Alvarez v. Shnipper Rests. LLC

• Decision Date: 01 November 2019
• Docket Number: 16 Civ. 5779 (ER)
• Parties: MARTIN ALVAREZ a/k/a EDUARDO LOPEZ, on behalf of himself, FLSA Collective Plaintiffs and the Class, Plaintiff, v. SHNIPPER RESTAURANTS LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

MARTIN ALVAREZ a/k/a EDUARDO LOPEZ,on behalf of himself, FLSA Collective Plaintiffs and the Class, Plaintiff, v. SHNIPPER RESTAURANTS LLC, et al., Defendants.

16 Civ. 5779 (ER)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

November 1, 2019

OPINION AND ORDER

Ramos, D.J.:

Plaintiff, Martin Alvarez, a/k/a Eduardo Lopez, brought the above-captioned action on behalf of himself and those similarly situated against Defendants Schnipper Restaurants LLC, SRG1 LLC d/b/a Schnipper's Quality Kitchen, SRG2 LLC d/b/a Schnipper's Quality Kitchen, SRG 570 Lex LLC d/b/a Schnipper's Quality Kitchen, SRG NYP LLC d/b/a Schnipper's Quality Kitchen, Andrew Schnipper, and Jonathan Schnipper (collectively, "Defendants") claiming violations of the Fair Labor Standards Act ("FLSA") and of New York Labor Law.

Before the Court is Plaintiff's unopposed motion for an order: (1) granting preliminary approval of the Settlement Agreement; (2) conditionally certifying the settlement class under Federal Rule of Civil Procedure 23(b)(3) and 29 U.S.C. § 216(b); (3) approving the proposed notice; (4) approving the proposed schedule for final settlement approval and setting a date for the Fairness Hearing and related dates; and (5) appointing class counsel. For the reasons stated below, Plaintiff's motion is DENIED without prejudice.

I. Background and Procedural History

Schnipper's Quality Kitchen, owned by Andrew and Jonathan Schnipper, has four locations throughout New York. Alvarez asserts that he was employed as a delivery person for Schnipper's Times Square from May 2013 until May 2016. Declaration of Martin Alvarez in Support of Plaintiff's Motion for Conditional Certification, Doc. 39 ("Alvarez Decl.") ¶ 1. Alvarez claims that during his employment, he also worked at the three other locations of Schnipper's Quality Kitchen. Id. ¶ 2. During Alvarez's employment, he claims he was paid at a rate between $5.00 and $7.50 per hour and did not receive notice that Defendants were taking a tip credit until August 2014. Id. ¶¶ 5, 7. He was also required to engage in nontipped work for over twenty percent of his work day. Id. ¶ 8. As a delivery person, Alvarez was required to use a bicycle to make deliveries; however, he used his own bicycle and was not compensated for the costs of purchasing, repairing, or maintaining his bicycle. Id. ¶ 9. Alvarez also alleges that he never received a proper wage and hour notice from Defendants and did not receive proper wage statements each month. Id. ¶¶ 13-14. According to Alvarez, other non-managerial tipped employees were subject to the same policies and practices. Id. ¶¶ 3-14.

Alvarez retained Lee Litigation Group, PLLC to represent himself and FLSA Collective Plaintiffs and Class members and filed this action on July 20, 2016. Doc. 1. Defendants filed an answer on November 9, 2016. Doc. 27. On December 12, 2017, the Court granted conditional certification of the FLSA class. Doc. 61. Fifteen individuals opted-in to become party plaintiffs. Docs. 75-89. Following private mediation on September 7, 2018, the parties reached a class settlement. Doc. 100. On December 17, 2018, Plaintiffs filed the instant unopposed motion for preliminary approval of the class settlement and related relief. Doc. 105.

II. Proposed Settlement Agreement

The Settlement Agreement reached by the parties provides that Defendants will pay up to $330,000.00 (the "Maximum Settlement Amount") "to settle fully and finally all Released Claims . . . in the Litigation." Doc. 106, Ex. A ("Settlement Agreement") at 1. At minimum, Defendants will pay an amount "sufficient to satisfy the Claimed Net Settlement Fund, payment of Service Award, payment of the Settlement Administrator's fees and Payment of Class Counsel's Legal Fees and Costs," (the "Minimum Settlement Amount"). Id. ¶ 1.20. Defendants will deposit this sum in installments into a qualified settlement fund, to be established and controlled by a settlement claims administrator, in this case Rust Consulting. Id. ¶¶ 1.29, 1.31, 2.2, 3.1. Class Members will be mailed notice of the settlement agreement with information about how they can either participate in the settlement or exclude themselves from or object to the settlement. Id. ¶¶ 2.4-2.6. Those who file a valid claim form will receive a settlement check based on weeks worked within the class period. Id. ¶ 3.4. Additionally, Alvarez can petition the Court for $7,500 as a service award from the fund. Id. ¶ 3.3. The settlement claims administrator will receive $15,000. Id. Class Counsel may also apply for reimbursement from the fund. Id. ¶ 3.2. The Court will have the opportunity to approve the amount of fees and costs paid to class counsel, who will file a motion for approval of attorneys' fees and costs prior to the final settlement approval hearing. Id. Class counsel will seek fees totaling one-third of the settlement fund.¹ Doc. 107 at 4-5.

In exchange, settlement class members will release Defendants "from all wage and hour claims that could have been asserted under federal or state laws by and on behalf of the Class Members in the Litigation as of the date the Court issues an Order preliminarily approving the Parties' settlement." Settlement Agreement ¶ 4.1. Alvarez has agreed to a broader release and will release Defendants from any "actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, judgments, obligations, union grievances, claims, charges, complaints, appeals and demands whatsoever, in law or equity, which [he] may have against[Defendants] . . . whether known or unknown, asserted or unasserted," etc. Id.

The Settlement Agreement provides that within fifteen days of the Court's preliminary approval, Defendants will provide the settlement administrator with the name, telephone number, social security number, and last known address of all class members in electronic form. Fifteen days after that, the settlement claims administrator will mail all class members the Court-approved settlement notice and claim form. Id. ¶ 2.4. From that point, settlement class members will have sixty days to either submit a claim form, opt out of the settlement agreement, or mail written objections to the settlement administrator. Id. ¶¶ 2.4-2.6. Anyone who does not opt-out will be deemed to have accepted the settlement and will release all relevant claims. Id. ¶ 2.5. The Settlement Agreement also provides for a fairness hearing before the Court before final approval of the settlement. Id. ¶ 2.7.

The approval of a proposed class action settlement is a matter of discretion for the trial court. Maywalt v. Parker & Parsley Petroleum Co., 67 F.3d 1072, 1079 (2d Cir. 1995). "In exercising this discretion, courts should give 'proper deference to the private consensual decision of the parties.'" Clark v. Ecolab, Inc., Nos. 07 Civ. 8623 (PAC), 04 Civ. 4488 (PAC), 06 Civ.5672 (PAC), 2009 WL 6615729, at *3 (S.D.N.Y. Nov. 27, 2009) (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1027 (9th Cir. 1988)). "In evaluating the settlement, the Court 'should keep in mind the unique ability of class and defense counsel to assess the potential risks and rewards of litigation . . . .'" In re BankAmerica Corp. Sec. Litig., 210 F.R.D. 694, 700 (E.D. Mo. 2002) (quoting Fed. Judicial Ctr., Manual for Complex Litig. § 30.42 at 240 (3d. ed. 1997)).

Preliminary approval, which is what Plaintiffs seek here, is the first step in the settlement process. It simply allows notice to issue to the class and for class members to object to or opt-out of the settlement. After the notice period, the Court will be able to evaluate the settlement with the benefit of the Settlement Class Members' input. Therefore, preliminary approval of a settlement agreement "requires only an 'initial evaluation' of the fairness of the proposed settlement on the basis of written submissions and an informal presentation by the settling parties. Puglisi v. TD Bank, N.A., No. 13 Civ. 637 (LDW) (GRB), 2015 WL 574280, at *1 (E.D.N.Y. Feb. 9, 2015) (internal citations omitted). The fairness of a settlement turns on its terms as well as the negotiating process from which it emerged. Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 116 (2d Cir. 2005) (citing D'Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001)). To grant preliminary approval, the Court need only find that there is "'probable cause' to submit the [settlement proposal] to class members and hold a full-scale hearing as to its fairness." In re Traffic Exec. Ass'n-Eastern R.R., 627 F.2d 631, 634 (2d Cir. 1980). If, after a preliminary evaluation of the proposed settlement, the Court finds that it "appears to fall within the range of possible approval," the Court should order that the class members receive notice of the settlement. In re Vitamins Antitrust Litig., Nos. Misc. 99-197 (TFH), 1285 (MDL), 2001 WL 856292, at *4 (D.D.C. 2001).

Here, the Court finds that probable cause does not exist to hold a full-scale hearing as to the fairness of the Settlement Agreement for four reasons. First, Alvarez's release is far too broad and goes well beyond the claims at issue in this litigation. This Court may not approve FLSA settlements containing an "overbroad release that would waive practically any possible claim against the defendants, including unknown claims and claims that have no relationship whatsoever to wage-and-hour issues." Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 206 (2d Cir. 2015) (internal quotation marks and citations omitted). "Courts in this District routinely reject release provisions that 'waive practically any possible claim against the defendants, including unknown claims and claims that have no relationship whatsoever to wage-and-hour issues.'" Martinez v. Gulluoglu LLC, No. 15 Civ. 2727 (PAE), 2016 WL 206474, at *2 (S.D.N.Y. Jan. 15, 2016) (quoting Lopez v. Nights of Cabiria, LLC, 96 F....