Medina v. NYC Harlem Foods Inc

Background

Marisol Medina brought a proposed class action under the Fair Labor Standards Act (FLSA), New York State Labor Law, New York wage regulations, and the New York Wage Theft Prevention Act. She alleged wage violations by NYC Harlem Foods Inc. and the other named defendants. She sought to represent similarly situated employees who worked for the defendants in New York as non-exempt hourly workers.

The parties reached a settlement after mediation. They first asked the court to approve the settlement preliminarily, conditionally certify the proposed settlement class, appoint Medina as class representative, appoint Bouklas Gaylord LLP as class counsel, and approve the proposed settlement notice. In an earlier opinion, the court rejected the settlement as unreasonable and directed the parties either to submit a revised agreement curing the identified problems or to state that they intended to abandon settlement.

The parties then filed a new motion and supporting materials. The court found that the second settlement agreement was word-for-word identical to the first agreement, and that the supporting memorandum was also identical to the earlier memorandum.

Legal standard

The court explained that employees may pursue an FLSA collective action to recover unpaid wages when they are similarly situated and consent in writing to become parties. Private FLSA settlements generally require approval by the district court or the Department of Labor. Without Department of Labor approval, the court must determine whether the settlement is fair and reasonable.

For that review, the court considered factors including the possible recovery, the burdens and expenses of continuing the litigation, the litigation risks, whether experienced counsel negotiated at arm’s length, and the possibility of fraud or collusion. The court also had to evaluate the reasonableness of any attorneys’ fees and costs. When a proposed FLSA settlement is unreasonable, the court may not rewrite it; it must reject the agreement or give the parties an opportunity to revise it.

Reasons for rejecting the proposed settlement

The court identified four deficiencies that remained unresolved:

1. FLSA settlement procedures. The agreement did not give potential FLSA collective members an opportunity to opt into the litigation. Instead, the court had previously explained that the agreement would improperly bind people who failed to opt out.

2. Insufficient information for fairness review. The parties did not provide an adequate explanation of the possible recovery, the defendants’ defenses, the anticipated burdens and expenses of proving the claims and defenses, or the seriousness of the litigation risks. The parties repeated a general statement that the gross settlement amount covered certain wage and notice-related violations but did not provide a damages breakdown or explain what portion of the alleged violations the settlement covered.

3. Termination provision. The agreement formally created a $1.3 million settlement fund but allowed defendants to terminate the agreement if the value of net filed claims reached 20% of the settlement’s total value, or $260,000. The court had previously found that this provision could allow defendants to nullify the settlement if too many class members filed claims, leave most claims unrecovered, and make the settlement amount uncertain and subject to further negotiation. The parties did not revise or justify this provision.

4. Attorneys’ fees. Plaintiff’s counsel did not submit documentation supporting the requested attorneys’ fees. The court stated that it would not approve a settlement without adequate documentation for the fee request.

Disposition

Because the settlement remained unreasonable, the court denied Plaintiff’s motion for preliminary settlement approval. The court also denied the requests for conditional certification of the proposed class, appointment of Medina as class representative, appointment of class counsel, and approval of the proposed class notice. The court stated that any later motion would also need to address the legal standard for certifying an FLSA collective action.

The court’s conclusion states that Plaintiff’s motion, Document 88, was DENIED without prejudice. The parties were permitted either to file a revised settlement agreement within 21 days that cured the identified deficiencies or to file a joint letter within 21 days stating that they intended to abandon settlement. The clerk was directed to terminate the pending motion.