Amaya v. Young & Chang, Inc.

JOSE OMAR AMAYA AMAYA, Plaintiff, v. YOUNG & CHANG, INC., et al., Defendants.

Civil Case No.: PWG-14-749

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND Southern Division

Dated: July 22, 2014

MEMORANDUM OPINION

Plaintiff Jose Omar Amaya Amaya filed this action against his former employer, Young & Chang, Inc. d/b/a Ichiban Japanese & Korean Restaurant ("Ichiban") and Suzie Kim, who operated Ichiban, seeking damages for its alleged failure to pay proper overtime wages under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201-219, and the Maryland Wage and Hour Law ("MWHL"), Md. Code Ann., Lab. & Empl. §§ 3-401 to 3-430. Three months after Defendants answered the Complaint, the parties jointly moved for court approval of the settlement agreement they have executed. I find the net amount Amaya is to receive to be fair and reasonable in light of the facts of this case. However, because Plaintiff has not provided sufficient information for me to determine the reasonableness of the attorneys' fees, I will ask Plaintiff to supplement the filings before I approve the agreement.¹

I. BACKGROUND

Defendants Young & Chang, Inc., a Maryland corporation, and Suzie Kim operate the Ichiban Restaurant. Compl. ¶ 4; Joint. Mem. 2.² Amaya worked for Ichiban an average of seventy-three hours per week from January 1, 2010 until November 13, 2013. Compl. ¶¶ 8, 11, 12. Plaintiff claims he was paid $660 every two weeks—less than minimum wage—and that he was not paid overtime wages. Id. ¶¶ 9, 10, 13. On that basis, he filed a two-count Complaint, seeking approximately $65,000 in wages and overtime, and an equal amount in liquidated damages. Id. ¶¶ 18, 43. Ichiban, however, disputes both Amaya's average work hours and payment amount. Answer ¶¶ 9, 11.

I held a Fed. R. Civ. P. 16 telephone conference on April 3, 2014 and then, on June 25, 2014, the parties filed the pending Joint Motion to Approve Settlement. The Settlement Agreement provides that Amaya releases Ichiban for all claims related to unpaid wages, minimum wages, and overtime pay, including attorneys' fees. Settlement Agr. ¶ 2. It contains a confidentiality clause restricting disclosure of the settlement agreement. Id. ¶ 4. The Settlement Agreement does not contain a provision governing whether Amaya is the prevailing party for purposes of attorneys' fees or costs under 29 U.S.C. § 216(b), but it does include claims for attorneys' fees in the specific release. Id. ¶ 2. The $30,000 global settlement splits into (1) $10,000 to Amaya for unpaid overtime, (2) $9,550 to Amaya for liquidated damages, and (3) $10,550 to Amaya's lawyers in attorneys' fees. Id. ¶ 1. The attorneys' fee was calculated by taking thirty-three percent of the settlement offer pursuant to a contingent-fee arraignment. See Joint Mem. 9.

II. DISCUSSION

A. FLSA Settlement Generally

Congress enacted the FLSA to protect workers from the poor wages and long hours that can result from significant inequalities in bargaining power between employers and employees. To that end, the statute's provisions are mandatory and generally are not subject to bargaining, waiver, or modification by contract or settlement. See Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706 (1945). Court-approved settlement is an exception to that rule, "provided that the settlement reflects a 'reasonable compromise of disputed issues' rather than 'a mere waiver of statutory rights brought about by an employer's overreaching.'" Saman v. LBDP, Inc., No. DKC-12-1083, 2013 WL 2949047, at *2 (D. Md. June 13, 2013) (quoting Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1354 (11th Cir. 1982)).

Although the Fourth Circuit has not addressed the factors to be considered in approving FLSA settlements, "district courts in this circuit typically employ the considerations set forth by the Eleventh Circuit in Lynn's Food Stores." Id. at *3 (citing Hoffman v. First Student, Inc., No. WDQ-06-1882, 2010 WL 1176641, at *2 (D. Md. Mar. 23, 2010); Lopez v. NTI, LLC, 748 F. Supp. 2d 471, 478 (D. Md. 2010)). The settlement must "reflect[] a fair and reasonable resolution of a bona fide dispute over FLSA provisions," which includes findings with regard to (1) whether there are FLSA issues actually in dispute, (2) the fairness and reasonableness of the settlement in light of the relevant factors from Rule 23, and (3) the reasonableness of the attorneys' fees, if included in the agreement. Id. (citing Lynn's Food Stores, 679 F.2d at 1355; Lomascolo v. Parsons Brinckerhoff, Inc., No. 08-1310, 2009 WL 3094955, at *10 (E.D. Va. Sept. 28, 2009); Lane v. Ko-Me, LLC, No. DKC-10-2261, 2011 WL 3880427, at *2-3 (D. Md. Aug. 31, 2011)). These factors are most likely to be satisfied where there is an "assurance of anadversarial context" and the employee is "represented by an attorney who can protect [his] rights under the statute." Lynn's Food Stores, 679 F.2d at 1354.

B. Bona Fide Dispute

In deciding whether a bona fide dispute exists as to a defendant's liability under the FLSA, courts examine the pleadings in the case, along with the representations and recitals in the proposed settlement agreement. See Lomascolo, 2009 WL 3094955, at *16-17. The Joint Motion and Memorandum, as well as the previous filings, make clear that several FLSA issues are in bona fide dispute. Most importantly, the parties disagree about whether Ichiban is liable at all in light of 28 U.S.C. § 203(m), which provides wage offsets for Amaya's tips and meal credit. Joint Mem. 5, ¶ 4. Additionally, the amount of damages sought in the Complaint ($128,908.12) requires the success of Amaya's equitable tolling theory. Id. at 5, ¶ 1. And, the statute of limitations set in § 255(a) would restrict a substantial amount of Amaya's claims unless Ichiban's alleged violation was willful, which the parties dispute. Id. at 5, ¶ 2. Accordingly, bona fide disputes exist as to § 203(m) credits, tolling, and the statute of limitations.

C. Fairness & Reasonableness

In finding this settlement fair and reasonable, I should evaluate several factors, including: "'(1) the extent of discovery that has taken place; (2) the stage of the proceedings, including the complexity, expense and likely duration of the litigation; (3) the absence of fraud or collusion in the settlement; (4) the experience of counsel who have represented the plaintiffs; (5) the opinions of [] counsel . . . ; and (6) the probability of plaintiffs' success on the merits and the amount of the settlement in relation to the potential recovery.'" Saman, 2013 WL 2949047, at *3 (quoting Lomascolo, 2009 WL 3094955, at *10).

First, although formal discovery could have begun after the Fed. R. Civ. P. 16 conference, the parties represent that in lieu of formal discovery, they informally exchanged written calculations and projections, records, and legal authority. Joint Mem. 7, 9-10. By avoiding formal discovery, resources that otherwise would have been consumed by the litigation were made available for settlement, and the risk and uncertainties for both parties were reduced. The total proposed settlement, exclusive of attorneys' fees, would compensate Amaya for approximately thirty-one percent of the back pay in Amaya's Fed. R. Civ. P. 26(a)(1)(A)(iii) disclosure. Settlement Agr. ¶ 1; Disc. 1. However, the informal discovery exchanged led Defendant to calculate damages, based on figures that "fall somewhere between each of the party's respective positions," at $15,100. Joint Mem. 5, ¶ 3 & 6, ¶ 6. Under the proposed settlement, he will receive about 130 percent of this estimate. See id. at 10 (Amaya to receive $19,550 total); Settlement Agr. ¶ 1. Amaya "agreed to the settlement figure as a reasonable compromise between the parties' calculations," which they made "under various scenarios (i.e., compromise positions on the number of hours worked, the amount of meals for credit, the tip credits, etc.)." Joint Mem. 7.

The second, fourth, fifth, and sixth factors can be analyzed together. Although the case may be resolved early, the settlement will release only Amaya's claims and will not affect other employees. See generally Manual for Complex Litigation (Fourth) § 32.461 (2004) ("the judge should ensure that members of the proposed class are not prejudiced"). Next, the complexity of the case is shown through the fact-intensive disputes surrounding § 203(m) credits, equitable tolling, and the statute of limitations. Joint Mem. 6-7. Essentially, it is possible that "Plaintiff's income was sufficiently enhanced with meal and tip credits" so as to "eliminate[] or substantially reduce[] the Plaintiff's minimum wage claim." Id. at 7, ¶¶ 2, 5. In light of the dearth of recordssupporting Amaya's claim, the hours worked and tips received would become hotly disputed questions of fact. Counsel believe that their settlement reached fair compromise positions on the disputed issues based on the information exchanged. Id. at 7, ¶ 6.

The Settlement Agreement contains a specific release covering only Amaya's claims for unpaid wages, minimum wages, and overtime pay. See Settlement Agr. ¶ 2. General releases can render settlement agreements unreasonable. See, e.g., Moreno v. Regions Bank, 729 F. Supp. 2d 1346, 1352 (M.D. Fla. 2010) (concluding that "a pervasive release in an FLSA settlement confers an uncompensated, unevaluated, and unfair benefit on the employer" that "fails judicial scrutiny"); McKeen-Chaplin v. Fanklin Am. Mortg. Co., No. 10-5243, 2012 WL 6629608, at *3 (N.D. Cal. Dec. 19, 2012). Here, the narrow release supports the compromise amount that Amaya is to receive, and I am not required to evaluate the reasonableness of the settlement as to the non-FLSA claim. See Saman, 2013 WL 2949047, at *5 (citing Robertson v. Ther-Rx Corp., No. 09-1010-MHT, 2011 WL 1810193, at *2 (M.D. Ala. May 12, 2011); Bright v. Mental Health Res. Ctr., Inc., No. 09-1010, 2012 WL 868804, at *2 (M.D. Fla. Mar. 14, 2012)). Amaya is to receive thirty-one percent of what he would recover...