Hernandez v. Compass One, LLC

Background

Emmanuel Hernandez and Compass One, LLC jointly sought approval of a settlement of Hernandez’s claims under the Fair Labor Standards Act and the New York Labor Law. Hernandez alleged that he worked approximately 45 to 60 or more hours per week as a manual kitchen worker from around 2003 through October 4, 2019, was not paid for some hours, was owed overtime wages, and sometimes worked more than 10 hours in a day. He also alleged that he did not receive wage notices and wage statements required by New York law.

The opinion states that the settlement was with Flik International Corp. and that, at the fairness hearing, the parties explained that the case named the wrong defendant and that Flik was Hernandez’s employer. The total settlement was $52,500. Hernandez was to receive $34,687. Counsel was to receive $17,343 in attorney fees, described as one-third of the total recovery, plus $470 in costs. The settlement included a release limited to wage-and-hour claims brought, or that could have been brought, in the lawsuit. Hernandez also agreed to execute a dismissal with prejudice and not to sue over matters released by the agreement.

Settlement and fee review

The court concluded that the settlement consideration was fair and reasonable. It was within the possible range of recovery, resulted from mediation and arm’s-length bargaining between experienced counsel, and accounted for the risks and burdens of litigation. Hernandez’s motion calculated possible unpaid wages at $35,486.72, with an additional $10,000 potentially available for New York notice and wage-statement claims and possible liquidated damages. The defendant denied liability and asserted that Hernandez was an exempt employee.

The court identified attorney fees as the only disputed issue. Counsel argued that the contingency-fee agreement controlled, that time records were unnecessary, and that the court lacked authority to review the allocation between Hernandez and his lawyer. The court rejected that argument. It explained that the court must review the reasonableness of fees and costs included in an FLSA settlement, and that a retainer agreement does not eliminate that responsibility.

The court further held that the review was required even though counsel requested a percentage of the recovery rather than an hourly fee. It relied on the lodestar method as a cross-check: the number of hours reasonably worked multiplied by a reasonable hourly rate. The court noted that the Second Circuit generally expects contemporaneous records identifying each attorney’s date, hours, and work, while also stating that a court may use either the percentage method or lodestar method in determining a reasonable fee.

Application and ruling

After initially declining to provide time records, counsel submitted them after the court requested additional support and held a fairness hearing. The records showed 39.25 hours of work. Using an hourly rate of $400, which the court described as within the range generally awarded to experienced wage-and-hour attorneys in the district, the lodestar was $15,700. The court found that this amount adequately supported the requested $17,343 fee, even assuming some hours might have been excessive or unnecessary.

Judge Lewis J. Liman therefore approved the settlement and determined that the attorney-fee request was not unreasonable. The opinion’s ruling concerned approval of the settlement and the fairness of the fee allocation; it did not decide whether Hernandez or the defendant was correct on the underlying wage claims.