Mei Xing Yu v. Hasaki Restaurant, Inc.

319 F.R.D. 111, 97 Fed. R. Serv. 3d 780, 2017 U.S. Dist. LEXIS 54597, 2017 WL 1424323
CourtDistrict Court, S.D. New York
DecidedApril 10, 2017
Docket16-CV-6094 (JMF)
StatusPublished
Cited by6 cases

This text of 319 F.R.D. 111 (Mei Xing Yu v. Hasaki Restaurant, Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mei Xing Yu v. Hasaki Restaurant, Inc., 319 F.R.D. 111, 97 Fed. R. Serv. 3d 780, 2017 U.S. Dist. LEXIS 54597, 2017 WL 1424323 (S.D.N.Y. 2017).

Opinion

OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:

In Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 200 (2d Cir. 2015), the Second Circuit held that, absent approval by a district court or the Department of Labor (“DOL”), parties “cannot” settle claims under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., “through a private stipulated dismissal with prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii).” The question presented here, which has divided district courts in this Circuit since Cheeks, is whether parties may make an end run around the judicial oversight required by Cheeks by settling FLSA claims pursuant to Rule 68 of the Federal Rules of Civil Procedure instead. Compare, [112]*112e.g., Anwar v. Stephens, No. 15-CV-4493 (JS) (GRB), 2017 WL 455416, at *1 (E.D.N.Y. Feb. 2, 2017) (holding that a Rule 68 settlement is not subject to judicial approval and citing cases), with Sanchez v. Burgers & Cupcakes LLC, 16-CV-3862 (VEC), 2017 U.S. Dist. LEXIS 38292, at *4-6 (S.D.N.Y. Mar. 16, 2017) (holding that a Rule 68 settlement offer is not valid absent DOL or court approval); Toar v. Sushi Nomada of Manhattan, Inc., 13-CV-1901 (VSB), Docket No. 137, op. at 7-14 (S.D.N.Y. Mar. 16, 2017) (same). In a “bottom-line” Order entered on March 21, 2017, the Court indicated that, for reasons to be stated in a forthcoming opinion, it had concluded that judicial approval was required of the parties’ settlement in this case, which was reached pursuant to Rule 68. (Docket No. 24),1 This is that opinion.

The FLSA was enacted “to correct and as rapidly as practicable to eliminate” certain “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.” 29 U.S.C. § 202. To that end, the statute provides various protections to covered employees, including a minimum wage and overtime compensation. See id, §§ 206(a), 207. Significantly, “[r]ecog-nizing that there are often great inequalities in bargaining power between employer’s and employees, Congress made the FLSA’s provisions mandatory; thus, the provisions are not subject to negotiation or bargaining between employers and employees.” Lynn’s Food Stores, Inc. v. U.S. Dep’t of Labor, 679 F.2d 1350, 1352 (11th Cir. 1982) (citing Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 706, 65 S.Ct. 895, 89 L.Ed. 1296 (1945)). Indeed, the Supreme Court has “frequently emphasized the nonwaivable nature of an individual employee’s right to a minimum wage and to overtime pay under the Act.” Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 740, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981). “Thus,” the Court has “held that FLSA rights cannot be abridged by contract or otherwise waived because this would nullify the purposes of the statute and thwart the legislative policies it was designed to effectuate.” Id. (internal quotation marks omitted). Indeed, the statute’s protections apply even “to those who would decline its protections,” as employers might otherwise “be able to use superior bargaining power to coerce employees ... to waive them protections under the Act.” Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 302, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985); see also Brooklyn Sav. Bank, 324 U.S. at 706-07, 65 S.Ct. 895 (describing the FLSA as “a recognition of the fact that due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered national health and efficiency and as a result the free movement of goods in interstate commerce”).

In light of the statute’s unique features and policies, courts have long held that there are only two ways in which FLSA claims can be settled or compromised by employees. First, under Section 216(c) of the statute, the DOL “is authorized to supervise payment to employees of unpaid wages.” See Lynn’s Food Stores, 679 F.2d at 1353. Second, a court “may enter a stipulated judgment after scrutinizing the settlement for fairness.” Id.; see also Wolinsky v. Scholastic Inc., 900 F.Supp.2d 332, 335-36 (S.D.N.Y. 2012) (discussing the judicial approval requirement). In Cheeks, the Second Circuit confronted the question of whether approval in one or the other of these ways was required before parties to a lawsuit involving FLSA claims could settle those claims with prejudice under Rule 41 (a)(1)(A)(ii) of the Federal Rules of Civil Procedure. Citing the language of Rule 41(a)(1)(A) that makes dismissal without a court order “[sjubject to .,. any applicable federal statute,” the Cheeks Court held that such dismissals do indeed “require the approval of the district court or the DOL to take effect,” 796 F.3d at 206. “Requiring judicial or DOL approval of such settlements,” the Court explained, “is consistent [113]*113with ... the PLSA’s underlying purpose: ‘to extend the frontiers of social progress by insuring to all our able-bodied working men and women a fair day’s pay for a fair day’s work.’” Id. (quoting A.H. Phillips, Inc. v. Walling, 324 U.S. 490, 493, 65 S.Ct. 807, 89 L.Ed. 1095 (1945)). Indeed, judicial approval “is necessary” to avoid the “potential for abuse,” including “highly restrictive confidentiality provisions in strong tension with the remedial purposes of the FLSA,” “overbroad release[s],” excessive attorney’s fee awards, and inadequate awards. Id. (internal quotation marks and alteration omitted).

In the wake of Cheeks, litigants have increasingly tried to evade the requirement for judicial or DOL approval by entering into settlements pursuant to Rule 68. These litigants have argued—as the parties do in this case (Docket Nos. 19, 22, 23)—that approval is not required for such settlements because Rule 68 provides that “[t]he clerk must ... enter judgment” of an accepted offer of judgment and lacks any language comparable to Rule 41’s “applicable federal statute” exception that figured prominently in Cheeks. Fed. R. Civ. P. 68 (emphasis added). The majority of courts in this Circuit have agreed, see, e.g., Anwar, 2017 WL 455416, at *1 (citing cases); Arzeno v. Big B World, Inc., 317 F.R.D.

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Bluebook (online)
319 F.R.D. 111, 97 Fed. R. Serv. 3d 780, 2017 U.S. Dist. LEXIS 54597, 2017 WL 1424323, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mei-xing-yu-v-hasaki-restaurant-inc-nysd-2017.