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Zendejas v. Reel Cleaning Services

August 6, 2009

ALMA ZENDEJAS, DIONICIO SANTANA, NANCY GONZALEZ, GUADALUPE OCOTITLA, LEONORILDA VELASQUEZ, FRANCISCO OCOTITLA, EZEQUIEL GONZALEZ, MODESTA RUIZ, FELIPE RUIZ, RAYMUNDO OCOTITLA, IVAN DOMINGUEZ MARTINEZ, NELSON LAGUNAS, AND JOSE SACRAMENTO SALAS ORTIS, PLAINTIFFS,
v.
REEL CLEANING SERVICES, INC., ALL PRO CLEANING SYSTEMS, INC., ELAN KOHEN, ABIATHAR SOLUTIONS, L.P., AND ALL PRO CLEANING SOLUTIONS, L.P., DEFENDANTS.



The opinion of the court was delivered by: Wayne R. Andersen District Judge

MEMORANDUM OPINION AND ORDER

On May 29, 2009, Magistrate Judge Geraldine Soat Brown filed her report and recommendation concerning plaintiffs' motion to enforce the settlement agreement in this case. Judge Brown recommends that plaintiffs' motion to enforce the settlement agreement be granted.

After careful consideration of the motion to enforce the settlement agreement, the applicable memoranda of law, the relevant briefs, Judge Brown's report, defendants' objections thereto and memorandum in support, and plaintiffs' memorandum opposing defendants' objections, this court hereby adopts in full Judge Brown's report and recommendation.

BACKGROUND

The report and recommendation issued by Judge Brown includes an extensive and complete factual background regarding the events at issue in the instant motion to enforce the settlement agreement. In addition, Judge Brown primarily supervised the settlement proceedings in this case. Therefore, we, in large part, adopt the recitation of the factual events in Judge's Browns report and recommendation as our own.

I. The Complaint

Plaintiffs Alma Zendejas, Dionicio Santana, Nancy Gonzalez, Guadalupe Ocotitla, Leonorilda Velasquez, Francisco Ocotitla, Ezequiel Gonzalez, Modesta Ruiz, Felipe Ruiz, Javier Ocotitla Tellez, Raymundo Ocotitla, Ivan Dominguez Martinez, Nelson Lagunas, and Jose Sacramento Salas Ortis (collectively "plaintiffs") filed their initial complaint in this case on December 8, 2005. Plaintiffs' third amended complaint is currently pending before the court and sets forth allegations that the defendants violated the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. ("FLSA") and the Illinois Minimum Wage Law, 820 ILCS 105/1 et seq. ("IMWL") by failing to pay plaintiffs and other similarly-situated employees their earned overtime pay and minimum wages. (Third Am. Compl. ¶ 1.) Certain plaintiffs also bring claims under the anti-retaliation provision of the FLSA for defendants' alleged unlawful termination of their employment. (Id.)

II. The Parties and Attorneys

Settlement negotiations between plaintiffs and certain defendants began in May 2008. Attorney Douglas Werman represented all plaintiffs in the settlement negotiations and attorney Kenneth Henry represented defendants All Pro Cleaning Systems, Inc., All Pro Cleaning Systems, L.P., and Elan Kohen. The settlement was also to include Marina Kohen, wife of defendant Elan Kohen, and William Grobowski on the defendants side, neither of which was a party named in the third amended complaint. Reel Cleaning Services, Inc. ("Reel") was the only party not involved in the settlement discussions. Reel has not been represented by counsel since October 2007 and was never represented by Mr. Henry. For simplicity, this opinion will refer to those represented by Mr. Henry as "defendants," and those who participated in the settlement as "the parties."

The defendants have had several attorneys represent them in this litigation. Defendants' original counsel withdrew in the fall of 2007. Mr. Henry filed his appearance on January 31, 2008. On October 21, 2008, Bonita Stone filed an additional appearance on behalf of defendants and stated that, at the time plaintiffs filed the instant motion to enforce the settlement agreement, Mr. Henry was her "predecessor counsel" and was "still co-counsel in this case." (Tr. Dec. 5, 2008 at 3.) (Ms. Stone withdrew as counsel for defendants on February 5, 2009 and Mr. Henry withdrew as counsel for defendants on June 19, 2009, after Judge Brown issued her report and recommendation. Defendants' new counsel filed an appearance on June 23, 2009 and filed the objections to Judge Brown's report on behalf of defendants.) After Ms. Stone filed her appearance in October 2008, she attended all court proceedings on behalf of defendants.

At a court appearance on December 5, 2008, Judge Brown asked Ms. Stone whether the defendants contended anything Mr. Henry said on their behalf was unauthorized. (Tr. Dec. 5, 2008 at 6.) Ms. Stone stated that she needed to consult with her clients on that matter and Judge Brown tentatively scheduled an evidentiary hearing on the issue of Mr. Henry's authority. (Id. at 8-9.) On December 11, 2008, after consulting with defendants, Ms. Stone reported to Judge Brown that defendants would not assert that any of Mr. Henry's actions or communications were unauthorized. (Tr. Dec. 11, 2008 at 2.) Specifically, Ms. Stone stated,

The answer to your Honor's question which was posed to me last week, which was whether or not the defendants contended that Mr. Henry's actions or any of Mr. Henry's actions in connection with his communications to Mr. Werman were unauthorized. I think that was...the sum and substance of what you said. And the answer to that is that it is not a position that the defendants are going to advocate. I'm comfortable after I talked to Mr. Henry. I also talked with Marina. And I think that the paper trail communications of Mr. Henry would reflect that he was our agent, and we'll stand by what he did.

(Id.) This clarified a somewhat ambiguous statement in Mr. Henry's declaration in which he stated that after reviewing the July 31, 2008 settlement proposal with his clients, he was not authorized to accept the proposal. (Henry Decl. ¶ 10.) Therefore, Judge Brown struck the scheduled evidentiary hearing regarding the issue of Mr. Henry's authority on the basis that it was no longer necessary. (See Tr. Dec. 11, 2008 at 3.)

III. Settlement Discussions

The initial settlement discussions between the parties involved the amount of money defendants would pay and the timing of the payment. Neither side disputes the fact that the parties ultimately agreed to an amount of $155,000 inclusive of attorneys' fees. (Werman Decl. ¶ 3; Henry Decl. ¶ 5; see also Tr. June 6, 2008 at 2.) Additionally, the parties agreed that the payment would be made in installments with an initial sum of $40,000 to be paid on August 1, 2008 and equal monthly installments of $6,388.89 to be paid thereafter through February 1, 2010. (Werman Decl. ¶ 3; Henry Decl. ¶ 5.)

A status conference was held before Judge Brown on June 6, 2008, at which point Mr. Werman indicated that he thought the case was settled based on an agreement that had been reached that morning. (Tr. June 6, 2008 at 2, 5.). Mr. Werman did indicate that there were some unresolved issues regarding who would sign the agreement and in what capacity and the consequences if defendants failed to make an installment payment, but Mr. Werman and Mr. Henry both indicated that they were confident that those issues could be resolved. (Id. At 2-3, 5.) Mr. Henry did not object to Mr. Werman's characterization of the outstanding issues, nor did he mention any other unresolved issues. (See Tr. June 6, 2008.) The parties then planned to return to court for another status before Judge Brown on July 17, 2008.

On July 6, 2008, Mr. Werman e-mailed a draft Master Settlement Agreement ("draft Master Agreement") and a draft Individual Settlement Agreement and release ("draft Individual Release") to Mr. Henry. (See Werman Decl., Ex. B.) The financial aspects of the draft Master Agreement were consistent with the terms set forth above. Additional terms in the draft Master Agreement included provisions regarding enforcement, dismissal of claims, and confidentiality. The draft Individual Release provided that a signing plaintiff released defendants from all claims pertinent to the lawsuit. (Id.)

On July 17, 2008, Mr. Werman and Mr. Henry appeared before this court and informed the court that the case had settled and that the attorneys were working through some paperwork. (Tr. before J. Andersen, July 17, 2008 at 2.) Again, Mr. Henry did not object to Mr. Werman's characterization of the case or to his statement that the case had settled. That same day the parties appeared before Judge Brown and reported similar information. (Tr. before J. Brown, July 17, 2008.) Mr. Henry indicated, "I have advised my client that even if we don't have all the Ts crossed and Is dotted that they need to be prepared to [start making payments as of August 1]." (Id. at 2-3.) Judge Brown then set a status date of August 4, 2008 and stated that she would "definitely anticipate, not just hope, but anticipate that th[e first installment] payment will be made on August 1st." (Id. at 4.) Neither Mr. Werman nor Mr. Henry objected to Judge Brown's statements.

On or about July 29, 2008, Mr. Henry e-mailed the July 29 draft agreements to Mr. Werman. The e-mail included the defendants' proposed revisions to the draft Master Agreement and the draft Individual Release. (Werman Decl., Ex. C; Henry Decl. ¶ 7.) The clearly noted revisions included: 1) removing reference to defendants as "employer" and replacing that with "defendant"; 2) adding "whereas" clauses in the draft Master Agreement; 3) stating that installment payments would be made to Mr. Werman's firm to be distributed to plaintiffs; 4) editing tax-related provisions in both documents; 5) removing an example of a disclosure prohibited under both agreements' confidentiality provisions; and 6) adding a statement to the draft Individual Release requiring a plaintiff to return all sums paid if he or she violated either agreement. (July 29 draft Master Agreement at 1-3; July 29 draft Individual Release at 1-3.)

Additionally, in the cover e-mail attaching the July 29 drafts, Mr. Henry posed this question to Mr. Werman:

Lastly, my clients have told me that you made some representation to them that you would agree not to settle this case and then turn around and find other similarly situated workers and come after them again. Is that true? And regardless, is such an agreement possible, or even enforceable? (Werman Decl., Ex. C.) My Henry subsequently restated his question:

My clients told me that, at some point in the litigation when you were apparently speaking directly to them (perhaps when they were without counsel), you represented to them that if they settled this matter, you would agree, as part of the settlement, to not come after them again, at least on a fact pattern similar to the current one. They are interested in having such a representations as part of any settlement. Frankly, even if you were to agree to such a provision (?), I am not sure that it is either ethical or enforceable. (Id.) Mr. Werman then responded on July 30:

I did not make such a statement, nor could I under the ethical rules. Even if such an agreement were made (which again, it cannot), you are correct that it would not be enforceable. (Id.) The record does not contain any evidence that Mr. Henry or the defendants proposed specific language for a settlement term in which Mr. Werman agreed not to sue on behalf of other individuals. Further, there is no indication of such a term in Mr. Henry's July 29 drafts of the settlement documents and Mr. Henry's e-mail raised the subject only as a question.

On July 31, 2008, Mr. Werman responded to Mr. Henry's changes to the draft agreements. The cover e-mail stated that they were close to being finished and attached revised drafts. (Werman Decl., Ex. D.) Mr. Werman's draft accepted all of Mr. Henry's changes and made the following additional revisions: 1) simplifying the description of the installment payments; 2) clarifying the provision that the stipulation without prejudice to be filed after the first installment payment was made would turn into a dismissal with prejudice on March 1, 2010; 3) adding a provision in which the signatory defendants acknowledged they would be jointly and severally liable for the entire settlement amount; and 4) modifying the penalty in the event of a ...


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