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Gaitan v. Ahmed

United States District Court, D. Maryland, Southern Division

July 7, 2016

JUAN CARLOS MENA GAITAN, et al., Plaintiffs,
v.
AHMED AHMED, et al., Defendants.

          MEMORANDUM OPINION

          Charles B. Day United States Magistrate Judge

         Before this Court is the parties' Joint Motion for Approval of Settlement (the "Motion") (ECF No. 16). The Court has reviewed the Motion, related memoranda, and applicable law. No hearing is deemed necessary. See Local Rule 105.6 (D. Md.). For the reasons presented below, the Court does not approve the Settlement Agreement the parties executed as to all claims, including Plaintiffs' claim under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201.

         I. Factual Background

         Plaintiffs Juan Carlos Mena Gaitan and Jorge L. Garcia Castillo ("Plaintiffs") worked for Ahmed Ahmed d/b/a POS Construction and Ahmed Ahmed ("Defendants") as laborers. Compl. 3. Plaintiffs allege that they worked hours in excess of forty (40) hours per week, yet they were not paid overtime wages. Id. Specifically, Plaintiffs allege that they worked for approximately fifty-eight (58) hours per week and they were not paid overtime wages. Id. Plaintiffs claim that they are each owed $18, 153.00 in unpaid wages. Id.

         On February 3, 2016, Plaintiffs filed a complaint against Defendants alleging that Defendants violated the FLSA, the Maryland Wage Payment and Collection Law ("MWPCL"), the Maryland Wage & Hour Law ("MWHL"). Compl. 1. Defendants argue that they were never Plaintiffs' "employer" or "employers" as defined under the FLSA, MWPCL, MWHL, or any other statute. Def.'s Answer 3. In addition, Defendants argue that they are not proper parties to this action and that Plaintiffs were paid all wages they were entitled to by the sub-contractors of POS Construction, who were their employers. Id.

         On May 18, 2016, the parties participated in a settlement conference before this Court. Mot. 6. On June 13, 2016, the parties reached a resolution and executed the Settlement Agreement. See ECF No. 16-2. On June 14, 2016, the parties filed the Motion seeking approval of the Settlement Agreement. Mot. 11. Under the Settlement Agreement, Plaintiffs agree to settle all claims and dismiss this case with prejudice in exchange for a payment of $20, 477.20, which is allocated as follows: (1) $3, 250.00 to Juan Carlos Mena Gaitan as a payment for alleged wages due; (2) $3, 250.00 to Juan Carlos Mena Gaitan as a payment for alleged liquidated damages; (3) $3, 250.00 to Jorge L. Garcia Castillo as a payment for alleged wages due; (4) $3, 250.00 to Jorge L. Garcia Castillo as a payment for alleged liquidated damages; and (5) $7, 472.20 to "Stein Sperling Bennett De Jong Driscoll PC" to account for $7, 000.00 in attorney's fees and $472.20 in costs. Mot. 7.

         II. Analysis

         Under the FLSA, Congress seeks to protect workers from the poor wages and long hours that can result from significant inequalities in bargaining power between employers and employees. See Saman v. LBDP, Inc., No. DKC-12-1083, 2013 WL 2949047, at *2 (D. Md. June 13, 2013) (citing Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706 (1945)). FLSA provisions are mandatory and generally are not subject to bargaining, waiver, or modification by contract or settlement. Id.; Brooklyn, 324 U.S. at 706. Court-approved settlement is an exception to that rule, "provided that the settlement reflects a ‘reasonable compromise of disputed issues' rather than ‘a mere waiver of statutory rights brought about by an employer's overreaching.'" Saman, 2013 WL 2949047, at *2 (quoting Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1354 (11th Cir. 1982)). The Fourth Circuit has not directly addressed the factors to be considered when deciding motions for approval of FLSA settlements. See id. at *3 (citations omitted). However, district courts in this circuit typically follow the Eleventh Circuit's analysis in Lynn's Food Stores. Id. The settlement must "reflect[] a fair and reasonable resolution of a bona fide dispute over FLSA provisions." Id. (citations omitted). In this respect, the Court considers (1) whether there are FLSA issues actually in dispute, (2) the fairness and reasonableness of the settlement in light of the relevant factors from Rule 23, and (3) the reasonableness of the attorney's fees, if included in the agreement. Riveros v. WWK Construction, Inc., No. PJM 15-193, 2015 WL 5897749, at *2 (D. Md. Oct. 5, 2015) (citations omitted).

         A. Bona Fide Dispute

         In deciding whether a bona fide dispute exists as to a defendant's liability under the FLSA, courts examine the pleadings in the case, along with the representations and recitals in the proposed settlement agreement. See Lomascolo v. Parsons Brinckerhoff, Inc., No. 08-1310, 2009 WL 3094955, at *16-17 (E.D. Va. Sept. 28, 2009). Furthermore, a bona fide dispute exists when an employee makes a claim that he or she is entitled to overtime payment. Id.

         After a review of the pleadings and the terms of the Settlement Agreement, the Court finds that a bona fide dispute exists in this case. Under the FLSA, "no employer shall employ any of his employees . . . for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed." 29 U.S.C. § 207(a)(2)(C). If an employer violates Section 207, he is liable for unpaid overtime and an equal amount of liquidated damages. 29 U.S.C. § 216. In this case, Plaintiffs allege that Defendants failed to pay them overtime wages as required under the FLSA. Mot. 5. In response, Defendants argue that Plaintiffs were not Defendants' employees and were not owed overtime wages under the FLSA, MWHL, and/or MWPCL. Id. Defendants also dispute the number of days and hours that Plaintiffs claim to have worked and the wages they allege they are owed. Id. Pursuant to the holding in Lomascolo, a bona fide dispute exists as to Defendants' liability under the FLSA. See Lomascolo, 2009 WL 3094955, at *16.

         B. Fairness and Reasonableness of the Settlement Agreement

         If a bona fide dispute exists, courts evaluate the fairness and reasonableness of the settlement using the following factors:

"(1) the extent of discovery that has taken place; (2) the stage of the proceedings, including the complexity, expense and likely duration of the litigation; (3) the absence of fraud or collusion in the settlement; (4) the experience of counsel who have represented the plaintiffs; (5) the opinions of [] counsel . . .; and (6) the probability of plaintiffs' success on ...

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