Fu et al v. Mee May Corp. et al

Filing 64

OPINION AND ORDER re: 63 SETTLEMENT AGREEMENT. Given that the parties amended other portions of the settlement agreement to limit the general release, the failure to amend this language appears to be an oversight. Thus, because all of the other fa ctors favor approval of the settlement, I shall give the parties another opportunity to amend the settlement agreement for judicial approval. Accordingly, within 30 days of the date of this Order, the parties are to provide a revised settlement agreement that eliminates the foregoing issue. (Signed by Magistrate Judge Henry B. Pitman on 10/18/2017) Copies Transmitted By Chambers. (ras)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

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

-againstMEE MAY CORP., d/b/a MEE NOODLE
SHOP & GRILL, JIANG QING CHEN,
KUANG CHI WU, JOHN WU (first
name unknown), JOHN DOE and
JANE DOE #1-10,
Defendants.

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

This matter is before me on the parties'
tion to approve the their settlement agreement
( "D. I.")

63) .

joint applica-

(Docket Item

All parties have consented to my exercising

plenary jurisdiction 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, overtime premium pay
and spread-of-hours pay.

The action is brought under the Fair

Labor Standards Act (the "FLSA"), 29 U.S.C.
the New York Labor Law.

§§

201

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,
actually worked.

regardless of the hours they

They further claim that this fixed weekly wage

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

Defendants claim that they maintained wage and hour docuincluding 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
2

fees and the remaining $14,000.00 will be divided among the
plaintiffs.

The amounts claimed by each of the plaintiffs 1 and

the net amount that each will receive after deduction for legal
fees and costs are as follows:

Plaintiff

Amount
Claimed

Net
Allocable
Share

Bao Cheng Fu

$19,256.10

$7,616.00

Guang Li Zhang

$9,672.00

$3,822.00

Zhong Qi Lin

$6,497.06

$2,562.00

The parties previously submitted the settlement agreement for approval in July of 2016 (Letter from Marisol Santos,
Esq., to the undersigned, dated July 20, 2016 (D.I. 55), Ex. 1)
In Opinions and Orders dated November 14, 2016 and March 31,
2017,

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 and because the parties included various provisions that were inconsistent with the principles set forth in the
relevant case law (Opinion & Order, dated Nov. 14, 2016
60); Opinion

&

Order, dated Mar. 31, 2017

(D.I.

62)

(D.I.

("March 2017

:The amounts claimed are the allegedly unpaid wages,
exclusive of liquidated damages and exclusive of damages for the
Labor Law notice claims.
3

The parties subsequently submitted a renewed

Opinion & Order")).

application for approval with amendments to the settlement
agreement

(see Letter from Jian Hang, Esq.,

dated Sept. 25,

2017

(D.I.

to the undersigned,

63); Amendment of Settlement Agreement

and Release Pursuant to Section 8 of the Agreement, dated Sept.
25,

2017

(D.I.

63-1)

("Amendment to Settlement Agreement"))

I have reviewed the docket sheet and the parties'
submissions,

and I now have sufficient evidence regarding the

amount of each plaintiff's claim for unpaid wages, dates worked,
weekly pay (and the fact that it was paid in cash)

and the number

of hours worked each week as well as an explanation for the
allocation of the settlement amount
Lin, dated Oct.

9,

dated Oct. 10, 2015
Oct. 12,

2015

2015

(D.I. 20); Declaration of Guang Li Zhang,

(D.I. 21); Declaration of Bao Cheng Fu, dated

(D.I. 22); Letter from Jian Hang, Esq.,

undersigned, dated Dec. 22,
Hang, Esq.,

(see Declaration of Zhong Qi

2016

(D.I.

to the

61); Letter from Jian

to the undersigned, dated Sept. 25,

2017

(D.I.

63))

The parties have also excised from the agreement
provisions prohibiting plaintiffs from cooperating in any action
or proceeding against defendants and barring plaintiffs from ever
working for defendants or their affiliated entities or businesses
(see Amendment to Settlement Agreement).

The parties have also

amended the broad mutual non-disparagement clause in the agree4

ment to permit truthful statements

(see Amendment to Settlement

Agreement) .
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.
"Generally,

4,

12 Civ.

2013)

960

(Baer,

(HB),

D.J.)

2013 WL 1401887 at *1

(alterations in original)

there is a strong presumption in favor of finding a

settlement fair,

[because] the Court is generally not in as good

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

365

Lliguichuzhca v. Cinema 60,

(S.D.N.Y. 2013)

tion marks omitted).

(Gorenstein, M.J.)

LLC,

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)

Beckman v. KeyBank, N.A.,

293

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

Inc. v. United States, supra,

679 F.2d at 1353-54.

The

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

Based upon the submissions of counsel

it is clear to me that all parties are represented

5

by counsel who are 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. 2012),

District Judge,

900 F. Supp. 2d 332,

the Honorable Jesse M.

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
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).

As discussed further below,

the settlement here satisfies the five criteria enumerated above.
However, because the settlement agreement still includes an
overbroad general release,

I shall provide the parties with

another opportunity to amend the settlement.
First, after deduction of attorneys'

fees and costs,

the net settlement represents approximately 39.5% of the plaintiffs' estimated unpaid wages.

The amount of the settlement

allocated to plaintiff Fu represents 39.6% of his claimed unpaid

6

wages,

the amount allocated plaintiff Zhang represents 39.5% of

his claimed unpaid wages and the amount allocated to plaintiff
Lin represents 39.4% of his claimed unpaid wages.

Given the

risks of litigation, as discussed in more detail below,

the

settlement amount is reasonable.
Second, the settlement will entirely avoid the burden,
Although the parties have

expense and aggravation of litigation.
conducted some discovery,

additional discovery will be needed in

order for to prepare for trial.

Settlement avoids the necessity

of conducting additional discovery and preparing for a trial.
Third,

the settlement will enable plaintiffs to avoid

the risks of litigation.

As noted above, defendants have indi-

cated that they kept records of the hours plaintiffs worked.
Plaintiffs,

therefore,

face the risk that a fact finder may

credit defendants' documentary evidence.

Thus, whether and how

much they would recover at trial is far from certain.
v. Domino's Pizza, LLC, No. 09-CV-2941
*6 (E.D.N.Y. Jan. 16, 2015)

(Report

&

(SLT),

See Bodon

2015 WL 588656 at

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

II

(inter-

nal quotation marks omitted)), adopted sub nom . .Qy, Bodon v.
7

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);

ll-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 quota ti on marks omitted) ) .

Fourth, counsel represents that the settlement is the
product of arm's length bargaining between experienced counsel
and that counsel advocated zealously on behalf of their respective clients during negotiations.
Fifth, there are no factors here that suggest the
existence of fraud or collusion.
The settlement agreement also provides that,

after

deduction of $3,000 of counsel's out-of-pocket costs, approximately 33% of the remaining settlement amount will be paid to
plaintiffs' counsel as a contingency fee.

Contingency fees of

one-third in FLSA cases are routinely approved in this circuit.
See Santos v. EL Tepeyac Butcher Shop Inc.,
2015 WL 9077172 at *3

15 Civ. 814

(S.D.N.Y. Dec. 15, 2015)

(Abrams,

(RA),
D.J.)

("[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
8

Rest.
Aug.

Inc.,
31,

13 Civ.

2015)

6667

(Engelmayer,

Inc.,

13 Civ. 507

2014)

(Furman,

(JMF),

2015 WL 5122530 at *4

D.J.)

(LB),

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

639 Grand St. Meat

2013 WL 5308277 at *l

(approving attorneys'

&

Produce

(E.D.N.Y. Sept.

fees of one-third of FLSA settle-

ment amount, plus costs, pursuant to plaintiffs'
ment,

(S.D.N.Y.

and Thornhill v. CVS Pharm.,

2014 WL 1100135 at *3

D.J.); Rangel v.

Corp., No. 13 CV 3234
19, 2013)

(PAE),

retainer agree-

and noting that such a fee arrangement "is routinely

approved by courts in this Circuit"); Febus v. Guardian First
Funding Grp., LLC,
(Stein,

D. J.)

870 F. Supp. 2d 337,

("[A]

340

(S.D.N.Y.

2012)

fee that is one-third of the fund is typical"

in FLSA cases); accord Calle v. Elite Specialty Coatings Plus,
Inc., No. 13-CV-6126 (NGG) (VMS),
Nov. 21,

2014 WL 6621081 at *3

2014); Palacio v. E*TRADE Fin. Corp.,

(LAP) (DCF),

2012 WL 2384419 at *6-*7

(Freeman, M.J.).
However,

Therefore,

(S.O.N.Y.

10 Civ.

(E.D.N.Y.
4030

June 22,

2012)

the contingency fee is reasonable.

one significant problem remains regarding the

general release in the settlement agreement.
Opinion and Order dated March 31, 2017,

As noted in the

"[n]umerous judges in

this Circuit have rejected general releases in FLSA settlement
agreements that are not limited to wage-and-hour issues"
D.I.

62

(citing cases)).

(see

The Opinion and Order specifically

noted that the language in paragraph 3 and on page 6 of the
9

settlement agreement included releases that were not specifically
limited to the wage-and-hour claims
Order at 6-7).

(see March 2017 Opinion &

In their revised submission,

the parties amended

paragraphs 1.1 and 3 of the settlement agreement to limit plaintiffs'

releases to wage-and-hour claims arising from the allega-

tions at issue in this litigation
Agreement) .

However,

(see Amendment to Settlement

the parties have not amended the language

on page 6 of the settlement agreement that provides that plaintiffs "enter into this agreement intending to waive,
release all claims plaintiff[s]
defendants"
signed,

had,

have,

(Letter from Marisol Santos,

dated July 20,

2016

(0. I. 55),

or might have against

Esq.,

Ex.

settle, and

to the under-

1 at 6).

Given that

the parties amended other portions of the settlement agreement to
limit the general release,
appears to be an oversight.

the failure to amend this language
Thus, because all of the other

factors favor approval of the settlement,

I shall give the

parties another opportunity to amend the settlement agreement for
judicial approval.

10

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

New York, New York
October 18, 2017
SO ORDERED

United States Magistrate Judge
Copies transmitted to:
All Counsel

11