Ali v. High-Steppers Corp. d/b/a City Lights

Background

The plaintiffs asserted claims under the Fair Labor Standards Act (FLSA) and New York Labor Law. The parties submitted a signed settlement agreement and asked the court to approve it under the required review standard for many FLSA settlements.

The agreement provided for total settlement consideration of $45,000. The plaintiffs would receive $30,000, or $15,000 each. Their counsel would receive $15,000 for fees and costs. The court noted that the plaintiffs’ recovery was approximately 30% of their claimed unpaid wages of $98,000 and approximately 14% of their total alleged damages, including additional damages, interest, and statutory penalties. The court also noted that some claimed damages related to 2019 and 2020 and might not be recoverable under the FLSA’s three-year time limit.

Economic Terms

The court found the settlement amount to be a reasonable compromise. It considered the disputed facts, the risks of trial and collection, the timing of the case, and other settlement factors. The court also found the combined $15,000 fee-and-cost award fair and reasonable. Counsel represented that the fee equaled one-third of the total settlement, and a calculation comparing the fee to counsel’s time produced a multiplier of 2.1.

Non-Economic Terms

The court identified three provisions that prevented approval of the agreement:

1. General release. Paragraph 3 released the defendants from all claims, known or unknown, that the plaintiffs had against them from the beginning of time through the agreement date. The release was not limited to wage-and-hour claims, and the defendants did not provide a matching release of claims against the plaintiffs. The court found this release impermissibly broad.

2. Non-disparagement clause. Paragraph 7 prohibited the plaintiffs from making disparaging, negative, or defamatory comments about the defendants. The restriction applied only to the plaintiffs, and the agreement did not clearly allow truthful statements about the litigation. Although Paragraph 8 contained language allowing discussion of litigation-related facts and truthful statements, the court found it unclear whether that language applied to Paragraph 7. The court required an explicit exception for truthful statements.

3. Non-cooperation clause. Paragraph 8 prohibited the plaintiffs from encouraging, assisting, or cooperating with other potential or actual claimants against the defendants, except when compelled by legal process. The court found the restriction too broad because it could prevent the plaintiffs from helping with claims unrelated to their own wage claims, including a possible workplace-safety class action. The court concluded that the clause was inconsistent with the remedial purposes of the FLSA and was not saved by the paragraph’s discussion carve-out.

Disposition

The court DENIES approval of the Settlement Agreement at this time. It directed the parties to file, by Wednesday, March 12, 2025, a revised agreement that modifies or deletes Paragraphs 3, 7, and 8 consistently with the order. Alternatively, the parties were directed to submit a joint letter stating that they intended to continue litigating the action.

The opinion identifies Gary Stein as the United States Magistrate Judge.