Sarit v. Westside Tomato, Inc.

Background

Ruth Sarit sued her former employer, Westside Tomato, Inc., doing business as Arte Café, along with Robert Malta, Marco Ornetti, Ernesto Matias Lopez, and unidentified defendants. She asserted claims under Title VII, the Fair Labor Standards Act, the New York Labor Law, and for battery. The parties asked the court to approve their settlement under the procedure required by Cheeks v. Freeport Pancake House, which requires courts to review Fair Labor Standards Act settlements for fairness and reasonableness.

The Proposed Settlement

The proposed agreement called for a total payment of $20,000. The court found that amount reasonable in light of the parties’ representation that the restaurant was experiencing financial difficulties because of the COVID-19 pandemic and the uncertainty of recovering damages if the case continued.

The agreement allocated $10,000 to Sarit’s attorney for fees and costs. Although that was half of the total settlement, the court explained that attorney’s fees in Fair Labor Standards Act cases are not subject to a fixed one-third limit. After reviewing counsel’s time records and considering the work performed, including litigating a motion to compel arbitration and two motions to dismiss, the court approved the attorney-fee provision.

The agreement also included a mutual release of claims. Although the release covered claims beyond wage-and-hour claims, the court approved it because it applied to both sides, Sarit would receive a practical benefit from releasing claims the defendants had asserted against her and her husband, and the parties’ employment relationship had ended.

Non-Disparagement Provision

The court did not approve the agreement’s non-disparagement provision. That provision barred both Sarit and the defendants from making, directly or indirectly, statements that might reasonably be viewed as derogatory, critical, negative, or harmful, whether the statements were true, false, or opinions.

The court had previously told the parties that it would not approve a settlement barring negative statements unless the agreement included an exception allowing truthful statements about the plaintiff’s experience litigating the case. Because the proposed provision lacked that exception, the court concluded that it could prevent Sarit from making truthful statements and declined to approve the settlement as drafted.

Disposition

The court stated that it could not simply rewrite the agreement. No later than June 2, 2021, the parties were required to choose one of three options: file a revised settlement agreement, stipulate to dismissal of the action without prejudice, or jointly notify the court that they were abandoning the settlement and would continue litigating. The opinion therefore did not approve the settlement in its existing form.