Matatia v. Kavouras Corp.

Background

Stephen Matatia brought claims under the Fair Labor Standards Act (FLSA) and New York Labor Law. He alleged that Kavouras Corp., doing business as Eastdale Avenue Bagels, and Alex Maravegias failed to pay him all wages owed, including overtime wages and sick leave. He also alleged violations involving wage notices and wage statements, retaliation under New York Labor Law, and unjust enrichment.

The parties submitted a proposed settlement for court approval. In the Second Circuit, parties generally may not privately settle FLSA claims through a stipulated dismissal without approval from the district court or the United States Department of Labor. The court therefore reviewed whether the agreement was fair and reasonable under the overall circumstances.

Settlement Terms and Court’s Analysis

The agreement required a total settlement payment of $52,500. Matatia was to receive $40,000, and his counsel was to receive $12,500 in attorney’s fees. Of Matatia’s payment, $26,250 was attributed to his wage-related claims. The court stated that this represented approximately 83 percent of his maximum potential recovery on those claims and more than 100 percent of his alleged unpaid wages.

The court found that all five factors it considered weighed in favor of approval: the settlement provided a substantial recovery compared with the potential wage-related recovery; it avoided the expense and burden of further discovery, motion practice, and trial; both sides faced significant litigation risks; the agreement resulted from arm’s-length negotiations between experienced counsel; and the court had no reason to suspect fraud or collusion.

The court also found no circumstances weighing against approval. It was not aware of similarly situated employees, the employment relationship had ended, it was not aware of a history of FLSA noncompliance by the employer, and the case did not appear to present novel issues requiring further development of the law.

The agreement contained a mutual non-disparagement provision with an exception for truthful statements about the litigation and the underlying facts. It also contained mutual general releases. The court found these provisions acceptable under the circumstances.

For attorney’s fees, the court considered counsel’s contemporaneous time records and hourly-rate information. Counsel reported 38.3 hours of work at $375 per hour. The court found both the hours and rate reasonable and concluded that the $12,500 fee was approximately 87 percent of the calculated lodestar amount, meaning the fee calculated from reasonable hours multiplied by a reasonable hourly rate.

Disposition

The court found the proposed settlement fair and reasonable and APPROVED the settlement agreement. It ordered that Matatia’s counsel receive $12,500 and that Matatia receive the remaining $40,000. The action was dismissed without prejudice to restoring it to the court’s calendar if an application was made within 30 days of the decision and order. The clerk was directed to close the case.