Adams v. By Design L.L.C.
- Vernon Broderick
- 1:21-cv-06157
- U.S. District Court · Southern District of New York
- 4
In Adams v. By Design LLC, Judge Broderick rejected approval of the parties’ Fair Labor Standards Act settlement because it barred Adams from future work for defendants.
The ruling directly affected Claudia Adams and defendants By Design LLC, Jay Lee, and Russel Kemp by preventing approval of their proposed settlement in its current form and requiring them either to revise it or continue litigating.
What happened
In Adams v. By Design LLC, the parties asked the U.S. District Court for the Southern District of New York to approve a settlement resolving Claudia Adams’s Fair Labor Standards Act case. The parties had reached the agreement and filed it with a joint request for approval.
The court found the agreement unfair and unreasonable because it prohibited Adams from seeking or accepting employment, independent-contractor work, or temporary work with the defendants. The court said this type of reemployment ban conflicts with the law’s purpose, and the parties had not explained or justified the provision.
Judge Vernon S. Broderick denied the request to approve the settlement and rejected the agreement in its current form. He gave the parties 28 days to file a revised agreement addressing the problem and supporting its approval, or to state that they wanted to continue litigating the case.
The detailed version
- Adams v. By Design L.L.C. · No. 1:21-cv-06157
- Vernon Broderick
- June 3, 2022
Background
Claudia Adams and By Design LLC, Jay Lee, and Russel Kemp were parties to a Fair Labor Standards Act (FLSA) case. The parties reached a settlement agreement on or about January 25, 2022. On January 27, 2022, they filed a joint letter asking the court to approve the agreement and attached the settlement document.
Because the Department of Labor had not approved the agreement, the court had to determine whether it was fair and reasonable. The court explained that this review considers factors such as the plaintiff’s possible recovery, the burdens and expenses the parties would avoid by settling, litigation risks, whether experienced counsel negotiated at arm’s length, and the possibility of fraud or collusion. The court also reviews requested attorney fees and costs when a settlement includes them.
Reason for Rejection
The settlement contained a section called “Cessation of Employment.” One subsection stated that Adams agreed not to seek or accept employment, or work as an independent contractor or temporary worker, with the “Releasees.” The agreement defined “Releasees” as the defendants in the case.
The court stated that courts in the district consistently reject FLSA settlements that prevent plaintiffs from having a future employment relationship with the defendant. It found the reemployment ban especially inappropriate because the parties had provided no explanation or supporting cases to justify it. The court reserved judgment on the agreement’s other provisions.
Disposition
The court denied the request to approve the settlement and rejected the settlement agreement in its current form. Within 28 days, the parties were ordered to file a new settlement agreement that cured the identified problem, together with a letter explaining why the revised agreement should be approved, or to indicate that they wished to continue litigating the action. Judge Vernon S. Broderick also instructed the parties to review the agreement’s other terms for compliance with the standards governing FLSA settlements.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.