Dougherty v. 2With Deli, Corp.

Background

Michelle Dougherty brought this proposed class action against 2With Deli Corp. and Andrew Wengrover. She alleged violations of the Fair Labor Standards Act (FLSA), the New York Labor Law, and New York wage regulations, including failures to pay the lawful minimum wage and overtime compensation and failures to provide required wage notices and statements. The parties jointly moved for approval of a settlement agreement.

Settlement Terms and Legal Standard

The proposed agreement provided for a total payment of $50,000. Dougherty’s counsel would receive approximately one-third of that amount—$16,400 for attorneys’ fees and costs—and Dougherty would receive $33,600. In exchange, Dougherty would release all past and present FLSA and New York Labor Law claims related to her work and employment with the defendants, including claims that were unknown at the time of settlement.

The court explained that FLSA claims generally cannot be privately settled with prejudice without approval from the district court or the Department of Labor. The court therefore had to determine whether the agreement was fair and reasonable. Relevant considerations included Dougherty’s possible recovery, the litigation risks and expenses, whether the agreement resulted from arm’s-length negotiations by experienced counsel, and the possibility of fraud or collusion.

Why Approval Was Denied

The court found that the parties had not supplied enough information to evaluate the proposed recovery. They did not estimate the number of hours Dougherty worked or her hourly wage, and they submitted no declarations, affidavits, or exhibits explaining how they calculated the settlement amount.

The parties also did not provide an estimate of Dougherty’s total damages if she prevailed on all claims. Although the motion stated figures for maximum FLSA damages, New York unpaid tip-credit damages, and unpaid spread-of-hours compensation, it was unclear whether the additional liquidated damages and penalties mentioned in a footnote were included in the analysis. Without a clear calculation of the potential recovery and the settlement’s relationship to it, the court could not determine whether the agreement was fair and reasonable.

Ruling

Judge Edgardo Ramos denied the request for settlement approval without prejudice. The parties were directed, by December 4, 2023, either to submit a revised motion and supporting documents containing an estimate of the hours Dougherty worked and clear calculations of her estimated total recovery, or to stipulate to dismissal of the case without prejudice. The court stated that it did not need to approve such a stipulated dismissal under the cited Second Circuit authority. The Clerk was directed to terminate the settlement-approval motion.