Tangtiwatanapaibul v. Tom & Toon Inc

Background

The plaintiffs, who worked at the defendant restaurants, asserted claims under the Fair Labor Standards Act and New York Labor Law for unpaid or improperly paid wages and failures to provide required wage notices.

At a June 26, 2019 settlement conference, the parties and their lawyers signed a Settlement Agreement Term Sheet. The term sheet provided for a total settlement of $72,000, including attorneys’ fees and costs, payable in monthly installments of $3,000 over 24 months. It also included a notice-and-cure period for missed payments, possible acceleration and a penalty after an uncured default, a release of the claims raised in the case, and no admission of liability by defendants. The term sheet stated that its material terms were binding on the date it was signed. The parties contemplated preparing a more formal agreement and having defendants provide confessions of judgment for a possible enforcement action, but the term sheet did not make those documents conditions to the settlement becoming effective.

The parties did not fully execute a later formal agreement. A January 2020 version contained additional provisions, including details about allocation of settlement proceeds, confessions of judgment, and dismissal language, but it was never fully signed. Defendants later signed a modified version with a temporary payment schedule, but the plaintiffs did not countersign it. Defendants made some settlement payments, which the plaintiffs accepted.

In October 2020, the court approved the settlement reflected in the term sheet after finding it fair and reasonable under the Fair Labor Standards Act, dismissed the action with prejudice, and did not retain jurisdiction to enforce the settlement. The plaintiffs then sought clarification about which settlement document the court had approved and appealed the dismissal. The appellate court stayed the appeal to allow the district court to address the clarification request.

Court’s Analysis

The court concluded that the parties had formed a binding settlement when they signed the term sheet. The fact that they intended to prepare a more formal document did not prevent the material terms from being binding. The court also held that the contemplated confessions of judgment were not conditions precedent to the settlement’s effectiveness or enforceability. The term sheet likewise did not require a stipulation of dismissal before the court could approve the settlement and dismiss the action.

The court explained that its clarification was governed by Rule 60(a), which permits correction of a clerical mistake or an oversight so that an order accurately reflects what the court previously decided. The court clarified that the settlement it approved was the one reflected in the binding term sheet. It stated that it should have issued a clarifying order rather than continue assisting the parties after the case had been dismissed with prejudice, because it no longer had jurisdiction to do so.

To the extent the plaintiffs sought relief under Rule 60(b), which permits relief from a final judgment in specified circumstances, the court denied that request. It found no qualifying mistake, inadvertence, surprise, or excusable neglect, and no extraordinary circumstances. The absence of a stipulation of dismissal and signed confessions of judgment did not justify reopening the case because the term sheet did not require those items before dismissal. The court also stated that a breach of a settlement agreement was not a basis for reopening a case dismissed with prejudice when the court had not retained jurisdiction over settlement-related claims.

Disposition

The court clarified, under Rule 60(a), that the approved settlement was the one reflected in the parties’ binding term sheet. It vacated its earlier order reopening the case “for all purposes.” It terminated the motion in limine because it was filed contrary to the court’s individual practices and because the court lacked jurisdiction to decide it. It also terminated the defendants’ settlement-enforcement motion because the court lacked jurisdiction to enforce the settlement. The clerk was directed to close the case, which had previously been dismissed with prejudice. The opinion states that any enforcement action could be brought in state court.