Bondi v. DeFalco

Background

Staci Bondi, Maria Caporale, Jasmine Hernandez, Jessica Sarfaty, Monique Mazzei, Matt Cam, and Noel Pugliese sued New Rochelle Hotel Associates, Michael DeFalco, Colby Brock Gualano, and Peter Brock under the Fair Labor Standards Act and New York Labor Law. They alleged that Defendants collected tips without properly distributing them, used a tip credit without providing required notices, failed to provide required wage notices, and failed to pay New York’s spread-of-hours premium for days exceeding 10 hours.

The plaintiffs previously moved to certify a collective group under the Fair Labor Standards Act and a class under Federal Rule of Civil Procedure 23 for the New York claims. A magistrate judge recommended denying certification without prejudice to renewal, and the court adopted that recommendation. The parties later negotiated several settlements, including the proposed class settlement addressed in this order. The court had already approved a separate settlement involving Mazzei.

Proposed settlement and notice

Under the proposed settlement, Defendants would pay up to $193,000 into a fund. The proposed allocation included $64,333.33 in attorneys’ fees, service awards of $10,000 each for Pugliese, Cam, and Sarfaty, a $2,000 service award for Mazzei, and an estimated $12,739 for the settlement claims administrator. The opinion states that the remaining estimated net settlement fund would be $83,927.67 for individual class members.

Class members’ shares would be based on the difference between the tipped wages paid for actual hours worked and the applicable New York minimum wage, using payroll information. Each class member would receive at least $50. The proposed notice would give class members 60 days to opt out or object. After that period, the plaintiffs would seek final approval, and the court would hold a fairness hearing. If the court did not enter a final approval order, the lawsuit would proceed as though there had been no settlement attempt.

Court’s analysis

The court explained that settlements of Fair Labor Standards Act claims require court approval and must be fair and reasonable. It also treated preliminary approval of the class settlement as the first step in the process required before a class action can be settled.

The proposed $193,000 settlement represented approximately two-thirds of the plaintiffs’ estimated $286,000 in unpaid wages. The plaintiffs estimated about $411 in potential Fair Labor Standards Act damages because Defendants had paid a tip credit exceeding the federal minimum since at least December 31, 2015. The court found the settlement amount reasonable in light of the estimated recovery, litigation risks, the earlier denial of class certification, and the time and expense the settlement would avoid.

The court also found that the settlement was negotiated competently, in good faith, and at arm’s length, without fraud or collusion. It approved the release for class members because it was limited to wage-and-hour claims. Although the class representatives’ release was broader and covered claims generally, the court found it reasonable because it was exchanged for service awards.

The court found the requested attorneys’ fees reasonable. The proposed fee was described as $64,333.33, or one-third of the $193,000 settlement. The court considered counsel’s reported billing, the risk and complexity of the litigation, the prior denial of class certification, expected future work, and the common practice of awarding one-third of an Fair Labor Standards Act settlement. The opinion concludes in this section that $63,333 was a reasonable fee, creating an apparent discrepancy with the $64,333.33 amount stated elsewhere.

Disposition

Judge Kenneth M. Karas granted the parties’ application for preliminary approval of the proposed Fair Labor Standards Act class settlement. The court also stated that it issued a separate order approving the proposed class notice, setting a deadline for the motion for final approval, and scheduling the fairness hearing. The order did not grant final approval of the settlement.