Perez v. Ultra Shine Car Wash, Inc.

Background

Jose Luis Perez and Pedro Santiago Zacariaz, former attendants at Ultra Shine Car Wash, Inc., sued Ultra Shine, its president and chief executive officer Adelino F. Pastilha, and its manager Juan Mendez. They brought claims under the Fair Labor Standards Act (FLSA), the federal wage-and-hour law, and the New York Labor Law.

The plaintiffs alleged that they generally worked six days and 65 hours per week, weather permitting. They claimed that the defendants failed to pay the lawful minimum wage and overtime, failed to pay New York’s premium for shifts longer than 10 hours, misappropriated tips, and failed to provide required wage statements and notices or maintain proper payroll and employment records. They sought unpaid wages, overtime, spread-of-hours premiums, tips, additional damages, interest, and attorneys’ fees and costs. They initially asserted claims on behalf of themselves and other workers, but later agreed to proceed only with their individual claims.

After mediation, the parties agreed to a proposed settlement and asked the court to approve it. Under the agreement, the defendants would pay $65,000: $34,000 to Perez, $9,000 to Zacariaz, and $22,000 to their attorneys. The plaintiffs’ net recovery after fees and costs would be $43,000.

Court’s analysis

Because the settlement resolved FLSA claims, the court had to review whether it was fair and reasonable before allowing the case to be dismissed through the agreement. The court compared the proposed payment with the plaintiffs’ estimates. The plaintiffs estimated approximately $180,000 in unpaid wages and other compensation, plus an equal amount in liquidated damages, for total alleged damages of $360,000. The proposed net recovery would therefore be about 11.9 percent of that estimate.

The court found that the parties had not provided enough information to evaluate whether the relatively low percentage was justified by the litigation risks. The defendants referred to wage-and-hour records that they said showed the plaintiffs rarely worked more than 50 hours per week and often worked fewer than 40 hours. The defendants also disputed parts of the plaintiffs’ employment histories. But the parties’ descriptions of those issues were too cursory for the court to determine their effect on the case.

The court also questioned the defendants’ proposed use of the fluctuating-workweek method to calculate damages. It directed defense counsel to separately brief whether that method applied, with specific reference to Second Circuit law. The parties also had to explain the data and methods used to calculate both the plaintiffs’ estimated damages and the settlement amount. The court noted that the parties gave different damage estimates, including a $68,000 figure in a footnote, without explaining how that figure related to the $180,000 estimate. The parties also had not clarified whether the damages estimate included possible statutory damages for failing to provide wage notices.

The court further required the parties to address another former Ultra Shine employee’s related litigation. The court said the existence of similarly situated employees can weigh against settlement approval, but the parties’ submission did not discuss that related case or explain its significance.

The court was satisfied that the agreement had been negotiated competently, in good faith, and at arm’s length, without fraud or collusion. It separately approved the release provision because it was limited to wage-and-hour claims arising on or before the agreement’s execution date. The court did not find the proposed attorneys’ fee amount facially unreasonable, but counsel had not supplied contemporaneous billing records showing each attorney’s dates, hours, and work performed. The court required those records and supporting documentation before making a final decision on the fee request.

Disposition

Judge Kenneth M. Karas denied without prejudice the parties’ request for approval of the proposed settlement agreement. The parties could submit a new request after addressing the court’s concerns. The order did not decide whether the plaintiffs’ underlying wage-and-hour claims were valid.