Chen v. A & L of NY Corp

Background

Angus Chen sued A & L of NY Corp., doing business as Izakaya Toribar, Scott Lee, and Frank Ahn. The opinion describes A & L as Chen’s former employer and a restaurant located in midtown Manhattan. Chen alleged that the restaurant engaged in wage theft by withholding between 20% and 30% of service employees’ hourly wages and tips, among other alleged violations.

The complaint asserted a proposed collective action under the Fair Labor Standards Act (FLSA) and proposed class claims under the New York Labor Law. The parties later informed the court that they had reached a settlement.

Proposed Settlement

The proposed settlement required the defendants to pay $24,000. Chen would receive $10,000, while $14,000 would go to his counsel for attorney’s fees and litigation costs. The parties explained that $2,602 of the $14,000 represented litigation costs, leaving $11,398 in proposed attorney’s fees.

The settlement was an individual settlement for Chen and abandoned the proposed collective and class claims. None of the 10 putative collective members opted into the action, and Chen’s counsel had not moved to certify the action as a collective action.

Why the Court Could Not Approve the Settlement

Courts in the district must review FLSA settlements before approving them. The court identified two principal problems: the parties had not provided enough information to evaluate Chen’s possible recovery, and the proposed attorney’s fees were not adequately supported.

Possible Recovery

The parties’ letter stated that the settlement represented more than 90% of Chen’s potential recovery. But the parties did not include possible recovery for alleged overtime, straight-time or off-the-clock work, and spread-of-hours violations. They characterized those claims as potentially having minimal value but did not provide calculations or explain the strengths and weaknesses of the claims. The court therefore lacked enough information to evaluate the genuine basis for the settlement.

Attorney’s Fees

The proposed payment to counsel equaled 58% of the total settlement. After subtracting the $2,602 in litigation costs, the proposed attorney’s fees were approximately 48% of the settlement. The court noted that the proposed fee exceeded the 33.33% contingency fee stated in Chen’s retainer agreement and that the parties had not shown why the additional amount was justified, particularly given that no putative collective members opted in and counsel had not sought collective certification.

The court also examined the lodestar method, which estimates reasonable fees by multiplying a reasonable hourly rate by a reasonable number of hours. Counsel submitted records showing 48.2 hours at $500 per hour, producing a claimed lodestar of approximately $24,100. The court questioned whether the hours were warranted given the limited work performed and could not determine whether the $500 hourly rate was reasonable. The parties offered no information substantiating counsel’s experience, such as how long Tanvir Rahman had practiced law or whether he was a partner or associate.

Disposition

Judge Mary Kay Vyskocil denied approval of the settlement without prejudice. The court ordered the parties to submit an amended request for judicial approval, with appropriate supporting details or documents, by December 20, 2022.