Brenowitz v. Implant Seminars, Inc. et al
ORDER Approving FLSA Settlement and Closing Case. Signed by Magistrate Judge Jonathan Goodman on 8/10/2017. (jf00)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 17-20184-CIV- GOODMAN
MATTHEW B. BRENOWITZ,
IMPLANT SEMINARS, INC., et al.,
ORDER APPROVING FLSA SETTLEMENT AND CLOSING CASE
This Order addresses a straightforward issue: whether a court may approve as
fair a settlement agreement in a Fair Labor Standards Act (“FLSA”) case in which
counsel receives a contingency contract percentage which is more than double the
amount he would otherwise be entitled to under a straightforward lodestar analysis
calculated by simply multiplying the hourly rate by the number of hours.
Based on the unique facts and legal issues underlying this case, the Court finds
that this settlement agreement is reasonable. The rationale is outlined below.
Plaintiff brought an FLSA case against Defendants, asserting both retaliatory
discharge and failure to pay overtime wages claims. [ECF No. 1]. At the mediation
before the Undersigned, the case settled. [ECF No. 43]. The parties did not at that time
advise the Court about the allocation of the settlement proceeds between the two
claims, nor did they give a breakdown of how the proceeds would be divided between
Plaintiff and his counsel. The parties then consented to the Undersigned’s full
jurisdiction, and United States District Judge Joan A. Lenard referred the case to me for
further proceedings, including trial, entry of final judgment, and a fairness
determination. [ECF Nos. 44; 45].
After the Court reviewed Plaintiff’s counsel’s retainer agreement and billing
records, the Court held a fairness hearing on July 18, 2017, where the Court heard from
counsel regarding the fairness of the FLSA settlement. [ECF Nos. 48-1; 48-2; 49].
At the hearing, Plaintiff’s counsel stated that (1) the total settlement amount is
$125,000; (2) costs are $490; (3) the attorney’s fees Plaintiff’s counsel seeks to recover is
$49,510; and (4) Plaintiff will recover $75,000. The total amount of hours billed at
Plaintiff’s counsel’s hourly rate, as indicated by the billing records, is $20,497. [ECF No.
48-1, p. 10]. The requested attorney’s fees are significantly higher than the hours billed
because the retainer agreement contained a 40% contingency fee provision. [ECF No.
48-2]. At the hearing, defense counsel had no objection to the amount of fees Plaintiff’s
counsel seeks to recover.
The Undersigned then requested supplemental memoranda on whether, under
the factors set out in Lynn's Food Stores, Inc. v. U.S., 679 F.2d 1350, 1353 (11th Cir. 1982),
a district court may approve an FLSA settlement as fair when the plaintiff’s counsel
seeks to recover a contingency fee award that would substantially exceed the amount of
fees the attorney would otherwise receive on an hourly basis. [ECF Nos. 50; 51].
Plaintiff’s counsel submitted a memorandum in compliance with the Court’s Order and
a declaration which included Plaintiff’s counsel’s resume, training, and experience.
[ECF Nos. 52; 52-1].
Defense counsel filed a response, agreeing with Plaintiff’s counsel’s contention
“that the settlement did, in fact, contemplate both the overtime and retaliatory
discharge claim[s], such that a direct application of Lynn’s Food may not be entirely
accurate,” and demurring to the fee arrangement agreed upon between Plaintiff and
Plaintiff’s counsel. [ECF No. 53, pp. 2-3].
In general, the minimum wage and overtime provisions of the FLSA 1 are
mandatory and not subject to negotiation or bargaining between employers and
employees. See Brooklyn Savings Bank v. O’Neil, 324 U.S. 697 (1945). However, there are
two ways employees may settle and waive a claim against their employer for unpaid
minimum wages or overtime pay under the FLSA: (1) if the payment of unpaid
minimum wage/overtime pay is supervised by the Secretary of Labor; or (2) in a private
lawsuit brought by an employee, if the parties present the district court with a proposed
settlement and the court enters an order approving the fairness of the settlement.
29 U.S.C. § 201 et seq.
29 U.S.C. § 216(c); Lynn’s Food Stores, 679 F.2d at 1353; see also Schulte, Inc. v. Gangi, 328
U.S. 108 (1946).
An employee may settle and release FLSA claims against his employer without
the supervision of the Secretary of Labor if all of the following conditions are met: (1)
the settlement occurs in an adversarial context; (2) there are issues of FLSA coverage
and/or computations actually in dispute; and (3) the district court enters an order
approving the settlement after scrutinizing the fairness of the settlement. Lynn’s Food
Stores, 679 F.2d at 1354.
Here, the settlement involves both overtime wages and retaliatory discharge
claims. For the overtime claim, the Court must review the settlement for fairness.
However, court approval of an FLSA retaliatory discharge settlement is not required.
Hernandez v. Iron Container, LLC, No. 13-22170-CIV, 2014 WL 633848, at *1-2 (S.D. Fla.
Feb. 18, 2014). Indeed, only when the settlement of the retaliation claim affects the
fairness of the settlement of the wage claims will the court review the retaliatory
discharge claim for fairness. Id.; Dunbar v. Wolf Bay Lodge, Inc., No. CV 15-00265-CG-M,
2015 WL 6394515, at *1 n.2 (S.D. Ala. Oct. 22, 2015). Here, the Court finds that it is
necessary to analyze whether the settlement as a whole is fair, regardless of the claims
asserted, based on the proposed contingency fee award.
In FLSA cases, the Eleventh Circuit has questioned the validity of contingency fee
agreements. Silva v. Miller, 307 F. App’x. 349, 351 (11th Cir. 2009) (rejecting forty-percent
contingency fee agreement in the settlement of FLSA case, noting that the FLSA
provides for reasonable attorney’s fees and holding that parties will not be permitted to
contract around such provisions in derogation of the FLSA); Zegers v. Countrywide
Mortg. Ventures, LLC, 569 F. Supp. 2d 1259, 1266-68 (M.D. Fla. 2008) (holding that a
forty-percent contingency fee agreement was “not consistent with the purposes of the
FLSA”); see also Skidmore v. John J. Casale, Inc., 160 F.2d 527, 531 (2d Cir. 1947) (“We have
considerable doubt as to the validity of the contingent fee agreement; for it may well be
that Congress intended that an employee’s recovery should be net[.]”)).
However, at least one Southern District of Florida Court has held that Silva and
Zegers did not “dictate the conclusion that [a] forty-percent [contingency award] is per
se unreasonable under the FLSA.” Aguirre v. S. Fla. Multispecialty Assocs. LLC, No. 14CIV-21660, 2014 WL 12539725, at *1 (S.D. Fla. Aug. 19, 2014). The Aguirre Court
summarized, “[p]ut simply, the Court’s duty is to assess the reasonableness of such fees
under the circumstances.” Id. The Undersigned finds the Aguirre Court’s interpretation
of the Silva and Zegers cases persuasive. There is no flat-out rule that contingency
arrangements in FLSA cases are always automatically unreasonable, presumptively
unreasonable, or presumptively reasonable. Instead, the reasonableness of the
contingency arrangement will depend on the specifics of the particular case. Thus, the
Court will follow a similar approach in this case when analyzing whether this 40%
contingency fee award is reasonable.
The Court, however, is “mindful of the strong presumption in favor of finding a
settlement fair.” Romeo v. Colonial Imports, Ltd., No. 6:16-cv-876, 2016 WL 7644854, at *2
(M.D. Fla. Dec. 15, 2016) (citing Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir. 1977)).
The Eleventh Circuit in Silva explained that the “FLSA requires judicial review of
the reasonableness of counsel’s legal fees to assure both that counsel is compensated
adequately and that no conflict of interest taints the amount the wronged employee
recovers under a settlement agreement.” 307 F. App’x. at 351-52. Thus, under this
scenario, a Court may deem a contingency fee award unreasonable if a plaintiff is
sacrificing a portion of his unpaid wages recovery to fund plaintiff’s attorney’s fees.
However, in this case, Plaintiff’s proposed recovery exceeds the amount of
unpaid wages he sought in his statement of claim. In Plaintiff’s statement of claim, he
sought $58,881.12 for overtime pay. [ECF No. 11]. At the fairness hearing, Plaintiff’s
counsel stated that Plaintiff would be recovering $75,000, which exceeds the statement
of claim amount. Based on this, Plaintiff is, without question, not sacrificing his recovery
to fund his counsel’s attorney’s fees. Furthermore, the record is clear that Plaintiff
agreed to a contingency fee arrangement when he signed his counsel’s retainer
agreement. [ECF No. 48-2]. In addition, Plaintiff specifically agreed to the allocation of
settlement proceeds in this case, including the portion of proceeds set aside for his
counsel’s fees based on the 40% contingency arrangement.
The Court also notes that Plaintiff’s retaliation claim was plagued with
significant legal hurdles, which means that Plaintiff’s counsel assumed the risk of
recovering nothing if those hurdles were not cleared.
For example, Plaintiff’s employer did not allegedly retaliate against Plaintiff for
something Plaintiff did, such as complaining about his pay. Instead, Plaintiff’s theory
was that his employer retaliated against his girlfriend, who was also employed by
Plaintiff’s employer, by terminating Plaintiff, because she raised a complaint. Plaintiff
claimed that he was fired because of his girlfriend’s wage claim, not as a result of his
own wage claim. Plaintiff’s theory is that the employer could not, as a practical matter,
retaliate against his girlfriend because she had already resigned. Therefore, under
Plaintiff’s theory, the Defendant employer had no viable retaliation options other than
retaliating against Plaintiff.
But Plaintiff did not submit persuasive legal authority supporting the viability of
this atypical, attenuated retaliation theory. Because of this, the Court finds that
Plaintiff’s counsel took a significant risk when agreeing to take this retaliation case as it
was more than a mere possibility that he would recover no fees if the case did not settle.
Therefore, under the specific, unique facts of this case, the Court finds that the
contingency arrangement is reasonable.
In addition, Plaintiff had to confront the additional issue of whether 29 U.S.C. §
215(a)(3) applies to a retaliation claim based on a labor-related lawsuit filed in another
country. Plaintiff did not present convincing legal authority on this significant issue at
Beyond that, Plaintiff also faced affirmative defenses which, if successful, would
eliminate the possibility of recovering for unpaid overtime. Specifically, Defendants
asserted two exemptions: the administrative exemption and the creative exemption.
Accordingly, the Court considered the factors outlined in Lynn’s Food Stores and
also considered the strengths of the parties’ cases; the factual positions of the parties;
the existence (or lack thereof) of documents supporting or corroborating the parties’
positions; the strengths and weaknesses in the parties’ respective cases; and the parties’
desire to resolve the dispute sooner, rather than later.
The Court finds that the settlement here represents a genuine compromise of a
bona fide dispute. Plaintiff will receive more than his unpaid wage claim and he
therefore did not discount or compromise it to fund his attorney’s contingency-based
fees. All parties involved -- Plaintiff, his counsel, and Defendants -- agreed to settle as a
result of reasonable strategic and financial considerations, including the novel fact
pattern and unusual legal issues. Moreover, the fees allocated to counsel, while greater
than the lodestar, are designed to address the substantial risk which counsel undertook
when agreeing to file this atypical lawsuit. See Hart v. RCI Hosp. Holdings, Inc., No. 09
Civ. 3043 (PAE), 2015 WL 5577713, at *14 (S.D.N.Y. Sept. 22, 2015) (finding multiplier of
1.08 “quite low relative to the multipliers in many cases in which fees have been
approved in this District”); Lizondro-Garcia v. Kefi LLC, No. 12 Civ. 1906 (HBP), 2015 WL
4006896, at *10 (S.D.N.Y. July 1, 2015) (finding “award of $105,000 or one-third of the
fund—a 1.68 multiplier of the lodestar calculation and 1.52 multiplier of plaintiffs’
counsel’s stated hourly rates”—reasonable in light of quality of counsel, time and labor
expended, risks of litigation, and litigation’s magnitude and complexity); Sakiko
Fujiwara v. Sushi Yasuda Ltd., 58 F. Supp. 3d 424, 439 (S.D.N.Y. 2014) (awarding fee
constituting 2.28 multiplier of modified lodestar calculation and noting that “multiplier
near 2 compensates [plaintiffs’ counsel] appropriately” for “the risk associated with
contingent fees in FLSA cases”); see also Escobar v. Fresno Gourmet Deli Corp., No. 16 Civ.
6816, 2016 WL 7048714, at *3-5 (S.D.N.Y. Dec. 2, 2016) (approving FLSA settlement
where the fee award was greater than the modified lodestar). 2
Compare the Southern District of New York cases cited above with Figueroa v.
RSC Corp., No. 6:10-CV-842-ORL-22, 2011 WL 1811684, at *3 (M.D. Fla. Apr. 26, 2011),
report and recommendation adopted, No. 6:10-CV-842-ORL-22, 2011 WL 1837795 (M.D. Fla.
May 12, 2011) (finding that “there is simply no way to justify a fee that is in excess of the
lodestar, even as calculated by the parties.”).
In Figueroa, the plaintiff’s counsel sought to recover under an FLSA settlement a
contingency amount that exceeded full compensation for the plaintiff’s counsel’s time.
Id. Based on this, and the fact that the plaintiff compromised his claim considerably,
Magistrate Judge Baker found that“[s]uch an arrangement smacks of self[-]interest at
the Plaintiff’s expense.” Id. However, in this case, Plaintiff’s recovery is in excess of the
amount stated on his statement of claim. Thus, Figueroa is inapplicable because
Plaintiff’s counsel did not act here with self-interest to Plaintiff’s detriment.
The Undersigned reviewed Plaintiff’s counsel’s billing records. [ECF No. 48]. The
settlement is reasonable not just when viewed in light of Plaintiff’s claims against
Defendants (and Defendants’ defenses to those claims), but also in light of the amounts
that Plaintiff and his counsel will each receive, given that the 40% contingency
arrangement is reasonable (under the unusual circumstances of this case) and duly
accepted by Plaintiff.
The Court finds that the settlement here occurred in an adversarial context and
that there are genuine coverage and computation issues in dispute. The Court further
finds that the settlement reached by the parties represents a reasonable compromise by
both sides and is fair and reasonable.
In doing so, the Undersigned emphasizes that Plaintiff is not compromising his
wage claim, which means that “the settlement is necessarily a fair and reasonable
resolution of a bona fide dispute over FLSA provisions.” Romeo, 2016 WL 7644854, at *3
(citing Lynn's Food Stores, 679 F.2d. at 1354-55); see also Natera v. Mastercorp of Tenn., Inc.,
No. 6:08-cv-2088-Orl-22DAB, 2009 WL 1515747, at *2 (M.D. Fla. June 1, 2009) (finding
“[f]ull recompense of the [FLSA] damage claim is per se fair and reasonable”). To be
sure, Plaintiff’s counsel will be receiving more than twice the lodestar, but, as noted
above, these multipliers are often approved when the risks are substantial.
Accordingly, it is ORDERED and ADJUDGED that the parties’ settlement
agreement is fair and reasonable, the settlement is APPROVED, and this action is
DISMISSED WITH PREJUDICE. The Court reserves jurisdiction to enforce the terms
of the parties’ settlement. The Clerk is directed to CLOSE THIS CASE and deny all
pending motions as moot. 3
DONE AND ORDERED in Chambers at Miami, Florida, on August 10, 2017.
Copies furnished to:
All counsel of record
This Order does not adopt an across-the-board rule authorizing fees in FLSA
cases pursuant to a contingency provision in a retainer agreement. Instead, it uses a
case-specific approach. The mere fact that this Court approved a contingency award in
excess of the lodestar here does not, by any stretch, suggest that similar approvals will
be forthcoming in other FLSA cases.
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