Paredes v. Tesfast

Background

Mercedes Paredes brought this action against Tesfast, LLC, alleging that Tesfast violated the federal Fair Labor Standards Act and the New York Labor Law by failing to pay proper wages and overtime compensation.

The parties notified the court on August 1, 2024, that they had reached a settlement. They later filed an amended settlement agreement. Under that agreement, Tesfast was required to pay Paredes $6,000 in six monthly installments of $1,000. Paredes agreed to release claims relating to the lawsuit and other unpaid-wage claims arising from her employment at Tesfast through the agreement’s effective date.

On October 25, 2024, the court approved the settlement as fair, reasonable, and adequate. It dismissed the action with prejudice in accordance with the settlement agreement but retained jurisdiction to enforce the agreement. Tesfast did not make any of the required payments, despite communications from Paredes’s counsel. Paredes therefore moved to enforce the settlement and sought reinstatement of the case and a $6,000 judgment. Tesfast did not oppose the motion.

Jurisdiction

The court explained that enforcing a settlement is generally a state-law breach-of-contract matter. A federal court may enforce a settlement after dismissal if its dismissal order expressly retains jurisdiction over the settlement or incorporates the settlement’s terms. Here, the earlier order expressly stated that the court retained jurisdiction to enforce the settlement. The court therefore proceeded to consider the enforcement motion.

Choice of Law

The settlement agreement stated that Illinois law would govern it. The court declined to apply that provision because the record did not connect the agreement or the dispute to Illinois. The only Illinois connection identified was the location of Paredes’s counsel, which the court found insufficient. Applying federal common-law choice-of-law principles, the court concluded that New York had the greatest interest because the parties were either domiciled or doing business in New York and the events underlying the action occurred there. The court therefore applied New York law, while noting that the result would likely be the same under Illinois law.

Merits of Enforcement

Under New York law, a breach-of-contract claim requires an agreement, the plaintiff’s performance, the defendant’s breach, and damages. The court found all four requirements satisfied. The fully executed and court-approved settlement agreement was a binding contract. Paredes performed her obligation by consenting to dismissal of the action with prejudice. Tesfast breached the agreement by failing to make any payments. Paredes was damaged by the unpaid $6,000 owed under the agreement.

Disposition

The court GRANTED Paredes’s motion to enforce the Settlement Agreement. It directed the Clerk of Court to enter judgment in Paredes’s favor for $6,000 and to terminate the pending motion.