Contreras v. Karizma Lounge Corp.

Background

Nathalie Johana Contreras brought the action on behalf of herself and others similarly situated against Karizma Lounge Corp. and Mohammed Bashir. She alleged violations of the Fair Labor Standards Act (FLSA), the New York Labor Law, and the New York City Rules and Regulations. Her allegations included failure to pay the lawful minimum wage, overtime compensation, spread-of-hours compensation, and tips, as well as gender discrimination.

The parties submitted a proposed settlement for court approval. The court explained that FLSA claims generally cannot be privately settled with prejudice without approval from the court or the Department of Labor. The court therefore had to determine whether the agreement was fair and reasonable.

Settlement Amount

The agreement provided a total recovery of $35,000. Contreras’s counsel would receive approximately one third of that amount, or $12,043.33, for attorneys’ fees and costs. Contreras would receive $22,956.67 after those amounts were deducted.

Contreras estimated that her maximum possible recovery was approximately $136,955. That estimate included $63,477.50 in unpaid overtime, minimum-wage, and spread-of-hours damages; an equal amount in liquidated damages; and $10,000 for notice and recordkeeping violations. The settlement therefore represented approximately 25% of her estimated maximum recovery rather than full payment of all claims.

The court found the amount fair and reasonable. It noted that the settlement allowed Contreras to avoid the risks and delays of continued litigation. The parties stated that the defendants had experienced significant financial distress during the COVID-19 pandemic and had provided financial records showing reduced revenue and substantial debts. The court also found that the agreement resulted from arm’s-length negotiations involving experienced labor and employment attorneys and resolved genuine disputes.

Attorneys’ Fees and Costs

The court approved the requested $12,043.33 in attorneys’ fees and costs. It found that a fee of approximately one third of the settlement was reasonable in an FLSA case.

The court also reviewed the fee request using the lodestar method, which estimates reasonable fees by multiplying a reasonable hourly rate by the reasonable hours worked. Michael Taubenfeld billed 20.2 hours at $500 per hour, producing a lodestar of $10,100. Raquel Heras, a Spanish-speaking paralegal, billed 5.5 hours at $100 per hour, producing a lodestar of $550. The total lodestar was $10,650.

The requested attorneys’ fees, excluding costs, were $11,478.33, producing a lodestar multiplier of approximately 1.08. The court accepted that multiplier and found the total fees and costs reasonable.

Other Settlement Terms and Disposition

The court found the agreement’s other provisions fair and reasonable. It found no objectionable release, non-disparagement provision, or confidentiality provision. The release was limited to claims arising from Contreras’s wage-and-hour allegations, including claims under the FLSA, New York Labor Law, and other claims asserted in the action.

Judge Edgardo Ramos approved the parties’ settlement agreement, directed the Clerk of Court to terminate the settlement-approval motion, and closed the case.