Ream v. Hill, Inc.

Background

This was a wage-and-hour case involving Christopher Ream and Berry-Hill Galleries, Inc., et al. The court had previously declined to enforce a settlement agreement and confession of judgment because it had not reviewed or approved the agreement as required under Cheeks v. Freeport Pancake House, Inc. The court had given Ream the option to submit a fully executed agreement with an explanation of why it was fair and reasonable, request another settlement conference, or bring a separate enforcement action in New York state court.

Ream’s counsel submitted a fairness letter and an agreement for review. The submitted agreement had been signed by the defendants but not by Ream, even after the court requested a fully executed copy.

Reasons for Rejecting Approval

The court stated that the missing signature alone was enough to deny approval because a fully executed settlement agreement is required before submission for approval. The court also considered the agreement’s terms and found that they were not fair and reasonable even if Ream had signed it.

First, the release was too broad. Although counsel described it as limited to wage-and-hour claims, the agreement purported to resolve all known and unknown disputes and claims between the parties, including claims unrelated to Ream’s employment or wage claims. The court stated that the release had to be limited to Ream’s wage-and-hour claims or claims arising from the same factual basis.

Second, the agreement contained an improper confidentiality provision. It required the parties to keep the settlement’s fact, amount, terms, and subject matter strictly confidential. The court found that this restriction conflicted with the public policy of ensuring that workers know about their rights under the Fair Labor Standards Act.

Third, the agreement contained a non-disparagement provision that lacked an exception for truthful statements. The court found that omission made the provision unfair and unreasonable.

Finally, the court could not approve counsel’s requested attorneys’ fees of 36% of the settlement amount. Courts in the district generally do not award more than one-third of an Fair Labor Standards Act settlement absent unusual circumstances, and counsel offered no basis for exceeding that amount. The agreement did not itself state that counsel would retain one-third of the settlement, and counsel did not provide the engagement agreement, exact fee and cost amounts, or supporting records needed to evaluate the request.

Ruling and Next Steps

Judge Sarah L. Cave ruled that the court could not approve the agreement in its current form. The parties could revise the agreement to address the court’s concerns and submit a fully executed copy for review, request a settlement conference, or, if Ream wanted to enforce the agreement or confession of judgment as written, bring a separate enforcement action in New York state court. Ream was directed to advise the court of the desired next step by December 18, 2020.