Abundiz Carranza v. VBFS, Inc.
- Paul Engelmayer
- 1:20-cv-02635-PAE
- U.S. District Court · Southern District of New York
- 4
In Abundiz Carranza v. VBFS, Judge Engelmayer declined to approve the proposed FLSA/NYLL settlement because its release was overbroad, allowing revision.
The proposed settlement parties, including Abundiz Carranza, the other proposed group members, defendants, and plaintiff’s counsel, were affected because the court did not approve the agreement and required a revised submission.
What happened
In Abundiz Carranza v. VBFS, Inc., the parties asked the court to approve a $200,000 settlement of claims under the Fair Labor Standards Act and New York Labor Law. The agreement called for payments over 48 months, with Abundiz Carranza receiving $133,044.02 and his lawyer receiving $66,955.98 in fees and costs.
The court found the attorney-fee share reasonable and noted that the agreement had no confidentiality or non-disparagement provision. But it rejected the release because it covered claims extending beyond the overtime and minimum-wage issues in the case, applied to any conduct, and protected defendants and successor entities from future actions.
Judge Paul A. Engelmayer declined to approve the agreement. The ruling was without prejudice to the parties submitting a revised agreement, and the court directed them to do so by July 1, 2022.
The detailed version
- Abundiz Carranza v. VBFS, Inc. · No. 1:20-cv-02635-PAE
- Paul Engelmayer
- June 15, 2022
Background
The parties submitted a proposed settlement agreement in this action under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL). The court explained that FLSA claims cannot be privately settled with prejudice without approval from the court or the Department of Labor. The settlement therefore had to be shown to be fair and reasonable, including the requested attorney’s fees.
Under the agreement, defendants would pay $200,000 in 48 monthly installments of different amounts. Abundiz Carranza would receive $133,044.02. His counsel would receive $66,955.98, consisting of $66,552.03 in fees and $433.91 in costs. The court found the allocation of one-third of the net settlement amount to counsel common and reasonable on the facts presented.
The Release Provision
The agreement did not include a confidentiality provision or a non-disparagement provision. The court found those aspects did not prevent approval. It reached a different conclusion about the release provision, which waived and released claims under the FLSA and NYLL based on “any conduct” occurring from the beginning of the world through the date of execution. The release also covered numerous related entities and people, including successor entities, and extended beyond the overtime and minimum-wage claims at issue in the action.
The court found the release unreasonable because it covered claims outside the scope of the litigation and shielded defendants and successor entities from future actions. The court stated that an FLSA settlement release should not extend beyond the claims at issue in the action and indicated that the deficiency could be corrected by narrowing the release.
Disposition
The court declined to approve the settlement agreement. The ruling was without prejudice to the parties’ right to submit a revised agreement correcting the release provision and any other deficiencies. The parties were directed to submit a revised agreement by July 1, 2022.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.