Vargas Garcia v. Park

Background

Ten plaintiffs sued Matthew Park, Chang Y Park, and C And J Brothers, Inc. under the Fair Labor Standards Act of 1948 (FLSA) and provisions of New York Labor Law. The plaintiffs, who were employed as “porters/stockers,” alleged claims for unpaid overtime, unpaid spread-of-hours compensation, missing wage notices, interest, and attorney’s fees. They estimated that they could recover approximately $490,544.63 if they succeeded on all claims at trial. The defendants maintained that they complied with the wage laws and had records that they said were signed by the plaintiffs and showed the hours worked and pay rates. The plaintiffs disputed the accuracy of those records and did not concede that they had signed them.

After two court-sponsored mediation sessions and what the parties described as extensive discovery, the parties reached a settlement through arms-length negotiations. The defendants agreed to pay $275,000, to be divided among the ten plaintiffs based on their work dates, hours, and pay rates. The proposed agreement provided for payment of attorney’s fees from the settlement fund. The parties asked the court to approve the settlement as fair and reasonable.

Settlement Amount

Because the settlement resolved FLSA claims with prejudice, court approval was required before the parties’ stipulated dismissal could take effect. The court considered the plaintiffs’ possible recovery, the risks and expense of trial, the parties’ negotiations, and the absence of evidence of fraud or collusion. It concluded that the $275,000 settlement was within the reasonable range considering the possible recovery and litigation risks. The court also recognized that a trial involving ten plaintiffs who worked for the defendants at different times could be lengthy and expensive.

Attorney’s Fees

The proposed agreement called for $79,166.66 in attorney’s fees for Brett M. Schatz, plus compensation for an unnamed “translator/paralegal.” The plaintiffs said Schatz billed at $700 per hour and that the translator/paralegal billed at $200 per hour. The plaintiffs had agreed to pay Schatz one-third of the recovery, but he reduced his fee by $12,500 during mediation and waived requests for disbursements.

The court used a lodestar calculation as a cross-check. A lodestar is the reasonable hourly rate multiplied by the reasonable number of hours worked. The court found that Schatz’s $700 hourly rate was not reasonable because it greatly exceeded the prevailing rates in the Southern District of New York for similar FLSA work. Based on Schatz’s experience, the work performed for ten plaintiffs, rates approved in comparable cases, and the result obtained, the court used a $425 hourly rate instead.

The court also found that Schatz’s time records included vague entries, such as repeated entries for “E-mail,” and entries for clerical work such as printing, stapling, and organizing documents. It reduced the claimed hours for both Schatz and the translator/paralegal by 2 percent. The resulting hours were 125.20 for Schatz and 45.33 for the translator/paralegal.

The court reduced the translator/paralegal’s hourly rate from $200 to $100 because the plaintiffs provided no information about that person’s background or experience, and $100 to $150 was the range commonly approved for paralegal services in comparable FLSA cases. Using the adjusted rates and hours, the court calculated $53,210 for Schatz and $4,533 for the translator/paralegal, producing a total lodestar of $57,743.

Ruling

The court concluded that $57,743 was the fair and reasonable attorney-fee amount. Although the settlement fund itself was reasonable, the proposed agreement’s fee provision was not. The court therefore found that approving the proposed settlement agreement was not warranted.

Judge Kevin Nathaniel Fox denied the parties’ application for settlement approval, without prejudice. The parties were directed to submit promptly a revised, fully executed stipulated settlement agreement providing for payment of $57,743 in attorney’s fees to Schatz.