Please Pass The Settlement: Second Circuit Widens Split Over Stipulated FLSA Dismissals

A recently filed petition for certiorari asks the U.S. Supreme Court to clarify the procedural requirements for ending private causes of action under the Fair Labor Standards Act ("FLSA"). Specifically, petitioner Dorian Cheeks is asking the Supreme Court to review a decision from the U.S. Court of Appeals for the Second Circuit holding that Federal Rule of Civil Procedure 41 ("FRCP 41") prohibits the dismissal of FLSA claims through private, stipulated settlement agreements absent approval from either a federal district court or the U.S. Department of Labor ("DOL").

The Second Circuit's ruling in Cheeks v. Freeport Pancake House Inc., et al., 796 F.3d 199 (2d Cir. 2015), contributes to an existing circuit split concerning the role of the federal district courts in overseeing private FLSA settlements. In Lynn's Food Stores, Inc. v. U.S. Dep't of Labor, 679 F.2d 1350 (11th Cir. 1982), the Eleventh Circuit ruled that private stipulated settlements of FLSA wage actions must be scrutinized and approved by either the district court or the DOL. The Federal Circuit (O'Connor v. United States, 308 F.3d 1233 (Fed. Cir. 2002)) and the Fifth Circuit (Martin v. Spring Break '83 Prods., L.L.C., 688 F.3d 247 (5th Cir. 2012)) have more recently gone the other way. Now that the Second Circuit has sided with a more-restrictive interpretation of the FLSA settlement process, the issue may be ripe for the High Court's consideration.

An Attempted Settlement

Cheeks originally filed his lawsuit in the U.S. District Court for the Eastern District of New York in August 2012 to recover overtime wages, and "damages for wrongful termination under the FLSA." Specifically, Cheeks alleged that "he was demoted, and ultimately fired, for complaining about Freeport Pancake House's failure to pay him and other employees the required overtime wage." After a full year of discovery and negotiations, the parties reached a settlement and filed a stipulation of dismissal under FRCP 41(a)(1)(ii).

However, the district court issued an order preventing the parties from dismissing the case without first submitting the settlement agreement to the court for review and approval. The court directed the parties to "file a copy of the settlement agreement on the public docket," "show cause why the proposed settlement reflects a reasonable compromise of disputed issues" and provide the Court "with additional information in the form of affidavits or other documentary evidence explaining why...