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Second Circuit to take up whether Rule 68 settlement in FLSA case requires judicial approval

By Lorene D. Park, J.D.

Even though the parties in this FLSA suit did not timely file with the Second Circuit a Section 1292(b) petition for interlocutory review, the appeals court decided that under the circumstances here, it should deem the notice of appeal, which was timely filed with the district court and then transmitted to the appeals court, the functional equivalent of a Section 1292(b) petition. Here, the appeals court found it significant that it was given full information on the legal issues presented and the order to be reviewed. Moreover, the appeal would resolve a split among district courts on whether Rule 68 settlements in FLSA cases require judicial review and approval (Yu v. Hasaki Restaurant, Inc., October 23, 2017, Newman, J.).

Parties settle FLSA suit under Rule 68. In an FLSA suit by a sushi chef against his employer and three restaurant owners or managers, the parties negotiated a settlement under Rule 68 and notified the district court. In response, the court ordered the parties to submit the settlement agreement for court approval and also to submit a letter detailing why the settlement was fair and reasonable. Counsel for the employer then sent the court a letter arguing that the court lacked authority to review the offer of judgment because entry of a Rule 68 judgment is mandatory.

District court says judicial approval required. Pointing to the Second Circuit’s reasoning in Cheeks v. Freeport Pancake House, Inc., which required court approval of FLSA claims sought to be settled by stipulated dismissal, the district court here entered an opinion and order holding that judicial review of an FLSA settlement was also required before entry of a Rule 68 judgment. However, acknowledging the split of authorities on this issue among district courts within the Second Circuit, the judge certified his order for interlocutory review under 28 U.S.C. § 1292(b). He also stayed the FLSA case in the event that the parties timely filed a notice of appeal within 10 days.

Untimely petition for leave to appeal. A few days later the employer filed with the district court a notice of appeal, which identified the district court’s order and opinion to be reviewed on appeal. That notice and the district court’s order and opinion were all then electronically transferred to the Second Circuit. However, the employer did not file a petition with the Second Circuit seeking leave to appeal under Section 1292(b) until June 21, well after the 10-day deadline. The employer filed a request that the belated petition be accepted as timely filed.

Notice filed with lower court deemed sufficient. Granting the petition, the Second Circuit concluded that under the circumstances of this case, the notice of appeal filed with the district court should be deemed the “functional equivalent” of a Section 1292(b) petition filed with the appeals court. For one thing, the appeals court had all the information it needed on the order that was being presented for appellate review. The district court’s opinion and order, which were electronically transmitted to the appeals court, set forth the “controlling question of law as to which there is substantial ground for difference of opinion” and made it clear that an immediate appeal “may materially advance the ultimate termination of the litigation” as required for interlocutory appeal under Section 1292(b). As such, the appeals court knew, within 10 days of the district court’s order, everything it needed to know in order to permit interlocutory appeal.

The appeals court further explained that there was reason to be indulgent here because it was not merely being asked to review the matter solely for the benefit of the litigant below. Here, the acceptance of appellate jurisdiction would serve the interests of efficient judicial administration be resolving the difference of opinion among lower courts on whether Rule 68 settlements in FLSA cases require district court review and approval.