Almanzar v. Silver Star Properties Corp.

Background

Rafael Almanzar filed this action on January 31, 2023, asserting claims under the Fair Labor Standards Act (FLSA), among other statutes. The parties participated in the Southern District of New York’s mediation program and informed the court that they had reached a settlement. They later submitted a fully executed settlement agreement for approval. The court had initially denied the settlement motion because the fully executed agreement was not attached, but Almanzar later docketed the completed agreement.

Settlement Approval Standard

Under Second Circuit precedent, an FLSA settlement must be approved by the district court or the Department of Labor. The court therefore evaluated whether the settlement was fair and reasonable by considering the possible recovery, the burdens and expenses of continued litigation, litigation risks, whether the agreement resulted from arm’s-length bargaining, and any signs of fraud or collusion.

Settlement Amount and Terms

Almanzar alleged approximately $78,750 in damages, including $10,000 in statutory penalties. The settlement provided for a total payment of $51,000, including attorney’s fees and costs. After deducting $477 in costs, Almanzar would receive $33,682, and his attorney would receive $16,841, representing one-third of the recovery.

The court found the settlement amount reasonable. Silver Star disputed the hours Almanzar claimed to have worked and the period during which he was employed. The parties also identified difficulties in proving wage-notice and wage-statement claims because some notices had been provided. The court concluded that these risks justified discounting the potential value of the claims to reach a settlement. It also recognized that continued litigation would impose discovery, trial, delay, and other burdens.

The court found that Almanzar was represented by experienced counsel, that the parties had mediated with a volunteer mediator, and that there were no signs of fraud or collusion. The court also reviewed the agreement’s non-monetary terms and found no significant burden on Almanzar.

Attorney’s Fees and Costs

The agreement provided for reimbursement of $477 in filing and service costs and payment of $16,841 in attorney’s fees. The retainer agreement stated that counsel would receive one-third of the net recovery.

The court declined to compare the contingent fee with the attorney’s time under a “lodestar cross-check,” which is a comparison between the requested fee and a reasonable hourly rate multiplied by reasonable hours worked. The court explained that this case did not involve attorney’s fees from a common fund; instead, the one-third fee was an agreed contingency arrangement under which counsel accepted the risk of receiving inadequate compensation if the case produced little or no recovery.

The court independently assessed whether the one-third contingency arrangement was reasonable when it was made. It found no indication of fraud, deception, or overreaching and noted that one-third was a customary contingency percentage in FLSA cases. The court therefore approved the attorney’s fees and costs as consistent with the retainer agreement.

Disposition

The court granted the application to approve the settlement. It dismissed the action with prejudice and without costs except as provided in the settlement agreement, retained jurisdiction to enforce the settlement agreement, found any pending motions moot, and directed the clerk to close the case.

Because the order approved a settlement and did not decide whether either side was liable on the underlying wage claims, this is classified as a procedural order.