Opinion
CASE NO. 20-CV-61902-VALLE
2022-09-22
Peter Joseph NAGY and Elmy Ivan Alonso, Plaintiffs, v. AVENTURA WORLDWIDE TRANSPORTATION SERVICE, INC., et al., Defendants.
Elliot Ari Kozolchyk, Fort Lauderdale, FL, for Plaintiffs. Michael Anthony Pancier, Michael A. Pancier, P.A., Pembroke Pines, FL, for Defendants.
Elliot Ari Kozolchyk, Fort Lauderdale, FL, for Plaintiffs. Michael Anthony Pancier, Michael A. Pancier, P.A., Pembroke Pines, FL, for Defendants. ORDER ON MOTION TO SEVER RELEASE OF PLAINTIFFS' ATTORNEY'S FEES AND COSTS FROM THE PARTIES' SETTLEMENT AGREEMENT AND RELATED RELIEF ALICIA O. VALLE, UNITED STATES MAGISTRATE JUDGE
THIS MATTER is before the Court upon Plaintiffs' counsel's Motion to Sever Release of Plaintiffs' Attorney's Fees and Costs from the Parties' Settlement Agreement, Approve Settlement Agreement, Dismiss Plaintiffs' Claims with Prejudice, and Reserve Jurisdiction to Award Fees and Costs (ECF No. 32) (the "Motion"). Pursuant to the parties' consent, this case is before the undersigned to conduct any and all proceedings in this case. See (ECF Nos. 21, 22).
Although the Motion is captioned as brought on behalf of Plaintiffs, the relief requested reflects that the real party in interest is Plaintiffs' counsel.
Having reviewed the Motion, Defendants' Response (ECF No. 36), and Plaintiffs' Reply (ECF No. 41), and being otherwise fully advised in the matter, the Motion is GRANTED IN PART and the case is DISMISSED WITHOUT PREJUDICE as set forth below.
I. BACKGROUND
This case includes claims under the Fair Labor Standards Act ("FLSA") for alleged violations of the statutory overtime provisions. (ECF No. 1); see 29 U.S.C. §§ 201-216. Plaintiffs filed their Complaint in September 2020. (ECF No. 1). The record does not include any significant motions or hearings before this Court until the instant Motion, filed in May 2022. (ECF No. 32). During the pendency of this federal action, however, the parties engaged in a separate 13-count state court action styled Aventura Limousine & Transportation Service v. Alonso, No. 2021-CACE-005233 (25) in the Seventeenth Judicial Circuit in and for Broward County, Florida. See (ECF No. 36 at 14-63) (the "state court action"). More specifically, in October 2021, Defendants/employer in this case commenced the state court action against Plaintiffs/employees (as defendants in state court) and other corporate entities alleging numerous claims of fraud, breach of fiduciary duties, and theft of trade secrets, among others. See generally id. at 14-63. In May 2022, the parties settled the state court action through a Confidential Settlement Agreement and Release (ECF No. 32-2) (the "state court Settlement Agreement").
In relevant part, the state court Settlement Agreement provided for payment of $20,000 by the Defendants/employer in this case to Wow Global Transportation Corp., a third party corporate entity whose owners/officers/directors are allegedly the Plaintiffs in this federal action. (ECF Nos. 32-2 at 1, 36 at 20). The state court Settlement Agreement also included: (i) a "Whereas" clause referencing the instant FLSA litigation as "the Wage Lawsuit;" (ii) an express dismissal of the Wage Lawsuit with "each side bearing their own attorneys' fees and costs; and (iii) a global release of Plaintiffs' counsel's attorney's fees and costs, which would include the fees and costs incurred in this FLSA litigation. See (ECF No. 32-2 at 1, 2, 3). The instant Motion followed and, at its core, is a dispute brought by Plaintiffs' FLSA counsel to recover his fees and costs incurred in the FLSA case.
In the Motion, Plaintiffs' counsel seeks various forms of relief, including this Court's: (i) severance of the provision in the state court Settlement Agreement generally releasing the obligation to pay FLSA counsel's attorney's fees; (ii) approval of the state court Settlement Agreement as a fair and reasonable resolution of a bona fide FLSA dispute; (iii) dismissal of Plaintiffs' FLSA claims with prejudice; and (iv) reservation of jurisdiction to award FLSA counsel's fees and costs. See generally (ECF No. 32). Defendants oppose the Motion and assert that Defendants are not seeking approval of the state court Settlement Agreement in the instant FLSA case. (ECF No. 36 at 12). Rather, Defendants state that "Plaintiff's counsel's fees were meant to be taken care of by the Plaintiffs; not the Defendants[.]" Id.
II. DISCUSSION
As an initial matter, the Motion fails to provide persuasive authority that this federal court has jurisdiction to sever a provision in a state court Settlement Agreement. To be clear, this action is an FLSA case brought in federal court. (ECF No. 1). Although this federal FLSA case was referenced in the state court Settlement Agreement, that agreement has not been jointly submitted by the parties to this Court for a determination of whether the agreement is a fair and reasonable compromise of Plaintiffs' FLSA claim pursuant to Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982). Indeed, Defendants confirm that they are "not seeking the Court's approval of the state court settlement." (ECF No. 36 at 12). However, Plaintiffs' counsel argues that the state court Settlement Agreement is a "backend deal" designed to circumvent the policy and statutory provisions of the FLSA. (ECF No. 41 at 7). Although facially appealing, counsel's argument, without more, is insufficient to warrant the relief sought in the Motion. Thus, the Motion fails procedurally because Plaintiffs' counsel has failed to establish that this Court has jurisdiction to sever provisions in the state court Settlement Agreement.
Case law cited by Plaintiff's counsel is distinguishable in that those cases involved the severance of provisions in an FLSA settlement agreement reached in an FLSA action pending before the same court. See Johnson v. Citrus Cty. Assoc. for Retarded Citizens, Inc., 2017 WL 7311891, at *3 (M.D. Fla. Jul. 12, 2017) (approving FLSA settlement of federal case while striking certain provisions as unenforceable, including a general release); Schroeder v. P.I.P., Inc., No. 18-CV-61706 (S.D. Fla. Sept. 20, 2018) (ECF No. 18) (approving FLSA settlement of federal case, except for the provision that releases plaintiff's counsel's claim to fees and costs).
The Motion also fails on the merits. In Lynn's Food Stores, the Eleventh Circuit held that "[t]here are only two ways in which back wage claims arising under the FLSA can be settled or compromised by employees." 679 F.2d at 1352. The first is under the supervision of the Secretary of Labor. Id. at 1353; 29 U.S.C. § 216(c). The second, which is "[t]he only other route for compromise of FLSA claims[,] is provided in the context of suits brought directly by employees against their employer to recover back wages for FLSA violations," as in the instant case. Lynn's Food Stores, 679 F.2d at 1353. In the latter scenario, the parties may "present to the district court a proposed settlement" and "the district court may enter a stipulated judgment after scrutinizing the settlement for fairness." Id. Consequently, before the Court can dismiss a case and approve a settlement of the FLSA claims, the court must scrutinize the settlement and determine that it is a "fair and reasonable resolution of a bona fide dispute over FLSA provisions." Id. at 1355. In doing so, courts consider various factors, including: (1) the possible existence of 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 the plaintiff's success on the merits; (5) the range of possible recovery; and (6) the opinions of counsel. See Leverso v. S.Trust Bank of Ala. Nat. Assoc., 18 F.3d 1527, 1531 n.6 (11th Cir. 1994); see also McHone v. Donald P. Hoekstra Plumbing, Inc., No. 10-CV-60322, 2010 WL 4625999, at *1 (S.D. Fla. Nov. 4, 2010); Dees v. Hydradry, Inc., 706 F. Supp. 2d 1227, 1241 (M.D. Fla. 2010). In the end, if the settlement reflects a reasonable compromise over FLSA issues that are actually in dispute, the court may approve the settlement "to promote the policy of encouraging settlement in litigation." Lynn's Food Stores, 679 F.2d at 1354.
Here, Plaintiffs' counsel has filed the state court Settlement Agreement with the Motion. See (ECF No. 32-2). As noted above, the undersigned is not persuaded that this Court has jurisdiction to sever any part of that agreement. Nevertheless, for completeness, the undersigned has compared the state court Settlement Agreement with the litigation record before this Court in an effort to determine whether the state court Settlement Agreement might reflect a fair and reasonable compromise of the federal FLSA claims under Lynn's Foods Stores. The answer is no.
According to the Statement of Claim, for example, Plaintiffs Peter Joseph Nagy and Elmy Ivan Alonso sought unpaid minimum/overtime wages of approximately $32,878 and $10,804, respectively. (ECF Nos. 6-1 at 3, 6-2 at 1). Under the state court Settlement Agreement, however, Defendants/employers paid $20,000 to a third party corporate entity allegedly owned by Plaintiffs/employees. See (ECF No. 32-2 at 1). The stark difference between the amounts claimed in this FLSA case and the amounts recovered through the state court Settlement Agreement by a third party corporate entity weigh against approval of the Settlement Agreement as a fair and reasonable compromise of the FLSA claim. Moreover, there is no argument/evidence establishing the requisite factors used to determine whether the settlement is actually fair and reasonable, including the overall strengths and weaknesses of the parties' positions or the extent to which the FLSA claims where disputed as to liability and amount. Additionally, although Plaintiffs' counsel asserts that the parties exchanged more than 7,000 pages of discovery, counsel nonetheless admits that the parties strategically declined to engage in further discovery (e.g., depositions, discovery requests). See (ECF No. 41 at 2). This strategic decision undercuts counsel's argument that the complexity, duration, and stage of the proceedings warrants a fee award against Defendants in this FLSA case. Furthermore, Plaintiffs/employees were represented by different counsel in the state court action—who purportedly is to be paid from the proceeds of the state court Settlement Agreement, see id. at 7—whose interest may therefore conflict with Plaintiff's counsel's interest in the FLSA case. Thus, this factor also weighs against approval of the state court Settlement Agreement unilaterally presented to the undersigned for approval. For these reasons, the Court cannot find that the state court Settlement Agreement constitutes a fair and reasonable resolution of this FLSA dispute.
Lastly, the undersigned considers Plaintiffs' counsel's overarching argument that counsel should recover reasonable fees and costs from Defendants in this action. See (ECF No. 32 at 12-14). In principle, the undersigned agrees. However, because the Court cannot approve the state court Settlement Agreement as a fair and reasonable resolution of a bona fide FLSA dispute, the Court cannot award Plaintiffs' counsel's reasonable fees and costs in this action. Nevertheless, the parties' maneuver to circumvent the FLSA's requirement that the settlement of FLSA claims be approved by the Secretary of Labor or a court and undisclosed release of Plaintiffs' counsel's FLSA fees through the state court Settlement Agreement without counsel's knowledge is frowned upon by the Court. The Court's ruling, however, is limited by the statutory provisions of the FLSA and the alleged claims in this federal action. Thus, Plaintiffs' counsel's claim for fees and costs, albeit legitimately sought in this case, may be better addressed through enforcement of a charging lien or other equitable relief in state court.
III. CONCLUSION
For the reasons set forth above, it is hereby ORDERED AND ADJUDGED that Plaintiffs' Motion to Sever Release of Plaintiffs' Attorney's Fees and Costs from the Parties' Settlement Agreement, Approve Settlement Agreement, Dismiss Plaintiffs' Claims with Prejudice, and Reserve Jurisdiction to Award Fees and Costs (ECF No. 32) is GRANTED IN PART AND DENIED IN PART. The Motion is GRANTED solely in that the case is DISMISSED WITHOUT PREJUDICE. The Motion is otherwise DENIED.
DONE AND ORDERED in Chambers, at Fort Lauderdale, Florida on September 22, 2022.