Choc v. Corporation 1

Background

Edgar Choc sued Corporation #1, doing business as Jimbo’s Hamburger Palace, 228 Willis Avenue Food LLC, and Misael Vivar under the Fair Labor Standards Act and New York Labor Law. He alleged that, while working as a cook at Jimbo’s, Defendants failed to pay required minimum wages and overtime, failed to pay wages on time, and failed to provide required payroll notices and wage statements. Choc sought unpaid wages, additional damages, and attorneys’ fees.

The parties negotiated a settlement before Defendants answered the complaint and before formal discovery. They submitted a Settlement Agreement and Mutual Release for court approval. The proposed agreement required Defendants to pay $22,000: $14,200 to Choc and $7,800 to his counsel, including $7,100 in fees and $700 in expenses.

Court’s Review of the Settlement

The court applied the requirement that courts review Fair Labor Standards Act settlements to determine whether they are fair and reasonable. It found the economic terms reasonable. The $14,200 payment represented approximately 90 percent of Choc’s alleged unpaid wages of about $15,835.50 and about 34 percent of his estimated total damages claim of approximately $41,671. The court considered the risks of proving the hours worked and the possibility that Choc could recover less or nothing if the case proceeded.

The court also found the proposed attorneys’ fees and expenses reasonable. The proposed fee was slightly less than one-third of the total settlement and about 48 percent of counsel’s stated lodestar, meaning the amount calculated from counsel’s recorded time multiplied by the applicable hourly rates. The court noted that the expenses were supported by documentation.

Release and Non-Disparagement Terms

The court found the release in Paragraph 5 acceptable because it was limited to wage-and-hour violations, related retaliation, claims that were or could have been asserted in the lawsuit, and claims concerning payment of wages. Although the release was unilateral because Defendants did not release potential claims against Choc, the court stated that limited unilateral releases can be acceptable.

The court also found the mutual non-disparagement provision in Paragraph 9 reasonable. That provision barred malicious disparagement or defamation but allowed Choc to disclose the agreement, the facts underlying his claims, and his statutory rights, and preserved his rights under Section 7 of the National Labor Relations Act.

Problematic Provisions

Paragraph 8 stated that, for any claim not covered by the release, Choc waived the ability to serve as a representative or participate in any proposed or certified class, collective, or multi-party action involving Defendants. The court found this provision overbroad because it was not limited to wage-and-hour claims. It could, for example, prevent Choc from participating in a group action involving asbestos contamination or unauthorized disclosure of workers’ personal information. The court required Paragraph 8 to be removed or revised so that it covered only claims released in Paragraph 5.

Paragraph 10 barred Choc from affirmatively contacting news organizations or posting on social media about the agreement, the settlement negotiations, or the lawsuit generally. The court found this restriction impermissibly broad because it would prevent Choc from publicizing the settlement’s existence or sharing truthful information about the case. The court stated that a narrower restriction focused on the settlement amount and the negotiations leading to the agreement could be acceptable.

Disposition

Magistrate Judge Gary Stein held that the court could not approve the agreement in its current form. The parties’ request for approval was denied without prejudice, and the parties were required to file a revised settlement agreement by January 3, 2024, modifying Paragraphs 8 and 10 consistently with the opinion.