Penate v. DBTG Chambers LLC

Background

The court was notified on December 2, 2020, that an agreement had been reached on all issues through the magistrate judge. The case involved claims under the Fair Labor Standards Act (FLSA), a federal wage-and-hour law. The order addressed what the parties needed to do if they wanted to resolve the case through a settlement.

Requirements for dismissal with prejudice

The court ordered that the parties could not dismiss the action with prejudice—that is, in a way that would bar the action from being brought again—unless the settlement agreement was approved by the court or the Department of Labor. If the parties wanted that type of dismissal, they had to file either a joint letter motion asking the court to approve the settlement or documentation showing Department of Labor approval. The filing and settlement agreement had to be placed on the public docket by January 4, 2021.

The letter motion had to explain why the proposed settlement was fair and reasonable. It also had to address the plaintiffs’ possible recovery, the burdens and costs the settlement would avoid, the litigation risks, whether experienced counsel negotiated at arm’s length, and the possibility of fraud or collusion. It further had to address whether a genuine dispute existed about the hours worked or compensation owed and how much the 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.

The court also warned that it was unlikely to approve a general release, or a release of claims unrelated to the wage-and-hour claims in the complaint and related state-law claims. If the parties believed unusual circumstances justified a broader release, their motion had to explain why. The court warned that failing to follow the order could result in denial of the motion and sanctions against the attorneys.

Possible dismissal without prejudice

The court 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). A dismissal without prejudice does not bar a new action, assuming the limitations period has not expired. If the parties chose this route, they had to file a Rule 41(a)(1)(A) stipulation on the public docket within 30 days. The filing also had to include an affirmation from the 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 agreement contained no release of the defendants. The court warned that this option risked the case being reopened later.

Disposition

The order did not approve the agreement, dismiss the case, or rule on the underlying wage-and-hour claims. It set procedures and deadlines for the parties’ possible settlement and dismissal. If no letter motion or stipulation was filed by January 4, 2021, the court scheduled a conference for January 8, 2021, at 10:00 a.m.