Neri Flores et al v. Hill Country Chicken NY, LLC et al

Filing 31

OPINION AND ORDER re: 27 MOTION for Settlement Approval in FLSA Action, filed by Sotero Neri Flores, Cornelio Guerrero. I cannot approve the settlement at this time. Within 30 days of the date of this Order, the parties are either t o provide the information sought and a revised settlement agreement that addresses the foregoing issues or to file a letter indicating their intention to abandon the settlement and proceed with litigation. The Clerk of the Court is respectfully requested to close Docket Item 27, and as further set forth herein. (Signed by Magistrate Judge Henry B. Pitman on 8/11/2017) Copies Transmitted By Chambers. (ras)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-----------------------------------x
SOTERO NELI FLORES and CORNELIO
GUERRERO, individually and on
behalf of others similarly
situated,
Plaintiffs,

16 Civ. 2916

-against-

(AT) (HBP)

OPINION
AND ORDER

HILL COUNTRY CHICKEN NY, LLC
d/b/a HILL COUNTRY CHICKEN and
MARC GLOSSERMAN,
Defendants.

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

Plaintiffs, former employees of defendants, commenced
this action pursuant to the Fair Labor Standards Act, 29 U.S.C.
§§ 201
~·

et~.,

and the New York Labor Law (the "NYLL") §§ 190 et

to recover unpaid minimum wage and overtime premium pay,

spread-of-hours pay, misappropriated tips, equipment costs and
penalties for failure to provide wage statements and notices
under the NYLL.

Plaintiffs brought the action as a collective

action pursuant to 29 U.S.C.

§

216(b) with respect to the FLSA

claims.
The parties reached a settlement prior to the matter
being conditionally certified as a collective action and now seek

approval of their proposed settlement

(Letter from Michael

Faillace, Esq., to the undersigned, dated Dec. 29, 2016
Item ("D. I.")

27)

("Faillace Letter")).

(Docket

The parties have con-

sented to my exercising plenary jurisdiction over this motion
pursuant to 28 U.S.C.

§

636(c).

I cannot approve the settlement at this time.

The

parties have not provided sufficient information to enable me to
determine whether the proposed settlement is fair and reasonable.
Although the parties claim that plaintiffs' total damages are
approximately $49,000, they fail to state the damages each
plaintiff claims and the basis therefore.

Thus, it is impossible

to determine whether the allocation of the settlement proceeds is
reasonable and bears a rational relationship to the amount
claimed by each plaintiff.

The parties should provide the amount

of damages claimed by each plaintiff, the basis therefore and an
explanation of the allocation of the settlement proceeds.
The settlement agreement also contains a general
release that is impermissible.

In pertinent part, the release

for plaintiffs provides:
Plaintiffs, with respect solely and only to conduct
that has arisen on, or prior to, the date this Agreement is executed, fully and forever release, relieve,
waive, relinquish, and discharge Defendants, Defendants' subsidiaries .
. , parents .
. , affiliates,
successors, related entities, assigns, heirs, executors, trustees, administrators, and attorneys, and all
2

of their present and former directors, officers, partners, shareholders, members, employees, representatives, agents, attorneys, owners, and insurers (collectively, "Releasees") from all actions, causes of action, suits,
claims and demands of any kind
whatsoever, at law or in equity, direct or indirect,
known or unknown, discovered or undiscovered, which
they had, now have or hereafter can, shall or may have
against Releasees, arising out of, by reason of, or
relating in any way whatsoever to any matter, cause or
thing from the beginning of the world through the date
Plaintiffs execute this Agreement
This release
is limited solely and only to claims that have arisen
on, or prior to, the date this Agreement is executed
and transmitted to counsel for Defendants and it does
not release or discharge any claims that may occur
after that date.
The only exclusions from this release
provision are claims for unemployment insurance and
workers' compensation
(Faillace Letter, Ex. 1 § 5(A)).

Plaintiffs also agree in the

release not to file "any other causes of action against Releasees
arising from employment-related or other matters that were
encompassed or could have been encompassed or raised in the
pending action"

(Fail lace Letter, Ex. 1 § 3) . 1

agree to release plaintiffs from "all actions,
suits,

Defendants also
causes of action,

claims and demands of any kind whatsoever, at law or

in equity, direct or indirect,

known or unknown, discovered or

undiscovered, which they had, now have or hereafter can,

1

shall or

Pursuant to Fed.R.Civ.P. 18(a), a party asserting a claim
"may join, as independent or alternative claims, as many claims
as it has against an opposing party." Thus, plaintiffs could
have asserted any claim in this action that they had against
defendants, even if unrelated to wage-and-hour issues.
3

may have against Plaintiffs"

(Faillace Letter, Ex. 1

§

5 (B)).

Defendants' release is similarly limited "solely and only to
conduct that has arisen on, or prior to, the date this Agreement
is executed"

(Faillace Letter, Ex. 1

5 (B)).

§

The problem with the parties' general release is not
that it runs in favor of both plaintiffs and defendants.

The

clause was negotiated by competent counsel for both sides, and
plaintiffs no longer work for defendants; thus,

"[a] general

release of the kind proposed in this case, with former employees
who have no ongoing relationship with the employer, makes sense
in order to bring complete closure."
Bistro, 15 Civ. 327
6, 2015)

(S.D.N. Y. June 10,

(Moses, M.J.); Lola v. Skadden, Arps, Meagher, Slate & Flom
(RJS), 2016 WL 922223 at *2

(S.D.N.Y. Feb. 3,

(Sullivan, D.J.).
Instead, the problem with the release,

Lopez v.
2016)

(S.D.N.Y. Nov.

Interactive Realty, LLC,

(BCM), 2016 WL 3440554 at *3-*4

LLP, 13 Civ. 5008
2016)

65 St. Marks

(JLC), 2015 WL 7271747 at *5

(Cott, M.J.); accord Cionca v.

15 Civ. 5123
2016)

Souza v.

Poko-St. Ann L.P.,

(Moses, M.J.),

176 F. Supp. 3d 340,

like the one in
344

(S.D.N.Y.

is that it would bar claims by plaintiffs

not only against defendants themselves, but also against a broad
array of persons, including former employees, members and share-

4

holders.

2

"As written, this language could be applied to absurd

effect[.]"
344.

Lopez v.

Poko-St. Ann L.P.,

supra,

176 F. Supp. 3d at

For example, plaintiffs would not be able to sue one of

defendants'
assault.

former employees for breach of contract or for an

Such a result is absurd and contrary to the FLSA's

remedial purposes.

Therefore, the parties must limit the persons

covered by plaintiffs' general release.

3

I also note that the settlement agreement contains two
other impermissible provisions.

First, the agreement bars

plaintiffs from ever working, or applying to work,
and the releasees

(Faillace Letter, Ex. 1

§

9).

for defendants

A provision

limiting plaintiffs' employment opportunities is not permitted.
Baikin v. Leader Sheet Metal,

Inc., 16 Civ.

102 5 9 91 at * 1 ( S . D. N . Y . Mar . 13 , 2 0 1 7 )

8194

(ER),

( Ramos , D. J . ) .

2017 WL
Such a

provision is in direct conflict with the FLSA's "primary remedial
purpose:

to prevent abuses by unscrupulous employers, and remedy

the disparate bargaining power between employers and employees."
2

Indeed, the fact that plaintiffs release a number of persons other than defendants, yet it is only defendants that
release plaintiffs, indicates that the release is not truly
mutual.
3

The agreement provides that "[i]f any provision is determined by a court of competent jurisdiction to be invalid or
unenforceable (other than Section S(A)
.) , the remaining
provisions shall continue in full force and effect notwithstanding" (Fail lace Letter, Ex. 1 § 8) .
Thus, plaintiffs' general
release cannot be severed from the rest of the agreement.
5

Cheeks v.

Freeport Pancake House,

Cir. 2015), cert. denied,

Inc.,

796 F.3d 199, 207

136 S. Ct. 824

(2d

(2016).

Second, the settlement agreement contains a mutual nondisparagement clause.

Specifically, the agreement provides that

the parties are free to "make whatever disclosures they deem
appropriate" to listed persons' "with respect to this litigation
provided those disclosures are truthful, and no derogatory
statements are made about Plaintiffs' Counsel, Defendants'
Counsel, the Plaintiffs, and/or the Defendants"
Ex. 1

§

11) .

(Faillace Letter,

However, it does not include a carve-out for

truthful statements about plaintiffs' experience litigating their
case.

5

A non-disparagement clause in an FLSA settlement must

include such a carve-out.
Supp. 3d 170, 180 n.65
Weng v. T&W Rest.,

Lopez v. Nights of Cabiria, LLC,

(S.D.N.Y. 2015)

Inc., 15 Civ. 8167

(Kaplan,

96 F.

D.J.); accord

(PAE) (BCM),

2016 WL 3566849

"The settlement agreement prohibits the parties from discussing "settlement discussions, the existence and/or terms of
this Agreement, and/or the facts and events leading up to same"
with the media or any blogs or social networking sites (Faillace
Letter, Ex. 1 § 11) .
"Al though this provision does place some
limits on Plaintiffs' ability to discuss the settlement, the
limit is not absolute.
The provision mainly restricts Plaintiffs' contact with the media, not their general ability to
discuss the Settlement." Lola v. Skadden, Arps, Meagher, Slate &
Flom LLP, supra, 2016 WL 922223 at *2.
Accordingly, this limited
confidentiality provision is permissible.
"The language of the agreement imposes a blanket ban on
derogatory comments, even if truthful.
6

at *4
Dee,

(S.D.N.Y. June 22,
Inc., 15 Civ.

Apr. 21,

2016)

647

2016)

(AJN),

(Nathan,

D.J.)

(Moses, M.J.); see Lopez v.
2016 WL 1626631 at *3

( S. D. N. Y.

Feb. 2 8,

16 Civ. 5060
201 7)

Accordingly,

(S.O.N.Y.

This is true even in the case of
~.g.,

a mutual non-disparagement clause.
Advertising Inc.,

Ploy

(JLC),

Howard v.

Don Coleman

2017 WL 773695 at *2

(Cott, M. J. ) . 6

for all the foregoing reasons,

approve the settlement at this time.

I cannot

Within 30 days of the date

of this Order, the parties are either to provide the information
sought and a revised settlement agreement that addresses the
foregoing issues or to file a letter indicating their intention
to abandon the settlement and proceed with litigation.

The Clerk

of the Court is respectfully requested to close Docket Item 27.
Dated:

New York, New York
August 11, 2017
SO ORDERED

United States Magistrate Judge

6

The re-employment and non-disparagement provisions, by
themselves, do not require me to withhold approval of the settlement agreement as a whole because they are severable, pursuant to
Section 8 of the Settlement Agreement.
See Hyun v. Ippudo USA
Holdings, 14 Civ. 8706 (AJN), 2016 WL 1222347 at *3 (S.D.N.Y.
Mar. 24, 2016) (Nathan, D.J.).
7

Copies transmitted to:
All Counsel of Record

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