Carmona v. Building Management Associates, Inc.

Background

Lisa Carmona sued Building Management Associates, Inc., Sebco Development, Inc., and Latoya Allen in a case involving claims under the Fair Labor Standards Act (FLSA). The parties informed the court that they had reached a settlement. Before the case was reassigned, Judge Nathan ordered the parties to submit a joint letter and their settlement agreement for review under the Second Circuit’s decision in Cheeks v. Freeport Pancake House, Inc. The case was reassigned to Judge Valerie Caproni on April 10, 2022.

Ruling

Judge Caproni vacated the order entered at docket entry 78. She ordered that the parties could not dismiss the action with prejudice based on their settlement unless the settlement was approved by either the court or the Department of Labor. If they wanted court approval, they had to file a joint letter motion and the settlement agreement on the public docket by April 29, 2022. The motion had to explain why the settlement was fair and reasonable, including the plaintiff’s possible recovery, the burdens and expenses avoided by settling, litigation risks, whether experienced counsel negotiated at arm’s length, and the possibility of fraud or collusion. It also had to address whether a genuine dispute existed about hours worked or compensation owed and the amount of attorney’s fees sought.

The court stated that it was unlikely to approve a settlement filed under seal or in redacted form absent special circumstances. It also warned that broad releases of claims unrelated to the wage-and-hour claims would generally be disfavored. If the parties believed an unusually broad release was appropriate, they had to explain why; failure to do so could lead to denial of the motion and possible sanctions against attorneys.

Alternative dismissal procedure

The court noted that the Second Circuit had not resolved whether the parties could settle an FLSA case without court or Department of Labor approval and dismiss it without prejudice under Federal Rule of Civil Procedure 41(a)(1)(A). If the parties chose that route, they had to file a stipulation within 30 days and include an affirmation from Carmona’s counsel stating that Carmona had been clearly advised that the settlement would not prevent another lawsuit against the defendants and affirming that the settlement agreement contained no release of the defendants. The court warned that this option could allow the case to be reopened in the future.

If neither a settlement-approval letter nor a dismissal stipulation was filed by April 29, 2022, the court ordered a conference for May 6, 2022. The court also advised the parties that they could consent to have further proceedings handled by a magistrate judge, who could make any required findings about the settlement. The Clerk of Court was directed to vacate docket entry 78.