Brittle v. Netamorphosis, LLC
- Edgardo Ramos
- 1:20-cv-03880
- U.S. District Court · Southern District of New York
- 8
In Brittle v. Netamorphosis, Judge Ramos denied without prejudice approval of a wage settlement because it barred reemployment, required confidentiality, overreleased claims, and lacked fee information.
Kirsten Brittle and the defendants, Netamorphosis, LLC and Lyde Spann. The settlement was not approved, but the parties could revise it or abandon it and continue toward trial.
What happened
Brittle brought wage claims under the Fair Labor Standards Act and New York Labor Law against the defendants. The parties agreed to settle while arbitration was pending, and Brittle asked the court to approve the settlement and dismiss the case with prejudice.
The court held that it had to review the settlement even though the defendants had not appeared and the dispute was subject to arbitration. It found that the agreement was not fair and reasonable because it barred Brittle from seeking reemployment, restricted disclosure of the settlement, released claims beyond wage-and-hour claims, and did not provide enough information to evaluate the settlement and attorney-fee amounts.
Judge Ramos denied the parties’ request for settlement approval without prejudice. He gave the parties until February 5, 2021, either to submit a revised letter and agreement addressing the problems or to state that they were abandoning the settlement and continuing toward trial.
The detailed version
- Brittle v. Netamorphosis, LLC · No. 1:20-cv-03880
- Edgardo Ramos
- Jan. 22, 2021
Background
Kirsten Brittle brought claims under the Fair Labor Standards Act (FLSA) and the New York Labor Law against Netamorphosis, LLC and Lyde Spann. The parties entered into a settlement agreement after Defendants informed Brittle about an arbitration agreement. The Court stayed the case while arbitration was pending, but before arbitration ended, the parties settled and Brittle withdrew her arbitration demand.
Brittle asked the Court to dismiss the suit with prejudice and argued that the Court did not need to review the settlement. She relied on the facts that Defendants had not appeared and that the dispute was subject to arbitration. Alternatively, she asked the Court to approve the agreement.
Requirement of Court Review
The Court applied the Second Circuit’s rule in Cheeks v. Freeport Pancake House, Inc., under which an FLSA settlement that dismisses claims with prejudice generally requires approval by either the district court or the Department of Labor. The Court explained that it was an open question whether that review is required when a plaintiff dismisses before the opposing party files an answer or a summary-judgment motion. It nevertheless found persuasive decisions holding that the review requirement applies in that situation because the FLSA’s protective purpose and concerns about abusive settlements do not depend on the particular dismissal procedure used.
The Court also concluded that arbitration did not eliminate the need for review. Although the FLSA claims were subject to arbitration, no arbitration award had been issued, the Court retained jurisdiction over the case, and Brittle had withdrawn her arbitration demand. The Court therefore determined that the settlement had to be reviewed under Cheeks.
Fairness Review
The Court explained that it had to decide whether the agreement was fair and reasonable based on the total circumstances, including Brittle’s possible recovery, the burdens and expenses the settlement would avoid, the litigation risks, whether experienced counsel negotiated at arm’s length, and possible fraud or collusion. The Court also identified provisions that generally prevent approval, including an overly broad release, improper confidentiality or non-disparagement terms, and a provision barring future employment with the defendants.
The Court identified four problems with the agreement:
1. Reemployment provision. The agreement barred Brittle from seeking reemployment with Defendants. The Court found that this term conflicted with the FLSA’s remedial purpose and was not fair and reasonable.
2. Confidentiality provision. The agreement restricted Brittle from affirmatively seeking public disclosure of the agreement or its contents and required confidentiality concerning the settlement terms, including the amount paid. The Court found that the provision could prevent information about FLSA settlements from reaching other workers and was therefore not fair and reasonable.
3. Broad release. The agreement released claims under common law, contract law, and statutes other than the FLSA or New York Labor Law if they arose from or related to Brittle’s employment or termination. The Court found that the release was not limited to wage-and-hour claims that were or could have been part of the lawsuit and was therefore not fair and reasonable.
4. Insufficient information about fees and the settlement. Brittle’s fairness letter stated that counsel had spent more than $20,000 on over ninety hours of work and would receive $8,181.82 from the $30,000 settlement for fees and costs. The Court stated that it needed evidence providing a factual basis to independently evaluate the reasonableness of the fee award. Because the agreement and fairness letter did not provide enough information, the Court could not determine whether the settlement or attorney-fee award was fair and reasonable.
Disposition
Judge Edgardo Ramos denied without prejudice the parties’ request for approval of the settlement agreement. The Court allowed the parties until February 5, 2021, to file a revised letter and signed agreement addressing the concerns in the order. Alternatively, they could file a joint letter stating that they intended to abandon the settlement and continue to trial, after which the Court would set a date for a pretrial conference. The opinion does not decide the underlying wage claims.
Read the full 8-page opinion on CourtListener, the free public archive maintained by the Free Law Project.