Mendoza v. LGRC Corp.

Background

The court reviewed Fernando Mendoza’s counsel’s application to approve a proposed settlement agreement and release under Cheeks v. Freeport Pancake House, Inc., which requires judicial review of certain Fair Labor Standards Act settlements. The parties reached the material settlement terms after a court-ordered mediation and consented to Magistrate Judge Barbara Moses’s jurisdiction.

Under the agreement, LGRC Corp. and Young Chul Song would pay Mendoza $25,500 in three equal installments to resolve his wage-and-hour claims under the Fair Labor Standards Act and state law. The agreement allocated $8,328.35 to Mendoza’s counsel as fees and $515 as costs, leaving $16,656.66 for Mendoza. The opinion states that this amount was approximately 22% more than the $13,618 in unpaid wages and overtime damages calculated by counsel.

The agreement included a one-way release limited to Mendoza’s wage-and-hour claims. It also referred to Mendoza’s having been instructed that defendants requested confidentiality. Judge Moses stated that the agreement was not confidential because it had been publicly filed, and that the provision did not legally prevent Mendoza from discussing the settlement.

The agreement’s related affidavits of confession of judgment, signed by Song for LGRC Corp. and himself, stated amounts of $38,250. That amount consisted of the $25,500 settlement payment plus $12,750 in liquidated damages. The court observed that the additional amount could create a substantial premium if defendants defaulted on later installments. It also said that whether the liquidated-damages provision was an unenforceable penalty would be premature to decide during settlement review. Even if that provision could not be enforced, Mendoza would retain a contractual right to the settlement amount and to reasonable fees and costs incurred to enforce the agreement.

Ruling

Judge Moses found that the agreement’s economic terms, including attorney fees and costs, were fair and reasonable under the required settlement review. The court declined Mendoza’s request to retain jurisdiction to enforce the agreement because that request was not included in the agreement and the state-law affidavits could be filed in state court.

The court therefore granted Mendoza’s letter-application to the extent that it approved the settlement agreement. It dismissed the action with prejudice and without costs and directed the Clerk of Court to close the case.