Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-01319/USCOURTS-casd-3_11-cv-01319-1/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 15:2(a) Fair Labor Standards Act

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

JOHN AMBROSINO, et al.,

Plaintiffs,

v.

HOME DEPOT U.S.A, INC.,

Defendant.

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Civil No. 11cv1319 L (MDD)

ORDER DENYING JOINT MOTION

FOR APPROVAL OF THE

SETTLEMENT AGREEMENT

[DOC. 72] WITHOUT PREJUDICE

Pending before the Court is the parties’ renewed joint motion for approval of the

settlement agreement. [Doc. 72.] For the following reasons, the Court DENIES the motion

WITHOUT PREJUDICE. In addition, because the parties filed a notice of settlement [Doc.

54], this Court DENIES WITHOUT PREJUDICE Plaintiffs’ pending motion for summary

judgment as MOOT. [Doc. 52]. 

I. BACKGROUND

On October 22, 2012, Plaintiffs filed their Amended Complaint alleging, inter alia,

violations of the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. (Amended Complaint [Doc.

21] ¶¶ 50-59.) On March 7, 2014, the parties filed a joint motion for approval of the settlement

and dismissal of the action. (Mot. Approval [Doc. 63].) On the same day, the parties filed a

joint motion to file the settlement agreement under seal. (Mot. Seal [Doc. 64].) The parties

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agreed that the settlement agreement should remain confidential. (Id. ¶¶ 3-4.) 

On March 10, 2014, this Court denied the parties joint motions because they failed to

meet the Ninth Circuit’s “compelling reasons” standard for sealing the proposed settlement

agreement. (Order Denying Motion for Settlement and Motion to File Documents Under

Seal [Doc. 69].) On March 24, 2014, the parties filed a renewed joint motion to approve their

settlement agreement. (Renewed Mot. Approval [Doc. 72].)

II. LEGAL STANDARD

The Eleventh Circuit has explained that an FLSA claim can be settled in two ways. 

Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1353 (11th Cir.1982). First, an 1

employee may settle and waive claims under the FLSA if the payment of unpaid wages by the

employer to the employee is supervised by the Secretary of Labor. Id. Second, an employee

may settle and waive claims under the FLSA if the parties present to a district court a proposed

settlement agreement, and the district court enters a judgment approving the settlement. Id.

Before approving an FLSA settlement, the court must scrutinize it to determine if it is “a fair and

reasonable resolution of a bona fide dispute.” Id. at 1354–1355. If the settlement reflects a

reasonable compromise over issues that are actually in dispute, the Court may approve the

settlement “in order to promote the policy of encouraging settlement of litigation.” Id. at 1354.

III. DISCUSSION

A. The Parties Have Established a Bona Fide Dispute

As illustrated by the parties representations in the instant motion, this collective action

under the FLSA presents a bona fide dispute between Plaintiffs and Defendant regarding

Plaintiffs’ allegedly improper classification as exempt from overtime requirements. (Renewed

 While the Ninth Circuit has not specifically addressed the question of whether FLSA 1

claims may only be settled and resolved in two ways, district courts in the Ninth Circuit have

followed Lynn’s Food Stores. See, e.g., Khanna v. Inter–Con Sec. Systems, Inc., 2012 WL

4465558, at *10–11(E.D.Cal.2012); Campanelli v. Hershey Co., 2011 WL 3583597, at *1

(N.D.Cal.2011); Lee v. The Timberland Co., 2008 WL 2492295, at *2 (N.D.Cal.2008); Yue Zhou

v. Wang’s Restaurant, 2007 WL 17230, at *1–3 (N.D.Cal.2007).

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Mot. Approval 2.) There also appears to be a dispute as to how damages would be calculated in

this case, if Defendant were to be found liable. (Id. 3; Pls.’ Mot. Summ. J. [Doc. 52].) Further,

the parties claim that over the course of several months, they reached a settlement in this matter

with the help of an experienced mediator. (Renewed Mot. Approval 2.) In light of the foregoing,

the Court is convinced that this case involves a bona fide dispute over the existence and extent of

Defendant’s FLSA liability. 

B. The Parties Fail to Establish that the Settlement Agreement is Fair and

Reasonable

A district court may approve an FLSA settlement if the proposed settlement reflects “a

reasonable compromise over [disputed] issues .” Lynn’s Food Stores, 679 F.2d at 1354. The

parties argument that the proposed settlement agreement is “fair and reasonable,” in its entirety,

is the following:

The settlement here is the fair and reasonable result of a bona fide dispute. The

settlement follows contested litigation conducted by experienced counsel. The

parties engaged in significant discovery as well as settlement negotiations

conducted at arm’s length and facilitated by an experienced mediator. In reaching

agreement, the parties have taken into account the uncertainty and risks in

litigation and the cost that each party will incur if litigation continues, including

multiple jury trials. The parties have concluded that it is in their mutual interest to

resolve the litigation in the manner set forth in the agreement. In this regard, the

parties have fully evaluated the likelihood of prevailing on the merits of their

claims and defenses, including the proper method for calculating unpaid overtime

in the event that one or more of the plaintiffs prevails on their misclassification

claims.

Plaintiffs have considered the potential value of their claims and concluded that

the proposed settlement provides a fair and reasonable resolution of their claims. 

Home Depot supports this result since it eliminates the uncertainties, risks, and

cost of further litigation, including multiple jury trials and possible appeals.

(Renewed Mot. Approval 2, 3.) This is insufficient.

The parties claims are conclusory, and not supported by any evidence or analysis. 

Specifically, the Court has no information to enable it do evaluate whether the $376,

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941.72 that Home Depot has agreed to pay to settle this case is reasonable in light of the

maximum recovery Plaintiffs could have obtained with a favorable judgment on the

merits. (Proposed Settlement Agreement [Doc. 72-1] ¶ 7.) In addition, the instant motion

does not provide estimates regarding the number of overtime hours worked by each

Plaintiff and information regarding the potential range of recovery for each Plaintiff,

rendering it impossible for the Court to determine whether the amounts to be paid to each

Plaintiff, listed in Exhibit A to the settlement agreement, are fair and reasonable. See

Khanna, 2012 WL 4465558, at *11 (rejecting FLSA settlement in part because counsel

provided no information about the potential range of recovery). Moreover, the parties

have failed to provide the Court with any specific information or analysis as to how and

why they arrived at the settlement amount above, or how they arrived at the specific

amounts allocated to each Plaintiff.

The Court also has concerns with the scope of the waiver and release provision in the

proposed settlement agreement, which provides that each Plaintiff “fully and finally release and

discharge Home Depot from any and all claims and rights of any kind that the plaintiffs may

have.” (Proposed Settlement Agreement ¶ 9.) Courts have found that overly broad release

provisions, which release a Defendant from all claims to settle their wage claims, including

claims that are unrelated to the claims asserted in the complaint, are improper in FLSA and class

action settlements. See Moreno v. Regions Bank, 729 F. Supp. 2d 1346, 1347, 1350–1352 (M.D.

Fla. 2010) (FLSA settlement); Hogan v. Allstate Beverage Co., Inc., 821 F. Supp. 2d 1274, 1284

(M.D. Ala. 2011) (same); Gambrell v. Weber Carpet, Inc., 2012 WL 5306273, at *2, 5 (D. Kan.

2012) (same); see also Bond. v. Ferguson Enterprises, Inc., 2011 WL 284962, at *7 (E.D. Cal.

2011) (finding release overbroad in class action where release did not track the extent and

breadth of Plaintiffs’ allegations and released unrelated claims of any kind or nature up to the

date of the agreement); Kakani v. Oracle Corp., 2007 WL 1793774, at *2–3 (N.D. Cal.2007)

(rejecting a settlement in part because of the “draconian scope” of the proposed release, which,

among other things, released and forever discharged the defendant from any and all claims that

were asserted or could have been asserted in the complaint whether known or unknown).

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The Court finds that the parties have failed to demonstrate that such a broad general

release is fair and reasonable, as it does not track the breadth of the allegations in this action and

releases unrelated claims, whether known or unknown, that the Plaintiffs may have against

Defendant. See Collins v. Cargill Meat Solutions Corp., 274 F.R.D. 294, 303 (E.D. Cal. 2011)

(finding release proper and not overly broad because the “released claims appropriately track the

breadth of Plaintiffs’ allegations in the action and the settlement does not release unrelated

claims that class members may have against defendants”); Vasquez v. Coast Valley Roofing, Inc.,

670 F. Supp.2d 1114, 1126 (E.D. Cal. 2009) (finding release proper because the “released claims

appropriately track the breadth of Plaintiffs' allegations in the action and the settlement does not

release unrelated claims that class members may have against defendants.”). The parties have

not explained why the release of “any and all claims and rights of any kind that the plaintiffs

may have, whether known or unknown, arising out of or in any way connected with plaintiffs’

employment and separation from Home Depot” is fair and reasonable. (Proposed Settlement

Agreement ¶ 9.) There has been no showing that Plaintiffs have been independently

compensated for the broad release of claims unrelated to any dispute regarding FLSA coverage

or wages due, including, among others, claims for discrimination under Title VII. (Id.); see

Moreno, 729 F.Supp.2d at 1351 (“[A]n employer is not entitled to use an FLSA claim (a matter

arising from the employer's failing to comply with the FLSA) to leverage a release from liability

unconnected to the FLSA.”). If Plaintiffs do indeed consent to such a broad release of claims,

the parties must provide evidence that each Plaintiff has a full understanding of what they are

releasing in exchange for a settlement payment. The language in Paragraph 3 that “the parties

desire to resolve this litigation and all other claims or disputes fully and finally, whether known

or unknown, that have been made or could have been made by or on behalf of plaitniffs against

Home Depot relating to conduct or events occurring at any time prior to and including the date

on which this Agreement is executed” also appears overbroad under the same analysis above, and

must be justified by the parties. (Proposed Settlement Agreement ¶ 3.) The same is true for

Paragraph 6. (Id. ¶ 6.)

The parties also agree that Home Depot will pay “$152,879.91 to Squitieri & Fearon,

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LLP, as attorney’s fees and expenses incurred in prosecuting this lawsuit on behalf of plaintiffs.” 

(Proposed Settlement Agreement ¶ 8.) However, the parties have again failed to produce any

evidence or analysis as to how this amount, which is to be taken from the entire settlement

amount noted above, is fair and reasonable. In the event the parties filed a renewed motion to

approve the settlement, the parties must support the attorneys’ fees figure in their settlement

agreement with time records setting forth time expended on this case, the hourly rates charged,

and argument as to why these fees are fair and reasonable in the context of this settlement. In

addition, the parties are required to show their attorneys’ fees are reasonable under 29 U.S.C. §

216(b). 

IV. CONCLUSION AND ORDER

In light of the foregoing, the renewed joint request to approve the settlement is DENIED

WITHOUT PREJUDICE so the parties may file a renewed motion for approval, and new

proposed settlement agreement (if necessary), that corrects the deficiencies identified above

[Doc. 72]. The parties must file a renewed motion for approval of their settlement agreement or

a stipulated request for additional time if necessary to negotiate a new settlement by May 5,

2014.

In addition, because the parties filed a notice of settlement [Doc. 54], this Court DENIES

WITHOUT PREJUDICE Plaintiffs’ pending motion for summary judgment as MOOT. [Doc.

52]. 

IT IS SO ORDERED.

DATED: April 28, 2014

M. James Lorenz

United States District Court Judge

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