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Castorena v. EL Trompito, Inc.

United States District Court, D. Colorado

November 3, 2014

NOEL CASTORENA, ANGELES SALAS, and ELIZABETH SANCHEZ, on their own behalf and on behalf of all others similarly situated, Plaintiffs,
EL TROMPITO, INC., doing business as El Trompito Taqueria, ANTUNEZ HOLDINGS, INC., doing business as El Trompito, LUIS ALFONSO ANTUNEZ, and SILVIA ANTUNEZ, Defendants.


KRISTEN L. MIX, Magistrate Judge.

This matter is before the Court on the parties' Renewed Joint Motion for Approval of Settlement Agreement as Stipulated Final Judgment [#36] (the "Motion"). The parties request that the Court approve the executed Settlement Agreement [#36-1], which resolves all of Plaintiffs' claims in this matter, some of which are brought pursuant to the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq.

In the context of a private lawsuit brought by an employee against an employer under section § 216(b) of the FLSA, an employee may settle and release FLSA claims against an employer if the parties present the district court with a proposed settlement and the district court enters a stipulated judgment approving the fairness of the settlement. Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1353 (11th Cir. 1982)); see also Sculte, Inc. v. Gandi, 328 U.S. 108, 113 n.8 (1946); Jarrad v. Se. Shipbuilding Corp., 163 F.2d 960, 961 (5th Cir. 1947). In detailing the circumstances justifying court approval of an FLSA settlement in a litigation context, the Eleventh Circuit has stated as follows:

Settlements 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 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.

I. Analysis

In Baker v. Vail Resorts Management Company, No. 13-cv-01649-PAB-CBS, 2014 WL 700096, at *3 (D. Colo. Feb. 24, 2014), the Court held that "[t]o approve the settlement agreement, the Court must find that (1) the litigation involves a bona fide dispute, (2) the proposed settlement is fair and equitable to all parties concerned, and (3) the proposed settlement contains a reasonable award of attorneys' fees." To demonstrate those factors, parties must generally describe the nature of and facts at issue in the action, show that the proposed settlement provides adequate compensation to the plaintiff, and provide for reasonable attorney's fees in the proposed settlement. Id. at *3-8. The Court addresses each of these factors in turn.

A. Bona Fide Dispute

The Court must first determine whether the parties have provided sufficient information to determine whether a bona fide dispute exists. Id. at *1. "The mere existence of an adversarial lawsuit is not enough to satisfy the bona fide dispute requirement." Id. Sufficient information regarding a bona fide dispute consists of the following: "(1) a description of the nature of the dispute; (2) a description of the employer's business and the type of work performed by the employees; (3) the employer's reasons for disputing the employees' right to a minimum wage or overtime; (4) the employees' justification for the disputed wages; and (5) if the parties dispute the computation of wages owed, each party's estimate of the number of hours worked and the applicable wage." Id.

The parties have provided sufficient information in support of their assertion that a bona fide dispute exists. Motion [#36] at 3-7. In short, Plaintiffs claim that Defendants improperly failed to pay its hourly employees overtime wages for hours worked beyond forty each workweek and that Defendants unlawfully seized tips and gratuities restaurant patrons left for Plaintiffs. Compl. [#1] ¶¶ 2-3; see also Motion [#36] at 3-4. Defendants believe that all wages were properly paid but acknowledge that the disputed overtime hours were not recorded and are "therefore subject to dispute coloring settlement." Motion [#36] at 4. The parties have also provided the estimated computation of wages owed based on hours worked and the applicable wage for each Plaintiff in this matter: Noel Castorena, Angela Salas, and Elizabeth Sanchez. Id. at 4-7. In light of the foregoing and the parties' briefing, the Court finds that a bona fide dispute exists.

B. Fair and Equitable Settlement

Second, the Court determines whether the proposed settlement is fair and equitable to all parties concerned. Baker, 2014 WL 700096, at *2. In making this determination, the Court considers: "(1) whether the parties fairly and honestly negotiated the settlement; (2) whether serious questions of law and fact exist which place the ultimate outcome of the litigation in doubt; (3) whether the value of an immediate recovery outweighs the mere possibility of future relief after protracted litigation; and (4) the judgment of the parties that the settlement is fair and reasonable." Id.

Under the terms of the proposed Settlement Agreement, Defendants will pay Plaintiffs $39, 000, of which Plaintiffs will retain $19, 000 and the remainder of which will be paid to Plaintiffs' counsel for attorneys' fees and costs. Motion [#36] at 5-7, 10; Settlement Agreement [#36-1] ¶ 1. According to the Motion, the parties "believe that the recovery contained in the Settlement Agreement is more than what Plaintiffs would have recovered if they were compensated fully for all claims under the [FLSA], inclusive of liquidated damages, but less than full recovery if Plaintiffs were also awarded full damages for Plaintiffs' disputed claims under the Colorado Wage Claim Act for tips allegedly withheld and for civil damages under 26 U.S.C. § 7434, which claims were released, but not pleaded."[1] Motion [#36] at 7. The parties represent that the expense and duration of litigation when coupled with the complexity of the issues render this settlement fair. Id. at 7-9. Moreover, the parties are represented by experienced counsel who believe that the settlement is fair and reasonable. Id. at 8-9. Based on the foregoing, the Court finds that the parties have presented evidence that they fairly and honestly negotiated the settlement.

Next, the Court examines whether the settlement agreement undermines the purpose of the FLSA. Baker, 2014 WL 700096, at *2. The purpose of the FLSA is the protection of employees' rights vis-à-vis employers who generally wield superior bargaining power. Id. A settlement agreement's compliance with the FLSA depends on these factors: (1) presence of other similarly situated employees; (2) a likelihood that the plaintiffs' circumstances will recur; and (3) whether the defendants had a history of non-compliance with the FLSA. Id. (citing Dees v. Hydradry, Inc., 706 F.Supp.2d 1227, 1244 (M.D. Fla. 2010)). There appear to be no other similarly situated employees who have sought to join this action, and there is no indication that Defendants' alleged failure to comply with the FLSA represents a continuing violation or is part of widespread conduct.[2] Motion [#36] at 7-10. Moreover, Plaintiffs are no longer employed by Defendants. Compl. [#1] ¶¶ 8-10. Finally, the Settlement Agreement contains no confidentiality provision, and thus the terms of the settlement are public. Motion [#36] at 7. The case therefore gives notice to future ...

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