Romero v. ABCZ Corp. et al

Filing 145

OPINION AND ORDER re: 144 JOINT MOTION for Settlement Parties' Joint Motion for Approval of FLSA Settlement, filed by Sheldon Romero. The parties have agreed to a total settlement of $100,000.00. The parties have also agreed th at $3,727.25 of the settlement figure will be allocated to reimburse plaintiff's counsel for their out-of-pocket costs, $32,090.88 (or one-third) of the remaining $96,272.75 will be paid to plaintiff's counsel as fees and th e remaining $64,181.87 will be paid to plaintiff. I approve the settlement in this matter. In light of the settlement, the action is dismissed with prejudice and without costs. The Court shall retain jurisdiction to enforce the settlement agree ment. See Hendrickson v. United States, 791 F.3d 354, 358 (2d Cir. 2015). The Clerk of the Court is respectfully requested to mark this matter closed. (Signed by Magistrate Judge Henry B. Pitman on 6/12/2017) Copies Transmitted By Chambers. (ras)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

FILED

-----------------------------------x
SHELDON ROMERO, individually and
on behalf of all others similarly
situated,
14 Civ. 3653

(HBP)

Plaintiff,
OPINION
AND ORDER

-againstABCZ CORP., et al.,
Defendants.

-----------------------------------x
PITMAN, United States Magistrate Judge:

This matter is before me on the parties'
tion to approve their settlement

joint applica-

(Docket Item ("D.I.")

144).

All

parties have consented to my exercising plenary jurisdiction
pursuant to 28 U.S.C. § 636(c).
Plaintiff formerly worked for defendants and seeks, by
this action, to recover allegedly unpaid wages.
brought under the Fair Labor Standards Act
U.S.C. §§ 201

et~.,

The action is

(the "FLSA"), 29

and the New York Labor Law (the "NYLL")

Plaintiff also asserts claims based on defendants' alleged
failure to maintain certain records and to provide certain
notices as required by the Wage Theft Prevention Act.

The action

was commenced as a collective action with respect to the FLSA
claim and was conditionally certified as such.

Although 26

individuals initially opted in to the collective action, they
subsequently opted out of it
2015
127))

(Opt-Out Statement, filed July 23,

(D.I. 70); Opt-Out Statement, dated Dec. 16, 2016

(D.I.

Thus, the only parties to the settlement are the named

plaintiff and the named defendants.
Plaintiff alleges he was employed as a disc jockey at
defendants' strip club from approximately January 26, 2008 to
April 22, 2014.

Plaintiff claims that during this period, he

never received any wages from defendants; instead, plaintiff was
only compensated by tips from the dancers who worked there.
Plaintiff claims he is owed $51,518.19 in unpaid minimum wage and
$47,999.09 in liquidated damages,

interest and statutory damages

for alleged violations of the Wage Theft Prevention Act.
Defendants deny plaintiff's allegations.
the number of hours plaintiff claims to have worked.

They dispute
Defendants

also contend that plaintiff was an independent contractor after
December 2012, as evidenced by a disc jockey agreement that
classified plaintiff as an independent contractor.

In support of

this argument, defendants assert that plaintiff was directed and
controlled not by defendants, but by the dancers.

Although the action was also commenced as a putative class

action with respect to the Labor Law claims, the parties reached
the proposed settlement prior to the matter being certified as a
class action.
2

I held a lengthy settlement conference on April 26,
2017 that was attended by the parties and their counsel.

There

was a protracted discussion of the strengths and weaknesses of
the parties' respective positions.

Although the parties did not

settle their dispute at the settlement conference, they subsequently reached an agreement after some of the defendants disclosed their financial records.
The parties have agreed to a total settlement of
$100,000.00.

The parties have also agreed that $3,727.25 of the

settlement figure will be allocated to reimburse plaintiff's
counsel for their out-of-pocket costs,

$32,090.88

(or one-third)

of the remaining $96,272.75 will be paid to plaintiff's counsel
as fees and the remaining $64,181.87 will be paid to plaintiff.
Court approval of an FLSA settlement is appropriate
"when [the settlement] [is] reached as a result of
contested litigation to resolve bona fide disputes."
Johnson v. Brennan, No. 10 Civ. 4712, 2011 WL 4357376,
at *12 (S.D.N.Y. Sept. 16, 2011).
"If the proposed
settlement reflects a reasonable compromise over contested issues, the court should approve the settlement."
Id. (citing Lynn's Food Stores, Inc. v. United
States, 679 F.2d 1350, 1353 n.8 (11th Cir. 1982)).
Agudelo v. E & D LLC,
(S.D.N.Y. Apr.

4,

12 Civ.

2013)

(Baer,

960

(HB),

D.J.)

2013 WL 1401887 at *1

(alterations in original)

"Generally, there is a strong presumption in favor of finding a
settlement fair,

[because] the Court is generally not in as good

3

a position as the parties to determine the reasonableness of an
FLSA settlement."
2d 362,

365

Lliguichuzhca v. Cinema 60, LLC,

(S.D.N.Y. 2013)

tion marks omitted).

(Gorenstein, M.J.)

948 F.

Supp.

(internal quota-

"Typically, courts regard the adversarial

nature of a litigated FLSA case to be an adequate indicator of
the fairness of the settlement."
F.R.D.
Stores,

467,

476

(S.D.N.Y. 2013)

Inc. v. United States,

Beckman v. KeyBank, N.A.,

293

(Ellis, M.J.), citing Lynn's Food
supra,

679 F.2d at 1353-54.

The

presumption of fairness in this case is bolstered by the caliber
of the parties' attorneys.

Based upon their pre-conference

submissions and their performance at the settlement conference,
it is clear to me that all parties are represented by counsel who
are extremely knowledgeable regarding all issues in the case and
who are well suited to assess the risks of litigation and the
benefits of the proposed settlement.
In Wolinsky v. Scholastic Inc.,
335

(S.D.N.Y.

900 F.

2012), the Honorable Jesse M.

District Judge,

Supp. 2d 332,

Furman, United States

identified five factors that are relevant to an

assessment of the fairness of an FLSA settlement:
In determining whether [a] proposed [FLSA] settlement is fair and reasonable, a court should consider
the totality of circumstances, including but not limited to the following factors:
(1) the plaintiff's
range of possible recovery; (2) the extent to which the
settlement will enable the parties to avoid anticipated
burdens and expenses in establishing their respective
4

claims and defenses; (3) the seriousness of the litigation risks faced by the parties; (4) whether the settlement agreement is the product of arm's-length bargaining between experienced counsel; and (5) the possibility of fraud or collusion.
(Internal quotation marks omitted).

The settlement here satis-

fies these criteria.
First, after deduction of attorneys'

fees and costs,

the net settlement represents approximately 64.5% of plaintiff's
total damages,
interest.

i.~.,

actual,

liquidated and statutory damages and

Thus, the net settlement amount provides plaintiff

with almost two-thirds of his claimed damages.
Second, the settlement will entirely avoid the burden,
expense and aggravation of litigation.

Defendants dispute the

number of hours plaintiff claims to have worked.

Additionally,

the parties disagree whether plaintiff was an employee or an
independent contractor.

Trial preparation would potentially

require additional depositions to explore these issues.

The

settlement avoids the necessity of conducting these depositions.
Third, the settlement will enable plaintiff to avoid
the risks of litigation.

There can be no assurance concerning

the conclusions the fact finder would reach concerning the number
of hours worked or plaintiff's status as an employee.

Litigation

would require testimony as to the nature of plaintiff's duties,
which would raise issues of credibility.
5

Thus,

it is uncertain

whether, or how much, plaintiff would recover at trial.
Bodon v. Domino's Pizza, LLC, No.
588656 at *6

(E.D.N.Y. Jan.

09-CV-2941

16, 2015)

(SLT),

See

2015 WL

(Report & Recommendation)

("[T]he question [in assessing the fairness of a class action
settlement]

is not whether the settlement represents the highest

recovery possible .

. but whether it represents a reasonable

one in light of the many uncertainties the class faces

"

(internal quotation marks omitted)), adopted sub nom . .Qy, Bodon
v.

Domino's Pizza,

Inc.,

2015 WL 588680

Massiah v. MetroPlus Health Plan,
2012 WL 5874655 at *5

(E.D.N.Y.

Inc., No.

(E.D.N.Y. Nov. 20,

Feb. 11, 2015);

11-cv-05669

2012)

(BMC),

("[W]hen a settle-

ment assures immediate payment of substantial amounts to class
members, even if it means sacrificing speculative payment of a
hypothetically larger amount years down the road,
reasonable .

"

settlement is

(internal quotation marks omitted; assessing

fairness of class action settlement)).
Fourth, because I presided over the settlement conference that preceded the settlement,

I know that the settlement is

the product of arm's-length bargaining between experienced
counsel.

Both counsel represented their clients zealously at the

settlement conference.
Fifth, there are no factors here that suggest the
existence of fraud.

The settlemenl was reached shortly after a
6

mediation before the Court,

further negating the possibility of

fraud or collusion.
The settlement agreement also contains a release.

It

provides that plaintiff releases defendants from
any and all past and present
. claims
. of any
kind, whether at common law, pursuant to statute,
ordinance or regulation, and whether arising under
federal, state, local or other applicable law, that are
based upon federal, state or local laws governing
overtime pay, wage payments, failure to provide wage
statements and/or wage notices, or otherwise arise out
of or relate to the facts, acts, transactions,
occurrence[s], events or omissions alleged in the
Action or which could have been alleged in the Action
("Released Claims").
The Released Claims include,
without limitation, claims under the FLSA, the New York
Minimum Wage Act, [NYLL] §§ 650 et ~·, the New York
Wage Payment Act, [NYLL] §§ 190 et ~·, the New York
Department of Labor regulations, 12 N.Y.C.R.R. part
142, all other statutes and regulations related to the
foregoing, and all claims that were made or could have
been made in this case.
However, nothing herein shall release or preclude
(i) any claims that arise after execution of this
Agreement, (ii) any claims that cannot be waived by
operation of law, and/or (iii) any right to file a
charge with the United States Equal Employment Opportunity Commission ("EEOC") or the National Labor Relations Board ("NLRB") .
(Letter from Brent E.

Pelton, Esq., Taylor B. Graham, Esq., and

Rex Whitehorn, Esq., to the undersigned, dated May 30, 2017
144)

("Pelton Letter"), Ex.

1

§

(D.I.

2(a)-(b)).

This release is problematic because the last clause of
the first paragraph quoted above is a general release that runs

7

only in favor of defendants.

Although the first sentence of the

release defines "Released Claims" narrowly to include only claims
regarding conduct at issue in this lawsuit, the second sentence
expands the definition of "Released Claims."
the second sentence,

Specifically, in

"Released Claims" is defined as,

inter alia,

"all claims that were made or could have been made in this case"
(Pelton Letter, Ex. 1
Fed.R.Civ.P.

§

2 (a)

(emphasis added)).

Pursuant to

18 (a), a party asserting a claim "may join, as

independent or alternative claims,
against an opposing party."

as many claims as it has

Thus, plaintiff could have asserted

in this action any claim that he had against defendants, even if
unrelated to wage-and-hour issues.
release a general release.

This makes the parties'

General releases in FLSA settlements

that run only in favor of the defendants has been routinely
rejected by courts.
Civ. 7942

(HEP),

(Pitman, M.J.)
above,

See Leon-Martinez v. Central Cafe & Deli,

2016 WL 7839187 at *1

(collecting cases).

therefore,

(S.D.N.Y.

Dec.

15

19, 2016)

The language emphasized

is hereby stricken.'

~My striking this language does not void the settlement
agreement because the agreement provides that "[t]he provisions
of this Agreement are severable.
If any provision of this
Agreement is held invalid, the invalidity shall not affect other
provisions or application of the Agreement that can be given
effect without the invalid provision or application" (Pelton
Letter, Ex. 1 § 9).
Therefore, the general release provision can
(continued ... )

8

The settlement agreement also contains a mutual nondisparagement clause

(Pelton Letter,

Ex.

1

§

7).

Because it

includes a carve-out for truthful statements about the litigation,

it too is permissible.

F. Supp. 3d 170, 180 n.65
Weng v. T&W Rest.,
at *4
Dee,

Lopez v. Nights of Cabiria, LLC,

(S.D.N.Y. 2015)

Inc., 15 Civ. 8167

(S.D.N.Y. June 22, 2016)
Inc., 15 Civ.

Apr. 21, 2016)

647

(Nathan,

(AJN),

(Kaplan,

(PAE) (BCM),

96

D.J.); accord
2016 WL 3566849

(Moses, M.J.); see Lopez v.
2016 WL 1626631 at *3

Ploy

(S.D.N.Y.

D.J.)

The settlement agreement also provides that, after
deduction of out-of-pocket costs, one-third of the total settlement amount will be paid to plaintiff's counsel as a contingency
fee.

Contingency fees of one-third in FLSA cases are routinely

approved in this circuit.
Inc.,

15 Civ.

2015)

(Abrams,

814

(RA),

D.J.)

Santos v. EL Tepeyac Butcher Shop

2015 WL 9077172 at *3

(S.D.N.Y.

Dec. 15,

("[C]ourts in this District have declined to

award more than one third of the net settlement amount as attorney's fees except in extraordinary circumstances."), citing Zhang
v. Lin Kumo Japanese Rest.
5122530 at *4

Inc.,

(S.D.N.Y. Aug.

13 Civ.

31, 2015)

6667

(PAE),

(Engelmayer,

2015 WL
D.J.)

and

" ( ... continued)
be stricken without affecting the validity of the remaining
provisions.
See Hyun v. Ippudo USA Holdings, 14 Civ. 8706 (AJN),
2016 WL 1222347 at *3 (S.D.N.Y. Mar. 24, 2016) (Nathan, D.J.).
9

Thornhill v. CVS Pharm.,
at *3

Inc., 13 Civ.

(S.D.N.Y. Mar. 20, 2014)

(Furman,

Grand St. Meat & Produce Corp., No.
5308277 at *l

(E.D.N.Y. Sept. 19,

507

(JMF),

D.J.); Rangel v.

13 CV 3234

2013)

2014 WL 1100135

(LB),

639

2013 WL

(approving attorneys'

fees of one-third of FLSA settlement amount, plus costs, pursuant
to plaintiff's retainer agreement,

and noting that such a fee

arrangement "is routinely approved by courts in this Circuit");
Febus v. Guardian First Funding Grp., LLC,
340

(S.D.N.Y. 2012)

(Stein,

D.J.)

("[A]

870 F. Supp. 2d 337,

fee that is one-third of

the fund is typical" in FLSA cases); accord Calle v. Elite
Specialty Coatings Plus,
6621081 at *3
Corp., 10 Civ.
Y. June 22,

Inc., No.

(E.D.N.Y. Nov. 21,
4030

2012)

(LAP) (DCF),

13-CV-6126 (NGG) (VMS),

2014 WL

2014); Palacio v. E*TRADE Fin.
2012 WL 2384419 at *6-*7

(S.D.N.-

(Freeman, M.J.).

Accordingly,

for all the foregoing reasons,

the settlement in this matter.

I approve

In light of the settlement, the

action is dismissed with prejudice and without costs.

The Court

shall retain jurisdiction to enforce the settlement agreement.

10

See Hendrickson v. United States,
2015) .

791 F.3d 354, 358

(2d Cir.

The Clerk of the Court is respectfully requested to mark

this matter closed.
Dated:

New York, New York
June 12, 2017
SO ORDERED

)

HEN~

/~

United States Magistrate Judge
Copies transmitted to:
All Counsel of Record

11