Aquino v. Fort Washington Auto Body Corp et al

Filing 30

OPINION AND ORDER: This matter is before me on a joint application to approve a settlement between plaintiff Ismael Santana and defendants and a separate settlement between the remaining plaintiffs and defendants. (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 between Santana and defendants that limits the persons or entities covered by the general release. (Signed by Magistrate Judge Henry B. Pitman on 3/31/2017) Copies Sent By Chambers. (cf)

USDCSDNY

DOCUMENT

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------~------------------x

YUNIOR AQUINO, 06 behalf of
himself, individmally, and
on behalf of all others
similarly situated, et al.,

ELECTRONICALLY FILED
DOC#:
::-:::-::---~~-DATE FILED:-:. ~ 131 ILz .
ili~.....,...,,.........~.:ii~u•

16 Civ. 390 (HBP)
Plaintiffs,
OPINION
AND ORDER

-againstFORT WASHINGTON AUTO BODY
CORP., et al.,
Defendants.

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

This matter is before me on a joint application to
approve a settlement between plaintiff Ismael Santana and defendants and a separate settlement between the remaining plaintiffs
and defendants.

All parties have consented to my exercising

plenary jurisdiction pursuant to 28 U.S.C. § 636(c).
This is an action brought by seven individuals who were
or are employed by defendants.

Plaintiffs allege that they were

not paid for overtime work and did not receive proper wage
statements.

Plaintiffs assert their claims under the Fair Labor

Standards Act (the "FLSA"), 29 U.S.C. §§ 201

et~.,

provisions of the New York Labor Law (the "NYLL").

and various

The action

was commenced as a collective action with respect to the FLSA

claim, and the parties stipulated to the matter proceeding as a
collective action.
Defendants deny plaintiffs' allegations.

They contend

that plaintiffs' salaries covered all hours worked and included
an additional amount for their overtime hours.

Defendants also

dispute the number of hours that plaintiffs claim to have worked.
Moreover, defendants assert that Santana was a manager and, thus,
exempt from the federal and state overtime requirements.
I held a lengthy settlement conference on September 29,
2016 that was attended by Santana and his counsel.

At the

conference, Santana claimed he was owed either $58,133.86 or
$239,802.19 in unpaid wages, depending on whether the wages he
received were intended to compensate him for all hours worked or
only for the first forty hours.

After a protracted discussion of

the strengths and weaknesses of the parties' respective positions, Santana and defendants agreed to resolve his claim for a
total settlement of $38,500.00.

The parties have also agreed

that $230.21 of the settlement figure will be allocated to
reimburse Santana's counsel for their out-of-pocket costs,
$15,400.00 (or 40%) of the remaining $38,269.79 will be paid to
Santana's counsel and that the balance of $22,869.79 will be paid
to Santana.

2

The remaining plaintiffs and defendants have agreed to
a total settlement of $170,000.00, to be distributed among the
plaintiffs on a pro rata basis.

The parties have also agreed

that, after deduction of out-of-pocket costs, plaintiffs' counsel
will receive one-third of each plaintiff's recovery as attorneys'
The amounts claimed by each of the remaining plaintiffs,

fees.

1

the gross amount of the settlement fund allocable to each plaintiff and the net amount that will be received by each plaintiff
after deduction for legal fees and costs are as follows:

Plaintiff

Amount
Claimed

Gross
Allocable
Share

Allocable
Share of
Costs

Allocable
Share of
Fees

Net
Allocable
Share

Yunior Aquino

36,909.88

37,878.62

277.78

12, 626. 21

24,974.63

Ramon Sanchez

39,654.37

40,695.13

298.43

13,565.04

26, 831. 66

Dominguez Celso

29,784.87

30,566.61

224.15

10,188.87

20,153.59

Dony Almanzar

29,447.62

30,220.50

221. 62

10,073.50

19,925.38

Jairo Pujols

6,433.33

6,602.18

48.41

2,200.73

4,353.04

Antonio Diaz

23,422.22

24,036.96

176.27

8,012.32

15,848.37

165,652.29

170,000.00

1,246.66

56,666.67

112,086.67

TOTAL

This settlement was reached prior to the settlement conference I
conducted between Santana and defendants.
A preliminary review of both proposed settlements
reveals problems.

First, I cannot approve the agreement between

1

The amount claimed by each of the plaintiffs purportedly
includes the allegedly unpaid overtime (assuming that the wages
paid represented straight time pay for all hours actually
worked) , liquidated damages and statutory damages for alleged
violations of New York's Wage Theft Prevention Act.
3

Santana and defendants because it contains an impermissible
general release.

In pertinent part, the release provides:

[T]he Parties, with respect solely and only to conduct
that has arisen on, or prior to, the date that this
Agreement is executed, knowingly and voluntarily, fully
and forever, release .
. all actions, causes of
action .
. including but not limited to those arising
under:
the Fair Labor Standards Act ("FLSA"); the New
York Labor Law ("NYLL"); the FLSA's and NYLL's implementing regulations; any alleged violation of federal,
state or local laws prohibiting discrimination .
.,
any other federal, state or local civil or human rights
laws .
. [;] the Employee Retirement Income Security
Act; the Fair Credit Reporting Act, as amended; the
Sarbanes-Oxley Act; any public policy, contract, tort
or common law obligation .
.; any claim for wages or
other compensation under any federal or state wage
payment laws, and their implementing regulations; any
claim for compensation, bonus, incentive pay, vacation
pay, sick pay, separation or severance payments of any
kind, or any other payments or benefits; and any obligation for costs, fees or other expenses, including but
not limited to, claims for minimum wages, overtime and
liquidated damages.
(Letter from Kevin A. Guaranda, Paralegal, to the undersigned,
dated Nov. 16, 2016 ("Guaranda Letter"), Ex. 1

<JI

4).

"[T] he

Parties" are defined as Santana and "[defendants], their parents,
subsidiaries, affiliates, successors and assigns, divisions,
vendors, customers, their past and present officers, owners,
shareholders, directors, principals, employees, former employees,
representatives, service providers, counsel and/or agents .
and each of their respective successors and assigns"
Letter, Ex. 1, at 1).

4

(Guaranda

Courts routinely reject general releases in FLSA cases
that run only in favor of the defendant and are not limited to
wage-and-hour issues.
15 Civ. 7942
2016)

See Leon-Martinez v. Central Cafe & Deli,

(HBP), 2016 WL 7839187 at *l (S.D.N.Y. Dec. 19,

(Pitman, M.J.)

(collecting cases); 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
Labor Law, and its governing regulations'").

.§.Sill.

and New York

The authorities are

more divergent, however, when the general release is mutual, such
as the release here.

On the one hand,

"[a] mutual release will

ensure that both the employees and the employer are walking away
from their relationship .
further disputes."

. without the potential for any

Souza v. 65 St. Marks Bistro, 15 Civ. 327

(JLC), 2015 WL 7271747 at *5 (S.D.N.Y. Nov. 6, 2015)
M.J.).

(Cott,

Additionally, "[a] general release of the kind proposed

in this case, with [a]

former employee[] who ha[s] no ongoing

relationship with the employer, makes sense in order to bring
complete closure."
7271747 at *5.

Souza v. 65 St. Marks Bistro, supra, 2015 WL

On the other hand, "despite the formal reciproc-

ity of such releases, their practical effect in some cases may be
5

lopsided because they may stand to benefit only the employer
defendant, who realistically may be less likely than the employee
plaintiff to have latent claims against its adversary"; the
employer's release may "appear[] an empty gesture."

Gurung v.

White Way Threading LLC, 16 Civ. 1795 (PAE), 2016 WL 7177510 at
*2 (S.D.N.Y. Dec. 8, 2016)

(Engelmayer, D.J.).

A general release between Santana and defendants is
permissible because Santana is no longer employed by defendants
and defendants' release would not necessarily be an empty gesture. 2

However, the issue with the release here, like the one in

Lopez v. Poko-St. Ann L.P., 176 F. Supp. 3d 340, 344
2016)

(S.D.N.Y.

(Moses, M.J.), is that it would bar claims not only against

defendants themselves, but also against defendants' vendors,
customers, former employees and other unrelated persons or
entities.

The reverse is also true:

these unrelated persons or

entities would be barred from suing Santana.

"As written, this

language could be applied to absurd effect."

Lopez v. Poko-St.

Ann L.P., supra, 176 F. Supp. 3d at 344.

For example, Santana

would not be able to sue one of defendants' customers for breach

2

At the settlement conference, defendants made certain
statements suggesting that they may have had claims against
Santana.
In light of the confidential nature of the settlement
conference, I shall not disclose the content of those statements
on the record.
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of contract or for an assault.

Similarly, that customer would

not be able to sue Santana for defamation or intentional inf liction of emotional distress.

Such a result is not only absurd,

but impossible, because defendants cannot release claims for
people or entities over which they have no control.
Additionally, I note that, after deduction of out-ofpocket costs, Santana's counsel seeks 40% of the settlement
amount as attorneys' fees.

"[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."
Santos v. EL Tepeyac Butcher Shop Inc., 15 Civ. 814
9077172 at *3 (S.D.N.Y. Dec. 15, 2015)

(Abrams, D.J.), citing

Zhang v. Lin Kumo Japanese Rest. Inc., 13 Civ. 6667
WL 5122530 at *4

(S.D.N.Y. Aug. 31, 2015)

Thornhill v. CVS Pharm., Inc., 13 Civ. 507
at *3 (S.D.N.Y. Mar. 20, 2014)

(RA), 2015 WL

(PAE), 2015

(Engelmayer, D.J.) and
(JMF), 2014 WL 100135

(Furman, D.J.); accord Rangel v.

639 Grand St. Meat & Produce Corp., No. 13 CV 3234
5308277 at *l (E.D.N.Y. Sept. 19, 2013)

(LB), 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. Guardi9n First Funding Grp., LLC, 870 F. Supp. 2d 337,
340 (S.D.N.Y. 2012)

(Stein, D.J.)
7

("[A] 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), 2014 WL
6621081 at *3 (E.D.N.Y. Nov. 21, 2014); Palacio v. E*TRADE Fin.
Corp., 10 Civ. 4030 (LAP) (DCF), 2012 WL 2384419 at *6-*7
Y. June 22, 2012)

(Freeman, M.J.).

(S.D.N.-

Counsel justifies this fee by

explaining that Santana's recovery was far from uncertain, and
could have been zero, because defendants claimed Santana was a
manager and exempt from the federal and state overtime requirements.

However, counsel has not provided any time records

reflecting that this issue required more attention and effort
than usual.

If counsel believe a 40% contingency is justified,

they should support this belief with documentation.

See Cheeks

v. Freeport Pancake House, Inc., 796 F.3d 199, 206 (2d Cir. 2015)
(noting that settlement provision that would have set attorneys'
fees between 40% and 43.6% of settlement,

"without adequate

documentation to support such a fee award," is an example of "the
potential for abuse in [FLSA] settlements"), cert. denied, 136 S.
Ct. 824

(2016), citing Lopez v. Nights of Cabiria, LLC, 96 F.

Supp. 3d 170, 173-82 (S.D.N.Y. 2015)

(Kaplan, D.J.); Lopez v.

Poko-St. Ann L.p., supra, 176 F. Supp. 3d at 342-43 (refusing to
approve attorneys' fees totaling more than 40% of settlement
amount, even though there was an issue of whether plaintiffs were
exempt, without information on "the actual time and effort of
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plaintiffs' counsel"; also noting that early resolution of matter
was factor against awarding the fees sought).
Second, I cannot approve the settlement between the
remaining plaintiffs and defendants because counsel has not
provided sufficient information for me to determine whether the
settlement is fair and reasonable.

Specifically, while counsel

listed the plaintiffs' maximum potential recovery, which purportedly included actual overtime owed (assuming that the wages paid
represented straight time pay for all hours actually worked) ,
liquidated damages and statutory penalties, counsel provided a
damages calculation only for the three-year period that preceded
the filing of the complaint (the FLSA's statute of limitations)
This damages calculation is not complete because it does not
include the six-year period that preceded the filing of the
complaint (the NYLL's statute of limitations).

Therefore,

counsel are directed to re-submit a damages calculation for the
six-year period that preceded the filing of the complaint so that
I can assess whether the estimates of plaintiffs' maximum potential recoveries are accurate.

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Accordingly, within 30 days of the date of this Order,
the parties are to provide the information sought and a revised
settlement agreement between Santana and defendants that limits
the persons or entities covered by the general release.
Dated:

New York, New York
March 31, 2017
SO ORDERED

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

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