Carter v. American Security Programs Inc.

Background

The parties notified the court through mediation that they had reached an agreement resolving all issues. The case involved claims under the Fair Labor Standards Act (FLSA), a federal law governing matters such as minimum wages, overtime, and related wage-and-hour protections. The order did not approve the settlement or state its financial terms.

Court’s Instructions for a Dismissal With Prejudice

The court ordered that the parties could not dismiss the action with prejudice based on their settlement unless either the court or the Department of Labor approved the settlement. A dismissal with prejudice generally ends the action and bars the same claims from being brought again. To seek court approval, the parties had to file a joint letter motion and the settlement agreement on the public docket by August 20, 2022. Alternatively, they could provide documentation showing Department of Labor approval.

The letter motion had to explain why the settlement was fair and reasonable. It had to address the plaintiff’s possible recovery, the burdens and expenses the settlement would avoid, the parties’ litigation risks, whether experienced counsel negotiated the agreement at arm’s length, and the possibility of fraud or collusion. It also had to address whether the parties genuinely disputed the number of hours worked or the compensation owed, and how much of the settlement the plaintiff’s attorney would seek as fees.

The court stated that it generally would not approve a settlement filed under seal or in redacted form, absent special circumstances. It also warned that it was unlikely to approve a general release, or a release of claims unrelated to the wage-and-hour claims in the complaint and related state-law claims. If the parties believed unusual circumstances justified a broader release, their motion had to explain why. The court warned that failure to comply could lead to denial of the motion and sanctions against the attorneys.

Possible Dismissal Without Prejudice

The court noted that the Second Circuit had not decided whether parties may settle an FLSA case without court or Department of Labor approval by filing a stipulation of dismissal without prejudice under Federal Rule of Civil Procedure 41(a)(1)(A). If the parties chose that route, they had to file the stipulation publicly within 30 days. It had to include an affirmation from the plaintiff’s counsel stating that Carter had been clearly advised that the settlement would not prevent him from filing another lawsuit against the same defendants, and affirming that the settlement agreement contained no release of the defendants. The court warned that this option carried a risk that the case could later be reopened.

Disposition

Judge Valerie Caproni issued instructions governing the parties’ possible settlement dismissal; she did not rule on the merits of the underlying wage claims or approve the settlement. If no approval letter or dismissal stipulation was filed by August 20, 2022, the court ordered a conference for August 26, 2022, at 10:00 a.m.