Persaud et al v. D & H Ladies Apparel LLC et al

Filing 25

OPINION AND ORDER. the Court will not approve the Agreement as currently written. The parties may proceed in one of the following ways: 1. File a revised settlement agreement on or before May 19, 2017 that cures the issue with the general mutual rele ase, or alternatively provides a persuasive explanation of the practical benefit that Plaintiffs stand to realize in exchange for broadly releasing all claims against the Defendants. 2. File a joint letter on or before May 19, 2017 that indicates the parties' intention to abandon settlement and continue to trial, at which point the Court will reopen the case and set down a date for a pre-trial conference; or 3. Stipulate to dismissal of the case without prejudice, which the Court need not a pprove under current Second Circuit case law, see Cheeks, 796 F.3d at 201 n.2. The status conference currently scheduled for 11:30 AM on May 17, 2017 is rescheduled for 11:00 AM on May 31, 2017. It is SO ORDERED. (Case Management Conference set for 5/31/2017 at 11:00 AM before Judge Edgardo Ramos.) (Signed by Judge Edgardo Ramos on 5/8/2017) (rjm)

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC#
DATE FILED: 5/8/2017

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
JAMES PERSAUD, KEVIN DIAZ, MICHAEL
DIAZ, LUIS VIERA, ANTHONY BONTUYAN,
MARIA DELVALLE, and ROSA PEREZ,
Plaintiffs,

OPINION AND ORDER
16 Civ. 5994 (ER)

– against –
D & H LADIES APPAREL LLC, AB & SONS
GROUP, LLC, ISAAC CHETRIT, and ISAK
PEREZ,
Defendants.
Ramos, D.J.:

James Persaud, Kevin Diaz, Michael Diaz, Luis Viera, Anthony Bontuyan, Maria
Delvalle, Rosa Perez and Gladys Gonzales (collectively, “Plaintiffs”) brought the abovecaptioned action against D & H Ladies Apparel LLC, AB & Sons Group, LLC, Isaac Chetrit and
Isak Perez (collectively, “Defendants”) for unpaid wages, overtime compensation, and spread-ofhours premiums under the Fair Labor Standards Act (“FLSA”) and New York Labor Law
(“NYLL”). Doc. 17. On April 25, 2017, the parties submitted an application for the Court to
approve the Settlement and Release Agreements between each Plaintiff and the Defendants
(“Agreements”), and to dismiss this action with prejudice. Doc. 24.
In this Circuit, parties cannot privately settle FLSA claims with prejudice absent the
approval of the district court or the Department of Labor. See Cheeks v. Freeport Pancake
House, Inc., 796 F.3d 199, 200 (2d Cir. 2015). The parties therefore must satisfy the Court that
their agreement is “fair and reasonable.” Beckert v. Ronirubinov, No. 15 Civ. 1951 (PAE), 2015
WL 8773460, at *1 (S.D.N.Y. Dec. 14, 2015). The Court will not approve the Agreements
because, for various reasons, it is not “fair and reasonable” as currently drafted.

“In determining whether the proposed settlement is fair and reasonable, a court should
consider the totality of circumstances, including but not limited to the following factors: (1) the
plaintiff’s range of possible recovery; (2) the extent to which the settlement will enable the
parties to avoid anticipated burdens and expenses in establishing their respective claims and
defenses; (3) the seriousness of the litigation risks faced by the parties; (4) whether the
settlement agreement is the product of arm’s-length bargaining between experienced counsel;
and (5) the possibility of fraud or collusion.” Felix v. Breakroom Burgers & Tacos, No. 15 Civ.
3531 (PAE), 2016 WL 3791149, at *2 (S.D.N.Y. Mar. 8, 2016) (quoting Wolinsky v. Scholastic
Inc., 900 F. Supp. 2d 332, 335 (S.D.N.Y. 2012)).
Here, the parties have “failed to provide the Court with enough information about the
bona fides of the dispute to determine whether the settlement amount was fair and reasonable.”
Run Guo Zhang v. Lin Kumo Japanese Rest. Inc., No. 13 Civ. 6667 (PAE), 2015 WL 5122530,
at *1 (S.D.N.Y. Aug. 31, 2015). The Court’s inquiry into the substantive reasonableness of a
FLSA settlement requires the parties to submit, among other things, a comparison of Plaintiffs’
range of possible damages with the final settlement amount, and an explanation of the casespecific litigation risks and other factors that justify the discrepancy between the potential value
of Plaintiffs’ claims and the settlement amount, if any. See, e.g., Jesus v. PS Bros. Gourmet, No.
15 Civ. 99 (WHP), 2015 WL 9809999, at *1 (S.D.N.Y. Dec. 18, 2015) (approving FLSA
settlement where Plaintiff submitted “a detailed breakdown of the total damages assessed for
minimum wage, overtime, and spread-of-hours violations; New York and federal liquidated
damages; interest; and pay stub violation”); Meza v. 317 Amsterdam Corp., No. 14 Civ. 9007
(VSB), 2015 WL 9161791, at *1 (S.D.N.Y. Dec. 14, 2015) (approving settlement after parties
“submitted a letter detailing why they believe the settlement reached in this action, and the

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contemplated attorney’s fees, are fair and reasonable”); Gaspar v. Pers. Touch Moving, Inc., No.
13 Civ. 8187 (AJN), 2015 WL 7871036, at *2 (S.D.N.Y. Dec. 3, 2015) (“Although the Court is
satisfied with the parties’ explanation of the methodology used to generate the settlement
amounts, however, the parties did not submit the underlying data to which the methodology was
applied…[T]he parties must submit this information to the Court before the Court can approve
the settlement.”). The parties have only submitted an explanation of the methodology employed,
but not any underlying data comparing the Planitiffs’ range of damages with the final settlement
amount.
Regarding the reasonableness of attorneys’ fees requested, the Court looks to “the
lodestar—the product of a reasonable hourly rate and the reasonable number of hours required by
the case—which creates a presumptively reasonable fee.” Zhang v. Lin Kumo Japanese Rest.,
Inc., No. 13 Civ. 6667 (PAE), 2015 WL 5122530, at *2 (S.D.N.Y. Aug. 31, 2015) (quoting
Stanczyk v. City of New York, 752 F.3d 273, 284 (2d Cir. 2014)). Under the proposed
Agreements, Plaintiffs’ attorneys will retain one third of the settlement amount, totaling
$181,429.92, as attorneys’ fees. Doc 24 at 4, Ex. B. Although “one-third contingency fees . . .
are commonly accepted in the Second Circuit in FLSA cases,” Najera v. Royal Bedding Co.,
LLC, No. 13 Civ. 1767 (NGG) (MDG), 2015 WL 3540719, at *3 (E.D.N.Y. June 3, 2015),
Plaintiffs do not provide any documentation allowing the Court to evaluate its reasonableness in
this action. Garcia v. Jambox, Inc., No. 14 Civ. 3504 (MHD), 2015 WL 2359502, at *6
(S.D.N.Y. Apr. 27, 2015) (“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. That requirement extends to parties seeking approval of a
settlement that allocates a portion of the proceeds to the attorney.”); see also Beckert, 2015 WL

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8773460, at *2 (evaluating the reasonableness of Plaintiff’s request for fees of one third of the
settlement amount by reviewing the reasonable hours worked multiplied by reasonable hourly
rates, i.e. the lodestar method).
The Court also finds problematic those sections prohibiting disparagement and barring
Plaintiffs from future employment with Defendants.
The Agreements contain “Mutual Non-Disparagement and Neutral References”
provisions that seeks to prohibit Plaintiff from “mak[ing], publish[ing], or communicat[ing] to
any person or entity or in any public forum, any defamatory or disparaging remarks, comments
or statements concerning the Defendants, now or in the future.” Agreements at ¶ 4. “Courts in
this District have held that while not all non-disparagement 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.
Otherwise, such a provision contravenes the remedial purposes of the [FLSA] and . . . is not fair
and reasonable.” Martinez v. Gulluoglu LLC, No. 15 Civ. 2727 (PAE), 2016 WL 206474, at *1
(S.D.N.Y. Jan. 15, 2016) (quoting Lazaro-Garcia, No. 15 Civ. 4259 (RA), 2015 WL 9162701, at
*3) (internal quotation marks omitted); see also Gaspar v. Pers. Touch Moving, Inc., No. 13 Civ.
8187 (AJN), 2015 WL 7871036, at *3 (S.D.N.Y. Dec. 3, 2015) (noting non-disparagement
clauses “can be contrary to public policy because they prevent the spread of information about
FLSA actions to other workers (both employees of Defendants and others), who can then use that
information to vindicate their statutory rights”). The clauses at issue here broadly bar Plaintiffs
from discussing any potentially disparaging topics, including truthful statements about Plaintiffs’
experience litigating the case. The Court will therefore not approve the Agreement with the nondisparagement provision as currently written.

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