Angulo v. Clowns.com, Inc.

Background

The plaintiffs—Brayan Angulo, Cameron Pille, Janina Salorio, and Xander Black—brought claims against Clowns.com, Inc., Adolph Rodriguez, and Erica Barbuto under the Fair Labor Standards Act (FLSA) and New York Labor Law. On May 29, 2024, the parties reported that they had resolved the claims and asked the court to skip the usual approval process for FLSA settlements in the Second Circuit.

In an earlier order, the court denied that request and directed the parties to file a motion seeking approval of the proposed FLSA settlement under Cheeks v. Freeport Pancake House, Inc. Cheeks requires a court to review an FLSA settlement before the parties dismiss the case through the type of joint dismissal they proposed.

Defendants then asked the court to reconsider that order or, alternatively, to allow them to file a motion to dismiss for lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). Plaintiffs opposed the request.

Reasons for the Decision

The court held that Defendants had not met the strict standard for reconsideration. They did not identify controlling decisions or factual information that the court had overlooked and that could reasonably change its earlier decision. The court also rejected Defendants’ argument that they should not be held to that standard because Plaintiffs’ counsel had submitted the parties’ earlier joint letter. The court noted that the letter was submitted jointly and included Defendants’ position on the issue.

The court further concluded that the parties’ document, although titled an “FLSA Satisfaction Agreement,” was substantively a settlement agreement. It included agreed payment amounts, releases of FLSA claims, mutual promises not to sue, a statement that Defendants did not admit liability, a proposed dismissal, conditions requiring court approval, and provisions concerning breach. The agreement also resulted from the same mediation that resolved the parties’ New York-law claims, which the parties described as a settlement.

The court rejected Defendants’ argument that the agreement eliminated any live controversy because it supposedly provided full satisfaction of the FLSA claims. No payments had yet been made, and Defendants’ promise to pay was subject to conditions, including releases and court approval. The court therefore found that the case was not moot and that it retained authority to conduct the required FLSA settlement review.

The court also explained that a settlement providing full economic recovery is not automatically exempt from review. The court could not yet determine whether the plaintiffs would receive full recovery or whether the agreement contained impermissible non-economic terms. Defendants acknowledged that they did not know how the FLSA payments had been calculated, and they had not provided the separate agreement resolving the New York-law and other state-law claims. The court said that agreement was needed as context to determine whether the FLSA settlement was fair and reasonable, although the court would not separately approve the non-FLSA settlement.

Rulings and Next Steps

Judge Gary Stein denied Defendants’ motion for reconsideration. The court also denied Defendants’ alternative request for leave to file a motion to dismiss for lack of subject-matter jurisdiction, stating that such a motion would lack merit for the reasons already discussed and might become unnecessary if the FLSA settlement were approved.

The court adhered to its earlier determination that the parties must file a motion seeking Cheeks approval of the proposed FLSA settlement and must provide the agreement resolving the non-FLSA claims. The parties were ordered to submit that application by September 18, 2024. The court permitted the non-FLSA settlement agreement to be filed under seal and directed the clerk to close Defendants’ pending motion at Docket No. 52. The court emphasized that it was not expressing an opinion on whether the FLSA settlement should ultimately be approved.