SARCENO et al v. CHOI et al

Filing 39

MEMORANDUM OPINION regarding the parties' 37 and 38 Joint Motions to Approve Settlement Agreements. Signed by Judge Beryl A. Howell on January 29, 2015. (lcbah1)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
LUIS SARCENO, et al.,
Plaintiffs,

Civil Action No. 13-1271(BAH)

v.

Judge Beryl A. Howell

KWAN S. CHOI, et al.,
Defendants.

MEMORANDUM OPINION
Pending before the Court are joint motions to approve settlement agreements in this Fair
Labor Standards Act (the “FLSA”), 29 U.S.C. § 201 et seq., suit between the plaintiffs, Luis
Sarceno, Rudy Godoy, Miguel Iraheta, Omar Vasquez, and Eber Flores (collectively, “the
plaintiffs”), and the defendants, Byung Choi, Pyoung Choi, Kwan Choi, and Hwan Eun
(collectively, “the defendants”). 1 Joint Motion to Approve Settlement Agreement (the “Choi and
Choi Mot.”), ECF No. 37; Joint Motion to Approve Settlement Agreement (the “Choi and Eun
Mot.”), ECF No. 38. For the reasons stated below, the motions are granted in part.
I.

BACKGROUND
The underlying facts in this matter are fully set out in a prior Memorandum Opinion

denying the defendants’ motions for summary judgment and will not be repeated in detail here.
See Sarceno v. Choi, No. 13-1271, 2014 WL 4380680, at *2–5 (D.D.C. Sept. 5, 2014). Briefly,
the plaintiffs were all employees at the defendants’ supermarket between 2004 and 2012. Choi
and Choi Mot. ¶ 2; Choi and Eun Mot. ¶ 2. During that time period, the plaintiffs allege that

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One joint motion seeks approval of a settlement between the plaintiffs and Defendants Byung Choi and Pyoung
Choi, ECF No. 37, while the other seeks approval of a settlement between the plaintiffs and Defendants Kwan Choi
and Hwan Eun, ECF No. 38.

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they were not paid for all of the hours they worked and were not paid overtime for the hours they
worked that exceeded forty hours in a week. Choi and Choi Mot. ¶ 3; Choi and Eun Mot. ¶ 3.
The defendants contest the plaintiffs’ allegations, stating that the plaintiffs have been paid all
wages due. Choi and Choi Mot. ¶ 4; Choi and Eun Mot. ¶ 4.
The plaintiffs filed suit on August 20, 2013, Compl. at 1, ECF No. 1, and the parties
subsequently engaged in settlement discussions supervised by a Magistrate Judge, Minute Order,
Dec. 5, 2013. The parties were unable to reach agreement and the defendants filed motions for
dismissal on the grounds that the plaintiffs’ claims were barred by purported settlement
agreements, which had been executed by the plaintiffs before the initiation of the pending action
and before the plaintiffs had obtained the assistance of counsel. 2 Sarceno, 2014 WL 4380680, at
*6. This Court denied the defendants’ motions and held that the purported settlement
agreements were unenforceable at a hearing on August 6, 2014. Id.
Following the denial of the summary judgment motions, the parties engaged in further
settlement negotiations, conducted through counsel, while simultaneously engaging in discovery
and motions practice. Choi and Choi Mot. ¶¶ 26–27; Choi and Eun Mot. ¶¶ 26–27. These
negotiations resulted in the two settlement agreements for which the parties now seek the Court’s
imprimatur.
The two motions and the settlement agreements to which the motions refer are identical
in all material respects, except for the defendants involved and the amounts paid to the individual
plaintiffs. See generally Choi and Choi Mot.; Choi and Eun Mot. Specifically, one proposed
settlement agreement is between the plaintiffs and Defendants Byung Choi and Pyoung Choi and
the other proposed settlement agreement is between the plaintiffs and Defendants Kwan Choi

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Defendants Byung Choi and Pyoung Choi filed a Motion to Dismiss, ECF No. 15, which was converted with the
consent of the parties to a Motion for Summary Judgment, Sarceno, 2014 WL 4380680, at *5; id. at *5 n.3.

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and Hwan Eun. Under the agreements, Plaintiff Sarceno would receive a total of $13,781.25,
comprised of $2,880.00 from Byung Choi and Pyoung Choi and $10,901.25 from Kwan Choi
and Hwan Eun; Plaintiff Godoy would receive a total of $19,293.75, comprised of $4,032 from
Byung Choi and Pyoung Choi and $15,261.75 from Kwan Choi and Hwan Eun; Plaintiff Iraheta
would receive a total of $21,131.25, comprised of $4,416.00 from Byung Choi and Pyoung Choi
and $16,715.25 from Kwan Choi and Hwan Eun; Plaintiff Vasquez would receive a total of
$16537.50, comprised of $3,456.00 from Byung Choi and Pyoung Choi and $13,081.50 from
Kwan Choi and Hwan Eun; and Plaintiff Flores would receive a total of $21,131.25, comprised
of $4,416.00 from Byung Choi and Pyoung Choi and $16,715.25 from Kwan Choi and Hwan
Eun. Choi and Choi Mot. ¶¶ 13–17; Choi and Eun Mot. ¶¶ 13–17. The parties stipulate that
these amounts, which include liquidated and actual damages, “represent[] a compromise amount,
negotiated by the Parties’ counsel.” Id. In aggregate, Defendants Byung Choi and Pyoung Choi
will pay the plaintiffs $19,200.00, Choi and Choi Mot. ¶ 10, while Defendants Kwan Choi and
Hwan Eun will pay the plaintiffs $72,675.00, Choi and Eun Mot. ¶ 10.
The proposed settlement agreements provide for the plaintiffs’ attorneys to receive, in the
aggregate, $62,800.00, with Defendants Byung Choi and Pyoung Choi contributing $12,800.00,
Choi and Choi Mot. ¶ 18, and Defendants Kwan Choi and Hwan Eun contributing $50,000.00,
Choi and Eun Mot. ¶ 18. The plaintiffs aver that they have incurred $176,000.00 in attorneys’
fees while litigating this matter, making the settlement equal to approximately thirty-six percent
of the reasonable attorneys’ fees and costs incurred by the plaintiffs. See Choi and Choi Mot. ¶
18; Choi and Eun Mot. ¶ 18.
The proposed settlement agreements release the defendants “from any and all liabilities,
claims, debts, demands, rights of action or causes of action at law or in equity [that] Plaintiffs

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had, have or may have . . . including, but not limited to, any claims or demands based upon or
relating to Plaintiffs’ employment.” Choi and Choi Mot. Ex. 1 (Settlement Agreement between
the plaintiffs and Defendants Byung Choi and Pyoung Choi (the “Choi and Choi Agreement”)) ¶
4, ECF No. 37-1; Choi and Eun Mot. Ex. 1 (Settlement Agreement between the plaintiffs and
Defendants Kwan Choi and Hwan Eun (the “Choi and Eun Agreement”)) ¶ 5, ECF No. 38-1.
The plaintiffs retain the right to exercise “any rights . . . that Plaintiffs may not waive as a matter
of law.” Choi and Choi Agreement ¶ 4; Choi and Eun Agreement ¶ 5. The defendants release
the plaintiffs from “any and all actions, causes of action, claims, demands, damages, costs, loss
of service, expenses, compensation and any consequential damages of any kind whatsoever
which they have and/or may have arising up to and including the date of execution of [the
Settlement Agreements], including, without limitation, any claims or causes of action.” Choi
and Choi Agreement ¶ 5; Choi and Eun Agreement ¶ 6.
Also included in the agreements is a “non-disparagement” provision, under which the
parties “shall not disparage, defame or make any negative or derogatory statements respecting
[the opposing party] to anyone, whether verbally or in writing.” Choi and Choi Agreement ¶ 7;
Choi and Eun Agreement ¶ 8.
II.

LEGAL STANDARD
The D.C. Circuit has not opined about whether judicial approval is required of FLSA

settlements reached after a FLSA suit has been filed or the related issue of whether such approval
is a prerequisite for subsequent judicial enforcement of a private settlement. Another Judge in
this District, citing Supreme Court precedent and the decisions of other Circuits, noted that “[i]t
is a long-held view that FLSA rights cannot be abridged or otherwise waived by contract because
such private settlements would allow parties to circumvent the purposes of the statute by

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agreeing on sub-minimum wages.” Beard v. Dist. of Columbia Hous. Auth., 584 F. Supp. 2d
139, 143 (D.D.C. 2008) (citing D.A. Schulte, Inc. v. Gangi (Gangi)), 328 U.S. 108, 116 (1946);
Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 740 (1981); Taylor v. Progress
Energy, Inc., 493 F.3d 454, 460 (4th Cir. 2007), superseded on other grounds, Whiting v. Johns
Hopkins Hosp., 416 F. App’x 312 (4th Cir. 2011); Lynn’s Food Stores, Inc. v. United States
(Lynn’s Food), 679 F.2d 1350, 1354 (11th Cir. 1982)).
No binding caselaw in this Circuit requires a district court to assess proposed FLSA
settlements ex ante. Declining to do so, however, leaves the parties in an uncertain position. If
the parties privately settle FLSA claims and seek dismissal of the suit by filing a Rule 41 motion,
the private settlement may be held unenforceable if the employer attempts to enforce the
employees’ waiver of claims per the settlement at a later date. Cf. Martin v. Spring Break ’83
Prods., L.L.C., 688 F.3d 247, 256–57 (5th Cir. 2012) (enforcing private settlement agreement
entered into without judicial consent where court determined that a bona fide dispute had existed
when settlement was entered). Indeed, in this action, the parties purported to enter into
settlement agreements without judicial approval, which this Court found to be unenforceable,
since, inter alia, (1) the purported agreements were executed under circumstances raising
significant question about whether “the plaintiffs knowingly, intelligently, and voluntarily”
waived their FLSA rights and whether “a bona fide dispute existed when the Settlement
Agreements were signed,” Sarceno, 2014 WL 4380680, at *11; and (2) both the circumstances
surrounding the execution of the agreements, as well as their terms, demonstrated that the
purported agreements were not the product of arm’s length negotiations and instead reflected an
overreach by the employers, id. at *12–16. “[U]ntil some court determines that there was a bona
fide dispute as to how much plaintiff was owed in wages, and that the offer of judgment fairly

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compromises it, the employer has not eliminated its risk” of future litigation exposure, and could
ultimately find its “settlement” to be ephemeral. Picerni v. Bilingual Seit & Presch., Inc., 925 F.
Supp. 2d 368, 372 (E.D.N.Y. 2013).
III.

DISCUSSION
At the outset, the Court must find that the proposed settlement resolves a bona fide

dispute. See Velez v. Audio Excellence, Inc., No. 10-CV-1448-ORL-22, 2011 WL 4460110, at
*1 (M.D. Fla. Sept. 21, 2011) (noting courts must first consider whether a proposed FLSA
settlement “is ‘a fair and reasonable resolution of a bona fide dispute.’” (quoting Lynn’s Food,
679 F.2d at 1354–55)), report and recommendation adopted by 10-CV-1448-ORL-22, 2011 WL
4460104, at *1 (M.D. Fla. Sept. 26, 2011). A settlement is bona fide if it “reflects a reasonable
compromise over issues that are actually in dispute,” id., since merely waiving a right to wages
owed is disallowed under Gangi, 328 U.S. at 115, and Brooklyn Savings Bank v. O’Neil, 324
U.S. 697, 707 (1945).
In the instant matter, the parties agree that a substantial difference exists between the
number of hours the plaintiffs claim to have worked and the number of hours the defendants’
records show the plaintiffs to have worked, resulting in a concomitant difference in the wages the
plaintiffs claim they are owed. Choi and Choi Mot. ¶¶ 5, 8–9; Choi and Eun. Mot. ¶¶ 5; 8–9.
The parties disagree about the accuracy of the defendants’ records and a factfinder would have to
determine whether and to what extent those records are reliable. See id. Consequently, the most
fundamental question in any FLSA action, namely, the amount of wages owed the plaintiff, is
contested, rendering the settlement agreements a compromise over a bona fide dispute.
Once a bona fide dispute has been established, the court must consider “whether the
agreement reflects a reasonable compromise of disputed issues [rather] than a mere waiver of

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statutory rights brought about by an employer’s overreaching.” Carrillo v. Dandan Inc., No. 13671, 2014 WL 2890309, at *6 (D.D.C. June 26, 2014) (quoting Lliguichuzhca v. Cinema 60,
L.L.C., 948 F. Supp. 2d 362, 365 (S.D.N.Y. 2013)); see also Sarceno, 2014 WL 4380680, at *12.
This approach takes account of “the totality of circumstances” to determine whether an FLSA
settlement is fair, reasonable, and adequate, rather than merely a waiver of rights. See Wolinsky
v. Scholastic, Inc., 900 F. Supp. 2d 332, 335 (S.D.N.Y. 2012). Under this approach, the focus is
on the fairness of the process used by the parties to reach settlement and the practical
ramifications of the settlement. Specifically, the court must consider whether the proposed
settlement (1) was the product of “overreaching” by the employer; (2) whether the settlement
was “the product of negotiation between represented parties following . . . [a]rm’s length
bargaining[;]” and (3) whether there exist serious impediments to the collection of a judgment by
the plaintiffs. Carrillo, 2014 WL 2890309, at *6 (internal quotations omitted).
In making this evaluation, a “[c]ourt should be mindful of the strong presumption in
favor of finding a settlement fair.” Velez, 2011 WL 4460110, at *1. Indeed, courts must be
aware that “after all, settlement is a compromise, a yielding of the highest hopes in exchange for
certainty and resolution.” In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig.,
55 F.3d 768, 806 (3d Cir. 1995); see also Crabtree v. Volkert, Inc., No. 11-529, 2013 WL
593500, at *3 (S.D. Ala. Feb. 14, 2013) (noting that “the Court is generally not in as good a
position as the parties to determine the reasonableness of an FLSA settlement” (quoting Bonetti
v. Embarq Mgmt. Co., 715 F. Supp. 2d 1222, 1227 (M.D. Fla. 2009)) (internal quotation marks
omitted)).
Applied to the instant settlement, the Court is satisfied that the two settlement agreements
represent a fair and reasonable compromise between the parties. As to the first element, whether

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the settlement is a result of employer “overreaching,” the parties have not provided an estimate
as to the total amount of money the plaintiffs claim to be owed, making an evaluation of where
the settlement amount falls between the plaintiffs’ position and the defendants’ impossible. Cf.
Carrillo, 2014 WL 2890309, at *7 (discussing $22,000 gap between plaintiffs’ asserted claim for
wages owed and defendants’ belief as to maximum exposure). Nevertheless, keeping in mind
the “presumption in favor of finding a settlement fair,” Velez, 2011 WL 4460110, at *1, the
Court is reluctant to reject the appraisal of the parties’ counsel that the amounts agreed upon are
a reasonable compromise, given the counsel’s extensive experience in pursuing and defending
FLSA actions generally and familiarity with the underlying facts in this case, Choi and Choi
Mot. ¶¶ 25–26; Choi and Eun Mot. ¶¶ 25–26. 3
The second element, whether the agreement is a result of arm’s length negotiation, is met
easily. The parties engaged in “14 months” of negotiations, during which time the parties were
represented by competent counsel. Choi and Choi Mot. ¶ 26; Choi and Eun Mot. ¶ 26. Some of
these negotiations were supervised by a Magistrate Judge, which further bolsters the arm’s length
nature of the negotiations. See Choi and Choi Mot. ¶ 27; Choi and Eun Mot. ¶ 27.
As for the third element, accounting for the difficulty of collecting any judgment, the
plaintiffs aver that the settlement amounts “account[] for the difficulty for Plaintiffs in obtaining
and collecting upon a judgment and the substantial risks inherent in the litigation of a wage and
hour dispute.” Choi and Choi Mot. ¶ 29; Choi and Eun Mot. ¶ 29. Given the substantial dispute
over the accuracy of the records that would be central to any resolution of this matter at trial, the
Court is satisfied that the settlement appropriately considers the potential benefits and pitfalls of
proceeding to trial.

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The Court also notes that the agreed upon wage amounts are in addition to those amounts already paid to the
plaintiffs pursuant to the pre-litigation agreements, which the Court found unenforceable.

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Additionally, the plaintiffs aver that they have had ample time to discuss this agreement
with counsel. Choi and Choi Mot. ¶ 19; Choi and Eun Mot. ¶ 19. The negotiated attorneys’ fees
represent less than half of the total recovery and less than forty percent of the costs incurred. See
Carrillo, 2014 WL 2890309, at *7 (approving settlement agreement where attorneys’ fees
accounted for slightly more than fifty percent of total recovery).
As for the mutual non-disparagement clause, Choi and Choi Agreement ¶ 7; Choi and
Eun Agreement ¶ 8, and the broad mutual releases of liability, Choi and Choi Agreement ¶¶4–5;
Choi and Eun Agreement ¶¶ 5–6, the Court need not opine “as to the enforceability of those
terms,” since its “review of a proposed FLSA settlement is properly limited only to those terms
precisely addressing the compromised monetary amounts to resolve pending wage and overtime
claims,” Carrillo, 2014 WL 2890309, at *8. With that limitation on its review and approval, the
Court finds that the proposed settlement agreements do not represent a waiver of rights in
violation of the FLSA.
IV.

CONCLUSION
For the reasons stated above, the parties’ Joint Motions to Approve Settlement

Agreements, ECF Nos. 37 and 38, are granted in part, and the settlement agreements are
approved with the aforementioned limitation. An appropriate Order accompanies this
memorandum opinion.
Digitally signed by Beryl A. Howell
DN: cn=Beryl A. Howell, o=District
Court for the District of Columbia,
ou=District Court Judge,
email=[e-mail]
urts.gov, c=US
Date: 2015.01.29 11:12:55 -05'00'

Date: January 29, 2015

__________________________
BERYL A. HOWELL
United States District Judge

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