Yugsi Morocho v. VIP Nail Salon Inc.

Background

This was a wage-and-hour case under the Fair Labor Standards Act. The parties consented to Magistrate Judge Sarah L. Cave’s authority to review their proposed settlement. They submitted a joint letter supporting the settlement and a proposed settlement agreement for review under the Second Circuit’s requirement that courts examine Fair Labor Standards Act settlements for fairness.

The court noted a strong presumption that such settlements are fair, and it considered the possibility that some defendants could face difficult financial circumstances if the settlement was not completed. The agreement provided for a total settlement of $12,000, paid in monthly installments of $1,000. The parties’ submission stated that $4,000, or one-third of the total, would cover attorney fees and costs.

Problems with the Agreement

The agreement stated that each $1,000 monthly payment would be made through two checks—one for $666.66 and one for $333.33—delivered to the plaintiff’s attorneys. It also appeared to state that both checks were for attorney fees. The court identified this as an apparent typographical error because the parties’ submission indicated that only the $333.33 portion was intended to cover attorney fees and costs.

The agreement also contained broad releases. It purported to release the defendants and related individuals from “any and all claims” of any nature, including unknown claims, through the effective date. The listed claims included several unrelated New York laws, such as laws concerning AIDS testing confidentiality, disability rights, genetic testing confidentiality, bone-marrow leave, and adoptive-parent child-care leave. The court found that these releases were too broad and required them to be limited to the plaintiff’s wage-and-hour claims or claims based on the same facts as the settled claims.

Ruling and Disposition

The court held that the agreement’s terms, including attorney fees and costs, appeared fair and reasonable except for the two identified provisions. It stated that it could not approve the agreement in its current form. The parties were ordered to file a revised agreement by August 18, 2020, making the $666.66 monthly payment payable to the plaintiff or payable to her attorneys for her benefit, and limiting the release as described above.

The court further ordered that, if the revised agreement retained either disputed provision or a similar provision, the parties had to submit a joint letter explaining the factual and legal grounds for claiming that provision was fair and reasonable, along with relevant Second Circuit authority supporting and opposing it. The opinion therefore required revisions and did not approve the settlement in its submitted form.