De Jesus v. Empire Szechuan Noodle House Inc.

Background

Felix De Jesus brought this wage-and-hour case under the Fair Labor Standards Act. The parties consented to the jurisdiction of Magistrate Judge James L. Cott under 28 U.S.C. § 636(c). They submitted a joint fairness letter and a fully executed settlement agreement for court approval.

Settlement Review

Because the case involved Fair Labor Standards Act claims, the court reviewed the settlement for fairness under the procedure required by the Second Circuit’s decision in Cheeks v. Freeport Pancake House. The court stated that settlements in these cases generally receive a strong presumption of fairness, while still requiring review of the agreement’s terms.

The court had questioned a provision requiring a 1099 form to be issued to the plaintiff’s counsel for the entire payment to both the plaintiff and counsel. The parties responded that the proposed tax treatment followed advice from the plaintiff’s counsel’s accountants. The court found that explanation plausible for this case.

Ruling

After reviewing the fairness letter, settlement agreement, and the circumstances leading to the settlement, the court found that all settlement terms—including attorneys’ fees and costs—appeared fair and reasonable. The agreement provided $20,000 to Felix De Jesus and $20,000 in attorneys’ fees and costs to his counsel. Although the court noted that this equal allocation might not be appropriate in every case, it approved the allocation here because counsel’s time records showed more than $10,000 in additional billing beyond the amount recovered.

The court approved the settlement and directed the Clerk to close the case. The court separately cautioned that its approval of the attorneys’ fee allocation was not approval of counsel’s hourly rate, which the court viewed as relatively high based on its experience with wage-and-hour cases.