Armenta Anastacio v. Ephesus Corp.

Background

Raul Armenta Anastacio brought claims under the Fair Labor Standards Act (FLSA), the federal wage law, and related provisions of the New York Labor Law. He alleged that Ephesus Corp., doing business as Seven Hills Mediterranean Grill, and Yonca E. Erdick owed him pay for all hours worked, minimum wages, overtime compensation, spread-of-hours pay, and damages for alleged wage-notice violations.

After mediation did not resolve the case, the parties conducted discovery and later participated in additional settlement discussions. They jointly moved for approval of a proposed settlement agreement.

The proposed settlement

The agreement provided for a total payment of $30,000. Of that amount, $19,488 would be paid directly to Armenta, $10,000 would go to his attorneys as fees, and $512 would cover costs. The parties stated that Armenta’s estimated possible recovery was between $12,000 and $20,000.

Court’s analysis

FLSA claims cannot be privately settled with preclusive effect without approval from the district court or the Department of Labor. The court therefore had to determine whether the agreement was fair and reasonable. Relevant considerations included the possible recovery, the litigation burdens and risks, whether the agreement resulted from arm’s-length negotiations, and whether fraud or collusion was possible.

The court concluded that it needed evidence supporting the parties’ estimate of Armenta’s possible recovery. The parties had not submitted declarations, affidavits, exhibits, or other calculations showing how they reached the $12,000-to-$20,000 estimate. Without that information, the court could not determine whether the settlement amount was reasonable.

The court found the proposed attorney fees and costs reasonable. The $10,512 total represented about 35% of the settlement fund. The court also reviewed the attorneys’ billing records, including a $400 hourly rate for Armenta’s attorney and a $100 hourly rate for the attorney’s assistant. The records reflected about 55 hours of work and a lodestar—the reasonable hourly rates multiplied by the reasonable hours—of $23,510. Comparing that amount with the requested fees and costs produced a multiplier of about 0.45, which the court found reasonable.

The court also found the remaining settlement terms reasonable. The agreement did not contain objectionable confidentiality provisions, and its release was limited to claims related to this case.

Disposition

Although the agreement was otherwise fair and reasonable, the court could not approve it without documentation supporting the estimated range of recovery. The court denied the parties’ motion for settlement approval without prejudice and instructed them to submit supporting records or provide a status update within one week, by May 18, 2021.