Fu et al v. Mee May Corp. et al

Filing 62

OPINION AND ORDER: The parties reached their proposed settlement prior to the settlement conference that I had scheduled in this matter, and therefore, my knowledge of the underlying facts and the justification for the settlement is limited to counse ls' representations in the letters submitted in support of the settlement. (As further set forth in this Order.) Accordingly, within 30 days of the date of this Order, the parties are to provide the information sought and a revised settlement agreement that eliminates the foregoing issues. (Signed by Magistrate Judge Henry B. Pitman on 3/31/2017) Copies Sent By Chambers. (cf)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-----------------------------------x

USDCSDNY
DOCUMENT
ELECTRONICALLY FILED
DOC#: _____________

DATE FILED: 3

61 Az

BAO CHENG FU, GUANG LI ZHANG
and ZHONG QI LIN,
15 Civ. 4549 (HBP)
Plaintiffs,
OPINION
AND ORDER

-againstMEE MAY CORP., JIANG QING CHEN,
KUANG CHI WU, JANE DOE #1-10,
JOHN DOE #1-10 and JOHN WU,
Defendants.

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

This matter is before me on the parties'
tion to approve the parties' settlement
55).

joint applica-

(Docket Item ("D.I.")

All parties have consented to my exercising plenary juris-

diction pursuant to 28 U.S.C. § 636(c).
This is an action brought by three individuals who
formerly made deliveries at a small Chinese restaurant in
Manhattan and seeks allegedly unpaid wages,
and spread-of-hours pay.
Labor Standards Act

overtime premium pay

The action is brought under the Fair

(the "FLSA"), 29 U.S.C. §§ 201

the New York Labor Law.

et~.,

and

Plaintiffs also assert claims based on

defendants' alleged failure to maintain certain payroll records,
to provide certain notices as required by the Labor Law and to

reimburse plaintiffs for the cost of bicycles that plaintiffs
used to make deliveries.
The parties reached their proposed settlement prior to
the settlement conference that I had scheduled in this matter,
and therefore, my knowledge of the underlying facts and the
justification for the settlement is limited to counsels' representations in the letters submitted in support of the settlement.
Plaintiffs advise that when they were employed by defendants,
they received a fixed weekly wage, regardless of the hours they
actually worked.

They further claim that this fixed weekly wage

was less than the minimum wage and overtime premium required by
law.

Defendants claim that they maintained wage and hour docu-

ments, including time cards and pay records.

Defendants also

claim that they provided plaintiffs with proper notice of the tip
credit and were, therefore, entitled to pay a reduced hourly
rate.

Finally, defendants also claim that plaintiffs' allega-

tions concerning the number of hours they worked are inflated.
The parties have agreed to a total settlement of
$24,000.00.

The parties have also agreed that $3,000.00 of the

settlement figure will be allocated to reimburse plaintiffs'
counsel for their out-of-pocket costs, $7,000

(or one-third) of

the remaining $21,000.00 will be paid to plaintiffs' counsel as
fees and the remaining $14,000.00 will be divided among plain. 2

tiffs.

The amounts claimed by each of the plaintiffs 1 and the

net amount that will be received by each plaintiff after deduction for legal fees and costs are as follows:

Plaintiff

Amount
Claimed

Net
Allocable
Share

Bao Cheng Fu

$19,255.00

$2,500.00

Guang Li Zhang

$9,673.16

$8,000.00

Zhong Qi Lin

$6,497.00

$3,500.00

I previously refused to approve the settlement agreement because the parties did not provide sufficient information
to enable me to determine whether the proposed settlement was
fair and reasonable (D.I. 60).

Specifically, the parties failed

to state the damages claimed by each plaintiff, and the basis for
each claimed amount, and an explanation of the allocation of the
settlement amount.

2

The parties have submitted a renewed application for
settlement approval (Letter from Jian Hang, Esq., to the undersigned, dated Dec. 22, 2016 (D.I. 61)

("Hang Letter")).

In

accordance with my previous Opinion and Order, counsel has

1

The amounts claimed are the allegedly unpaid wages,
exclusive of liquidated damages and exclusive of damages for the
Labor Law notice claims.
2

Specifically, I expressed a concern about Fu's share of the
settlement amount, especially as compared to Lin's share.
3

provided each plaintiff's amount of allegedly unpaid wages, dates
worked and weekly pay (and the fact that it was in cash), the
number of hours Fu worked each week and an explanation for the
allocation of the settlement amount.
review of the proposed settlement,

However, upon further

several significant problems

remain.
First,

again the parties have not provided me suffi-

cient information to allow me to determine whether the proposed
settlement is fair and reasonable.

Counsel failed to provide the

number of hours Lin claims to have worked each week.

3

Thus,

I

have no way to assess the basis for his claim for unpaid wages.
Second, the allocation of the settlement proceeds is
unsatisfactory.

As an explanation for the allocation,

counsel

states that Lin and Zhang settled their claims privately, without
the involvement of counsel.

Additionally,

Fu will also be

receiving $6,256.00 as part of a settlement with defendant Chen
in a different FLSA action with nearly identical allegations, Mao
v. Mee Chi Corp., 15 Civ. 1799

(S.D.N.Y.).

Finally, counsel

claims that there are issues with respect to defendants'

3

liquid-

Although counsel also failed to provide the number of hours
Zhang worked each week, this information can be found in the
amended complaint (First Amended Collective and Class Action
Complaint and Jury Trial Demand, dated Aug. 7, 2015 (D.I. 11) ~
29).
The number of hours Lin worked does not appear in the
amended complaint.
4

ity and ability to pay a larger amount (Hang Letter, at 2).
However, a settlement in a different matter involving a different
employer has no bearing on the settlement here.

If an individual

has two employers, both of whom failed to pay the minimum wage, a
generous settlement from one employer cannot justify a meager
settlement from the other.

Moreover, even if the two settlements

are combined, Fu's total recovery would be $8,756.00, or 45% of
his claim.

Zhang, on the othe1 hand, is receiving approximately
Although I recognize that Zhang

83% of his claimed unpaid wages.

is receiving $8,000.00 only because of private negotiations and
that there may be issues with defendants' liquidity, this unjustified, disparate allocation to Fu is not acceptable under Cheeks
v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015),
cert. denied, 136 S. Ct. 824

(2016).

Third, the settlement agreement contains a provision
prohibiting plaintiffs from cooperating in any action or proceeding against defendants.

Specifically, it provides that plain-

tiffs
shall not, in any way, voluntarily assist any individual or entity in commencing or prosecuting any action
or proceeding against Defendants .
. or in any way
voluntarily participate or cooperate in any such action
or proceeding.
This prohibition applies to every stage
of any action or proceeding, including any trial,
hearing, pretrial or prehearing preparation, pre-litigation investigation or fact gathering, administrative
agency procedure or arbitral procedure, and bars Plain5

tiffs from voluntarily testifying, providing documents
or information, advising, counseling or providing any
other form of voluntary assistance to any person or
entity who wishes to make or is making any claim against Defendants.
(Letter from Marisol Santos, Esq., to the undersigned, dated July
20, 2016 (D.

55)

I.

("Santos Letter"), Ex. 1

<JI

4).

Such a provi-

sion in an FLSA settlement is contrary to the remedial purposes
of the statute.

See Zapata v. Bedoya, No. 14-CV-4114 (SIL), 2016

WL 4991594 at *2 (E.D.N.Y. Sept. 13, 2016); Lopez v. Ploy Dee,
Inc., 15 Civ. 647
2016)

(AJN), 2016 WL 1626631 at *3 (S.D.N.Y. Apr. 21,

(Nathan, D.J.); Alvarez v. Michael Anthony George Constr.

Corp., No. 11 CV 1012 (DRH) (AKT), 2015 WL 3646663 at *1 (E.D.N.Y.
June 10, 2015); Lopez v. Nights of Cabiria, LLC, 96 F. Supp. 3d
170, 178

(S.D.N.Y. 2015)

(Kaplan, D.J.).

Fourth, the settlement agreement contains a broad,
mutual non-disparagement clause.

A non-disparagement clause in

an FLSA settlement "must include a carve-out for truthful statements about plaintiffs' experience litigating their case."

Lopez

v. Nights of Cabiria, LLC, supra, 96 F. Supp. 3d at 180 n.65;
accord Weng v. T&W Rest.,
3566849 at *4

Inc., 15 Civ. 8167

(S.D.N.Y. June 22, 2016)

(PAE) (BCM), 2016 WL

(Moses, M.J.); see Lopez

v. Ploy Dee, Inc., supra, 2016 WL 1626631 at *3.
Fifth, the settlement agreement contains a general
release.

It provides that plaintiffs "enter into this agreement
6

intending to waive, settle, and release all claims plaintiff had,
have, or might have against defendants"
6).

(Santos Letter, Ex. 1, at

The agreement also provides that plaintiffs "waive any right

or ability to be a class or collective action representative or
to otherwise participate in any putative or certified class,
collective or multi-party action or proceeding based on such a
claim" in which defendants or other releasees are a party (Santos
Letter, Ex. 1

~

3).

Numerous judges in this Circuit have re-

jected general releases in FLSA settlement agreements that are
not limited to wage-and-hour issues.
Central Cafe & Deli, 15 Civ. 7942
(S.D.N.Y. Dec. 19, 2016)

See Leon-Martinez v.

(HBP), 2016 WL 7839187 at *l

(Pitman, M.J.)

(collecting cases); Lopez

v. Poko-St. Ann L.P., 176 F. Supp. 3d 340, 343-45 (S.D.N.Y. 2016)
(Moses, M.J.); see also Boyle v. Robert M. Spano Plumbing &
Heating, Inc., 15 Civ. 2899 (KMK), 2016 WL 1688014 at *3 (S.D.N.Y. Apr. 27, 2016)

(Karas, D.J.)

(approving "broad" release

because it was limited to "'conduct set forth in the Lawsuit
including, claims arising under or pursuant to the Fair Labor
Standards Act, 29 U.S.C. §[§] 201 et

~·

and New York Labor Law,

and its governing regulations'").
Sixth, the settlement agreement bars plaintiffs from
ever working for defendants or its affiliated entities or businesses (Santos Letter, Ex. 1

~

4).
7

Even if the parties have

"irreconcilable differences," as they claim (Santos Letter, Ex. 1
~

4), a provision limiting plaintiffs' employment opportunities

is unacceptable.
8194

Baikin v. Leader Sheet Metal, Inc., 16 Civ.

(ER), 2017 WL 1025991 at *1 (S.D.N.Y. Mar. 13, 2017)

(Ramos,

Such a provision is in direct conflict with the FLSA's

D.J.)

"primary remedial purpose:

to prevent abuses by unscrupulous

employers, and remedy the disparate bargaining power between
employers and employees."

Cheeks v. Freeport Pancake House,

Inc., supra, 796 F.3d at 207.

4

Accordingly, within 30 days of the date of this Order,
the parties are to provide the information sought and a revised
settlement agreement that eliminates the foregoing issues.
Dated:

New York, New York
March 31, 2017
SO ORDERED

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

4

I recognize that I did not address most of these issues
when the parties first sought approval of their settlement
agreement.
However, "[w]isdom too often never comes, and so one
ought not to reject it merely because it comes too late."
Henslee v. Union Planters Nat'l Bank & Tr. Co., 335 U.S. 595, 600
(1949) (Frankfurter, J., dissenting)
8