Cruz v. Alpine Construction & Renovation Corp.

Background

The eighteen plaintiffs sued Alpine Construction & Renovation Corp. and Anthony Marcelino Grace, individually. Their claims included unpaid overtime wages under the Fair Labor Standards Act and New York Labor Law, along with alleged failures to provide wage statements and notices. The parties reached a proposed settlement totaling $125,000, including attorney’s fees and costs, and asked the court to approve it.

Court’s analysis

The court explained that a settlement of Fair Labor Standards Act wage claims requires approval by the Department of Labor or a federal district court. The court must determine whether the agreement is fair and reasonable by considering factors such as the plaintiffs’ possible recovery, the burdens and expenses avoided through settlement, litigation risks, whether the agreement resulted from arm’s-length bargaining by experienced counsel, and possible fraud or collusion.

The plaintiffs said they were receiving half of their alleged unpaid wages, but the court could not determine how they reached that conclusion. The settlement listed each plaintiff’s compensation, and a damages spreadsheet calculated alleged unpaid wages totaling $237,631.50, but the plaintiffs did not explain how the settlement payments corresponded to the spreadsheet. The spreadsheet also did not include liquidated damages or damages for recordkeeping and notice violations. The court observed that some plaintiffs appeared to receive more than their alleged unpaid overtime wages while others received substantially less. It therefore required information about the potential damages, including the maximum possible recovery, for each plaintiff and each claim.

The plaintiffs also gave only conclusory descriptions of the risks and costs of continued litigation. The court found that the parties adequately represented that the settlement resulted from arm’s-length negotiations between experienced labor and employment counsel, was free of fraud or collusion, and followed court-ordered mediation. But the court concluded that the settlement materials did not adequately address the possible recovery, the burdens avoided through settlement, or the seriousness of the litigation risks.

The court separately found the proposed release too broad. It released numerous entities and people beyond the defendants, including affiliated entities and various individuals. It also purported to bind the plaintiffs’ heirs, legal representatives, insurers, agents, and assigns; covered known and unknown claims from the beginning of the world through execution of the agreement; and included claims that could have been asserted in the lawsuit. The court further noted that the plaintiffs received no comparable release from liability. In addition, defendants could seek attorney’s fees and costs if plaintiffs breached the agreement, but plaintiffs had no reciprocal remedy if defendants breached it.

The proposed attorney’s-fee award was $25,000, or 20 percent of the settlement. The court found that request fair and reasonable because it represented less than one-third of the recovery and had a lodestar multiplier of approximately 1.02. The court emphasized, however, that approval of the fee award remained contingent on showing that the settlement amount itself was reasonable.

Disposition

Judge Analisa Torres denied the parties’ motion for settlement approval without prejudice to refiling a revised settlement agreement. The court permitted the parties to file a revised letter and agreement consistent with the order by March 1, 2024.