Pinckney v. Riverbay Corporation

Background

Counsel for the parties submitted a proposed settlement agreement for court approval under the Second Circuit’s requirement that courts review Fair Labor Standards Act (FLSA) settlements for fairness and reasonableness. The proposed agreement provided for a total recovery of $50,000, with $15,000, or 30 percent, allocated to Plaintiff’s counsel for fees and costs.

Reasons for Disapproval

The court identified several problems with the proposed agreement. Counsel had not provided an estimate of Pinckney’s maximum possible recovery at trial, so the court could not evaluate whether his recovery was reasonable in light of the litigation risks. Counsel also had not provided billing records, preventing the court from evaluating whether the $15,000 fee request was reasonable based on the time spent and counsel’s experience.

The agreement included an overbroad general release covering known and unknown claims, including claims not asserted in the action. Because the value of those unspecified claims was unknown, the court could not determine whether the settlement was reasonable. The agreement also included confidentiality or non-disclosure provisions concerning the settlement and required the parties to respond to inquiries by saying only that the litigation had been resolved to their satisfaction. The court noted that confidentiality provisions concerning the settlement’s existence or terms were moot because the agreement had been publicly filed. It further stated that any non-disclosure provision had to allow Pinckney to make truthful statements about the case and his experience litigating it.

The agreement also made Pinckney liable for actual or liquidated damages for violating confidentiality obligations. The court found that provision unreasonably threatened to make him responsible for damages owed to other employees denied fair pay under the FLSA if those employees learned of their rights from him. The non-disparagement provision did not exempt truthful statements.

Ruling and Required Next Steps

Judge Valerie Caproni denied the motion to approve the proposed settlement agreement as fair and reasonable because of the overbroad release, non-disparagement provision, and confidentiality or non-disclosure provisions. The court also stated that it could not determine whether Pinckney’s recovery or counsel’s fees and costs were reasonable without additional information. It ordered the parties to submit a revised settlement for approval no later than April 17, 2020. By that date, Plaintiff’s counsel also had to provide a reviewable assessment of Pinckney’s maximum recovery at trial and a breakdown of counsel’s costs, fees, and the lodestar multiplier, a calculation used to evaluate reasonable attorney fees. The court adjourned the status conference scheduled for April 3, 2020, pending those submissions.