Martinez v. Midspan Telecom Corp.

Background

The named plaintiffs are Bernardo Martinez, Lamine Zerbo, and Mohammed Kamara, individually and on behalf of others similarly situated. They brought claims under the Fair Labor Standards Act (FLSA) against Midspan Telecom Corp., Insperity PEO Services, L.P., Daniel Zayas, and Richard Grullard. On July 24, 2020, the court was notified that mediation had resulted in an agreement resolving all issues.

Settlement-approval requirements

The court ordered that the parties could not dismiss the action with prejudice based on the settlement unless either the court or the Department of Labor approved the agreement. If the parties wanted court approval, they had to file a joint letter motion and the settlement agreement on the public docket by August 24, 2020. The motion had to explain why the settlement was fair and reasonable, including the plaintiffs’ possible recovery, the burdens and expenses avoided, the litigation risks, whether experienced counsel negotiated at arm’s length, and the possibility of fraud or collusion.

The motion also had to address whether a genuine dispute existed about the hours worked or compensation owed and how much plaintiffs’ attorney would seek in fees. The court stated that, absent special circumstances, it was unlikely to approve an agreement filed under seal or in redacted form.

Releases and alternative dismissal procedure

The court warned that it was unlikely to approve a general release or a release covering claims unrelated to the wage-and-hour claims under the FLSA or related state laws. If the parties believed unusual circumstances justified a broader release, their joint motion had to explain why. The court warned that failure to comply could result in denial of the motion and possible sanctions against the attorneys.

The court also noted that the Second Circuit had not decided whether an FLSA case could be settled without court or Department of Labor approval and dismissed without prejudice under Federal Rule of Civil Procedure 41(a)(1)(A). If the parties chose that route, they had to file a stipulation within 30 days and include an affirmation from plaintiffs’ counsel stating that the plaintiffs had been clearly advised that the settlement would not prevent another lawsuit against the same defendants and affirming that the settlement contained no release of the defendants. The court warned that this option could allow the case to be reopened in the future.

Disposition

The order did not approve the settlement or dismiss the action. It established the procedures the parties had to follow for either seeking approval and dismissal with prejudice or pursuing a dismissal without prejudice. If no letter or stipulation was filed by August 24, 2020, Judge Valerie Caproni ordered a conference for August 28, 2020, at 11:00 a.m.