Court Opinion

ID: 1035594
Source: CourtListenerOpinion
Date Created: 2013-07-30 00:01:41.121289+00
Date Added: 2024-06-11T15:27:47.243314
License: Public Domain

Case: 12-13528       Date Filed: 07/29/2013       Page: 1 of 10

                                                                                   [PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT
                              ________________________

                                     No. 12-13528
                               ________________________

                        D.C. Docket No. 6:10-cv-00464-JA-KRS

CANDACE NALL,

                                                                        Plaintiff - Appellant,

                                             versus

MAL-MOTELS, INC.,
MOHAMMAD MALIK,

                                                                     Defendants - Appellees.

                               ________________________

                      Appeal from the United States District Court
                          for the Middle District of Florida
                            ________________________

                                        (July 29, 2013)

Before CARNES and WILSON, Circuit Judges, and HUCK, * District Judge.

CARNES, Circuit Judge:

       *
          Honorable Paul C. Huck, United States District Judge for the Southern District of
Florida, sitting by designation.
              Case: 12-13528    Date Filed: 07/29/2013   Page: 2 of 10

      This appeal grew out of an effort by two people to settle an FLSA lawsuit

involving an overtime claim. They attempted to settle the litigation without the

advice and assistance of attorneys, which only led to the involvement of attorneys

and more litigation. The case presents issues about how a lawsuit involving an

FLSA claim can be settled, and it demonstrates how a few dollars saved can lead to

a lot more dollars spent.

                                         I.

      Candace Nall first worked for Mal-Motels, which is owned by Mohammad

Malik, from 2005 to 2006. After taking another job in 2006, she returned to Mal-

Motels in August 2008 to work as a front desk clerk and night auditor. For the first

four months or so after she returned, Nall used a time clock to keep track of the

hours she worked. In December 2008, however, Malik told her to stop using the

time clock and said that he would pay her a “salary” of $8.75 per hour. Nall

started verbally reporting her hours to Malik, and he would call in her hours to a

payroll company, which would issue a paycheck based on what he reported to it.

There are no accurate written records of the hours that Nall actually worked.

      Nall claims that she “periodically” worked more than forty hours per week

but was not paid one and one-half times her regular hourly wage for that overtime

work, which was in violation of the Fair Labor Standards Act, 29 U.S.C. §

207(a)(1). She contends that Mal-Motels owes her at least $3,780 in unpaid

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overtime, plus another $3,780 in liquidated damages, for a total of $7,560. See 29

U.S.C. § 216(b) (“Any employer who violates the provisions of . . . section 207 of

this title shall be liable to the employee or employees affected in the amount of . . .

their unpaid overtime compensation, . . . and in an additional equal amount as

liquidated damages.”). For those figures, Nall relies on the motel’s guest

registration logs, which she argues show that she worked more than forty hours per

week. Mal-Motels concedes that it owed Nall some unpaid overtime (which would

also mean some liquidated damages), but it disputes the number of hours that she

worked and the amount of damages owed.

      Nall quit her job at Mal-Motels in February 2010 because she was not being

paid for her overtime. She obtained an attorney, and on March 29, 2010, he filed a

lawsuit on her behalf against Malik and Mal-Motels, claiming a violation of the

Fair Labor Standards Act. On April 28, 2010, Malik, without the assistance of an

attorney, filed an answer for himself and for Mal-Motels. That answer was

stricken and a default entered as to Mal-Motels because Malik, as a non-lawyer,

could not represent it in the lawsuit.

      In May 2010, still acting without an attorney, Malik called Nall about

settling her lawsuit. The two of them agreed to meet at the motel. Malik told Nall

not to bring her attorney, and she didn’t. When the two of them met and talked,

Malik told Nall that she was “ruining his business” and that it would be better for

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him if she would settle the case. He presented her with two documents to sign and

offered her a check for one thousand dollars and another one or two thousand

dollars in cash if she agreed to sign them and dismiss her lawsuit. 1 Malik did not

allow Nall to read the documents he was asking her to sign, but the magistrate

judge found that he explained them to her and there is no contention that the

explanation was inaccurate. Nall testified that even though she felt that Malik was

pressuring her, she agreed to sign the two documents that he gave her because she

trusted him and she “was homeless at the time and needed money.”

       The documents that Nall signed were a voluntary dismissal with prejudice of

her complaint and a letter to her attorney informing him that the case had been

settled. They had been prepared by a non-attorney legal assistant Malik sometimes

used to prepare documents for his business. There was no written settlement

agreement. On June 2, 2010, the voluntary dismissal document Nall had signed

was filed (the record does not indicate by whom) in district court. On June 8,

2010, however, the court issued an order (apparently on its own motion) stating

that because Nall’s complaint had been filed by an attorney and she had not

received permission to appear without that attorney, her pro se voluntary dismissal

with prejudice “has no effect and [the complaint] remains pending.”

       1
         At the hearing before the magistrate judge, Malik testified that he gave Nall $2,000 in
cash, but Nall testified that he gave her only $1,000. The district court did not resolve that
factual dispute, which does not matter to the result in this appeal anyway.
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       Shortly thereafter, Malik hired a lawyer to represent him and Mal-Motels in

the case. The lawyer filed a motion to set aside the default as to Mal-Motels,

which the district court granted, and he also filed a “motion to enforce the

settlement agreement.” A magistrate judge held an evidentiary hearing on that

motion. At the hearing, Malik and Nall gave conflicting testimony about the

number of hours of overtime that Nall had worked, and they also testified about the

circumstances surrounding the settlement agreement. After the hearing, the

magistrate judge issued a report recommending that the district court approve the

settlement and dismiss the case with prejudice because the agreement that Nall and

Malik had reached was “a fair and reasonable resolution of a bona fide dispute

under the FLSA.” 2 The district court adopted the magistrate judge’s report and

recommendation, overruled Nall’s objections to it, and dismissed her complaint

with prejudice. This is her appeal of that judgment of dismissal.

                                                II.

       In Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir.

1982), we held that “[t]here are only two ways in which back wage claims arising

under the FLSA can be settled or compromised by employees.” 679 F.2d at 1352.

The first is under the supervision of the Secretary of Labor. Id. at 1353; 29 U.S.C.

       2
           The magistrate judge also determined that the settlement agreement was enforceable
under Florida law, and the district court agreed. Neither party has raised the enforceability of the
agreement under state law as an issue on appeal, and we therefore express no opinion on what
effect, if any, state law principles have on the enforceability of a settlement of a FLSA claim.
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§ 216(c). The second, which is “[t]he only other route for compromise of FLSA

claims[,] is provided in the context of suits brought directly by employees against

their employer . . . to recover back wages for FLSA violations.” Lynn’s Food, 679
F.2d at 1353. In those lawsuits, the parties may “present to the district court a

proposed settlement” and “the district court may enter a stipulated judgment after

scrutinizing the settlement for fairness.” Id.

      The parties, the magistrate judge, and the district court all assumed that

Lynn’s Food applies to this case, but Lynn’s Food involved a settlement agreement

between employees and their current employer. Id. at 1352–53. The decision in

that case recognized Congress’ concern that “there are often great inequalities in

bargaining power between employers and employees.” Id. at 1352. It would seem

that the most cause for concern exists when the plaintiff employee is still working

for the defendant employer. An employee is subject to the supervision and

personnel decisions of her employer and the possibility of retaliation may pervade

the negotiations. That is not this case, however, because Nall no longer worked for

Mal-Motels when she negotiated the settlement agreement with Malik, or when she

filed the lawsuit for that matter.

      Still, we believe that the rule of Lynn’s Food applies to settlements between

former employees and employers. The Lynn’s Food decision relied on Brooklyn

Savings Bank v. O’Neil, 324 U.S. 697, 65 S. Ct. 895 (1945). In that decision, the

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Supreme Court held that a plaintiff cannot waive her right to liquidated damages in

a FLSA settlement when there is no genuine dispute about whether she is entitled

to them. Id. at 706, 65 S.Ct. at 902. In reaching that holding, the Court reasoned

that by enacting the FLSA, Congress intended “to protect certain groups of the

population from substandard wages and excessive hours which endangered the

national health and well-being and the free flow of goods in interstate commerce.”

Id. Liquidated damages, the Court said, are an important way of enforcing that

protection, because “[k]nowledge on the part of the employer that he cannot escape

liability for liquidated damages by taking advantage of the needs of his employees

tends to insure compliance in the first place.” Id. at 709–10, 65 S.Ct. at 903.

      Those same public policy justifications led the Court to place limits on the

ability of private parties to settle FLSA lawsuits. See id. at 704–05, 65 S.Ct. at

900–01 (“It has been held in this and other courts that a statutory right conferred on

a private party, but affecting the public interest, may not be waived or released if

such waiver or release contravenes the statutory policy.”). In the Court’s view,

permitting “an employer to secure a release from the worker who needs his wages

promptly will tend to nullify the deterrent effect which Congress plainly intended

that [the FLSA] should have.” Id. at 709–10, 65 S.Ct. at 903. Given the “often

great inequalities in bargaining power between employers and employees,”

mandatory protections “not subject to negotiation or bargaining between employers

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and employees” are needed to ensure that an employer — who has a strong

bargaining position — does not take advantage of an employee. Lynn’s Food, 679
F.2d at 1352 (citing Brooklyn Sav. Bank, 324 U.S. at 706–08, 65 S.Ct. at 902).

Allowing the employer to escape liquidated damages by simply giving an

employee the wages she was entitled to earn in the first place — or in some cases,

less than that — would undermine the deterrent effect of the statutory provisions.

      Ensuring that each FLSA plaintiff receives the damages, including

liquidated damages, to which she is statutorily entitled is no less important when

the plaintiff is a former employee. One of the cases that was consolidated for

decision in Brooklyn Savings Bank involved a plaintiff who had accepted a

settlement for unpaid overtime wages more than two years after he had stopped

working for the employer defendant. Brooklyn Sav. Bank, 324 U.S. at 699–700,

65 S.Ct. at 898–99. The Supreme Court’s decision that the settlement of that

former employee’s claim was invalid means that the limitations on settlement of

FLSA claims apply to settlements by former employees as well as current

employees. And that makes sense. The purposes of the FLSA are undermined

whenever an employer is allowed to escape liability for violations of the statute,

regardless of whether those who were victimized by those violations are still

employees. See id. at 707, 65 S.Ct. at 902 (“No one can doubt but that to allow

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waiver of statutory wages by agreement would nullify the purposes of the

[FLSA].”).

                                          III.

      Having decided that the Lynn’s Food requirements apply here, the next

question is whether the settlement in question met them. It is not a difficult

question. The agreement between Nall and Malik was not made under the

supervision of the Secretary of Labor, so it is valid only if the district court entered

a “stipulated judgment” approving it. Lynn’s Food, 679 F.2d at 1352–54. The

court did enter a judgment approving the settlement, but it was not a stipulated one.

      Lynn’s Food did not define the term “stipulated judgment,” and we do not

have any decisions defining it in this context. But it takes two (or more) to

stipulate, and a judgment to which one side objects is not a stipulated one. When

the magistrate judge held an evidentiary hearing on whether to approve the

settlement agreement, Nall’s attorney objected to approval, contending that the

terms were not fair and reasonable. When a plaintiff’s attorney asks the district

court to reject a settlement agreement that was reached without the attorney’s

knowledge or participation, whatever else the judgment approving the agreement

may be, it is not a “stipulated judgment” within the meaning of Lynn’s Food. Cf.

Lynn’s Food, 679 F.2d at 1354 (noting that “[s]ettlements may be permissible in

the context of a suit brought by employees under the FLSA” because the

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employees are “likely to be represented by an attorney who can protect their rights

under the statute” when the settlement is reached within the “adversarial context”

of a lawsuit). 3

       The district court should not have granted the opposed motion to approve

and enforce the settlement agreement and dismissed the complaint. The district

court judgment is vacated and the case is remanded for further proceedings

consistent with this opinion. 4

       VACATED AND REMANDED.

       3
          We need not decide whether a judgment approving an out-of-court agreement entered
with the assistance of counsel is a stipulated judgment even if the attorney later objects. That
issue is not before us. Likewise, we need not decide whether the terms of the agreement in this
case would have satisfied the additional requirement that the agreement be “a fair and reasonable
resolution of a bona fide dispute over FLSA provisions.” See Lynn’s Food, 679 F.2d at 1355.
       4
         We note that on remand it may be necessary for the district court to make a factual
finding about how much money Nall has already received from Malik in the unsuccessful
settlement attempt so that amount may be set off against the amount of any future judgment for
Nall.
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