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Lee v. Guyoungtech USA, Inc.

United States District Court, S.D. Alabama, Southern Division

March 23, 2017

JUN SOO LEE, Plaintiff,
v.
GUYOUNGTECH USA, INC., and JIN HAN SON, Defendants.

          ORDER

          KRISTI K. DuBOSE CHIEF UNITED STATES DISTRICT JUDGE

         This action is before the Court on the parties' Joint Motion for Approval of Settlement Agreement and Dismissal with Prejudice and the Settlement Agreement (docs. 21, 21-2). Upon consideration, and for the reasons set forth herein, the Motion is DENIED with leave to re-file on or before April 17, 2017.

         I. Background

         Plaintiff Jun Soo Lee filed this action against Defendants Guyoungtech USA, Inc. and Jin Han Son in the Circuit Court of Conecuh County, Alabama. Plaintiff alleged that Defendants, his employers, violated the Fair Labor Standards Act, 29 U.S.C. § 201, et seq., (FLSA) by failing to pay federally mandated overtime wages from June 1, 2014 through March 12, 2016. 29 U.S.C. § 207. Plaintiff alleges that he was a shipping assistant manager and worked 2, 183 hours of overtime for which he was not compensated at the required one and one-half times his hourly rate ($27.69). He seeks to recover his unpaid overtime compensation in the amount of $90, 678.46 together with liquidated damages[1] plus a reasonable attorney's fee and costs (doc. 1- 1). Defendants removed the action on basis that this Court has original jurisdiction over FLSA action pursuant to 28 U.S.C. § 1331.

         The parties negotiated a Settlement Agreement wherein Plaintiff has compromised his claim. Among other terms and conditions, the parties have agreed that Plaintiff will recover $25, 000.00 to be apportioned $15, 000.00 to Plaintiff and $10, 000.00 to his attorneys in return for dismissal of this action and release of the Defendants (doc. 21-1). The parties have now filed their Joint Motion for Approval of Settlement Agreement and Dismissal with Prejudice and the Settlement Agreement (docs. 21, 21-2).

         II. Analysis

         Pursuant to the FLSA, the Court must determine whether the settlement is a “fair and reasonable resolution of a bona fide dispute” of the claims raised and if so, approve the parties' settlement agreement. Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1354-55 (11th Cir. 1982); Silva v. Miller, 307 Fed.Appx. 349, 351 (11th Cir. 2009); Stalnaker v. Novar Corp., 293 F.Supp.2d 1260, 1263 (N.D. Ala. 2003). In Lynn's Food Stores, the Court of Appeals for the Eleventh Circuit recognized two methods for settlement of claims brought pursuant to the FLSA: Supervision by the Secretary of Labor or by court approval in a private action where plaintiff is represented by counsel. The Eleventh Circuit stated that the FLSA “contemplates that ‘the wronged employee should receive his full wages plus the penalty without incurring any expense for legal fees or costs.'” 679 F.2d. at 351 (citation omitted). In Silva, the Eleventh Circuit noted that the FLSA “contemplates that ‘the wronged employee should receive his full wages plus the penalty without incurring any expense for legal fees or costs.'” 307 Fed.Appx. at 351. “Therefore, in any case where a plaintiff agrees to accept less than his full FLSA wages and liquidated damages, he has compromised his claim within the meaning of Lynn's Food Stores.” Vergara v. Delicias Bakery & Restaurant, Inc., 2012 WL 2191299, *1 (M.D. Fla. May 31, 2012). If the plaintiff has compromised the FLSA claim, the plaintiff may do so only with Court approval of the settlement agreement. The rationale is that

[s]ettlements may be permissible in the context of a suit brought by employees under the FLSA for back wages because initiation of the action by the employees provides some assurance of an adversarial context. The employees are likely to be represented by an attorney who can protect their rights under the statute. Thus, when the parties submit a settlement to the court for approval, the settlement is more likely to reflect a reasonable compromise of disputed issues than a mere waiver of statutory rights brought about by an employer's overreaching. 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 Stores, 679 F.2d at 1354. The Eleventh Circuit concluded that

[o]ther than a section 216(c) payment supervised by the Department of Labor, there is only one context in which compromises of FLSA back wage or liquidated damage claims may be allowed: a stipulated judgment entered by a court which has determined that a settlement proposed by an employer and employees, in a suit brought by the employees under the FLSA, is a fair and reasonable resolution of a bona fide dispute over FLSA provisions.

Lynn's Food Stores, 679 F.2d at 1355.

         Therefore, before entry of a stipulated judgment approving a compromise and settlement, the Court must determine whether there is a “bona fide dispute over FLSA provisions” and then determine whether the proposed Settlement Agreement is a fair and reasonable resolution of that dispute.

         A. Bona fide dispute over FLSA provisions

         Section 216(b) of the FLSA provides that “ ... [a]ny employer who violates the provisions of section 206 or section 207 of this title shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages...” 29 U.S.C. § 216(b).

         “[T]he FLSA obligates employers to compensate employees for hours in excess of 40 per week at a rate of 1 ½ times the employees' regular wages.” Christopher v. SmithKline Beecham Corp., 132 S.Ct. 2156, 2162 (2012) (citation omitted). Section 207 is captioned “Maximum Hours” and paragraph (a)(1) states as follows:

Except as otherwise provided in this section, no employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.

29 U.S.C. § 207(a)(1).

         Upon review of the complaint and answer (docs. 1-1, 2) and the parties' representations in the Joint Motion (doc. 21), the Court finds that there is a “bona fide dispute” over FLSA provisions. Specifically, the parties dispute whether Plaintiff was an hourly non-exempt employee instead of a salaried employee exempt from overtime pay, whether unpaid overtime wages are owed to him, and whether he worked the overtime hours he claimed. The parties also dispute Plaintiff's allegations as to his job duties, whether Defendant Son was Plaintiff's employer, and whether the Defendants are jointly and severally liable to Plaintiff.

         B. Fair and reasonable settlement

         Pursuant to Lynn's Food Stores, the Court must determine whether Lee's compromise and settlement of his claims is fair and reasonable. Lynn's Food Stores, 679 F.2d at 1352-1355. In Silva, the Eleventh Circuit explained that the FLSA imposes “a duty to review the compromise” of an FLSA claim. 307 Fed.Appx. at 352. As a framework, the Court may consider the following factors: “1) the existence of fraud or collusion behind the settlement; 2) the complexity, expense, and likely duration of the litigation; 3) the stage of the proceedings and the amount of discovery completed; 4) the probability of plaintiff's success on the merits; 5) the range of possible recovery; and 6) the opinions of the counsel.” Dees v. Hydradry, Inc., 706 F.Supp.2d 1227, 1241 (M.D. Fla. 2010) (finding that the factors for evaluating the fairness of a settlement in a class action were applicable in an FLSA action); Mason v. Wyndham Vacation Ownership, Inc., 2012 WL 570060 (M.D. Fla. Feb. 17, 2012) (same); Lewkowicz v. F&J's Caffe Italia, LLC, 2016 WL 3438750, at *2 (M.D. Fla. June 23, 2016) (same).

         Also, the Court may approve the settlement of FLSA claims where there are “problems” which warrant a compromise and settlement. Moreno v. Regions Bank, 729 F.Supp.2d 1346 (M.D. Fla. 2010) (“Problems, for example, in proving hours-worked or “non-exempt” status - or the presence of some other lawful defense to payment (if any) - may warrant a reasonable compromise, if the court approves.”); Meek v. Wachovia Corporation, 2007 WL 2728404, 2 (M.D. Fla. Sept. 17, 2007) (“The settlement to Plaintiff is a reflection of the difficulties of proof Plaintiff faced, should he proceed to trial, and makes allowances for the inherent difficulties and costs of a trial.”).

         With the foregoing in mind, the Court now reviews Plaintiff's compromise of his claims and the terms and ...


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