Gomez v. Terri Vegetarian LLC

Background

Salvador Gomez brought a wage-and-hour action under the Fair Labor Standards Act and New York Labor Law. The court certified a collective action, and the parties later proposed a settlement for court approval. The settlement required the remaining defendants—Cochran and Pease LLC, Terri 2 LLC, Terri 3 LLC, and Craig Cochran—to pay $390,000: an initial $30,000 payment followed by 48 monthly payments of $7,500.

The court approved the settlement and retained jurisdiction to administer and enforce it. In the same final order, the court approved a stipulation dismissing Terri Vegetarian LLC, Jeffrey Lapadula, and Tomer Versano. The dismissal order explained that Terri Vegetarian LLC was not involved in operating the restaurant and that Lapadula and Versano had limited ownership interests, were not substantially involved in operating the restaurants, and could not be considered employers under the federal or New York wage laws.

Gomez later moved to enforce the settlement and sought judgment for $307,500, along with $2,150 in attorney’s fees. Gomez asserted that the remaining defendants had paid only $82,500 and had stopped making payments. The remaining defendants did not respond. The dismissed defendants opposed enforcement against them and filed a separate motion for sanctions under Rule 11, seeking $10,180.55 in attorney’s fees and costs.

Enforcement Against the Remaining Defendants

The court held that it had authority to enforce the settlement because the final dismissal order expressly retained jurisdiction over the agreement. It treated enforcement as a contract matter under New York law. Gomez and the class members had performed their obligations by releasing their claims, while the remaining defendants had failed to satisfy their payment obligations.

The court therefore found that the remaining defendants breached the settlement and that Gomez and the class were entitled to judgment for the full amount owed under the settlement’s terms. The court did not consider the settlement’s late-payment interest penalty because Gomez did not request it in the relief or proposed judgment. The court also rejected a proposed New York Labor Law failure-to-pay provision because the proceeding enforced a settlement contract rather than adjudicating a New York Labor Law claim.

Enforcement Against the Dismissed Defendants

The court concluded that the settlement could not be enforced against Terri Vegetarian LLC, Lapadula, or Versano. When the proposed settlement was submitted, the identity of the proper defendants was still being negotiated. The court found no sufficient agreement, or “meeting of the minds,” showing that the dismissed defendants were parties to the final settlement approved by the court.

The court also reasoned that, because the settlement required court approval under the federal wage law, only the approved version was enforceable. By the time the settlement became enforceable, the dismissed defendants had been dismissed and were no longer parties to it. The court therefore lacked authority to enforce the settlement against them and found that they could not be held responsible for the remaining defendants’ breach.

Attorney’s Fees Requested by Gomez

The court denied Gomez’s request for attorney’s fees incurred in enforcing the settlement. It held that this proceeding arose from enforcement of the settlement, not directly from the federal or New York wage laws. The settlement did not authorize additional attorney’s fees for enforcement and instead stated that, after payment of the approved fee award and costs, the defendants would have no additional liability for class counsel’s fees, expenses, or costs.

Rule 11 Sanctions

Rule 11 permits sanctions for presenting a court filing that lacks factual or legal support, including when a party continues advocating a position after learning that it lacks merit. The court found that the procedural requirements for sanctions were satisfied because the dismissed defendants gave Gomez’s counsel at least 21 days to withdraw the enforcement request against them, but counsel refused to do so.

The court found the continued inclusion of the dismissed defendants unreasonable. It relied on the dismissal order, the history of the case, counsel’s knowledge of the settlement negotiations, counsel’s refusal to withdraw the dismissed defendants after notice, and a similar earlier incident involving the same counsel. The court held that seeking enforcement against the dismissed defendants violated Rule 11 and granted their sanctions motion.

Disposition

The court granted in part and denied in part Gomez’s motion to enforce the settlement. It denied Gomez’s attorney’s-fee request. It granted Terri Vegetarian LLC, Jeffrey Lapadula, and Tomer Versano’s sanctions motion and directed Gomez’s counsel, Lee Litigation Group, PLLC, to pay $10,180.55 to counsel for the dismissed defendants within 30 days. The court stated that judgment would be entered separately and directed service of the opinion on certain remaining defendants’ counsel of record.