Puerto v. Happy Life Home Health Agency Inc.

Background

Claudia Lobo Puerto filed this action on June 12, 2023, asserting claims under the Fair Labor Standards Act (FLSA), among other statutes. The parties participated in a settlement conference held by Judge Gorenstein on September 19, 2023, reached an agreement, and jointly sought approval of the proposed settlement.

Legal standard

The court explained that FLSA settlements must be approved by a federal court or the Department of Labor. The court therefore reviewed whether the agreement was fair and reasonable under the circumstances. Relevant considerations included Puerto’s possible recovery, the burdens and expenses of continued litigation, the litigation risks, whether the agreement resulted from arm’s-length negotiations involving experienced counsel, and whether fraud or collusion was possible.

Settlement amount and terms

Puerto alleged damages exceeding $100,000, including $30,000 in unpaid overtime wages. The parties agreed to a total settlement of $27,500, inclusive of attorney’s fees and costs. After deducting $1,106 in costs, Puerto would receive $17,596 and her attorney would receive $8,798, representing one-third of the recovery.

The parties agreed that Puerto was not paid at the overtime rate, but disputed how many hours qualified for overtime compensation. Defendants relied on time records indicating that the overtime shortfall was $4,442.75. The court found that this dispute provided a good reason to discount the potential full value of the claims in exchange for settlement. The court also considered the burdens of discovery and trial and the delay involved in continued litigation. It found no indication of fraud or collusion and found no significant burden on Puerto in the agreement’s non-monetary terms.

Attorney’s fees and costs

The settlement provided $8,798 in attorney’s fees and $1,106 in costs. Counsel submitted records showing approximately 29 hours of work, which would amount to $9,132.50 based on the recorded billing rates.

The court declined to use a lodestar cross-check—comparing a contingency fee with reasonable hours multiplied by a reasonable hourly rate—to evaluate the fee. It reasoned that this was not a common-fund settlement and that the parties had agreed in advance to a one-third contingency fee. Instead, the court examined whether the contingency arrangement was reasonable when made. It found no indication of fraud, deception, overreaching, or an unusually high percentage. The court stated that one-third is a customary contingency percentage in FLSA cases and approved the $8,798 fee as consistent with Puerto’s retainer agreement.

The court also approved the $1,106 in costs, consisting of $402 in filing fees and $704 in service-of-process costs.

Disposition

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