Nieto Guerra v. Flores et al
MEMORANDUM OPINION AND ORDER DENYING 34 Joint MOTION for Settlement. Signed by Judge Virginia Emerson Hopkins on 10/16/2015. (JLC)
2015 Oct-16 PM 01:52
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
ENNER ABIGAIL NIETO GUERRA,
ARTURO FLORES and BLUE
TEQUILA LLC, d/b/a Mi Casita
) Case No.: 4:14-CV-2470-VEH
MEMORANDUM OPINION AND ORDER
Before the court is a joint motion by Plaintiff Enner Guerra and Defendants Arturo
Flores and Blue Tequila LLC (“Parties”) to settle the above-styled case, an action under
the Fair Labor Standards Act (“FLSA”). The settlement agreement was submitted to the
court in camera. Because an undisclosed
unreasonable, the motion is DENIED.
I. Procedural Background
Plaintiff Enner Abigial Nieto Guerra (“Guerra”) brought this action against
Defendants Arturo Flores (“Flores”) and Los Pinos Mexican Restaurant LLC d/b/a Mi
Casita Mexican Restaurant (“Los Pinos”) for overtime violations under 29 U.S.C. § 207
and minimum wage violations under 29 U.S.C. § 206. (Doc. 1 ¶¶ 21, 28). Guerra also
brought claims under Alabama law for breach of contract and unjust enrichment. (Doc.
1 ¶¶ 35, 41). On March 10, 2015, Guerra amended his complaint to include Blue Tequila
LLC (“Blue Tequila”) as a defendant. (Doc 12). Flores and Blue Tequila moved to
dismiss the Alabama claims against them on April 3, 2015. (Doc. 16). The court
dismissed Guerra’s unjust enrichment claim, but not the contract claim. (Doc. 27). On
May 29, 2015, Blue Tequila and Flores filed counterclaims against Guerra for slander
and intentional interference with business relationships. (Doc. 25 ¶¶ 13, 21). Guerra
voluntarily dismissed Los Pinos as a defendant on August 31, 2015, doc. 30, and the
court entered an order of pro tanto dismissal on September 9, 2015. (Doc. 31).
The parties now wish to settle. As required by Nall v. Mal-Motels, Inc., 723 F.3d
1304 (11th Cir. 2013), which applied Lynn’s Food Stores v. United States to claims by
employees against their former employers, the parties
submitted their proposed
settlement to the court for approval on September 22, 2015. The parties also requested
that the settlement be sealed, doc. 32, and the court denied the motion. (Doc. 33). The
parties have moved again for approval of their proposed settlement, this time by
submitting the settlement agreement in camera. (Doc. 34).
A. The Fair Labor Standards Act
The Fair Labor Standards Act, passed in 1938, establishes uniform national wage
and hour standards. See 29 U.S.C. §§ 206 & 207. When an employer fails to pay an
employee in conformity with the act, she may be sued for what amounts to double the
balance owed—back pay plus “liquidated damages” in an amount equal to the unpaid
wages. 29 U.S.C. § 216(b). The employee’s rights under the Act are mandatory, or so
they are often called, see D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 115–116 (1946),
but a better word is inalienable. Even if he truly wants to, no employee can give away his
FLSA rights. See Lynn’s Food Stores v. United States, 679 F.2d 1350, 1352 (11th Cir.
1982) (citation omitted) (“FLSA rights cannot be modified by contract or otherwise
The FLSA “is designed to prevent consenting adults from transacting about
minimum wages and overtime pay,” Walton v. United Consumers Club, Inc., 786 F.2d
303, 306 (7th Cir. 1986), because Congress found the bargaining power between
employees and employers so unbalanced as to invariably give rise to exploitation.
Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 706 (1945). Thus, “federal compulsory
legislation [prevents] private contracts” between workers and employers in derogation
the wage-hour laws. Id.
The Supreme Court extended this prohibition on ex ante contracts to settlements
of FLSA actions in two cases, Brooklyn Savings Bank v. O’Neil and D.A. Schulte v.
Gangi. In O’Neil, it concluded that a plaintiff cannot alienate his right to liquidated
damages, so a waiver of rights under the FLSA was void where only back pay, but not the
liquidated damages, were paid. 324 U.S. at 709–10. In Gangi, the Court held that FLSA
rights may not be alienated on account of a dispute about whether the employer was
covered by the Act.1 328 U.S. at 114. The logic underlying O’Neil and Gangi was the
insight that “once the Act makes it impossible to agree on the amount of pay, it is
necessary to ban private settlements of disputes about pay.” Walton, 786 F.2d at 306.
“Otherwise, the parties’ ability to settle disputes would allow them to establish subminimum wages.” Id.
The results in O’Neil and Gangi placed the policy of the FLSA in substantial
tension with the well-worn judicial policy of settlement promotion. See Gangi, 328 U.S.
at 122 (Frankfurter, J., dissenting). In response to the Court’s circumscription of parties’
capacity to settle FLSA claims, Congress added to the Act a provision allowing the
The Gangi Court explicitly left open whether a dispute over the number of hours worked
could be settled. 328 U.S. at 114–15. The Eleventh Circuit implicitly resolved this issue in Lynn’s
Food, infra at 5, when it held that court approval was required for all settlements under the FLSA.
Most of the other Courts of Appeals to consider the issue have endorsed or adopted Lynn’s Food.
See, e.g., Seminiano v. Xyris Enterprise, Inc., 602 F. App’x 682, 683 (9th Cir. 2015); Copeland
v. ABB, Inc., 521 F.3d 1010, 1014 (8th Cir. 2008); Taylor v. Progress Energy, Inc., 493 F.3d 454,
459–60 (4th Cir. 2007) (superseded on other grounds); O’Connor v. United States, 308 F.3d 1233,
1243 (Fed. Cir. 2002); Walton v. United Consumers Club, 786 F.2d 303, 306 (7th Cir. 1986). But
see Bodie v. TXL Mortg. Corp., 788 F.3d 159, 161 (5th Cir. 2015).
settlement of claims under the supervision of the Department of Labor. See generally
Martinez v. Bohls Bearing Equipment Co., 361 F. Supp. 2d 608 (W.D. Tex. 2005)
(containing a detailed history of the law governing FLSA settlements). Additionally, the
Eleventh Circuit authorized settlement of pending FLSA actions, so long as the trial court
approved the agreement as fair, in Lynn’s Food Stores, Inc. v. United States, 679 F.2d
1350, 1352 (11th Cir. 1982). Reasoning that an active lawsuit assured adequate
protection of employee rights through the adversarial process, the Eleventh Circuit
determined that a district court approved settlement would satisfy both the policy of the
FLSA and the policy of encouraging settlement. Id. at 1354.
B. Settlement under Lynn’s Food
As the law stands now, an action under 29 U.S.C. §§ 206, 207, or 215(a)(3) can
only be settled by taking one of two routes. Lynn’s Food, 679 F.2d at 1352. Route one,
via statute, is 29 U.S.C. § 216(c), which allows the Department of Labor to supervise a
compromise resolution of FLSA actions. The second, judicially-created2 route allows
a district judge presiding over “a suit brought directly by employees against their
employer under [29 U.S.C. § 216(b)],” Lynn’s Food, 679 F.2d at 1353, to approve a
proposed settlement and enter a stipulated judgment only after “scrutiniz[ing] the
See Barnhill v. Fred Stark Estate, No. 15 Civ. 3360 (BMC), 2015 WL 5680145, at *1
(E.D.N.Y. Sept. 24, 2015) (“Notwithstanding the absence of any express reservation in the FLSA,
the FLSA [...] limits the parties’ rights to stipulate to the dismissal of their action.”).
proposed settlement for fairness to the plaintiff employees.” Briggins v. Elwood TRI,
Inc., 3 F. Supp. 3d 1277, 1284 (N.D. Ala. 2014) (citing Lynn’s Food, 679 F.2d at 1353).3
Put more directly, unless the FLSA settlement is approved by the Department of Labor
or a trial judge, it is no good. See Nall, 723 F.3d at 1308. Only the second route, a Lynn
settlement, is at issue here.
A Lynn settlement must be: 1) entered “in a suit brought by the employees under
the FLSA,” 2) “a stipulated judgment,” and 3) “a fair and reasonable resolution of a bona
fide dispute over FLSA provisions.” Lynn’s Food, 679 F.2d at 1355. Whether the first
requirement is satisfied in a case requires no elaboration; either a lawsuit was filed, or
it was not. As to the second requirement, the phrase “stipulated judgment” is capacious;
it is not simply a reference to Rule 41. Indeed, a “stipulated judgment” need not take any
particular form, Rakip v. Paradise Awnings Corp., 514 F. App’x 917, 919 (11th Cir.
2013), other than it must be unopposed. Nall, 723 F.3d 1308. It simply means that the
district court must take an active role in approving the settlement agreement. Rakip, 514
F. App’x at 920.
The reasonableness factor is by far the murkiest. See Briggins, 3 F. Supp. 3d at
1284–85 (“Although Lynn’s Food requires a court to scrutinize a proposed settlement
for fairness, it does not describe the factors a court should use in doing so.”). Happily,
There does not appear to be a commonly used shorthand for this latter route, so the court
will call it a Lynn settlement.
the precise contours of the reasonableness requirement need not be divined here; the
narrow issue raised by the parties’ motion in this case is whether, as a general matter, it
is “fair and reasonable” for a Lynn settlement to be off the public record. The answer is
C. A “[F]air and [R]easonable” Settlement is Public Record by Default
Confidentiality clauses in FLSA settlements, attempts to seal the agreement, and
requests for in camera approval are analyzed identically. See, e.g., Murphy v.
Dolgencorp, Inc., Nos. 1:09cv7, 1:09cv14, 2010 WL 3766946, at *1 (W.D.Va. Sept. 21,
2010) (“In camera inspection of such essential evidence in these circumstances is the
functional equivalent of a filing under seal.”) (not italicized in original); Bartelloni v.
DeCastro, No. 05-80910-CIV, 2007 WL 2155646, at *1 (S.D. Fla. July 26, 2007). The
Circuit has declined to determine categorically whether confidentiality
provisions are fair and reasonable, noting only that district courts have discretion in
approving settlements, and that the determination is fact-intensive. Rodrigues v. CNP of
Sanctuary, LLC, 523 F. App’x 628, 629 (11th Cir. 2013).
A number of district courts, including this one, have concluded that filing under
seal, seeking approval in camera, and confidentiality agreements are generally
inconsistent with the FLSA. See, e.g., Burroughs v. Honda Mfg. Ala., LLC, No. 1:08CV-1239-VEH, slip op. at 3–4 (N.D. Ala. Mar. 10, 2014) (Hopkins, J.); Lopez v. Nights
of Cabiria, LLC, --F. Supp. 3d.-- 2015 WL 1455689 (S.D.N.Y. Mar. 30, 2015); Baker
v. Dolgencorp, 818 F. Supp. 2d 940, 943 (E.D.Va. 2011); Dees v. Hydrardy, 706 F.
Supp. 2d 1227, 1245–46 (M.D. Fla. 2010); Tran v . Thai, No. H-08-3650, 2009 WL
2477653, at *1 (S.D. Tex. Aug. 12, 2009); Hanson v. Wells Fargo Bank , N.A., No. 0880182-Civ, 2009 WL 1490582, at *1 (S.D. Fla. May 26, 2009); Stalnaker v. Novar
Corp., 293 F. Supp. 2d. 1260, 1263–64 (M.D. Ala. 2003).
Non-public FLSA settlements are not fair and reasonable because the rights
secured by the FLSA have a public-private character, and because Lynn settlements are
judicial records subject to the common law right of public access. In O’Neil, the Court
explained that the rights established under the FLSA accrue both to private individuals and
to society as a whole; Congress established minimum wages and maximum work hours
to promote the “national health and well-being and the free flow of goods in interstate
commerce.” 324 U.S. at 706–07. Cf. Alex ander v. Gardner-Denver Co., 415 U.S. 36,
45 (1974) (“[T]he private litigant not only redresses his own injury but also vindicates
[...] important congressional policy.”). “The sealing from public scrutiny of FLSA
agreements between employees and employers would thwart the public's independent
interest in assuring that employees' wages are fair and thus do not endanger ‘the national
health and well-being.’” Stalnaker, 293 F. Supp. 2d at 1264 (quoting O’Neil, 324 U.S.
“The common-law right of access ‘establish[es] a general presumption that
criminal and civil actions should be conducted publicly.’” F.T.C. v. AbbVie Products,
LLC, 713 F.3d
Cir. 2013) (quoting Chi. Tribune Co. v.
Bridgestone/Firestone, Inc., 263 F.3d 1304, 1311 (11th Cir. 2001)). Further, the public
presumptively has access to judicial records. Chi. Tribune, 263 F.3d at 1311. A precise
definition of “judicial records” is elusive, see Nixon v. Warner Communications, 435
U.S. 589, 598–99 (1978), but the Eleventh Circuit has tacitly endorsed the Second
Circuit’s view that the weight of the presumption is a function of how a particular
document is used. See Chi. Tribune, 263 F.3d at 1311 n. 7 (citing United States v.
Amodeo, 71 F.3d 1044, 1048 (2d Cir. 1995)). The range of uses was described as thus:
“[I]nformation will fall somewhere on a continuum from matters that directly affect an
adjudication to matters that come within a court’s purview solely to insure their
irrelevance.” Amodeo, 71 F.3d at 1049. Relevant here, “[a]n adjudication is a formal act
of government, the basis of which should, absent exceptional circumstances, be subject
to public scrutiny. Id. (citation omitted).
A Lynn settlement, requiring judicial approval, is a judgment that disposes of an
action and is entitled to preclusive effect. See Jarrard v. Southeastern Shipbuilding
Corp., 163 F.2d 960, 961 (5th Cir. 1947).4 The presumption of public access to a Lynn
Decisions of the Fifth Circuit handed down prior September 30, 1981, are binding on the
Eleventh Circuit. Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981).
settlement is therefore quite strong. “And the presumption is surely most strong when
the ‘right’ at issue is of a ‘private-public character,’ as the Supreme Court has described
employee rights under the FLSA.” Stalnaker, 293 F. Supp. 2d at 1264 (citation omitted).
Further, the fundamental of premise of Lynn’s Food is that an unbiased intermediary is
required to prevent employers from using their superior bargaining power to exploit
workers; public scrutiny of the settlement process serves the salutary function of
assuring citizens that employers who flout the FLSA are indeed held to task.
For these reasons, a “fair and reasonable” Lynn settlement must be on public
record, absent an exceptional showing by the parties. As no such showing has been made
here, the proposed settlement agreement must be entered into the record, pursuant to the
default rule of public access. The motion is DENIED.
DONE and ORDERED this 16th day of October, 2015.
VIRGINIA EMERSON HOPKINS
United States District Judge
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