Valencia v. Three Star on First

Background

The plaintiffs are Hector Valencia and Ricardo Valencia. The defendants are Three Star on First, doing business as Three Star Diner, Ioannis Kiriakakis, Georgia I. Kiriakakis, and Jimmy Kiriakakis. The opinion states that the case involved claims under the Fair Labor Standards Act, a federal wage-and-hour law. On March 10, 2021, the court was notified that mediation had resulted in an agreement on all issues.

Settlement-Approval Requirement

The court stated that the parties could not dismiss the action with prejudice based on the settlement unless either the court or the Department of Labor approved the agreement. A dismissal with prejudice generally ends the action in a way that bars refiling the same claims, but the opinion’s specific ruling was that approval was required for that type of dismissal.

If the parties wanted court approval, they had to file a joint letter motion and the settlement agreement on the public docket by April 11, 2021. The motion had to explain why the settlement was fair and reasonable, including the plaintiffs’ possible recovery, the burdens and expenses avoided through settlement, the litigation risks, whether experienced counsel negotiated at arm’s length, and the possibility of fraud or collusion. It also had to address whether there was a genuine dispute about the hours worked or compensation owed and how much the plaintiffs’ attorney sought in fees. The court said it generally would not approve an agreement filed under seal or in redacted form absent special circumstances.

The court also warned that it was unlikely to approve a broad release of claims not raised in the complaint or unrelated to wage-and-hour claims under the Fair Labor Standards Act or related state laws. If the parties believed unusual circumstances justified a broader release, the joint motion had to explain why. The court warned that failing to follow the order could lead to denial of the motion and sanctions against the attorneys.

Alternative Dismissal Without Prejudice

The opinion stated that the United States Court of Appeals for the Second Circuit had not decided whether parties may 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 a stipulation under that rule within 30 days. The stipulation had to include an affirmation from the plaintiffs’ counsel stating that the plaintiffs had been clearly advised that the settlement did not prevent them from filing another lawsuit against the same defendants, and affirming 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.

Order

Judge Valerie Caproni did not approve the settlement or enter a dismissal in this order. Instead, she set the requirements and deadlines for either seeking approval for a dismissal with prejudice or filing the alternative stipulation. If no letter or stipulation was filed by April 11, 2021, the court ordered a conference on April 16, 2021, at 10:00 a.m. in the stated courtroom.