Kim v. Choi

Background

Sara Kim and Angelo Duva sued Stephen Choi, Christine Tripi, and St. Vince Group, LLC under the Fair Labor Standards Act (FLSA) and New York Labor Law. They alleged that they worked for the Company but were not paid the required minimum wage, were not paid certain additional wages for long workdays, and incurred unreimbursed expenses. They also asserted non-FLSA claims involving the Company’s operating agreement and access to Company records.

The defendants moved to dismiss, arguing that the plaintiffs were investors in the Company rather than FLSA employees. The court had not decided that motion when the parties reached a settlement. They asked the court to approve the settlement under the rule requiring court approval of settlements resolving FLSA claims.

Settlement-approval standard

The court explained that it would approve the agreement only if it was fair and reasonable. It considered factors including the plaintiffs’ possible recovery, the costs and risks of continued litigation, whether the parties negotiated at arm’s length, and whether fraud or collusion was possible.

Court’s analysis

The proposed settlement allocated $11,000 to the plaintiffs’ FLSA claims. The plaintiffs had alleged at least $6,500 in damages for Duva and $4,100 for Kim, and estimated total damages of at least $31,000 after adding liquidated and statutory damages. The court noted that the proposed amount exceeded the stated actual damages of $10,600, but the parties did not say how much each plaintiff would actually receive or whether attorney’s fees would be paid from the settlement amount. Without that information, the court could not fully evaluate whether the settlement was fair.

The court recognized that settlement would avoid the expense and burden of continued litigation, including disputes over whether the plaintiffs were covered employees under the FLSA and how the Company’s annual revenue should be calculated. The parties represented that they negotiated extensively, with mediation assistance, and the record showed no evidence of fraud or collusion.

The court also found that the proposed release was limited to FLSA claims arising from the plaintiffs’ employment through the date of the agreement. The agreement did not contain a confidentiality or non-disparagement provision. However, the submission still did not provide enough information about attorney’s fees. The plaintiffs stated that each side would bear its own fees and costs, but they did not clarify whether any portion of the $11,000 would be used for the plaintiffs’ lawyers’ fees.

Disposition

Judge Ona T. Wang declined to approve the parties’ proposed settlement agreement as fair and reasonable. The court ordered that the plaintiffs may renew their request for approval by February 19, 2021, but must provide information about attorney’s fees and whether their counsel intends to claim a percentage of the settlement award. The opinion did not decide whether the plaintiffs were FLSA employees or resolve the underlying wage claims.