United States District Court, D. Colorado
DAVID SLAUGHTER, on behalf of himself and all others similarly situated, Plaintiff,
SYKES ENTERPRISES, INC., doing business as Sykes Home Powered by Alpine Access, Defendant.
Kristen L. Mix United States Magistrate Judge.
matter is before the Court on Plaintiff's
Unopposed Motion for Approval of Collective Action
Settlement, Service Payments, and Attorneys' Fees and
Costs [#109] (the “Motion”). Plaintiff
requests that the Court approve the executed Settlement
Agreement [#110-1], which resolves all of Plaintiff's and
Collective Members' claims in this matter pursuant to the
Fair Labor Standards Act (“FLSA”), 29 U.S.C.
§ 201 et seq.
context of a private lawsuit brought by an employee against
an employer under section § 216(b) of the FLSA, the
prevailing opinion prior to January 2017 in the District of
Colorado has been that 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, pursuant to Lynn's Food Stores, Inc.
v. United States, 679 F.2d 1350, 1353 (11th Cir. 1982).
In detailing the circumstances justifying court approval of
an FLSA settlement in a litigation context, the Eleventh
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, 679 F.2d at 1354.
on January 9, 2017, the court issued an order in Ruiz v.
Act Fast Delivery of Colorado, Inc., No.
14-cv-00870-MSK-NYW, ECF No. 132 (D. Colo. Jan. 9, 2017)
(unpublished), ultimately holding after a thorough discussion
that “absent special circumstances, FLSA settlements do
not require court approval.” Since that time, courts in
this District have approached court approval of FLSA
settlements in a variety of ways.
Prim v. Ensign United States Drilling, Inc., No.
15-cv-02156-PAB-KMT, 2017 WL 3641844 (D. Colo. Aug. 24,
2017), Davis v. Crilly, 292 F.Supp.3d 1167 (D. Colo.
2018), and Ostrander v. Customer Engineering Services,
LLC, No. 15-cv-01476-PAB-MEH, 2018 WL 1152265 (D. Colo.
Mar. 5, 2018), the court adjudicated motions to approve FLSA
settlements pursuant to Lynn's Food without
acknowledging Ruiz or other opinions calling into
question the mandatory application of Lynn's
Manohar v. Sugar Food LLC, No. 16-cv-02454-NYW, 2017
WL 3173451, at *2 (D. Colo. July 26, 2017), and Teague v.
Acxiom Corporation, No. 18-cv-01743-NYW, 2018 WL
3772865, at *1 (D. Colo. Aug. 9, 2018), the court
acknowledged Ruiz, stating: “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.
Because the issue is not yet settled by the United States
Court of Appeals for the Tenth Circuit . . ., this court
proceeds with applying the standard utilized by courts in
this District to consider whether it can approve the
settlement.” Teague, 2018 WL 3772865, at *1.
The court there further stated:
The court notes that the Ruiz court does not stand
alone on this issue. Courts outside of this District have
similarly questioned whether judicial approval of FLSA
settlements is required or even appropriate, observing that
parties may, with certain exceptions, manage the resolution
of their cases independent of judicial intervention under
application of Rule 41 of the Federal Rules of Civil
Procedure. See Picerni v. Bilingual Seit & Preschool
Inc., 925 F.Supp.2d 368, 375 (E.D.N.Y. 2013);
Martinez v. Bohls Bearing Equipment Co., 361
F.Supp.2d 608, 618-31 (W.D. Tex. 2005). Recently, in
Cheeks v. Freeport Pancake House, Inc., the Second
Circuit addressed the issue in a matter of first impression
and held that parties cannot enter into private settlements
of FLSA claims without either the approval of the district
court or the Department of Labor. 796 F.3d 199 (2d Cir. 2015)
(determining that the FLSA is an “applicable federal
statute” within the meaning of Rule 41, and thus an
exception to the operation of Rule 41). In reaching its
decision, the Cheeks court considered the potential
for abuse in FLSA settlements against the FLSA's
underlying purpose “to extend the frontiers of social
progress by insuring to all our able-bodied working men and
women a fair day's pay for a fair day's work, ”
and the Supreme Court's consistent efforts to
“interpret[ ] the Act liberally and afford[ ] its
protections exceptionally broad coverage.” Id.
at 206 (citations omitted). To this court's knowledge,
the Tenth Circuit has not yet entered the debate or otherwise
provided guidance as to whether the FLSA falls within the
federal statute exception to Rule 41.
Id. at *1 n.1.
Thompson v. Qwest Corporation, No.
17-cv-01745-WJM-KMT, 2018 WL 2183988, at *1-2 (D. Colo. May
11, 2018), the court acknowledged that requiring court
approval of FLSA settlements under all circumstances had
become unsettled law but ultimately decided to assume it must
approve the settlement:
The Court understands that certain recent decisions,
including from this District, have held that FLSA settlements
do not require judicial approval. See Martinez v. Bohls
Bearing Equip. Co., 361 F.Supp.2d 608 (W.D. Tex. 2005);
see also Ruiz et al. v. Act Fast Delivery of Colorado,
Inc., et al., No. 14-cv-870-MSK-NYW, ECF No. 132 (D.
Colo., Jan. 9, 2017). These decisions generally question the
correctness of the holding in Lynn's Food Stores,
Inc. v. United States, 679 F.2d 1350, 1355 (11th Cir.
1982), that the FLSA prohibits private compromise of wage
claims. Lynn's Food is the authority on which
most courts, including this one, have relied as the basis for
exercising authority over FLSA settlements. See,
e.g., Stransky et al. v. HealthONE of Denver,
Inc., No. 11-cv-2888-WJM-MJW, ECF No. 326 (D. Colo.,
Nov. 10, 2015).
Under Lynn's Food, courts employ procedures
analogous to Rule 23 class action settlements. See
Whittington v. Taco Bell of Am., Inc., 2013 WL 6022972,
at *4 (D. Colo. Nov. 13, 2013). One might assume that Rule 23
procedures have been imported to the FLSA settlement context
because FLSA claims may be brought as collective actions,
which are somewhat similar to class actions. However, such an
assumption is probably mistaken. The reasoning of
Lynn's Food applies equally well to an
individual settlement of an FLSA claim as it might to a
collective action. Lynn's Food concludes that a
settlement for less than the full value of the wages and
liquidated damages available under the FLSA is essentially a
waiver of FLSA rights, and Congress did not intend FLSA
claims to be waivable in any sense. 679 F.2d at 1352.
Having concluded as much, Lynn's Food might have
stopped there and concluded that FLSA settlements are
prohibited in all circumstances. However, Lynn's
Food drew upon a distinction it saw in Supreme Court
case law “between a settlement agreement and a
stipulated judgment entered in the adversarial context of an
employees' suit for FLSA wages.” Id. at
1353 n.8. Based on this distinction, Lynn's Food
concluded that “a district court may enter a stipulated
judgment after scrutinizing the settlement for
fairness.” Id. at 1353; see also Id.
at 1355 (“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”). Since then, Lynn's
Food has been both honored as the pronouncement of a
court's duty to scrutinize FLSA settlements and yet also
partly ignored, since courts do not always enter a stipulated
judgment (as opposed to approving the settlement qua
Whether Lynn's Food was correctly decided is
certainly open to question. See, e.g., Manohar
v. Sugar Food LLC, 2017 WL 3173451, at *5 n.1 (D. Colo.
July 26, 2017). But no party here has raised that question
and the Court sees no reason to explore it sua
sponte at this time. Accordingly, the Court will go
forward under the assumption that it must approve the
recently in the District of Colorado,  in Fails v. Pathway
Leasing LLC, No. 18-cv-00308-CMA-NYW, 2018 WL 6046428
(D. Colo. Nov. 19, 2018), the court thoroughly reviewed
Lynn's Food, Ruiz, and other relevant
legal authority to join the holdings of other recent court
opinions that, absent exceptional circumstances, the Court
need not review and provide approval for FLSA settlements.
The Fails court first noted that the Ruiz
court reasoned that “nothing in the text of the FLSA
expressly requires court review and approval of settlements,
” and thereby joined other courts which had held
“that an FLSA claim that is genuinely disputed by the
employer may be compromised via private settlement between
the parties, and . . . such settlement will be legally
effective regardless of whether [the settlement is] submitted
to or approved by the trial court.” Fails,
2018 WL 6046428, at *2 (quoting Ruiz, ECF No. 132,
at 2, 6) (citations omitted).
Ruiz court further noted that “[r]ather than
being statutorily mandated, the practice of seeking court
approval for all FLSA settlements is rooted in an 11th
Circuit decision, which held that ‘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 . . . is a
fair and reasonable resolution of a bona fide dispute over
FLSA provisions.'” Fails, 2018 WL 6046428,
at *2 (quoting Ruiz, ECF No. 132, at 2 (citing
Lynn's Food, 679 F.2d at 1355)). Fails,
Ruiz, and other courts have determined that
“the 11th Circuit's holding pertains specifically
to the settlement of what did not amount to a bona fide
dispute, ” Fails, 2018 WL 6046428, at *2,
because “the Lynn's Food's requirement
for judicial approval of voluntary settlements was driven by
its facts - the employer overreached the employees in
inducing them to settle unasserted and unevaluated claims for
a small amount of money, ”-and because the employees
were “largely unaware of the fact that they had rights
under the FLSA, and had not been advised by an attorney
before signing the agreements; indeed, many did not speak
English.” Ruiz, ECF No. 132, at 4.
Fails court next noted that “[t]he limited
prohibition on FLSA settlements that are made in the absence
of a bona fide dispute is supported by Supreme Court
precedent.” 2018 WL 6046428, at *2 (citing Brooklyn
Savings Bank v. O'Neil, 342 U.S. 697 (1945)
(distinguishing between impermissible waivers of FLSA rights
and settlements of bona fide disputes). The Fails
court went on to state:
the 11th Circuit's Lynn's Food holding is
correct to the extent that it followed the Supreme
Court's instruction that settlements of non-bona fide
disputes are invalid. It is analytically erroneous, however,
to rely on Lynn's Food's reasoning to extend
settlement restrictions to bona fide settlements which-as the
Supreme Court recognized-are qualitatively distinct.
Moreover, as Chief Judge Krieger noted in Ruiz,
although “[t]here may be a small number of employers
who will resort to subterfuge, misdirection, or coercion to
improperly induce employees into surrendering their FLSA
rights, ” which both the 11th Circuit and the Supreme
Court agree to be prohibited, “the correct solution to
address such a narrow problem is not an overbroad rule
requiring all FLSA settlements to receive judicial review and
approval” as Lynn's Food suggests. This
Court agrees with Chief Judge Krieger that, in such
instances, the proper remedy is “the same remedy used
in literally every other context where a settlement is
claimed to be coercive, deceptive, or overreaching: upon a
proper showing by the employee, the court may set aside the
settlement contract and restore the employee's right to
seek his or her FLSA remedies directly.”
Fails, 2018 WL 6046428, at *3 (internal citations
Fails court further discussed “[t]he logical
dissonance of burdening the settlement process of bona fide
FLSA disputes with judicial review” based on “the
particular nature of FLSA claims.” Id. Relying
heavily on the reasoning of Ruiz, the court stated:
Specifically, the “peculiar opt-in nature of an FLSA
collective action anticipates that all of those parties who
settle are actively participating and are represented by
counsel.” Therefore, there is little justification to
include FLSA settlements in the narrow range of settlements
that require court approval. That range includes settlements
in class actions under Fed.R.Civ.P. Rule 23 and settlements
involving infants or incompetent individuals. In such cases,
“judicial review of compromises is necessary because
the parties affected - the class members or the incompetent
persons - are not directly before the court nor have they
necessarily participated in the decision to settle.”
FLSA claims, by contrast, are analogous to the ...