Alvarez v. Schnipper Restaurants LLC et al
Filing
111
OPINION AND ORDER re: 105 MOTION for Settlement preliminary approval of class settlement. filed by Martin Alvarez. Accordingly, Plaintiffs' request for approval of the proposed settlement is DENIED without prejudice. The parties may proceed in one of the following ways: 1. File a revised settlement agreement on or before November 21, 2019; or 2. File a joint letter on or before November 21, 2019 that indicates the parties' intention to abandon settlement and continue to trial. The Clerk of the Court is respectfully directed to terminate the motion, Doc. 105. SO ORDERED. (Signed by Judge Edgardo Ramos on 11/1/2019) (kv)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
MARTIN ALVAREZ a/k/a EDUARDO
LOPEZ, on behalf of himself, FLSA Collective
Plaintiffs and the Class,
Plaintiff,
OPINION AND ORDER
16 Civ. 5779 (ER)
– against –
SHNIPPER RESTAURANTS LLC, et al.,
Defendants.
Ramos, D.J.:
Plaintiff, Martin Alvarez, a/k/a Eduardo Lopez, brought the above-captioned action on
behalf of himself and those similarly situated against Defendants Schnipper Restaurants LLC,
SRG1 LLC d/b/a Schnipper’s Quality Kitchen, SRG2 LLC d/b/a Schnipper’s Quality Kitchen,
SRG 570 Lex LLC d/b/a Schnipper’s Quality Kitchen, SRG NYP LLC d/b/a Schnipper’s Quality
Kitchen, Andrew Schnipper, and Jonathan Schnipper (collectively, “Defendants”) claiming
violations of the Fair Labor Standards Act (“FLSA”) and of New York Labor Law.
Before the Court is Plaintiff’s unopposed motion for an order: (1) granting preliminary
approval of the Settlement Agreement; (2) conditionally certifying the settlement class under
Federal Rule of Civil Procedure 23(b)(3) and 29 U.S.C. § 216(b); (3) approving the proposed
notice; (4) approving the proposed schedule for final settlement approval and setting a date for
the Fairness Hearing and related dates; and (5) appointing class counsel. For the reasons stated
below, Plaintiff’s motion is DENIED without prejudice.
I.
Background and Procedural History
Schnipper’s Quality Kitchen, owned by Andrew and Jonathan Schnipper, has four
locations throughout New York. Alvarez asserts that he was employed as a delivery person for
Schnipper’s Times Square from May 2013 until May 2016. Declaration of Martin Alvarez in
Support of Plaintiff’s Motion for Conditional Certification, Doc. 39 (“Alvarez Decl.”) ¶ 1.
Alvarez claims that during his employment, he also worked at the three other locations of
Schnipper’s Quality Kitchen. Id. ¶ 2. During Alvarez’s employment, he claims he was paid at a
rate between $5.00 and $7.50 per hour and did not receive notice that Defendants were taking a
tip credit until August 2014. Id. ¶¶ 5, 7. He was also required to engage in nontipped work for
over twenty percent of his work day. Id. ¶ 8. As a delivery person, Alvarez was required to use
a bicycle to make deliveries; however, he used his own bicycle and was not compensated for the
costs of purchasing, repairing, or maintaining his bicycle. Id. ¶ 9. Alvarez also alleges that he
never received a proper wage and hour notice from Defendants and did not receive proper wage
statements each month. Id. ¶¶ 13–14. According to Alvarez, other non-managerial tipped
employees were subject to the same policies and practices. Id. ¶¶ 3–14.
Alvarez retained Lee Litigation Group, PLLC to represent himself and FLSA Collective
Plaintiffs and Class members and filed this action on July 20, 2016. Doc. 1. Defendants filed an
answer on November 9, 2016. Doc. 27. On December 12, 2017, the Court granted conditional
certification of the FLSA class. Doc. 61. Fifteen individuals opted-in to become party plaintiffs.
Docs. 75–89. Following private mediation on September 7, 2018, the parties reached a class
settlement. Doc. 100. On December 17, 2018, Plaintiffs filed the instant unopposed motion for
preliminary approval of the class settlement and related relief. Doc. 105.
2
II.
Proposed Settlement Agreement
The Settlement Agreement reached by the parties provides that Defendants will pay up to
$330,000.00 (the “Maximum Settlement Amount”) “to settle fully and finally all Released
Claims . . . in the Litigation.” Doc. 106, Ex. A (“Settlement Agreement”) at 1. At minimum,
Defendants will pay an amount “sufficient to satisfy the Claimed Net Settlement Fund, payment
of Service Award, payment of the Settlement Administrator’s fees and Payment of Class
Counsel’s Legal Fees and Costs,” (the “Minimum Settlement Amount”). Id. ¶ 1.20. Defendants
will deposit this sum in installments into a qualified settlement fund, to be established and
controlled by a settlement claims administrator, in this case Rust Consulting. Id. ¶¶ 1.29, 1.31,
2.2, 3.1. Class Members will be mailed notice of the settlement agreement with information
about how they can either participate in the settlement or exclude themselves from or object to
the settlement. Id. ¶¶ 2.4–2.6. Those who file a valid claim form will receive a settlement check
based on weeks worked within the class period. Id. ¶ 3.4. Additionally, Alvarez can petition the
Court for $7,500 as a service award from the fund. Id. ¶ 3.3. The settlement claims
administrator will receive $15,000. Id. Class Counsel may also apply for reimbursement from
the fund. Id. ¶ 3.2. The Court will have the opportunity to approve the amount of fees and costs
paid to class counsel, who will file a motion for approval of attorneys’ fees and costs prior to the
final settlement approval hearing. Id. Class counsel will seek fees totaling one-third of the
settlement fund. 1 Doc. 107 at 4–5.
1
The Court notes that when such application is made, counsel must provide documentation to support the
reasonableness of the proposed attorneys’ fees. “In this circuit, a proper fee request ‘entails submitting
contemporaneous billing records documenting, for each attorney, the date, the hours expended, and the nature of the
work done.’” Lopez v. Nights of Cabiria, 96 F. Supp. 3d 170, 181 (S.D.N.Y. 2015) (quoting Wolinsky v. Scholastic
Inc., 900 F. Supp. 2d 332, 336 (S.D.N.Y. 2012)).
3
In exchange, settlement class members will release Defendants “from all wage and hour
claims that could have been asserted under federal or state laws by and on behalf of the Class
Members in the Litigation as of the date the Court issues an Order preliminarily approving the
Parties’ settlement.” Settlement Agreement ¶ 4.1. Alvarez has agreed to a broader release and
will release Defendants from any “actions, causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements,
promises, judgments, obligations, union grievances, claims, charges, complaints, appeals and
demands whatsoever, in law or equity, which [he] may have against[Defendants] . . . whether
known or unknown, asserted or unasserted,” etc. Id.
The Settlement Agreement provides that within fifteen days of the Court’s preliminary
approval, Defendants will provide the settlement administrator with the name, telephone number,
social security number, and last known address of all class members in electronic form. Fifteen
days after that, the settlement claims administrator will mail all class members the Courtapproved settlement notice and claim form. Id. ¶ 2.4. From that point, settlement class members
will have sixty days to either submit a claim form, opt out of the settlement agreement, or mail
written objections to the settlement administrator. Id. ¶¶ 2.4–2.6. Anyone who does not opt-out
will be deemed to have accepted the settlement and will release all relevant claims. Id. ¶ 2.5.
The Settlement Agreement also provides for a fairness hearing before the Court before final
approval of the settlement. Id. ¶ 2.7.
The approval of a proposed class action settlement is a matter of discretion for the trial
court. Maywalt v. Parker & Parsley Petroleum Co., 67 F.3d 1072, 1079 (2d Cir. 1995). “In
exercising this discretion, courts should give ‘proper deference to the private consensual decision
of the parties.’” Clark v. Ecolab, Inc., Nos. 07 Civ. 8623 (PAC), 04 Civ. 4488 (PAC), 06 Civ.
4
5672 (PAC), 2009 WL 6615729, at *3 (S.D.N.Y. Nov. 27, 2009) (quoting Hanlon v. Chrysler
Corp., 150 F.3d 1011, 1027 (9th Cir. 1988)). “In evaluating the settlement, the Court ‘should
keep in mind the unique ability of class and defense counsel to assess the potential risks and
rewards of litigation . . . .’” In re BankAmerica Corp. Sec. Litig., 210 F.R.D. 694, 700 (E.D. Mo.
2002) (quoting Fed. Judicial Ctr., Manual for Complex Litig. § 30.42 at 240 (3d. ed. 1997)).
Preliminary approval, which is what Plaintiffs seek here, is the first step in the settlement
process. It simply allows notice to issue to the class and for class members to object to or optout of the settlement. After the notice period, the Court will be able to evaluate the settlement
with the benefit of the Settlement Class Members’ input. Therefore, preliminary approval of a
settlement agreement “requires only an ‘initial evaluation’ of the fairness of the proposed
settlement on the basis of written submissions and an informal presentation by the settling
parties. Puglisi v. TD Bank, N.A., No. 13 Civ. 637 (LDW) (GRB), 2015 WL 574280, at *1
(E.D.N.Y. Feb. 9, 2015) (internal citations omitted). The fairness of a settlement turns on its
terms as well as the negotiating process from which it emerged. Wal-Mart Stores, Inc. v. Visa
U.S.A., Inc., 396 F.3d 96, 116 (2d Cir. 2005) (citing D’Amato v. Deutsche Bank, 236 F.3d 78, 85
(2d Cir. 2001)). To grant preliminary approval, the Court need only find that there is “‘probable
cause’ to submit the [settlement proposal] to class members and hold a full-scale hearing as to its
fairness.” In re Traffic Exec. Ass’n-Eastern R.R., 627 F.2d 631, 634 (2d Cir. 1980). If, after a
preliminary evaluation of the proposed settlement, the Court finds that it “appears to fall within
the range of possible approval,” the Court should order that the class members receive notice of
the settlement. In re Vitamins Antitrust Litig., Nos. Misc. 99–197 (TFH), 1285 (MDL), 2001
WL 856292, at *4 (D.D.C. 2001).
5
Here, the Court finds that probable cause does not exist to hold a full-scale hearing as to
the fairness of the Settlement Agreement for four reasons. First, Alvarez’s release is far too
broad and goes well beyond the claims at issue in this litigation. This Court may not approve
FLSA settlements containing an “overbroad release that would waive practically any possible
claim against the defendants, including unknown claims and claims that have no relationship
whatsoever to wage-and-hour issues.” Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199,
206 (2d Cir. 2015) (internal quotation marks and citations omitted). “Courts in this District
routinely reject release provisions that ‘waive practically any possible claim against the
defendants, including unknown claims and claims that have no relationship whatsoever to wageand-hour issues.’” Martinez v. Gulluoglu LLC, No. 15 Civ. 2727 (PAE), 2016 WL 206474, at *2
(S.D.N.Y. Jan. 15, 2016) (quoting Lopez v. Nights of Cabiria, LLC, 96 F. Supp. 3d 170, 181
(S.D.N.Y. 2015)). This is especially true where “the releases were not mutual and protected only
the defendants.” Lola v. Skadden, Arps, Meagher, Slate & Flom LLP, No. 13 Civ. 5008 (RJS),
2016 WL 922223, at *2 (S.D.N.Y. Feb. 3, 2016). Even where releases affect only named
plaintiffs, courts in this district have rejected overly broad releases as part of their duty to “police
unequal bargaining power between employees and employers.” Lopez v. Poko-St. Ann L.P., 176
F. Supp. 3d 340, 344 (S.D.N.Y. 2016) (quoting Flood v. Carlson Rests. Inc., No. 14 Civ. 2730
(ANT), 2015 WL 4111668, at *2 (S.D.N.Y. July 6, 2015)); see also Camacho v. Ess-A-Bagel,
Inc., No. 14 Civ. 2592 (LAK), 2014 WL 6985633, at *4 (denying preliminary approval of a
settlement containing a nonmutual general release); Thallapaka v. Sheridan Hotel Assocs. LLC,
No. 15 Civ. 1321 (WHP), 2015 WL 5148867, at *1 (same). Here, because the Named Plaintiff’s
release far exceeds the scope of the FLSA, this Court finds that it cannot preliminarily approve
the Settlement Agreement.
6
Second, the Settlement Agreement has a confidentiality clause that contains both nondisclosure and non-disparagement provisions. These provisions “contravene[] the remedial
purposes of the [FLSA] and . . . [are] not fair and reasonable.” Martinez, 2016 WL 206474, at
*1 (internal quotation marks omitted) (quoting Lazaro-Garcia v. Sengupta Food Servs., No. 15
Civ. 4259 (RA), 2015 WL 9162701, at *3 (S.D.N.Y. Dec. 15, 2015)). The non-disclosure
provision prevents Alvarez from publicizing the terms of the agreement and release to the media
or from discussing them on social media. Settlement Agreement ¶ 4.2. Even though the
confidentiality provision does not purport to seal the case, it “imposes an obligation on the
plaintiff—a gag order, really—to refrain from discussing any aspect of the case or the
settlement” on certain platforms. Camacho, 2015 WL 129723, at *2. Courts in this District have
found that,
Practically speaking . . . the public filing of the settlement in this case, standing
alone, is unlikely to benefit low-wage workers. Documents available via ECF are
almost as obscure for some people, including many whom the FLSA aims to
protect, as paper courthouse filings were in the pre-digital age. Pragmatically, the
best way for a worker to learn about his or her employment rights is directly or
indirectly from a co-worker or an outside organization.
Yet nondisclosure provisions prevent workers from using a win to publicize both the
wrongdoing of the employer and the possibility of success more generally. For
these reasons, a non-disclosure agreement in an FLSA settlement, even when the
settlement papers are publically available on the Court's docket, is contrary to wellestablished public policy because it inhibits one of the FLSA’s primary goals—to
ensure
that
all
workers
are
aware
of
their
rights.
Nights of Cabiria, 96 F. Supp. 3d at 179–80 (internal quotation marks and citations omitted).
Such a provision “runs afoul of the purposes of the FLSA and the ‘public’s independent interest
in assuring that employees’ wages are fair.’” Camacho, 2015 WL 129723, at *2 (quoting
Stalnaker v. Novar Corp., 293 F. Supp. 2d 1260, 1264 (M.D. Ala. 2003)).
The confidentiality clause also provides that “[Alvarez] further agrees not to make
disparaging comments related to Defendants except as may be required by law or protected by
7
law.” Settlement Agreement ¶ 4.2. “Courts in this District have held that while not all nondisparagement clauses are per se objectionable, if the provision would bar plaintiffs from making
any negative statement about the defendants, it must include a carve-out for truthful statements
about plaintiffs’ experience litigating their case.” Martinez, 2016 WL 206474, at *1 (internal
quotation marks omitted) (quoting Lazaro-Garcia, 2015 WL 9162701, at *3). If it does not,
“such a provision contravenes the remedial purposes of the [FLSA] and . . . is not fair and
reasonable.” Id. (quoting Lazaro-Garcia, 2015 WL 9162701, at *3). Because the Settlement
Agreement contains a non-disclosure provision and because the non-disparagement clause at
issue here does not include a carve-out for truthful statements, the Court will not approve the
Agreement with the confidentiality clause as currently written.
Third, Plaintiffs argue that the settlement amount is fair because it “represents a good
value given the attendant risks of litigation.” Doc. 107 at 13–14. But the parties do not explain
what the range of possible recovery for any Plaintiff is. Other courts in this District have
rejected settlements when the parties do not present sufficient information regarding the range of
recovery, as “[i]n the absence of such information, the Court cannot discharge its duty to ensure
that the proposed settlement is fair and reasonable.” See Nights of Cabiria, 96 F. Supp. 3d at
177. Although the settlement amount may be imminently reasonable, the Court cannot judge its
fairness without more information on the Plaintiffs’ possible recovery.
Finally, the Settlement Agreement provides that the settlement checks “will be allocated
25% to W-2 wage payments and 75% to 1099 non-wage payments for interest, liquidated
damages and statutory penalties.” Settlement Agreement ¶ 3.5. However, “FLSA settlement
represents an award of back pay and not also liquidated damages until the plaintiff is
compensated for the wages allegedly owed.” Guzman v. Prodelca Corp., No. 16 Civ. 2637
8
(AJP), 2016 WL 4371631, at *1 (S.D.N.Y. Aug. 16, 2016). Therefore, to the extent the
settlement amount for each claimant is “less than the full amount of alleged unpaid wages, all of
the settlement payments to the plaintiff (after deduction of attorneys’ fees and costs) must be on
a taxable W-2 basis.” Id. at *2.
For the foregoing reasons, the Court must therefore deny Plaintiff’s motion for
preliminary approval. Because the proposed notice and schedule for final settlement approval
are dependent on preliminary approval of the Settlement Agreement, the Court declines to
consider these at this juncture.
III.
Conditional Certification of the Settlement Class
Plaintiff also seeks conditional certification of a Rule 23 Class for the purposes of
facilitating a settlement. Should the parties decide to amend the Settlement Agreement in light
of the Court’s discussion in Part II supra, class and collective action certification will likely be
granted based on the information provided.
Under Rule 23 of the Federal Rules of Civil Procedure, a class action may proceed when:
(1) the class is so numerous that joinder of all members is impracticable; (2) there
are questions of law or fact common to the class; (3) the claims or defenses of the
representative parties are typical of the claims or defenses of the class; and (4) the
representative parties will fairly and adequately protect the interests of the class.
Fed. R. Civ. P. 23(a). Provisional class certification and appointment of class counsel have
several practical purposes, including avoiding the costs of litigating class status while facilitating
settlement, ensuring notification to class members of the proposed settlement agreement, and
setting the date and time of the final approval hearing. See, e.g., Westerfield v. Washington Mut.
Bank, Nos. 06 Civ. 2817 (CBA) (JMA), 08 Civ. 00287 (CBA) (JMA), 2009 WL 6490084, at *1
(E.D.N.Y. June 26, 2009) (conditionally certifying a multi-state wage and hour settlement class
and granting preliminary approval to nationwide wage and hour settlement).
9
Plaintiffs seek to certify the following class under Federal Rule of Civil Procedure 23, for
settlement purposes: “Named Plaintiff, Opt-in Plaintiffs and all individuals who worked as
delivery employees for any of the Corporate Defendants . . . from July 20, 2010 through the date
of preliminary approval.” Doc. 107 at 14. Defendants do not oppose class certification for the
purposes of achieving settlement and therefore do not contest that the requirements for class
certification under Federal Rule of Civil Procedure 23 have been met. The Court finds that,
based on the information presently before it, Plaintiffs meet the requirements for class
certification.
Plaintiffs satisfy Federal Rule of Civil Procedure 23(a)(1) because there are
approximately 225 class members, rendering joinder impracticable. Doc. 107 at 15; see also
Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995) (noting that
“numerosity is presumed at a level of 40 members”). Rules 23(a)(2) and (3) are also satisfied.
Alvarez contends that he and the other class members “were all non-exempt, tipped, delivery
persons employed by Defendants, and that they were subject to the same policies.” Doc. 107 at
16. The Court finds that there are common issues of law or fact among the class members and
that Alvarez’s claims are typical of the class members’ claims. See Martens v. Smith Barney,
Inc., 181 F.R.D. 243, 258–59 (S.D.N.Y. 1998) (observing that commonality and typicality “tend
to merge into one another, so that similar considerations animate analysis”) (quoting Marisol A.
v. Giuliani, 126 F.3d 372, 376 (2d Cir. 1997)); see also Lizondro-Garcia v. Kefi LLC, 300 F.R.D.
169, 175 (S.D.N.Y. 2014) (conditionally certifying a class alleging the same state wage and hour
violations for settlement purposes); Reyes v. Buddha-Bar NYC, No. 08 Civ. 2494 (DCF), 2009
10
WL 5841177, at *2–3 (S.D.N.Y. May 28, 2009) (granting final approval of a class alleging state
wage and hour violations for settlement purposes).
Finally, Plaintiffs satisfy Rule 23(a)(4)’s “adequacy of representation” inquiry, which
“looks both to the ability of class counsel and to the potential for conflict of interest between the
representative plaintiffs and the rest of the class.” Martens, 181 F.R.D. at 259. Alvarez’s
interests are not antagonistic to or at odds with those of the settlement class members. See id.
(“[O]nly a conflict that goes to the very subject matter of the litigation will defeat a party’s claim
of representative status.”) (quoting Krueger v. N.Y. Tel. Co., 163 F.R.D. 433, 443 (S.D.N.Y.
1995)).
Plaintiffs also satisfy Federal Rule of Civil Procedure 23(b)(3), as “[c]ommon factual
allegations and a common legal theory predominate over any factual or legal variations among
the Class Members.” Reyes, 2009 WL 5841177, at *3. “Class adjudication of this case is
superior to individual adjudication because it will conserve judicial resources and is more
efficient.” Id.; see also Damassia v. Duane Reade, Inc., 250 F.R.D. 152, 164 (S.D.N.Y. 2008)
(finding class adjudication of state wage and hour claims appropriate even where a FLSA
collective action was simultaneously available). Thus, the Court finds that conditional
certification of a settlement class would be appropriate.
Plaintiffs also seek conditional certification of a FLSA collective action. The Second
Circuit has endorsed a two-step framework for determining whether a court should certify a case
as a collective action under § 216(b). See Myers v. Hertz Corp., 624 F.3d 537, 554–55 (2d Cir.
2010); see also Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528, 540 (2d Cir. 2016). This
process entails an analysis of whether prospective plaintiffs are “similarly situated” at two
different stages: an early “notice stage,” and again after discovery is largely complete. McGlone
11
v. Contract Callers, Inc., 867 F. Supp. 2d 438, 442 (S.D.N.Y. 2012) (citing Bifulco v. Mortg.
Zone, Inc., 262 F.R.D. 209, 212 (E.D.N.Y. 2009)). At stage one, the court makes “an initial
determination to send notice to potential opt-in plaintiffs who may be ‘similarly situated’ to the
Plaintiffs with respect to whether a[n] FLSA violation has occurred.” Myers, 624 F.3d at 555
(citations omitted). The standard for certification of a collective action is less stringent than
certification of a class. See Hadel v. Gaucho, LLC, 15 Civ. 3706 (RLE), 2016 WL 1060324, at
*4 (S.D.N.Y. Mar. 14, 2016). Plaintiffs argue that they are similarly situated because “they were
not paid proper minimum wages due to invalid tip credit.” Doc. 107 at 19. The Court finds that
Plaintiffs are likely entitled to conditional certification as an FLSA collective action.
IV.
Appointing Class Counsel
The adequacy of class counsel is also not contested at this stage. The Court finds that
appointment of C.K. Lee of Lee Litigation Group PLLC as class counsel is likely warranted
because counsel has performed substantial work identifying, investigating, and settling Plaintiffs’
and the class members’ claims. Doc. 106 ¶¶ 9–17. Counsel is also skilled and experienced in
employment class action with extensive experience prosecuting and settling wage and hour class
and collective actions. Id. ¶¶ 4–7. Courts have also found counsel to be adequate class counsel
in similar class actions. Id. ¶ 7.
12
V.
Conclusion
Accordingly, Plaintiffs’ request for approval of the proposed settlement is DENIED
without prejudice. The parties may proceed in one of the following ways:
1. File a revised settlement agreement on or before November 21, 2019; or
2. File a joint letter on or before November 21, 2019 that indicates the parties’ intention to
abandon settlement and continue to trial.
The Clerk of the Court is respectfully directed to terminate the motion, Doc. 105.
SO ORDERED.
Dated:
November 1, 2019
New York, New York
_______________________
Edgardo Ramos, U.S.D.J.
13
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?