Guillen de Mercado v. Pikasso Empanadas Y Mas Inc.

Background

Norayna Guillen de Mercado asserted claims against Pikasso Empanadas Y Mas Inc., Ronald Espinal, and Rafaelina Fermin for unpaid overtime wages and for failing to provide wage statements and notices under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL). The parties entered into a Settlement Agreement and Release, and Guillen de Mercado asked the court to approve it under the Second Circuit’s requirement that courts review FLSA settlements for fairness and reasonableness.

The opinion states that Guillen de Mercado claimed total damages of $26,902.02, including compensation, liquidated damages, wage-notice and wage-statement penalties, and interest. The claimed unpaid wages accounted for $7,780.50. The defendants disputed liability and contended that their records showed Guillen de Mercado had been properly paid.

Settlement Terms

The total settlement amount is $20,000. Guillen de Mercado will receive $12,656.83. Her counsel will receive $6,666.67 in attorneys’ fees and $676.50 in costs. The court found the economic terms fair and reasonable in light of the disputed liability and the recovery described in the opinion.

The agreement does not include a confidentiality provision, a non-disparagement clause, or a general release. Its release is limited to the FLSA and NYLL claims Guillen de Mercado may have against the defendants. Although the release is not mutual, the court found that its limited scope made it reasonable in this case.

Attorneys’ Fees and the Lodestar Cross-Check

The fee award represents one-third of the $20,000 settlement, plus costs. A lodestar cross-check is a comparison between a contingent fee and a calculation based primarily on the attorney’s hours and billing rate. Guillen de Mercado did not submit proof of counsel’s hours, so the court could not perform that comparison.

The court held that a lodestar cross-check was not required here. It distinguished cases involving court-ordered fee awards—such as fees requested after a trial, summary judgment, or a class-action settlement—from a non-class FLSA settlement in which the plaintiff and counsel agreed on the fee as part of the overall settlement. The court also concluded that Second Circuit precedent did not require a lodestar cross-check for this type of agreed fee.

Instead, the court examined the written engagement letter and the surrounding circumstances. The engagement letter, which was in Spanish, provided for a one-third contingency fee based on the plaintiff’s gross recovery. The court found that arrangement market-standard and reasonable and found no indication of fraud, deception, or overreaching. The court also approved calculating the one-third fee from the total settlement amount even though that amount included litigation costs paid to counsel, noting that the method increased counsel’s compensation by $225.50 and minimally affected Guillen de Mercado.

Ruling

Judge Gary Stein approved the motion for approval of the Settlement Agreement. The opinion did not decide whether the defendants actually violated the FLSA or NYLL; it approved the parties’ negotiated resolution and the related fee and cost amounts.