Tag Archives: FLSA Settlements

M.D.Fla.: Approval of Settlement Agreement That Hinged on Results of Lie Detector Test Denied

Brooke v. Administrative Maintenance Services, LLC

Generally, we post cases here that feature issues that are likely to come up in other cases.  Other times we post cases simply because they involve interesting fact patterns or scenarios.  This case falls in the latter category.  Here, the case was before the court on the parties’ joint motion to approve their settlement.  However, this was no ordinary settlement.  Instead, based on concerns pertaining to plaintiff’s credibility, regarding the number of improperly compensated overtime hours claimed by plaintiff, and the defendants’ assertions that they were due various offsets based on unrelated transactions between the parties, the parties entered into a unique settlement agreement, following mediation.

In order to resolve the various issues, largely involving the credibility of the parties, the parties agreed that the plaintiff would submit to a lie detector case, the results of which would dictate what, if any, amounts of damages plaintiff would recover under the settlement.

As described by the court:

“The parties… agreed that Mr. Brooke will be asked, in a format crafted by the operator of the lie detector, whether he worked five, ten, and, finally, fifteen hours per week, on average, of overtime. If the operator concludes Mr. Brooke worked no overtime, Mr. Brooke will dismiss his case and reimburse the Defendants one-half of the lie detector administrator’s fee to the Defendants. If the operator concludes Mr. Brooke did work overtime in the brackets described above, he will be paid the greatest number of average weekly overtime he credibly answers about, per week, times $12.00 (one-half his base rate of $12.00 per hour and an equal amount in liquidated damages), times the eighty one weeks he was employed by the Defendants. If the result is inconclusive, the Defendants will pay a total of $10,000.00, including fees and costs.”

While the court noted the settlement might be fair, depending on the amounts ultimately payable to plaintiff under the agreement, the court declined to approve the settlement citing the contingency nature of the settlement and the fact that it was unclear how much plaintiff would receive.  The court reasoned:

“The Court does not quarrel with the parties’ contention that this approach is quicker and cheaper than a jury. The same can be said, however, as dueling and coin flips. The standard is not whether a resolution is quick and cheap, but whether it is fair and reasonable. There is no showing here that conditioning an award based on the ability to pass a lie detector test is either of those things.

To be clear, the Court is not finding that settlement in the amounts suggested would not be fair. If the parties had presented an agreement for Defendant to pay $10,000, for example, the Court could evaluate that sum in view of all of the pertinent considerations supporting a settlement, and could issue a recommendation on same. As long as there was an agreement as to an amount rationally related to the claim, and the Court found the settlement to be voluntary and objectively fair and reasonable, it would not matter if the actual numbers were reached via lie detector test, rock-paper-scissors, or drawing straws. Here, however, the parties are not asking the Court to approve a settlement—they are asking the Court to approve a method of reaching a settlement. This is beyond the scope of the fairness finding duties set forth in Lynn’s Food.

For these reasons, it is respectfully recommended that the Court deny the motion, without prejudice to renewal, if appropriate, upon clarification of the status of the corporate Defendants and upon a presentation of terms that are consistent with the principles discussed herein.”

Click Brooke v. Administrative Maintenance Services, LLC to read the entire Report and Recommendation, which was ultimately adopted in full by the presiding District Court Judge.

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S.D.N.Y.: Court Refuses To Allow “Settlement” That Grossly Undervalued FLSA Claims To Serve As Basis For Summary Judgment

Latacela v. Cohen

This case involved an action under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq., for unpaid minimum wages and unpaid overtime wages.  The case was before the court on defendants motion for summary judgment and for judicial approval of a settlement allegedly reached by the parties.  The plaintiff opposed the defendants’ motion on the basis that he had withdrawn support for the settlement because the sum certain agreed to by the parties was based on faulty calculations by the plaintiff.  Plaintiff asserted that he had mistakenly calculated that he was owed $1,415.82 in unpaid minimum wages, rather than $14,170.  This miscalculation also affected the amount the plaintiff claimed in liquidated damages, since employees are entitled to liquidated damages (in addition to back wages) equal to the amount of unpaid wages. 29 U.S.C. § 216(b).

Denying the defendants’ motion, the court reasoned:

” ‘There are only two ways in which back wage claims arising under the FLSA can be settled or compromised by employees. First, under [29 U.S.C. § 216(c) ], the Secretary of Labor is authorized to supervise payment to employees of unpaid wages owed to them. Second [sic] when 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.’ Manning v. New York Univ., 2001 WL 963982 (S.D.N.Y. Aug. 22, 2001). Even assuming that the agreement defendant presses the Court to approve remains valid, the Court is not satisfied that it is fair. Under the agreement, the plaintiff would receive approximately $28,000 less than the amount he claims he is owed not for strategic reasons, but rather because plaintiff’s counsel made an arithmetical error. Cf. Elliot v. Allstate Investigations, Inc., 2008 WL 728648, at *2 (S.D.N.Y. Mar. 19, 2008) (approving settlement of less than half the amount plaintiff claims he was owed under the FLSA when the plaintiff could not support his claims through documentary evidence and the defendant could not pay more than the amount agreed to).

Accordingly, defendant’s motion for summary judgment is DENIED.”

Click Latacela v. Cohen to read the entire opinion.

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D.Md.: FLSA Plaintiffs Residing In Honduras May Testify At Trial Via Videoconference; Good Cause Demonstrated By Visa Issues And Cost Of Travel

Lopez v. NTI, LLC

This case was before the Court on several motions.  As discussed here, several of the plaintiffs who resided out of state and out of the country, requested that they be permitted to testify at trial via videoconference in lieu of appearing in person in court.  Granting plaintiffs motion in part and denying in part, the court held that the international plaintiffs had demonstrated the requisite good cause, because of visa issues and high cost of international travel.  However, the court denied the out of state plaintiffs’ motion for failure to demonstrate the requisite good cause.

Discussing the plaintiffs’ motion, the Court reasoned:

“Plaintiffs have moved for an order permitting certain Plaintiffs residing in Honduras, Tennessee, and Virginia to testify via “contemporaneous transmission” (Paper 70), namely videoconferencing. In support, Plaintiffs note the difficulty of securing a visa from Honduras and the substantial expense of travel. Defendants oppose, arguing that (1) the non-resident Plaintiffs need to be in the courtroom to establish their identity, (2) the use of videoconferencing would impede central credibility determinations, and (3) financial considerations weigh in favor of Defendants, not Plaintiffs.

Federal Rule of Civil Procedure 43 governs the taking of testimony at trial. That rule expressly provides for the possibility of videoconference testimony, stating that “[t]he court may, for good cause shown in compelling circumstances and upon appropriate safeguards, permit presentation of testimony in open court by contemporaneous transmission from a different location.” Fed.R.Civ.P. 43(a). Although Rule 43 provides some flexibility in accepting remote testimony, it seems obvious that remote transmission is to be the exception and not the rule. See Fed.R.Civ. P. 43 advisory committee’s note on 1996 amendments (“The importance of presenting live testimony in court cannot be forgotten. The very ceremony of trial and the presence of the factfinder may exert a powerful force for truth telling. The opportunity to judge the demeanor of a witness face-to-face is accorded great value in our tradition.”). Courts have also recognized that, even with the benefits that technology provides, substitutes for live testimony are necessarily imperfect:

Videoconference proceedings have their shortcomings. Virtual reality is rarely a substitute for actual presence and … even in an age of advancing technology, watching an event on the screen remains less than the complete equivalent of actually attending it. The immediacy of a living person is lost with video technology…. Video conferencing … is not the same as actual presence, and it is to be expected that the ability to observe demeanor, central to the fact-finding process, may be lessened in a particular case by video conferencing. This may be particularly detrimental where it is a party to the case who is participating by video conferencing, since personal impression may be a crucial factor in persuasion.  Thornton v. Snyder, 428 F.3d 690, 697 (7th Cir.2005) (quotations and citations omitted).

Despite videoconferencing’s deficiencies, courts in this circuit and elsewhere have approved or affirmed its use in the civil context. See generally Rusu v. INS, 296 F.3d 316 (4th Cir.2002) (asylum proceeding); United States v. Baker, 45 F.3d 837 (4th Cir.1995) (civil commitment hearing); Edwards v. Logan, 38 F.Supp.2d 463 (W.D.Va.1999) (civil rights action); see also In re Merck Prods. Liab. Litig., 439 F.Supp.2d 640, 642 (E.D.La.2006) (listing cases). These cases reflect a “consistent sensitivity to the utility of evolving technologies that may facilitate more efficient, convenient, and comfortable litigation practices.” 9A Wright & Miller, Federal Practice & Procedure § 2414 (3d ed.2008). And while videoconferencing has its shortcomings, it at least appears to be favorable to alternative methods, such as the submission of written deposition testimony. Sallenger v. City of Springfield, No. 03-3093, 2008 WL 2705442, at *1 (C.D.Ill. July 9, 2008).

In this case, Plaintiffs have demonstrated good cause as to those Plaintiffs residing in Honduras. The cost of international travel can provide good cause for contemporaneous transmission of testimony. See, e.g., Dagen v. CFC Grp. Holdings, No. 00 Civ. 5682, 2003 WL 22533425, at *2 (S.D.N.Y. Nov. 7, 2003). In some cases, travel cost and inconvenience have justified contemporaneous transmission even when the parties where located within the United States, in contrast to the internationally resident Honduran Plaintiffs in this case. See, e.g., Beltran-Terado v. INS, 213 F.3d 1179, 1186 (9th Cir.2000) (affirming use of telephonic testimony for hearing in California where witness was in Missouri); Scott Timber, Inc. v. United States, No. 05-708C, 2010 WL 2947090, at *1 (Fed.Cl. July 28, 2010) (approving use of videoconferencing for trial in Washington, D.C., where witness was in Oregon); Fed. Trade Comm’n v. Swedish Match N. Am., Inc., 197 F.R.D. 1, 2 (D.D.C.2000) (finding good cause for videoconferencing where witness was in Oklahoma and hearing was in Washington, D.C.). Forcing the Honduran Plaintiffs in this case to travel to the United States would impose substantial inconvenience and cost on persons with strikingly few financial resources. (Paper 76-1). When viable alternatives like videoconferencing are available, compelling individuals who make no more than $7,000 a year to travel hundreds of miles seems fundamentally unjust. And although the court sympathizes with Defendants’ claim that this litigation has already imposed substantial costs on them as well (Paper 75, at 4-5), those costs do not justify imposing needless expense on Plaintiffs.

The use of videoconferencing for the Honduran Plaintiffs will not prejudice Defendants. Each of the witnesses will testify in open court, under oath, and will face cross-examination. Even if Defendants are correct that this case presents complicated issues (Paper 75, at 3), the protections of the oath and cross-examination will provide them with the tools necessary to resolve those issues. With videoconferencing, a jury will also be able to observe the witness’ demeanor and evaluate his credibility in the same manner as traditional live testimony. Indeed, one judge who presided over two hearings using videoconferencing has concluded that “there is no practical difference between live testimony and contemporaneous video transmission.” Swedish Match, 197 F.R.D. at 2; see also Scott Timber, 2010 WL 2947090, at *1 (observing that videoconferencing does not have a “significantly adverse effect” on factfinder’s ability to make credibility determinations).

Plaintiffs’ motion is not limited to the Honduran Plaintiffs; it requests an order permitting contemporaneous transmission of testimony for all Plaintiffs “outside a 100 mile radius of this Court.” (Paper 70-2). Although Plaintiffs have shown good cause as to the Honduran Plaintiffs, good cause has not been shown as to the remaining Plaintiffs. Plaintiffs do not address the Plaintiff residing in Richmond, Virginia anywhere in the motion papers, and the court cannot discern any reason why the Richmond Plaintiff would be unable to attend. The court is also unconvinced that the financial expense of travelling from Tennessee merits videoconferencing for that witness. Therefore, Plaintiffs’ motion will be denied as to those two witnesses.

In sum, Plaintiffs have shown good cause for contemporaneous transmission of the testimony of those Plaintiffs currently residing in Honduras. Those Plaintiffs are Marvin A. Mejia, Jesus Orellana, Victor Perez, Juan Pineda Gonzalez, Josue Roberto Pineda, Nery Armando Pineda, and Oscar Pineda. The Plaintiffs have not shown good cause as to any other Plaintiff.”

Not discussed here, the Court also denied Defendants’ motion for summary judgment based upon the plaintiffs prior settlement of a portion of their claims with some of the co-defendants.

To read the entire opinion, click here.

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