Mei Xing Yu v. Hasaki Rest., Inc.
| Decision Date | 06 December 2019 |
| Docket Number | No. 17-3388-cv,August Term, 2018,17-3388-cv |
| Parties | MEI XING YU, individual, on behalf of all other employees similarly situated, Plaintiff-Appellee, v. HASAKI RESTAURANT, INC., Shuji Yagi, Kunitsuga Nakata, Hashimoto Gen, Defendants-Appellants, Jane Doe and John Doe #1–10, Defendants. |
| Court | U.S. Court of Appeals — Second Circuit |
KELI LUI, WILLIAM M. BROWN, Hang and Associates, PLLC, Flushing, NY, for Plaintiff-Appellee.
LILLIAN M. MARQUEZ (Louis Pechman, Laura Rodriguez, on the brief), Pechman Law Group PLLC, New York, NY, for Defendants-Appellants.
ADINA H. ROSENBAUM (Sean M. Sherman, Adam R. Pulver, on the brief), Public Citizen Litigation Group, for Court-Appointed Amicus Curiae.
Before: Walker, Calabresi, and Livingston, Circuit Judges.
Mei Xing Yu, an employee of Hasaki Restaurant, filed a claim alleging violations of the Fair Labor Standards Act's ("FLSA" or the "Act") overtime provisions. Soon thereafter, Hasaki Restaurant sent Mei Xing Yu an offer of judgment, pursuant to Federal Rule of Civil Procedure 68(a), for $20,000 plus reasonable attorneys' fees. After Mei Xing Yu accepted the offer, the parties filed the offer and notice of acceptance with the district court. Before the Clerk of the Court could enter the judgment, however, the district court sua sponte ordered the parties to submit the settlement agreement to the court for a fairness review and judicial approval, which the district court believed was required under the Second Circuit's decision in Cheeks v. Freeport Pancake House, Inc. , 796 F.3d 199 (2d Cir. 2015). Both parties disputed the district court's interpretation of the FLSA, Rule 68, and Cheeks , and filed an interlocutory appeal. Upon review of the text of the Act and judicial precedents interpreting the Act, we hold that judicial approval is not required of Rule 68(a) offers of judgment settling FLSA claims. Accordingly, we REVERSE and VACATE the district court's order and REMAND with instructions to direct the Clerk of the Court to enter the judgment as stipulated in the accepted Rule 68(a) offer. Judge Calabresi dissents in a separate opinion.
Plaintiff-appellee Mei Xing Yu worked as a sushi chef at a restaurant owned and operated by appellant Hasaki Restaurant, Inc. On August 1, 2016, Mei Xing Yu filed a complaint against Hasaki Restaurant and various individual owners and managers of Hasaki Restaurant (collectively "Hasaki") in the Southern District of New York on behalf of himself and all other employees similarly situated, alleging violations of the overtime provisions of the Fair Labor Standards Act and New York labor laws.
On November 23, 2016, Hasaki mailed Mei Xing Yu a Rule 68 offer of judgment for $20,000 plus reasonable attorneys' fees, costs, and expenses through the date of the offer. Mei Xing Yu timely accepted the offer of judgment, and on December 8, 2016, Mei Xing Yu filed a letter with the district court (Furman, J. ) notifying the court of his acceptance.
On December 9, 2016, Judge Furman ordered the parties to submit their settlement agreement to the district court along with a joint letter explaining why the settlement should be approved as fair and reasonable. Judge Furman explained that he believed our decision in Cheeks v. Freeport Pancake House, Inc.1 required him to scrutinize the parties' settlement to ensure it was fair and reasonable. Cheeks held that stipulated dismissals settling FLSA claims with prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii) require the approval of either the district court or the Department of Labor ("DOL"). Alternatively, the district court offered the parties the opportunity to argue why they did not believe that judicial approval of the Rule 68(a) offer of judgment was required.
The parties then submitted a joint letter on December 22, 2016, arguing that they did not need judicial approval of their Rule 68(a) offer of judgment to settle Mei Xing Yu's FLSA claims. On January 13, 2017, the Secretary of Labor filed an amicus brief in a separate case in the Southern District of New York, Sanchez v. Burgers & Cupcakes LLC ,2 arguing that judicial approval is required when a Rule 68(a) offer of judgment is accepted by a plaintiff raising FLSA claims. Pursuant to a district court order, the parties filed supplemental briefs in response to the Secretary's amicus brief in Sanchez , in which the parties maintained their position that judicial approval was not required.
On March 20, 2017, the district court issued a brief order concluding that "judicial approval of the parties' settlement is required, notwithstanding the fact that it was reached pursuant to Rule 68(a) of the Federal Rules of Civil Procedure."3 Shortly thereafter, the district court issued a follow-up opinion.4 The district court reasoned that although Rule 68(a) is phrased in mandatory terms—requiring the clerk of the court to enter judgment of an accepted offer of judgment without any reference to judicial approval—there are exceptions to the Rule's mandatory terms, such as class action and bankruptcy settlements, which require judicial approval.5 Accepting the fact that there are exceptions to Rule 68(a)'s mandatory language, the district court concluded that FLSA claims "fall within the narrow class of claims that cannot be settled under Rule 68 without approval by the court (or the DOL)."6 Relying on our opinion in Cheeks, the district court concluded that while " Cheeks may not apply a fortiori to a Rule 68 FLSA settlement given its reliance on the language of Rule 41, its reasoning—combined with the fact that Rule 68 is not always ... mandatory—compels the conclusion that parties may not evade the requirement for judicial (or DOL) approval by way of Rule 68."7
Noting the existence of "substantial ground for difference of opinion" on the issue, and that the lower courts were divided on the question, the district court certified its order for interlocutory appeal under 28 U.S.C. § 1292(b).8 The parties filed a timely notice of appeal in the district court, but did not file a timely § 1292(b) petition for permission to take an interlocutory appeal in this court. Nonetheless, on October 23, 2017, a panel of our court granted the parties' motion to file a late § 1292(b) petition and then granted the petition.9 In addition, because both Mei Xing Yu and Hasaki took the same position before the district court, a panel of our court granted the Public Citizen Litigation Group's ("PCLG") motion to be appointed amicus curiae in order to defend the district court's ruling.10 We also invited and received an amicus brief from the Secretary of Labor.11
The question before us is straightforward: whether acceptance of a Rule 68(a) offer of judgment that disposes of an FLSA claim in litigation needs to be reviewed by a district court or the DOL for fairness before the clerk of the court can enter the judgment. The question is one of statutory interpretation. Therefore, "we begin, as we must, with a careful examination of the statutory text" of both Rule 68(a) and the FLSA.12
Rule 68(a) states:
At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.13
Rule 68(d) provides that "[i]f the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made,"14 which includes attorney's fees.15 Rule 68(b) discusses the effect of an unaccepted offer, and Rule 68(c) provides a mechanism for making an offer after a party's liability has been determined but the extent of liability remains to be determined.16
17
On its face, Rule 68(a)'s command that the clerk must enter judgment is mandatory and absolute.18 The Sixth Circuit has described a district court's role in entering a Rule 68(a) judgment as "ministerial rather than discretionary," because the plain language of the Rule "leaves no discretion in the district court to do anything but enter judgment once an offer has been accepted."19 Other circuits have said substantially the same thing,20 as has this circuit, though in less obvious terms.21
Both the common usage of the word "must" and the dictionary definition of that word support this understanding of Rule 68(a)'s mandatory nature.22 There is also no doubt that Rule 68(a) applies in this case: Rule 1 provides that the Federal Rules of Civil Procedure "govern the procedure in all civil actions and proceedings in the United States district courts ...."23
Despite the mandatory language, however, amici and the district court contend that there are "rare situations" in which a district court must approve the proposed resolution of the pending litigation before the stipulated judgment can take legal effect.24 They point to various examples in support of their argument that Rule 68(a)'s facially mandatory nature is riddled with "a host of situations in which parties may not, without approval of either or both a government agency and a court, enter into a settlement."25
The first category of examples involves proceedings that are governed by federal rules that explicitly require judicial approval before settlement. For instance, Federal Rule of Bankruptcy Procedure 9019 specifically requires judicial approval of settlements, and the D.C. Circuit has held...
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