Arellano v. Highline Construction Group, LLC

Background

Luis Arellano, Pedro Leon, Balthazar Martinez, and Kevin Vega brought claims on behalf of themselves and similarly situated people against Highline Construction Group, LLC, and Mark Dobbin. The opinion states that the case involves claims under the Fair Labor Standards Act (FLSA), a federal wage-and-hour statute. On June 25, 2021, the parties notified the court that mediation had produced an agreement resolving all issues.

Settlement-Approval Requirement

The court ordered that the parties may not dismiss the action with prejudice based on the settlement unless the settlement agreement is approved by the court or the Department of Labor. If the parties want a dismissal with prejudice, they must either file a joint letter motion asking the court to approve the settlement or provide documentation of Department of Labor approval. The materials, including the settlement agreement, had to be filed on the public docket by July 28, 2021.

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

The court stated that, absent special circumstances, it would not approve a settlement filed under seal or in redacted form. It also warned that it was unlikely to approve a general release or a release covering claims unrelated to the wage-and-hour claims under the FLSA or related state laws. If the parties believed unusual circumstances justified a broader release, their joint motion had to explain why. The court warned that failing to follow these instructions could result in summary denial of the motion and sanctions against the attorneys.

Alternative Dismissal Without Prejudice

The court noted that the Second Circuit had not decided whether an FLSA case may be settled without court or Department of Labor approval and dismissed without prejudice under Federal Rule of Civil Procedure 41(a)(1)(A). If the parties chose that route, they had to file a stipulation under that rule within 30 days. The stipulation had to include an affirmation from the plaintiffs’ counsel stating that the plaintiffs had been clearly advised that the settlement would not prevent them from filing another lawsuit against the same defendants and affirming that the settlement agreement contained no release. The court warned that this option risked the case being reopened later.

Disposition

Judge Valerie Caproni did not approve or reject the settlement. She ordered the parties to file either the settlement-approval materials or the alternative stipulation by July 28, 2021. If neither was filed, the court scheduled a conference for July 30, 2021, at 10:00 a.m.