Whitley v. City of Mount Vernon

Background

Bryan Whitley sued the City of Mount Vernon under the Fair Labor Standards Act for unpaid wages, liquidated damages, and attorney’s fees and costs. The parties entered into a settlement agreement that required the City to pay Whitley $35,078.40 for unpaid wages and liquidated damages and $24,731.00 for attorney’s fees and costs. The court approved the agreement on January 14, 2022 and retained jurisdiction until the settlement amount was paid in full.

The agreement required payment within 30 days after approval. It also stated that interest on any unpaid amount would accrue daily at the New York State post-judgment interest rate of 9%, beginning on the thirty-first day after approval. The City did not make the required payments by February 13, 2022. The City later processed checks for the amounts stated in the agreement, but the parties disputed the interest owed.

Settlement-enforcement ruling

The court treated enforcement of the settlement as a contract matter governed by state law. It held that the interest provision was clear and unambiguous. The New York post-judgment rate is 9% per year, not 9% per day, and New York’s post-judgment interest is simple rather than compound interest.

The court explained that “accrue daily” describes how often interest is calculated, not the size of the annual rate. Therefore, the 9% annual rate could be applied only to the original settlement balance, not to the balance plus previously accrued interest. The court rejected Whitley’s request for 9% daily interest compounded daily.

The court granted in part and denied in part Whitley’s motion to enforce the settlement agreement. It granted the motion to the extent the City was required to make all payments due under Paragraph 2 and pay simple interest at 9% per year, accruing daily from February 14, 2022 through December 8, 2022. It denied the motion in all other respects, including the request for daily compound interest. The court directed the City to make all settlement payments no later than 30 days after December 8, 2022.

Plaintiff’s sanctions motion

Whitley also sought sanctions against the City based on the City’s decision to withhold payment while disputing Whitley’s interest calculation. The court declined to use its inherent power to impose sanctions. Although the court was disappointed that the City did not pay Whitley on time, it found that the City acted reasonably when it withheld payment of the disputed interest rather than pay the millions of dollars demanded.

The court denied Whitley’s motion for sanctions.

City’s Rule 11 sanctions motion

The City sought sanctions against Whitley’s lawyer, Ms. Irene Donna Thomas, under Rule 11 of the Federal Rules of Civil Procedure. Rule 11 requires attorneys to make a reasonable inquiry before presenting claims or motions to the court and permits sanctions for objectively unreasonable or frivolous filings. The court found that the City complied with Rule 11’s 21-day “safe harbor” requirement by serving a draft sanctions motion and giving Ms. Thomas an opportunity to withdraw the challenged filings.

The court found that Ms. Thomas’s interpretation of the settlement agreement was baseless because it would have required the City to pay extraordinarily large amounts of interest on a settlement worth tens of thousands of dollars. The court also found, however, that Whitley’s request to enforce the City’s timely payment obligations had merit and that he did not act unreasonably by seeking enforcement.

Despite its criticism of Ms. Thomas’s interest argument, the court exercised its discretion not to impose sanctions. It denied the City’s sanctions motion.

Disposition

Judge Nelson S. Roman ordered that Whitley’s motion to enforce the settlement agreement was granted in part and denied in part. Whitley’s motion for sanctions was denied, and the City’s motion for sanctions was denied. The clerk was directed to terminate the sanctions motions at ECF Nos. 28 and 37.