Guerra v. Trece Corp.

Background

Ana Guerra brought claims under the Fair Labor Standards Act (FLSA), a federal wage-and-hour law, and the New York Labor Law. She alleged that Trece Corp. and Joel Lim failed to pay minimum wage, overtime, and spread-of-hours wages; misappropriated tips; and failed to provide required wage notices and wage statements.

The court had previously partly granted and partly denied the parties’ cross-motions for summary judgment. The opinion also notes that the court had dismissed Guerra’s pregnancy-discrimination claim without prejudice in that earlier ruling. Before the court was the parties’ motion to approve their settlement.

Settlement Approval Standard

The court explained that parties generally cannot privately settle FLSA claims with prejudice without approval from the court or the Department of Labor. The court therefore evaluated whether the agreement was fair and reasonable, considering factors such as Guerra’s possible recovery, the burdens and expenses of further litigation, litigation risks, whether the agreement resulted from arm’s-length negotiations, and the possibility of fraud or collusion.

Settlement Terms and Recovery

The proposed agreement provided for a $25,000 recovery, plus $833.53 in costs. Guerra estimated that her possible recovery was approximately $35,000 to $45,000. The parties submitted timesheets showing that she had been paid below minimum wage during her time at Trece.

The court nevertheless found the settlement amount reasonable because factual disputes affected the possible recovery, including the typical length of Guerra’s shifts and whether she had been required to share tips. The court also noted that, because of Trece’s bankruptcy, Guerra might be able to recover only from Lim, the individual defendant.

Attorneys’ Fees

The agreement provided Guerra’s attorneys with $8,333.33, equal to one-third of the settlement, plus $833.53 in costs. The court found the percentage reasonable. It also reviewed the attorneys’ billing records using the lodestar method, which estimates fees by multiplying a reasonable hourly rate by a reasonable number of hours. Although the attorneys’ $450 hourly rates were high for some FLSA cases, the court found them within the range of reasonable rates for attorneys with similar experience. The court noted that the requested fee was approximately 12 percent of the stated lodestar of more than $71,000 and found that amount reasonable.

Release Provision

The settlement contained a broad release covering “any and all known claims” and liabilities of any kind for any reason. The court stated that it ordinarily would not approve such a broad release. It approved the provision here because the release was mutual, applied only to Guerra and Lim individually, did not affect similarly situated people, and Lim was no longer Guerra’s employer and had not been her employer since before the case began.

The court also relied on the case’s history, including multiple mediation sessions and vigorously contested summary-judgment motions, as evidence that the settlement was a genuine compromise rather than an improper waiver of statutory rights. The court found the other provisions fair and reasonable and noted that the agreement contained no objectionable confidentiality or non-disparagement provisions. The opinion further states that the parties had considered the effect of the release on any potential state-court action concerning the previously dismissed pregnancy-discrimination claim.

Disposition

The court found the settlement agreement fair and reasonable and approved it. The court dismissed the case with prejudice, directed the Clerk of Court to terminate the settlement motion, and closed the case.