Santos v. YMY Management Corp.

Background

Henry Santos brought this action against his employers under the Fair Labor Standards Act of 1938 (FLSA) and the New York Labor Law. The parties asked the court to approve their proposed settlement agreement.

Santos alleged that the defendants owed him $58,700 in unpaid minimum wages and overtime, along with liquidated damages and other penalties. Based on the allegations, the court estimated that Santos’s total possible recovery could be $127,400, including an amount equal to the alleged unpaid wages as liquidated damages and $10,000 for alleged failure to provide required notices.

The defendants categorically denied Santos’s claims and asserted that he had been properly paid for all hours worked. They reported producing signed timesheets showing that Santos worked 40 hours or fewer per week. The court noted that Santos could therefore recover nothing if he proceeded to trial.

Settlement Approval

In the Second Circuit, parties cannot privately settle FLSA claims through a stipulated dismissal with prejudice without approval from either the district court or the Department of Labor. The court therefore reviewed whether the agreement was a fair and reasonable compromise rather than an improper waiver of statutory rights.

The court considered the possible recovery, the burdens and expenses of continuing the case, the litigation risks, the parties’ bargaining process, and the possibility of fraud or collusion. Santos would receive $23,019.33 after attorneys’ fees. The court described that amount as approximately 18% of his total alleged damages and approximately 39% of his alleged minimum-wage and overtime losses. Given the possibility that Santos could recover nothing at trial and the costs and risks of further litigation, the court found the settlement amount fair and reasonable. The court also found no indication of fraud, collusion, or bargaining that was not conducted at arm’s length.

Attorneys’ Fees and Release

Under the agreement, Santos’s counsel would receive $11,509.67 in attorneys’ fees and $471 in costs. The fee was approximately one-third of the total settlement amount. Counsel reported spending 77.7 hours on the matter, producing a lodestar amount of $21,545—the fees calculated by multiplying reasonable hourly rates by the hours worked. The court found the hourly rates reasonable and concluded that the proposed fee, approximately half the lodestar amount, was fair and reasonable.

The court also approved the release provision because it did not require Santos to waive unrelated claims. The provision covered claims asserted in the action and claims that could have been asserted under the FLSA and New York Labor Law.

Disposition

The court approved the parties’ proposed settlement agreement. Santos was to receive $23,019.33, and his counsel was to receive $11,980.67 total, consisting of $11,509.67 in attorneys’ fees and $471 in costs. The court dismissed the case with prejudice pursuant to the parties’ stipulation, directed the Clerk of Court to terminate all pending motions, and closed the case.