Najera v. Royal Bedding Company, LLC
Filing
16
MEMORANDUM & ORDER: The court concludes that the Settlement Agreement is fair and reasonable. Thus, the settlement is APPROVED and the Stipulation of Dismissal is SO ORDERED. Signed by Judge Nicholas G. Garaufis on 6/3/2015. (Lee, Tiffeny)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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JUAN NAJERA,
D/f
Plaintiff,
MEMORANDUM & ORDER
-against-
13-CV-1767 (NGG) (MDG)
ROYAL BEDDING COMPANY, LLC,
Defendant.
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NICHOLAS G. GARAUFIS, United States District Judge.
I.
BACKGROUND
On April 2, 2013, Plaintiff Juan Najera commenced this action against Defendant Royal
Bedding Company, LLC, seeking-among other things-unpaid overtime, liquidated damages,
spread of hours, and attorney's fees and costs, pursuant to the Fair Labor Standards Act
("FLSA"), 29 U.S.C. §§ 201, et seq., and the New York Labor Law§§ 650, et seq. (Compl.
(Dkt. 1) ~~ 1-2.) Plaintiff alleges that he was formerly employed by Defendant to assemble box
springs contained in Defendant's mattresses, and that Plaintiff regularly worked in excess of 40
hours per week without receiving statutory overtime payments or spread of hours pay. (Id.
W 12-14.)
Although no attorney ever appeared on behalf of Defendant-which also never filed
an answer-the docket reflects that nearly one year after Plaintiff filed his Complaint, the parties
began pursuing settlement discussions before Magistrate Judge Marilyn D. Go. (See
Feb. 7, 2014, Min. Entry.) During these discussions, Plaintiff was represented by the law office
of Ulloa & Castillo, LLP, whom Plaintiff retained for the purpose of this litigation (Compl.
~
15); Defendant was represented by its President, Wellbbis Trinidad (see. e.g., Mar. 26, 2014,
Min. Entry).
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On September 3, 2014, Plaintiff filed a Settlement Agreement and Release (the
"Settlement Agreement," or the "Agreement") (Dkt. 11 ), as well as a stipulation of voluntary
dismissal (Stip. of Dismissal (Dkt. 12)), pursuant to Federal Rule of Civil
Procedure 41(a)(l)(A)(ii). On September 15, 2014, however, the court notified the parties that
settlements of FLSA claims must be reviewed for fairness and reasonableness, and the court
lacked sufficient information to have "a factual basis upon which to evaluate the settlement and
any attorney's fee award contained therein." (Sept. 15, 2014, Order.) For that reason, the court
directed Plaintiff to advise the court, by letter or affirmation, of: "(1) the estimated value of
Plaintiff's original claims, (2) the amount of the settlement that is allocated to attorney's fees, (3)
the experience of the counsel in wage and hour suits, (4) the arm's-length nature of the parties'
negotiations, and (5) the hours billed by Plaintiffs counsel." (Id. (citation omitted).)
Over six months later, on April 17, 2015, Plaintiff filed a letter responding to the court's
instruction. (Apr. 17, 2015, Pl. Ltr. ("Pl. Ltr.") (Dkt. 14).) The court has now reviewed
Plaintiff's letter, as well as the Settlement Agreement itself. For the following reasons, the court
concludes that the terms of the settlement are fair and reasonable.
II.
DISCUSSION
A.
Legal Standard
The FLSA places '"strict limits on an employee's ability to waive claims for fear that
employers [will] coerce employees into settlement and waiver.'" Mosquera v. Masada Auto
Sales. Ltd., No. 09-CV-4925 (NGG), 2011WL282327, at *1 (E.D.N.Y. Jan. 25, 2011) (quoting
Lev. SITA Info. Networking Computing USA. Inc., No. 07-CV-86 (JS), 2008 WL 724155, at *1
(E.D.N.Y. Mar. 13, 2008)). Consequently, absent direct supervision by the Secretary of Labor,
FLSA claims may be voluntarily dismissed pursuant to an out-of-court settlement for less than
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the full statutory damages amount only where the district court has had an opportunity to
scrutinize the proposed settlement for fairness and to approve of its content. See Archer v. TNT
USA Inc., 12 F. Supp. 3d 373, 387 (E.D.N.Y. 2014); Socias v. Vornado Realty L.P., 297
F.R.D. 38, 40-41 (E.D.N.Y. 2014); Wolinsky v. Scholastic Inc., 900 F. Supp. 2d 332, 334-37
(S.D.N.Y. 2012). In scrutinizing the proposed settlement, courts consider "'whether the
agreement reflects a reasonable compromise of disputed issues rather than a mere waiver of
statutory rights brought about by an employer's overreaching.'" Mosquera, 2011 WL 282327,
at *1 (quoting Le, 2008 WL 724155, at *l).
When reviewing an FLSA settlement that does not involve a certified class, district courts
typically examine the agreement to assess the following factors: (1) the complexity, expense, and
likely duration of the litigation; (2) the stage of the proceedings and the amount of discovery
completed; (3) the risks of establishing liability; (4) the risks of establishing damages; {5) the
ability of the defendants to withstand a larger judgment; and (6) the range of reasonableness of
the settlement amount in light of the best possible recovery and all the risks of litigation. See.
~.Misiewicz
v. D'Onofrio Gen. Contractors Corp., No. 08-CV-4377 (KAM) (CLP), 2010
WL 2545439, at *4 (E.D.N.Y. May 17, 2010) (report and recommendation) (quoting Alleyne v.
Time Moving & Storage Inc., 264 F.R.D. 41, 54 (E.D.N.Y. 2010)), adopted, 2010 WL 2545472
(E.D.N.Y. June 18, 2010). In addition, the court also considers whether the settlement is the
result of arm's-length negotiations conducted in good faith by counsel with significant
experience litigating wage and hour suits. See D' Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d
Cir. 2001).
When an FLSA settlement includes an allotment for attorney's fees, the court must also
evaluate the reasonableness of the fees. 29 U.S.C. § 216(b); see also Rangel v. 639 Grand St.
3
Meat& Produce Corp., No. 13-CV-3234 (LB), 2013 WL 5308277, at *1 (E.D.N.Y.
Sept. 19, 2013) (observing that in FLSA cases, district courts in the Second Circuit routinely
approve of fees that amount to one-third of the total recovery). This ensures that the agreement
is not influenced by a conflict between the interests of counsel and the interest of a plaintiff in
obtaining the best possible recovery. See Wolinsky, 900 F. Supp. 2d at 336 (citing Silva v.
Miller, 307 F. App'x 349, 351 (11th Cir. 2009) (per curiam)).
B.
Analysis
Having considered the relevant factors, the court is satisfied that the Settlement
Agreement represents a fair and reasonable resolution of Plaintiff's claims. Under the terms of
the Agreement, Defendant will pay a total of $10,000 (Settlement Agreement at para. 3), of
which Plaintiff will receive $8,000 in damages, with the remaining $2,000 to be paid to
Plaintiff's counsel as attorney's fees. (Pl. Ltr. at I.) Given Plaintiff's assertion that the original
value of his claim was approximately $8,320 1 (id. at 1), his recovery of more than 95% certainly
constitutes a reasonable resolution in light of the best possible recovery. See Alleyne, 264
F.R.D. at 57-58 (finding 17% recovery to be reasonable).
Other factors also support the court's determination that the Settlement Agreement is fair
and reasonable. For example, not only did Defendant dispute the number of weeks Plaintiff
worked each year, but neither Plaintiff nor Defendant maintained any records of Plaintiff's time
at work. (Id.) Consequently, insofar as the parties disputed the precise value of Plaintiff's claim,
Plaintiff faced obvious risks in establishing damages. In fact, Plaintiff specifically agreed to
forgo liquidated damages to account for this dispute and the ensuing litigation risks. (@
1
Plaintiff estimates the value of his claim by arguing that while he was owed $520 per week (based on wages of$10
per hour at 40 hours per week ($400), plus overtime wages of $15 per hour at 8 hours per week ($120)), he was only
paid $480 per week, leaving a deficiency of $40 per week. (Pl. Ltr. at 1.) Because Plaintiff claims that he worked
52 weeks per year-with no vacation-for four years, he is owed $8,320 ($40 per week x 52 weeks per year x 4
years) in linpaid overtime. (MJ
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In addition, although it has been over two years since Plaintiff filed his Complaint, the
parties reached this settlement at an early phase of the litigation-before Defendant filed an
answer, before the parties engaged in fact discovery, and before any dispositive motion practice.
Instead, the parties engaged in extensive settlement negotiations, first in Plaintiff's counsel's
office, on three occasions (id.), and then before Judge Go, on at least six occasions over the
course of more than three months. (See Feb. 7, 2014, Min. Entry; Mar. 26, 2014, Min. Entry;
Apr. 16, 2014, Min. Entry; Apr. 23, 2014, Min. Entry; Apr. 24, 2014, Min. Entry; May 13, 2014,
Min. Entry.) Moreover, there is evidence that these negotiations were conducted at arm's length.
According to Plaintiffs counsel, whose stated goal was maximizing Plaintiff's recovery, the
parties only reached this Agreement after Judge Go applied "some pressure" on Defendant to
make certain concessions and accept the ultimate settlement amount of $10,000. (Id.)
The court also determines that the attorney's fees awarded under the Agreement are
reasonable. Pursuant to the Agreement, Plaintiffs counsel will be awarded $2,000, which
represents 20% of the total recovery. (See iQJ As a percentage of the overall settlement amount,
this is less than the one-third contingency fees that are commonly accepted in the Second Circuit
in FLSA cases. See Rangel, 2013 WL 5308277, at *l; Palacio v. E*TRADE Fin. Corp.,
No. 10-CV-4030 (LAP) (DCF), 2012 WL 2384419, at *6 (S.D.N.Y. June 22, 2012) (finding
FLSA class counsel's request for one-third of the total recovery to be fair and reasonable using
the "percentage-of-recovery method, which is consistent with the 'trend in this Circuit"' (quoting
McDaniel v. Cnty. of Schenectady, 595 F.3d 411, 417 (2d Cir. 2010))). Plaintiff's counsel,
however, represents that it has only five years of practice handling general civil litigation
matters, and "some experience" handling wage and hour claims in district court. (See Pl. Ltr.
at 1.) Thus, a reduced award appropriately reflects and appears commensurate with counsel's
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more limited experience relative to attorneys who have received higher fees in the past. See,
~.Palacio, 2012 WL 2384419, at *5 (noting that counsel has "substantial experience
prosecuting and settling employment class actions ... and are well-versed in wage and hour law
and in class action law").
Furthermore, the lower award of $2,000 also constitutes a significant reduction from the
amount counsel would have charged for its work. According to counsel, Plaintiff was billed
for 14 hours of work at a rate of $250 per hour, for a total of $3,500. (Pl. Ltr. at 1.) Counsel
represents that it agreed to accept a discount of $1,500--representing more than 40% of its total
bill-however, "in large measure because Defendant's financial situation did not permit recovery
of the entire amolint." (Id. at 1-2.) Moreover, on an adjusted basis, counsel's effective hourly
rate of $143 per hour is far less than the hourly billing rates typically approved in this district.
See Konits v; Karahalis, 409 F. App'x 418, 422:(2d Cir. 2011) (summary order) (affirming
district court's holding that "the prevailing rates for experienced attorneys in the Eastern District
of New York cases range from approximately $300-400 per hour") (internal quotation marks
omitted); Estrella v. P.R. Painting Corp., 596 F. Supp. 2d 723, 725 (E.D.N.Y. 2009) (noting that
hourly rates approved in this district range from $200 to $350 for partners, and approving rate of
$250 per hour in calculating attorney's fees award for FLSA plaintiffs). Since the Agreement
provides that Plaintiff will recover more than 95% of his alleged claim, while his attorneys will
receive less than 60% of their typical fees (at an effective hourly rate that is less than half of
what is usually considered appropriate), it is clear that Plaintiff's counsel's first priority was to
ensure Plaintiffwould obtain the best possible recovery. See Wolinsky, 900 F. Supp. 2d at 336.
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In these circumstances, the court is convinced that this Agreement reflects a "'reasonable
compromise of disputed issues.'"
Mosguer~
2011 WL 282327, at *1 (quoting Le, 2008
WL 724155, at *l).
III.
CONCLUSION
For the foregoing reasons, the court concludes that the Settlement Agreement is fair and
reasonable. Thus, the settlement is APPROVED and the Stipulation of Dismissal is
SO ORDERED. The Clerk of Court is respectfully directed to close this case.
SO ORDERED.
s/Nicholas G. Garaufis
l'ficHOLAS h."'oA.RAlWIS
United States District Judge
Dated: Brooklyn, New York
June~ , 2015
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