Bonaventura v. Gear Fitness One NY Plaza LLC

Background

Ben Bonaventura brought contract-based claims and claims under the Fair Labor Standards Act (FLSA) and the New York Labor Law. The parties asked the court to approve their settlement agreement and dismiss the lawsuit with prejudice.

In the Second Circuit, parties cannot privately settle FLSA claims with prejudice without approval from the district court or the Department of Labor. The court therefore reviewed the proposed agreement for fairness and reasonableness under the factors identified in Cheeks v. Freeport Pancake House, Inc. Those factors include the plaintiff’s possible recovery, the litigation burdens and risks avoided by settlement, whether the agreement resulted from arm’s-length bargaining between experienced counsel, and the possibility of fraud or collusion.

Reasons for rejecting the proposed agreement

The court identified three problems.

1. Bar on future employment. The agreement barred Bonaventura from applying to work for, seeking a business relationship with, or working for any of the defendants or their affiliates, parent companies, or successors. It also allowed the defendants to terminate him if he became an applicant or employee of one of those entities. The court held that these provisions prevented a future employment relationship and made the agreement unfair and unreasonable under the FLSA.

2. Non-disparagement provision. The agreement prohibited Bonaventura from publishing or communicating disparaging statements about the defendants. Although it allowed truthful statements about his experiences litigating his FLSA claims and defenses, the court found that it still barred him from sharing some truthful information about his wage-and-hour claims that might be viewed as critical or disparaging. The court held that this restriction was not fair and reasonable because it could interfere with the sharing of information about wage-and-hour violations.

3. Insufficient information about settlement funds and attorney’s fees. The fairness letter stated that the $300,000 settlement included $100,000 for attorney’s fees. But the agreement and letter did not specify the amount allocated to litigation costs. Bonaventura’s attorneys reported spending 403.1 hours, and stated that prior counsel had spent 127.3 hours, but they did not provide documentation supporting those figures, identify the litigation costs, or explain what portion of the fee allocation would go to prior counsel. They also did not support their requested hourly rates, which ranged from $430 to $680, or provide prior counsel’s rates.

The court explained that it uses the lodestar method as a cross-check for attorney’s fees. The lodestar is the reasonable hourly rate multiplied by the reasonable number of hours required for the case. Because the parties had not supplied enough information to evaluate the settlement award or attorney’s fees, the court could not determine whether the agreement was fair and reasonable.

Disposition

Judge Edgardo Ramos denied the parties’ request for approval of the settlement agreement without prejudice. The parties were permitted either to file a revised letter and signed agreement addressing the court’s concerns by April 26, 2021, or to file a joint letter stating that they intended to abandon settlement and continue to trial, after which the court would set a pretrial conference.