Zhang v. Aria Asian Corp.

Background

Yu Zhang brought this Fair Labor Standards Act case against Aria Asian Corp., doing business as Aria Fusion Sushi; Aria Lucky Star 888 Inc., doing business as Aria Asian Fusion Sushi; Huang Lin; Lifa Lin; “John” Chen; and “Jane” Chen. The court stated that it had federal-question jurisdiction under 28 U.S.C. § 1331.

At a July 9, 2019 conference, the court ordered Zhang to file either a motion for collective-action certification or a stipulation for conditional collective-action certification by September 9, 2019. During the case, counsel withdrew from representing Aria Lucky Star 888 Inc. The court warned that the corporation had to obtain new counsel and that failure to do so could result in a default judgment. New counsel appeared for Aria Lucky Star 888 Inc. and Lifa Lin on September 6, 2019.

On September 9, Zhang moved for conditional collective-action certification. Later that day, defense counsel informed the court that Aria Lucky Star 888 Inc. and Lifa Lin had reached a written settlement with Zhang. According to counsel, the defendants had paid Zhang $8,500, and Zhang had accepted and cashed the check in full settlement of the matter.

The court denied Zhang’s certification motion without prejudice as premature, vacated the Clerk’s Certificate of Default, and ordered the defendants to seek approval of the settlement. Zhang opposed approval. After a November 7 hearing, the court ordered Zhang to provide the $8,500 to his attorneys, Troy Law, PLLC, to hold in escrow while the case continued. The court warned him that failure to comply would result in dismissal and allowed him to submit an affidavit opposing settlement approval.

Failure to Comply

Zhang filed an affidavit alleging that Lifa Lin had threatened to find an assassin to kill him if he did not accept the settlement. Zhang stated that he accepted the $8,500 while being watched by two young men whom he believed were hired assassins. His attorney reported, however, that Zhang had not placed the money in escrow because he had spent it on expenses including his daughter’s school in China, rent, food, gasoline, and a phone bill. Defense counsel asked the court to dismiss the action for failure to comply with the November 7 order.

Court’s Analysis

The court applied Rule 41(b), which allows a federal court to dismiss a case when a plaintiff fails to follow a court order. It considered the length of the violation, Zhang’s notice that dismissal could result, possible prejudice to defendants, the competing interests of case management and a fair hearing, and whether a less severe sanction would be adequate.

The court found that Zhang had not complied and was unlikely to do so. It emphasized that the November 7 order expressly warned him that noncompliance would result in dismissal. The court found that defendants would be severely prejudiced because they believed they had resolved the claims by paying $8,500 and would have to continue litigating after Zhang spent the money. The court also reasoned that Zhang would not lose a fair chance to be heard because his attorney had previously stated that Zhang was owed approximately $6,100 in lost wages, less than the amount he received.

The court concluded that dismissal was the only appropriate remedy and found Zhang’s violation willful and in bad faith. The court was also highly doubtful of Zhang’s coercion allegations, noting that he had not raised coercion with his counsel or the court before the November 7 hearing and had spent the money despite contesting the settlement. The court did not find at that time that Zhang’s attorneys, Mr. Troy and Mr. Schweitzer, acted in bad faith, although it criticized aspects of their conduct and stated that their continued opposition appeared driven by Troy Law’s interest in receiving part of the settlement proceeds.

Disposition

The court dismissed the case with prejudice under Rule 41(b) for Zhang’s failure to comply with the November 7 order. It canceled the December 10 settlement-approval hearing and denied the defendants’ motion to approve the settlement as moot. The order closed the case. Because the dismissal rested on failure to follow a court order, the opinion did not decide the underlying Fair Labor Standards Act claims or approve the settlement.