Adams v. By Design L.L.C.

Background

Claudia Adams filed this action against her employer, By Design, LLC, and its co-owners, Jay Lee and Russell Kemp. Adams alleged discrimination based on pregnancy and gestational diabetes, including that Defendants terminated her after she requested reasonable accommodations. Her claims included sex discrimination, pregnancy discrimination, disability discrimination, and retaliation under Title VII, the Americans with Disabilities Act, and New York statutes. She also brought a claim for unpaid overtime under the Fair Labor Standards Act (FLSA) and a parallel New York claim.

The parties reached a settlement after a court-ordered mediation. The court had previously denied two proposed settlement agreements. The first included a provision preventing Adams from working for Defendants in the future. The second included overly broad provisions concerning non-disparagement and communication. The parties then submitted a third agreement for review.

Legal standard

Because the settlement included FLSA claims and had not been approved by the Department of Labor, the court independently reviewed whether it was fair and reasonable. The court considered factors including Adams’s possible recovery, the litigation burdens and risks, whether the agreement resulted from negotiations between experienced counsel, and whether fraud or collusion was possible. The court also reviewed the reasonableness of the attorneys’ fees and costs.

Settlement terms and fairness

The agreement provided a total settlement of $85,000: $5,000 for unpaid overtime; $51,666.67 for Adams’s discrimination claims and liquidated damages on the wage claims; and $28,333.33 for attorneys’ fees. The parties stated that Adams sought $104,629 for her pregnancy-discrimination and retaliation claims and alleged approximately $5,000 in unpaid overtime.

The court calculated the maximum potential recovery on the FLSA overtime claim as $10,000, consisting of $5,000 in unpaid overtime and an equal amount in liquidated damages. Because the $51,666.67 payment was not divided between the FLSA and discrimination claims, the court stated that the amount allocated to the FLSA claim was at least 50% of its total potential recovery. The court noted that courts regularly approve FLSA settlements representing smaller percentages of potential recovery.

The court also found that the revised agreement removed the provisions that had caused it to reject the earlier agreements. Although the release covered more than the overtime claim, the court found it permissible because the agreement resolved both FLSA and non-FLSA claims. The settlement was reached relatively early through negotiations involving a court-appointed mediator. The parties represented that Adams had not kept records of her claimed off-the-clock work and likely would have had difficulty presenting witnesses to support the overtime claim at trial. The court found no basis to believe that fraud or collusion was involved.

Attorneys’ fees

The agreement provided $28,333.33 in attorneys’ fees, equal to one-third of the total settlement. Counsel’s billing records showed 47.1 hours of work: 10.8 attorney hours billed at $495 per hour, 28.5 attorney hours at $395 per hour, 5.5 attorney hours at $175 per hour, and 2.3 paralegal hours at $175 per hour. The records supported a lodestar amount of $17,968.50.

The court found the requested fee reasonable under both the percentage-of-the-fund and lodestar approaches. Although the fee was 1.58 times the lodestar amount, the court described that multiplier as modest and reasonable given the risk of bringing an FLSA case on a contingency basis.

Ruling

The court found the settlement agreement, including its fee provision, fair and reasonable and approved it. The Clerk of Court was directed to terminate the action. The opinion approved the settlement rather than deciding whether Defendants were liable on Adams’s underlying claims.