Cano v. Cherry Lawn Farms, Inc.

Background

Hector I. Cano sued Cherry Lawn Farms, Inc., doing business as Cherry Lawn Farm Market, Paul DiPietro, and Armando D’Onofrio. He asserted claims under the Fair Labor Standards Act (FLSA) and New York Labor Law for allegedly unpaid minimum wages, overtime wages, spread-of-hours pay, and required wage statements and notices. He also asserted discrimination, retaliation, and hostile-work-environment claims under Title VII and the New York State Human Rights Law. The parties told the court that they separately settled the non-wage claims, which did not require judicial approval.

The parties asked the court to approve their settlement of the FLSA claims. In this circuit, a private FLSA settlement requires approval by the court or the Department of Labor. The court therefore evaluated whether the proposed agreement was fair and reasonable under the circumstances.

Court’s analysis

The proposed settlement required a total payment of $160,000: $106,011.67 to Cano and $53,988.33 to his counsel for attorneys’ fees and costs. Based on Cano’s damages calculation, his payment represented approximately 42 percent of the damages he claimed he would have recovered at trial. The court found that the settlement would avoid the expense and burden of further discovery and trial, and that both sides faced significant litigation risks. Defendants contended that their records showed Cano was paid a higher weekly rate, that he was exempt from overtime at certain times, and that he did not work all the hours he alleged.

The court also found that the agreement resulted from arm’s-length bargaining between experienced counsel, following two mediation sessions and two court-supervised settlement conferences. It found no reason to suspect fraud or collusion. The court further determined that the case involved only one plaintiff, that Cano’s employment had ended, that it was not aware of a history of FLSA noncompliance by the employer, and that the case did not present novel issues requiring development of the law.

The court found the proposed attorneys’ fees and costs reasonable. Counsel requested $53,333.33 in fees, approximately one-third of the settlement, and $655 in costs. Counsel submitted time records and rate information, and the court calculated a lodestar—the number of hours reasonably worked multiplied by the applicable hourly rates—of $58,450. The requested fee was approximately 91 percent of that amount. The court also found the requested costs sufficiently documented and reasonable.

Problem with the release

The court declined to approve the agreement because paragraph 10, titled “Other actions,” contained an overbroad release. The provision barred Cano from directly or indirectly bringing, continuing, assisting, or participating in any lawsuit, charge, claim, or proceeding against any defendant, and applied to claims and damages arising before the agreement’s effective date. The court held that this language could waive practically any possible claim, including unknown claims and claims unrelated to wage-and-hour issues.

The court stated that the parties could obtain approval by deleting the problematic language. If they instead modified it, the new language had to comply with the established limits on releases and could, for example, be limited to wage-and-hour matters.

Disposition

The court denied without prejudice the parties’ application for approval of the settlement. It directed the parties to modify the “Other actions” provision and refile the proposed agreement by June 25, 2021, identifying all changes in a cover letter. The court also directed the parties to submit a proposed dismissal stipulation for Cherry Lawn Farms and Armando D’Onofrio. Because the court understood that Cano no longer intended to pursue his claims against DiPietro, it directed Cano to submit a proposed order voluntarily dismissing those claims under Federal Rule of Civil Procedure 41(a)(2).