Tolomei v. Hess Restorations, Inc.

Background

Julia Tolomei brought a wage-and-hour action against Hess Restorations, Inc. and Lada Gabriel, alleging violations of the Fair Labor Standards Act (FLSA) and New York Labor Law, among other claims. The parties entered into a settlement agreement providing Tolomei with $10,000. The agreement included a mutual-release provision covering claims arising from Tolomei’s work for, or separation from, the defendants, including claims for unpaid wages, retaliation, and discrimination.

On March 27, 2023, the court approved the settlement after reviewing it under Cheeks v. Freeport Pancake House, which requires judicial review of FLSA settlements. The court dismissed the case with prejudice but retained jurisdiction solely to resolve disputes arising from the settlement and the settlement of the action.

Later, through new counsel, Tolomei sent the defendants a pre-litigation demand letter concerning a proposed employment-discrimination action. The allegations included unwanted and harassing remarks toward Tolomei and her co-workers and termination based on Tolomei’s transgender identity. The defendants moved to enforce the settlement, prevent Tolomei from filing further lawsuits arising from her employment, obtain attorney’s fees, and impose sanctions on Tolomei and her new attorneys.

Settlement Enforcement

The court held that it had authority to enforce the settlement because its dismissal order expressly retained jurisdiction over the settlement agreement. It treated the settlement as a contract governed by general contract-law principles.

The court concluded that the settlement’s plain language released Tolomei’s claims arising from her employment or termination, including discrimination claims. Tolomei did not dispute that the agreement, as written, covered the employment-discrimination claims she intended to bring. Instead, she argued that the release was unenforceable because it was impermissibly broad under the FLSA settlement-review standard.

The court rejected that argument. It explained that the court had already approved the settlement after conducting the required review. A party seeking to undo or change that final order had to file a motion under Federal Rule of Civil Procedure 60(b), which permits relief in specified circumstances such as mistake, newly discovered evidence, fraud, or other exceptional circumstances. Tolomei had not filed such a motion, had not shown exceptional circumstances, and had first raised the argument about sixteen months after the settlement was approved without explaining why that delay was reasonable. The court therefore ruled that she could not obtain relief from the approval order.

Attorney’s Fees and Sanctions

The settlement agreement stated that the substantially prevailing party in an action or proceeding brought because of the agreement could recover reasonable attorney’s fees and litigation costs. Applying that provision, the court awarded the defendants attorney’s fees and costs incurred in bringing the motion to enforce the settlement.

The court separately denied the request for sanctions. Although a federal court may sanction a party or attorney for bad-faith, vexatious, wanton, or oppressive conduct, the court stated that it could not conclude at that time that Tolomei or her attorneys had acted in bad faith or in another sufficiently egregious manner.

Disposition

The court granted the defendants’ motion to enforce the Settlement Agreement, granted the defendants’ motion for attorney’s fees, and denied the defendants’ motion for sanctions. It also enjoined Tolomei from initiating further legal proceedings that violate the Settlement Agreement.