Hong v. New York Meat, Inc.

Background

The parties advised the court that they had reached a settlement in this Fair Labor Standards Act (FLSA) case. Because the Department of Labor had not approved the settlement, the court reviewed whether the agreement was fair and reasonable. The proposed agreement provided Hong $50,000, inclusive of attorneys’ fees and expenses. Hong represented that he believed he could recover $52,492.50 in unpaid overtime and $124,025.93 when liquidated and statutory damages were included. The parties cited litigation and collection risks, including disputes about whether the defendants were joint employers and difficulties obtaining records of Hong’s work hours.

Settlement Amount

The court concluded that the settlement amount appeared fair and reasonable under the circumstances. Although the $50,000 payment was less than the total damages Hong claimed, it represented almost all of the unpaid overtime amount he believed he was owed. The court also found no basis to believe the agreement resulted from fraud or collusion, noting that the parties negotiated during an hour-long conference while represented by counsel.

Non-Disparagement Clause

The proposed agreement contained a mutual clause barring direct or indirect disparaging statements about either party, except when disclosure was required by legal process. It allowed the injured party to seek equitable relief, damages, and attorneys’ fees for a material violation. The court found the clause unacceptable because it contained no exception allowing Hong to make truthful statements about his participation in the litigation. In the court’s view, the clause could discourage communication with other workers who might use information about FLSA cases to protect their statutory rights.

Release Provision

The agreement also included a provision under the heading “Other Actions and Covenant Not to Sue.” It stated that Hong had not filed or participated in other actions, charges, complaints, or proceedings against the “Releasees,” other than this case. The court found the provision impermissibly vague. The agreement did not define “Releasees,” did not clearly state whether Hong promised not to sue, and did not identify whom such a promise would cover or what claims it would address. Because the provision was too unclear to interpret, the court concluded that it had to be revised.

Attorneys’ Fees

The agreement contemplated $17,160.64 in attorneys’ fees, described as one-third of the settlement after deducting $740.96 in costs and expenses. Counsel billed attorneys’ time at $400 per hour and paralegal time at $160 per hour, producing a $12,200 lodestar, meaning the amount calculated from the hours worked multiplied by reasonable hourly rates. The requested fee was a 1.4 multiplier of that lodestar. The court found the fees fair and reasonable. It also noted that the parties’ joint letter appeared to undercount counsel’s hours and that counsel had not provided the credentials of an attorney identified by the initials “JC,” but found those deficiencies not dispositive because the billing records supported the lodestar.

Disposition

The court held that the non-disparagement clause and release provision made the proposed settlement not fair and reasonable. It therefore denied without prejudice the parties’ request to approve the proposed settlement agreement. The parties could file a revised agreement within 21 days that corrected the identified deficiencies, or they could file a joint letter stating that they intended to abandon settlement, after which the court would schedule a status conference. The clerk was directed to terminate the motions pending at Documents 22 and 24.