Lantino v. Clay LLC

Background

Michael Lantino and Joanne Cabello brought claims under the Fair Labor Standards Act and New York Labor Law against The Gym at Greenwich, LLC; The Gym at Port Chester, Inc.; The Gym at Union Square, Inc.; Seth Hirschel; Stefan Malter; and Barnet Liberman. They alleged that Defendants paid employees late, issued checks that bounced because the corporate account lacked sufficient funds, and eventually stopped paying employees for time worked.

Thirty-eight other employees filed consents to sue and joined the Fair Labor Standards Act claims. The parties reached a settlement in principle during a September 9, 2019 settlement conference. The court later received a fully executed Settlement Agreement signed by the 40 Plaintiffs and opt-in Plaintiffs and by the Corporate Gym Defendants and Individual Defendants.

The Settlement Agreement required Defendants to pay $300,000 through an initial $50,000 payment followed by monthly installments of $8,695.65, less applicable withholdings, for 23 months. It also included a signed form of Consent Judgment. If Defendants defaulted, the agreement allowed Plaintiffs’ counsel to enter the Consent Judgment for $1,000,000, less payments already made, without further notice.

Motion and Arguments

Plaintiffs submitted evidence that Defendants had defaulted after failing to make a required payment following notice and an opportunity to cure. Plaintiffs asked the court to enter the Consent Judgment for $923,913.51.

Defendants did not dispute the default. They argued that their performance should be excused under the contract-law defense of impossibility because the COVID-19 pandemic and New York Governor Andrew M. Cuomo’s “New York State on PAUSE” Executive Order harmed their ability to make the required payments. The individual Defendants also submitted declarations concerning their financial condition.

Court’s Analysis

The court explained that the Settlement Agreement was a contract governed by New York law. Under the impossibility defense, performance is excused only when an unexpected event makes performance objectively impossible and the event could not have been anticipated or addressed in the contract. The court also explained that this defense is limited to destruction of the means of performance by an extraordinary event or by law; financial difficulty, economic hardship, insolvency, or bankruptcy ordinarily does not excuse contractual performance.

The court found that Defendants had shown, at most, financial difficulties arising from the pandemic and the PAUSE Executive Order. Those financial difficulties did not excuse their obligations under the Settlement Agreement. Because Defendants were undisputedly in default, and the agreement permitted entry of the Consent Judgment, the court granted Plaintiffs’ motion.

Disposition

Judge Stewart D. Aaron granted Plaintiffs’ motion for entry of the Consent Judgment and ordered that the Consent Judgment be entered for $923,913.51. The opinion notes inconsistent figures in Plaintiffs’ submissions for total payments already made—$76,086.95 and $76,086.49—but the court used the lower figure, $76,086.49, because it matched the listed payments. The opinion does not state a separate disposition of the underlying wage claims beyond enforcement of the settlement.