Frias v. Restoration Specialties, Inc.

Background

Domingo Frias, Francisco Reyes, and Agustin Olarte brought claims against Restoration Specialties, Inc. and Tim O’Donoghue under the Fair Labor Standards Act (FLSA) and New York Labor Law. They alleged that the defendants failed to pay overtime wages and failed to provide wage notices and wage statements. The action was commenced on August 18, 2020.

The parties submitted a proposed settlement for court approval. In the Southern District of New York, FLSA settlements require review by the district court or the Department of Labor. The court must determine whether the settlement is fair and reasonable.

Settlement terms and fairness review

The proposed settlement required a total payment of $80,000. Plaintiffs would receive $52,942: $18,000 to Frias, $11,942 to Reyes, and $23,000 to Olarte. Plaintiffs’ counsel would receive $27,058, consisting of $26,470 in attorneys’ fees and $588 in costs.

The plaintiffs estimated that they could have recovered $250,000 in unpaid overtime, liquidated damages, prejudgment interest, and statutory damages if they prevailed at trial. The plaintiffs’ settlement recovery represented approximately 21 percent of their total alleged damages and approximately 48 percent of their alleged overtime owed.

The court found that all five factors it applied to evaluate the settlement supported approval: the potential recovery, the expense and burden of further litigation, the parties’ litigation risks, the arm’s-length negotiations conducted by experienced counsel, and the absence of indications of fraud or collusion. The parties had conducted some discovery but had not taken depositions or engaged in motion practice. The defendants disputed the plaintiffs’ wage and hour allegations and asserted that the plaintiffs had generally been overcompensated under the defendants’ overtime-payment structure. The defendants nevertheless acknowledged that some pay periods may not have used the correct overtime rate. The plaintiffs acknowledged that they were unlikely to succeed on wage claims arising after December 2018.

The court also found that the factors weighing against approval were absent. It was not aware of similarly situated employees, found no likelihood that the circumstances would recur because the employment relationship had ended, found no known history of FLSA noncompliance by the employer, and found no novel factual or legal issues requiring further development of the law.

Release, fees, and costs

The court determined that the settlement’s release was appropriately limited to the wage-and-hour claims asserted in the action and related claims that could have been asserted. Although one provision referred broadly to claims under any local, state, or federal law, the court read that language in context as releasing only claims concerning wage claims and rights. The agreement contained no inappropriate confidentiality or non-disparagement provisions.

The requested attorneys’ fee was one-third of the settlement amount after costs. Counsel submitted time records and hourly-rate information showing 117.6 hours of work. The court found the $26,470 fee reasonable and noted that it was approximately 90 percent of the calculated lodestar amount, a cross-check used to evaluate the reasonableness of a fee. The court also found the $588 in documented costs reasonable.

Disposition

Judge Andrew E. Krause found the proposed settlement fair and reasonable and approved the settlement agreement filed at ECF No. 35-1. The court ordered payment of $27,058 to plaintiffs’ counsel and $52,942 to the plaintiffs according to the stated allocations and payment schedule.

The parties were ordered to file an executed Stipulation of Discontinuance with Prejudice. The court separately ordered that the action be dismissed, without prejudice to restoring it to the court’s calendar if an application was made within 45 days of the order. An application filed later could be denied solely because it was late. The clerk was directed to terminate the settlement-approval motion and close the case.