Settlement of a FLSA action accomplished through a unilateral dismissal of the Complaint by Plaintif
Wage theft, or the failure to pay minimum wage or overtime wages as required by the Fair Labor Standards Act ("FLSA"), is a rampant occurrence throughout the United States. On a personal note, one of the strangest yet most satisfying parts about being a lawyer is explaining the law to someone from another country who does not seem to understand his or her rights. Yes, you have the right (in certain instances) to overtime wages and, yes, you have the right to minimum wage although you may have "agreed" to something else. Like child labor, it is illegal to steal wages, fail to pay minimum wage and overtime wages. This case is important because of Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015) and its progeny which holds, inter alia, that a settlement must be judicially approved.
While Rule 41(a)(1)(A), Fed. R. Civ. P., permits a plaintiff to unilaterally dismiss an action without prejudice and without court approval, the Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015) case (see my article on the matter here-Cheeks Exception to Rule 41 by Cory H. Morris) decided that these cases should be subject to judicial scrutiny to ensure the fairness of a settlement. The Second Circuit described the FLSA as "a uniquely protective statute," and concluded that review of settlements is a safeguard against the "disparate bargaining power between employers and employees." Id. at 207.
Here, Plaintiff filed suit in the Southern District of New York alleging violations of the Fair Labor Standard Act, that Plaintiff was not paid wages in accordance with New York State and Federal Law. Rather than file an answer, "Plaintiff's "Notice" was prepared and submitted with a signature line for the Court to enter the document as an order, and the Court complied. (Docket # 15.)" What happens next is what makes the case noteworthy:
Thereafter, the plaintiff, Issa Seck, who had been represented by an attorney, Abdul K. Hassan, complained that he had not been paid monies that were promised to him in a settlement with defendants. (Docket # 16.) Because the underlying claims included one brought under FLSA, the Court gleaned from Seck's letter that this was not a true dismissal without prejudice, but a settlement with an adverse party that had not been submitted for judicial review Mailed to Mr. Seck 5/8/2017 pursuant to Cheeks. Within days of Seck's letter, the Court entered the following order: "By March 28, 2017, Mr. Hassan shall disclose to the Court the amount of all fees paid to him for his services with a copy of the retainer agreement. He shall also explain why the settlement agreement was not submitted to the Court for review and approval pursuant to Cheeks. . . . Failure to comply will result in sanctions and disgorgement of all fees received by Mr. Hassan." (Docket # 18.)
The defense attorney, Hassan, stated to the Court that he had negotiated a settlement and claimed that no judicial review was required under Cheeks. "Hassan, who had been counsel to the losing party in Cheeks, asserted that no judicial review of the settlement was required, relying on footnote 2 of Cheeks, which left "for another day" the question of whether a "stipulation without prejudice" requires review." Id. (citing 796 F.3d at 201 n.2).
In analyzing the settlement, the Court finds that "A settlement containing a release that extinguishes the right to bring a claim in the future forecloses the claim as certainly as a stipulation of dismissal with prejudice. The Court concludes that it falls within the category of settlements that require Cheeks review...This conclusion is consistent with the holdings of other judges of this Court who have been faced with accepted Rule 68, Fed. R. Civ. P., offers of judgment in the FLSA context." Id. (citing Sanchez v. Burgers & Cupcakes LLC, 16 cv 3862 (Mar. 16, 2017)(Judge Caproni) (collecting cases); but see Baba v. Beverly Hills Cemetery Corp., 15 cv 5191(CM), 2016 WL 2903597, at *1 (May 9, 2016)(Chief Judge McMahon)(expressing concern over the perceived gap created by Rule 68)).
In sum, "The settlement agreement in this case implicates many of the core concerns raised in Cheeks. Its terms operate as a dismissal with prejudice, and includes both the release of all claims and a covenant not to reassert them in the future. The attorney's fee award amounts to 52% of the overall settlement and is challenged by the plaintiff himself. The Court's Order dismissing the action will be vacated."
The case is Seck v. DIPNA RX, INC., No. 16-cv-7262 (PKC) (S.D.N.Y. May 8, 2017). Stop wage theft. Should you feel that you are not being paid an appropriate wage, minimum wage or overtime wages, call the Law Offices of Cory H. Morris (631-450-2515 | 954-998-2918) for a free evaluation.