Fisher v. SD Protection Inc.

948 F.3d 593

• Court: Court of Appeals for the Second Circuit
• Decided: February 4, 2020
• Docket: 18-2504-cv
• Status: Published

Opinion

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.