Ubri v. Majestic Associates LLC

Background

Eduardo Ubri brought this Fair Labor Standards Act (FLSA) case on behalf of himself and others similarly situated against Majestic Associates LLC, Joshua Balsam individually, Majestic Property Management Associates, LLC, 3871 Village Court Associates, LLC, and Majestic Associates LLC. The parties filed a joint request for approval of their settlement agreement.

The settlement provided that Ubri would receive $40,000, including attorneys’ fees and expenses. The parties asserted that the maximum recovery for Ubri’s unpaid-overtime claims was $6,632.36 in actual damages plus an equal amount in liquidated damages, for a total of $13,264.71. They therefore characterized the settlement as 300 percent of that maximum recovery.

Court’s Analysis

The court explained that private FLSA settlements require approval by either the court or the Department of Labor. Without Department of Labor approval, the court must determine whether the settlement is fair and reasonable. That review considers, among other things, the possible recovery, the burdens and expenses of litigation, the litigation risks, whether the agreement resulted from arm’s-length bargaining between experienced counsel, and the possibility of fraud or collusion. When a settlement includes attorneys’ fees and costs, the court also evaluates whether those amounts are reasonable and supported by adequate documentation.

The court found that the parties’ damages calculation covered only the unpaid-overtime claims. It did not calculate potential recovery for the other claims in the amended complaint: unpaid minimum wages, failure to pay wages timely, violation of the split-shift requirement, failure to provide proper wage statements, and failure to provide proper wage notice. The court stated that parties seeking approval of an FLSA settlement must address all possible sources of the plaintiff’s potential damages. Without a complete and accurate assessment of Ubri’s best-case recovery at trial, the court could not determine whether the $40,000 settlement was fair and reasonable.

Disposition

The court denied the parties’ request for settlement approval without prejudice. It stated that it could not rewrite an unreasonable settlement agreement, but could reject it or give the parties an opportunity to revise it. Within 21 days of the Opinion and Order, the parties may file a revised settlement agreement and a new letter explaining why it is fair and reasonable, including a response to the issues identified by the court. Alternatively, they may file a joint letter stating that they intend to abandon settlement, after which the court will set a status conference.