Loor v. Atlantic Contracting of Yonkers Inc.

Background

The parties notified the court that mediation had produced an agreement resolving all issues. The case involved claims under the Fair Labor Standards Act (FLSA), a federal wage-and-hour law.

Court’s instructions about dismissal with prejudice

The court ordered that the parties could not dismiss the FLSA action with prejudice based on their settlement unless either the court or the Department of Labor approved the settlement. A dismissal with prejudice would end the case and bar refiling the same claims. If the parties wanted that type of dismissal, they had to file either a joint letter motion asking the court to approve the settlement or documentation showing Department of Labor approval. The filing and settlement agreement had to be placed on the public docket by July 2, 2021.

The court required any motion for approval to explain why the proposed settlement was fair and reasonable. It identified these factors for discussion: the plaintiff’s possible recovery; the burdens and expenses the settlement would avoid; the litigation risks; whether experienced counsel negotiated at arm’s length; and the possibility of fraud or collusion. The filing also had to address whether there was a genuine dispute about the hours worked or compensation owed, and how much the plaintiff’s attorney would seek in fees.

The court stated that, absent special circumstances, it was unlikely to approve a settlement filed under seal or in redacted form. It also warned that it was unlikely to approve a broad release covering claims unrelated to the wage-and-hour claims in the complaint and related state-law claims. If the parties nevertheless believed that an unusually broad release was justified, the motion had to explain why. The court warned that failure to comply could lead to denial of the motion and sanctions against the attorneys.

Alternative dismissal without prejudice

The court noted that the Second Circuit had not decided whether parties may settle an FLSA case without court or Department of Labor approval by filing a voluntary dismissal without prejudice under Federal Rule of Civil Procedure 41(a)(1)(A). A dismissal without prejudice does not itself bar a new action, assuming the applicable filing deadline has not expired.

If the parties chose that route, they had to file a Rule 41(a)(1)(A) stipulation on the public docket within 30 days. The stipulation had to include an affirmation from the plaintiff’s counsel stating that the plaintiff or plaintiffs had been clearly advised that the settlement would not prevent another lawsuit against the same defendants, and confirming that the settlement agreement contained no release of the defendants. The court warned that this option created a risk that the case could later be reopened.

Disposition

Judge Valerie Caproni did not approve the settlement and did not dismiss the case. The order set filing requirements and deadlines. If the parties filed no qualifying letter or stipulation by July 2, 2021, the court ordered a conference for July 9, 2021, at 10:00 a.m.