Shearer v. Estep Construction, Inc. et al

Filing 27

ORDER denying without prejudice 22 Motion for Settlement; Adopting in part, rejecting in part, Report and Recommendations - re 23 Report and Recommendations. On or before June 3, 2015, the parties shall: (1) file an amended joint motion for settlement approval in accordance with the above or (2) file a report as to the status of any pending settlement agreement or further litigation in this case. Signed by Judge Carlos E. Mendoza on 5/20/2015. (DJD)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION

WILLIAM SHEARER,
Plaintiff,
v.

Case No: 6:14-cv-1658-Orl-41GJK

ESTEP CONSTRUCTION, INC. and
JEFFREY ESTEP,
Defendants.
/
ORDER
THIS CAUSE is before the Court on the parties’ Joint Motion to Approve Settlement and
to Dismiss With Prejudice (the “Joint Motion,” Doc. 22). United States Magistrate Judge Gregory
J. Kelly submitted a Report and Recommendation (the “R&R,” Doc. 23), which recommends that
this Court (1) find that the parties’ Settlement Agreement (Doc. 22-1) is a fair and reasonable
compromise under the Fair Labor Standards Act (the “FLSA”), 29 U.S.C. § 201 et seq., and (2)
grant the Joint Motion, thereby approving the Settlement Agreement. Thereafter, the parties filed
a Joint Notice of Non-Objection to Report and Recommendation (Doc. 24). For the reasons set
forth below, the Joint Motion will be denied, and the R&R will be accepted in part and rejected in
part.
I.

BACKGROUND

From August 2013 through January 2014, Plaintiff worked as a dump truck driver for
Defendant Estep Construction, Inc., which, at that time, was owned and operated by Defendant
Jeffrey Estep. (Compl., Doc. 1, ¶¶ 2, 8, 13). According to Plaintiff, Defendants “provide[] general
contracting services for residential and commercial construction projects,” and as an employee,

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Plaintiff’s duties included driving dump trucks between job sites and Defendants’ shop. (Id. ¶¶ 11,
17, 23). Plaintiff alleges that Defendants failed to pay Plaintiff required overtime compensation.
(Id. ¶¶ 16, 21, 27–28). Specifically, Plaintiff contends that Defendants miscalculated the number
of hours that Plaintiff worked by failing to include time “spent driving Defendant[s’] dump truck
from the job site back to Defendant[s’] shop at the end of the work day” and by deducting thirty
minutes “per day for a meal break that Plaintiff did not regularly take.” (Id. ¶¶ 17–18). The
necessary assumption seems to be that, if those hours had been accounted for, Plaintiff would have
worked more than forty hours in a given week and that Plaintiff was not sufficiently compensated
for the excess hours.
On October 14, 2014, Plaintiff initiated this case by filing the Complaint, whereby Plaintiff
sets forth a claim for overtime compensation under the FLSA and a claim for unjust enrichment
under state common law. Defendants filed an Answer (Doc. 9), in which they contend that they
“did not willfully violate and, in fact, acted in good faith regarding the requirements of the FLSA.”
(Id. at 5). Thereafter, the parties settled, (see Jan. 21, 2015 Notice, Doc. 18), and on February 11,
2015, the parties jointly moved for approval of their Settlement Agreement.
By way of the Settlement Agreement, Defendants are to pay $6,000.00—of which
$2,000.00 will be paid to Plaintiff, and $4,000.00 will be paid to Plaintiff’s Counsel. (Settlement
Agreement at 2). According to the parties, Plaintiff “is receiving any and all overtime pay or other
wages that [Plaintiff] believes he is due.” (Joint Mot. at 2). 1 Plaintiff has nonetheless forgone
liquidated damages, purportedly as a result of the defenses raised in Defendants’ Answer. (Id.).

1

The parties failed to file answers to the Court’s interrogatories, which require an
accounting of Plaintiff’s claim. (See Scheduling Order, Doc. 11, at 5). Coincidentally, Plaintiff
filed its notice of settlement on the same day that those answers were due. (See id. at 2).

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The Settlement Agreement also contains a pervasive, general release, which states in pertinent
part:
IV. COMPLETE RELEASE
A. Release by PLAINTIFF. In exchange for the consideration
described in paragraph II above and throughout this Agreement,
PLAINTIFF . . . releases DEFENDANTS . . . from any and all
claims or demands he had or may now have (through the Effective
Date of this Agreement as defined in paragraph XIV below) against
the RELEASED PARTIES for any reason. . . . PLAINTIFF
ACKNOWLEDGES, AGREES AND UNDERSTANDS THAT
THIS RELEASE IS A FULL AND FINAL BAR TO ANY AND
ALL CLAIMS OF ANY TYPE THAT HE HAD, OR MAY NOW
HAVE, AGAINST THE RELEASED PARTIES UP THROUGH
THE EFFECTIVE DATE OF THIS AGREEMENT.
B. Release by DEFENDANTS. In exchange for the consideration
set forth herein, DEFENDANTS release PLAINTIFF from any and
all claims or demands of any kind or nature that DEFENDANTS
once had or now have through the Effective Date of this Agreement
as defined in paragraph XIV below against PLAINTIFF.
DEFENDANTS
ACKNOWLEDGE,
AGREE,
AND
UNDERSTAND THAT THIS RELEASE IS A FULL AND FINAL
BAR TO ANY AND ALL CLAIMS OF ANY TYPE THAT THEY
HAD, OR MAY NOW HAVE, AGAINST THE PLAINTIFF UP
THROUGH THE EFFECTIVE DATE OF THIS AGREEMENT.
(Settlement Agreement at 3–5). The release is non-severable. (See id. at 6). In the R&R, Judge
Kelly recommends that the Settlement Agreement be approved, and the parties have notified the
Court that they do not object to that recommendation. 2
II.

DISCUSSION

The parties argue that there is a bona fide dispute as to liability and that the Settlement
Agreement is a fair and equitable resolution of this case. In that vein, the parties request that the

2

The Court may undertake a de novo review of the Joint Motion even if neither party
objected to the R&R. See Stephens v. Tolbert, 471 F.3d 1173, 1176 (11th Cir. 2006).

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Court approve their Settlement Agreement. Nevertheless, the pervasive, general release in the
Settlement Agreement precludes a fairness determination, and the parties’ request will be denied.
“The principal congressional purpose in enacting the Fair Labor Standards Act of 1938 was
to protect all covered workers from substandard wages and oppressive working hours, ‘labor
conditions [that are] detrimental to the maintenance of the minimum standard of living necessary
for health, efficiency and general well-being of workers.’” Barrentine v. Ark.-Best Freight Sys.,
Inc., 450 U.S. 728, 739 (1981) (alteration in original) (quoting 29 U.S.C. § 202(a)). Under the
FLSA, “[a]ny employer who violates the provisions of section 206 or section 207 of this title shall
be liable to the employee or employees affected in the amount of their unpaid minimum wages, or
their unpaid overtime compensation, . . . and in an additional equal amount as liquidated damages.”
29 U.S.C. § 216(b). Section 206 prescribes a federally-mandated minimum hourly wage, and § 207
prescribes an overtime compensation rate of “one and one-half times the regular rate” for each
hour worked in excess of forty hours within a given workweek.
The provisions of the FLSA are mandatory and “cannot be abridged by contract or
otherwise waived.” Barrentine, 450 U.S. at 740. To permit otherwise would “‘nullify the purposes’
of the [FLSA] and thwart the legislative policies it was designed to effectuate.” Id. (quoting
Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 707 (1945)). Thus, in Lynn’s Food Stores, Inc. v.
United States, 679 F.2d 1350 (11th Cir. 1982), the Eleventh Circuit held that, for civil actions
“brought directly by employees against their employer under [§] 216(b) to recover back wages for
FLSA violations,” such actions may only be compromised or settled following “a stipulated
judgment entered by a court which has determined that a settlement proposed by an employer and
employees, . . . is a fair and reasonable res[o]lution of a bona fide dispute over FLSA provisions.”
Id. at 1353, 1355. Thus, “[i]f a settlement in an employee FLSA suit does reflect a reasonable

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compromise over issues, such as FLSA coverage or computation of back wages, that are actually
in dispute,” the Eleventh Circuit permits “the district court to approve the settlement in order to
promote the policy of encouraging settlement of litigation.” Id. at 1354. Nevertheless, “Lynn’s
Food neither prescribes a method for ‘approving’ an FLSA compromise nor identifies any factor
for evaluating the ‘fairness’ of the compromise.” Moreno v. Regions Bank, 729 F. Supp. 2d 1346,
1349 (M.D. Fla. 2010).
A.

General Releases

The parties do not specifically address the fairness of the Settlement Agreement’s general
release, which provides that each party releases the other “from any and all claims or demands he
had or may now have . . . against [the other party] for any reason.” (Settlement Agreement at 4–
5). On recommendation, Judge Kelly notes that there is no consensus in the Middle District of
Florida regarding the permissibility of such overly-broad, general releases in FLSA settlements.
(See R&R at 6–7 (comparing Bright v. Mental Health Res. Ctr., Inc., No. 3:10-cv-427-J-37TEM,
2012 WL 868804, at *4 (M.D. Fla. Mar. 14, 2012), and Moreno, 729 F. Supp. 2d at 1350–52, with
Bacorn v. Palmer Auto Body & Glass, LLC, No. 6:11-cv-1683-Orl-28KRS, 2012 WL 6803586, at
*2 (M.D. Fla. Dec. 19, 2012), and Vergara v. Delicias Bakery & Rest., Inc., No. 6:12-cv-150-Orl36KRS, 2012 WL 2191299, at *2–3 (M.D. Fla. May 31, 2012))). Ultimately, the R&R
recommends that this Court find that the general release is not unfair because “the parties’ releases
are essentially identical” and because the parties—“are no longer in an employment relationship”;
“are also settling a state law claim”; and “are represented by counsel.” (Id. at 7). Respectfully, this
Court disagrees.
In Moreno v. Regions Bank, the parties sought judicial approval of their settlement
agreement, which purported to settle the plaintiff’s FLSA claim and required that the plaintiff

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waive “any and all claims of any nature whatsoever . . . known or unknown.” 729 F. Supp. 2d at
1346–47. United States District Judge Steven D. Merryday held that such a release was unfair and
declined approval. Id. at 1352–53. Particularly, Judge Merryday noted that “[a]n employee who
executes a broad release effectively gambles, exchanging unknown rights for a few hundred or a
few thousand dollars to which he is otherwise unconditionally entitled.” Id. at 1351. Judge
Merryday further observed that such releases are incapable of valuation and unfairly leverage the
employee’s FLSA claim to effect a release of non-FLSA claims. Id. at 1351–52. In Bright v. Mental
Health Resource Center, Inc., United States District Judge Roy B. Dalton made similar
observations: (1) such general releases provide a windfall to employers “should some unknown
claim accrue to the employee at a later time,” and (2) “the indeterminate nature of general releases
also prevents the Court from being able to evaluate the claims that have been waived by employees,
thereby making a fairness determination difficult if not impossible.” 2012 WL 868804, at *4. Judge
Dalton held that “[p]ervasive, overly broad releases have no place in settlements of most FLSA
claims.” Id.
Here, like in Moreno and Bright, the pervasive, general release in the parties’ Settlement
Agreement precludes a fairness determination. The fundamental impediment relates to the
valuation of unknown claims. At the most basic level, a general release comprehends the parties’
desire for complete disengagement, the value of which, for the plaintiff, exceeds the expected value
of the forgone claims. In non-FLSA cases, the plaintiff’s internal valuation process is immune
from judicial scrutiny. However, in FLSA cases, the court is tasked with determining the fairness
of the settlement, see Lynn’s Food, 679 F.2d at 1355, which requires judicial assessment of the
proposed consideration, including forgone claims. Where, as here, the plaintiff releases “any and
all claims . . . he had or may now have,” (Settlement Agreement at 4), that task is “difficult if not

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impossible,” Bright, 2012 WL 868804, at *4. Particularly, Plaintiff purports to be owed $4,000.00
under the FLSA, which includes $2,000.00 for overtime compensation and $2,000.00 for
liquidated damages. According to the parties, Defendants have raised a bona fide dispute as to
liability, and as a result, Plaintiff has agreed to accept $2,000.00, minus the value of the forgone,
unknown claims. Based on the limited record, the Court lacks any guidance regarding the
probability or the value of the released claims; thus, the Court cannot determine, within any
reasonable degree of certainty, the expected value of such claims. Therefore, the release precludes
a fairness determination.
To be sure, the mutuality of the general release does little to resolve the issue. Particularly,
Defendants purport to release Plaintiff from “any and all claims . . . of any kind or nature.”
(Settlement Agreement at 5). While Defendants’ reciprocal release confers a benefit upon Plaintiff,
that release is equally as indeterminate as Plaintiff’s release, and for the reasons stated above, the
Court is unable to undertake a fairness determination. Moreover, the parties’ settlement of
Plaintiff’s state law claim for unjust enrichment does not negate Lynn’s Food ‘s judicial approval
requirement. As noted, the release of non-FLSA claims is generally not subject to judicial scrutiny.
However, where, as here, the state law claim mimics the FLSA claim and pursues the same relief
based on the same conduct, the release of the state law claim does not render judicial scrutiny
unnecessary.
In sum, based on the record thus far, the Settlement Agreement’s pervasive, general release
evades assessment. As a result, the Court cannot determine whether the terms of the Settlement
Agreement indicate a fair and reasonable resolution over FLSA liability. The R&R will be rejected
to the extent it recommends otherwise, and the parties’ Joint Motion will be denied without
prejudice.

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B.

Remaining Terms

The R&R also recommends that the remaining terms of the Settlement Agreement be
approved. The Court agrees, and the R&R will be accepted to that extent.
III.

CONCLUSION

Accordingly, it is ORDERED and ADJUDGED as follows:
1. The parties’ Joint Motion to Approve Settlement and to Dismiss With Prejudice
(Doc. 22) is DENIED without prejudice.
2. The Report and Recommendation (Doc. 23) is ACCEPTED in part and
REJECTED in part.
3. On or before June 3, 2015, the parties shall: (1) file an amended joint motion for
settlement approval in accordance with the above or (2) file a report as to the status
of any pending settlement agreement or further litigation in this case.
DONE and ORDERED in Orlando, Florida on May 20, 2015.

Copies furnished to:
Counsel of Record

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