Castellon De Paz et al v. Breeding Construction, Inc. et al
Filing
4
FLSA MEMORANDUM to Counsel. Signed by Judge Paul W. Grimm on 5/19/2015. (aos, Deputy Clerk)
UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND
CHAMBERS OF
PAUL W. GRIMM
UNITED STATES DISTRICT JUDGE
6500 CHERRYWOOD LANE
GREENBELT, MARYLAND 20770
(301) 344-0670
(301) 344-3910 FAX
MEMORANDUM TO COUNSEL
This memorandum is provided to assist counsel in addressing common problems that
arise in the settlement of actions brought under the Fair Labor Standards Act (“FLSA”), 29
U.S.C. §§ 201–219.
Congress enacted the FLSA to protect workers from the poor wages and long hours that
can result from significant inequalities in bargaining power between employers and employees.
To that end, the statute’s provisions are mandatory and generally are not subject to bargaining,
waiver, or modification by contract or settlement. See Brooklyn Sav. Bank v. O’Neil, 324 U.S.
697, 706 (1945). Court-approved settlement is an exception to that rule, “provided that the
settlement reflects a ‘reasonable compromise of disputed issues’ rather than ‘a mere waiver of
statutory rights brought about by an employer’s overreaching.’” Saman v. LBDP, Inc., No.
DKC-12-1083, 2013 WL 2949047, at *2 (D. Md. June 13, 2013) (quoting Lynn’s Food Stores,
Inc. v. United States, 679 F.2d 1350, 1354 (11th Cir. 1982)).
I. Inapplicability of Fed. R. Civ. P. 41(a)(1)(A)
All settlement agreements that resolve claims under the FLSA must receive court
approval. Gionfriddo v. Jason Zink, LLC, No. RDB-09-1733, 2012 WL 1077765, at *2 (D. Md.
Mar. 29, 2012); Hoffman v. First Student, Inc., No. WDQ-06-1882, 2010 WL 1176641, at *2 (D.
Md. Mar. 23, 2010). And, “since Rule 41(a)(1)(A)(ii) makes dismissal under such rule ‘[s]ubject
to . . . any applicable federal statute,’ and since the FLSA requires court approval of such
dismissals, the parties may not effectuate such dismissal through use of a stipulation of
dismissal.” Minsterman v. S.L. Nusbaum Realty Co., No. 10-303, 2011 WL 9687817, at *1 (E.D.
Va. Jan. 21, 2011). Some courts have reached the opposite conclusion, see, e.g., Picerni v.
Bilingual Seit & Preschool Inc., 925 F. Supp. 2d 368 (E.D.N.Y 2013), but the objectives of the
FLSA, as announced in O’Neil, cannot be guaranteed through the use of dismissals under Fed. R.
Civ. P. 41(a)(1)(A) as a vehicle for avoiding court review and approval of FLSA settlements.
II. Factors Considered in the Approval of FLSA Settlements1
In reviewing FLSA settlements for approval, “district courts in this circuit typically
employ the considerations set forth by the Eleventh Circuit in Lynn’s Food Stores.” Saman,
2013 WL 2949047, at *3 (citing Hoffman v. First Student, Inc., No. WDQ-06-1882, 2010 WL
1176641, at *2 (D. Md. Mar. 23, 2010); Lopez v. NTI, LLC, 748 F. Supp. 2d 471, 478 (D. Md.
2010)). The settlement must “reflect[] a fair and reasonable resolution of a bona fide dispute
1
Counsel may find it helpful to review a recent opinion discussing the standards governing the
settlement of FLSA actions. Amaya v. Young & Chang, Inc., No. PWG-14-749, 2014 WL
3671569 (D. Md. July 22, 2014); Duprey v. Scotts Co. LLC, No. PWG-13-3496, 2014 WL
2174751, at *5 (D. Md. May 23, 2014).
over FLSA provisions.” Id. The Court considers (1) whether there are FLSA issues actually in
dispute, (2) the fairness and reasonableness of the settlement in light of the relevant factors from
Rule 23, and (3) the reasonableness of the attorneys’ fees, if included in the agreement. Id.
(citing Lynn’s Food Stores, 679 F.2d at 1355; Lomascolo v. Parsons Brinckerhoff, Inc., No. 081310, 2009 WL 3094955, at *10 (E.D. Va. Sept. 28, 2009); Lane v. Ko-Me, LLC, No. DKC-102261, 2011 WL 3880427, at *2–3 (D. Md. Aug. 31, 2011)).
A. Bona Fide Dispute and Fairness and Reasonableness
In deciding whether a bona fide dispute exists as to a defendant’s liability under the
FLSA, courts examine the pleadings in the case, along with the representations and recitals in the
proposed settlement agreement. See Lomascolo, 2009 WL 3094955, at *16–17. If a bona fide
dispute exists, courts evaluate the fairness and reasonableness of the settlement using the
following factors:
“(1) the extent of discovery that has taken place; (2) the stage of the proceedings,
including the complexity, expense and likely duration of the litigation; (3) the
absence of fraud or collusion in the settlement; (4) the experience of counsel who
have represented the plaintiffs; (5) the opinions of [] counsel . . . ; and (6) the
probability of plaintiffs’ success on the merits and the amount of the settlement in
relation to the potential recovery.”
Saman, 2013 WL 2949047, at *3 (quoting Lomascolo, 2009 WL 3094955, at *10).
B. Attorneys’ Fees
Under 29 U.S.C. § 216(b), “‘the wronged employee should receive his full wages plus the
[liquidated damages] penalty without incurring any expense for legal fees or costs.’” Silva v.
Miller, 307 F. App’x 349, 351 (11th Cir. 2009) (quoting Maddrix v. Dize, 153 F.2d 274, 275–76
(4th Cir. 1946) (emphasis added)). Thus, although contingent-fee arrangements are allowed, and
sometimes even preferred, in many common-fund cases, see, e.g., Goldenberg v. Marriott PLP
Corp., 33 F. Supp. 2d 434, 437 (D. Md. 1998) (citing authority from multiple circuits), a district
court may abuse its discretion by approving, without an independent evaluation for
reasonableness, an FLSA settlement that includes a contingent fee, Lyle v. Food Lion, Inc., 954
F.2d 984, 988 (4th Cir. 1992) (concluding that “it was an abuse of discretion for the district
court . . . to forgo the lodestar approach and to calculate reasonable attorney’s fees by adopting
instead the attorney’s customary contingent-fee arrangement”); Llora v. H. K. Research Corp.,
No. 96-1552, 1997 WL 693062, at *1 (4th Cir. Oct. 29, 1997) (concluding that “it was an abuse
of discretion for the district court to award attorney’s fees that equaled one-third of the judgment
award without adequately explaining its reasoning for failing to use the lodestar amount”). This
is because “permitting contractual waiver of . . . the right to minimum wage, overtime
compensation, liquidated damages, and attorney’s fees—would nullify the purposes of the
[FLSA].” Walthour v. Chipio Windshield Repair, LLC, 944 F. Supp. 2d 1267, 1272 (N.D. Ga.
2013), aff’d, 745 F.3d 1326 (11th Cir. 2014), cert. denied, 134 S. Ct. 2886 (U.S. 2014).
Consequently, allowing a contingent fee that distributes a percentage of the damages
award to the attorney, effectively allowing the employee to waive both the statutorily-mandated
attorneys’ fees and the portion of her wages and liquidated damages allocated to attorneys’ fees,
2
would be an impermissible infringement on the statutory award to the employee. See Walthour,
944 F. Supp. 2d at 1272; see also O’Neil, 324 U.S. at 706 & n.16. Nonetheless, an attorneys’ fee
award negotiated pursuant to a contingent-fee arrangement can be approved if the court finds
(1) that the fees were negotiated separately from the damages, so that they do not infringe on the
employee’s statutory award, and (2) that they are reasonable under the lodestar approach. See
Silva, 307 F. App’x at 351 (“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.”); Lyle, 954
F.2d 984, 988 (4th Cir. 1992); Llora, 1997 WL 693062, at *1. For guidance in providing the
information necessary for the Court’s lodestar analysis, counsel should review Chief Judge
Chasanow’s opinion in Saman, where the parties were required to supplement their motion with
the necessary information. 2013 WL 2949047, at *6–7.
III. Confidentiality Clauses and Sealing of Court Records
Filings in an FLSA case should not be sealed unless warranted under existing legal
standards that govern motions to seal. See Kianpour v. Rest. Zone, Inc., No. DKC 11-0802, 2011
WL 3880463, at *2 (D. Md. Aug. 30, 2011). If the parties believe that sealing is appropriate,
they must satisfy the standard set forth in Doe v. Pub. Citizen, 749 F.3d 246 (2014).
Additionally, a confidentiality clause in an FLSA settlement agreement is “not permitted
without compelling reasons.” Salamone v. Balt. Diamond Exch., Inc., No. JKB-14-1507, 2014
WL 2930788, at *1 (D. Md. June 27, 2014) (citing Carpenter v. Colonial Mgmt. Grp., LP, No.
JKB-12-686, 2012 WL 2992490, at *2 (D. Md. July 19, 2012)). In Carpenter, this Court held
that such a provision “contravene[d] the important purposes of the [FLSA] and defeat[ed] both
public and private efforts to enforce it.” 2012 WL 2992490, at *2. Additionally, if the parties
negotiate a settlement agreement of an FLSA claim that includes a confidentiality agreement, the
attachment of that settlement agreement as an exhibit to a motion to approve the settlement may
have the practical effect of rendering the confidentiality agreement nugatory. See Salamone,
2014 WL 2930788, at *1 (approving FLSA settlement agreement while noting that “the
[confidentiality] provision is of no practical effect”).
IV. Conclusion
If a settlement agreement is executed, the parties should file a joint motion seeking
approval of the proposed agreement. The supporting memorandum should include specific
factual representations and legal argument demonstrating what bona fide disputes exist and how
the proposed settlement constitutes a fair and reasonable compromise of those disputed issues,
using the factors explained above. The parties should attach the proposed settlement agreement
as an exhibit, along with the evidence necessary for me to evaluate the attorneys’ fees using the
lodestar approach, as explained above.
Dated: May 19, 2015
/S/
Paul W. Grimm
United States District Judge
3
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?