Mercado v. Metropolitan Transportation Authority

Background

Jeffrey Mercado, Tyrone Pringle, Adam Roman, Kevin Knois, and Edward Kalanz sued the Metropolitan Transportation Authority and Triborough Bridge and Tunnel Authority under the Fair Labor Standards Act, a federal law governing wages and overtime. They alleged that the defendants failed to pay overtime wages properly and on time. The court had conditionally certified the matter as a collective action on June 24, 2021. In addition to the named plaintiffs, 456 opt-in plaintiffs joined the case. The parties later reached a proposed settlement and asked the court to approve it.

Legal standard

The court explained that an employer cannot settle Fair Labor Standards Act wage claims without approval from the Department of Labor or a district court. The court must determine whether the settlement is fair and reasonable. Relevant factors include the plaintiffs’ possible recovery, the costs and burdens of continued litigation, the risks of litigation, whether experienced lawyers negotiated at arm’s length, and the possibility of fraud or collusion. Courts should also reject highly restrictive confidentiality terms and overbroad releases. Any requested attorney’s fees must be separately evaluated, and counsel must provide evidence supporting requested costs.

Settlement analysis

The parties stated that continued litigation would involve substantial expense and risk, including expert discovery, motion practice, trial preparation, and a likely trial. They also stated that the settlement resulted from arm’s-length negotiations involving experienced counsel and that there was no fraud or collusion.

The proposed settlement provided $7,250,000, including attorney’s fees and costs, service payments to the named plaintiffs, and claims-administrator fees and costs. The parties asserted that the amount represented all estimated backpay damages and an additional portion of liquidated damages for late-paid overtime claims. They estimated total damages of $14,898,935.34, making the proposed settlement approximately 49 percent of the possible recovery under their best-case calculation. But they did not provide records or other evidence supporting the possible-recovery estimates or the settlement’s reasonableness. The court therefore could not determine that the required fairness factors were satisfied.

The settlement also contained an overbroad liability release. It released numerous entities beyond the defendants, including listed affiliates, subsidiaries, and their officers, employees, agents, attorneys, successors, and other related people. The release also purported to bind heirs, family members, spouses, representatives, and others who were not parties to the lawsuit. The parties did not support their assertion that this broad scope was appropriate. The court further noted that the settlement did not give the plaintiffs any release from liability. The court therefore could not find the release fair and reasonable.

Attorney’s fees and costs

Plaintiffs’ counsel requested one-third of the settlement proceeds, or $2,416,666.67 in fees, plus $82,402.90 in costs. The court accepted the hourly rates as reasonable and found that the requested fee was reasonable under the circumstances. Counsel had submitted time records, and the requested fee produced a multiplier of approximately 1.59 over the calculated lodestar, meaning the reasonable-hours-times-reasonable-rate benchmark. The court also considered the risks of the contingency-fee representation, the matter’s complexity, and the success obtained.

The court reached a different conclusion about costs. Although counsel referred to calculations totaling $82,402.90, counsel did not submit documentation supporting that request. The court therefore could not conclude that the requested costs were reasonable.

Conditional certification and required revision

The matter had been conditionally certified, but neither party had requested final certification. The court directed the parties, if they renewed their request, to provide legal authority supporting approval of a settlement at the conditional-certification stage. They also had to address whether the lack of final certification affected the requested service awards for the named plaintiffs and the claims-administrator fees and costs.

Disposition

Judge Analisa Torres denied the parties’ motion for settlement approval without prejudice to renewal. The court directed the parties to file a revised letter and settlement agreement by May 30, 2023, consistent with the order.