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Judge enforces FLSA settlement, both sides balk

EA federal judge says he will enforce a $100,000 Fair Labor Standards Act settlement even though the plaintiff claimed he did not agree to the deal.

The decision by U.S. District Judge Henry C. Morgan Jr. came after the plaintiff’s lawyer was forced to withdraw over conflicts with his client about the settlement.

The battlefield was not quiet after Morgan’s ruling, however. Even though the defendants requested and received the judge’s approval of the settlement agreement, they now have refused to pay as agreed, the plaintiff’s lawyer claims.

The dust-up arose from a pay dispute involving an employee at two Newport News hotels owned by the defendant companies. The plaintiff, Mukesh Patel, alleged he was paid a flat salary of $25,000 but worked far more than 40 hours a week staffing front desks and otherwise managing the hotels.

Patel contended his pay worked out to less than $4 an hour with no overtime. When he sued, he added a claim that one of his supervisors pushed him to the ground during a dispute, injuring his knee.

The defendants denied they were covered by state and federal fair wage laws. Even if they were subject to the laws, they claimed Patel would be exempt from overtime pay. They denied any tortious conduct.

After nine months of litigation, and a settlement conference with a magistrate judge, the two sides appeared to agree on a plan for the defendant companies to pay $100,000 in six installments, with payment secured by a promissory note against one of the hotel properties.

The terms were spelled out in a Jan. 27 email from the plaintiff’s lawyer, James R. Theuer of Norfolk.

A week later, Patel allegedly balked. He refused to sign the settlement agreement, according to the defendants’ pleadings.
The defendants asked the judge to enforce the settlement and dismiss the case.

Theuer filed a motion opposing approval of the settlement and – at the same time – moved to withdraw as counsel for Patel.

Theuer said he believed he would be a material witness in the resolution of the dispute.

At a March 19 hearing, Patel testified that he never fully agreed to the settlement, but he “forgot” to tell Theuer to consider additional damages for his injury because he was busy when Theuer called. Patel told Morgan he did not realize the proposed settlement was for the entire case.

Morgan said he then informed Patel that his testimony was in conflict with his lawyer’s email, and he was forced to call the lawyer as a witness. At that point, Morgan granted Theuer’s request to withdraw and ruled that Patel had waived his attorney-client privilege.

Theuer testified that he sent the email confirming the terms of the settlement because Patel had authorized him to do so, and that he had sent a copy to Patel.

The testimony covered specific details of the relationship and discussions between Theuer and Patel. Theuer even provided a copy of his retainer agreement.

Morgan then heard argument on the fairness of the proposed agreement.

No new lawyer ever appeared on Patel’s behalf, either at the hearing or within a 10-day window afterward, Morgan said.

Morgan said he found most of Patel’s testimony not credible.

The judge concluded Patel had authorized Theuer to settle the entire case and understood the terms of the agreement as set out in the email.

While Theuer’s retainer agreement did not explicitly authorize Theuer to settle the case on Patel’s behalf, Morgan said Theuer received direct authorization from Patel. Even though there were other conditions in the actual settlement agreement – beyond the basic terms set out in the email – Morgan found that an enforceable settlement had been reached.

Morgan also approved the fairness of the settlement, including its allocation of the recovery, under the requirements of the FLSA.
Morgan’s April 23 opinion is Patel v. Barot (VLW 014-3-250).

Theuer acknowledged the case presented a tricky situation for him. “I tried to walk a narrow line,” he said.

He noted the judge had to take over questioning of witnesses during the hearing with Patel.

“I think Judge Morgan did a pretty good job of charting his way through some troubled waters,” he said.

Thomas M. Lucas of Norfolk, the lawyer for the defendants, declined to comment after Morgan’s decision. “We’re not done,” he said on May 16.

In fact, the sparring continues. Theuer – now fighting to recover his firm’s fees – contends the defendants have refused to live up to their side of the deal. Theuer is asking Morgan to hold them in contempt.

The defendants had agreed to execute a deed of trust for Theuer’s fees in the case, but he now says the defendants failed to sign and return the document. He also claims they missed their first installment payment for the settlement agreement.

“Defendants invoked the power of the Court to approve and enforce a settlement agreement, yet now refuse to perform the very terms they demanded be imposed,” Theuer wrote in a May 20 brief.

Theuer asked for immediate judgment for his firm in the amount of $38,856.85.

VLW 014-3-250

Virginia Lawyers Weekly
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