Patel v. Barot et al

Filing 55

OPINION AND ORDER GRANTING Defendants' 39 Motion for Approval of Settlement and Dismissal and Defendants' 42 Motion for Settlement Approval and GRANTING Plaintiff's counsel's 45 Motion to Withdraw. The Court ORDERS that all claims for damages included in the Complaint and specifically those claims for damages under the FLSA and for personal injury are DISMISSED WITH PREJUDICE. With the exception of those costs specified as reimbursable to Plaintiff's counsel, all other costs shall be borne by the party incurring them. Entered and filed 4/23/14, as outlined. (See Order and Footnotes for specifics) (Signed by District Judge Henry C. Morgan, Jr on 4/23/14). (ecav, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA

Newport News Division

MUKESH PATEL,
Plaintiff,
v.

Civil Action No. 4:13cv59

HARSHAD D. BAROT,
PRAKASH D. BAROT,
CAAP HOSPITALITY, LLC,
SHRINIDHI CORPORATION, INC.
and

DBSH, LLC,
Defendants.
OPINION AND ORDER

This matter comes before the Court on Defendants Harshad D. Barot; Prakash D. Barot;

CAAP Hospitality, LLC; DBSH, LLC; and Shrinidhi Corporation, Inc.'s ("Defendants") Motion

for Settlement and Dismissal, Doc. 39, and Amended Motion for Settlement Approval, Doc. 42, as

well as PlaintiffMukesh Patel's ("Plaintiff or "Patel") counsel's Motion to Withdraw as Attorney,
Doc. 45. For the reasons stated herein, the Court GRANTS the above Motions.

I.

Factual and Procedural Background

On May 2,2013, Patel filed a Complaint against the Defendants, alleging violations ofthe
Fair Labor Standards Act ("FLSA"), violations ofVirginia's minimum wage law, assault, and

battery. Doc. 1. Asettlement conference was held before United States Magistrate Judge
Lawrence Leonard on January 14, 2014. Settlement discussions continued, and a Joint Notice of
Settlement was filed on January 27,2014. Doc. 38. A Motion for Settlement andDismissal was

filed bythe Defendants on February 5, 2014, Doc. 39, followed by a Motion for Settlement

Approval filed on February 7,2014. Doc. 42. Plaintiffthen filed a Memorandum in Opposition

to the Motions on February 19, 2014. Doc. 44. Plaintiffs counsel, James R. Theuer ("Theuer"),
then filed a Motion to Withdraw that same day. Doc. 45.
Plaintiffs Opposition did not statewhy he opposed the settlement. Doc. 44. In their

supporting Memorandum, Defendants submitted an e-mail dated January 27,2014 from Plaintiffs
counsel stating, in whole:

This confirms that Plaintiff accepts theoffer of settlement, to wit:

Defendants will pay $100,000 in six equal installments beginning 14 days from court
approval and on 30-day intervals thereafter. Plaintiff will designate the allocation.

In addition, Defendants will not dispute such that Plaintiffwill get the $4855.85 on deposit
withDOL1 from DBSH.

The settlement amount will be secured through apromissory note and recorded DOT by

CAAP Hospitality, LLC, against the Hampton Bay Plaza hotel property.
Court retains jurisdiction to enforce the settlement.

Doc. 39-1. The e-mail is signed by Plaintiffs counsel. Id. The Settlement Agreement
("Agreement") contains these terms. Doc. 39-2. However, it contains numerous additional

terms not memorialized in this e-mail.2 Many are general releases that would be expected in a
settlement agreement, claiming both Plaintiff and Defendants waive all causes ofaction against
each other. The Agreement also contains language whereby the Defendants do not admit

liability, but again this is not uncommon to asettlement agreement. The Agreement also contains

achoice oflaw provision specifying Virginia law; aforum selection clause; aclause regarding the
award ofattorney's fees in an action to enforce the Agreement; awarning regarding potential tax
consequences ofthe Agreement; and other disclaimers regarding bankruptcy, misrepresentations,
and violations. Furthermore, the Agreement contains language stating that it "shall be effective
1 "DOL" is shortfor the United States Department of Labor.

2 All these additional terms may be found between pages 1-8 ofthe Agreement, Doc. 39-2.

upon exchange by the parties offully executed copies ofthis Agreement." Doc. 39-2 at 8.

The Court held ahearing on the Motion to Withdraw on March 5,2014. Despite being
orally instructed to appear, Plaintiff failed to appear. Plaintiffs counsel represented to the Court
that he was concerned ifforced to continue representing the Plaintiff, he could run afoul ofhis

responsibilities under the Virginia Rules ofProfessional Conduct. The Court, while recognizing
his concern, denied the Motion to Withdraw without prejudice, and ordered ahearing on March

19,2014 on the pending Motions regarding the Settlement Agreement. Doc. 50. The Court gave
leave to the parties to file supplemental briefing on the enforceability ofthe Settlement Agreement,
but neither party filed a brief.

Ahearing was then held on March 19, 2014 concerning the enforceability and fairness of
the proposed Agreement. The Court first called Patel as awitness. Patel testified that he never

fully agreed to the settlement, but that he forgot to tell Theuer to consider the injury portion ofhis
case because he was busy when Theuer called him to discuss the terms of the Agreement. Patel
testified that he told Theuer the settlement was acceptable for the wage portion ofthe case. Patel
testified he did not realize the settlement was for the entire case until he received the written
agreement.

At that point, the Court informed Patel that his testimony was in conflict with his attorney's
e-mail and thereby forced the Court to call Theuer as awitness. In view ofthe conflict ofinterest

between Plaintiffs counsel and Plaintiff, the Court granted Theuer's request to withdraw. Patel

stated that no one had informed him that Theuer could no longer act as his attorney. The Court,

having granted Theuer's Motion to Withdraw, called him as awitness, and advised the parties that
Patel's conduct and testimony compelled the Court to rule that Patel had waived his attorney-client
privilege.

Theuer testified that he told his client to obtain substitute counsel for the hearing, and

spoke with him three times regarding this issue, but that Patel did not commit to obtaining new
counsel ifhe was forced to withdraw. Theuer testified that he sent an e-mail to opposing counsel
on January 27,2014 containing the terms ofthe proposed Settlement Agreement because Patel had

authorized him to do so. Theuer testified that he explained to Patel how the $100,000 settlement
(plus the wages set aside with the DOL) would be broken down, and that Patel told him he wanted

$66,000 to settle the entire case. Theuer also testified that he sent acopy ofthe January 27 e-mail
to Patel, but that it was not until February 4that Patel informed him he would not sign the
Agreement.

Prior to Patel's phone call to Theuer concerning the settlement, Theuer testified that he

received an e-mail from Patel saying he would accept $66,000, but not the DOL wages.3 The
e-mail did not distinguish between the wage claims and the injuries. Confused by this, Theuer

called Patel to clarify this misunderstanding. Theuer testified that Patel said he understood, and
that he had authorized Theuer to accept the settlement. Theuer went on to explain to the Court
that he never understood Patel to separate the wage and injury portion ofhis case. Theuer also
provided the Court a copy ofhis retainer agreement with Patel, which the Court admitted as an
exhibit.4

The Court next questioned Theuer on Patel's injuries alleged in the assault and battery

claims. Theuer testified that the injuries resulted from Patel being pushed. Patel saw aphysician
twice, though his care was not extensive. Theuer testified that Patel did not have health

3 A copy of this e-mail was admitted bythe Court asan Exhibit.

4 The retainer agreement does not expressly provide Theuer authority to settle the case.

insurance, and did not seek further medical care.5

Theuer also testified regarding the terms and structure ofthe Agreement. Theuer stated

that he structured it in away to give Patel the most favorable tax treatment as would be allowed by
the Internal Revenue Service ("IRS"). Thus, aportion ofthe recovery was allocated for his

injuries; such payments would not be subject to IRS withholding, as the payments for his wages
would be. Therefore, the settlement was structured so that $22,000 was allocated for the unpaid
wages under the FLSA, $22,000 for liquidated damages under the FLSA, and $22,000 for the tort
claims.6

After Theuer's testimony, the Court again called Patel to the stand. Patel testified that the

phone conversation with Theuer in which they discussed the Agreement lasted three or four
minutes. Patel testified that he asked Theuer to hold on accepting the settlement. He testified
that he did not believe he had achieved a final settlement until he saw the e-mail.

The Court then heard argument on the fairness ofthe Agreement. Defense counsel argued

that according to their calculations, assuming liability at all, they owed about $14,000 in unpaid
wages to Patel. Defense counsel informed the Court that the value ofthe DOL wages was smaller

because it covered only adiscrete portion oftime. Theuer informed the Court that according to
his calculations, abest case scenario for Patel would be arecovery of$74,000 in unpaid overtime
compensation. However, Theuer listed anumber ofissues that could prevent Patel from

recovering that sum: the necessity ofshowing that the Defendants were acommon enterprise to
achieve any recovery at all; proving the amount ofhours Patel worked; and the statute of
limitations.

5 The Court asked the part.es to submit documentation regarding the extent of Patel's injuries. An affidavit from
Defendant Barot was received on March 26,2014 containing the medical documents. Doc. 54. The Court finds that

the documents are consistent with Theuer's testimony regarding the treatment ofPatel's injuries

6 The rest was to cover Theuer's fees and costs.

At the conclusion ofthe hearing, the Court informed Patel that it would keep the
Defendants' Motions under advisement for ten (10) days. The Court informed Patel that ifhe

wished to hire an attorney to represent him in the matter, that such attorney must enter anotice of
appearance with the Court within ten (10) days ofthe date ofthe hearing. Alternatively, the Court

informed Patel that in lieu ofhiring an attorney, he could file an affidavit with the Court explaining
any additional facts he felt the Court should consider in ruling on the Motion. Patel stated that he

understood the Court's direction. No attorney has filed an appearance for Patel, and Patel has not
filed any affidavit or other evidentiary information.
II.

Legal Standards

District courts have the inherent authority to enforce settlement agreements. Henslev v.

Alcon Labs., Inc., 277 F.3d 535, 540 (4th Cir. 2002). However, before enforcing asettlement
agreement, the Court must conclude an agreement has been reached. Id. Thus, the Court has a

two-step inquiry: (1) did the parties reach acomplete agreement, and (2) can the Court determine

its terms and conditions? Id at 540^11. When presented with afactual dispute regarding
whether an agreement has been reached, or ifthe attorney has the authority to enter into the

agreement, the court '"must conduct aplenary evidentiary hearing in order to resolve that dispute,'
and "make findings on the issues in dispute." Id. at 541 (quoting Millner v. Norfolk &W. Rv.

Ca, 643 F.2d 1005, 1009 (4th Cir. 1981)) (citing Ozvaecilar v. Davis. 701 F.2d 306,308 (4th Cir.

1983)). Settlement agreements are matters ofcontract law, and contract law principles apply.
Bradley v.Am. Household Inc., 378 F.3d 373, 380 (4th Cir. 2004); see also Intersections. Inc. v

Loomis, No. 1:09cv597, 2010 WL 4623877, at *3 (E.D. Va. Nov. 3, 2010) (applying Virginia law
in finding asettlement agreement unenforceable). Courts will only enforce "settlement terms on

which the parties have reached agreement." Bradley. 378 F.3d at 380. "Once acompetent party

makes asettlement and acts affirmatively to enter into such settlement, her second thoughts at a

later time upon the wisdom of the settlement do not constitute good cause for setting it aside."
Snyder-Falkinham v. Stockburger, 457 S.E.2d 36, 41 (Va. 1995); see also Henslev. 277 F.3d at
540.

Furthermore, because this action arises from the FLSA, federal law requires court approval
for fairness before any settlement can be executed, and the public has agenuine interest in
determining whether the court is properly fulfilling its duties when it approves an FLSA settlement
agreement. Boone v. Citv ofSuffolk. Va.. 79 F. Supp. 2d 603,609 (E.D. Va. 1999). This Court

has followed the guidelines for approval ofan FLSA settlement set forth by the Eleventh Circuit in

Lynn's Food Stores. Inc. v. United States 679 F.2d 1350 (11th Cir. 1982). Boone. 79 F. Supp. 2d
at 605 n.2. "[I]n the context ofsuits brought directly by employees against their employer under
section 216(b) to recover back wages for FLSA violations," the parties must present any proposed

settlement to the district court, which "may enter astipulated judgment after scrutinizing the
settlement for fairness." Lynn's Food Stores. 679 F.2d at 1353. Lynn's Food instructs the Court to

"determine[ ]that asettlement proposed by an employer and employees, in asuit brought by the
employees under the FLSA, is afair and reasonable resolution ofabona fide dispute over FLSA
provisions."

III.

Id. at 1355.

Analysis

A. Enforcing the Settlement Agreement
1. Factual findings

Because Patel argues that he never accepted the Agreement and never authorized Theuer to

settle the case, the Court must make factual findings on this issue. The Court makes the following
factual findings:

The Court FINDS that Patel authorized Theuer to settle the case according to the terms of

the e-mail, Doc. 39-1. The Court further FINDS that Theuer drafted the Agreement in
accordance with his client's authorization to settle the case, but that some ofthe terms ofthe

Agreement, such as choice of law, mutual releases, and attorney's fees incurred in enforcing the
settlement, while consistent with Patel's authorization to settle, were not encompassed in Patel's
specific authorization to Theuer. The Court FINDS that Patel authorized Theuer to settle the

entire case, including his FLSA claims for unpaid wages and statutory damages as well as his
personal injury claims. Furthermore, the Court FINDS that Patel understood the terms ofthe
Agreement set forth in Theuer's e-mail ofJanuary 27,2014. The Court FINDS that Patel's

medical injuries for assault and battery were not severe. The Court FINDS that through his
conduct and testimony, much ofwhich the Court FINDS is not credible, Patel waived his

attorney-client privilege and understood that Theuer could not continue to represent him at the
March 19,2014 hearing. Finally, the Court FINDS that Patel understood the instructions ofthe

Court on March 19, and has chosen not to hire an attorney or file an affidavit or other evidence.
2.

Conclusions of law

Attorneys have implied authority to conduct litigation and negotiate its resolution. Auvil

v. Grafton Homes, Inc., 92 F.3d 226, 229-30 (4th Cir. 1996). However, substantive decisions,
such as the authority to settle, "are not by implication ones that the attorney is authorized to make."

14 at 230; see also Snyder-Falkinham, 457 S.E.2d at 39 ("An attorney at law, merely by virtue of
being retained by the client, has no authority to compromise the client's claim without the latter's

consent."). Ifan agent (the attorney) does not have the authority to act on behalfofthe principal

(the client), the agent's statements to athird-party "cannot, without more, entitle athird-party to
rely on his agency." Auyji, 92 F.3d at 230. Under Virginia law, an attorney cannot move to

dismiss a case with prejudice without the consent ofthe client. Snyder-Falkinham. 457 S.E.2d at
39.

Binding oral and written contracts exist when there is an objective manifestation to be

bound, even ifasubsequent formal agreement is contemplated. Seneal v. Fakouri Elec. Eng'p.
Inc., No. I:10cv538,2011 WL 5873376, at *3 (E.D. Va. Nov. 22, 2011).

However, "without a

meeting ofthe minds as to all material terms, there can be no enforceable settlement agreement as
amatter ofcontract law." Intersections. Inc.. 2010 WL 4623877 at *2. "[A] settlement that
includes a term requiring that itbe reduced to asigned writing is not enforceable unless and until
that contingency is fulfilled." Id at *3.

In Snyder-Falkinham, the Supreme Court ofVirginia found that aretainer agreement
authorizing the attorney "to effect asettlement or compromise," combined with the act ofthe

plaintiffgiving oral instructions to empower her attorneys to speak for her during negotiations,
gave the necessary consent to bind the plaintiff to the settlement agreement. Id. at 41-42.

Furthermore, in Singer Sewing Machine Co. v. Ferrell. 132 S.E. 312, 314-15 (Va. 1926), the
Supreme Court of Virginia held that the act ofthe attorney negotiating in the presence ofthe
plaintiff and defendant, and the plaintiff assenting to a document, was sufficient to establish
apparent authority to settle a case.

Here, while the retainer agreement does not explicitly authorize Theuer to settle the case,

he received direct authorization from Patel. This is sufficient evidence under Virginia law for
Theuer to have set forth the terms ofthe settlement as expressed in the e-mail.

Additionally, neither the inclusion ofthe additional terms in the Agreement, nor the

requirement that the Agreement be fully executed before taking effect, defeat the enforceability of
the settlement as expressed in the January 27 e-mail. In Snyder-Falkinham. 457 S.E.2d at 41,

Plaintiffs oral agreement to a proposed settlement agreement, despite the fact that a laterwriting
was contemplated, was sufficient to bind her to that agreement. But see Golding v. Flovd. 539

S.E.2d 735, 737 (Va. 2001) (finding thata settlement memorandum prepared during a mediation
session containing the language "subjectto execution of a formal agreement" did not create a

binding agreement because the execution of a formal agreement was an express condition of the

initial agreement). Pursuant to Snyder-Falkinham. the e-mail does not contain any language
stating that it is subject to execution of a formal agreement; accordingly, while the formal
Settlement Agreement as drafted by Plaintiffs counsel is not enforceable, the settlement as
outlined in the e-mail is enforceable. See also Bamgbose v. Delta-T Group. Inc.. Civil Action No.

09-667, 2011 WL 6150599, at *4 (E.D. Pa. Dec. 12,2011) (finding that settlement terms attached

to an e-mail that were accepted by counsel sufficient to create a binding settlement). Thus, the
Court FINDS that an enforceable settlement was reached.7
B. Fairness of the Settlement

Even though there is an enforceable settlement, the Court must still determine if the

proposed settlement is proper under the FLSA.8

When considering a motion to approve an FLSA settlement agreement, courts weigh a
7 While Virginia courts do not recognize the "blue pencil" doctrine in making an unenforceable agreement

enforceable, that doctrine is not implicated by this case. See Pitchford v. Oakwood Mobile Homes. Inc.. 124 F. Supp.
2d 958,965-66 (W.D. Va. 2000) (discussing cases). Here, the Court is not striking any terms from the Agreement; it
is holding that the January 27, 2014 e-mail contains the terms ofthe settlement, whereas the Agreement drafted by
Theuer was prepared without the specific authority ofthe Plaintiff, and thus cannot be enforced by this Court in
accordance with Virginia law.

8 TheEleventh Circuit hasheld thatwhen onepartyobjects to a FLSA settlement, then a district court cannot enteran
order approving it. Nail v. Mal-Motels. Inc.. 723 F.3d 1304, 1308 (11 th Cir. 2013). TheEleventh Circuit noted that
it did nothaveanydecisions defining the term "stipulated judgment" in Lynn's Food. Id. The Courtreasoned that"a

judgment to which one side objects is not a stipulated one." Id. This Court did not find any other opinions
subsequent to NaU that applies the holding inthat case toa situation analogous tothe one before the Court; however, a
sister court inthe Fourth Circuit has enforced an oral settlement agreement inwhich the defendant attempted to back
out ofprior to the completion ofa written agreement. Lopez v. XTEL Const. Group. LLC. 796 F. Supp. 2d 693,699700 (D. Md. 2011). The instant case ismore like Lopez than NaU because Patel isattempting to back out ofa
settlement agreement that he authorized his attorney to enterinto.

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number of factors, including:

(1) the extent of discovery that has taken place;

(2) the stage of the proceedings, including the complexity, expense and likely duration of
the litigation;

(3) the absence of fraud or collusion in the settlement;

(4) the experience of counsel who have represented the plaintiffs;
(5) the probability of plaintiffs' success on the meritsf;] and
[(6)] the amount of the settlement in relation to the potential recovery.
In re Dollar General Stores FLSA Litigation. No. 5:09-MD-1500, 2011 WL 3841652, at *2

(E.D.N.C. Aug. 23, 2011); see also Lomascolo v. Parsons Brinckerhoff. Inc.. No. I:08cvl310,
2009 WL 3094955, at *10 (E.D. Va. Sep. 28,2009).

With regard to factors (1) and(2), theparties have gone through discovery, and a draft of a

final pretrial order was prepared. Doc. 40 at 2. Asettlement conference was held with Judge
Leonard on January 14,2014. Id. The parties were represented by counsel.
Regarding factor (3), the Court notes that the Plaintiffcontests the settlement as set forth in

the January 27lh e-mail. However, the Court finds that Plaintiffactually authorized the
settlement, and there isno evidence counsel colluded innegotiating a settlement against Plaintiffs
wishes.

With regard to factor (4), both parties have been represented by counsel. While the Court

granted the Motion to Withdraw during the settlement hearing, the Plaintiff had the experience of

counsel negotiating this settlement, and defense counsel and Theuer are experienced in litigating
FLSA claims.

With regard to factor (5), the evidence presented to the Court indicated that Plaintiffhad

significant hurdles to overcome to affect any recovery under the FLSA. Thus, this factor weighs
heavily in favor of finding the settlement fair.

With regard to factor (6), the Plaintiff will receive a total of $104,855.85 from the
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Defendants.9 The $100,000 ispayable insix equal monthly installments, and the other $4,855.85,
which has been submitted by Defendant DBSH to the DOL, will be released to Patel for back
wages. The $ 100,000 breaks down as follows: $5,522.53 in costs to Theuer, two $ 11,000

installments to Patel for physical injuries, $4,855.85 and two installments of $8,572.07 for

liquidated damages, two installments of $8,572.07 subject to applicable withholding for back

wages, and two installments of $16,666.66 to Theuer for attorney's fees.10
Regarding the attorney's fees, Theuer has spent more than 163 hours on this case. Doc. 40

at 5. His total fee of $33,333.32, plus costs of $5,523.53, totals $38,856.85, or approximately
37% of the recovery. The hourly rate averages out to approximately $204.50.

While the Court

was not provided a complete breakdown of the fees, this award is consistent with other cases in the

district. See Walker v. Dovetails. Inc.. No. 3:10cv526, 2010 WL 5878336, at *3 (E.D. Va. Nov.
30,2010) (finding hourly rates of $250 and $350 reasonable).
This would leave Plaintiffa gross payment of$70,855.85, ofwhich $48,855.85 is allocated

for the FLSA claim. The parties represented to the Court that the potential unpaid overtime
ranged from $14,000 to $78,000; however, there could be potentiallyno recovery becausethe
main employer, Shrinidhi Corp., could conceivably not be covered by the FLSA. Therefore, the
award given to Patel was fair.

Thus, the settlement is fair and the Court GRANTS Defendant's Motion for Approval of
the Settlement Agreement.
IV.

Conclusion

For the above-stated reasons, the Court GRANTS Defendants' Motions, Docs. 39 & 42,
and GRANTS Plaintiffs counsel's Motion to Withdraw, Doc. 45. The Court FINDS Patel
9 This is all taken from the pages 4-6 of the Agreement, Doc. 39-2.
10 After adding up the amounts to be paid in each installment, the Court came to a sum of $99,999.98.
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authorized his attorney to settle all claims for lost wages and statutory damages under the FLSA, as

well as his tort claims. The Court FINDS that the use ofthe term allocation in the January 27,
2014 e-mail is consistent with Patel's authorization to settle the case. The Court FINDS that Patel

understood there would be an allocation ofdamages among his several claims as evidenced by
Theuer's e-mail ofJanuary 27, 2014. In view ofthe hurdles that Patel faced in effecting any
FLSA recovery, the Court FINDS the amount allocated to the FLSA claims is fair and reasonable.
The Court further FINDS that the amount allocated to cover the tort claims is also fair and
reasonable.

Therefore, the Court ORDERS that all claims for damages included in the Complaint and
specifically those claims for damages under the FLSA and for personal injury are DISMISSED
WITH PREJUDICE. With the exception ofthose costs specified as reimbursable to Plaintiffs
counsel, all other costs shall be borne by the party incurring them.

The Clerk is REQUESTED to send acopy ofthis Order to all counsel ofrecord, as well as
to prose Plaintiff Patel.
It is so ORDERED

/s/
Henry Coke Morgan, Jr.
Senior United States District Jud

HENRY COKEMORGAN, JR.

SENIOR UNITED STATES DISTRICTJUDGE
Norfolk, Virginia

Date: April o^^> — . 2014

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