Lawyers’ Cut of Sushi Settlement Is Too Large

     MANHATTAN (CN) – Although he praised the lawyers’ service in resolving a three-star sushi restaurant labor dispute, a federal judge nevertheless cut their portion of the $2.4 million settlement by more than a third to protect the workers.
     “The danger to workers from underpayment by their employers is clear,” U.S. District Judge William Pauley wrote in his 21-page opinion. “The danger of overpaying their lawyers is more subtle.”
     Midtown’s Sushi Yasuda received acclaim for its authenticity in The New York Times, but its wait staff, bussers and sushi chefs panned the restaurant’s alleged policy of paying trainees less than the minimum wage.
     After the workers filed a class action lawsuit, Sushi Yasuda publicized a new policy to eliminate tipping.
     “While most of the reportage emphasized the restaurant’s desire to follow Japanese customs and create a more pleasant customer experience, it appears this lawsuit may also have prompted the move,” Judge Pauley wrote.
     The parties eventually proposed a multimillion-dollar settlement giving $800,000 to the workers’ lawyers, $20,000 for each of six named employees, $100,000 for an administration fund and the rest for a settlement fund for class members.
     Although the lawyers agreed to reduce their pay to $600,000, Judge Pauley commented even this portion cut against the grain of the Fair Labor Standards Act (FLSA).
     Paraphrasing Franklin Delano Roosevelt, Pauley remarked that the 76-year-old statute was meant to guard against “the evil of ‘overwork’ as well as underpay.”
     There has been an “explosion in FLSA litigation” in the last decade, he noted.
     So far this year, FLSA cases represent nearly 9 percent of the civil cases filed in the Southern District of New York, the opinion states.
     “And this district is no outlier,” it continues. “Nationwide, annual FLSA fillings are up over 400 percent from 2001.”
     “A law is only effective to the extent it is enforced, and this increased litigation has been a positive development for many low-wage workers,” Pauley wrote. “The same is true for their lawyers.”
     The tendency of these case to settle breeds overcharging by the lawyers, he added.
     “When cases settle, ‘the adversarial process melts away,'” the opinion states. “Settling defendants tend to lose interest in how settlement monies are distributed. And a natural tension arises between plaintiffs’ attorneys and the class they represent, in that both must jockey for payment from a common fund. Often, it is judges alone who are left to safeguard the interests of the class.
     “Courts typically rely on the adversarial process to strike a balance between competing interests,” it continues. “But the vacuum created by proposed FLSA class action settlements has permitted plaintiffs’ attorneys to write much of the law on what constitutes a reasonable attorney’s fee. Those fees, effectively paid by the class, at times provide lawyers with more than a fair day’s pay for a fair day’s work.”
     Despite praising the lawyers for having “expertly guided the case” and “obtained an excellent settlement,” Pauley reduced class counsel fees to $500,020.18.
     Lawyers for the sushi workers declined to comment, and Sushi Yasuda’s lawyers did not immediately respond to a request for comment.

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