Candido Basurto v. Original Ray's Inc.

Background

The court was notified that, through mediation, the parties had reached an agreement on all issues. The action included claims under the Fair Labor Standards Act (FLSA), a federal wage-and-hour law.

Order concerning dismissal with prejudice

The court ordered that the parties could not dismiss the action with prejudice unless the settlement agreement was approved by either the court or the Department of Labor. If the parties wanted a dismissal with prejudice, they had to file either:

1. A joint letter motion asking the court to approve the settlement, together with the settlement agreement; or 2. Documentation showing that the Department of Labor had approved the settlement.

The filing was due on the public docket by November 16, 2020. The letter motion had to explain why the proposed settlement was fair and reasonable, including the plaintiff’s possible recovery, the burdens and expenses the settlement would avoid, the litigation risks, whether experienced counsel negotiated at arm’s length, and the possibility of fraud or collusion. It also had to address whether there was a genuine dispute about the hours worked or compensation owed and the amount of attorney’s fees sought.

The court stated that, absent special circumstances, it was unlikely to approve a settlement filed under seal or in redacted form. It also warned that it was unlikely to approve a general release, or a release of claims unrelated to the wage-and-hour claims under the FLSA or related state laws, unless the parties explained why such a release was appropriate. The court warned that failure to follow these instructions could lead to summary denial of the motion and possibly sanctions against the attorneys.

Alternative dismissal without prejudice

The court noted that the United States Court of Appeals for 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 under that rule on the public docket within 30 days. The stipulation had to include an affirmation from the plaintiff’s counsel stating that the plaintiff or plaintiffs had been clearly advised that the settlement would not prevent another lawsuit against the same defendants, and affirming that the settlement agreement contained no release of the defendants.

The court warned that this option carried a risk that the case could be reopened in the future. If no letter or stipulation was filed by November 16, 2020, the court ordered a conference for November 20, 2020, at 10:00 a.m.

Ruling

Judge Valerie Caproni did not approve the settlement and did not enter a dismissal. Instead, she set the requirements and deadlines for seeking approval or filing an alternative dismissal.