Patel v. Barot et al
Filing
62
OPINION AND ORDER on Motions of James R. Theuer, PLLC 56 Motion to Intervene and 57 Motion for Order of Contempt and Entry of Judgment. Ruling from the bench, the Court GRANTED the Motion to Intervene and RESERVED RULING on the Motion for Order of Contempt and Entry of Judgment, as outlined. The Defendants were ORDERED to comply with the terms of the settlement agreement and this Court's April 23, 2014 Order by June 23, 2014. A hearing was SCHEDULED for June 23, 2014 at 12:00 p.m. fo r the purposes of determining the appropriate remedy and sanctions if Defendants' do not comply with the terms of this Court's Orders, as outlined. (See Order for Specifics) Copies provided as directed on 6/13/14 and copy mailed to Plaintiff Patel on 6/13/14 at address provided on above motions. Entered and filed 6/13/14. (Signed by District Judge Henry C. Morgan, Jr on 6/13/14_. (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 came before the Court on the Motions of James R. Theuer, PLLC ("Theuer") to
Intervene and for Order of Contempt and Entry of Judgment ("Motions"), Docs. 56 & 57. Ruling
from the bench, the Court GRANTED the Motion to Intervene, Doc. 56, and RESERVED
RULING on the Motion for Order of Contempt and Entry of Judgment, Doc. 57.
I.
Factual and Procedural Background
On May 2,2013, Plaintiff Mukesh Patel ("Patel" or "Plaintiff) filed a Complaint against
the Defendants, alleging violations of the Fair Labor Standards Act ("FLSA"), violations of
Virginia's minimum wage law, assault, and battery. Doc. 1. A settlement conference was held
before Magistrate Judge Lawrence Leonard on January 14, 2014. Settlement discussions
continued, Doc. 43 at 2, and a Joint Notice of Settlement was filed on January 27, 2014, Doc. 38.
A Motion for Settlement and Dismissal was filed by the Defendants on February 5,2014. Doc.
1
39.
A Motion for Settlement Approval was filed on February 7, 2014. Doc. 42. Plaintiff then
filed a Memorandum in Opposition to the Motion on February 19,2014. Doc. 44. Plaintiffs
counsel, James R. Theuer, then filed a Motion to Withdraw that same day. Doc. 45.
Plaintiffs opposition did not state why he opposed the settlement. Doc. 44. In their
supporting Memorandum, Defendants submitted an e-mail from Plaintiffs counsel stating, in
whole:
This confirms that Plaintiffaccepts the offer 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
Plaintiff will get the $4855.85 on deposit with DOL from DBSH. The
settlement amount will be secured through a promissory note and recorded
DOT by CAAP Hospitality, LLC, against the Hampton Bay Plaza hotel
property. Court retainsjurisdictionto enforce the settlement.
Doc. 39-1. The e-mail is signed by Plaintiffs counsel. Id.
In an Order dated April 23, 2014, the Court granted Defendants' Motion for Settlement
Approval and enforced the settlement agreement. Patel v. Barot, 2014 WL 1624001 (E.D. Va.
Apr. 23,2014). While the Orderdoes not contain any language specifically stating that the Court
retained jurisdictionto enforce the settlement, the Court found that Plaintiff "authorized Theuerto
settle thecase according to theterms of thee-mail." Id. at *4. Additionally, theCourt found that
an enforceable settlement was reached, and that the terms of the settlement were those contained in
the e-mail, which stated the Court retains jurisdiction of the settlement. Id at *5 n.7. The Order
approved the allocation of $38,856.85 in attorney's fees and costs to Theuer to be paid out of the
settlement proceeds. Id at *6. The Defendants have not made any installment payments to
Theuer, nor has the above-reference deed of trust been executed.
Theuer filed the instant Motions on May 20,2014. Docs. 56 & 57. Defendants filed their
Opposition to the Motions onJune 4, 2014.' Doc. 60.
II.
Legal Standards
Federal Rule of Civil Procedure 24(a)(2) allows for intervention of right when someone
"claims an interest relating to the property or transaction that is the subject of the action, and is so
situated that disposing ofthe action may as a practical matter impair or impede the movant's ability
to protect its interest, unless existing parties adequately represent that interest." The Fourth
Circuit has parsed this rule into four threshold requirements:
First, the intervenor must submit a timely motion to intervene in the
adversary proceeding. Second, he must demonstrate a "direct and
substantial interest" in the property or transaction. Third, he has to
prove that the interest would be impaired if intervention was not
allowed. Finally, he must establish that the interest is inadequately
represented by existing parties.
Richman v. First Women's Bank. 104 F.3d 654, 659 (4th Cir. 1997). Federal Rule of Civil
Procedure 24(c) requires that the motion to intervene be served in accordance with Federal Rule of
Civil Procedure 5, and that it "must state the grounds for intervention and be accompanied by a
pleading that sets out the claim or defense for which intervention is sought."
District courts have the inherent authority to enforce settlement agreements. Henslev v.
Alcon Labs.. Inc.. 277 F.3d 535, 540 (4th Cir. 2002). However, because federal courts are courts
of limited jurisdiction, "a district court may not enforce a Settlement Agreement unless 'the
agreement had been approved and incorporated into an order of the court, or, at the time the court
is requested to enforce the agreement, there exists some independent ground upon which to base
federal jurisdiction.'" Columbus-Am. Discovery Group v. Atlantic Mut. Ins. Co.. 203 F.3d 291,
299 (4th Cir. 2000) (quoting Fairfax Countvwide Citizens Ass'n v. Fairfax Cntv.. 571 F.2d 1299,
1 Theuer also filed a Local Rule 7(E)Notice, Doc. 59, but as Defendants correctly argued, it was premature. Doc. 60
at I.
1303 (4th Cir. 1978)). However, there is jurisdiction to enforce the settlement agreement if the
court approves and incorporates it into its order. Columbus-Am.. 203 F.3d at 299 (citing
Kokkonen v. Guardian Life Ins. Co. of America. 511 U.S. 375, 381 (1994)).
III.
a.
Analysis
Jurisdiction to Enforce the Settlement
Defendants argued that this Court does not have jurisdiction to enforce the settlement
agreement because "[t]he order did not incorporate the terms of the settlement agreement or
include any other language giving the parties the right to reopen the case to enforce the Settlement
Agreement." Doc. 60 at 3. While the Court's Order did not include specific language retaining
jurisdiction, the e-mail that the Court found constituted the terms of the settlement said that the
Court retained jurisdiction. The Court found these terms constituted an enforceable settlement
agreement. Thus, the Court approved settlement terms stating that the Court would retain
jurisdiction over the settlement, and entered an appropriate Order.
Furthermore, this action arose under the FLSA, which requires court approval of a
settlement agreement. Boone v. City of Suffolk. Va.. 79 F. Supp. 2d 603, 609 (E.D. Va. 1999).
Lvnn's Food Stores. Inc. v. United States. 679 F.2d 1350, 1353 (11th Cir. 1982), the seminal case
regarding approval of FLSA settlements, speaks of such approval as requiring the entry of "a
stipulated judgment." The district court can compel parties to satisfy judgments entered against
them. Simmons v. United Morta. and Loan Inv.. LLC. 634 F.3d 754, 765 (4th Cir. 2011).
Therefore, this Court does have jurisdiction to hear the matter.
b.
Intervention
Defendants did not contest the fact that Theuer can intervene in this case, and instead
focused their arguments on the lack ofjurisdiction and their inability to pay Theuer. Doc. 60 at 2-
3.
In Gaines v. DixieCarriers. Inc.. 434 F.2d 52,53 (5th Cir. 1970) (per curiam), the plaintiff
fired a law firm with which he had signed a contingency fee agreement. The law firm then
subsequently moved to intervene in the lawsuit. Id The Fifth Circuit found that "the law firm
here claimed aninterest in the subject of the action ... and issosituated that the final disposition of
the action may as a practical matter impair or impede its ability to protect that interest." Id
However, this decision has been heavily criticized. Later panels of the Fifth Circuit have
questioned the wisdom of Gaines' holding. See Keith v. St. George Packing Co.. 806 F.2d 525,
526 (5th Cir. 1986) ("Although Gaines may not represent the most persuasive use of Fed. R. Civ.
P. 24, it binds us as law of this Circuit until modified en banc") (citing Gilbert v. Johnson. 601
F.2d 761,767-68 (5th Cir. 1979) (Rubin, J., specially concurring)). Courts from other
jurisdictions have since rejected the logic of Gaines, and found that an attorney is not entitled to
intervene to protect his interest in recovering fees. See^ ejj., Butler. Fitzgerald & Potter v. Sequa
Corp., 250 F.3d 171, 179 (2nd Cir. 2011) (declining "to decide whether the financial stake of
discharged counsel in its former client's action is thetype of interest contemplated byRule 24(a)");
Newman v. Mutual Life Ins. Co. of New York. 206 F.R.D. 410, 411 (D. Md. 2002) (rejecting the
Fifth Circuit line of cases and finding a discharged law firm could not intervene in a subsequently
filed lawsuit).
However, these cases address the issue of attorneys seeking to intervene in ongoing
litigation. Forexample, the Butler court discussed a large-range of policy considerations in
reaching its conclusion, all focusing on the effect of intervention on ongoing litigation. One such
concern raised by the Butlercourt was that "anintervenor-counsel mightadvance arguments either
not raised, or even in conflict with those already made, unintentionally undermining the current
trial strategy of his former client." Butler. 250 F.3d at 178. Additionally, while both the former
lawyer and client will want the client to succeed, there could bedifferent cost-benefit calculations,
such as the client's desire for equitable reliefas opposed to monetary compensation. Id at 179.
Furthermore, the ability of former counsel to intervene aftera client terminates the attorney-client
relationship "impugns the historical privilege of clients to decide who will represent them, and
when that representation will cease." Id. Thus, the Second Circuit declined to allow
intervention, noting that "[ujnder New York law, the attorney still has an avenue to recover legal
fees owed via a plenary action in quantum meruit for the reasonable value of services rendered."
However, in the instant case, there is no concern about Theuer raising a different legal
strategy, as this case has been dismissed with prejudice. Furthermore, Patel compelled the Court
to grant Theuer's Motion to Withdraw because of his attempt to back out of the settlement.
Accordingly, in this instance, the Fifth Circuit's line of cases is more persuasive.
Looking at the Fourth Circuit's four factors, Theuer can easily meet factors (2) and (4). He
has a direct and substantial interest in enforcing the settlement, as he is entitled to $38,856.85 from
the terms of the settlement. Additionally, his interest is inadequately represented because
Plaintiff has not moved to enforce the settlement, and Defendants are failing to uphold their
obligations under it.
Concerning factor (1), while intervention is not appropriate once an action is terminated,
Black v. Central Motor Lines. Inc.. 500 F.2d 407, 408 (4th Cir. 1974), because the Court has
jurisdiction to enforce the settlement, it can hear an intervenor attempting to enforce the
settlement. Cf. Shv v. Navistar Int'l Corp.. 291 F.R.D. 128,133 (S.D. Ohio 2013) ("There is
ample precedent for postjudgment intervention under Federal Rule 24."). Theuer's Motions were
filed less than one month after the entry ofthe Order approving the settlement, and two weeks after
the first payment was due.
Concerning factor (3), Theuer's interest will be impaired without intervention. It is
undisputed that Defendants have not performed their obligations pursuant to the settlement
agreement and this Court's order. Accordingly, the Court GRANTED the Motion to Intervene.
c. Enforcing the Settlement
The Defendants proffered reason for not submitting timely payments is that their business
is struggling, and that the non-party owners ofCAAP Hospitality, LLC refuse to approve the deed
of trust onthe hotel property. Doc. 60 at 3. Defendants instead have offered to pay Theuer
approximately $500/month and to offer a security interest inreal property at512 Rushwood Court,
Suffolk, VA 23435. Id
However, the inability to payis notan excuse for non-performance of the settlement terms.
Thus, the Court ORDERED that Defendants perform their obligations in accordance with the
settlement agreement and April 23, 2014 Order. The Court SET a hearing for June 23,2014 at
12:00 p.m. to determine sanctions and the appropriate remedy if Defendants fail to perform their
obligations.
d. Finding Defendants in Contempt
Finally, Theuer asked the Court to find Defendants in contempt for failing to abide by the
terms of the settlement and the April 23,2014 Order.
"Contempt is a 'severe remedy and should not be resorted to where there is fair ground of
doubt as to the wrongfulness of the defendant's conduct.'" ePlus Inc. v. Lawson Software. Inc..
946 F. Supp. 2d 472,478 (E.D. Va. 2013)(quoting Cal. Artificial StonePaving Co. v. Molitor. 113
U.S. 609, 618 (1885)). Civil contempt is designed "'to coerce obedience to a court order or to
compensate the complainant for losses sustained as aresult ofthe contumacy."' Cromer v. Kraft
Foods N. Am.. 390 F.3d 812, 821 (4th Cir. 2004) (quoting In re General Motors Corp., 61 F.3d
256, 258 (4th Cir. 1995)). Criminal contempt is designed to punish the wrongdoer and deter
future misconduct. Cromer, 390 F.2d at 822. Civil contempt requires proof by clear and
convincing evidence of:
(1) The existence of a valid decree of which the alleged contemnor
had actual or constructive knowledge; (2)... that the decree was in
the movant's "favor"' (3) ... that the alleged contemnor by its
conduct violated the terms of the decree, and had knowledge (at
least constructive knowledge) of such violations; and (4) ... that
[the] movant suffered harm as a result."
Capital Source Fin.. LLC v. Delco Oil. Inc.. 520 F. Supp. 2d 684, 687 (D. Md. 2007) (quoting
Ashcraft v. Conoco. Inc.. 218 F.3d 288, 301 (4th Cir. 2000)). Before attorney's fees can be
awarded, it must be shown that the contemnor's conduct rose to the level of "obstinence or
recalcitrance." Capital Source, 520 F. Supp. 2d at 687 (internal citations omitted).
At the hearing, the Court found that contempt was not an appropriate sanction at this time,
and instead gave the Defendants until June 23,2014 to come into compliance with the terms ofthe
settlement agreement. However, ifDefendants disregard this Order and fail to perform, the Court
will consider the entry of contempt at the June 23,2014 hearing.
IV.
Conclusion
Theuer's Motion to Intervene, Doc. 56, was GRANTED. Defendants were ORDERED
to comply with the terms ofthe settlement agreement and this Court's April 23,2014 Order by June
23, 2014. A hearing was SCHEDULED for June 23, 2014 at 12:00 p.m. for the purposes of
determining the appropriate remedy and sanctions if Defendants' do not comply with the terms of
this Court's Orders.
The Clerk is REQUESTED to send acopy ofthis Order to all counsel ofrecord, as well as
to pro se PlaintiffPatel.
It is so ORDERED.
/s/
Henry Coke Morgan, Jr.
Senior United States District Judge
HENRY COKE MORGAN, JR.
SENIOR UNITED STATES DISTRICT JUDGE
Norfolk, Virginia
Date: June
13
TJ
2014
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