Melendez v. Cosan Construction Corp.

Background

Hector Melendez brought claims against Cosan Construction Corp., Cosan New York Inc., and Terence Ferguson under the Fair Labor Standards Act (FLSA) and the New York Labor Law. He alleged that he was not paid the required overtime rate, was terminated in retaliation for speaking with a New York State Department of Labor investigator about his wages, and did not receive required wage notices and wage statements.

The court had previously compelled arbitration and stayed the case. After the parties reached a settlement, they sought judicial approval under the requirement that courts review most FLSA settlements. The proposed agreement required the defendants collectively to pay $35,000 in four installments. The agreement allocated $14,152.18 for Melendez’s attorney’s fees and expense reimbursement, leaving $20,847.82 for Melendez.

Court’s Analysis

The court found the economic terms fair and reasonable. It noted that the proposed payment substantially exceeded the damages Melendez could likely recover for unpaid overtime wages, liquidated damages, interest, and wage-notice violations. Even including an estimate of lost wages from the alleged retaliation, the court stated that the $35,000 settlement represented approximately 72% of the maximum recoverable damages, excluding punitive damages. The court also found that the settlement resulted from arm’s-length negotiations between experienced counsel after written discovery and depositions, and that the record contained no suggestion of fraud or collusion.

The court also found the attorney’s fee reasonable. The fee was approximately one-third of the net settlement payment, was consistent with Melendez’s contingency agreement, and represented approximately 60% of counsel’s stated lodestar, meaning the value of the attorney’s time calculated using hourly rates.

Most of the non-economic terms were also acceptable. The release covered labor-law claims that Melendez brought or could have brought in the litigation or arbitration, but it was not a broad general release, and the agreement did not prohibit rehiring.

The problem was section H(14), called a “No Publicity” clause. It would have barred Melendez and his lawyer from advertising the settlement, issuing a press release, or making statements to the press about the settlement, other than saying, if asked, that the matter was settled. The court held that it could not approve this restriction because limiting truthful information about an FLSA settlement prevents workers from learning about wage-law violations and potential legal remedies. The court also observed that the clause restricted Melendez and his lawyer while leaving the defendants free to discuss the case.

Disposition

Judge Barbara Moses denied the parties’ motion for approval of the proposed settlement without prejudice to renewal after the parties excised or significantly modified the no-publicity clause. The order stated that if no renewed settlement-approval motion was filed within 30 days, the parties were to proceed with arbitration.