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Lan v. Aol Time Warner, Inc.

United States District Court, Second Circuit

April 30, 2013

SANG LAN, Plaintiff,
v.
AOL TIME WARNER, INC. et al., Defendants.

MEMORANDUM & ORDER

LEONARD B. SAND, District Judge.

Plaintiff's former counsel, Ming Hai, objects to Magistrate Judge James C. Francis's August 13, 2012, Report and Recommendation ("R&R"), which recommended denying Hai's motion to set aside a settlement agreement between Hai and defendants Kao Sung Liu, Gina Hiu-Hung Liu, and Hugh H. Mo ("Defendants"). Having reviewed the R&R and Hai's objections thereto, we adopt the R&R and deny Hai's motion.

I. BACKGROUND

On July 12, 2011, Defendants moved for sanctions against Plaintiff and her then-attorney Hai alleging, among other things, that Plaintiff's claims were frivolous. See Mot., July 12, 2011, ECF No. 47; Defs.' Rule 11 Men. Law, July 12, 2011, ECF No. 49.[1] On October 31, 2011, Magistrate Judge Francis approved Hai's motion to withdraw as Plaintiff's counsel because of an irreconcilable conflict between counsel and attorney. See Sang Lan v. AOL Time Warner, Inc., No. 11 Civ. 2870, 2011 WL 5170311 (S.D.N.Y. Oct. 31, 2011).

On November 21, 2011, Magistrate Judge Francis issued a report and recommendation that noted that "defendants' most serious ground for sanctions is that] some of the plaintiff s claims are clearly frivolous." but that "resolution of the defendants' motion for sanctions should... be deferred until the issue of whether all or merely some of the plaintiff's claims are sanctionable has a more conclusive answer." Sang Lan v. AOL Time Warner, Inc., No. 11 Civ. 2870, 2011 WL 7807290, at *10-11 (S.D.N.Y. Nov. 21, 2011), adopted in part and rejected in port by 2012 WL 1633907 (S.D.N.Y. May 9, 2012).

With the threat of sanctions looming over Hai, Hai and Defendants held a settlement conference on February 27, 2012, before Magistrate judge Francis, in which Hai and Defendants negotiated and agreed upon all the key term" including that Hai pay $5, 000 and execute a signed Acknowledgment of Wrongdoing to be prepared by the defendants." R&R 2-3. After Hai wrote to Mo, requesting that Mo reduce the already-agreed-upon figure to $4, 000, Hai signed the Stipula on. Id. at 3-4. Hai then sent a fax to Magistrate Judge Francis asking for the payment to bc reduced to 84, 000, but withdrew that request, allegedly under pressure. Id. at 4.

The Stipulation stated that only the settlement amount was to be confidential. See Stipulation and Order of Partial Dismissal Attachment § 8, Mar. 2, 2013, ECF No. 96 ("With the exception of the Settlement Amount, this Settlement Agreement may be made publicly available and is subject to no restrictions as to Confidentiality."). However, a modified version of the stipulation of dismissal in which the $5, 000 figure was unredacted was tiled on March 6. R&R 5. Although the settlement amount was redacted shortly thereafter, Hai claims that the $5, 000 figure was published widely. Id. at 5-6.

On May 9, 2012, issued an Order that. among other things, denied Defendants' motion for sanctions against Plaintiff with prejudice because "Defendants ha[d] not shown that her claims had no chance of success, '" Sang Lan v. AOL Time Warner, Inc., No. 11 Civ. 2870, 2012 WL 1633907, at 3-4 (S.D.N.Y. May 9, 2012) (quoting Mori Ciba-Geigy Corp., 68 F.3d 21, 25 (2d Cir. 1995)).

The very next day, Hai tried to file a motion to set aside the stipulation he entered into in March to avoid the risk of those sanctions against himself. See ECF No. 99. On May 14, 2012, after resolving his difficulties filing Hai filed a motion to set aside the stipulation and order of dismissal See Mot., May 14, 2012, ECF No. 103. In his affirmation in support of his motion to cancel the settlement agreement, Hai raised four issues:

(1) The settlement should be rescinded because Defendants published the confidential settlement amount. Hai Affirm. Supp. Mot. §§ 2-5.
(2) There was "misrepresentation" in the negotiation because widespread publication of Hai's admission of fault was not "expected or contemplated in negotiating the settlement." Id. §§ 6-9.
(3) The settlement was "was obtained by defendants through undue influences, threats, duress and other prohibited acts" when (a) Defendants threatened bar disciplinary action, (b) provided Hai the documents "in last minute, literally order[ing him] to sign within one hour without change, " (c) and threatened Hai when Hai faxed a letter to Magistrate Judge Francis complaining about the settlement he had already signed. Id. §§ 10-14.
(4) the settlement is "unconscionable, contradictory to Judge's Sand's ruling and against public policy, " seemingly because we ruled that the misconduct Hai said he committed in the Acknowledgement of Wrongdoing was not sanctionable under Rule 11. Id. §§ 15-21.

Even though Hai knew the settlement amount had been disclosed in March, as well as all of the other relevant facts, Hai's May motion was the first time that Hai raised these issues.

We referred Hai's motion to Magistrate Judge Francis. See Order, May 14, 2012, ECF No. 102. On June 5, 2012, Magistrate Judge Francis held a telephone hearing. See Minute Entry, June 5, 2012. Following briefing by both sides, Magistrate Judge Francis issued a well-reasoned R&R on August 13, 2012. In the R&R, Magistrate Judge Francis held that:

§ Disclosure of the settlement amount was a material breach, but Hai had waived that breach or, in the alternative, his claim was barred by the election of remedies doctrine. R&R 7-11 & 11 n.3.
§ There was no misrepresentation when the public parts of the settlement agreement were publicized more than ...

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