Tung v. Jade Spoon Asian Cuisine Inc.

Background

Tzu-Hsiang Tung brought claims against Jade Spoon Asian Cuisine Inc., Wai Yung a/k/a Way Liang, Hi Ling Kwok, and Yi Gao under the Fair Labor Standards Act, the New York Labor Law, and the Wage Theft Prevention Act. He alleged that the defendants failed to pay the minimum wage and overtime wages and failed to provide required wage notices, wage statements, spread-of-hours pay, and timely wages.

The parties asked the court to approve a proposed settlement under the Second Circuit’s requirement that courts review private settlements of Fair Labor Standards Act claims. The proposed agreement provided for a total payment of $25,000. The application stated that $8,333 would go to Tung’s counsel, including $7,706 in fees and $627 in costs, but the agreement itself did not include that allocation.

Reasons Approval Was Denied

The court identified five deficiencies:

1. Unexplained recovery calculation. The application said Tung’s estimated base lost wages were approximately $18,960, excluding liquidated damages, but did not explain how that figure was calculated or provide the underlying information. The court said this prevented it from evaluating the proposed settlement.

2. Missing fee allocation in the agreement. The agreement did not specify the amount to be paid to Tung’s counsel. The court stated that the revised agreement must clearly identify the exact amount of attorney’s fees and expenses because judicial review is intended to protect employees and ensure that they benefit from the settlement.

3. Insufficient documentation of costs. Counsel documented the filing fee but did not provide adequate proof of the $225 service-of-process expense. The court required an invoice, receipt, sworn statement, or declaration under penalty of perjury.

4. Unclear release language. The agreement used the undefined term “Released Parties” and inconsistently described the people and entities covered by the release. The court required the term to be defined or removed. It otherwise found that the release was appropriately limited to wage-and-hour claims related to the lawsuit.

5. Non-disparagement provision. The agreement allowed truthful statements about the parties’ employment relationship but did not clearly allow truthful statements about Tung’s experience litigating the case. The court required that protection to be stated expressly.

Other Findings

Apart from those defects, the court found that the relevant settlement factors favored approval. Settlement would avoid the expense and burden of discovery, further motions, and trial. The court recognized substantial litigation risks: Tung’s recovery estimates assumed that all disputed facts were correct, while the defendants disputed the hours he worked and denied his allegations. The defendants also faced potentially significant liability for attorney’s fees if Tung prevailed.

The court found that the settlement resulted from arm’s-length negotiations by competent counsel, including mediation through the court’s mediation program, and found no reason to believe that fraud or collusion produced the agreement. It also found no confidentiality provision that would prevent approval.

The court considered the requested $7,706 in attorney’s fees—about 31 percent of the settlement—to be fair and reasonable. Using the lodestar method, which estimates fees by multiplying reasonable hours by a reasonable hourly rate, the court calculated $5,760 based on 12.8 hours at $450 per hour. It found the resulting multiplier of approximately 1.34 reasonable. The court also noted that the application had incorrectly listed the multiplier as 1.2.

Disposition

Judge Andrew E. Krause denied without prejudice the parties’ motion to approve the proposed settlement. The parties may reapply with a revised application and settlement agreement addressing the identified deficiencies. The court directed them to submit those materials by June 2, 2022.