NY Eatery Can't Delay Settlement Payment Due To COVID-19

Law360 (March 25, 2020, 10:58 PM EDT) -- A New York federal judge on Tuesday rejected a Manhattan restaurant's bid to push back the payment date of an $85,000 wage-and-hour settlement by a month in light of the business being “decimated” by the novel coronavirus pandemic, instead greenlighting the deal as is.

U.S. Magistrate Judge Sarah Netburn approved a settlement between Sable NYC Inc., which operates as Sable's Smoked Fish, and a former worker who claims Sable's shorted him on overtime pay. The judge turned aside the eatery's request to push back the date of the agreed-upon payment from next week to late April due to the negative impact COVID-19 has had on its operations.

“The application is denied as defendants have not made a showing that the settlement agreement is invalid and have not provided an adequate legal basis upon which the court may modify the agreement,” the judge said in her brief order, which also said that the settlement “is fair and reasonable.”

The parties each signed the settlement on the week of March 9, and it was submitted by plaintiff Eduardo Aguilar to the court for approval on March 19. Meanwhile, New York Gov. Andrew Cuomo has steadily tightened restrictions over the past two weeks on movement and commerce in the state due to the coronavirus pandemic. 

In a March 20 letter to Judge Netburn, Sable’s lawyer said the restrictions in place in New York have “impeded [Sable’s] ability to generate income” and “affected [its] source of funds for this settlement.” 

Emails between the parties' attorneys that were attached to Sable’s letter indicated the restaurant's owners were planning to borrow the money needed to pay Aguilar and that the unnamed lender had also been affected by the pandemic. 

Sable’s counsel told the court that they reached out to their client as the deal was being finalized to arrange for the payment to be made, but were told by the restaurant that it needed more time. The settlement called for a lump sum payment to be made by the later of March 31 or the date the deal was approved.

“Defendants now need additional time as this ‘pandemic’ has decimated their business,” the restaurant told the judge, requesting an extension to late April.

Sable’s lawyer also told the judge that he was unable to reach an agreement with Aguilar’s lawyers to push the payment deadline back to around April 30 and found out through a PACER notification that the plaintiff had filed a motion seeking court approval for the deal without consent since the payment date was still being negotiated. 

But in a March 23 response letter, Aguilar’s lawyers at Pechman Law Group PLLC told Judge Netburn that there was “neither a legal basis, nor a moral basis” for the court to alter the parties’ agreement. 

Aguilar’s counsel argued that the judge only had the authority to determine whether the deal was fair and not delve into individual elements.

They also said Sable’s offered no financial information to support its contention that the restaurant or its owners would be unable to pay the settlement amount by March 31 and that the defendants themselves opted for an $85,000 lump sum settlement due by the end of March rather than a $95,000 deal that they could have paid over a longer period of time, according to the response letter.

Additionally, Aguilar’s lawyers claimed that Sable’s attorneys misrepresented the parties’ communications by submitting a truncated email thread instead of the complete email chain.

Aguilar’s letter included the longer chain as an exhibit, which purported to show that the former employee had agreed to let Sable’s pay half of the settlement amount upon the deal being approved by the judge and the other half in a month. 

Moreover, Aguilar’s lawyers told the judge that while most businesses in New York will face tough times in the weeks and months ahead because of the pandemic, Sable’s is still able to offer mail orders and takeout and delivery services, which are the “predominant source of their business.”

“In sum, defendants’ incantation of the word ‘coronavirus’ may not be used to unravel a settlement agreement which they have signed,” Aguilar’s counsel told the judge. “Although plaintiff has agreed to informally accommodate a delay in half the payment for 30 days, that was an act of courtesy that was given sight unseen. What defense counsel neglects to acknowledge is that plaintiff, a victim of extraordinary wage theft over a decade of employment with defendants, has a right to receive the settlement monies that defendants have agreed to pay.”

Aguilar, who worked at Sable’s as a delivery and counter worker for about a decade, filed suit in July accusing Sable’s and owners Danny Sze and Kenny Sze of not paying him time-and-a-half overtime even though he regularly worked over 60 hours per week and sometimes as much as 90 hours in a week. He also accused Sable’s of not paying him so-called spread-of-hours pay for days when he worked over 10 hours.

The suit alleged violations of the Fair Labor Standards Act and New York state law. Sable operates a small restaurant and also offers over-the-counter takeout service, according to the complaint. 

Louis Pechman of Pechman Law Group told Law360 that his firm “also represents companies, so we are very sympathetic to the impact of the COVID-19 pandemic on all businesses.”

“But the mere incantation of the word ‘coronavirus’ does not justify giving a defendant a pass on a carefully negotiated settlement, particularly absent proof of an inability to pay,” he said. 

Sable’s counsel Michael K. Chong told Law360 that the pandemic “has been a difficult time for everyone,” expressing sympathy for those who have been infected and the medical professionals treating them. It's also an especially hard time for small restaurant businesses in Manhattan, many of which have been forced to do things like limit their hours, lay off workers, or close entirely, he said.

“It is a situation in which we are all essentially 'in this together' and in this context many attorneys along with the courts have been working together,” Chong said. “In many of the FLSA and related matters that I am handling, adversaries understand the impact of the pandemic and have provided more flexibility as to settlement payments in light of the present limitations on business owners.”

Although the court didn’t grant his client’s request for an extension, Chong said he is “hopeful that I can still work with plaintiff’s counsel directly if my client is unable to obtain the required funding.”

Aguilar is represented by Louis Pechman, Catalina Cadavid and Vivianna Morales of Pechman Law Group PLLC. 

Sable’s is represented by Michael K. Chong of MKC Law Group.

The case is Aguilar v. Sable NYC Inc. et al., case number 1:19-cv-07135, in the U.S. District Court for the Southern District of New York.

--Editing by Aaron Pelc.

For a reprint of this article, please contact reprints@law360.com.

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Case Information

Case Title

Aguilar v. NYC Sable Inc. et al


Case Number

1:19-cv-07135

Court

New York Southern

Nature of Suit

Labor: Fair Standards

Judge

Katherine Polk Failla

Date Filed

July 31, 2019

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