United States District Court, E.D. Pennsylvania
CHRISTOPHER MARTINEZ, on behalf of himself and others similarly situated, Plaintiff,
THE IFA GROUP, INC., and JOSEPH McOWEN, Defendant.
D. WOLSON, J.
parties to this case ask the Court to approve their proposed
settlement pursuant to 29 U.S.C. § 216(b). The Court has
reviewed the facts and the proposed settlement and concludes
that it is fair and reasonable, and that counsel has made a
sufficient showing for an award of attorneys' fees.
However, the Court concludes that the broad release included
in the proposed settlement agreement would frustrate the
purpose of the Fair Labor Standards Act and must be narrowed.
Factual Allegations and Procedural History
Martinez alleges in his Complaint that he worked as a
repossessor for The IFA Group (“IFA”) from
September 2016 through June 2018. IFA paid Martinez a
piece-rate for each item of property he repossessed. When he
was not repossessing vehicles, Martinez worked at IFA's
lot in Pottstown, Pennsylvania between the hours of noon and
3 p.m. Martinez alleges that IFA's owner and President,
Joseph McOwen, agreed to pay him $15/hour for every hour he
worked at the lot.
claims in his Complaint that he regularly worked 75-80 hours
per week, though he now concedes that he worked 65-70 hours
per week. He also claims that IFA failed to pay him his
agreed-upon wages for the hours he was at the lot. Martinez
alleges that, based on a 65-70 hour workweek, he was entitled
to unpaid overtime wages between $40, 000 and $45, 000.
Martinez filed his Complaint, Defendants took the position
that the motor carrier exemption in the Fair Labor Standards
Act (“FLSA”), 29 U.S.C. § 213(b)(1), bars
Martinez's claims. Plaintiff's counsel concluded that
the motor carrier exception might preclude Martinez's
claims. Given that risk, the parties agreed to settle the
the terms of the settlement, Defendants will pay a total of
$35, 000: Martinez receives $21, 000; and Plaintiff's
counsel receives $14, 000. In the settlement, Martinez agrees
to release IFA “from any and all charges, complaints,
claims, and liabilities of any kind whatsoever, known or
unknown, suspected or unsuspected … which Martinez at
any time has, had or claimed to have against IFA regarding
events that have occurred as of the date Martinez executes
this Agreement.” (ECF No. 10 at Ex. 1.) The settlement
also includes a non-disparagement provision and choice of law
and forum provisions, among other things.
counsel asserts in the Motion that Scott Pollins spent 30
hours of time on this case, with a suggested rate of
$495/hour, and Tashell Jenkins spent 35 hours on this case,
with a suggested rate of $350/hour. Thus, in total,
Plaintiff's counsel has $27, 700 in fees, as well as
approximately $600 in expenses. Plaintiff's counsel then
suggests that they will lower their fees in order to
effectuate the settlement here. The parties have not
submitted any time records or other information that the
Court can use to assess the claimed fees.
enacted the FLSA to “protect all covered workers from
substandard wages and oppressive working hours
….” Barrentine v. Arkansas-Best Freight
Sys., Inc., 450 U.S. 728, 739 (1981). There are only two
ways that parties can compromise claims under the FLSA: (1) a
compromise supervised by the Department of Labor pursuant to
29 U.S.C. § 216(c); or (2) a settlement that a district
court approves pursuant to 29 U.S.C. § 216(b). See,
e.g., Lynn's Food Stores, Inc. v. U.S. ex rel.
U.S. Dep't of Labor, 679 F.2d 1350, 1354 (11th Cir.
1982); see also Kraus v. PA Fit II, LLC, 155
F.Supp.3d 516, 522-23 (E.D. Pa. 2016) (courts in Third
Circuit generally look to Lynn's Food decision
for guidance). In general, when parties present to the
district court a proposed settlement, “the district
court may enter a stipulated judgment if it determines that
the compromise reached is a fair and reasonable resolution of
a bona fide dispute over FLSA provisions, rather than a mere
waiver of statutory rights brought about by an employer's
overreaching.” See Kraus, 155 F.Supp.3d at 523
proposed settlement resolves a bona fide dispute where its
terms reflect a reasonable compromise over issues, such as
back wages, that are actually in dispute. See Id.
“A dispute is ‘bona fide' where it involves
factual issues rather than legal issues such as the
statute's coverage and applicability.” Flores
v. Eagle Diner Corp., No. 2:18-CV-01206-AB, 2019 WL
3943355, at * 9 (E.D. Pa. Aug. 21, 2019) (quote omitted). For
a bona fide dispute to exist, there must be evidence of the
defendant's intent to reject or actual rejection of that
claim when it is presented. See Id. at 530. If a
bona fide dispute exists, courts conduct a two-part fairness
inquiry to ensure that (1) the settlement is fair and
reasonable for the employee and (2) the agreement furthers
the FLSA's implementation in the workplace. See,
e.g., Kauffman v. U-Haul Int'l, Inc., No.
5:19-cv-0580, 2019 WL 1785453 (E.D. Pa. Apr. 24, 2019).
FLSA provides that, in addition to any judgment awarded to
the plaintiff, the Court “shall … allow a
reasonable attorney's fee to be paid by the defendant,
and costs of the action.” 29 U.S.C. § 216(b). The
Court is required to “articulate” the basis for a
fee award. Kraus, 155 F.Supp.3d ...