Cheeks review under FLSA is required for unilateral dismissals

In 2015, the Second Circuit held for the first time that federal judges must approve the settlements of any claims brought under the Fair Labor Standards Act (FLSA). That was the Cheeks decision. Since then, we've seen a few cases that explore the boundaries of Cheeks, such as whether Rule 68 Offers of Settlement are subject to Cheeks review. (They are not). In this case, the Court considers whether the district judge must retain jurisdiction over a case when the plaintiff files a notice of voluntary dismissal of the FLSA claim. 

The case is Samake v. Thunder Lube, Inc., issued on January 27. The procedural history is complex. After plaintiff filed his FLSA claim, the employer moved to compel arbitration, no doubt triggered by plaintiff's having signed an arbitration agreement on the first day of employment without realizing he was signing his rights away but that's what you do when you start a new job and you have no bargaining power anyway and will sign whatever they put in front of you so you can get to work and start paying your bills. Anyway, the plaintiff next filed a notice of voluntary dismissal without prejudice under Rule 41. Normally, the district court signs off on such a notice without asking any questions. Not this case; the trial court held onto the case to determine that the parties had not reached any settlement that would necessitate judicial review under Cheeks.

Can the trial court do this? Yes, says the Court of Appeals (Jacobs and Liman [D.J.], with Menashi concurring). A couple of district court cases say the trial court should do this under Cheeks, but there was no binding authority on this issue, until now. The concern is the parties will try to avoid the (sometimes intrusive and time-consuming) Cheeks oversight by filing a stipulation of voluntary discontinuance and settling the case on their own. In this case, it looks like there was no FLSA settlement, and since the trial court granted the motion to compel arbitration, off to JAMS (or AAA) the case went.

The Second Circuit holds the trial court had authority to retain limited jurisdiction over the case to conduct a Cheeks review. The policies behind reviewing the settlement under Cheeks (that case  involved a joint dismissal by the parties) equally apply when we've got a unilateral dismissal under Rule 41: we have to make sure the plaintiff is getting a fair shake under the settlement. Also, the Court is worried that a contrary ruling will try to evade Cheeks review "simply by negotiating a settlement and release, then filing a unilateral dismissal without prejudice rather than a stipulated dismissal." This is not a theoretical concern, the Court notes. "History demonstrates that such concerns beset FLSA settlements arrived at by voluntary dismissal just as they do dismissals that are stipulated." A footnote to this statement cites four cases where this has happened, further supporting the Second Circuit's intent to eliminate such gamesmanship.