Cortorreal v. Reyes Fastest Shipping Inc.

Background

Mercy Cortorreal brought an action for damages under the Fair Labor Standards Act, a federal law governing wages and overtime. The parties asked the court to approve a settlement agreement. The proposed agreement required the defendants to pay $8,000 total: $5,063.32 to Cortorreal and $2,936.68 in attorney’s fees and costs.

Settlement Amount

The parties estimated that Cortorreal’s potential recovery at trial could include $5,800 in unpaid minimum wages, $5,220 in unpaid overtime wages, $11,020 in liquidated damages, and $10,000 in wage-notice damages. The court determined that the $8,000 settlement, approximately 73% of the claimed unpaid wages and approximately 25% of the best-case recovery, reasonably reflected the risks and uncertainties of continued litigation. The court also found that the settlement resulted from arm’s-length negotiations between experienced counsel.

Covenant Not to Sue

The court would not approve the agreement in its current form because of its “Covenant Not to Sue” provision. That provision stated that Cortorreal would not, among other things, confer, communicate with, or assist a third party in bringing a wage-and-hour claim against any releasee. The parties’ submission did not discuss this provision. The court noted that courts routinely reject provisions preventing a Fair Labor Standards Act plaintiff from cooperating with other claimants.

The parties were permitted either to remove the provision or to provide legal authority and argument supporting its inclusion.

Attorney’s Fees and Costs

The court found the requested $2,936.68 in attorney’s fees and costs reasonable. Counsel deducted $405 in costs and sought a contingency fee equal to 33.33% of the remaining settlement amount. As a cross-check, the court calculated a lodestar—the reasonable hourly rate multiplied by the reasonable hours worked—of $7,597 based on the submitted billing records, without deciding whether the proposed hourly rates were reasonable. The requested fee, excluding costs, was $2,531.68, producing a lodestar multiplier of approximately 0.33. The court stated that even using lower hourly rates, the multiplier would remain low and would support the requested award.

Disposition

Judge Henry J. Ricardo denied the parties’ request to approve the proposed settlement without prejudice to filing a new motion for approval of a revised settlement agreement. The parties were directed to meet and confer and submit a revised agreement and explanatory letter by March 20, 2025. If they could not reach a revised agreement, they were directed to submit a joint status letter outlining next steps by that date.