Martinez v. 35 West 20th Street Rest. Inc.

Background

Martin Martinez sued 35 West 20th Street Rest. Inc., doing business as Periyali Restaurant, and Nicola Tzolis and Sotirios Tzolis, also known as Steve Tzolis, individually. The case involved claims under the Fair Labor Standards Act (FLSA). On December 13, 2022, the court was notified that mediation had resulted in an agreement on all issues.

Order concerning settlement approval

The court ordered that the parties could not dismiss the action with prejudice based on the settlement unless either the court or the Department of Labor approved the settlement. If the parties wanted a dismissal with prejudice, they had to file a joint letter motion asking the court to approve the settlement, together with the settlement agreement, or provide documentation of Department of Labor approval. The materials had to be filed on the public docket by January 14, 2023.

The court stated that any approval motion had to explain why the proposed settlement was fair and reasonable. It identified factors including Martinez’s possible recovery, the burdens and expenses the settlement could avoid, the litigation risks, whether experienced counsel negotiated at arm’s length, and the possibility of fraud or collusion. The motion also had to address whether a genuine dispute existed about the hours worked or compensation owed and how much Martinez’s attorney would seek in fees. The court said it generally would not approve a settlement filed under seal or in redacted form without special circumstances.

The court 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 joint motion had to explain why. The court warned that failure to comply could lead to summary denial of the motion and sanctions against the attorneys.

Alternative dismissal without prejudice

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

Disposition

The order did not approve or reject the settlement and did not enter a dismissal. It set filing requirements and directed that, if neither a letter nor a stipulation was filed by January 14, 2023, a conference would be held on January 20, 2023, at 10:00 a.m. in Courtroom 443 of the Thurgood Marshall U.S. Courthouse. Judge Valerie Caproni signed the order.