Shuler v. Liberty Consulting Servs.
| Decision Date | 04 April 2022 |
| Docket Number | 20 CV 5779 (KAM) (CLP) |
| Parties | KENDELL SHULER, Plaintiff, v. LIBERTY CONSULTING SERVICES, LTD., Defendant. |
| Court | U.S. District Court — Eastern District of New York |
REPORT AND RECOMMENDATION
On November 30, 2020, plaintiff Kendell Shuler commenced this action against defendant Liberty Consulting Services, Ltd. (“Liberty” or “defendant”), alleging that defendant failed to pay him proper overtime wages, in violation of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. and the New York Labor Law (“NYLL”) Section 650 and failed to provide him with proper wage notices and wage statements, in violation of Article 6 of the NYLL §§ 191, 193. (Compl.[1]).
By letter dated May 12, 2021, plaintiff's counsel, Abdul Karim Hassan, Esq., notified the Court that defendant entered into a settlement agreement (“the Agreement”) with plaintiff, but without the knowledge or involvement of plaintiff's counsel. (Pl.'s 5/12/21 Ltr.[2] at 1). By letter dated June 14, 2021, counsel further notified the Court that his client sent him a letter stating that the parties had supplemented the agreement (“the Settlement Letter”). (Pl.'s 6/14/21 Ltr.[3] at 2-3). For the reasons set forth below, it is respectfully recommended that the alleged Agreement and the supplemental Settlement Letter be declared unenforceable and void. This Court further respectfully recommends that sanctions be imposed against defendants' counsel in the form of plaintiff's attorney's fees expended on this motion.
The Complaint in this action was filed on November 30, 2020. (See Compl.). Despite proper service, defendant failed to answer, and this Court Ordered plaintiff to provide a status report as to how he wished to proceed with the action. (See Electronic Order, dated Jan. 6, 2021). On February 8, 2021, plaintiff requested an extension to file the status report, stating that “it appears that the Defendant has had some communications with Plaintiff concerning resolution” of the action and noting that counsel was concerned that the parties had come to a settlement in contravention of Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015). (ECF No. 7). The Court granted the request on February 9, 2021. (See Electronic Order, dated Feb. 9, 2021).
After seeking several more extensions, plaintiff's counsel filed the May 12, 2021 letter, attaching the Agreement, which provides for a $4, 000 payment to plaintiff, and alleging that the parties had impermissibly reached the Agreement in his absence. [4]). Plaintiff's counsel notes that the Agreement appears to have been drafted by an attorney. (Pl.'s 5/12/21 Ltr. at 1). However, he states that no one at his firm was involved in negotiating or drafting the Agreement and no attorney from counsel's firm “sought or received any monies under the purported settlement, ” although the Agreement does contain a provision for $1, 000 to be paid to counsel. (See Pl.'s 5/12/21 Ltr. at 1; Sett. Agr. ¶ 2).
On May 14, 2021, this Court issued an Order requiring defense counsel to enter a notice of appearance and respond to plaintiff's letter by May 20, 2021. (See ECF No. 12). The Court also set a hearing for June 17, 2021, noting that it was concerned about the “possible violation of Cheeks. (Id.)
On May 20, 2021, Gary Rosen, Esq., counsel for defendant, responded to plaintiff's counsel's letter, stating that, while defendant was served by service upon the Secretary of State on December 8, 2020, defendant “did not receive the service of the complaint until approximately December 15, 2020.” (Def.'s 5/20/21 Ltr.[5] at 1). According to counsel, on December 4, 2020, plaintiff “allegedly told Defendant's manager that Plaintiff was due money and that he had a lawyer.” (Id.) At this point, counsel emailed Mr. Hassan requesting that they discuss “this case.” (Id.) On December 7, 2020, Mr. Rosen attempted to contact Mr. Hassan again, attaching the Agreement and requesting that Mr. Hassan obtain plaintiff's signature, but Mr. Hassan did not respond. (Id.) The very next day, December 8, 2020, defendant provided Mr. Rosen with the Agreement, signed by plaintiff, who subsequently sent the signed Agreement to Mr. Hassan. (Id. at 2). Defendant's counsel represents in his letter that on December 8, 2020, before defendant was served with the Complaint, the parties “resolved their dispute of pay allegedly due to Plaintiff.” (Id.) According to Mr. Rosen, plaintiff was paid on December 8, 2020 pursuant to the Agreement. (Id.; see Ex. 4 ()).
On June 14, 2021, plaintiff's counsel responded to defense counsel's letter arguing that “the defense is trying to create the erroneous impression” that defendant and counsel were not aware of the pending civil case before entering into the Agreement. (Pl.'s 6/14/21 Ltr. at 1). Counsel states that he mailed a copy of the Complaint to defendant on December 3, 2020 and cites Mr. Rosen's December 4, 2020 email requesting to discuss “this case, ” as evidence that both defendant and Mr. Rosen were aware of this pending case before December 8, 2020 when the parties signed the Agreement. (Id.) Mr. Hassan reiterates his position that the Agreement was reached in violation of Cheeks, and he asserts that Mr. Rosen's conduct violates the ethical rules restricting communications between lawyers and represented parties. (Id. at 2 (citing 22 N.Y.C.R.R. § 1200.4)). Lastly, Mr. Hassan asserts that he received plaintiff's Settlement Letter on June 7, 2021, stating that the parties had supplemented the Agreement in which plaintiff received a raise and $12, 200. (Id.) In the Settlement Letter, plaintiff notified his attorney that plaintiff did “not wish to pursue any legal action against” defendant, particularly because plaintiff did not want to risk “jeopardize[ing] [his] employment” with defendant. [6]).
On June 17, 2021, this Court held a hearing during which counsel for both parties reiterated their positions on the issue. (See Tr.[7]). Mr. Rosen argued that “because this case was settled before a complaint was served . . . Cheeks did not apply.” (Id. at 10). Mr. Hassan opposed that argument, asserting that “if you're aware of a lawsuit, a lawsuit is pending in court, that's what triggers Cheeks.” (Id. at 14). At the hearing, the Court set a further briefing schedule, requiring the parties to submit “affidavits from your clients as to what happened . . . documents showing timing . . . [and] case authority for your respective positions as to when you believe Cheeks” begins to apply. (Id. at 21).
On July 6, 2021, Mr. Hassan filed a letter, arguing that “it is the filing and subsequent settlement/dismissal of an FLSA action that triggers Cheeks review, ” not formal service. (Pl.'s 7/6/21 Ltr.[8] at 2). Mr. Hassan also noted that, even where both parties “declined and opposed court review and approval, ” the Second Circuit held in Cheeks that a court is required to approve of the settlement. (Id. at 3). As to whether the various Agreements should be approved pursuant to Cheeks, plaintiff's counsel states that there are two[9] “agreements:” the Agreement, dated December 7, 2020 and signed on December 8, 2020, and plaintiff's Settlement Letter, dated June 4, 2021. (Id.) Counsel notes that the Agreement provides for a $4, 000 payment, while the Settlement Letter provides for a $12, 200 payment and an unspecified pay raise for plaintiff. (Id. at 3-4). According to Mr. Hassan, “the original amount of $4, 000 would clearly be inadequate for approval under Cheeks.” (Id. at 4). He suggests, however, that the second amount may be closer to an appropriate settlement amount, but notes that it is difficult to determine since plaintiff's Letter does not specify what the amount of the raise was to be, nor is there evidence that plaintiff was ever paid the $12, 200. (Id. at 4).
Mr. Hassan further contends that the Agreement contains an “improper general release [and] an improper non-disparagement provision, ” which likely would not meet court approval under Cheeks. (Id.) Moreover, the fact that the Agreement and the terms of plaintiff's Letter were not reached through “arm's-length bargaining between experienced counsel” indicates that they should not be approved and enforced, particularly because defendant “had the benefit of legal counsel” while plaintiff did not. (Id. at 6 (citing Wolinsky v. Scholastic Inc., 900 F.Supp.2d 332, 335 (S.D.N.Y. 2012))). Counsel argues that in comparing certain documents, he has become concerned that there is “the possibility of fraud or collusion” because there are “significant and material differences between what Plaintiff believed he was agreeing to and what the defense had him sign.” (Id. at 9). Mr. Hassan further cites to the provision contained in the Agreement which states that plaintiff has “consulted with an attorney before signing below, ” but reiterates that he never spoke with his client regarding either the Agreement or the terms contained in the Settlement Letter. (Id.; Hassan Decl.[10] ¶¶ 10-13, 16, 17, 26). He also notes that, as of June 17, 2021, plaintiff was still working for defendant and was in “a difficult position of not wanting to anger the Defendant and jeopardize his job.” (Id. ¶ 27).
In response, Mr. Rosen submitted an affidavit on July 20, 2021 stating that Mr. Hassan “opted not to follow what his client wanted . . . [and] continue[d] this case for no apparent reason.” (Rosen Decl.[11] ¶ 4). Counsel analogizes the settlement in this case to that of an Offer of Judgment pursuant to Federal Rule of Civil Procedure 68, which has...
To continue reading
Request your trial