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Herrera v. Eastside Wok, Inc.

United States District Court, S.D. New York

November 25, 2014

SERGIO HERRERA, et al., Plaintiffs,
v.
EASTSIDE WOK, INC., et al., Defendants

For Sergio Herrera, on behalf of themselves and all other person similarly situated, Adrian Juan Hernandez, on behalf of themselves and all other person similarly situated, Uriel Feliciano, on behalf of themselves and all other person similarly situated, Magdaleno Cantu Feliciano, on behalf of themselves and all other person similarly situated, Plaintiffs: David Stein, Samuel & Stein, New York, N.Y. USA.

For Eastside Wok, Inc., doing business as Eden Wok, Kevin Cohnen, Choon Soo HO, Defendants: Peter C. Godfrey, LEAD ATTORNEY, Hodgson Russ Andrews Woods & Goody, LLP (Buffalo), Buffalo, N.Y. USA; Joseph Paul Goldberg, Selyn Hong, Hodgson Russ, LLP (NYC), New York, N.Y. USA.

MEMORANDUM ORDER

JAMES L. COTT, United States Magistrate Judge.

Plaintiffs Sergio Herrera, Adrian Juan Hernandez, Uriel Feliciano, and Magdaleno Cantu Feliciano brought this wage-and-hour action against defendants Eastside Wok, Inc. and its principals Kevin Cohnen and Choon Soo Ho. The parties appeared for a settlement conference before the Court on May 8, 2014, at which a settlement was reached and the material terms of which were memorialized on the record. On October 23, 2014, plaintiffs filed a motion to enforce the settlement agreement, as described on the record, particularly as against the individual defendants. Defendants opposed the motion and cross-moved to enforce their interpretation of the agreement. As described further below, plaintiffs' motion is granted and defendants' cross-motion is denied.

I. BACKGROUND

On December 17, 2013, plaintiffs Sergio Herrera, Adrian Juan Hernandez, Uriel Feliciano, and Magdaleno Cantu Feliciano filed a complaint against Eastside Wok, Inc. and its principals Kevin Cohnen and Choon Soo Ho alleging violations of the Fair Labor Standards Act (" FLSA") and New York Labor Law (" NYLL"). (Dkt. No. 1). After Judge Oetken referred this case to the undersigned for general pre-trial supervision (Dkt. No. 13), the Court held an initial pre-trial conference and scheduled a settlement conference. (Dkt. Nos. 14-15). At a settlement conference before the Court on May 8, 2014, all parties appeared with their counsel, [1] and after nearly five hours of negotiation, the parties reached a settlement. Declaration of David Stein, Esq. dated October 23, 2014 (" Stein Decl."), at ¶ ¶ 2-4, 10 (Dkt. No. 30); Declaration of Peter C. Godfrey, Esq. dated November 13, 2014 (" Godfrey Decl."), at ¶ ¶ 2-5 (Dkt. No. 34). As is this Court's normal practice, the parties then placed the material terms of the settlement on the record.[2]

The terms of the settlement placed on the record included the amount to be paid to plaintiffs, which was inclusive of attorneys' fees, costs, and prejudgment interest, in return for which plaintiffs would provide full releases of liability to all defendants. See Tr. at 3, 11. After the material terms had been stated, the Court asked each party present at the conference whether he understood the terms of the agreement and agreed to be bound by them. Tr. at 13-15. The Court also asked counsel whether they had additional questions to put to the parties on the record regarding their respective understandings of the settlement. Tr. at 11, 14-15. After the settlement conference, the parties consented to the Court's jurisdiction for all purposes pursuant to 28 U.S.C. § 636(c). (Dkt. Nos. 17, 22).

As the parties negotiated the details of a written version of the settlement agreement, discussions broke down over a disagreement regarding the liability of the individual defendants, Cohnen and Ho. Stein Decl., ¶ ¶ 17-21; Godfrey Decl., ¶ ¶ 11-13. Plaintiffs asserted that all defendants were jointly and severally liable for the agreed-upon settlement amount, and included language to that effect in their draft written settlement agreement, while defendants believed that only Eastside Wok was responsible for the amount. Id. Plaintiffs then attempted to enforce the oral agreement placed on the record, which they believed supported defendants' joint and several liability, Stein Deck at ¶ 22, and so moved the Court on October 23, 2014. See Notice of Motion (Dkt. No. 29); Stein Decl.; Memorandum of Law in Support of Plaintiffs' Motion to Enforcement the Settlement Agreement (" Pls. Mem.") (Dkt. No. 31); see also Plaintiffs' Reply Memorandum of Law (" Reply Mem.") (Dkt. No. 36); Supplemental Declaration of David Stein, Esq. dated November 24, 2014 (" Stein Supp. Deck") (Dkt. No. 36-1). Defendants opposed plaintiffs' motion in the form of a cross-motion to preclude enforcement of the agreement against the individual defendants. See Notice of Cross-Motion (Dkt. No. 33); Godfrey Decl.; Memorandum of Law in Opposition to Plaintiffs' Motion to Enforce the Settlement Agreement (" Defs. Mem.") (Dkt. No. 35).

II. DISCUSSION

As a preliminary matter, " [a] district court has the power to enforce summarily, on motion, a settlement agreement reached in a case that was pending before it." Meetings & Expositions, Inc. v. Tandy Corp., 490 F.2d 714, 717 (2d Cir. 1974). All parties agree that the terms of the settlement placed on the record on May 8, 2014 constitute a binding and enforceable agreement. See Pls. Mem. at 4-7; Defs. Mem. at 3. This is well-settled law, see, e.g., Powell v. Omnicom, BBDO/PHD, 497 F.3d 124, 129 (2d Cir. 2007), and the Court stated as much on the record before the settlement terms were detailed, Tr. at 2. The fact that the parties also anticipated formalizing this agreement in writing is of no import here. Powell, 497 F.3d at 129. The crux of the dispute is whether the agreement stated on the record contemplated defendants' joint and several liability for the settlement payment amount. Before the Court are cross-motions to enforce the parties' respective interpretations of the oral settlement agreement. For the reasons that follow, the Court agrees with plaintiffs' interpretation that defendants are jointly and severally liable for the settlement payment amount.

" A settlement agreement is a contract that must be construed in accordance with general principles of contract law." In re World Trade Ctr. Disaster Site Litig., 754 F.3d 114, 121 (2d Cir. 2014) (citation omitted). The ambiguity of a contract provision is a question of law for the Court, and ambiguity will be found " where the terms of the contract could suggest more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business." Law Debenture Trust Co. of New York v. Maverick Tube Corp., 595 F.3d 458, 466 (2d Cir. 2010) (citation omitted). Where, as here, parties have proposed two opposing interpretations, each of which they contend is the true meaning of an " unambiguous" provision, the Court " need not determine which is the more likely interpretation; we need merely decide whether each . . . is sufficiently reasonable to render the clause ambiguous." In re Delta Airlines, Inc., 313 F.App'x 430, 434 (2d Cir. 2009) (citation omitted).

Here, in exchange for a general release of liability from plaintiffs for all defendants, plaintiffs were to receive a certain sum of money on or before a date certain. After these terms were explicated, the Court engaged in the following colloquy with Cohnen and Ho, the individual defendants and principals of the corporate defendant:

COURT: Mr. Ho, do you understand all of the terms of the settlement and do you agree to be bound by them?
MR. HO: Yes.
COURT: Mr. Cohnen, do you understand all of the terms and do you agree to be bound by them?
MR. COHNEN: Yes.

Tr. at 15. Plaintiffs argue that, by virtue of this colloquy, Cohnen and Ho are jointly and severally liable with Eastside Wok for the total settlement amount. Defendants, by contrast, argue that because the issue of joint and several liability was not explicitly discussed on the record, Cohnen and Ho are not individually liable for the entire settlement amount. They further argue that their interpretation is supported by the discussions during the settlement conference, which centered on Eastside Wok's ability to pay the settlement amount, a fact which plaintiffs contest.

Despite this fundamental disagreement between the parties, the Court finds that the settlement agreement unambiguously provides for joint and several liability for all defendants. Lemus v. Manhattan Car Wash, Inc., No. 06-CV-15486 (MHD), 2010 WL 1372705 (S.D.N.Y. Mar. 26, 2010) is on point. In Lemus, one of the defendants in a FLSA case contested his liability where the written settlement agreement did not explicitly provide for joint and several liability, only that " defendants" were responsible for paying the settlement amount to plaintiffs. In rejecting the defendant's interpretation, the court observed that " New York law is clear that when multiple promisors agree to pay a stated sum to the same promisee, they will be jointly liable unless the promisors unambiguously expressed a contrary intention." Lemus, 2010 WL 1372705, at *7 & n.15 (collecting cases); accord Battery Associates, Inc. v. J & B Battery Supply, Inc., 944 F.Supp. 171, 178 (E.D.N.Y. 1996); Deltor Corp. N.V. v. Gardner, 91-CV-8424 (TPG), 1995 WL 505643, at *7 (S.D.N.Y. Aug. 24, 1995); United States Printing & Lithograph Co. v. Powers, 233 N.Y. 143, 152, 135 N.E. 225 (1922) (" It is a general rule, so well established as not to require extended discussion, that promises by two or more persons create a joint duty unless the contrary is stated."); Wujin Nanxiashu Secant Factory v. Ti-Well Int'l Corp., 22 A.D.3d 308, 310-11, 802 N.Y.S.2d 411, 414 (1st Dep't 2005) (" Settled rules governing the interpretation of contracts provide that when two or more entities take on an obligation, . . . they do so jointly, and that words of severance are necessary to overcome this primary presumption.") (citations omitted).[3] Similarly, courts have explained that " [i]f the transaction takes the form of a single contract and the promisors so express themselves as to lead the promisee reasonably to understand that each one promises the whole compensation, they are all bound accordingly." NYKCool A.B. v. Pac. Fruit Inc., No. 10-CV-3867 (LAK) (AJP), 2011 WL 3666579, at *3 (S.D.N.Y. Aug. 9, 2011) (quoting 9 Corbin on Contracts § 52.4 (rev. ed. 2007)), aff'd, 507 F.App'x 83 (2d Cir. 2013).[4]

In light of this well-established principle of New York contract law governing joint and several liability, defendants' interpretation of the agreement set forth on the record is not " sufficiently reasonable to render [it] ambiguous." In re Delta AirLines, Inc., 313 F.App'x at 434.[5] For the same reason, defendants' argument that plaintiffs improperly seek to add joint and several liability to the agreement is unavailing. See Defs. Mem. at 4-5. Rather it is defendants who are attempting to modify the oral agreement by advocating for their several liability in a manner contrary to principles of New York contract law. Given that Cohnen and Ho each stated that he intended to be bound by the obligations that had just been elucidated on the record, joint and several liability is the only reasonable interpretation.[6] If defendants had contemplated that only Eastside Wok would be responsible for making the settlement payment to plaintiffs in exchange for all defendants being released from liability for the suit, such an arrangement should have been made explicit with " words of severance, " Wujin Nanxiashu Secant Factory, 802 N.Y.S.2d at 414, and it was not, even though the Court twice invited counsel to place any other terms on the record, Tr. at 11, 15.[7]

III. CONCLUSION

For the foregoing reasons, plaintiffs' motion is granted and defendants' cross-motion is denied. Defendants are directed to make the required settlement payment within 45 days of the date of this memorandum order, and consistent with the terms set forth on the record on May 8, 2014. If payment is not made by that date, plaintiffs may seek further relief from the Court, including their fees and costs for both this motion to enforce and any subsequent motion.

The Clerk of the Court is directed to close docket entry numbers 29 and 33.

SO ORDERED.


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