Lara v. Air Sea Land Shipping & Moving Inc.

Background

The parties submitted a joint request for approval of a negotiated settlement under the Fair Labor Standards Act (FLSA), the federal wage-and-hour law, and the New York Labor Law. Hildeberto Lara brought claims arising from his past employment as a mover for Air Sea Land Shipping & Moving Inc. and the other defendants.

The defendants agreed to pay $19,000 to settle the claims. The agreement allocated $6,676.67 to Lara’s attorneys for fees and costs. The parties stated that Lara worked approximately 52.5 to 63 hours per week during each four-month summer season, was paid a fixed weekly rate of $520 in cash, and received no overtime pay. They estimated that Lara could recover approximately $59,725, excluding liquidated damages, if he prevailed on all claims. The defendants disputed the amount of work Lara performed and stated that documentary evidence and discovery from non-parties would show that he worked significantly fewer days.

Court’s Analysis

The court applied the standard from Cheeks v. Freeport Pancake House, Inc., which requires judicial review of FLSA settlements for fairness and reasonableness. It found the settlement’s economic terms fair and reasonable because the amount reflected a genuine dispute about damages and the risks of continuing to trial.

The court also found the attorney-fee award reasonable. Of the $6,676.67 awarded for fees and costs, $515 reimbursed costs, leaving $6,161.67 in attorney’s fees. That amount was approximately one-third of the $18,485 net settlement payment after costs. The court noted that this percentage was within the range ordinarily approved in the district and reviewed counsel’s time records, which showed a lodestar of $8,395.

The court identified three problems with the agreement’s non-economic terms. First, although the release was limited in subject matter to claims alleged in the complaint and wage-and-hour claims, its definition of released parties was so broad that it could release wage claims against unidentified people or businesses only tenuously affiliated with Air Sea Land, including claims unrelated to Lara’s work for that company. The court interpreted the parties’ intended goal as releasing the specified entities and people only in their business or representative capacities.

Second, the court found the confidentiality clause improper because it prevented information about FLSA actions from reaching other workers who might use that information to protect their statutory rights. Third, it found the non-disparagement clause objectionable for similar reasons. The court noted that the parties’ joint letter acknowledged that both types of clauses were improper but did not explain their inclusion in the agreement.

Disposition

Rather than reject the settlement, the court relied on the agreement’s severability clause and approved it after modifications. It struck the word “individual” from paragraph 1(iii) of the release, struck paragraph 7 containing the non-disparagement clause, and struck paragraph 8 containing the confidentiality clause.

The court held that the agreement, as modified, was fair and reasonable under the FLSA settlement-approval standard and approved it as modified. It stated that it would separately approve the parties’ proposed stipulation and order of dismissal with prejudice.