Rosario v. 2022 Eastchester LLC

Background

Alexandra Rosario, Elizabeth Ortiz, and Amadou Camara sued 2022 Eastchester, LLC, Frank Cotto, and Noboru Takashima under the Fair Labor Standards Act (FLSA) and New York Labor Law. Their claims arose from work as cashiers and delivery drivers at Vaya from August 2017 through March 2020.

After the complaint was served but before defendants answered, Susan Egan, who represented Cotto, drafted a settlement agreement for Camara. Cotto gave the agreement to Camara without Egan notifying Camara’s lawyer in advance. Camara and Cotto signed the agreement on October 17, 2021. It provided Camara $660 and included a broad release covering employment-related claims, FLSA and New York Labor Law claims, and other claims involving the defendants.

Why the Court Voided the Release

The court considered three grounds asserted by Camara.

First, the court found that Egan violated New York Rule of Professional Conduct 4.2(b). That rule permits a lawyer to advise the lawyer’s client about communications with a represented opposing party only if the opposing party’s lawyer receives reasonable advance notice. The court found that Egan knew Camara had counsel, drafted the release for Cotto to give Camara, and failed to provide the required advance notice. The court did not decide whether that ethics violation alone required voiding the release.

Second, the court found that the settlement failed the fairness review required for FLSA settlements under Cheeks v. Freeport Pancake House. The court found the $660 payment unreasonably low. Plaintiffs stated that Camara’s best-case estimate for his claims was $304,610.35 and that he alleged $88,858.75 in unpaid wages; defendants did not provide information tying the $660 payment to hours worked, applicable wages, or factual disputes. The court also found the release unfair and unreasonable because it was not limited to wage-and-hour claims and instead covered essentially every conceivable dispute between Camara and the defendants.

Third, the court found the release void for procedural unconscionability, meaning that the agreement was formed through an unfair process. The court found that Egan and Cotto knew Camara was under financial strain after losing his job, that Egan drafted the release without notifying Camara’s lawyer, and that Cotto obtained Camara’s signature without first ensuring that Camara had received advice from his own lawyers.

Fees and Costs Under 28 U.S.C. § 1927

Plaintiffs also asked the court to require Egan to pay the fees and costs caused by the motion. Section 1927 permits a court to require an attorney to personally pay excess costs, expenses, and attorney fees caused by unreasonably and vexatiously multiplying court proceedings. The court explained that such an award requires clear and convincing evidence of conduct that is entirely without legal or factual support, motivated by an improper purpose, and in bad faith.

The court found that standard satisfied. It identified three actions by Egan: failing to notify Camara’s lawyer before providing the release; drafting a release that could not lawfully resolve the FLSA dispute because of its low payment and broad terms; and demanding that Camara’s lawyer file an amended complaint removing Camara or face a dismissal motion based on the release. The court found that these actions wasted court resources, lacked a legal or factual basis, and were undertaken in bad faith.

Disposition

The court granted plaintiffs’ motion insofar as it sought to void the release and order Egan to personally satisfy the excess costs, expenses, and attorney fees associated with litigating the motion. Plaintiffs had seven days to submit a tabulation of those fees and costs, and defendants had seven days afterward to respond. The court also scheduled a pretrial conference to establish a schedule for the remainder of the litigation.