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Calle v. Elite Specialty Coatings Plus, Inc.

Nov 19, 2014
13-CV-6126 (NGG) (VMS) (E.D.N.Y. Nov. 19, 2014)


13-CV-6126 (NGG) (VMS)


EDISON CALLE and GONZALO CARVACHO, individually, and on behalf of all others similarly situated, and MIGUEL RECABARREN, Plaintiffs, v. ELITE SPECIALTY COATINGS PLUS, INC. and JOHN VASQUEZ, Defendants.


On November 5, 2013, Plaintiffs Edison Calle and Gonzalo Carvacho brought this putative collective and class action under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201, et seq.; the New York Labor Law ("NYLL"), Article 6, §§ 190, et seq.; and NYLL, Article 19, §§ 650, et seq. (Compl. (Dkt. 1).) On November 13, 2013, opt-in Plaintiff Miguel Recabarren filed a consent to become a party in the collective action. (Consent (Dkt. 4).) Plaintiffs allege that they were formerly employed by Defendants as painters, and that they regularly worked in excess of 40 hours per week without receiving statutory overtime premiums; that Defendants failed to provide required annual wage notices and wage statements; and Plaintiff Calle alleges retaliation. (Compl.) Defendants Elite Specialty Coatings Plus, Inc. and John Vazquez answered the Complaint on January 20, 2014, denying liability in full and asserting, inter alia, that Plaintiffs Carvacho and Recabarren were properly classified as independent contractors and thus not covered by the FLSA. (Answer (Dkt. 9).) On September 29, 2014, the parties filed a joint stipulation of dismissal with prejudice, pursuant to Federal Rule of Civil Procedure 41. (Stip. of Dismissal (Dkt. 19).) Following the court's instruction (Sept. 30, 2014, Order (Dkt. 20)), Plaintiffs filed a motion for judicial approval of the settlement (Ltr. Mot. for Settlement Approval ("Mot. for Approval") (Dkt. 21)), along with a copy of the executed, proposed Settlement Agreement and General Release ("Settlement Agreement") (Dkt. 21-1).

For the following reasons, the court concludes that the terms of the settlement are fair and reasonable. The Settlement Agreement is APPROVED, and the parties' Stipulation of Dismissal (Dkt. 19) is SO ORDERED.

The FLSA places "strict limits on an employee's ability to waive claims for fear that employers [will] coerce employees into settlement and waiver." Mosquera v. Masada Auto Sales, Ltd., No. 09-CV-4925 (NGG), 2011 WL 282327, at *1 (E.D.N.Y. Jan. 25, 2011) (quoting Le v. SITA Info. Networking Computing USA, Inc., No. 07-CV-86 (JS), 2008 WL 724155, at *1 (E.D.N.Y. Mar. 13, 2008)) (internal quotation marks omitted). Before the parties may settle a case brought under the FLSA, the settlement must be judicially approved. See id.; Boucaud v. City of New York, No. 07-CV-11098 (RJS), 2010 WL 4813784, at *1 (S.D.N.Y. Nov. 16, 2010). The court must "scrutinize the settlement for fairness." Boucaud, 2010 WL 4813784, at *1 (quoting Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1353-54 (11th Cir. 1982)). The court considers "whether the agreement reflects a reasonable compromise of disputed issues rather than a mere waiver of statutory rights brought about by an employer's overreaching." Mosquera, 2011 WL 282327, at *1 (quoting Le, 2008 WL 724155, at *1) (internal quotation marks omitted); see also Khait v. Whirlpool Corp., No. 06-CV-6381 (ALC), 2010 WL 2025106, at *7 (E.D.N.Y. Jan. 20, 2010).

When reviewing an FLSA settlement that does not involve a certified class, the court typically examines the following factors: (1) the complexity, expense, and likely duration of the litigation; (2) the stage of the proceedings and the amount of discovery completed; (3) the risks of establishing liability; (4) the risks of establishing damages; (5) the ability of the defendants to withstand a larger judgment; and (6) the range of reasonableness of the settlement amount in light of the best possible recovery and all the risks of litigation. See Peralta v. Allied Contracting II Corp., No. 09-CV-953 (NGG) (RER), 2011 WL 3625319, at *1 (E.D.N.Y. Aug. 1, 2011) (report and recommendation) (citing Misiewicz v. D'Onofrio Gen. Contractors Corp., No. 08-CV-4377 (KAM), 2010 WL 2545439, at *4 (E.D.N.Y. May 17, 2010)), adopted, 2011 WL 3625501 (E.D.N.Y. Aug. 17, 2011). The court should also consider whether the settlement is the result of an arm's length negotiation conducted in good faith by counsel with significant experience litigating wage and hour suits. See D'Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001).

When an FLSA settlement includes an allotment of attorney's fees, the court must also evaluate the reasonableness of the fees. 29 U.S.C. § 216(b); see also Rangel v. 639 Grand St. Meat & Produce Corp., No. 13-CV-3234 (LB), 2013 WL 5308277, at *1 (E.D.N.Y. Sept. 19, 2013) (approving as reasonable a negotiated fee of one-third of the settlement amount, plus costs, in accordance with retainer agreement). This ensures that the agreement is not influenced by conflicts between the interests of counsel and the plaintiff's interest in obtaining the best possible recovery. See Wolinsky v. Scholastic, Inc., 900 F. Supp. 2d 332, 336 (S.D.N.Y. 2012) (citing Silva v. Miller, 307 F. App'x 349, 351 (11th Cir. 2009)).

A consideration of the relevant factors indicates that the settlement is a fair and reasonable resolution of Plaintiffs' claims. Under the terms of the agreement, Defendant will pay a total of $30,000, of which Plaintiffs' counsel will receive one-third as a contingency fee ($10,000) plus expenses ($636.52), consistent with Plaintiffs' retainer agreement with counsel and with the consent to sue form signed by all Plaintiffs; and the remaining $19,363.49 will be allocated among Plaintiffs based on their individual dates of employment, recollections of hours worked, rates paid, and classification as employee or independent contractor. (Mot. for Approval at 1, 3; Settlement Agreement ¶ 1(a)(i)-(v).) Plaintiffs' initial damages calculations as to the best possible recovery, relying on their recollections of hours worked, came to a substantially higher dollar amount: $200,374. (Mot. for Approval at 2.)

The consent to sue form states that counsel will petition the court for costs and for attorneys' fees in the event of any settlement or judgment in the amount that is the greater of (1) a lodestar-calculated award or (2) one-third of the total recovery. (See Consent (Dkt. 4); Compl. at 20-21.) Plaintiffs' counsel represents that the one-third contingency fee set forth in the Settlement Agreement is in fact less than the total lodestar amount incurred by counsel as of the date of the instant motion. (Mot. for Approval at 3.)

Allocation on these bases is reasonable, as it takes into consideration the relative difficulty of proving liability with respect to coverage, as well as the relative likely amount of damages to which each Plaintiff would be entitled. Since all Plaintiffs rely on their recollections with respect to hours worked, any difference in difficulty of proving their respective damages is minor. Specifically, Plaintiff Calle, who was classified as an employee and worked for Defendants from approximately May 21, 2008, to May 17, 2013, at an alleged rate ranging from $16.25 to $20 per hour (Compl. ¶¶ 11, 77; Answer ¶ 11; Mot. for Approval at 1), will receive $5,797.14; Plaintiff Carvacho, who was classified as an independent contractor and allegedly worked for Defendants from approximately 2006 to October 24, 2013, at a rate of $21.50 per hour (Compl. ¶¶ 15, 84; Mot. for Approval at 1), will receive $7,242.10; and opt-in Plaintiff Recabarren, who was classified as an independent contractor (Mot. for Approval at 1), will receive $6,324.25. (Settlement Agreement ¶ 1(a)(i)-(v).) --------

However, given the serious risks to Plaintiffs with respect to establishing liability and damages (see id. at 1-4, 6 (discussing strengths and weakness of Plaintiffs' claims)), the recovery here is a reasonable resolution. For example, Defendants fervently contend that Plaintiffs Carvacho and Recabarren were properly classified as independent contractors, and that Plaintiff Calle was not terminated but voluntarily resigned. (Id. at 3-4.) The parties have colorable factual and legal disputes with respect to the relevant FLSA statute of limitations and whether liquidated damages are recoverable under either or both the NYLL and FLSA. (See id.) Of particular importance to the court's conclusion is that it appears that even if liability were to be established, Plaintiffs' only evidence of the hours they worked—even after the receipt of interrogatory responses and document discovery—are their "recollections," which Defendants argue are incorrect. (Id. at 2, 3, 6; see also Settlement Agreement at 1 (noting that the parties had "exchanged and analyzed payroll and employment documents").)

Additionally, Defendants contend that they are unable to withstand a greater judgment. (See Mot. for Approval at 6 (asserting that Defendants have "consistently asserted that they are contemplating bankruptcy and lack the funds to pay more than the current settlement amount").) Even if Plaintiffs can prove liability and the full damages claimed, Plaintiffs' counsel are not optimistic about the likelihood of Plaintiffs' actually collecting much more than the settlement amount. (See id. at 2, 6.)

Furthermore, the settlement agreement was reached at a relatively early phase in the litigation: after the exchange of written and document discovery, but prior to the completion of fact discovery and any dispositive motion practice or briefing regarding collective or class certification. (See id. at 2, 6; see also Jt. Mot. for Extension of Time to Complete Disc. (Dkt. 17).) The current posture has allowed the parties to assess the strengths and weaknesses of their claims and defenses, while settlement at this time enables the avoidance of more extensive and likely costly litigation going forward. (See Mot. for Approval at 2.)

Finally, the settlement was "hard fought" and negotiated at arm's length over the course of approximately seven months of extensive discussions (id. at 2, 6), in which Plaintiffs were represented by counsel experienced in wage-and-hour litigation. See Flynn v. New York Dolls Gentlemen's Club, No. 13-CV-6530 (PKC) (RLE), 2014 WL 4980380, at *4 (S.D.N.Y. Oct. 6, 2014) ("[Fitapelli & Schaffer, LLP] has acted as lead counsel or co-counsel on dozens of wage and hour class and collective actions" (citing cases)). Plaintiffs represent that they discussed the terms of the settlement with their counsel and fully understand the agreement. (Settlement Agreement ¶ 17.) Accordingly, the court finds that the settlement amount is within the range of reasonableness, in light of the best possible recovery and all the risks of litigation, and "reflects a reasonable compromise over contested issues." Khait, 2010 WL 2025106, at *7.

The court also determines that the attorneys' fees awarded under the agreement are reasonable. A one-third contingency fee is a commonly accepted fee in this Circuit. See Rangel, 2013 WL 5308277, at *1 (approving attorneys' fees of one-third of FLSA settlement amount, plus costs, pursuant to plaintiff's retainer agreement, and noting that such a fee arrangement "is routinely approved by the courts in this Circuit"); Palacio v. E*TRADE Fin. Corp., No. 10-CV-4030 (LAP), 2012 WL 2384419, at *6 (S.D.N.Y. June 22, 2012) ("[T]he percentage of recovery method . . . is consistent with the 'trend in this Circuit.'" (quoting McDaniel v. City of Schenectady, 595 F.3d 411, 417 (2d Cir. 2010) (discussing common fund class actions))). Further, Plaintiff's counsel represents that the amount of fees comes to below the lodestar total. (Mot. for Approval at 3.) Accordingly, the court finds the fee award contained in the settlement to be reasonable.

For the reasons discussed above, the court concludes that the settlement agreement is fair and reasonable. Thus, the settlement is APPROVED and the Stipulation of Dismissal is SO ORDERED. The Clerk of Court is respectfully directed to close the case.


s/Nicholas G. Garaufis


United States District Judge Dated: Brooklyn, New York

November 19, 2014

Summaries of

Calle v. Elite Specialty Coatings Plus, Inc.

Nov 19, 2014
13-CV-6126 (NGG) (VMS) (E.D.N.Y. Nov. 19, 2014)
Case details for

Calle v. Elite Specialty Coatings Plus, Inc.

Case Details

Full title:EDISON CALLE and GONZALO CARVACHO, individually, and on behalf of all…


Date published: Nov 19, 2014


13-CV-6126 (NGG) (VMS) (E.D.N.Y. Nov. 19, 2014)

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