Martinez v. 280 Katonah Corp.

Background

Daniel Allan Martinez brought claims against 280 Katonah Corp., doing business as La Familia Pizza & Pasta of Katonah; Frok Duhanaj; 888 Work, LLC, doing business as La Familia Pizza & Pasta of Cross River; and Mirash Vataj. He alleged violations of the Fair Labor Standards Act and New York Labor Law based on allegedly unpaid minimum wages, overtime wages, spread-of-hours wages, wage notices, and accurate wage statements.

The parties submitted a proposed settlement for court approval. In the Second Circuit, an employee’s Fair Labor Standards Act claims generally cannot be privately settled through a dismissal with prejudice unless the court or the United States Department of Labor approves the settlement.

Settlement Review

The court reviewed the settlement under the totality of the circumstances, including the employee’s possible recovery, the costs and burdens of continued litigation, the parties’ litigation risks, whether the agreement resulted from arm’s-length negotiations between experienced counsel, and whether fraud or collusion was possible.

The agreement provided for a total payment of $60,000. Martinez was to receive $39,522.67, and his counsel was to receive $20,477.33 for fees and costs. Martinez estimated that he could have recovered $128,749.40 if he prevailed at trial, including unpaid wages, liquidated damages, prejudgment interest, and statutory damages. The court stated that Martinez’s proposed recovery represented approximately 31 percent of his total alleged damages and approximately 73 percent of his alleged minimum wage, overtime, and spread-of-hours pay.

The court noted discrepancies in the wage calculations concerning Martinez’s work from January through March 2018 and in the calculation of prejudgment interest. It concluded that correcting those discrepancies would increase the settlement’s percentage of the alleged damages and would not affect the overall finding that the settlement was fair and reasonable.

The parties had conducted some discovery but had not taken depositions. The court found that continued litigation likely would involve additional proceedings concerning subject-matter jurisdiction, summary-judgment motions, or extensive motions before trial. The defendants disputed Martinez’s account of his wages and hours and asserted that he was properly compensated. Both sides identified witnesses concerning the work Martinez performed, creating litigation risks for each party.

The court also found that the settlement resulted from arm’s-length bargaining, based in part on the court’s own settlement conference, and found no reason to believe that it resulted from fraud or collusion. It found no other similarly situated employees affected by the agreement, no likelihood that the circumstances would recur because the employment relationship had ended, no known history of Fair Labor Standards Act violations by these employers, and no novel legal or factual issues requiring further development of the law.

The release was limited to the wage-and-hour claims asserted in the action and related claims that could have been asserted. The agreement did not contain confidentiality or non-disparagement provisions that the court considered improper.

Fees and Costs

The settlement allocated $19,761.33 to attorneys’ fees and $716 to costs. The fee represented one-third of the settlement amount after costs. Counsel submitted time records showing 75.6 hours of work, and the court determined that the requested fee was approximately 67 percent of the lodestar amount—the amount calculated from counsel’s recorded hours and billing rates. The court found both the fee and the documented costs reasonable.

Disposition

The court APPROVED the settlement agreement filed at ECF No. 38-1. It directed that Martinez’s counsel receive $20,477.33, consisting of $19,761.33 in attorneys’ fees and $716 in costs, and that Martinez receive the remaining $39,522.67. The parties were ordered to file an executed copy of a Stipulation and Order of Dismissal with Prejudice for the court to approve.