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

Filing 34

OPINION AND ORDER re: 32 SETTLEMENT AGREEMENT. Although the parties' modified language no longer releases claims plaintiffs may have against defendants' former employees, shareholders, or members, the proposed agreement still releases cl aims plaintiffs may have that are unrelated to wage and hour issues against former directors, officers and representatives, among others (Faillace Letter, Ex. 1 paragraph 5(A)). Accordingly, within 30 days of this Order, the parties are to submit a revised settlement agreement that corrects the foregoing deficiencies, and as further set forth herein. (Signed by Magistrate Judge Henry B. Pitman on 10/25/2017) Copies Transmitted By Chambers. (ras)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

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USDCSDNY
DOCUMENT
ELECTR01iICALLY FILED
DOC#:~:----~:--:-­
DATEFILEP: \0/1-15"/t1

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

'

--

16 Civ. 2916(HBP)
Plaintiffs,
OPINION
AND ORDER

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

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PITMAN, United States Magistrate Judge:

Plaintiffs commenced this action pursuant to the Fair
Labor Standards Act (the "FLSA"), 29 U.S.C.
the New York Labor Law (the "NYLL")

§§

§§

201 et filill., and

190 et filill· 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, but the

parties reached a settlement prior to the matter being conditionally certified.
ties'

The matter is currently before me on the par-

joint application to approve a settlement that they have

reached (Docket Item ("D.I.") 32).

The parties have consented to

my exercising plenary jurisdiction pursuant to 28 U.S.C.

§

636 (c) .
By Opinion & Order dated August 11, 2017,

I rejected

the parties' previous settlement agreement for two reasons

(Order

dated Aug. 11, 2017

First,

(D. I. 31 ) ("August 11, 2017 Order")).

the parties failed to provide sufficient information to enable me
to determine whether the proposed settlement was fair and reasonable.

Second, the general mutual release provisions set forth in

Sections 3 and 5(A),

(B) were deficient because they would have

barred plaintiffs' claims against a broad array of non-parties
and released any claims that plaintiffs might have which are
unrelated to wage-and-hour issues.

1

The parties resubmitted their settlement agreement for
approval on September 11, 2017
dated Sept. 11, 2017
However,

(Letter of Michael Faillace, Esq.,

(D.I. 32) ("Faillace Letter"), Ex. 1).

I am still unable to approve the proposed settlement

agreement.
Under the proposed settlement agreement, plaintiffs
agree not to file "any other causes of action against Releasees

1

My August 11, 2017 Order also noted that the provision
barring plaintiffs from seeking employment with defendants and
the provision prohibiting plaintiffs from making truthful
statements about their experience litigating their case were
impermissible (August 11, 2017 Order at 6).
2

arising from employment-related or other matters that were
encompassed or could have been encompassed" in this action
(Faillace Letter, Ex. 1

§

3 (emphasis added)).

Plaintiffs also

agree to release not only defendants, but a broad array of
persons,

2

including former officers and directors,

from "torts,

intentional infliction of emotional distress, negligence, promissory estoppel, breach of contract

. fraud, misrepresentation,

or otherwise, arising prior to or at the time of the execution of
the Agreement, including but not limited to, all claims asserted
in the Pending Action"

(Faillace Letter, Ex. 1

~

5(A)).

The

named defendants agree to release plaintiffs alone from a vast
assortment of claims unrelated to wage and hour issues
Letter, Ex. 1

~

5(B)).

(Faillace

The plaintiffs do not, however, receive a

release from all the persons and entities that they are releasing.
The amended general release still impermissibly releases claims plaintiffs may have that are unrelated to wage and

2

Under the proposed settlement agreement, plaintiffs would
be providing a general release in favor of defendants'
"subsidiaries (including but not limited to any grandchild
entities, great grandchild entities, and so on), parents
(including but not limited to any grandparent entities, great
grandparent entities, and so on), affiliates, successors, related
entities, assigns, heirs, executors, trustees, administrators,
and attorneys, and all of their present and former directors,
officers, representatives, attorneys and insurers .
"
(Faillace Letter~ 5(A)).
3

hour issues against a broad array of persons and entities.
Although the parties' modified language no longer releases claims
plaintiffs may have against defendants' former employees, shareholders, or members, the proposed agreement still releases claims
plaintiffs may have that are unrelated to wage and hour issues
against former directors, officers and representatives, among
others (Faillace Letter, Ex. 1

~

5(A)) . 3

As the release is

written, it "could be applied to an absurd effect[.]"
Poko-St. Ann L.P., 176 F. Supp. 3d 340, 344
(Moses, M.

J)

Lopez v.

(S.D.N.Y. 2016)

(rejecting a general release that released a "long

list" of entities and persons related to defendants from "every
imaginable claim").

For example, the release would expressly

prohibit plaintiffs from commencing an action against defendants'
former officers for breach of contract or for an assault
(Faillace Letter, Ex. 1

~

5(A)) . 4

Such a result is absurd and

3

In addition, the fact that plaintiffs release a number of
persons other than defendants, yet only the named defendants
release plaintiffs, demonstrates that the release is not truly
mutual.
4

I also note that the proposed settlement agreement
contains limitations in certain provisions that are effectively
voided by other provisions.
For example, in Section 3 of the
proposed settlement agreement, plaintiffs agree not to file "any
other causes of action against Releasees arising from employmentrelated or other matters that were encompassed or could have been
encompassed" in this action.
Section 5(A), however, contains a
general release from plaintiffs in favor of a wide range of
individuals and entities.
Given Section 5(A), the limitation in
(continued ... )
4

contrary to the FLSA's remedial purpose. 5
Pancake House, Inc., 796 F.3d 199, 207

See Cheeks v. Freeport

(2d Cir. 2015)

(concluding

that the "primary remedial purpose" of the FLSA is "to prevent
abuses by unscrupulous employers and remedy the disparate bargaining power between employers and employees"), cert. denied,
136 S. Ct. 824

(2016).

The parties must further limit the

persons covered by the release.

4

( • • • continued)
Section 3 has no meaning.

5

In rejecting the proposed settlement agreement here, I
have not overlooked the fact that some Judges in the Circuit have
approved FLSA settlements containing mutual general releases.
Souza v. 65 St. Marks Bistro, 15 Civ. 327 (JLC), 2015 WL 7271747
at *5 (S.D.N.Y. Nov. 5, 2015) (Cott, M.J.) (alterations in
original); accord Cionca v. Interactive Realty, LLC, 15 Civ. 5123
(BCM), 2016 WL 3440554 at *3-*4 (S.D.N.Y. June 10, 2016) (Moses,
M.J.); Lola v. Skadden, Arps, Meagher, Slate & Flom LLP, 13 Civ.
5 0 0 8 ( RJS) , 2016 WL 9 2 2 2 2 3 at * 2 ( S. D. N. Y. Feb. 3, 2016)
(Sullivan, D.J.).
However, general release provisions are not
truly mutual unless the plaintiffs receive a general release from
all the persons and entities to whom plaintiffs provide a general
release.
For example, if defendants seek a general release from
plaintiffs in favor of defendants' insurers, the release can be
fairly characterized as mutual only if defendants' insurers
provide a reciprocal general release in favor of plaintiffs.
If
the parties submit a renewed application for approval of the
settlement, any general release provisions that are not fully
mutual will not be approved.
5

Accordingly, within 30 days of this Order, the parties
are to submit a revised settlement agreement that corrects the
foregoing deficiencies.
Dated:

New York, New York
October 25, 2017
SO ORDERED

United States Magistrate Judge
Copies transmitted to:
All Counsel

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