Benavides v. Serenity Spa NY Inc. et al

Filing 121

OPINION AND ORDER: Accordingly, the settlement is approved. In light of the approval of the settlement between Plaintiffs and Serenity Spa, as well as the dismissal of Dai, the Court grants the parties' request that judgment be entered agains t Serenity Spa in accordance with the terms of the Revised Offer of Judgment and that this case be dismissed with prejudice. In sum, for the foregoing reasons, (1) the Rule 23 class is decertified; (2) the parties' settlement, as embodied by the Revised Offer of Judgment and its acceptance, is approved; (3) Dai is dismissed from this case; and (4) the Clerk is directed to enter judgment in favor of Plaintiffs and against Serenity Spa in accordance with the terms of the Revised Offer of Judgment and dismiss this case with prejudice. (Signed by Magistrate Judge James L. Cott on 5/25/2018) (kgo)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------X
:
GLORIA BENAVIDES and FANNY
:
YIN-FANG LIN, on behalf of themselves,
:
FLSA Collective Plaintiffs and the Class,
:
:
Plaintiffs,
:
:
- against :
:
SERENITY SPA NY INC., et ano.,
:
:
Defendants.
:
---------------------------------------------------------------X

May 25, 2018

OPINION AND ORDER
15-CV-9189 (JLC)

JAMES L. COTT, United States Magistrate Judge.
On September 1, 2017, the Court certified this wage-and-hour case as a class
action pursuant to Rule 23 of the Federal Rules of Civil Procedure. In the following
months, the parties negotiated and reached a settlement. On April 13, 2018, the
parties provided the Court with a copy of an offer of judgment made pursuant to
Rule 68 of the Federal Rules of Civil Procedure, which had been accepted by the
plaintiffs. That same day, the parties also submitted a joint letter seeking (1)
decertification of the Rule 23 class; (2) approval of the parties’ settlement, as
embodied by the offer of judgment and its acceptance; (3) dismissal of individual
defendant Yu Qun Dai—the case against whom had been stayed due to Dai’s filing
of Chapter 13 bankruptcy—from this proceeding; and (4) entry of judgment in favor
of the plaintiffs and dismissal of this case with prejudice. For the reasons set forth
below, the parties’ requests are granted.

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I.
A.

Procedural Background
Plaintiff Gloria Benavides filed her complaint against Defendants Serenity

Spa NY Inc. (“Serenity Spa”) and Yu Qun Dai (“Dai”) (jointly, “Defendants”) on
November 20, 2015, alleging violations of the Fair Labor Standards Act (“FLSA”),
New York Labor Law (“NYLL”), and New York State and New York City Human
Rights Laws (Dkt. No. 1). On February 18, 2016, the parties consented to my
jurisdiction for all purposes under 28 U.S.C. § 636(c) (Dkt. No. 17). On May 11,
2016, Benavides filed her first amended complaint (Dkt. No. 35), and Defendants
filed their answer on May 25, 2016 (Dkt. No. 40).
On May 31, 2016, Benavides moved for conditional collective action
certification of her FLSA claims (Dkt. No. 41). Defendants opposed the motion. By
memorandum order dated August 3, 2016, the Court granted Benavides’ motion for
conditional collective certification and directed that notice of the certification, as
well as a consent to sue form, be sent out to potential class members (Dkt. No. 57).
Thereafter, the parties engaged in discovery, during which Defendants produced a
list of names of 52 non-exempted employees who worked at Serenity Spa during the
relevant period (see Dkt. No. 79 at 1).
On August 31, 2016, Benavides filed motions seeking (1) class certification of
her NYLL claims under Rule 23, and (2) summary judgment on her FLSA and
NYLL claims (Dkt. Nos. 71, 75). Defendants opposed both motions. In the interim,
on November 28, 2016, Plaintiff Fanny Yin-Fang Lin joined the action by filing a

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notice of consent to become a plaintiff (Dkt. No. 95). By memorandum opinion and
order dated September 1, 2017, the Court granted Benavides and Lin’s (jointly,
“Plaintiffs”) motion for class certification under Rule 23 but denied their motion for
summary judgment without prejudice (Dkt. No. 98).
By letter dated January 30, 2018, Defendants’ counsel reported that Dai had
filed a petition for Chapter 13 bankruptcy (Dkt. No. 112). That same day the Court
issued an order staying the case as to Dai as required by the automatic stay under
11 U.S.C. § 362(a) (Dkt. No. 113).
On February 22, 2018, Plaintiffs filed a notice of acceptance of a Rule 68 offer
of judgment made by Serenity Spa (Dkt. No. 116). Under the terms of the offer of
judgment, Serenity Spa would “allow Judgment to be entered against it in this
action in the amount of $175,000.00” (id.).1
On March 9, 2018, the Court held a status conference with the parties during
which they reported that they were negotiating a revised offer of judgment. On
April 13, 2018, Plaintiffs filed a notice of acceptance of a revised offer of judgment
from Serenity Spa (Dkt. No. 119, the “Revised Offer of Judgment”). Under the
terms of the Revised Offer of Judgment, Serenity Spa would allow judgment to be
entered against it in favor of the named Plaintiffs, Benavides and Lin, in a total
amount of $20,000, inclusive of attorneys’ fees and costs, to be paid in four
installments of $5,000 (id.). Also on April 13, 2018, the parties filed a joint letter

The offer of judgment was not clear as to whether the amount of $175,000 was
intended to satisfy only the claims of the two named Plaintiffs or of the entire Rule
23 class.
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requesting (1) decertification of the Rule 23 class, (2) approval of the parties’
settlement (as embodied by the Revised Offer of Judgment), (3) dismissal of Dai
from this case due to her ongoing bankruptcy proceeding, and (4) entry of judgment,
based on the terms of the Revised Offer of Judgment, against Serenity Spa, and
dismissal of this case with prejudice (Dkt. No. 120).
B.

Decertification of Rule 23 Class
“An order that grants or denies class certification may be altered or amended

before final judgment.” Fed. R. Civ. P. 23(c)(1)(C). In particular, “a district court
may decertify a class if it appears that the requirements of Rule 23 are not in fact
met.” In re Scotts EZ Seed Litig., No. 12-CV-4727 (VB), 2017 WL 3396433, at *18
(S.D.N.Y. Aug. 8, 2017) (quoting Sirota v. Solitron Devices, Inc., 673 F.2d 566, 572
(2d Cir. 1982)); Wu v. Pearson Educ. Inc., No. 09-CV-6557 (KBF), 2012 WL 6681701,
at *5 (S.D.N.Y. Dec. 21, 2012) (“A district court may—and should—decertify a class
when the standards of Rule 23 have not been met.”). The district court “is afforded
broad discretion in class certification questions” and “has the ability” to, inter alia,
“decertify the class whenever warranted.” MacNamara v. City of New York, 275
F.R.D. 125, 137 (S.D.N.Y. 2011) (quoting Sumitomo Copper Litig. v. Credit Lyonnais
Rouse, Ltd., 262 F.3d 134, 139 (2d Cir. 2001)). However, the district court “may not
disturb its prior certification findings absent some significant intervening event, or
a showing of compelling reasons to reexamine the question.” In re Scotts EZ Seed
Litig., 2017 WL 3396433, at *18 (internal quotations and alteration omitted) (citing
Doe v. Karadzic, 192 F.R.D. 133, 136–37 (S.D.N.Y. 2000)). “Courts faced with a

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motion to decertify must also take account of the progression of the litigation.”
Jermyn v. Best Buy Stores, L.P., 276 F.R.D. 167, 169 (S.D.N.Y. 2011) (citation
omitted); Wu, 2012 WL 6681701, at *4 (“While district courts have broad discretion
over class certification, we are ‘required to reassess class rulings as the case
develops.’”) (quoting Boucher v. Syracuse Univ., 164 F.3d 113, 118 (2d Cir. 1999)).
In this case, the Court finds that the parties have provided sufficiently
compelling reasons to justify decertification of the Rule 23 class. The parties have
represented that of the 52 names of potential class members disclosed by
Defendants, Plaintiffs have been able to obtain addresses for only 34 of these
individuals (Dkt. No. 120 at 1 & Ex. A).2 As such, notice of the Rule 23 certification
could be reliably sent at the present time to, at best, 34 potential class members,
which falls below the “numerosity” threshold in Rule 23 class actions. See, e.g.,
Siegel v. Bloomberg L.P., No. 13-CV-1351 (DLC), 2013 WL 4407097, at *2 (S.D.N.Y.
Aug. 16, 2013) (noting that “[n]umerosity is presumed when a class consists of forty
or more members,” and denying certification to class consisting of 33 members). In
general, certification is no longer appropriate if a class fails to meet one of the
requirements of Rule 23. See, e.g., MacNamara, 275 F.R.D. at 137 (“[e]ach of the
Rule 23 requirements must be satisfied by a preponderance of the evidence” for
class certification to be maintained) (citation omitted).

Specifically, after “conducting a skip trace,” Plaintiffs sent notices of the FLSA
collective certification to 37 individuals, but 3 of these notices were returned as
undeliverable, leaving only 34 individuals for whom potentially reliable addresses
have been identified (Dkt. No. 120 at 1).
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Furthermore, the parties are still in an early phase of litigating the Rule 23
class action claims. The Rule 23 class was certified less than a year ago, and the
parties have not engaged in significant (if any) class-wide discovery. In fact, the
parties have yet to even mail out Rule 23 notices to potential class members; as the
parties point out, “[c]lass members have not yet received notice of the class
certification and are therefore not reliant on this litigation to protect their rights or
toll their statute of limitations” (Dkt. No. 120 at 4); see also Wu, 2012 WL 6681701,
at *5 (“Prior to the point at which notice is sent to class members, a certification
order is ‘inherently tentative.’”) (quoting Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S.
147, 160 (1982)); Karadzic, 192 F.R.D. at 136. Moreover, because the Court denied
Plaintiffs’ motion for summary judgment without prejudice, none of the class claims
has been decided on the merits.3 Decertifying the Rule 23 class at this relatively
early stage is thus unlikely to prejudice any potential class members.
In addition, potential class members are unlikely to be prejudiced by
decertification because their class claims have been tolled through the date of this
Opinion and Order. See, e.g., Scott v. Chipotle Mexican Grill, Inc., No. 12-CV-8333
(ALC) (SN), 2017 WL 1434498, at *1 (S.D.N.Y. Apr. 19, 2017) (“In Rule 23 class
actions and § 216(b) collective actions, the statute of limitations resumes after a
court’s determination to decertify a class.”); Morano v. Intercontinental Capital

Had the class claims been decided on the merits, such a scenario may well have
dictated a different result as to decertification. See, e.g., Woe v. Cuomo, 729 F.2d 96,
107 (2d Cir. 1984) (finding abuse of discretion where district court decertified the
class after granting summary judgment in part).
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Grp., Inc., No. 10-CV-02192 (KBF), 2012 WL 2952893, at *9 (S.D.N.Y. July 17,
2012) (granting motion for decertification and noting that “the statute of limitations
has been tolled for [plaintiffs’] claims between the filing of the original complaint
and the filing of this Order”). Thus, potential class members may still be able to
bring individual actions against Defendants after the Rule 23 class is decertified
(assuming that their time for doing so has not expired even after the tolling period
is taken into account).
For these reasons, the Rule 23 class is decertified.
C.

Approval of Settlement
The parties seek the Court’s approval of their settlement, as embodied by the

Revised Offer of Judgment and its acceptance (Dkt. No. 119), under Cheeks v.
Freeport Pancake House, 796 F.3d 199 (2d Cir. 2015). As a threshold matter, the
Court notes that there is a split of authority in this Circuit as to whether parties
seeking to settle FLSA claims by way of a Rule 68 offer of judgment require judicial
approval of their settlement under Cheeks. In prior decisions, I have adopted the
majority position holding that such approval is not required. See, e.g., Khereed v. W.
12th St. Rest., 317 F.R.D. 441, 442–43 (S.D.N.Y. 2016) (Cott, M.J.). There is,
however, a “growing number (albeit still minority) of judges in this Circuit” who
have “conclude[d] that Rule 68 does not override the need for judicial (or DOL)
approval of a settlement of claims under the FLSA.” Mei Xing Yu v. Hasaki
Restaurant, Inc., 319 F.R.D. 111, 117 (S.D.N.Y.), leave to appeal granted, 874 F.3d
94 (2d Cir. 2017). This issue is currently pending before the Second Circuit. See id.

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In any event, given that the parties have sought the Court’s approval of their
settlement, the issue of whether such approval is required under Cheeks need not be
reached in this case.
Courts generally recognize a “strong presumption in favor of finding a
settlement fair” in cases like this one brought under the FLSA, as they are “not in
as good a position as the parties to determine the reasonableness of an FLSA
settlement.” Souza v. 65 St. Marks Bistro, No. 15-CV-327 (JLC), 2015 WL 7271747,
at *4 (S.D.N.Y. Nov. 6, 2015) (citation omitted). Moreover, Plaintiffs have expressed
serious concerns about collectability (Dkt. No. 120 at 4), which “militates in favor of
finding a settlement reasonable.” Lliguichuzhca v. Cinema 60, LLC, 948 F. Supp.
2d 362, 365 (S.D.N.Y. 2013); see also Hart v. RCI Hosp. Holdings, Inc., No. 09-CV3043 (PAE), 2015 WL 5577713, at *10 (S.D.N.Y. Sept. 22, 2015) (significant “risk
that plaintiffs would not be able to collect, or fully collect, on a judgment” supported
approval of settlement agreement, which “[g]uaranteed recovery from the other two
defendants in the event that [one] prove[d] unable to pay the entire settlement
amount”).
In this case, of the proposed $20,000 settlement amount, Plaintiffs will
allocate $6,500 to Benavides, $3,500 to Lin, and $10,000 to Plaintiffs’ counsel for
attorneys’ fees and costs (Dkt. No. 120 at 5). According to the parties, Benavides
and Lin will receive, respectively, 55% and 48% of the alleged back wages owed to
them under the FLSA (id.). Of the $10,000 allocated to Plaintiffs’ counsel,
$5,798.66 is attributable to costs (including $3,500 for the private mediation that

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led to the settlement) and the remaining $4,201.34 to fees (Dkt. No. 120 at 5 & Ex.
C). This allocation is reasonable in these circumstances. Given that Plaintiffs’
counsel litigated this case through class certification, counsel undoubtedly billed
fees far in excess of the $4,201.34 that counsel will receive under the parties’
settlement. Moreover, $4,201.34 represents 21% of the $20,000 settlement amount,
which is a reasonable percentage of recovery for attorneys’ fees in similar wage-andhour cases, which typically result in one-third of the settlement allotted for fees.
See, e.g., Chung v. Brooke’s Homecare LLC, No. 17-CV-2534 (AJN), 2018 WL
2186413, at *1 (S.D.N.Y. May 11, 2018) (“Courts routinely award 33.33% of a
settlement fund as a reasonable fee in FLSA cases.”); Martinez v. SJG Foods LLC,
No. 16-CV-7890 (RA), 2017 WL 4676828, at *2 (S.D.N.Y. Oct. 16, 2017) (“[C]ourts
regularly approve attorney’s fees of one-third of the settlement amount in FLSA
cases.”) (quoting Meza v. 317 Amsterdam Corp., No. 14-CV-9007 (VSB), 2015 WL
9161791, at *2 (S.D.N.Y. Dec. 14, 2015)).
In sum, having carefully reviewed the parties’ joint letter and the proposed
settlement terms, the Court finds that all of the terms of the proposed settlement
(including the allocation of attorneys’ fees and costs) appear to be fair and
reasonable under the totality of the circumstances (and in light of the factors
enumerated in Wolinsky v. Scholastic Inc., 900 F. Supp. 2d 332, 335 (S.D.N.Y.
2012)). Accordingly, the settlement is approved.

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D.

Dismissal of Defendant Dai
As previously mentioned, Dai has filed for Chapter 13 bankruptcy, and

Plaintiffs’ case against her is currently stayed. The parties are in agreement, and
have jointly requested, that Dai should be dismissed from this case (Dkt. No. 120 at
1). Given that Dai’s participation is not necessary for the parties to effectuate their
settlement, their request is granted.
E.

Dismissal with Prejudice
In light of the approval of the settlement between Plaintiffs and Serenity

Spa, as well as the dismissal of Dai, the Court grants the parties’ request that
judgment be entered against Serenity Spa in accordance with the terms of the
Revised Offer of Judgment and that this case be dismissed with prejudice.
II.
In sum, for the foregoing reasons, (1) the Rule 23 class is decertified; (2) the
parties’ settlement, as embodied by the Revised Offer of Judgment and its
acceptance, is approved; (3) Dai is dismissed from this case; and (4) the Clerk is
directed to enter judgment in favor of Plaintiffs and against Serenity Spa in
accordance with the terms of the Revised Offer of Judgment and dismiss this case
with prejudice.
SO ORDERED.
Dated: New York, New York
May 25, 2018

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