Confidentiality provisions in employment settlements are routine, but they can be problematic in the context of the settlement of a class or collective action. Class action settlements require court approval under Rule 23(e) (if the class is certified) and FLSA settlements require approval from either the United States Department of Labor or a court. See Lynn’s Food Stores v. United States, 679 F.2d 1353 (11th Cir. 1982). So, can the parties get that approval without publicly disclosing the terms through a court filing?
In a recent case, Rice v. Lucky Brand Dungarees Stores, Inc., Case No. 11-CV-61923 (Jan. 9, 2012), the parties settled a putative FLSA collective action, but apparently chose not to seek court approval, and simply tendered a stipulation that stated that the case was to be dismissed with prejudice. The court, however, refused to enter the stipulation and directed the parties to file the agreement publicly or to show extraordinary circumstances why the agreement should not be filed. This decision is similar to one reached two years ago by another district court in Florida in Dees v. HydraDry, Inc., Case No. 8:09-CV-1405 (M.D. Fla. Apr. 19, 2000), in which the court rejected such an attempt in a much longer opinion.
One interesting twist in the Rice case is that the parties did not explicitly ask the court to approve the settlement or to issue any class-wide relief, but had only filed the stipulation of the court. Despite the lack of any such request, the court still refused to permit so much as a stipulation for dismissal with prejudice under Rule 41.
Rice was, of course, under the FLSA, but class actions (as opposed to collective actions) are subject to the additional disclosure requirements of Rule 23(e) and the Class Action Fairness Act, 28 U.S.C. section 1715. Thus, the same, and probably higher, obligations apply.
The Bottom Line: Parties should assume that a court will demand the public disclosure of the terms of a either a class or collective action settlement.
