Chen v. Nara Sushi 76 Inc.

Background

De Fa Chen brought claims against Nara Sushi 76 Inc., doing business as Nara Sushi, Nara Sushi 76, and Kumo Sushi, along with Guimin Lin, Kathy Zeng, and Bo Huang. The claims included unpaid minimum and overtime wages under the Fair Labor Standards Act (FLSA) and unpaid or illegally withheld wages and wage-notice and wage-statement violations under the New York Labor Law.

After the parties reached a settlement, they asked the court to approve it. The proposed agreement provided Chen with $11,523. Chen estimated his best-case damages at $23,474.48, making the settlement approximately 49.09% of that estimate. The parties stated that continued litigation would be lengthy and uncertain, potentially require a trial, and create collection concerns because of the defendants’ reduced financial capabilities. They also stated that the agreement resulted from arm’s-length negotiations and that Chen had experienced counsel during mediation.

Court’s analysis

The court explained that FLSA settlements require approval by the Department of Labor or a federal district court. A court may approve a settlement only if it is fair and reasonable. Relevant considerations include the possible recovery, the burdens and expenses of continued litigation, litigation risks, the nature of the negotiations, and the possibility of fraud or collusion.

The court found that the parties had not expressly stated that the negotiations involved no fraud or collusion. Because of that omission, the court could not determine that the required fairness factors were satisfied.

The court also found the release provision improper. Although the release was limited to wage-and-hour matters and related claims, it covered numerous entities and people beyond the defendants, including predecessors, successors, parents, subsidiaries, agents, officers, shareholders, employees, representatives, and attorneys. The court concluded that, read literally, the provision could release wage-and-hour claims against unidentified parties only tenuously connected to the defendants. Chen was not given a comparable release from liability.

The court separately reviewed the requested attorney’s fees and costs. Chen’s counsel requested $6,000 in fees—one-third of the settlement—and $477 in costs. The court found the submitted hourly rates and time records reasonable, calculated a lodestar of $8,915, accepted the resulting 1.49 multiplier, and determined that the $6,000 fee was reasonable. The court also found the documented costs reasonable.

Disposition

Judge Analisa Torres denied the parties’ motion for settlement approval without prejudice to refiling a revised letter and settlement agreement. The revised materials had to address the missing statement concerning fraud or collusion and narrow the release so that it did not provide an unearned benefit to entities or individuals beyond the parties in the action. The parties were ordered to file the revised materials by November 7, 2022.