United States District Court, S.D. Alabama, Northern Division
WILLIAM H. STEELE, Chief District Judge.
This matter comes before the Court on the parties' Joint Motion for Approval of Settlement Agreement and Entry of Stipulated Judgment (doc. 29).
I. Procedural History.
Plaintiff, Gladys Luker, brought this action against her former employer, Wilcox Hospital Board d/b/a J. Paul Jones Hospital (the "Hospital"), asserting multiple claims for relief under the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. ("FLSA"). In particular, Luker alleged that the Hospital had failed to pay her for hours worked or overtime compensation, as required by §§ 206 and 207 of the FLSA, and that the Hospital had violated the FLSA's anti-retaliation provision by firing her for complaining about unpaid work hours. Aside from her FLSA claims, Luker also asserted a state-law claim against both the Hospital and Elizabeth Kennedy (the Hospital's administrator) for tortious interference with business relations. This claim rested on allegations that defendants had interfered with Luker's business relationship with a company called Med Plus Disability Evaluations by declaring that she could not perform services for Med Plus at the Hospital. For their part, defendants' position was that Luker had been paid all wages she was owed and that her employment at the Hospital had been terminated for legitimate non-retaliatory business reasons.
On June 19, 2014, some four months after Luker filed suit against the Hospital and Kennedy, the parties participated in a settlement conference before Magistrate Judge Bivins. Four days later, the parties notified Judge Bivins that they had reached a mutually agreeable compromise to settle this action in its entirety. ( See doc. 28.) As required by applicable law and Judge Bivins' Order, the parties followed up by filing a detailed Joint Motion for Approval of Settlement Agreement and Entry of Stipulated Judgment. That Motion is now ripe.
A. Statutory Requirement of Judicial Approval of FLSA Settlements.
In the overwhelming majority of civil actions brought in federal court, settlements are not subject to judicial oversight, scrutiny or approval. Congress has specified that FLSA settlements are to be handled differently. Indeed, "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. United States, 679 F.2d 1350, 1352 (11th Cir. 1982); see also Hogan v. Allstate Beverage Co., 821 F.Supp.2d 1274, 1281 (M.D. Ala. 2011) ("Settlement of an action under the FLSA differs from settlement of other claims.... [T]he FLSA's provisions are mandatory and generally not subject to bargaining, waiver, or modification by contract or settlement."); Moreno v. Regions Bank, 729 F.Supp.2d 1346, 1348 (M.D. Fla. 2010) ("Settlement of an action under the FLSA stands distinctly outside the practice common to, and accepted in, other civil actions.").
"Despite this general rule, an employer and an employee may settle a private FLSA suit under the supervision of the district court" where there is a "bona fide dispute over FLSA coverage." Hogan, 821 F.Supp.2d at 1281-82. What this means is that "[w]hen employees bring a private action for back wages under the FLSA, and present to the district court a proposed settlement, the district court may enter a stipulated judgment after scrutinizing the settlement for fairness." Lynn's Food, 679 F.2d at 1353; see also Miles v. Ruby Tuesday, Inc., 799 F.Supp.2d 618, 622-23 (E.D. Va. 2011) ("the reason judicial approval is required for FLSA settlements is to ensure that a settlement of an FLSA claim does not undermine the statute's terms or purposes"); Burkholder v. City of Ft. Wayne, 750 F.Supp.2d 990, 994-95 (N.D. Ind. 2010) ("[s]tipulated settlements in a FLSA case must be approved by the Court... because there is a fear that employers would coerce employees into settlement and waiver of their claims") (citations and internal quotation marks omitted). "If a settlement in an employee FLSA suit does reflect a reasonable compromise over issues, such as FLSA coverage or computation of back wages, that are actually in dispute; we allow the district court to approve the settlement in order to promote the policy of encouraging settlement of litigation." Lynn's Food, 679 F.2d at 1354.
At the core of Lynn's Food, then, is a directive that district courts must evaluate FLSA settlements for fairness, and must not simply rubber-stamp them as approved. The objective of this inquiry is "to ensure that employees have received all uncontested wages due and that they have received a fair deal regarding any additional amount that remains in controversy." Hogan, 821 F.Supp.2d at 1282. In effect, then, courts examine whether the proposed settlement "constitutes a fair and reasonable compromise of a bona fide FLSA dispute." Crabtree v. Volkert, Inc., 2013 WL 593500, *3 (S.D. Ala. Feb. 14, 2013). That said, "[i]n reviewing FLSA settlements under Lynn's Food, courts should be mindful of the strong presumption in favor of finding a settlement fair." Parker v. Chuck Stevens Chevrolet of Atmore, Inc., 2013 WL 3818886, *2 (S.D. Ala. July 23, 2013) (citations and internal quotation marks omitted). Such deference is warranted because, where parties reach a pre-trial, compromise settlement in an FLSA case, "the Court is generally not in as good a position as the parties to determine the reasonableness of an FLSA settlement" and "[i]f the parties are represented by competent counsel in an adversary context, the settlement they reach will, almost by definition, be reasonable." Bonetti v. Embarq Management Co., 715 F.Supp.2d 1222, 1227 (M.D. Fla. 2009).
B. Fairness/Reasonableness of Settlement.
The Joint Motion reflects that the parties did, indeed, have a bona fide FLSA dispute. Significantly, there was a good-faith factual disagreement as to whether the Hospital had paid Luker for all hours she actually worked. If the finder of fact at trial were to resolve that disputed issue in the Hospital's favor, then Luker would recover nothing on her claims for back wages. Likewise, there appeared to be a bona fide factual dispute as to the FLSA retaliation claim, on the question of whether the Hospital terminated Luker's employment for cause or in retaliation for complaining about alleged FLSA violations. To be clear, the point is not whether plaintiff would or would not ultimately have prevailed at trial; rather, the point is that plaintiff's FLSA claims were actually, reasonably in dispute, thereby giving rise to the possibility of a Lynn's Food compromise settlement of those disputed claims.
1. Terms of Settlement.
Against this backdrop of litigation uncertainty, the parties negotiated a compromise settlement that would resolve Luker's claims against the Hospital and Kennedy in their entirety. Specifically, this proposed settlement contemplates that defendants would pay Luker a lump-sum amount of $33, 000, in exchange for which Luker would dismiss with prejudice both this lawsuit and her pending EEOC Charge, and would execute a broad release, pursuant to which she would release the Hospital, its employees and agents from all claims arising out of or connected with Luker's employment at the Hospital or the termination of same. (Doc. 29, Exh. A.) The settlement proceeds would be allocated as follows: (i) payment to Luker of $10, 000 in back wages (representing Luker's estimate of the entire amount of back wages she would receive if she prevailed at trial); (ii) payment to Luker of an additional $8, 000 for ...