Lazaro v. Liberty Car Serv.
| Decision Date | 23 March 2021 |
| Docket Number | 19 CV 7314 (LDH)(LB) |
| Parties | NATALY LAZARO and JOSE MOLINA, Plaintiff, v. LIBERTY CAR SERVICE, INC. and RAY PERRY, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
REPORT AND RECOMMENDATION
Plaintiffs bring this action under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 216(b), and New York Labor Law (“NYLL”), N.Y. Lab. Law §§ 650 et. seq. alleging that defendants failed to pay them the minimum wage, required overtime wages and spread of hours pay and failed to provide required wage notices and statements. Compl. ¶¶ 1-3, ECF No. 1. The Honorable LaShann DeArcy Hall referred the parties' motion for settlement approval to me for a Report and Recommendation pursuant to 28 U.S.C. § 636(b). For the reasons stated herein, it is respectfully recommended that the parties' motion for settlement approval should be denied without prejudice.
Plaintiffs Nataly Lazaro[1] and Jose Molina worked for defendants' transportation business from September 2019 through October 2019 performing manual and clerical work, including processing credit cards. Compl. ¶¶ 16-18. Plaintiffs received about $12 an hour, which they allege was lower than New York's legally required minimum wage, and never received overtime even though they worked 70-80 hours per week. Id. ¶¶ 19-21. Defendants never provided plaintiffs with spread of hours pay, even though plaintiffs worked 11 or more hours per day. Id. ¶ 24. Plaintiffs also allege that they never received proper wage notices or wage statements. Id. ¶¶ 25-26.
Plaintiffs commenced this action on December 31, 2019 seeking unpaid wages, liquidated damages, and attorney's fees.[2] Id. ¶¶ 57-60. Defendants answered the complaint on February 20, 2020. ECF No. 6. The parties participated in a mediation on November 12, 2020 and reached a settlement. They now request approval of their settlement agreement pursuant to Cheeks v Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015). In support of their application, the parties provide a letter motion (Mot. Settl., ECF No. 20); a settlement agreement and release regarding plaintiff Lazaro's claims (“Lazaro Agreement, ” ECF No. 20-1); a settlement agreement and release regarding plaintiff Molina's claims (“Molina Agreement, ” ECF No. 20-2); plaintiffs' counsel's time and billing records (ECF No. 20-3); and plaintiffs' counsel's receipts for costs (ECF No. 20-4).
Pursuant to Cheeks v. Freeport Pancake House, Inc., “Rule 41(a)(1)(A)(ii) stipulated dismissals settling FLSA claims with prejudice require the approval of the district court or the [Department of Labor] to take effect. 796 F.3d 199, 206 (2d Cir. 2015). This approval requirement is intended to ensure FLSA's objective of insuring that all workers are fairly compensated. Id. (quoting A.H. Phillios, Inc. v. Walling, 324 U.S. 490, 493 (1945)). Review also furthers FLSA's remedial purpose, namely preventing abuse while accounting for the uneven power dynamic between employers and employees. Id. at 207. As discussed by the Cheeks Court, certain provisions within a settlement agreement are unacceptable when subjected to judicial review. Id. Such provisions include: (1) restrictive confidentiality provisions; (2) overbroad releases that waive all claims, especially those with no connection to a plaintiff's wage-and-hour case; (3) and awards of attorney's fees without record support. Id. at 206 (quoting Lopez v. Nights of Cabiria, 96 F.Supp.3d 170, 177-82 (S.D.N.Y. 2015).
In reviewing FLSA settlement agreements, Courts are ultimately seeking to determine if the parties' proposed resolution is “fair and reasonable.” Wolinsky v. Scholastic, Inc., 900 F.Supp.2d 332, 335 (S.D.N.Y. 2012) (quoting Mosquera v. Masada Auto Sales, Ltd., No. 09-CV-4925(NGG), 2011 WL 282327, at *1 (E.D.N.Y. Jan. 25, 2011)). Although not an exhaustive list, this reasonableness determination includes review of the following factors:
(1) [T]he 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.
Id. (citing Medley v. Am. Cancer Soc., No. 10-CV-3214(BSJ), 2010 WL 3000028, at *1
(S.D.N.Y. July 23, 2010)). Certain factors weigh against approving a settlement, including:
(1) [T]he presence of other employees situated similarly to the claimant; (2) a likelihood that the claimant's circumstances will recur; (3) a history of FLSA non-compliance by the same employer or others in the same industry or geographic region; and (4) the desirability of ‘a mature record' and ‘a pointed determination of the governing factual or legal issue to further the development of the law either in general or in an industry or in a workplace.
Id. (internal quotation marks omitted). There is a strong presumption in favor of finding a proposed FLSA settlement agreement to be fair and reasonable because the Court can never be “in as good of a position as the parties to determine the reasonableness of an (sic) FLSA settlement.” Martinez Aguilar v. VBFS Inc., No. 19-CV-621(JLC), 2020 WL 1036071, at *1 (S.D.N.Y. Mar. 3, 2020) (internal quotation marks omitted) (quoting Souza v. 65 St. Marks Bistro, No. 15-CV-327(JLC), 2015 WL 7271747, at *4 (S.D.N.Y. Nov. 6, 2015)); Cortes v. Bronx Bar and Grill, LLC, No. 19-CV-2819(SN), 2019 WL 6318430, at *1 (S.D.N.Y. Nov. 25, 2019) (quoting Lliguichuzhca v. Cinema 60, LLC, 948 F.Supp.2d 362, 365 (S.D.N.Y. 2013)). Although the Court believes the financial terms of the settlements are reasonable, the agreements' vague releases prevent approval at this time.
The parties' two settlement agreements, one for Ms. Lazaro and one for Mr. Molina, differ only in the amounts awarded to each plaintiff. Compare Lazaro Agreement with Molina Agreement. Defendants agree to pay a total of $9, 000 to settle both plaintiffs' claims. Mot. Settl. 2. In exchange for releasing their claims against defendants, plaintiffs Lazaro and Molina will receive $4, 947 and $4, 053 respectively. Lazaro Agreement ¶ 2; Molina Agreement ¶ 2. After payment of attorney's fees and costs, plaintiff Lazaro will receive $3, 000 and plaintiff Molina will receive $2, 404. Mot. Settl. 2. Their counsel will receive $2, 702, plus $894 in costs. Id. Payment to plaintiff Lazaro will be made as follows: three payments to plaintiff of $500, “less applicable taxes and withholdings, to be reported on an IRS form W-2;” three payments to plaintiff of $500, “representing liquidated and other damages, to be reported on an IRS Form 1099-MISC;” three payments to plaintiff's counsel of $649, “representing partial payment of a 1/3 contingency fee ($1, 500) plus costs ($447).” Lazaro Agreement ¶ 2(a)-(c). Payment to plaintiff Molina will be made as follows: three payments to plaintiff of $400, “less applicable taxes and withholdings, to be reported on an IRS form W-2;” three payments to plaintiff of $401.33, “representing liquidated and other damages, to be reported on an IRS Form 1099- MISC;” three payments to plaintiff's counsel of $549.66, “representing partial payment of a 1/3 contingency fee ($1, 202) plus costs ($447).” Molina Agreement ¶ 2(a)-(c). The first payments are due within 30 days of Court approval of the agreements, the second payments are due within 60 days, and the third payments are due within 90 days. Lazaro Agreement ¶ 2; Molina Agreement ¶ 2. The agreements contain a mutual release. Defendants agree to release plaintiffs “from any and all claims, debts, obligations, or liability…that they had or may have” against plaintiffs. Lazaro Agreement ¶ 2(e); Molina Agreement ¶ 2(e). Plaintiffs agree to “release[] and forever discharge[] Defendants of and from any and all claims asserted in this action…consistent with Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015).” Lazaro Agreement ¶ 4; Molina Agreement ¶ 4. The parties also agree that the Court shall retain jurisdiction to enforce the agreement. Lazaro Agreement ¶ 8; Molina Agreement ¶ 8. Neither agreement contains a confidentiality nor a non-disparagement clause.
The Court looks to the factors discussed in Wolinsky v Scholastic, Inc. when determining the reasonableness of the settlement. The first factor is the range of possible recovery. Wolinsky, 900 F.Supp.2d at 335. Even where a proposed settlement is a far lower percentage of the total amount claimed by a plaintiff, Courts will still approve the settlement in light of a defendant's claimed defenses and the uncertainty of litigation. Sanchez v. DPC New York Inc., 381 F.Supp.3d 245, 249-50 (S.D.N.Y. 2019); Chowdhury v. Brioni America, Inc., No. 16 Civ. 344(HBP), 2017 WL 5953171, at *2 (S.D.N.Y. Nov. 29, 2017) (approving a settlement where the net recovery was approximately 40% of the claimed damages.) Plaintiff Lazaro alleges that she is owed approximately $4, 147.50 in unpaid wages and could receive an additional $7, 450 if successful on her wage notice and statement violation claims. Mot. Settl. 1- 2. Plaintiff Molina alleges that he is owed approximately $2, 962.50 in unpaid wages and could receive an additional $6, 750 if successful on her wage notice and statement violation claims. Id. Defendants dispute both plaintiffs' allegations, including the number of hours each worked, and plaintiffs acknowledge that the law is unsettled regarding recovery for wage notice...
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