Pacheco v. Chickpea at 14th Street Inc.

Background

Jorge Pacheco brought claims against his former employers under the Fair Labor Standards Act, a federal wage-and-hour law, and the New York Labor Law. The defendants moved to dismiss, arguing that:

- Pacheco’s federal wage claims were moot because of an unaccepted offer of judgment under Federal Rule of Civil Procedure 68; - his New York wage claims were preempted, meaning displaced, by the Immigration Reform and Control Act; and - he lacked standing to serve as a class representative because of issues related to that Act.

A Report and Recommendation by Magistrate Judge Gabriel Gorenstein recommended denying the motion to dismiss. The recommendation explained that two controlling decisions, Campbell-Ewald Co. v. Gomez and Radha Geismann, M.D., P.C. v. ZocDoc, Inc., foreclosed the defendants’ argument that an unaccepted Rule 68 offer made Pacheco’s claims moot.

The defendants objected to the recommendation but again relied on the decision they had cited previously and did not address the controlling decisions identified by the magistrate judge. The court later rejected the objections and ordered the defendants and their counsel to show why sanctions should not be imposed. The present opinion decides that sanctions issue. The court noted that the parties had reported reaching a settlement, but the settlement had not yet been approved and did not eliminate the court’s authority to consider sanctions.

Sanctions analysis

The court considered sanctions under 28 U.S.C. § 1927 and its inherent authority. Under those provisions, sanctions required findings that the challenged position had no legally supportable basis and had been pursued in bad faith. The court also stated that detailed factual findings were required, although bad faith could be inferred when an attorney’s actions were so completely without merit that an improper purpose had to be inferred.

The court did not impose sanctions based on the defendants’ arguments concerning the Immigration Reform and Control Act. Instead, it based the sanctions on the defendants’ repeated failure to cite or discuss Campbell-Ewald and Radha Geismann while continuing to press the Rule 68 mootness argument. The court found that this conduct was beyond acceptable advocacy and supported a finding that the defendants pursued the argument in bad faith and for an improper purpose.

The defendants said they repeated the arguments to preserve them for appellate review. The court rejected that explanation, finding that their objections did not specifically identify the portions of the recommendation they challenged and therefore did not actually preserve the arguments. The court also stated that preserving an issue for further review did not justify relying on inapplicable authority or ignoring controlling authority.

Amount and disposition

Pacheco requested $7,950.50 for attorney fees incurred in responding to the defendants’ objections. The court found the requested hourly rates excessive and determined that only part of the claimed time resulted from the sanctionable conduct. It therefore imposed a sanction equal to 30 percent of the requested fees, or $2,385.15.

The court imposed the sanction jointly and severally on Lee Nuwesra, the Law Offices of Lee Nuwesra, and the defendants. Joint and several liability means that each listed party is responsible for the full amount, subject to any rights among them to divide responsibility. The court ordered payment within 30 days, required Pacheco to confirm payment within one week after receiving it, and retained jurisdiction to impose additional sanctions if appropriate.

Disposition

The court imposed sanctions of $2,385.15 against Mr. Nuwesra, his law firm, and the defendants jointly and severally.