Arroyo v. J & M Realty Services Corp.

Background

Larry Arroyo brought this Fair Labor Standards Act (FLSA) and New York Labor Law action individually and on behalf of similarly situated people against J & M Realty Services Corp. and other defendants. The parties submitted a proposed settlement agreement in December 2021. The court declined to approve that agreement because plaintiff’s counsel had not fully accounted for the requested attorney fees and because the agreement contained an overly broad general release.

The parties submitted a revised agreement and billing records on February 1, 2022. Under the revised agreement, the defendants would pay $99,000 within 45 days after court approval. Arroyo would receive $58,434, and his counsel would receive $40,566, consisting of $39,600 in fees and $966 in costs.

Attorney Fees

The court explained that FLSA claims generally cannot be privately settled with prejudice without approval from the district court or the Department of Labor. The court therefore had to determine whether the settlement was fair and reasonable and separately assess whether the requested attorney fees were reasonable.

The requested fee represented approximately 40% of the total settlement. The court noted that courts in the district generally decline to award more than one-third of a settlement amount except in extraordinary cases. Here, however, counsel identified substantial legal and factual complexity. The legal issues included potential joint-employer liability, possible application of a building-service minimum-wage order and exemptions, statutes of limitations and pandemic-related tolling, and the FLSA’s and New York Labor Law’s prompt-payment requirements. The factual issues involved Arroyo’s work and pay from four separate entities over overlapping periods. The case also involved seven defendants, four separate defense counsel, individual defenses, potential cross-claims, and factual disputes.

The court reviewed counsel’s billing records. Justin Ames recorded 107.3 hours, not 1073 hours as the opinion’s text appears to state, at a requested rate of $350 per hour; Robert Salaman recorded 3 hours at $400 per hour; and Olena Tatura recorded 10.5 hours at $225 per hour. The court reduced the hourly rates to $250 for Ames, $300 for Salaman, and $200 for Tatura. Using those adjusted rates, the court calculated a lodestar—the number of hours multiplied by reasonable hourly rates—of $29,825. The requested $39,600 fee therefore represented a multiplier of approximately 1.3. The court found that multiplier reasonable in light of the case’s complexity and litigation risks.

Release of Claims

The original agreement released a broad range of known and unknown wage claims and other claims connected to Arroyo’s employment. The court previously rejected that provision because it could have released claims unrelated to wage-and-hour issues and released the defendants without a comparable release from them.

The revised agreement limited Arroyo’s release to wage-and-hour claims asserted in the litigation or that could have been asserted based on the facts pleaded in the complaint. The defendants also released Arroyo from claims and rights connected to his employment or its separation. The court found these revisions properly limited the release and made it reasonable.

Disposition

The court found that the agreement was reached through procedurally fair means and was fair and reasonable. It approved the settlement agreement, directed the clerk to close all pending motions, and closed the case.