Gallardo v. PS Chicken Inc.
Gallardo v. PS Chicken Inc.
Opinion of the Court
*551This case raises important issues concerning judicial review of settlements in combined Fair Labor Standards Act ("FLSA") and New York Labor Law ("NYLL") wage and hour actions. On November 2, 2017, the parties to this action (originally filed on June 19, 2017) informed the court that they had reached a settlement in principle. (See Minute Entry, dated Nov. 2, 2017.) One month later, they reported that the case had indeed settled and that an agreement was circulating for signature. (See Status Report, dated Dec. 4, 2017, Dkt. No. 14.) I ordered the parties to submit that agreement to the court for review and approval by January 5, 2018. (Order, dated Dec. 5, 2017.) The parties thereafter consented to magistrate judge jurisdiction in this case, but failed to file their motion to approve the settlement as directed. Instead, they filed a stipulation of dismissal without prejudice. (Stipulation of Dismissal Without Prejudice, dated Dec. 20, 2017, Dkt. No. 16.)
After I ordered counsel to explain their failure to file such a motion and the status of the case, defendant's counsel filed a status report that stated that the parties had agreed to a separate settlement of their state-law NYLL claims and "codified such in an agreement." (Status Report, dated Jan. 9, 2018, Dkt. No. 17.) Counsel further wrote that "[i]t was agreed among the parties to have the entire matter withdrawn without prejudice. As the case is withdrawn, there is no need to impose upon the Court for any further assistance." (Id. ) I construe this somewhat cryptic letter as making two contentions: first, that because the dismissal of the FLSA claims was without prejudice, court review and approval of the dismissal is not required; second, that court review and approval of settlements of NYLL claims that were originally brought together with FLSA claims is not necessary.
In Cheeks, the Second Circuit focused on dismissals with prejudice but explicitly left open the question of whether dismissals without prejudice may proceed without court approval. Cheeks v. Freeport Pancake House, Inc.,
However, several courts have undertaken review of dismissals of FLSA claims without prejudice, finding that "[a]lthough Cheeks does not require judicial review when a settlement dismisses a case without prejudice, Cheeks also does not preclude such review." Lopez v. 41-06 Bell Blvd. Bakery LLC, No. 15 CV 6953,
There are three reasons why reviewing dismissals without prejudice best serves the policy considerations underlying Cheeks , i.e., the potential for abuse in FLSA settlements. See Cheeks,
"Notices of dismissal without prejudice should not be used in FLSA cases as a mechanism to effect an end-run around the policy concerns articulated in Cheeks ." Carson,
*553Martinez v. Ivy League Sch., Inc., No. 15 CV 7238,
The second issue raised by the parties' status report is whether, in cases such as this one, the court may require review of settlements of non-FLSA claims brought together with FLSA claims. Several courts have accepted the idea of a "bifurcated" settlement in which parties settle the FLSA claim in an agreement that undergoes Cheeks review and the NYLL claim separately without Cheeks review. See Yunda v. SAFI-G, Inc., No. 15 CV 8861,
I agree with these courts that separate settlement agreements of non-FLSA claims in a combined FLSA/non-FLSA action would not generally be subject to court approval, insofar as their terms concerned only the non-FLSA claims. My concern is that, absent an opportunity to review the NYLL settlement agreement in this case, the court has no way of knowing whether or not this is a true dismissal without prejudice. Similarly, unless the court can review this agreement, it cannot determine whether the agreement contains other conditions relating to or otherwise affecting the FLSA claims that would be impermissible if executed in an FLSA settlement agreement.
In short, the parties appear to be attempting an end-run around Cheeks . I am concerned that such a circumvention, if unchecked, could become standard practice, effectively undermining the courts' statutory obligation to oversee the settlement of FLSA claims. I therefore order *554the parties to submit all agreements they have executed in settlement of this action-both for the FLSA claims and the NYLL claims-to the court for a fairness review. The parties shall submit these agreements by February 1, 2018.
SO ORDERED.
This concern is particularly important in the FLSA context because "[t]he typical FLSA plaintiff may be unaware of his ability to challenge the enforceability of a release ... [m]oreover, even assuming a plaintiff could overcome the release provision, he might be precluded from prosecuting an action, in any event, as the statute of limitations may have run since the commencement of the initial action. This outcome is not remote given the fairly short two-year statute of limitations that governs most FLSA claims." Carson,
This holding was in the context of determining whether a dismissal with prejudice made prior to the defendant's answer or motion for summary judgment, pursuant to Rule 41(a)(1)(A)(i), was subject to court review and approval-another open question unaddressed by the Cheeks decision. Ivy League Sch.,
Were such an agreement executed and submitted, this court could review it to see whether it contains a provision stating that it is the sole agreement between the parties as to the FLSA claims. Such a provision might satisfy the court that review of the non-FLSA settlement agreement was not necessary.
I note that this concern was likely not an issue in Yunda because the parties in that case submitted the NYLL agreement to the court prior to the court's decision. Thus, that court had the opportunity to verify that there were no terms in the NYLL agreement that improperly affected the FLSA claims, even though it did not undertake to "examine" the NYLL settlement. See Yunda,
Reference
- Full Case Name
- Leyla GALLARDO v. PS CHICKEN INC., doing business as La Casa del Pollo Peruano
- Cited By
- 10 cases
- Status
- Published