Court Opinion

ID: 2774488
Source: CourtListenerOpinion
Date Created: 2015-01-29 17:01:04.477148+00
Date Added: 2024-06-11T11:27:54.340665
License: Public Domain

UNITED STATES DISTRICT COURT
                               FOR THE DISTRICT OF COLUMBIA

LUIS SARCENO, et al.,

                          Plaintiffs,                             Civil Action No. 13-1271(BAH)

                          v.                                      Judge Beryl A. Howell

KWAN S. CHOI, et al.,

                          Defendants.

                                        MEMORANDUM OPINION

        Pending before the Court are joint motions to approve settlement agreements in this Fair

Labor Standards Act (the “FLSA”), 29 U.S.C. § 201 et seq., suit between the plaintiffs, Luis

Sarceno, Rudy Godoy, Miguel Iraheta, Omar Vasquez, and Eber Flores (collectively, “the

plaintiffs”), and the defendants, Byung Choi, Pyoung Choi, Kwan Choi, and Hwan Eun

(collectively, “the defendants”). 1 Joint Motion to Approve Settlement Agreement (the “Choi and

Choi Mot.”), ECF No. 37; Joint Motion to Approve Settlement Agreement (the “Choi and Eun

Mot.”), ECF No. 38. For the reasons stated below, the motions are granted in part.

I.      BACKGROUND

        The underlying facts in this matter are fully set out in a prior Memorandum Opinion

denying the defendants’ motions for summary judgment and will not be repeated in detail here.

See Sarceno v. Choi, No. 13-1271, 2014 WL 4380680, at *2–5 (D.D.C. Sept. 5, 2014). Briefly,

the plaintiffs were all employees at the defendants’ supermarket between 2004 and 2012. Choi

and Choi Mot. ¶ 2; Choi and Eun Mot. ¶ 2. During that time period, the plaintiffs allege that

1
 One joint motion seeks approval of a settlement between the plaintiffs and Defendants Byung Choi and Pyoung
Choi, ECF No. 37, while the other seeks approval of a settlement between the plaintiffs and Defendants Kwan Choi
and Hwan Eun, ECF No. 38.

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they were not paid for all of the hours they worked and were not paid overtime for the hours they

worked that exceeded forty hours in a week. Choi and Choi Mot. ¶ 3; Choi and Eun Mot. ¶ 3.

The defendants contest the plaintiffs’ allegations, stating that the plaintiffs have been paid all

wages due. Choi and Choi Mot. ¶ 4; Choi and Eun Mot. ¶ 4.

        The plaintiffs filed suit on August 20, 2013, Compl. at 1, ECF No. 1, and the parties

subsequently engaged in settlement discussions supervised by a Magistrate Judge, Minute Order,

Dec. 5, 2013. The parties were unable to reach agreement and the defendants filed motions for

dismissal on the grounds that the plaintiffs’ claims were barred by purported settlement

agreements, which had been executed by the plaintiffs before the initiation of the pending action

and before the plaintiffs had obtained the assistance of counsel. 2 Sarceno, 2014 WL 4380680, at

*6. This Court denied the defendants’ motions and held that the purported settlement

agreements were unenforceable at a hearing on August 6, 2014. Id.

        Following the denial of the summary judgment motions, the parties engaged in further

settlement negotiations, conducted through counsel, while simultaneously engaging in discovery

and motions practice. Choi and Choi Mot. ¶¶ 26–27; Choi and Eun Mot. ¶¶ 26–27. These

negotiations resulted in the two settlement agreements for which the parties now seek the Court’s

imprimatur.

        The two motions and the settlement agreements to which the motions refer are identical

in all material respects, except for the defendants involved and the amounts paid to the individual

plaintiffs. See generally Choi and Choi Mot.; Choi and Eun Mot. Specifically, one proposed

settlement agreement is between the plaintiffs and Defendants Byung Choi and Pyoung Choi and

the other proposed settlement agreement is between the plaintiffs and Defendants Kwan Choi

2
 Defendants Byung Choi and Pyoung Choi filed a Motion to Dismiss, ECF No. 15, which was converted with the
consent of the parties to a Motion for Summary Judgment, Sarceno, 2014 WL 4380680, at *5; id. at *5 n.3.

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and Hwan Eun. Under the agreements, Plaintiff Sarceno would receive a total of $13,781.25,

comprised of $2,880.00 from Byung Choi and Pyoung Choi and $10,901.25 from Kwan Choi

and Hwan Eun; Plaintiff Godoy would receive a total of $19,293.75, comprised of $4,032 from

Byung Choi and Pyoung Choi and $15,261.75 from Kwan Choi and Hwan Eun; Plaintiff Iraheta

would receive a total of $21,131.25, comprised of $4,416.00 from Byung Choi and Pyoung Choi

and $16,715.25 from Kwan Choi and Hwan Eun; Plaintiff Vasquez would receive a total of

$16537.50, comprised of $3,456.00 from Byung Choi and Pyoung Choi and $13,081.50 from

Kwan Choi and Hwan Eun; and Plaintiff Flores would receive a total of $21,131.25, comprised

of $4,416.00 from Byung Choi and Pyoung Choi and $16,715.25 from Kwan Choi and Hwan

Eun. Choi and Choi Mot. ¶¶ 13–17; Choi and Eun Mot. ¶¶ 13–17. The parties stipulate that

these amounts, which include liquidated and actual damages, “represent[] a compromise amount,

negotiated by the Parties’ counsel.” Id. In aggregate, Defendants Byung Choi and Pyoung Choi

will pay the plaintiffs $19,200.00, Choi and Choi Mot. ¶ 10, while Defendants Kwan Choi and

Hwan Eun will pay the plaintiffs $72,675.00, Choi and Eun Mot. ¶ 10.

       The proposed settlement agreements provide for the plaintiffs’ attorneys to receive, in the

aggregate, $62,800.00, with Defendants Byung Choi and Pyoung Choi contributing $12,800.00,

Choi and Choi Mot. ¶ 18, and Defendants Kwan Choi and Hwan Eun contributing $50,000.00,

Choi and Eun Mot. ¶ 18. The plaintiffs aver that they have incurred $176,000.00 in attorneys’

fees while litigating this matter, making the settlement equal to approximately thirty-six percent

of the reasonable attorneys’ fees and costs incurred by the plaintiffs. See Choi and Choi Mot. ¶

18; Choi and Eun Mot. ¶ 18.

       The proposed settlement agreements release the defendants “from any and all liabilities,

claims, debts, demands, rights of action or causes of action at law or in equity [that] Plaintiffs

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had, have or may have . . . including, but not limited to, any claims or demands based upon or

relating to Plaintiffs’ employment.” Choi and Choi Mot. Ex. 1 (Settlement Agreement between

the plaintiffs and Defendants Byung Choi and Pyoung Choi (the “Choi and Choi Agreement”)) ¶

4, ECF No. 37-1; Choi and Eun Mot. Ex. 1 (Settlement Agreement between the plaintiffs and

Defendants Kwan Choi and Hwan Eun (the “Choi and Eun Agreement”)) ¶ 5, ECF No. 38-1.

The plaintiffs retain the right to exercise “any rights . . . that Plaintiffs may not waive as a matter

of law.” Choi and Choi Agreement ¶ 4; Choi and Eun Agreement ¶ 5. The defendants release

the plaintiffs from “any and all actions, causes of action, claims, demands, damages, costs, loss

of service, expenses, compensation and any consequential damages of any kind whatsoever

which they have and/or may have arising up to and including the date of execution of [the

Settlement Agreements], including, without limitation, any claims or causes of action.” Choi

and Choi Agreement ¶ 5; Choi and Eun Agreement ¶ 6.

       Also included in the agreements is a “non-disparagement” provision, under which the

parties “shall not disparage, defame or make any negative or derogatory statements respecting

[the opposing party] to anyone, whether verbally or in writing.” Choi and Choi Agreement ¶ 7;

Choi and Eun Agreement ¶ 8.

II.    LEGAL STANDARD

       The D.C. Circuit has not opined about whether judicial approval is required of FLSA

settlements reached after a FLSA suit has been filed or the related issue of whether such approval

is a prerequisite for subsequent judicial enforcement of a private settlement. Another Judge in

this District, citing Supreme Court precedent and the decisions of other Circuits, noted that “[i]t

is a long-held view that FLSA rights cannot be abridged or otherwise waived by contract because

such private settlements would allow parties to circumvent the purposes of the statute by

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agreeing on sub-minimum wages.” Beard v. Dist. of Columbia Hous. Auth., 584 F. Supp. 2d

139, 143 (D.D.C. 2008) (citing D.A. Schulte, Inc. v. Gangi (Gangi)), 328 U.S. 108, 116 (1946);

Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 740 (1981); Taylor v. Progress

Energy, Inc., 493 F.3d 454, 460 (4th Cir. 2007), superseded on other grounds, Whiting v. Johns

Hopkins Hosp., 416 F. App’x 312 (4th Cir. 2011); Lynn’s Food Stores, Inc. v. United States

(Lynn’s Food), 679 F.2d 1350, 1354 (11th Cir. 1982)).

       No binding caselaw in this Circuit requires a district court to assess proposed FLSA

settlements ex ante. Declining to do so, however, leaves the parties in an uncertain position. If

the parties privately settle FLSA claims and seek dismissal of the suit by filing a Rule 41 motion,

the private settlement may be held unenforceable if the employer attempts to enforce the

employees’ waiver of claims per the settlement at a later date. Cf. Martin v. Spring Break ’83

Prods., L.L.C., 688 F.3d 247, 256–57 (5th Cir. 2012) (enforcing private settlement agreement

entered into without judicial consent where court determined that a bona fide dispute had existed

when settlement was entered). Indeed, in this action, the parties purported to enter into

settlement agreements without judicial approval, which this Court found to be unenforceable,

since, inter alia, (1) the purported agreements were executed under circumstances raising

significant question about whether “the plaintiffs knowingly, intelligently, and voluntarily”

waived their FLSA rights and whether “a bona fide dispute existed when the Settlement

Agreements were signed,” Sarceno, 2014 WL 4380680, at *11; and (2) both the circumstances

surrounding the execution of the agreements, as well as their terms, demonstrated that the

purported agreements were not the product of arm’s length negotiations and instead reflected an

overreach by the employers, id. at *12–16. “[U]ntil some court determines that there was a bona

fide dispute as to how much plaintiff was owed in wages, and that the offer of judgment fairly

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compromises it, the employer has not eliminated its risk” of future litigation exposure, and could

ultimately find its “settlement” to be ephemeral. Picerni v. Bilingual Seit & Presch., Inc., 925 F.

Supp. 2d 368, 372 (E.D.N.Y. 2013).

III.   DISCUSSION

       At the outset, the Court must find that the proposed settlement resolves a bona fide

dispute. See Velez v. Audio Excellence, Inc., No. 10-CV-1448-ORL-22, 2011 WL 4460110, at

*1 (M.D. Fla. Sept. 21, 2011) (noting courts must first consider whether a proposed FLSA

settlement “is ‘a fair and reasonable resolution of a bona fide dispute.’” (quoting Lynn’s Food,

679 F.2d at 1354–55)), report and recommendation adopted by 10-CV-1448-ORL-22, 2011 WL

4460104, at *1 (M.D. Fla. Sept. 26, 2011). A settlement is bona fide if it “reflects a reasonable

compromise over issues that are actually in dispute,” id., since merely waiving a right to wages

owed is disallowed under Gangi, 328 U.S. at 115, and Brooklyn Savings Bank v. O’Neil, 324

U.S. 697, 707 (1945).

       In the instant matter, the parties agree that a substantial difference exists between the

number of hours the plaintiffs claim to have worked and the number of hours the defendants’

records show the plaintiffs to have worked, resulting in a concomitant difference in the wages the

plaintiffs claim they are owed. Choi and Choi Mot. ¶¶ 5, 8–9; Choi and Eun. Mot. ¶¶ 5; 8–9.

The parties disagree about the accuracy of the defendants’ records and a factfinder would have to

determine whether and to what extent those records are reliable. See id. Consequently, the most

fundamental question in any FLSA action, namely, the amount of wages owed the plaintiff, is

contested, rendering the settlement agreements a compromise over a bona fide dispute.

       Once a bona fide dispute has been established, the court must consider “whether the

agreement reflects a reasonable compromise of disputed issues [rather] than a mere waiver of

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statutory rights brought about by an employer’s overreaching.” Carrillo v. Dandan Inc., No. 13-

671, 2014 WL 2890309, at *6 (D.D.C. June 26, 2014) (quoting Lliguichuzhca v. Cinema 60,

L.L.C., 948 F. Supp. 2d 362, 365 (S.D.N.Y. 2013)); see also Sarceno, 2014 WL 4380680, at *12.

This approach takes account of “the totality of circumstances” to determine whether an FLSA

settlement is fair, reasonable, and adequate, rather than merely a waiver of rights. See Wolinsky

v. Scholastic, Inc., 900 F. Supp. 2d 332, 335 (S.D.N.Y. 2012). Under this approach, the focus is

on the fairness of the process used by the parties to reach settlement and the practical

ramifications of the settlement. Specifically, the court must consider whether the proposed

settlement (1) was the product of “overreaching” by the employer; (2) whether the settlement

was “the product of negotiation between represented parties following . . . [a]rm’s length

bargaining[;]” and (3) whether there exist serious impediments to the collection of a judgment by

the plaintiffs. Carrillo, 2014 WL 2890309, at *6 (internal quotations omitted).

       In making this evaluation, a “[c]ourt should be mindful of the strong presumption in

favor of finding a settlement fair.” Velez, 2011 WL 4460110, at *1. Indeed, courts must be

aware that “after all, settlement is a compromise, a yielding of the highest hopes in exchange for

certainty and resolution.” In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig.,

55 F.3d 768, 806 (3d Cir. 1995); see also Crabtree v. Volkert, Inc., No. 11-529, 2013 WL

593500, at *3 (S.D. Ala. Feb. 14, 2013) (noting that “the Court is generally not in as good a

position as the parties to determine the reasonableness of an FLSA settlement” (quoting Bonetti

v. Embarq Mgmt. Co., 715 F. Supp. 2d 1222, 1227 (M.D. Fla. 2009)) (internal quotation marks

omitted)).

       Applied to the instant settlement, the Court is satisfied that the two settlement agreements

represent a fair and reasonable compromise between the parties. As to the first element, whether

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the settlement is a result of employer “overreaching,” the parties have not provided an estimate

as to the total amount of money the plaintiffs claim to be owed, making an evaluation of where

the settlement amount falls between the plaintiffs’ position and the defendants’ impossible. Cf.

Carrillo, 2014 WL 2890309, at *7 (discussing $22,000 gap between plaintiffs’ asserted claim for

wages owed and defendants’ belief as to maximum exposure). Nevertheless, keeping in mind

the “presumption in favor of finding a settlement fair,” Velez, 2011 WL 4460110, at *1, the

Court is reluctant to reject the appraisal of the parties’ counsel that the amounts agreed upon are

a reasonable compromise, given the counsel’s extensive experience in pursuing and defending

FLSA actions generally and familiarity with the underlying facts in this case, Choi and Choi

Mot. ¶¶ 25–26; Choi and Eun Mot. ¶¶ 25–26. 3

        The second element, whether the agreement is a result of arm’s length negotiation, is met

easily. The parties engaged in “14 months” of negotiations, during which time the parties were

represented by competent counsel. Choi and Choi Mot. ¶ 26; Choi and Eun Mot. ¶ 26. Some of

these negotiations were supervised by a Magistrate Judge, which further bolsters the arm’s length

nature of the negotiations. See Choi and Choi Mot. ¶ 27; Choi and Eun Mot. ¶ 27.

        As for the third element, accounting for the difficulty of collecting any judgment, the

plaintiffs aver that the settlement amounts “account[] for the difficulty for Plaintiffs in obtaining

and collecting upon a judgment and the substantial risks inherent in the litigation of a wage and

hour dispute.” Choi and Choi Mot. ¶ 29; Choi and Eun Mot. ¶ 29. Given the substantial dispute

over the accuracy of the records that would be central to any resolution of this matter at trial, the

Court is satisfied that the settlement appropriately considers the potential benefits and pitfalls of

proceeding to trial.

3
 The Court also notes that the agreed upon wage amounts are in addition to those amounts already paid to the
plaintiffs pursuant to the pre-litigation agreements, which the Court found unenforceable.

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       Additionally, the plaintiffs aver that they have had ample time to discuss this agreement

with counsel. Choi and Choi Mot. ¶ 19; Choi and Eun Mot. ¶ 19. The negotiated attorneys’ fees

represent less than half of the total recovery and less than forty percent of the costs incurred. See

Carrillo, 2014 WL 2890309, at *7 (approving settlement agreement where attorneys’ fees

accounted for slightly more than fifty percent of total recovery).

       As for the mutual non-disparagement clause, Choi and Choi Agreement ¶ 7; Choi and

Eun Agreement ¶ 8, and the broad mutual releases of liability, Choi and Choi Agreement ¶¶4–5;

Choi and Eun Agreement ¶¶ 5–6, the Court need not opine “as to the enforceability of those

terms,” since its “review of a proposed FLSA settlement is properly limited only to those terms

precisely addressing the compromised monetary amounts to resolve pending wage and overtime

claims,” Carrillo, 2014 WL 2890309, at *8. With that limitation on its review and approval, the

Court finds that the proposed settlement agreements do not represent a waiver of rights in

violation of the FLSA.

IV.    CONCLUSION

       For the reasons stated above, the parties’ Joint Motions to Approve Settlement

Agreements, ECF Nos. 37 and 38, are granted in part, and the settlement agreements are

approved with the aforementioned limitation. An appropriate Order accompanies this

memorandum opinion.

                                                                        Digitally signed by Beryl A. Howell
                                                                        DN: cn=Beryl A. Howell, o=District
                                                                        Court for the District of Columbia,
       Date: January 29, 2015                                           ou=District Court Judge,
                                                                        email=howell_chambers@dcd.usco
                                                                        urts.gov, c=US
                                                                        Date: 2015.01.29 11:12:55 -05'00'
                                                      __________________________
                                                      BERYL A. HOWELL
                                                      United States District Judge

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