Ovalles Acosta v. Prudent Management, LLC

Background

The parties advised the court that they had reached an amended settlement in this Fair Labor Standards Act (FLSA) case. The plaintiff alleged that he was paid a fixed biweekly salary that did not meet the minimum wage, that he was not paid required overtime or spread-of-hours premiums, and that the defendants violated statutory record-keeping requirements. The defendants denied those allegations.

The parties first sought approval of a settlement on May 2, 2019. On July 23, 2020, the court denied that request because the proposed agreement contained an overbroad release. The parties later submitted a revised agreement and supporting letters, including a supplemental letter correcting the settlement figure.

Settlement terms and fairness review

The revised agreement provided for a total settlement of $52,500. Of that amount, $17,873.82 would go to the plaintiff’s counsel as attorneys’ fees, leaving the plaintiff with $34,626.18. The amended agreement reduced both the gross settlement and the plaintiff’s net proceeds compared with the earlier agreement, but provided for payment of the plaintiff’s proceeds one month after he vacated the premises instead of in installments over six months. Counsel also reduced the requested fees and costs from $22,040.49 to $17,873.82.

The court considered the total circumstances, including the plaintiff’s possible recovery, the litigation expenses and delay that would result from continuing the case, the risks faced by both sides, the parties’ negotiations, and the possibility of fraud or collusion. Counsel represented that the plaintiff’s maximum recovery was $106,972.50, although the court noted that this figure apparently did not include liquidated damages, which may equal 100 percent of unpaid wages under the FLSA. Even taking a larger possible recovery into account, the court found the settlement reasonable given the case’s history and litigation risks.

The parties had engaged in extensive paper discovery, and the defendants had deposed the plaintiff. Counsel also represented that multiple rounds of revisions were needed to reach the amended agreement. The court found no basis to believe that the settlement resulted from fraud or collusion and concluded that it was the product of arm’s-length negotiations between experienced counsel.

Attorneys’ fees

The court separately reviewed the $17,873.82 fee request. That amount was approximately one-third of the total settlement and was $4,166.67 less than the prior fee request. Counsel had previously documented 112.8 hours of work, including document discovery and mediation, and represented that counsel had spent more than 20 additional hours negotiating and rewriting the settlement agreement. The court found the reduced fee fair and reasonable and not a windfall.

Release

The amended agreement included a mutual general release. The plaintiff released the defendants from claims concerning matters occurring through the agreement’s effective date, and the defendants gave a reciprocal release to the plaintiff. The plaintiff’s counsel stated that the plaintiff wanted the release because he feared claims for rent or damage relating to the room he occupied, while the defendants reportedly wanted a release because they feared claims concerning the adequacy of the tenancy.

The court acknowledged that broad releases are often rejected in FLSA settlements, but found this release acceptable because it was mutual, supported by plausible reasons from both sides, did not cover future claims, and applied only to the parties rather than other employees. The court therefore found no reason to withhold approval based on the release.

Ruling

Judge Vernon S. Broderick approved the parties’ settlement agreement. The Clerk of Court was directed to close the case.