Castillo v. AVI Food Systems

Background

Bianca Castillo brought claims against AVI Food Systems, Inc. under the Fair Labor Standards Act, a federal wage law, and New York wage laws. She alleged that she worked more than 40 hours per week but was paid for fewer hours, received less than the promised regular and overtime rates, and was not paid required overtime and spread-of-hours premiums. She also alleged minimum-wage, timely-payment, wage-notice, wage-statement, unlawful-deduction, and retaliation violations.

Wilbert Harris later joined the case as an opt-in plaintiff. Castillo proceeded without a lawyer after the Court allowed her former counsel to withdraw; Harris remained represented by counsel. The parties previously sought approval of settlements, but the Court denied those applications without prejudice on July 16, 2025. Castillo and AVI then submitted a second proposed settlement, followed by a similar second application involving Harris.

Settlement-review standard

Because the claims arose under the Fair Labor Standards Act, the Court explained that a private settlement generally requires approval by the district court or the Department of Labor. The Court therefore had to determine whether each agreement was fair and reasonable. It considered factors including the plaintiffs’ possible recovery, the risks and costs of continued litigation, whether the negotiations were conducted at arm’s length, the possibility of fraud or collusion, and whether the parties supplied enough information to evaluate the dispute and the settlement amounts.

Reasons for denying approval

The Court was satisfied that both agreements resulted from competent, good-faith, arm’s-length negotiations and found no evidence of fraud or collusion. It also found that the lack of other similarly situated employees supported approval because Harris was the only additional plaintiff who opted in and the proposed agreements were limited to Castillo’s and Harris’s individual claims.

The Court nevertheless found that the release provisions were overbroad. The provisions purported to release claims relating in any way to the plaintiffs’ compensation, including claims that might have no relationship to the wage-and-hour claims in this case. The Court explained that an Fair Labor Standards Act settlement release generally must be tied to the claims or conduct involved in the lawsuit and cannot be used to release unrelated claims.

The Court also found that the parties had not supplied enough information to evaluate Castillo’s settlement. AVI agreed to pay Castillo $4,000, consisting of $3,000 in back wages and $1,000 in statutory penalties, with no deduction for attorneys’ fees or costs. The parties appeared to estimate her best-case recovery at approximately $40,579.91, making the proposed recovery about 9.86 percent, which the Court said was generally acceptable. But the parties did not provide supporting declarations, exhibits, or records substantiating the calculations and factual assertions about Castillo’s likelihood of success. The Court specifically noted that an offer letter and an asserted expert report referenced in the application were not supplied.

The Court found Harris’s proposed recovery acceptable. AVI agreed to pay him $8,625, including $2,338.15 in back pay, $2,338.15 in statutory penalties, and $3,948.70 in attorneys’ fees and costs. The parties appeared to estimate his best-case recovery at approximately $18,628.29, making the proposed recovery about 46.3 percent. The Court also found that the proposed attorneys’ fee amount for Harris could be reasonable in light of the submitted lodestar calculation, which is an estimate based on attorneys’ hours multiplied by hourly rates.

Attorneys’ costs

Castillo’s former counsel asked the Court to direct AVI to pay the firm $1,073.70 from Castillo’s settlement. Counsel represented that an arbitrator had awarded that amount in a fee dispute with Castillo. Because the settlement agreements required further work and approval, the Court found it premature to decide whether the amount should be paid directly to the firm. The Court requested supplemental authority addressing whether it could issue such an order without the firm having a lien on Castillo’s recovery and required Castillo to state whether she opposed the request.

Disposition

The Court denied both settlement-approval applications without prejudice. It ordered Castillo’s former counsel to provide supplemental authority regarding the request for attorneys’ costs by October 24, 2025, and ordered Castillo to indicate any opposition by October 31, 2025.