Gonzalez v. Chestnut Holdings of New York

Background

Angel Collado brought claims under the Fair Labor Standards Act (FLSA), New York Labor Law regulations, and various provisions of the New York Labor Law. He alleged that the defendants:

- failed to pay minimum and overtime wages; - unlawfully deducted weekly rental payments from his wages; - failed to provide required notices about minimum and overtime wages; - failed to provide proper wage notices and wage statements; and - discharged him in retaliation for complaints about wage underpayments.

Collado sought lost wages, allegedly unauthorized wage deductions, out-of-pocket costs and expenses for improving the defendants’ real property, penalties, liquidated damages, attorney’s fees, and costs. The opinion also states that the defendants brought an ejectment action against Collado in state civil court after his discharge, although Collado claimed he had already vacated the apartment where he had been a live-in superintendent.

Settlement Approval Standard

The court explained that FLSA claims cannot be privately settled with prejudice without approval from the district court or the Department of Labor. The court therefore had to determine whether the agreement was fair and reasonable. Relevant considerations included Collado’s possible recovery, the burdens and expenses avoided through settlement, the litigation risks, whether experienced counsel negotiated at arm’s length, and the possibility of fraud or collusion.

The court also noted that it may reject an FLSA settlement when the parties do not explain the recovery amount, fail to support the requested attorney’s fees, or include improper provisions such as restrictive confidentiality clauses or overly broad releases.

Settlement Amount

The agreement provided a total recovery of $10,000. Under the agreement, Collado’s counsel would receive $3,330 in attorney’s fees and $903.80 in costs and disbursements, for a total of $4,233.80. Collado would receive the remaining $5,766.20.

Collado estimated a maximum recovery of approximately $101,880. His estimate included approximately $57,600 in double back pay from the date of discharge through mediation; approximately $32,600 in minimum- and overtime-wage underpayments and liquidated damages; $1,680 for underpaid overtime; $5,000 for failure to provide written minimum- and overtime-wage notices; $5,000 for improper wage statements; and $750 in unpaid reimbursements.

The defendants disputed all of Collado’s allegations. The disputed issues included whether he worked more than 40 hours per week, whether he was covered by New York’s residential janitorial exemption from minimum- and overtime-wage requirements, whether he lived on the employers’ premises throughout his employment, and whether the defendants provided the required wage notices. The court concluded that the settlement provided value by avoiding the risks and delays of litigation, resolved genuine disputes, and represented a reasonable compromise reached through arm’s-length negotiations by experienced attorneys.

Attorney’s Fees and Costs

The court found the requested $4,233.80 in attorney’s fees and costs reasonable. The amount was approximately one-third of the settlement, a percentage the court stated is routinely approved in FLSA cases in the district.

As a cross-check, the court considered the lodestar method, which multiplies a reasonable hourly rate by the reasonable number of hours worked. Susan Ghim, an attorney at Nisar Law Group, P.C., submitted billing records showing an hourly rate of $400 and 46 hours of work, producing a lodestar of $18,400. The requested $4,233.80 represented a lodestar multiplier of approximately 0.23. The court found both the hourly rate and the requested total reasonable under the circumstances.

Other Settlement Provisions

The court found the remaining provisions fair and reasonable. The agreement contained no confidentiality provision. Its mutual non-disparagement clause included an exception for truthful statements, including truthful statements about the terms and conditions of Collado’s employment.

The mutual general release covered claims arising from Collado’s wage-and-hour allegations, including his FLSA and New York Labor Law claims, as well as other claims related to the state-court ejectment action. The court concluded that the release was appropriately connected to the dispute and did not improperly waive unrelated claims.

Disposition

The court GRANTED the motion for settlement approval. The clerk was directed to terminate the motion, Doc. 33, and close the case.