Cruz v. Harlem Group Dr Corp.

Background

The court was notified that, through mediation, the parties had reached an agreement on all issues. The case involved Lucas Cruz's claims under the Fair Labor Standards Act against Harlem Group Dr Corp. doing business as Bronx Drafthouse, Alfredo Anguera Jr., and Ramon Martinez.

Settlement approval and dismissal with prejudice

The court ordered that the parties could not dismiss the action with prejudice based on their settlement unless either the court or the Department of Labor approved the agreement. If the parties wanted that form of dismissal, they had to file by February 4, 2021, either a joint letter motion asking the court to approve the settlement or documentation showing Department of Labor approval.

The required letter motion had to explain why the proposed settlement was fair and reasonable. The court identified these factors: Cruz's possible recovery; the burdens and expenses the settlement would avoid; the seriousness of the parties' litigation risks; whether experienced counsel negotiated the agreement at arm's length; and the possibility of fraud or collusion. The filing also had to address whether there was a genuine dispute about the hours worked or compensation owed and how much Cruz's attorney would seek in fees. The court stated that, absent special circumstances, it was unlikely to approve a settlement 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 under the Fair Labor Standards Act 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 lead to denial of the motion and sanctions against the attorneys.

Dismissal without prejudice option

The court noted that the Second Circuit had not decided whether the parties could settle a Fair Labor Standards Act case without court or Department of Labor approval and dismiss it without prejudice under Federal Rule of Civil Procedure 41(a)(1)(A). If the parties chose that route, they had to file the required stipulation on the public docket within 30 days. The stipulation had to include an affirmation from plaintiff's counsel stating that Cruz had been clearly advised that the settlement would not prevent him from filing another lawsuit against the same defendants and confirming that the settlement contained no release of the defendants. The court warned that this option carried a risk that the case could be reopened later.

Ruling and next step

The order did not approve the settlement or dismiss the case. Instead, Judge Valerie Caproni directed the parties to submit one of the specified filings by February 4, 2021. If they did not, the court ordered a conference on February 5, 2021, at 10:00 a.m. in Courtroom 443 of the Thurgood Marshall U.S. Courthouse in New York.