Velez v. S.T.A. Parking Corp.
- Analisa Torres
- 1:23-cv-04786
- U.S. District Court · Southern District of New York
- 6
In Velez v. S.T.A. Parking Corp., Judge Torres denied without prejudice approval of the parties’ Fair Labor Standards Act settlement because key terms were insufficiently supported.
The five plaintiffs—Noel Velez, Efrain Echevarria, Ariel Burgos, Jose Urbano, and Abdel Chabur—and the settling defendants, S.T.A. Parking Corp., Michael Zacharias, and Kathleen McLeod. The ruling concerns approval of their proposed FLSA settlement; PPS 77 LLC is named as a defendant in the action but is not identified as a settling defendant in this order.
What happened
In Velez v. S.T.A. Parking Corp., five plaintiffs alleged that S.T.A. Parking Corp., PPS 77 LLC, Michael Zacharias, and Kathleen McLeod failed to pay overtime wages under federal and New York law. The plaintiffs and the settling defendants asked the court to approve a proposed settlement of the federal wage claims.
The court found that the parties had not estimated the plaintiffs’ possible recovery, so it could not evaluate whether the $30,000 settlement was fair and reasonable. The court also found that the agreement’s release of claims was too broad, required submission of the separate New York settlement for review, and did not yet allow the court to evaluate the requested $10,000 attorney-fee payment.
Judge Analisa Torres denied the motion for settlement approval without prejudice to renewal. She allowed the parties to submit a revised letter and settlement agreement by January 15, 2024, addressing the court’s concerns and explaining how the New York settlement affected the federal settlement’s fairness.
The detailed version
- Velez v. S.T.A. Parking Corp. · No. 1:23-cv-04786
- Analisa Torres
- Dec. 14, 2023
Background
Noel Velez, Efrain Echevarria, Ariel Burgos, Jose Urbano, and Abdel Chabur brought claims under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL), alleging that S.T.A. Parking Corp., PPS 77 LLC, Michael Zacharias, and Kathleen McLeod failed to pay overtime wages. The plaintiffs and S.T.A. Parking Corp., Michael Zacharias, and Kathleen McLeod, identified as the “Settling Defendants,” reached a proposed settlement of the FLSA claims and asked the court to approve it. The proposed settlement provided the five plaintiffs a total recovery of $30,000, including attorney’s fees and costs. The plaintiffs’ counsel sought $10,000, or one-third of the settlement proceeds.
Court’s analysis
The court explained that FLSA settlements require approval by the United States Department of Labor or a district court. A court must determine whether a proposed settlement is fair and reasonable by considering the total circumstances, including the plaintiffs’ possible recovery, the burdens and expenses avoided through settlement, litigation risks, the parties’ bargaining process, and possible fraud or collusion. The court must also separately assess the reasonableness of any attorney-fee award.
The court identified several problems with the proposed agreement:
- The parties did not provide an estimate of the plaintiffs’ possible recovery. They stated only that the settlement was less than the plaintiffs’ maximum possible recovery and was fair. Without an estimated recovery range, the court could not evaluate the settlement under the required factors. - The liability release was overbroad in four ways. It released many entities and people beyond the defendants; bound the plaintiffs’ heirs and assigns; covered a broad range of known and unknown claims connected to FLSA wage-and-hour violations; and gave the defendants a release without providing a corresponding release for the plaintiffs. - The parties had separately settled the NYLL claims in an agreement that they did not submit to the court. The court adopted a case-by-case approach under which it would review both agreements to determine whether the non-FLSA settlement improperly affected the fairness of the FLSA settlement. The court therefore required the parties to submit the NYLL agreement if they renewed their request. - Because the court had not yet determined whether the settlement amount was reasonable, it reserved judgment on whether the proposed $10,000 contingent attorney fee was reasonable.
Disposition
Judge Analisa Torres denied the parties’ motion for settlement approval without prejudice to renewal. The court permitted the parties to file a revised letter and settlement agreement by January 15, 2024. Any renewed submission must address each required settlement factor and explain how the NYLL settlement affects the fairness of the FLSA settlement.
Read the full 6-page opinion on CourtListener, the free public archive maintained by the Free Law Project.