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Manohar v. Sugar Food LLC

United States District Court, D. Colorado

July 26, 2017

SUGAR FOOD LLC d/b/a Jai Ho, SUGAR BHAVAN LLC d/b/a Jai Ho Boulder, SUGAR DOSA LLC d/b/a Jai Ho Park Meadows, SATHYA NARAYA, an individual, and SUJATHA NARAYAN, an individual, Defendants.


          Nina Y. Wang, United States Magistrate Judge

         Magistrate Judge Nina Y. Wang This civil action is before the court on Plaintiffs' Unopposed Motion for Approval of Fair Labor Standards Act Settlement (“Motion for Approval”). [#61, filed July 14, 2017]. Under the authority of 28 U.S.C. § 636(c) and the Order of Reference dated January 3, 2017 [#22], the court has considered the Motion for Approval, the associated brief, and the applicable case law. For the following reasons, the Motion is DENIED without prejudice.


         On September 29, 2016, Plaintiff Aswinraj Manohar initiated this lawsuit for violations of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq., the Colorado Wage Claim Act (“CWCA”), Colo. Rev. Stat. § 8-4-101, et seq., and the Colorado Minimum Wage Order for unpaid and underpaid wages he earned while employed at Defendants' Indian restaurants as a server and cashier and for “general front of the house” duties. [#1]; see also [#40]. On December 16, 2016, Defendants filed an Answer that included one counterclaim consisting of nine paragraphs. [#15 at 7-8].

         On February 9, 2017, Mr. Manohar amended his Complaint with leave of court to add Plaintiff Packiaraj Veeran. [#39, #40]. The First Amended Complaint pleads one claim for FLSA violations asserted by both Plaintiffs against all Defendants, and one claim for violations of the CWCA asserted by both Plaintiffs against Defendants Sugar Food LLC d/b/a Jai Ho, Sugar Bhavan LLC d/b/a Jai Ho Boulder, and Sugar Dosa LLC d/b/a Jai Ho Park Meadows (the “Corporate Defendants”). See [#40 at 7, 9]. Plaintiffs plead that Defendants were their employers at all times relevant to this lawsuit. On February 23, 2017, Defendants filed an Answer in which Defendant Sugar Bhavan, LLC d/b/a Jai Ho Boulder (“Sugar Bhavan”) asserted three Counterclaims for Conversion, Civil Theft, and Breach of Fiduciary Duty against Plaintiff Manohar. [#41]. On March 16, 2017, Plaintiff Manohar filed a motion to dismiss arguing that the Counterclaims constitute “improper retaliation in violation of the FLSA and CWA's anti-retaliation provisions, ” and “must be dismissed as they do not arise out of a common nucleus of operative facts with Plaintiffs' FLSA/CWA wage claims.” [#45]. Sugar Bhavan (and “the other Defendants to the extent impacted”) filed a Response on April 6, 2017. [#57]. Plaintiff Manohar filed a Reply on April 20, 2017. [#58]. Before the motion to dismiss could be fully adjudicated, however, the Parties notified the court that the matter had been settled.

         On June 30, 2017, the Parties filed a Notice of Settlement stating that they had “reached a mutually-acceptable settlement in this action.” [#59]. On July 14, 2017, Plaintiffs filed the Motion for Approval and accompanying brief. [#61]. The same day, the court denied the motion to dismiss Counterclaims as moot in light of the Motion for Approval, permitting leave for Plaintiffs to renew their motion should the settlement fail. [#64]. The court exercises jurisdiction pursuant to 28 U.S.C. § 1331 and supplemental jurisdiction pursuant to 28 U.S.C. § 1367.


         Within the context of a lawsuit brought directly by employees against their employer under section 216(b) to recover back wages for FLSA violations, and upon consideration of whether the proposed settlement is fair, the district court may enter a stipulated judgment approving the agreement and dismissing the action. Baker v. Vail Resorts Management Co., No. 13-cv-01649-PAB-CBS, 2014 WL 700096 (D. Colo. Feb. 24, 2014) (citing Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1353 (11th Cir. 1982)). Approval is appropriate upon demonstration 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. Baker, 2014 WL 700096, at *1 (citing Lynn's Food Stores, 679 F.2d at 1354).

         Recently, as noted by the Parties, a court in this District called into question whether an FLSA settlement requires court approval, absent any special circumstance. See Ruiz v. Act Fast Delivery of Colorado, Civil No. 14-cv-00870-MSK-NYW, ECF 132, (D. Colo. Jan. 9, 2017) (unpublished).[1] Upon consideration of a motion to approve a settlement in an FLSA matter, the Ruiz court found that, with few exceptions, such settlements do not require court approval. Id. Because the issue is not yet settled by the Tenth Circuit, this court proceeds with applying the standard utilized by courts in this District to consider whether it can approve the settlement.

         I. Bona Fide Dispute

         For the court to discern whether a bona fide dispute exists, the parties must present: (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 employee; (3) the employer's reasons for disputing the employee's right to a minimum wage or overtime; (4) the employee's 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. Baker, 2014 WL 700096, at *1.

         This court finds that the Parties adequately describe their dispute. As stated above, Plaintiffs worked at Defendants' Indian restaurants as servers, cashiers, cooks, and for “general front of the house” duties. [#40 at ¶ 2]; see also [#62 at 3]. They claim that Defendants failed to pay them minimum wage and overtime as required under the FLSA. In the brief filed in support of the Motion for Approval, the Parties note that Defendants believe they are exempt from the FLSA due to the Act's minimum monetary threshold, and that, even if the FLSA applies, Plaintiffs were properly classified as exempt employees. [#62 at 4]. Plaintiffs contend that the Indian restaurants are involved in a single integrated enterprise, Defendants' enterprise generates sufficient revenue to satisfy the monetary threshold, they did not qualify as exempt employees, and Defendants paid them a flat salary that did not account for the hours they worked in excess of 40 hours per week. [Id.] The Parties assert that through the exchange and analysis of document discovery and review of witness accounts, they focused settlement discussions on “the eight weeks of alleged non-payments” for Plaintiff Manohar, and the “seven weeks of wholly unpaid wages” for Plaintiff Veeran because each side understood the potential difficulties and risks in identifying the overtime hours worked. [Id. at 4-5]. After negotiating the method of calculating the Parties' regular rate and hours worked, the Parties arrived at a settlement figure of $17, 500.00 to compensate Plaintiff Manohar, and a figure of $7, 500.00 for Plaintiff Veeran. [Id. at 5]. Based on the information the Parties provide through the Amended Complaint and the Motion for Approval and associated brief, as well as consideration of the docket as a whole, the court finds that a bona fide dispute led to the settlement negotiation and resulting terms.

         II. Fair and Equitable Settlement Agreement

         “To be fair and reasonable, an FLSA settlement must provide adequate compensation to the employees and must not frustrate the FLSA policy rationales.” Baker, 2014 WL 700096, at *2. The “prime purpose” in enacting the FLSA “was to aid the unprotected, unorganized and lowest paid...employees who lack[ ] sufficient bargaining power to secure for themselves a minimum subsistence wage.” Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 707, n.18 (1945). See also Christopher v. SmithKline Beecham Corp.,132 S.Ct. 2156, 2162 (2012) (“Congress enacted the FLSA in 1938 with the goal of protect[ing] all covered workers from substandard wages and oppressive working hours.”) (citation omitted). “Normally, a settlement is approved where it is the result of “contentious arm's-length negotiations, which were undertaken in good faith by counsel…and serious questions of law and ...

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