Fisher v. SD Protection Inc. ( 2020 )

18‐2504‐cv
Fisher v. SD Protection Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 2019
(Argued: November 19, 2019 Decided: February 4, 2020)
Docket No. 18‐2504‐cv
MICHAEL FISHER,
Plaintiff‐Appellant,
v.
SD PROTECTION INC. and SANDRA DOMINGUEZ MERCADO,
Defendants.*
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
Before:
WALKER, CHIN, and SULLIVAN, Circuit Judges.
* The Clerk of the Court is respectfully directed to amend the official caption to
conform to the above.
Appeal from an order of the United States District Court for the
Southern District of New York (Berman, J.) approving a settlement agreement in
a Fair Labor Standards Act case but modifying the agreement by increasing the
portion of the settlement funds to be paid to plaintiff while reducing attorneysʹ
fees and costs to be paid to his counsel. On appeal, plaintiff contends that the
district court abused its discretion in modifying the settlement agreement.
VACATED and REMANDED.
C.K. LEE, Lee Litigation Group, PLLC, New York, New
York, for Plaintiff‐Appellant.
No appearance for Defendants.1
___________
CHIN, Circuit Judge:
In this Fair Labor Standards Act case, see 29 U.S.C. §§ 201 et seq. (the
ʺFLSAʺ), plaintiff‐appellant Michael Fisher and his former employer settled the
action for $25,000, inclusive of attorneysʹ fees and costs. The parties sought
1 This Court received a letter from the Law Offices of Nolan Klein, P.A., advising
that defendants did not retain counsel in this appeal. App. Ct. Docket No. 38.
Defendants have not responded to the Notice sent by this Court prohibiting a
corporation from proceeding pro se. See App. Ct. Docket Nos. 43‐44. Defendants appear
to take no position in this action as the appeal involves the split of the settlement funds
between plaintiff and his counsel. We note also that the notice of appeal and brief were
filed on behalf of plaintiff and not his counsel.
2
approval of the settlement agreement from the district court, and the agreement
provided for $23,000 of the settlement amount to be paid to counsel for fees and
costs and $2,000 to be paid to Fisher.
The district court approved the overall amount of the settlement as
fair and reasonable under Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d
Cir. 2015), but significantly modified the distribution of the settlement funds as
between Fisher and his counsel. In modifying the settlement, the district court
calculated Fisherʹs damages for unpaid overtime as $585. With statutory
damages under the FLSA and the New York Labor Law (the ʺNYLLʺ), Fisherʹs
maximum possible recovery ‐‐ were he to prevail in every respect ‐‐ was $11,170.
Nonetheless, the district court awarded Fisher $15,055, which constituted 60.22%
of the settlement amount, while awarding his counsel $8,250 in fees, or 33% of
the total settlement amount, and $1,695 in costs.
We hold that the district court abused its discretion in rewriting the
settlement agreement by modifying the allotment of the settlement funds. When
a district court concludes that a proposed settlement in a FLSA case is
unreasonable in whole or in part, it cannot simply rewrite the agreement, but it
must instead reject the agreement or provide the parties an opportunity to revise
3
it. The district court further erred in concluding that the ʺmaximum fee
percentageʺ that plaintiffʹs counsel may retain in an FLSA suit is generally
limited to 33% of the total settlement amount. See Appʹx at 78. Accordingly, and
for the reasons set forth below, we vacate the district courtʹs order and remand
for further proceedings consistent with this opinion.
BACKGROUND
I. The Facts
In February 2015, Fisher was hired by defendants SD Protection Inc.
(ʺSDʺ) and Sandra Dominguez Mercado to work as a professional chaperone.2
His duties included working in hotel hallways to supervise student tour groups
during late nights and early mornings, enforcing curfews, and monitoring noise
levels. During his 26 weeks of employment from February to July 2015, Fisher
regularly worked 49 hours per week and was paid $10 per hour on a weekly
basis. Defendants failed to furnish Fisher any paystubs and he was not
compensated for any overtime as required by the FLSA and NYLL. Moreover,
2 For purposes of this appeal, the facts alleged in Fisherʹs complaint are assumed
to be true.
4
defendants failed to provide Fisher proper wage notices or wage statements as
required under the NYLL.
II. Proceedings Below
On March 28, 2017, Fisher sued SD and Dominguez Mercado for
violations of the FLSA and the NYLL, alleging that he and others similarly
situated were entitled to recover from defendants: (1) unpaid overtime, (2)
statutory penalties, (3) liquidated damages, and (4) attorneysʹ fees and costs.
Fisher was and still is represented by Lee Litigation Group, PLLC (ʺLLGʺ).
On May 11, 2017, Fisher filed a pre‐motion letter with the district
court seeking a conference to discuss an anticipated motion for conditional
collective certification. The parties participated in an initial pretrial conference
before the district court on May 15, 2017, and defendants filed an answer on June
2, 2017. Fisher never filed a motion for class or collective certification.
Between June 2017 and September 2017, Fisher filed several letter
motions with the magistrate judge regarding ongoing discovery disputes. On
August 17, 2017, LLG deposed Dominguez Mercado in Orlando, Florida. On
August 21, 2017, Fisher filed a letter motion seeking a conference to discuss an
anticipated motion for sanctions against defendants for failure to comply with
discovery obligations. According to Fisherʹs letter, Dominguez Mercado
5
prematurely ended the deposition after three hours despite agreeing to a seven‐
hour deposition. The letter motion asked the district court to compel her to
attend a second deposition. Following a September 5, 2017 conference, a
magistrate judge ordered a resumption of the deposition and also assessed the
costs associated with the second deposition to the deponent. On October 13,
2017, LLG resumed Dominguez Mercadoʹs deposition in Florida. Between
September and October 2017, several additional discovery letter motions were
filed before the district court.
After months of discovery, on October 25, 2017, the parties
participated in a settlement conference before the district court and agreed to a
settlement in principle. The district court ordered the parties to submit a final,
executed settlement agreement as well as a ʺCheeks fairness submission.ʺ Appʹx
at 12; see also Cheeks, 796 F.3d at 199.
Accordingly, on January 30, 2018, LLG filed a letter discussing the
factors enumerated in Wolinsky v. Scholastic Inc., 900 F. Supp. 2d 332, 335‐36
(S.D.N.Y. 2012), and submitting the executed settlement agreement as well as
certain documentation of LLGʹs time records and expenses. The settlement
agreement required defendants to pay $25,000 ʺinclusive of all costs and fees,
6
including but not limited to attorneyʹs fees,ʺ in checks made out to LLG in six
installments. Appʹx at 23. The settlement agreement was silent as to how the
payment was to be divided between Fisher and LLG. The letter, however,
clarified that LLG would receive $23,000 of the settlement for fees and costs and
Fisher would receive the remaining $2,000. The letter also represented that
LLGʹs lodestar was ʺmore than $50,000.ʺ Appʹx at 20. Of the $23,000 to be paid
to LLG, $5,140.39 was attributable to costs.
On July 27, 2018, the district court issued an order approving the
total settlement sum of $25,000, but modifying the settlement by increasing the
amount to be paid to Fisher and reducing the fees and costs to be paid to LLG.
First, the district court increased the amount allocated to Fisher from $2,000 to
$15,055, or 60.22% of the settlement amount. In doing so, the district court found
that Fisher was entitled to $585 in unpaid overtime compensation, $585 in
liquidated damages, $5,000 for wage notice violations under the NYLL, and
$5,000 for wage statement violations under the NYLL, for a total of $11,170.3
3 Unpaid overtime compensation was calculated by multiplying the number of
weeks Fisher worked over 40 hours (13) by the overtime hours each week (9), and then
multiplying that total (117) by half of Fisherʹs regular hourly salary or $5/hour for a total
of $585. Moreover, an employer who willfully violates the FLSA ʺshall be liableʺ for
unpaid minimum and overtime wages in ʺan additional equal amount as liquidated
damages.ʺ 29 U.S.C. § 216(b). The same amount of liquidated damages is available
7
Although this was apparently Fisherʹs maximum possible recovery, the district
court awarded Fisher an additional $3,885, as explained below.
Second, the district court concluded that LLGʹs requested costs of
$5,140 for ʺfiling fee, service fees, court reporting fees, and travel expensesʺ were
not supported by sufficient documentation, reasoning that LLG ʺhas submitted
documentation supporting no more than $1,695 in costs.ʺ Appʹx at 75. The
district court awarded costs in that amount only and stated that it would allocate
the difference to Fisher, but the district court, we assume inadvertently,
calculated the cost‐differential as $3,885 rather than $3,445, and increased Fisherʹs
award by that amount instead.
Finally, the district court reviewed the factors outlined in Goldberger
v. Integrated Res., Inc., 209 F.3d 43, 50 (2d Cir. 2000), and found that the proposed
under the NYLL. See NYLL § 198(1‐a). A plaintiff cannot recover ʺduplicative
liquidated damages for the same course of conduct,ʺ and thus a plaintiff cannot recover
liquidated damages under both the FLSA and NYLL. Rana v. Islam, 887 F.3d 118, 123
(2d Cir. 2018) (per curiam).
In addition, an employee who does not receive a wage notice within ten business
days of his first day of employment may recover $50 for each workday that the
violation continues, up to a maximum of $5,000. NYLL § 198(1‐b). New York law also
requires employers to provide the employee with a wage statement containing certain
information including the hours being compensated, the wages paid, and any
deductions. See NYLL § 195(3). An employee may recover $250 per day for each wage
statement violation, up to a maximum of $5,000. See NYLL §§ 195(1)(a), 198(1‐d).
8
attorneysʹ fees of $17,860 was ʺunreasonable and excessiveʺ and reduced the fees
to $8,250, equivalent to 33% of the total settlement. Appʹx at 75; see also Appʹx at
75‐78. The district court reduced the attorneysʹ fees after holding that ʺ[a]s a
matter of policy, 33% of the total settlement amount ‐‐ or less ‐‐ is generally the
maximum fee percentage which is typical and approved in FLSA cases.ʺ Appʹx at
78 (emphasis in original). Accordingly, the district court approved the proposed
settlement amount of $25,000 as fair under Cheeks, but significantly altered the
distribution of the settlement funds by reducing the fees and costs by $9,610 and
$3,445, respectively, and reallocating those amounts to Fisher.4
This appeal followed.
4 The parties had agreed to file a stipulation of dismissal with prejudice after the
district court approved the settlement. Although the district court never entered a final
order of dismissal, see Fed. R. Civ. P. 58(a), it is clear the parties and the district court
intended this to be a stipulated dismissal with prejudice. Cf. Vona v. Cty. of Niagara, 119
F.3d 201, 206 (2d Cir. 1997) (considering a judgment final where it was ʺclear that the
court so intended itʺ); United States ex rel. Polansky v. Pfizer, Inc., 762 F.3d 160, 163 (2d
Cir. 2014) (ʺif the district court only overlooked a ministerial dut[y], any omission is not
fatal to finality and consequent appealabilityʺ (alteration in original, internal quotation
marks omitted)).
9
DISCUSSION
I. Applicable Law
A. FLSA Settlements
This Court has held that parties cannot privately settle FLSA claims
with a stipulated dismissal with prejudice under Federal Rule of Civil Procedure
41 absent the approval of the district court or the Department of Labor. See
Cheeks, 796 F.3d at 200.5 As a result, district courts in this Circuit routinely
review FLSA settlements for fairness before approving any stipulated dismissal.
District courts typically evaluate the fairness of a settlement agreement by
considering the factors outlined in Wolinsky, which include, among others:
(1) the plaintiffʹs range of possible recovery; (2) the
extent to which the settlement will enable the parties to
avoid anticipated burdens and expenses in establishing
their respective claims and defenses; (3) the seriousness
of the litigation risks faced by the parties; (4) whether
the settlement agreement is the product of armʹs‐length
bargaining between experienced counsel; and (5) the
possibility of fraud or collusion.
5 Another panel of this Court has recently held that Cheeks does not extend to
offers of judgment entered under Federal Rule of Civil Procedure 68(a). See Mei Xing
Yu v. Hasaki Rest., Inc., 944 F.3d 395, 411 (2d Cir. 2019) (declining to extend Cheeksʹs
judicial approval requirement to Rule 68(a) context). The instant case does not involve
an offer of judgment.
10
900 F. Supp. 2d at 335‐36 (internal quotation marks omitted); see also Mei Xing Yu,
944 F.3d at 413 (referring to the Wolinksy factors examined as part of a district
courtʹs fairness review under Cheeks).
In addition, if attorneysʹ fees and costs are provided for in the
settlement, district courts will also evaluate the reasonableness of the fees and
costs. See Cheeks, 796 F.3d at 206 (referring to a fees provision within a FLSA
settlement agreement); 29 U.S.C. § 216(b) (ʺThe Court . . . shall, in addition to any
judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorneyʹs fee to
be paid by the defendant, and costs of the action.ʺ (emphasis added)); see, e.g.,
Calle v. Elite Specialty Coatings Plus, Inc., No. 13‐cv‐6126 (NGG), 2014 WL 6621081,
at *2 (E.D.N.Y. Nov. 21, 2014) (ʺWhen an FLSA settlement includes an allotment
of attorneyʹs fees, the court must also evaluate the reasonableness of the fees.ʺ).
B. Fees and Costs
Under the FLSA and the NYLL, a prevailing plaintiff is entitled to
reasonable attorneysʹ fees and costs. See 29 U.S.C. § 216(b); NYLL § 663(1);
Barfield v. N.Y.C. Health & Hosps. Corp., 537 F.3d 132, 151 (2d Cir. 2008) (citing 29
U.S.C. § 216(b)). An award of costs ʺnormally include[s] those reasonable out‐of‐
pocket expenses incurred by the attorney and which are normally charged fee‐
11
paying clients.ʺ Reichman v. Bonsignore, Brignati & Mazzotta P.C., 818 F.2d 278,
283 (2d Cir. 1987); see also Torres v. Gristedeʹs Operating Corp., No. 04‐cv‐3316
(PAC), 2012 WL 3878144, at *5 (S.D.N.Y. Aug. 6, 2012), affʹd, 519 F. Appʹx 1 (2d
Cir. 2013) (affirming costs awarded, including out‐of‐town travel, meals,
photocopying, and other expenses).
The fee applicant must submit adequate documentation supporting
the requested attorneysʹ fees and costs. See N.Y. State Assʹn for Retarded Children,
Inc. v. Carey, 711 F.2d 1136, 1154 (2d Cir. 1983) (ʺAll applications for attorneyʹs
fees . . . should normally be disallowed unless accompanied by contemporaneous
time records indicating, for each attorney, the date, the hours expended, and the
nature of the work done.ʺ); McCann v. Coughlin, 698 F.2d 112, 131 (2d Cir. 1983)
(ʺFee awards . . . must be made on the basis of adequate documentation.ʺ).
Attorneysʹ fees and costs in FLSA actions generally arise in three
contexts: (1) fee applications following a ruling in favor of plaintiff, see, e.g.,
Choudry v. Durrani, No. 14‐cv‐4562 (SIL), 2016 WL 6651319, at *8 (E.D.N.Y. Nov.
10, 2016) (prevailing plaintiff granted leave to file an application for attorneysʹ
fees and costs after successful bench trial); (2) fee applications following a
settlement where the settlement agreement reserves the questions of fees and
12
costs for the court to decide, see, e.g., Boutros v. JTC Painting & Decorating Corp.,
No. 12‐cv‐7576 (PAE), 2014 WL 3925281, at *1 (S.D.N.Y. Aug. 8, 2014) (reviewing
fee application resulting from partiesʹ disagreement over fees paid to plaintiffʹs
counsel in FLSA settlement); and (3) settlements incorporating attorneysʹ fees
and costs into the settlement amount, see, e.g., Lopez v. Nights of Cabiria, LLC, 96 F.
Supp. 3d 170, 181‐82 (S.D.N.Y. 2015) (reviewing FLSA settlement incorporating
counselʹs fees as part of the total settlement amount). This case involves the third
scenario.
C. Standard of Review
ʺWe generally review a district courtʹs approval of a settlement
agreement for abuse of discretion.ʺ In re Sept. 11 Prop. Damage Litig., 650 F.3d 145,
151 (2d Cir. 2011). We review a district courtʹs factual conclusions under the
ʺclearly erroneousʺ standard, and its legal conclusions de novo. See Omega Engʹg,
Inc. v. Omega, S.A., 432 F.3d 437, 443 (2d Cir. 2005).
II. Application
We discuss the district courtʹs order first with respect to costs and
second with respect to fees.
13
A. Costs
We first consider whether the district court committed an abuse of
discretion in reducing counselʹs costs from $5,140 to $1,695. LLG argues that the
district court committed a factual error by failing to properly calculate the costs
submitted to the court as documented in the accompanying receipts and
invoices. We agree, as it appears that the district court overlooked certain
documentation and consequently failed to properly calculate the costs as detailed
by the supporting receipts.6
LLGʹs expenses included court reporting and service of process fees,
filing fees, hotels and transportation (including two trips to Florida for
depositions), and working meals. These expenses appear to be reasonable,
incidental, and necessary to the representation of Fisher in this action. Moreover,
these expenses were documented ‐‐ at least to the extent discussed below ‐‐ in the
6 On appeal, LLG represents that the receipts and invoices submitted in the
appendix were also presented to the district court as part of its Cheeks submission. See
Appellantʹs Br. at 22‐23. This Court was unable to locate any such receipts in the district
courtʹs electronic docket because the filed document states that Exhibit C (which
includes receipts) is ʺRedacted on ECF,ʺ see Dist. Ct. Docket No. 78, and the receipts
were otherwise unavailable from the Clerkʹs Office. For purposes of this appeal, we
accept LLGʹs representation that these receipts were presented to the district court.
14
receipts and invoices submitted by counsel and would appear to be adequate to
support at least most of the requested costs. See Appʹx at 31‐71.
While district courts, in evaluating fee requests, ʺneed not, and
indeed should not, become green‐eyeshade accountants,ʺ on this record, we
conclude that the district court erred by failing to properly calculate the costs.
See Fox v. Vice, 563 U.S. 826, 838 (2011). After reviewing the receipts in the
appendix, we conclude that the district courtʹs finding that the receipts support
ʺno more than $1,695ʺ is clearly erroneous. Appʹx at 75. As one example, the
costs of the Florida deposition transcripts ‐‐ for which receipts were submitted ‐‐
by themselves amount to $2,549.62, thereby already exceeding the figure found
by the district court. See Appʹx at 62‐63. By our calculation, the submitted
receipts add up to $4,733.60 in costs. See Appʹx at 45‐71 (receipts and invoices).7
Accordingly, we conclude, in light of the receipts included in the
record on appeal, that the district court abused its discretion in reducing costs to
$1,695. We remand for the district court to reconsider the amount of costs.
7 Because the district court did not explain how it arrived at $1,695 in costs, this
Court is unable to determine the district courtʹs rationale with respect to the calculation
of costs. Cf. Gierlinger v. Gleason, 160 F.3d 858, 876 (2d Cir. 1998) (ʺ[W]hen the court
concludes that certain hours are not deserving of compensation, it must ordinarily state
its reasons for excluding those hours ʹas specifically as possibleʹ in order to permit
meaningful appellate review.ʺ).
15
B. Attorneysʹ Fees
Next, we consider the district courtʹs reduction of LLGʹs attorneysʹ
fees. The district court found that the requested attorneysʹ fees of $17,860 was
ʺunreasonable and excessiveʺ and reduced the fees to $8,250, equivalent to 33%
of the total settlement amount of $25,000. See Appʹx at 75‐78. The district court
reduced the attorneysʹ fees after holding that ʺ[a]s a matter of policy, 33% of the
total settlement amount ‐‐ or less ‐‐ is generally the maximum fee percentage
which is typical and approved in FLSA cases.ʺ Appʹx at 78 (emphasis in
original). The reduction of $9,610 in attorneysʹ fees was allocated to Fisher.
We conclude that the district court abused its discretion in two
respects: First, the district court erred as a matter of law in concluding that the
ʺmaximum fee percentageʺ that counsel may be awarded in an FLSA suit is
generally limited to 33% of the total settlement amount. See Appʹx at 78. Indeed,
we have ʺrepeatedly rejected the notion that a fee may be reduced merely
because the fee would be disproportionate to the financial interest at stake in the
litigation.ʺ Kassim v. City of Schenectady, 415 F.3d 246, 252 (2d Cir. 2005)
(discussing attorneysʹ fees in connection with a claim brought under 42 U.S.C. §
1983). Second, the district court abused its discretion in rewriting the partiesʹ
16
settlement agreement, and it erred in evaluating the fees portion of the
settlement agreement as a separate fee application rather than as part of a
complete settlement agreement. Accordingly, we vacate the district courtʹs order
and remand for further proceedings.
i. The district court erred in presuming a 33% limit on
attorneysʹ fees in FLSA settlements and enforcing a
proportionality standard.
The district court reduced the fees based, in part, on the perceived
disproportionality of the fee to Fisherʹs recovery, using proportionality as an
outcome determinative factor in evaluating the reasonableness of LLGʹs fees. In
fact, district courts in FLSA actions in this Circuit routinely apply a
proportionality limit on attorneysʹ fees in FLSA actions.8
8 See, e.g., Heiloo v. Fruitco Corp., No. 18‐cv‐1917 (JPO), 2019 WL 5485205, at *4
(S.D.N.Y. Oct. 25, 2019) (flagging attorneysʹ fees of 40% of settlement as potential issue
and denying approval of settlement agreement); Aguirre v. Torino Pizza, Inc., No. 18‐cv‐
2004 (KMK), 2019 WL 126059, at *4 (S.D.N.Y. Jan. 8, 2019) (ʺCourts routinely award
attorneys in FLSA settlements one‐third of the total recovery in fees.ʺ); Cohetero v. Stone
& Tile, Inc., No. 16‐cv‐4420 (KAM), 2018 WL 565717, at *7 (E.D.N.Y. Jan. 25, 2018)
(attorneysʹ fees representing 33.3% of the settlement in single plaintiff FLSA action was
reasonable); Hernandez v. Immortal Rise, Inc., 306 F.R.D. 91, 102 (E.D.N.Y. 2015) (fee
representing 31% of settlement fund in FLSA class action was reasonable); Run Guo
Zhang v. Lin Kumo Japanese Rest. Inc., No. 13‐cv‐6667 (PAE), 2015 WL 5122530, at *4
(S.D.N.Y. Aug. 31, 2015) (reducing award from 37% of net settlement amount to 33%, in
two person FLSA action, because ʺfee in excess of one‐third of the settlement amount
disserves the FLSAʹs important interest in fairly compensating injured plaintiffsʺ);
Thornhill v. CVS Pharmacy, Inc., No. 13‐cv‐5507 (JMF), 2014 WL 1100135, at *3 (S.D.N.Y.
Mar. 20, 2014) (collecting cases where district courts reduce attorneysʹ fees greater than
17
Neither the text nor the purpose of the FLSA, however, supports
imposing a proportionality limit on recoverable attorneysʹ fees. With respect to
the statutory text, FLSA simply provides for a ʺreasonable attorneyʹs fee to be
paid by the defendant.ʺ 29 U.S.C. § 216(b). Nothing in this clause or the
surrounding text supports the conclusion that a ʺreasonable attorneyʹs feeʺ must
be a ʺproportionalʺ fee. See, e.g., United Auto. Workers Local 259 Soc. Sec. Depʹt v.
Metro Auto Ctr., 501 F.3d 283, 294 (3d Cir. 2007) (explaining that ʺ[n]othing in the
text of [ERISAʹs similar fee‐shifting provision] suggests that to be ʹreasonable,ʹ
fees must be proportionalʺ); cf. 42 U.S.C. § 1997e(d)(l)(B)(i) (expressly providing
that a prisoner will not be awarded fees in an action brought pursuant to 42
U.S.C. § 1988 unless ʺthe amount of the fee is proportionately related to the court
ordered relief for the violationʺ).
A proportionality rule would also be inconsistent with the remedial
goals of the FLSA, which we have deemed a ʺuniquely protective statute.ʺ
Cheeks, 796 F.3d at 207. In 1938, Congress enacted the FLSA to guarantee
workers ʺ[a] fair dayʹs pay for a fair dayʹs workʺ and to guard against ʺthe evil of
ʹoverworkʹ as well as ʹunderpay.ʹʺ Overnight Motor Transp. Co. v. Missel, 316 U.S.
33% of the settlement).
18
572, 578 (1942) (quoting 81 Cong. Rec. 4983 (1937) (message of President
Roosevelt)). By implementing a percentage cap on attorneysʹ fees in FLSA
actions, district courts impede Congressʹs goals by discouraging plaintiffsʹ
attorneys from taking on ʺrun of the millʺ FLSA cases where the potential
damages are low and the risk of protracted litigation high. Fee awards in wage
and hour cases should ʺencourage members of the bar to provide legal services
to those whose wage claims might otherwise be too small to justify the retention
of able, legal counsel.ʺ Sand v. Greenberg, No. 08‐cv‐7840 (PAC), 2010 WL 69359,
at *3 (S.D.N.Y. Jan. 7, 2010). In advancing Congressʹs goals under the FLSA to
ensure a ʺfair dayʹs pay for a fair dayʹs work,ʺ the law cannot be read to impose a
proportional limitation based on the perceived complexities of the litigation.
Missel, 316 U.S. at 578.
While in some cases the proportion of fees may be relevant in
considering the reasonableness of an award (for example, the multi‐million
dollar securities class action involving a common fund, often cited by the district
courts in evaluating fee requests, see Goldberger, 209 F.3d at 50‐51), there is no
explicit limit on attorneysʹ fees in FLSA actions and district courts should not, in
effect and practice, implement such a limit. See City of Riverside v. Rivera, 477 U.S.
19
561, 578 (1986) (ʺA rule of proportionality would make it difficult, if not
impossible, for individuals with meritorious civil rights claims but relatively
small potential damages to obtain redress from the courts.ʺ). Even if helpful,
however, the percentage of attorneysʹ fees cannot be the determinative factor in
evaluating the reasonableness of the award.
In most FLSA cases, it does not make sense to limit fees to 33% of the
total settlement. FLSA cases often involve ordinary, everyday workers who are
paid hourly wages and favorable outcomes frequently result in limited
recoveries. Plaintiffs in wage and hour disputes, like Fisher (a professional
chaperone, earning $10 an hour), earn modest salaries. See Cheeks, 796 F.3d at 207
(noting that FLSA cases tend to settle for less than $20,000 in total recovery and
fees, and that employees will often ʺsettle for between $500 and $2,000ʺ in unpaid
compensation (internal quotation marks and citation omitted)). If plaintiffsʹ
attorneys in these so‐called ʺrun of the millʺ FLSA actions are limited to a
proportional fee of their clientʹs recovery (here, a maximum of $11,170), no
rational attorney would take on these cases unless she were doing so essentially
pro bono. Without fee‐shifting provisions providing compensation for counsel,
employees like Fisher would be left with little legal recourse.
20
This case is a prime example of a ʺrun of the millʺ FLSA action
involving modest damages. The district court justified its reduction of attorneysʹ
fees after reviewing the ʺmagnitude and complexitiesʺ of this FLSA action, which
it deemed a ʺrelatively simple and uncomplicated overtime dispute.ʺ Appʹx at
77‐78.9 Few plaintiffs would be willing to pay $22,000 in attorneysʹ fees and costs
to recover $11,000 in overtime wages and statutory penalties, and ʺ[t]he whole
purpose of fee‐shifting statutes is to generate attorneysʹ fees that are
disproportionate to the plaintiffʹs recovery.ʺ Millea v. Metro‐N. R. Co., 658 F.3d 154,
169 (2d Cir. 2011) (emphasis in original) (holding that district court
impermissibly limited attorneyʹs fees to one‐third of $612.50 recovery on Family
Medical Leave Act claim). Indeed, this Court has recognized that:
The public interest in private civil rights enforcement is
not limited to those cases that push the legal envelope;
it is perhaps most meaningfully served by the day‐to‐
day private enforcement of these rights, which secures
compliance and deters future violations. Congress
meant reasonable attorneyʹs fees to be available to the
9 We are uncertain whether we, in the first instance, would characterize this action
as ʺsimple and uncomplicated.ʺ While it is true that the uncompensated overtime was
small ($585), the litigation itself involved months of discovery resulting in several letter
motions and an out‐of‐state deposition that was abruptly ended due to improper
conduct by the deponent and then later resumed. See Appʹx at 7‐10 (Dist. Ct. Docket
Nos. 34, 39, 46, 55); see Kassim, 415 F.3d at 252 (where counsel is required to take action
to address other sideʹs dilatory conduct, ʺthe hours required to litigate even a simple
matter can expand enormouslyʺ).
21
private attorneys general who enforce the law, not only
to those whose cases make new law.
Quaratino v. Tiffany & Co., 166 F.3d 422, 426 (2d Cir. 1999) (citation omitted).
In the context of analogous civil rights legislation, we have long held
‐‐ and we reiterate today ‐‐ that a fee may not be reduced merely because the fee
would be ʺdisproportionate to the financial interest at stake in the litigation.ʺ
Kassim, 415 F.3d at 252; accord Dunlap‐McCuller v. Riese Org., 980 F.2d 153, 160 (2d
Cir. 1992) (rejecting notion that ʺfees be proportional to the amount of damages
recoveredʺ); Cowan v. Prudential Ins. Co. of Am., 935 F.2d 522, 527 (2d Cir. 1991)
(holding that lodestar was not subject to reduction to achieve proportionality
with damages award). The Supreme Court, this Court, and district courts in this
Circuit have long recognized the significance of attorneysʹ fees in civil rights
cases and have not hesitated to award or approve disproportionate fees to
counsel. See, e.g., City of Riverside, 477 U.S. at 564‐67 (upholding award of
$245,456.25 in fees, even though plaintiffs recovered only $33,350); Barbour v. City
of White Plains, 700 F.3d 631, 634‐35 (2d Cir. 2012) (per curiam) (affirming award
of $290,997.94 in fees and costs, even though plaintiffs recovered only $30,000);
Hui Luo v. L & S Acupuncture, P.C., 649 F. Appʹx 1, 3 (2d Cir. 2016) (summary
order) (affirming award of $64,038 in fees and $4,830.67 in costs, even though
22
plaintiff recovered only $4,130.75); Gonzalez v. Scalinatella, Inc., 112 F. Supp. 3d 5,
9 (S.D.N.Y. 2015) (awarding $48,366.50 in attorneysʹ fees and $1,150.60 in costs,
even though plaintiff recovered only $7,500); Grochowski v. Ajet Const. Corp., No.
97‐cv‐6269 (NRB), 2002 WL 465272, at *1 (S.D.N.Y. Mar. 27, 2002) (awarding
$97,207.50 in attorneysʹ fees, even though plaintiffs recovered only $26,000);
Samborski v. Linear Abatement Corp., No. 96‐cv‐1405 (DC), 1999 WL 739543, at *4
(S.D.N.Y. Sept. 22, 1999) (awarding $110,000 in attorneysʹ fees and $7,437.59 in
costs, even though plaintiffs recovered only $50,000).
Accordingly, in light of the text and purpose of the FLSA, as well as
longstanding case law interpreting other similar fee‐shifting statutes in the civil
rights context, we conclude that the district court erred in imposing a
proportionality limit on LLGʹs recoverable attorneysʹ fees.
ii. The district court abused its discretion by rewriting the
proposed settlement agreement.
The district court approved the settlement amount as fair under
Cheeks, but then proceeded to modify the allocation of the settlement funds as
between Fisher and LLG.10 In doing so, the district court abused its discretion by
10 Other district courts have also approved settlements while imposing significant
modifications. See, e.g., Beckert v. Ronirubinov, No. 15‐cv‐1951 (PAE), 2015 WL 8773460,
at *3 (S.D.N.Y. Dec. 14, 2015); Penafiel v. Rincon Ecuatoriano, Inc., No. 15‐cv‐112 (PAE),
23
rewriting the proposed settlement agreement.11 If a district court concludes
pursuant to Cheeks that a proposed settlement is unreasonable in whole or in
part, the court cannot simply rewrite the agreement ‐‐ it must reject the
agreement or give the parties an opportunity to revise it. In its discretion, a
district court may suggest ‐‐ as it does in an order of additur or remittitur ‐‐ an
amount of attorneysʹ fees and costs it would find reasonable under the
circumstances. But it exceeds its authority when it simply rewrites the
agreement by imposing terms on the parties to which they did not agree. See
Evans v. Jeff D., 475 U.S. 717, 726 (1986) (holding, in Fed. R. Civ. P. 23 context, that
ʺthe power to approve or reject a settlement negotiated by the parties before trial
does not authorize the court to require the parties to accept a settlement to which
they have not agreedʺ).
A district court may not simply rewrite the terms of a settlement
agreement because a ʺsettlement agreement is a contract that is interpreted
2015 WL 7736551, at *3 (S.D.N.Y. Nov. 30, 2015); Aguilera v. Cookie Panache ex rel. Between
the Bread, Ltd., No. 13‐cv‐6071 (KBF), 2014 WL 2115143, at *1, *3‐4 (S.D.N.Y. May 20,
2014).
11 While the settlement agreement itself was silent as to the division of settlement
funds between Fisher and LLG, as noted supra at 6‐7, LLGʹs detailed letter submitted on
behalf of Fisher with the defendantsʹ agreement clarified the allocation of settlement
funds. Accordingly, we read the settlement agreement and the letter together.
24
according to general principles of contract law.ʺ Omega, S.A., 432 F.3d at 443;
accord In re World Trade Ctr. Disaster Site Litig., 754 F.3d 114, 121 (2d Cir. 2014)
(same); Patterson v. Newspaper & Mail Deliverersʹ Union of N.Y. & Vicinity, 514 F.2d
767, 772 (2d Cir. 1975) (court is ʺpowerless to rewrite the provisions of the
settlement agreementʺ). If the ʺterms of a contract are clear, courts must take care
not to alter or go beyond the express terms of the agreement, or to impose
obligations on the parties that are not mandated by the unambiguous terms of
the agreement itself.ʺ Lilly v. City of New York, 934 F.3d 222, 235 (2d Cir. 2019)
(quoting Steiner v. Lewmar, Inc., 816 F.3d 26, 32 (2d Cir. 2016)). When presented
with a settlement for approval, a district courtʹs options are to (1) accept the
proposed settlement; (2) reject the proposed settlement and delay proceedings to
see if a different settlement can be achieved; or (3) proceed with litigation. See
Evans, 475 U.S. at 727.
We recognize that FLSA settlements entered into pursuant to a
stipulated dismissal with prejudice represent a special type of contract because
district courts are required to review these settlements for reasonableness as set
forth in Cheeks, 796 F.3d at 199. Cf. Mei Xing Yu, 944 F.3d at 411. The obligation
extends to the reasonableness of attorneysʹ fees and costs. Cheeks, 796 F.3d at 206.
25
We further recognize that FLSA rights cannot be abridged via contract. See
Barrentine v. Arkansas‐Best Freight Sys., Inc., 450 U.S. 728, 740 (1981) (ʺFLSA rights
cannot be abridged by contract or otherwise waived because this would ʹnullify
the purposesʹ of the statute and thwart the legislative policies it was designed to
effectuate.ʺ (quoting Brooklyn Sav. Bank v. OʹNeil, 324 U.S. 697, 707 (1945)).
Nonetheless, even though a district court has a duty to review an FLSA
settlement for reasonableness to prevent any potential abuse, this does not grant
the court authority to rewrite contract provisions it finds objectionable. See Lilly,
934 F.3d at 236 (holding that district court erred in awarding attorneysʹ fees
ʺbeyond what the parties agreed toʺ in the contract).
The district court treated the issue of fees and costs as if it was being
presented with a fee application separately made after a plaintiff has prevailed
through litigation or settlement. In those circumstances, district courts have the
discretion to set attorneysʹ fees as they reasonably see fit. See, e.g., McDonald ex
rel. Prendergast v. Pension Plan of the NYSA‐ILA Pension Tr. Fund, 450 F.3d 91, 96
(2d Cir. 2006) (ʺA district court may exercise its discretion and use a percentage
deduction as a practical means of trimming fat from a fee applicationʺ (internal
quotation marks and citation omitted, emphasis added)). Where the issue of fees
26
and costs is presented in the context of a complete settlement agreement that
includes an agreement with respect to fees and costs, however, the inquiry is
different as the settlement is submitted for approval, not adjustment or revision.
Accordingly, the district court erred here by evaluating the settlement agreement
under the lens of a fee application, and then proceeding to rewrite the
agreement.
* * *
On remand, the district court shall evaluate the reasonableness of
the requested attorneysʹ fees and costs without using proportionality as an
outcome determinative factor.
While the original proposed split of $23,000 to LLG and $2,000 to
Fisher understandably gave the district court pause, the reasonableness of the
fees does not turn on any explicit percentage cap. Instead, as noted by the
Supreme Court, ʺʹthe most critical factorʹ in determining the reasonableness of a
fee award ʹis the degree of success obtained.ʹʺ Farrar v. Hobby, 506 U.S. 103, 114
(1992) (quoting Hensley v. Eckerhart, 461 U.S. 424, 436 (1983)). In considering the
reasonableness of LLGʹs fees on remand, the district court shall take into account
that an award of $11,170 would give Fisher complete recovery in this litigation.
If Fisher were to be awarded $11,170, LLG would have achieved complete
27
success by obtaining 100% of Fisherʹs possible overtime wages and statutory
damages under the FLSA and NYLL.12
Moreover, the district court should also take into account that LLG
engaged in the following tasks: drafting and filing a complaint, discovery
(including conducting two depositions in Florida), filing several letter motions
concerning discovery disputes, participating in court conferences, engaging in
settlement negotiations, and drafting and filing an executed settlement
agreement along with a Cheeks submission. Given its efforts in litigating this case
and its success in negotiating a favorable settlement on Fisherʹs behalf, LLG is
entitled to reasonable compensation, not limited by an artificial rule of
proportionality. If the district court determines that the proposed split of $23,000
12 We recognize that the settlement here resolves both the FLSA claims and the
state law claims, as did the settlement in Cheeks. 796 F.3d at 200 (both state and federal
claims). Some district courts have approved ʺbifurcated settlements,ʺ where parties
settle the FLSA claims in an agreement that receives judicial review and the non‐FLSA
state claims separately without judicial review. See, e.g., Gallardo v. PS Chicken Inc., 285
F. Supp. 3d 549, 553 (E.D.N.Y. 2018); Feliz v. Parkoff Operating Corp., No. 17‐cv‐7627
(HBP), 2018 WL 1581991, at *3 (S.D.N.Y. Mar. 27, 2018). We do not have such a
bifurcated settlement before us and thus we do not decide whether the settlement of
state law claims paired with FLSA claims requires judicial approval. As a practical
matter, we recognize that employers are unlikely to settle FLSA claims separately from
parallel state law claims in the same action. Where a settlement dismisses with
prejudice both FLSA and state law claims, it seems to us a district court must take into
account at least the existence of the state law claims in assessing the reasonableness of
the settlement, which turns in part on the total potential recovery.
28
to LLG and $2,000 to Fisher is not reasonable, it shall reject the settlement,
although it may advise the parties what it would find reasonable and give them
an opportunity to reach a new agreement.
CONCLUSION
For the reasons set forth above, we VACATE the district courtʹs
order and REMAND to the district court for further proceedings consistent with
this Opinion.
29