Leon-Martinez et al v. Central Cafe & Deli et al

Filing 39

OPINION AND ORDER: All parties have consented to my exercising plenary jurisdiction pursuant to 28 U.S.C. § 636(c). Accordingly, within 30 days of the date of this Order, the parties are to provide a revised settlement agreement that eliminates the foregoing issues and a rational explanation for the allocation of the settlement proceeds. (As further set forth in this Order.) (Signed by Magistrate Judge Henry B. Pitman on 4/13/2017) Copies Sent By Chambers. (cf)

USDCSDNY

DOCUMENT

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

ELECTRONICALLY FILED

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DOC#:------

DATE FILED:

/i

'4 3ft1

CARLOS LEON-MARTINEZ, Himself
and on behalf of all others
similarly situated, et al.,
15 Civ. 7942

:
-. f

(HBP)

Plaintiffs,
OPINION
AND ORDER

-againstCENTRAL CAFE & DELI, Jointly
and severally, et al.,
Defendants.

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PITMAN, United States Magistrate Judge:

This matter is before me on the parties' joint application to approve the parties' settlement (Letter from Thomas J.
Lamadrid, Esq., to the undersigned, dated Mar. 29, 2017
Item ("D. I.")

37)

("Lamadrid Letter")).

(Docket

All parties have con-

sented to my exercising plenary jurisdiction pursuant to 28
U.S.C. § 636(c).
This is an action brought by four individuals who were
formerly employed by defendants as restaurant workers 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. §§ 201
Law (the "NYLL") .

et~.,

and the New York Labor

Plaintiffs also assert claims based on defen-

dants' alleged failure to maintain certain payroll records and to
provide certain notices as required by the Wage Theft Prevention
Act

(the "WTPA").

Although the action was commenced as a collec-

tive action with respect to the FLSA claim, the parties reached
the proposed settlement prior to the matter being conditionally
certified as a collective action.

Thus, the only parties to the

settlement are the named plaintiffs and the named defendants.
Defendants deny plaintiffs' allegations.

Defendants

claim that they maintained weekly payroll reports for each
plaintiff that showed the number of hours plaintiffs worked each
week, their earnings for the first forty hours worked at the
employees' regular rate, their earnings for overtime worked at
the employees' overtime rate, spread-of-hours pay, deductions for
meals, additions for uniforms and bonus/adjustment entries.
Defendants also claim that plaintiffs signed most of their weekly
payroll reports.
I held a lengthy settlement conference on May 31, 2016
that was attended by the parties and their counsel.

There was a

protracted discussion of the strengths and weaknesses of the
parties' respective positions; however, the parties were not able
to come to a settlement at the conference.

Rather, the parties

agreed to resolve the dispute in August 2016 for a total settlement amount of $18,000.00, to be distributed among the plaintiffs
2

based on the duration of each plaintiff's employment with defendants.

The parties have also agreed that $642.44 of the settle-

ment figure will be allocated to reimburse plaintiffs' counsel
for their out-of-pocket costs, $5,785.85 (or one-third) of the
remaining $17,357.56 will be paid to plaintiffs' counsel and that
the balance will be paid to plaintiffs.

The length of employment

of each plaintiff, the amount claimed by each plaintiff 1 and the
net amount that will be received by each plaintiff after deduction for legal fees and costs are as follows:

Plaintiff

Length of
Employment

Amount
Claimed

Net
Settlement
Amount

Fernando Meza Ramos

6 years

$104,970.00

$3,967.44

Carlos Leon-Martinez

6 years

$101,506.00

$3,967.44

Victor Bautista
Sanchez

4 years

$55,070.00

$2,644.96

Jose Antonio Lopez

1. 5 years

$75,153.00

$991.86

I previously refused to approve the settlement agreement (Amended Order, dated Dec. 21, 2016 (D.I. 36)).

First,

given the relatively modest size of the settlement fund in
comparison to plaintiffs' claims, I ordered specific information
concerning defendants' assets.

Second, the settlement had an

overly broad release, and it was unclear what claims were being
1

The amount claimed by each plaintiff includes the allegedly
unpaid wages, liquidated damages and statutory damages for
alleged violations of the WTPA.
3

released.

I ordered the parties to more clearly and narrowly

define what was being released.
The parties have submitted a renewed application to
approve their settlement.

In accordance with my previous Order,

counsel provided evidence of defendants' dire financial condition
(Letter from Jian Hang, Esq., to the undersigned, dated Mar. 29,
2017

(D.I.

38), Ex. A).

Counsel has also revised the release so

that plaintiffs are releasing only those claims arising under the
FLSA, NYLL, WTPA, New York Code Rules and Regulations and claims
for unpaid minimum, regular and overtime wages and for notice and
recordkeeping penalties.

However, upon further review of the

proposed settlement, several significant problems remain.
First, the unexplained disproportionate allocation of
the settlement proceeds is not acceptable.

The parties have

allocated the settlement funds based on the length of each
plaintiff's employment rather than the amount of damages each
plaintiff claims.

As a result, Lopez would receive a smaller

settlement than Sanchez, even though Lopez claims greater damages
than Sanchez.

Additionally, while Sanchez receives 4.8% of his

claimed damages, Ramos receives 3.8% of his damages, Leon-Martinez receives 3.9% and Lopez only receives 1.3%.

I cannot approve

the settlement without a rational explanation for the allocation
of the settlement proceeds.
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Second, the settlement agreement contains a provision
prohibiting plaintiffs from assisting in a lawsuit or proceeding
against defendants.

Specifically, it provides that plaintiffs

"shall not hereafter directly or indirectly .

in

. assist

any lawsuit, charge, claim or proceeding, in any forum .
against Defendants arising out of or relating to any allegation
or claim that Plaintiff has brought in the Action, unless directed by court order or subpoena"

(Lamadrid Letter, Ex. 1

~

3)

Such a provision in an FLSA settlement is contrary to the remedial purposes of the statute.
4114

See Zapata v. Bedoya, No. 14-CV-

(SIL), 2016 WL 4991594 at *2 (E.D.N.Y. Sept. 13, 2016);

Lopez v. Ploy Dee, Inc., 15 Civ. 647
(S.D.N.Y. Apr. 21, 2016)

(AJN), 2016 WL 1626631 at *3

(Nathan, D.J.); Alvarez v. Michael

Anthony George Constr. Corp., No. 11 CV 1012 (DRH) (AKT), 2015 WL
3646663 at *l (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.).
Third, the settlement agreement bars plaintiffs from
ever working for defendants or their parents, subsidiaries,
affiliates, successors, assigns or divisions
Ex. 1

~

6).

A provision limiting plaintiffs' employment opportu-

nities is not acceptable.
Civ. 8194

(Lamadrid Letter,

Baikin v. Leader Sheet Metal, Inc., 16

(ER), 2017 WL 1025991 at *l (S.D.N.Y. Mar. 13, 2017)
5

(Ramos, D.J.).

Such a provision is in direct conflict with the

FLSA's "primary remedial purpose:

to prevent abuses by unscrupu-

lous employers, and remedy the disparate bargaining power between
employers and employees."
Inc., 796 F.3d 199, 207
824

Cheeks v. Freeport Pancake House,

(2d Cir. 2015), cert. denied, 136 S. Ct.

(2016) .
Accordingly, within 30 days of the date of this Order,

the parties are to provide a revised settlement agreement that
eliminates the foregoing issues and a rational explanation for
the allocation of the settlement proceeds.
Dated:

New York, New York
April 13, 2017
SO ORDERED

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

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