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Mercedes v. Tito Transmission Corp.

United States District Court, S.D. New York

March 7, 2017

JUAN GONZALEZ MERCEDES, Plaintiff,
v.
TITO TRANSMISSION CORP., et al., Defendants.

          HON. COLLEEN McMAHON, U.S.D.J.

          REPORT AND RECOMMENDATION

          DEBRA FREEMAN, United States Magistrate Judge

         This action, brought under the Fair Labor Standards Act ("FLSA") and New York Labor Law ("NYLL"), has been referred to this Court for general pretrial supervision. For the reasons set out below, however, and as discussed more fully in an Order issued by this Court on February 8, 2017 (Dkt. 38), a copy of which is attached hereto for reference, I recommend that a default judgment be entered against defendants Tito Transmission Corp., d/b/a V.A. Automatic Transmission Repairs ("Tito Transmission"), and Vincente Amparo ("Amparo") (collectively, "Defendants"), for their repeated failure to comply with this Court's Orders and their apparent abandonment of any defense of this action.

         DISCUSSION

         By letter motion dated December 7, 2016 (Dkt. 35; see also Dkt. 37 (supplementing motion)), plaintiff Juan Gonzalez Mercedes ("Plaintiff) moved for the imposition of sanctions against Defendants for their failures to cooperate in discovery and to attend Court-ordered conferences. Specifically, Plaintiff sought (1) a monetary sanction to compensate Plaintiff, his counsel, and a Spanish interpreter for time incurred in attending scheduled Court conferences for which Defendants and their counsel failed to appear, in apparent defiance of explicit Court directives, and (2) the entry of a default judgment against both Defendants.

         (Image Omitted)

         By Order dated February 8, 2017 (Dkt. 38), this Court considered the law applicable to the imposition of the types of sanctions requested. Upon consideration of that law and the procedural history of this case, this Court imposed a monetary sanction on both Defendants and their counsel under Rules 16(f)(1) and 37(b)(2)(c) of the Federal Rules of Civil Procedure (see Dkt. 38, at Sections I and 11(A)), but determined that it would be premature to recommend the entry of a default judgment, given that, in this Court's view, it was possible that lesser sanctions would be sufficient to compel compliance (see Id. at Section 11(B) (citing, e.g., Agiwal v. Mid Island Mortgage Corp., 555 F.3d 298, 303 (2d Cir. 2009))). So as to give Defendants a final opportunity to comply, this Court (1) ordered payment of the monetary sanction by February 22, 2017; (2) ordered Defendants to produce certain documents by that same date; (3) rescheduled, to March 1, 2017, the in-person conference for which Defendants and their counsel had twice failed to appear; (4) and directed Defendants' counsel to confirm to this Court by February 22, 2017 that both he and his clients would attend the March 1 conference. This Court expressly cautioned Defendants and their counsel that, if they failed to make a timely payment of the monetary sanction, to make a timely document production, or to confirm their intended appearance at the March 1 conference, then this Court would cancel the conference (rather than require Plaintiffs counsel and Plaintiff to appear unnecessarily, for a third time) and would recommend that a default judgment be entered against Defendants.

         By letter dated February 25, 2017 (Dkt. 39), Plaintiffs counsel informed this Court that, as of that date, Defendants and their counsel had "not submitted any portion of the sanctions award" and had also "not submitted any discovery documents to Plaintiff." Further, since issuing its February 8 Order, this Court has received no communication from Defendants' counsel (or from Defendants directly), either confirming an intent to appear for the March 1 conference, requesting an adjournment of that conference, raising any issue regarding an inability to appear, or challenging this Court's imposition of a monetary sanction or its discovery ruling. This Court's Chambers has not been contacted informally in this regard, and no motion for reconsideration or any other filing by Defendants has been made. In short, Defendants and their counsel have now demonstrated an intent to ignore this Court entirely and, apparently, to abandon any defense of this action.

         CONCLUSION

         As Defendants have failed to comply with any aspect of this Court's February 8, 2017 Order, thus demonstrating that lesser sanctions are not sufficient to compel their compliance with this Court's Orders or their discovery obligations, I hereby recommend that Defendants be held in default, and that a default judgment be entered against them, with the amount of damages due to Plaintiff to be determined upon a damages inquest.

         Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days from service of this Report to file written objections. See also Fed. R. Civ. P. 6. Such objections, and any responses to objections, shall be filed with the Clerk of Court, with courtesy copies delivered to the chambers of the Honorable Colleen McMahon, United States Courthouse, 500 Pearl Street, Room 2550, New York, New York 10007, and to the chambers of the undersigned, United States Courthouse, 500 Pearl Street, Room 1660, New York, New York, 10007. Any requests for an extension of time for filing objections must be directed to Judge McMahon. FAILURE TO FILE OBJECTIONS WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See Thomas v. Arn, 474 U.S. 140, 155 (1985); IUEAFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992); Wesolek v. Canadair Ltd., 838 F.2d 55, 58 (2d Cir. 1988); McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983).

         ORDER

         The Honorable Colleen McMahon, U.S.D.J., has referred this Fair Labor Standards Act ("FLSA") and New York Labor Law ("NYLL") case to this Court for general pretrial supervision. Currently before this Court is a motion by plaintiff Juan Gonzalez Mercedes ("Plaintiff'), seeking the imposition of sanctions against defendants Tito Transmission Corp., d/b/a V.A. Automatic Transmission Repairs ("Tito Transmission"), and Vincente Amparo ("Amparo") (collectively, "Defendants"), for their failure to appear at two court conferences or to produce discovery, as directed by this Court. Specifically, Plaintiff and his counsel seek a sanctions award of $2, 002.50 to reimburse them for the time that they (and an interpreter) spent in attending the conferences in question, and the entry of a default judgment against Defendants based on Defendants' non-compliance with multiplecourt orders.

         For the reasons discussed below, Plaintiffs motion is granted to the extent it seeks the imposition of monetary sanctions against Defendants and their counsel, although this Court has adjusted the amount of the sanctions award downward from the amount sought. As to Plaintiffs separate request for entry of a default judgment against Defendants, this Court will defer acting on that aspect of Plaintiff s motion until it becomes evident whether the lesser sanction of a monetary award is sufficient to compel Defendants' compliance with court orders. If Defendants fail to pay the monetary sanction imposed by this Court, continue to fail to comply with discovery orders, or fail to take advantage of a final opportunity that this Court will afford them to appear and defend this case, then this Court will proceed to recommend to Judge McMahon that a default judgment be entered.

         BACKGROUND

         A. Initial Proceedings Before Judge McMahon

         This case was commenced on February 13, 2015, by Plaintiffs filing of a Complaint alleging FLSA and NYLL violations, arising from Plaintiffs alleged employment by Defendants. (See generally Complaint, dated Feb. 18, 2015 (Dkt. 1).) After Defendants had been served with process, but failed to appear, Plaintiff filed a motion for a default judgment. (Dkt. 12.) After that motion was made, though, an attorney - Ramon Wigwaldo Pagan, Sr., Esq. ("Pagan") - filed a Notice of Appearance on behalf of both Defendants (Dkt. 19), [1] and then wrote a letter to Judge McMahon, stating that Plaintiff had previously "settled the matter" with defendant Amparo, having "executed a release in favor of Mr. Amparo last year." (Letter to the Court from Pagan, filed May 23, 2016 (Dkt. 20).) Pagan stated that Plaintiffs counsel, Michael Faillace, Esq. ("Faiilace"), of the law firm of Michael Faillace & Associates, P.C. (the "Faillace Firm"), had not brought the "release" to the Court's attention in connection with Plaintiffs default motion, even though Faillace was aware of it. (Id.) According to Pagan, Faillace merely indicated to Pagan that Plaintiff had "changed his mind" regarding the settlement. (Id.) Pagan also wrote that Amparo was not "notified of this event" (presumably the default motion), "nor has a refund been given to Mr. Amparo." (Id.)

         Upon receiving this letter, Judge McMahon scheduled a conference for June 24, 2016 (Dkt. 21), but Pagan failed to appear at that conference. Judge McMahon then rescheduled the conference to August 5, 2016, in a written Order in which the Court found that Pagan's representation that a prior release had not been brought to the Court's attention by the Faillace Firm in the default motion was "deeply disturbing" (Dkt. 24), and also noted that "[t]he fact of the prior settlement, if it was in fact entered into, could well explain the default in this case, and would almost certainly excuse it..." (id.). Judge McMahon directed Pagan to bring to the August 5 conference a copy of any release and proof of payment to Plaintiff. (7c?.)

         The August 5 conference was rescheduled twice on the Court's own initiative (Dkts. 25, 27), and a third time upon a request from Faillace, who wrote to the Court on August 12, 2016, stating that "[r]ather than arguing over whether or not a settlement agreement was reached outside of Court, and the impact said agreement would have on Plaintiffs motion for a default judgment, Plaintiff is willing to withdraw his default motion and resume litigating the case" (Dkt. 29). Once Plaintiff in fact withdrew the default motion on August 22, 2016 (Dkt. 30), Judge McMahon proceeded to hold a conference on September 16, 2016, after which she referred the case to this Court, both to determine whether the "release" still being proffered by Defendants was valid and a settlement had been reached, and, if necessary, for general pretrial supervision (see Minute Entry for proceedings held before Judge McMahon; see also Dkt. 32 (Order of Reference)).

         B. Proceedings Before This Court

         This Court held a telephone conference with counsel on October 5, 2016, on the record. At that conference, it became clear to this Court that the so-called "release" that had been put forward by Defendants' counsel, Pagan, had not been signed by Plaintiff prior to the lawsuit being commenced, but rather afterwards, such that, if it in fact evidenced a settlement of the FLSA claims asserted in this case, that settlement would have to be placed before the Court for fairness review, pursuant to Cheeks v. Freeport Pancake House, Inc., 796 F.3d 1999 (2d Cir. 2015). Further, at the October 5 conference, Plaintiffs counsel (Jesse S. Barton, Esq. ("Barton"), of the Faillace Firm) indicated that Plaintiff was strenuously denying that any settlement agreement had been made. According to Barton, although Plaintiff was not denying that he signed the purported release, Plaintiff does not speak English, had no understanding of what he was asked to sign, did not receive any payment (despite Defendants' claim to the contrary), and would vigorously dispute that he had agreed to settle his claims in this case.

         Under the circumstances, this Court pointed out that, if Defendants wished to maintain their position that this action had been settled, they (1) would have to demonstrate a meeting of the minds on all material terms of a settlement, and then (2) would have to persuade the Court that the settlement was fair and adequate. As the "release" document recited no consideration and included no settlement terms - merely stating that Plaintiff had "decided to settle this case outside of court and stop the lawsuit" (see Dkt. 26 (copy of purported release)) - and as Barton represented that, while Defendants claimed to have paid Plaintiff $1, 500 to resolve the action, Plaintiffs wage claims alone were for $150, 000, this Court noted that Defendants might face difficult obstacles in persuading the Court of the fairness of the purported settlement. This Court also suggested that perhaps the Court should hold a settlement conference, and Pagan indicated that he wanted an opportunity to discuss all of this with defendant Amparo.

         At the close of the October 5 conference, this Court directed Defendants to produce whatever wage and hour records they had for Plaintiff, and directed Plaintiffs counsel to review those records and then provide Defendants with a full damages computation, informed by the records. This Court also scheduled a follow-up telephone conference for October 27, 2016, and urged the parties to discuss settlement prior to that follow-up conference. In particular, this Court encouraged Plaintiff to make a reasonable settlement demand, ...


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