Julian v. Applied Robotics, Inc.

BRIAN JULIAN, Plaintiff, v. APPLIED ROBOTICS, INC., Defendant.

1:19-CV-0222 (ML)

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK

April 29, 2020

APPEARANCES:

BLAU LEONARD LAW GROUP LLC

Co-Counsel for Plaintiff

23 Green Street, Suite 105

Huntington, New York 11743

HINMAN, HOWARD LAW FIRM

Co-Counsel for Plaintiff

80 Exchange Street, 700 Security Mutual Building

Binghamton, New York 13902-5250

WHITEMAN, OSTERMAN LAW FIRM

Counsel for Defendant

One Commerce Plaza, Suite 1900

Albany, New York 12260

OF COUNSEL:

SHELLY A. LEONARD, ESQ.

STEVEN BENNETT BLAU, ESQ.

DAWN J. LANOUETTE, ESQ.

LESLIE PRECHTL GUY, ESQ.

HEATHER D. DIDDEL, ESQ.

ERIN M. CALLAHAN, ESQ.

ROBERT S. ROSBOROUGH, ESQ.

MIROSLAV LOVRIC, United States Magistrate Judge

DECISION and ORDER

Currently before the Court, in this Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., action filed by Brian Julian ("Plaintiff") against Applied Robotics, Inc. ("Defendant"), is a proposed settlement agreement, which has been forwarded to the Court for approval. (Dkt. No. 36; Dkt. No. 38.) For the reasons set forth below, the Court rejects the settlement agreement.¹

I. RELEVANT BACKGROUND

Plaintiff commenced this action on February 18, 2019. (Dkt. No. 1.) Plaintiff alleges that he was employed by Defendant "[a]t all times material and relevant." (Dkt. No. 1 at ¶ 11.) Plaintiff asserts the following two claims: (1) Defendant intentionally and knowingly treated him as an exempt employee to circumvent overtime pay requirements pursuant to § 213(a) of the FLSA; and (2) Defendant intentionally and knowingly treated him as an exempt employee to circumvent overtime pay requirements pursuant the New York Labor Law ("NYLL") § 661 and 12 N.Y.C.R.R. § 472.2. (Id. at ¶¶ 22-25.) Plaintiff alleges that Defendant failed to pay him proper overtime wages and as a result, Plaintiff seeks (1) unpaid overtime wages, (2) liquidated damages, (3) prejudgment interest, and (4) costs and attorneys' fees. (See generally Dkt. No. 1.)

On February 14, 2020, the Court received notification from the parties that settlement had been achieved. (Dkt. No. 36.) The joint letter motion submitted by the parties included the first proposed settlement agreement and stipulation of dismissal, which were negotiated under the supervision of United States Magistrate Judge David E. Peebles. (Id.)

On February 24, 2020, the Court issued a text order sua sponte granting the parties leave to file an amended settlement agreement and identifying several concerns that the Court had with the initial settlement agreement. (Dkt. No. 37.) For example, the Court requested that the parties specifically address the "very broad language concerning the [g]eneral [r]elease & [w]aiver by Plaintiff in this Settlement Agreement." (Id.)

On March 23, 2020, the parties submitted an amended settlement agreement (the "Agreement"), which addressed some, but not all, of the Court's concerns.

II. SETTLEMENT TERMS

The terms of the parties' settlement are memorialized in the Agreement that has been publicly filed with the Court. (Dkt. No. 38, Attach. 1.) The material terms of the Agreement include payment by Defendant to Plaintiff in the amount of $50,000.00. (Id.) Of the settlement amount ($50,000.00), $32,935.00 will be paid to Plaintiff for unpaid wages and liquidated damages. (Dkt. No. 38, Attach. 1.) The remaining $17,065.00 will be paid to Plaintiff's attorneys for attorneys' fees and costs. (Id.)

The Agreement includes mutual release language and provides for execution of a stipulation of voluntary dismissal of the action with prejudice. (Dkt. No. 38, Attach. 1; Dkt. No. 36, Attach. 2.) In addition, the Agreement includes a non-disparagement clause. (Dkt. No. 38, Attach. 1.)

III. LEGAL STANDARD GOVERNING DISMISSAL OF FAIR LABOR STANDARDS ACT CLAIMS

Construing the relevant language of the FLSA, the Second Circuit has held that stipulated dismissals under Federal Rule of Civil Procedure 41(a)(1)(A)(ii) settling FLSA claims with prejudice require approval of either a district court or the Department of Labor to become effective. Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 206 (2d Cir. 2015).² Requiring such approvals furthers the FLSA's manifest purpose of insuring that workers receive"'a fair day's pay for a fair day's work.'" Cheeks, 796 F.3d at 206 (quoting A.H. Phillips, Inc. v. Walling, 324 U.S. 490, 493 (1945)).

The touchstone of the required review under Cheeks is that a settlement agreement must be fair and reasonable. Lopez v. 41-06 Bell Blvd. Bakery LLC, 15-CV-6953, 2016 WL 6156199, at *1 (E.D.N.Y. Oct. 3, 2016). Among the factors to be considered in the determining the issue of fairness are (1) the ranges of potential recovery by the plaintiff; (2) the litigation risks faced by the parties; (3) the extent to which the parties will avoid the burdens of expensive litigation; (4) whether the agreement results from good-faith, arm's-length negotiations involving experienced attorneys; and (5) whether there is any indicia of fraud or collusion. Lopez, 2016 WL 6156199, at *1 (citing Wolinsky v. Scholastic Inc., 900 F. Supp. 2d 332, 335 (S.D.N.Y. 2012)). In addition, when a proposed FLSA settlement includes payment of attorney's fees, the reasonableness of the fee award must also be examined. Lopez, 2016 WL 6156199, at *2; Wolinsky, 900 F. Supp. 2d at 336. When evaluating the overarching consideration of fairness, the court bears in mind that "the vast majority of FLSA cases . . . are simply too small, and the employer's finances too marginal, for proceeding with litigation to make financial sense if the district court rejects the proposed settlement." Cheeks, 796 F.3d at 206-07 (quotation marks omitted).

Other factors may weigh against settlement approval, such as:

(1) "the presence of other employees situated similarly to the claimant"; (2) "a likelihood that the claimant's circumstance will recur"; (3) "a history of FLSA noncompliance by the same employer or others in the same industry or geographic region"; and (4) the desirability of "a mature record" and "a pointed determination of the governing factual or legal issue to further the development of the law either in general or in an industry or in a workplace."

Felix v. Breakroom Burgers & Tacos, 15-CV-3531, 2016 WL 3791149, at *2 (S.D.N.Y. Mar. 8, 2016) (citations omitted).

IV. DISCUSSION

Having carefully reviewed the parties' Agreement, the Court concludes that much of it is legally satisfactory and the Court would be prepared to approve the overall settlement sum as substantively reasonable and achieved through procedurally fair means.³ However, the Courtdeclines to approve the Agreement in its present form because (a) its non-disparagement clause does not provide a carve-out for truthful statements, and (b) it contains an overbroad general release.

"[I]n Cheeks, the Second Circuit provided guidance as to the types of provisions that contravene the FLSA's remedial purpose of 'prevent[ing] abuses by unscrupulous employers, and remedy[ing] the disparate bargaining power between employers and employees.'" Yang v. Matsuya Quality Japanese Inc., 15-CV-1949, 2017 WL 456464, at *1 (E.D.N.Y. Feb. 2, 2017) (quoting Cheeks, 796 F.3d at 207). The Second Circuit specifically disapproved of settlement agreements containing:

(1) a battery of highly restrictive confidentiality provisions . . . in strong tension with the remedial purposes of the FLSA; (2) an overbroad release that would waive practically any possible claim against the defendants, including unknown claims and claims that have no relationship whatsoever to wage-and-hour issues; and (3) a provision that would set the fee for plaintiff's attorney . . . without adequate documentation to support such a fee award.

Cheeks, 796 F.3d at 206 (quotation marks omitted). "Courts in this Circuit also commonly decline to approve settlements containing . . . overbroad non-disparagement provisions." Escobar v. Fresno Gourmet Deli Corp., 16-CV-6816, 2016 WL 7048714, at *2 (S.D.N.Y. Dec. 2, 2016). The Court now turns to these considerations.

A. Mutual Non-Disparagement Clause

The Agreement contains a mutual "Public Statements and Non-Disparagement" clause. (Dkt. No. 38, Attach. 1 at ¶ 9.)

With respect to the public statements portion of that clause, Defendant's Board of Directors, Chief Operating Officer, and Plaintiff, are prohibited from "mak[ing], or direct[ing] to be made . . . any false statements, either oral or written, regarding any events which took place during Plaintiff's employment with Defendant, this Settlement Agreement, or payment of Settlement Amount." (Dkt. 38, Attach. 1 at ¶ 9.)

In addition, with respect to the non-disparagement portion of that clause, the Agreement states

the Settling Parties further agree that neither Plaintiff nor Defendant's Board of Directors or Chief Operating Officer, now or in future, will make . . . disparaging statements intended to injure the personal and/or business reputation of Plaintiff or Defendant respectively. For purposes of this Paragraph 9, the term 'disparaging' shall mean to depreciate by direct or indirect means to a person or entity not a Party to this Settlement Agreement, including referring to the Party disapprovingly, contemptuously, belittling, scornfully, derisively, or otherwise express a negative opinion, or cause damage to the reputation of a Party to the Settlement Agreement.

(Id.)

"Although not all non-disparagement clauses are per se objectionable, if the provision 'would bar plaintiffs from making any negative statement about the defendants, it must include a carve-out for truthful statements about plaintiffs' experience litigating their case.'" Lazaro-Garcia v. Sengupta Food Servs., 15-CV-4259, 2015 WL 9162701, at *3 (S.D.N.Y. Dec. 15, 2015) (quoting Lopez v. Nights of Cabiria, LLC, 96 F. Supp. 3d 170, 180 (S.D.N.Y. 2015)); see Snead v. Interim HealthCare of Rochester, Inc., 286 F. Supp. 3d 546, 553 (W.D.N.Y. 2018) (approving a settlement agreement that specifically stated ...