Clarke v. City of New York

Background

The parties jointly sought approval of a proposed settlement under Cheeks v. Freeport Pancake House, Inc., which requires judicial review of certain Fair Labor Standards Act settlements. The court commended the parties for resolving the matter early but identified several problems requiring additional information.

Damages and Settlement Calculations

The application stated that both the gross damages amount and the net settlement fund represented approximately 71% of the plaintiffs’ total claimed damages. The court found that these statements could not both be correct. The gross damages amount was listed as $1,609,870.47, while the net settlement fund was listed as $1,137,413.65. The court explained that dividing the net settlement fund by the gross damages amount produces approximately 71%, but the gross damages amount was not equivalent to 100% of the plaintiffs’ claimed damages. The application therefore did not provide a reliable total claimed-damages figure—the denominator needed to evaluate the plaintiffs’ percentage recovery.

The court also found that the claim-by-claim chart did not reconcile with the settlement figures. The chart’s back-pay amounts totaled $818,541.61, matching the settlement’s back-pay amount, but its liquidated-damages amounts totaled $501,667.03. That figure differed from both the $318,872.04 net liquidated-damages amount identified elsewhere and the $791,328.86 amount that would be needed, when added to the back-pay amount, to reach the stated gross damages amount. The court further noted that the chart listed $235,039 in liquidated damages for the meal-period claim, which was 40% rather than the stated 90% of the $583,034.25 meal-period back-pay amount. The court directed the parties to submit a corrected chart showing back pay, liquidated damages, and claimed damages for each claim.

Lump Sum and Attorneys’ Fees

The application stated that the $905,508.41 lump-sum amount would include $788,828.86 in net liquidated damages, a $2,500 service award, $14,179.55 in expenses, and a one-third contingency fee of $569,956.82. Those amounts totaled $1,375,465.23, not $905,508.41. The court suspected that the listed net liquidated-damages figure was incorrect because it did not correspond to the other information in the application.

The application also stated that the defendant would pay $100,000 in attorneys’ fees as a statutory award, although the settlement agreement itself did not specifically reflect that amount. The court understood the payment information to mean that plaintiffs would receive the full $1,139,913.65 shown in the settlement agreement’s exhibit and that plaintiffs’ counsel would receive $569,956.82 in total fees. It directed the renewed application to confirm those amounts or explain what plaintiffs and counsel would receive instead.

Fee Multiplier

The application stated that counsel’s lodestar—the fee calculated from the hours worked and applicable hourly rates—was $163,904.50. The requested contingency fee produced a lodestar multiplier of 3.48. The court noted that decisions in the district had said a multiplier near 2 would ordinarily compensate for the risks of contingent-fee representation in Fair Labor Standards Act cases. It also noted that six of the seven other settlements involving plaintiffs’ counsel and the City of New York cited in the application had multipliers ranging from 0.71 to 2.66. The court said the existing arguments might justify a 3.48 multiplier but invited counsel to provide additional cases or arguments addressing why that multiplier was appropriate.

Notice to Plaintiffs

The application stated that counsel had sent each plaintiff written information about the settlement. The court requested the form of that communication, or an example of it, so it could evaluate whether the settlement was fair and reasonable. If the plaintiffs believed disclosure to the defendant would raise attorney-client privilege concerns, the court allowed the document to be submitted for private court review.

Ruling

The court denied the parties’ application for approval of the settlement without prejudice to renewal. It directed the parties to submit a revised application by May 13, 2024.