Fisher v. SD Prot. Inc., Docket No. 18-2504-cv
| Decision Date | 04 February 2020 |
| Docket Number | August Term 2019,Docket No. 18-2504-cv |
| Citation | 948 F.3d 593 |
| Parties | Michael FISHER, Plaintiff-Appellant, v. SD PROTECTION INC. and Sandra Dominguez Mercado, Defendants. |
| Court | U.S. Court of Appeals — Second Circuit |
C.K. Lee, Lee Litigation Group, PLLC, New York, New York, for Plaintiff-Appellant.
No appearance for Defendants.1
Before: Walker, Chin, and Sullivan, Circuit Judges.
In this Fair Labor Standards Act case, see 29 U.S.C. §§ 201 et seq. (the "FLSA"), plaintiff-appellant Michael Fisher and his former employer settled the action for $25,000, inclusive of attorneys' fees and costs. The parties sought approval of the settlement agreement from the district court, and the agreement provided for $23,000 of the settlement amount to be paid to counsel for fees and costs and $2,000 to be paid to Fisher.
The district court approved the overall amount of the settlement as fair and reasonable under Cheeks v. Freeport Pancake House, Inc. , 796 F.3d 199 (2d Cir. 2015), but significantly modified the distribution of the settlement funds as between Fisher and his counsel. In modifying the settlement, the district court calculated Fisher's damages for unpaid overtime as $585. With statutory damages under the FLSA and the New York Labor Law (the "NYLL"), Fisher's maximum possible recovery -- were he to prevail in every respect -- was $11,170. Nonetheless, the district court awarded Fisher $15,055, which constituted 60.22% of the settlement amount, while awarding his counsel $8,250 in fees, or 33% of the total settlement amount, and $1,695 in costs.
We hold that the district court abused its discretion in rewriting the settlement agreement by modifying the allotment of the settlement funds. When a district court concludes that a proposed settlement in a FLSA case is unreasonable in whole or in part, it cannot simply rewrite the agreement, but it must instead reject the agreement or provide the parties an opportunity to revise it. The district court further erred in concluding that the "maximum fee percentage" that plaintiff's counsel may retain in an FLSA suit is generally limited to 33% of the total settlement amount. See App'x at 78. Accordingly, and for the reasons set forth below, we vacate the district court's order and remand for further proceedings consistent with this opinion.
In February 2015, Fisher was hired by defendants SD Protection Inc. ("SD") and Sandra Dominguez Mercado to work as a professional chaperone.2 His duties included working in hotel hallways to supervise student tour groups during late nights and early mornings, enforcing curfews, and monitoring noise levels. During his 26 weeks of employment from February to July 2015, Fisher regularly worked 49 hours per week and was paid $10 per hour on a weekly basis. Defendants failed to furnish Fisher any paystubs and he was not compensated for any overtime as required by the FLSA and NYLL. Moreover, defendants failed to provide Fisher proper wage notices or wage statements as required under the NYLL.
On March 28, 2017, Fisher sued SD and Dominguez Mercado for violations of the FLSA and the NYLL, alleging that he and others similarly situated were entitled to recover from defendants: (1) unpaid overtime, (2) statutory penalties, (3) liquidated damages, and (4) attorneys' fees and costs. Fisher was and still is represented by Lee Litigation Group, PLLC ("LLG").
On May 11, 2017, Fisher filed a pre-motion letter with the district court seeking a conference to discuss an anticipated motion for conditional collective certification. The parties participated in an initial pretrial conference before the district court on May 15, 2017, and defendants filed an answer on June 2, 2017. Fisher never filed a motion for class or collective certification.
Between June 2017 and September 2017, Fisher filed several letter motions with the magistrate judge regarding ongoing discovery disputes. On August 17, 2017, LLG deposed Dominguez Mercado in Orlando, Florida. On August 21, 2017, Fisher filed a letter motion seeking a conference to discuss an anticipated motion for sanctions against defendants for failure to comply with discovery obligations. According to Fisher's letter, Dominguez Mercado prematurely ended the deposition after three hours despite agreeing to a seven-hour deposition. The letter motion asked the district court to compel her to attend a second deposition. Following a September 5, 2017 conference, a magistrate judge ordered a resumption of the deposition and also assessed the costs associated with the second deposition to the deponent. On October 13, 2017, LLG resumed Dominguez Mercado's deposition in Florida. Between September and October 2017, several additional discovery letter motions were filed before the district court.
After months of discovery, on October 25, 2017, the parties participated in a settlement conference before the district court and agreed to a settlement in principle. The district court ordered the parties to submit a final, executed settlement agreement as well as a " Cheeks fairness submission." App'x at 12; see also Cheeks , 796 F.3d at 199.
Accordingly, on January 30, 2018, LLG filed a letter discussing the factors enumerated in Wolinsky v. Scholastic Inc. , 900 F. Supp. 2d 332, 335-36 (S.D.N.Y. 2012), and submitting the executed settlement agreement as well as certain documentation of LLG's time records and expenses. The settlement agreement required defendants to pay $25,000 "inclusive of all costs and fees, including but not limited to attorney's fees," in checks made out to LLG in six installments. App'x at 23. The settlement agreement was silent as to how the payment was to be divided between Fisher and LLG. The letter, however, clarified that LLG would receive $23,000 of the settlement for fees and costs and Fisher would receive the remaining $2,000. The letter also represented that LLG's lodestar was "more than $50,000." App'x at 20. Of the $23,000 to be paid to LLG, $5,140.39 was attributable to costs.
On July 27, 2018, the district court issued an order approving the total settlement sum of $25,000, but modifying the settlement by increasing the amount to be paid to Fisher and reducing the fees and costs to be paid to LLG. First, the district court increased the amount allocated to Fisher from $2,000 to $15,055, or 60.22% of the settlement amount. In doing so, the district court found that Fisher was entitled to $585 in unpaid overtime compensation, $585 in liquidated damages, $5,000 for wage notice violations under the NYLL, and $5,000 for wage statement violations under the NYLL, for a total of $11,170.3
Although this was apparently Fisher's maximum possible recovery, the district court awarded Fisher an additional $3,885, as explained below.
Second, the district court concluded that LLG's requested costs of $5,140 for "filing fee, service fees, court reporting fees, and travel expenses" were not supported by sufficient documentation, reasoning that LLG "has submitted documentation supporting no more than $1,695 in costs." App'x at 75. The district court awarded costs in that amount only and stated that it would allocate the difference to Fisher, but the district court, we assume inadvertently, calculated the cost-differential as $3,885 rather than $3,445, and increased Fisher's award by that amount instead.
Finally, the district court reviewed the factors outlined in Goldberger v. Integrated Res., Inc. , 209 F.3d 43, 50 (2d Cir. 2000), and found that the proposed attorneys' fees of $17,860 was "unreasonable and excessive" and reduced the fees to $8,250, equivalent to 33% of the total settlement. App'x at 75; see also App'x at 75-78. The district court reduced the attorneys' fees after holding that "[a]s a matter of policy, 33% of the total settlement amount -- or less -- is generally the maximum fee percentage which is typical and approved in FLSA cases." App'x at 78 (emphasis in original). Accordingly, the district court approved the proposed settlement amount of $25,000 as fair under Cheeks , but significantly altered the distribution of the settlement funds by reducing the fees and costs by $9,610 and $3,445, respectively, and reallocating those amounts to Fisher.4
This appeal followed.
This Court has held that parties cannot privately settle FLSA claims with a stipulated dismissal with prejudice under Federal Rule of Civil Procedure 41 absent the approval of the district court or the Department of Labor. See Cheeks , 796 F.3d at 200.5 As a result, district courts in this Circuit routinely review FLSA settlements for fairness before approving any stipulated dismissal. District courts typically evaluate the fairness of a settlement agreement by considering the factors outlined in Wolinsky , which include, among others:
(1) the plaintiff's range of possible recovery; (2) the extent to which the settlement will enable the parties to avoid anticipated burdens and expenses in establishing their respective claims and defenses; (3) the seriousness of the litigation risks faced by the parties; (4) whether the settlement agreement is the product of arm's-length bargaining between experienced counsel; and (5) the possibility of fraud or collusion.
900 F. Supp. 2d at 335-36 (internal quotation marks omitted); see also Mei Xing Yu , 944 F.3d at 413 ().
In addition, if attorneys' fees and costs are provided for in the settlement, district courts will also evaluate the reasonableness of the fees and costs. See Cheeks , 796 F.3d at 206 (); 29 U.S.C. § 216(b) ...
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