Foster v. Monticello Motor Club Sales and Management

Opinion

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ----------------------------------------------------------X : JOSEPH FOSTER, : : Plaintiff, : : 21-CV-1400 (VSB) -v- : : ORDER : MONTICELLO MOTOR CLUB SALES AND : MANAGEMENT AND MANAGING : PARTNER ARI STRAUS, : : Defendants. : : ---------------------------------------------------------X VERNON S. BRODERICK, United States District Judge: Currently before me is the parties’ Rule 68 filings and proposed judgment filed on September 6, 2022. (Docs.41–42.) The parties submitted the Rule 68 filings after having fileda stipulation and order on August 3, 2022, pursuant to Rule 41(a)(1)(A)(ii), and dated July 30, 2022, for me to approve. (Doc. 38.) The stipulation submitted by the parties for my signature states “Pursuant to Rule 41(a)(1)(A)(ii) of the Federal Rules of Civil Procedure, Plaintiff Joseph Foster and Defendants Monticello Motor Club Sales and Management and Managing Partner Ari Straus hereby stipulate that the above-captioned matter is dismissed without prejudice and without right to appeal. Each party shall bear his/its own attorneys’ fees and costs.” (Id.) On August 5, 2022, I ordered the parties to submit a letter stating whether the parties had reached a settlement agreement, and if so, to file the terms of the settlement agreement and demonstrate that the settlement constituted a fair and reasonable compromise of disputed issues under Cheeks v. Freeport Pancake House, Inc.,796 F.3d 199 (2d Cir. 2015). (Doc. 40.) In an apparent response to my order, the parties fileda notice of acceptance with offer of judgment and a proposed judgment on September 6, 2022, seeking dismissal pursuant to Rule 68(a). (Docs. 41-42.) Defendants’ Offer of Judgment to Plaintiff Joseph1 Foster (“Offer of Judgment”) is dated August 26, 2022, and Plaintiff’s attorney accepted on behalf of Mr. Foster on September 5, 2022. (Docs. 41-42.) The Offer of Judgmentis “in the total amount of Ten Thousand Dollars and Zero Cents on all Plaintiff’s claims in the Complaint filed on February 17, 2021. . . . [and]

“includes any and all of Plaintiff’s claims for costs and attorney’s fees.” (Doc. 41 at 1.) The fact that the Offer of Judgment was made about three weeks after the initial stipulation of dismissal pursuant to Rule 41(a) and my subsequent order to submit terms and demonstrate that the settlement was fair and reasonable underCheeksfurther raises the specter that the parties are utilizing Rule 68(a) to circumvent the protections afforded by Cheeks in recognition that FLSA is a “uniquely protective statute.” Cheeks, 796 F.3d at 207. Further, the initial Stipulation and Order of Dismissal stated that “[e]ach party shall bear his/its own attorneys’ fees and costs.” (Doc. 38.) However, the Offer of Judgment appears to provide for Plaintiff’s attorneys’ fees and costs (“This amount includes any and all of Plaintiff’s

claims for costs and attorneys’ fees.”). (Docs. 41–42.) Thesefactsfurther raise concerns regarding the fairness and reasonableness of the settlement and of the attorneys’fees awarded to Plaintiff’s counsel. In Cheeks v. Freeport Pancake House, Inc., the Second Circuit determined that Fair Labor Standards Act (“FLSA”) settlements have “unique policy considerations” such that they must “require the approval of the district court or the [Department of Labor] to take effect.” 796 F.3d 199, 206 (2d Cir. 2015). More recently, the Second Circuit determined that “judicial approval is not required of Rule 68(a) offers of judgment settling FLSA claims.” Mei Xing Yu v.

1Joseph was misspelled “Jospeh” in the title of the offer of judgment. (Doc. 41 at 1.) Hasaki Rest., Inc., 944 F.3d 395, 414 (2d Cir. 2019). In light of this unqualified language, I find that Mei Xing Yu compels the result here that I must enter judgment in accordance with the parties’ Rule 68 offer and acceptance of judgment. However, I note that the result hereappearsinconsistent with the Second Circuit’s holdingin Cheeks and that,absent further clarity from the Second Circuitor legislative action,

the holding in Mei Xing Yu threatens to dramatically curtailthe purpose behind the Cheeks decision—toprotect workers’ wages. The rule announced in Mei Xing Yuwill allow parties to “use Rule 68(a) as an ‘end run’ to accomplish whatCheeksforbade.” Mei Xing Yu,944F.3dat 425–26(Calabresi, J., dissenting). “As the Second Circuit recognized inCheeks, abuse is clearly evident even in FLSA cases involving offers of judgment under Rule 68.” De Jesus Torres v. HWF Realty Mgmt., Inc., No. 18 CIV. 994 (PAC), 2020 WL 995861, at *2 (S.D.N.Y. Mar. 2, 2020). Under Mei Xing Yu, district courts,“faced with settlements that they would have previously declined to approve pursuant toCheeks, due to attorneys’ fees being too high, or the general release being too broad, for example, [are] forced to direct the Clerk of the Court to enter

judgments submitted pursuant to Rule 68.” Id. This newfound ability for parties to submit broad and unreasonable terms and evade Cheeks review certainly “conflicts with the spirit of” the Second Circuit’s holding in Cheeks, which is designed “to prevent abuses by unscrupulous employers, and remedy the disparate bargaining power between employersand employees.” Segarra v. United Hood Cleaning Corp., No. 15-CV-656 (VSB), 2016 U.S. Dist. LEXIS 189293, at *2 n.1 (S.D.N.Y. Jan. 6, 2016) (internal quotation marks omitted). Here, the parties include terms and conditions in their offer and acceptance of judgment that I would likely deem unreasonable in a settlement agreement submitted pursuant to Cheeks. For example, the offer of judgment contains an overbroad release, with acceptance discharging Defendants of “all claims Plaintiff could have asserted against Defendants, its current and former owners, shareholders, members, directors, employees, affiliated entities, attorneys, agents, insurers, and other related individuals or entities.” (Doc. 41 at 2.) “[C]ourts in this district routinelyreject release provisions that ‘waive practically any possible claim against the defendants, including unknown claims and claims that have no relationship whatsoever to wage-

and-hour issues.’” Gurung v. White Way ThreadingLLC, 226 F. Supp. 3d 226, 228 (S.D.N.Y. 2016) (quoting Lopez v. Nights of Cabiria, LLC, 96 F.Supp. 3d 170, 181 (S.D.N.Y. 2015)). The offer of judgment also sets forth the judgment amount as $10,000, inclusive of attorneys’fees, costs, expenses, and prejudgment interest, but does not indicate how much of that amount will be paid in attorneys’ fees or costs, (Doc. 41 at 1),therefore, making it impossible to ascertain whether the attorneys’fees are reasonable or not. Thus, this term is incompatible with what I would consider a reasonable FLSA settlement under a typical Cheeksapproval process. See Fisher v. SD Prot. Inc., 948 F.3d 593,600 (2d Cir. 2020) (“if attorneys’ fees and costs are provided for in the settlement, district courts will also evaluate the reasonableness of the fees and

costs”); see alsoid. (“[t]he fee applicant must submitadequate documentation supporting the [request]”). However, I find Mei Xing Yucompels me to sign the proposed judgment in contravention to the result I would likely reach under Cheeksregardingthe terms of the parties’ offer and acceptance of judgment. Therefore, pursuant to the Second Circuit’s holding in Mei Xing Yu,it is hereby: ORDERED that judgment be entered in accordance with the parties’ Rule 68 offer. (Docs. 41-42.) The parties’ proposed judgment will be filed simultaneously with this Order. SO ORDERED. Dated: September 16, 2022 New York, New York / . | LAAT NAATOLA tla Vernon S. Broderick United States District Judge