Rios Lopez v. Blue WP, Inc.

Background

Jose Alberto Rios Lopez and Jesus Rios Lopez brought this proposed group action under the Fair Labor Standards Act and New York Labor Law. They sought unpaid wages and liquidated damages, as well as damages for alleged tip misappropriation, failure to maintain payroll records, uniform violations, improper wage deductions, and retaliation. The defendants denied the allegations.

The parties notified the court that they had reached a settlement and jointly requested approval. The court explained that it had to evaluate whether the settlement was fair and reasonable under all the circumstances, including the plaintiffs’ possible recovery, the burdens and expenses of continuing the case, litigation risks, the parties’ negotiations, and any possibility of fraud or collusion.

Court’s Analysis

The court found that the settlement resulted from extensive, arm’s-length negotiations between capable counsel and was fair and reasonable generally. It identified two problems.

First, the settlement’s non-disparagement provision was overly broad. Although the provision allowed truthful statements when required by a subpoena, under oath, or in a government investigation, it did not expressly allow truthful statements about the parties’ experiences litigating the case. The court therefore would not approve the agreement with that provision in its current form.

Second, plaintiffs’ counsel requested $22,575.18 in attorneys’ fees, which the court stated was less than one-third of the settlement amount and appeared reasonable as a percentage. But counsel did not submit contemporaneous billing records showing the rates, hours, and tasks involved. The court also noted that counsel described the plaintiffs’ total lodestar—the fee calculated from reasonable hours multiplied by reasonable rates—as exceeding $300,000, without providing enough supporting information. The court therefore could not meaningfully evaluate the requested fee.

Ruling

The court stated that it was prepared to approve the settlement terms except for the non-disparagement provision and the attorneys’ fees. It required counsel to submit contemporaneous billing records and evidence supporting counsel’s rates before the settlement and fee request could be approved.

The parties were directed to notify the court in writing within seven days of the order whether they would either file a revised settlement agreement consistent with the order or abandon the settlement and continue the litigation. Judge Judith C. McCarthy did not enter an unconditional approval of the proposed agreement in this order.