Harris v. F. Schumacher & Co., LLC

Background

Mary Harris sued F. Schumacher & Co., LLC, her former employer, under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL). Harris alleged that, while working as a cleaner from approximately November 2018 until June 2023, the company failed to pay certain wages, paid wages late, and failed to provide required notices and wage statements. The company then terminated her employment.

The company moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. It argued that Harris’s claims were barred by a purported severance agreement containing a broad release of claims. According to the company, it offered the agreement before Harris filed suit, Harris electronically signed it on July 31, 2023, the company countersigned it on August 8, 2023, and the company paid the severance amount. The agreement was not attached to or mentioned in Harris’s complaint.

Harris opposed dismissal and cross-moved for sanctions against the company and its counsel. She argued that the defense tried to avoid the court review of FLSA settlements required by Cheeks v. Freeport Pancake House, Inc. She also argued that the defense violated professional-conduct rules by communicating with her after she was represented by counsel. Her counsel additionally questioned whether Harris had signed the agreement.

Motion to Dismiss

The court denied the company’s motion to dismiss. On a Rule 12(b)(6) motion, the court ordinarily may consider the complaint, documents attached to it, documents incorporated by reference, and documents known to and relied on by the plaintiff in bringing the lawsuit. The purported severance agreement did not fit any of those categories: it was not attached to or referenced in the complaint, and Harris did not rely on it in asserting her FLSA and NYLL claims.

The court declined to treat the motion as one for summary judgment, which permits consideration of evidence outside the pleadings. Even if it had done so, the court stated that summary judgment would have to be denied because Harris’s counsel raised serious doubts about whether Harris signed the agreement, creating a material factual dispute. The court therefore did not decide whether the agreement was valid or enforceable.

The court also declined to decide whether the agreement required review under Cheeks or whether the FLSA and NYLL barred the alleged waiver of wage rights. Those issues depended on a document that was not properly before the court at this stage.

Sanctions

The court denied Harris’s cross-motion for sanctions. Sanctions based on the court’s inherent authority require bad faith, and the court found that the present record did not establish bad faith. The court noted that the company said it offered the agreement before Harris filed the complaint and did not contact her again about signing it after the litigation began; Harris did not dispute those facts.

The court also concluded that the lawyers appearing for the company could not be sanctioned based on the alleged communications because, according to both sides, those lawyers were not involved in countersigning the agreement or paying Harris. The opinion stated that the company’s general counsel appeared to have countersigned the agreement, but Harris’s counsel had not provided enough information about that lawyer’s representation of the company or knowledge that Harris had counsel. The court exercised its discretion to deny sanctions even if the general counsel may have engaged in some wrongdoing. To the extent Harris sought sanctions under Rule 11, the court also denied that request because Rule 11 sanctions require a separate motion and a safe-harbor period, which the opinion said had not occurred.

Disposition

The court denied Defendant’s motion to dismiss and denied Plaintiff’s cross-motion for sanctions. The case was not dismissed, and the court did not resolve the ultimate merits of Harris’s wage claims or the enforceability of the purported severance agreement. The court warned that future violations of settlement-review requirements, professional obligations, procedural rules, local rules, court rules, or court orders could lead to sanctions, including monetary sanctions, limits on claims or evidence, dismissal with prejudice, or default judgment.