Jordan v. Krasdale Foods, Inc.
- Edgardo Ramos
- 1:18-cv-11477
- U.S. District Court · Southern District of New York
- 4
In Jordan v. Krasdale Foods, Judge Ramos denied approval of a wage settlement because fee records, tax treatment, and another agreement needed review.
Jeffrey Jordan and Krasdale Foods, Inc. were directly affected by the denial of settlement approval. The proposed settlement resolved only Jordan’s claims and did not bind other potential members of the uncertified collective action.
What happened
Jeffrey Jordan sued Krasdale Foods, Inc., alleging that it failed to pay overtime under the Fair Labor Standards Act and violated New York Labor Law. The parties asked the court to approve a settlement, but the action was never certified as a collective action, and the agreement covered only Jordan’s claims.
The proposed settlement totaled $95,000, with $63,002.77 allocated to Jordan. The court found the settlement amounts justified in light of the risks of litigation and the parties’ arm’s-length negotiations, but the parties did not provide billing records supporting the requested attorneys’ fees. The agreement also needed to revise its tax treatment and submit a separate agreement for court review.
Judge Edgardo Ramos denied the settlement-approval application as submitted. He gave the parties until February 5, 2020, to file a revised agreement, state that they would proceed to trial, or stipulate to dismissal without prejudice.
The detailed version
- Jordan v. Krasdale Foods, Inc. · No. 1:18-cv-11477
- Edgardo Ramos
- Jan. 13, 2020
Background
Jeffrey Jordan brought this action individually and on behalf of others similarly situated against Krasdale Foods, Inc. He alleged violations of the Fair Labor Standards Act (FLSA) based on unpaid overtime wages, along with several violations of New York Labor Law. The parties submitted a joint application for approval of a settlement.
Although the action was filed as a proposed collective action, the court noted that certification was never granted. The settlement agreement resolved only Jordan’s claims and therefore had no binding effect on other potential members of the proposed collective.
Court’s analysis
The court explained that parties generally cannot privately settle FLSA claims with prejudice without approval from the district court or the Department of Labor. The court therefore had to determine whether the proposed agreement was fair and reasonable by considering factors including the plaintiff’s possible recovery, litigation burdens and risks, the parties’ negotiations, and the possibility of fraud or collusion.
The agreement provided for a total settlement of $95,000, of which $63,002.77 would be paid to Jordan. Jordan estimated that his maximum recovery was $298,757.06. The court found that the parties adequately justified the settlement amounts, reasonably explained the reduction based on litigation risks and potential defenses, and reached the agreement through arm’s-length bargaining assisted by an experienced mediator.
The court could not evaluate the requested attorneys’ fees because the submission did not include billing records showing, for each attorney, the date, hours worked, and nature of the work. The court also found that the settlement’s proposed use of an Internal Revenue Service Form 1099 for part of Jordan’s payment needed revision. Because the settlement was for less than the full amount of alleged unpaid wages, the court stated that, after attorneys’ fees and costs were deducted, the payments had to be reported on a taxable Form W-2 basis to the extent required by the court’s analysis.
The parties also referred to a separate settlement agreement that they said did not affect Jordan’s claims. The court directed them to submit that agreement for review so it could determine whether it contained terms affecting the FLSA claims. The court said that the separate agreement would not require a full review if its terms did not affect the FLSA claims, but submission was necessary to verify its scope.
Disposition
Judge Edgardo Ramos denied the application and stated that the court would not approve the settlement as then written. The parties were given three options by February 5, 2020: file a revised settlement agreement addressing the tax provision, provide documentation supporting the attorneys’ fees, and submit the separate agreement; file a joint letter abandoning settlement and continuing to trial; or stipulate to dismissal of the case without prejudice, which the court stated did not require approval under then-existing Second Circuit case law.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.