Copper v. Cavalry Staffing, LLC
1:14-cv-03676
| E.D.N.Y | Mar 16, 2021Background
- Cavalry Staffing, LLC sold its assets to Fleet Staff, Inc.; the two agreed to a 50/50 split of any liability arising from an existing wage-and-hour suit.
- Plaintiffs reached a settlement with Cavalry for $460,000; Cavalry paid $230,000 and could not pay the balance by the deadline.
- Plaintiffs’ counsel Borelli & Associates obtained an assignment of Cavalry’s claim against Fleet for breach of contract and filed a third-party complaint against Fleet and its owner; both third-party defendants defaulted.
- Magistrate Judge Mann recommended denying Borelli’s motion for a default judgment, reasoning that contractual indemnification claims are unenforceable in FLSA cases.
- Borelli timely objected; the district court reviewed de novo and sustained Borelli’s objection, finding Herman v. RSR distinguishable and Gustafson inapplicable to the agreement here.
- The district court declined to dismiss the third-party complaint and recommitted the matter to the magistrate judge for further proceedings on the default-judgment motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FLSA bars contractual indemnification or contribution claims between employers post-litigation | Borelli: Herman addressed statutory contribution/indemnity under FLSA but is silent on contractual indemnity; the asset-purchase allocation is enforceable and benefits plaintiffs | R&R/Magistrate: Courts have extended Herman to bar contractual indemnity to prevent employers contracting away FLSA obligations (per Gustafson) | Court: Herman does not automatically bar contractual indemnity here; Gustafson is distinguishable; remanded for further proceedings |
| Whether the Cavalry–Fleet agreement improperly shifts FLSA liability onto plaintiffs or undermines FLSA policy | Borelli: Agreement did not shift liability onto plaintiffs and provided an additional source to satisfy judgments | R&R: Allowing such agreements could permit employers to avoid FLSA responsibilities | Court: Agreement did not put liability on plaintiffs, did not incentivize flouting FLSA, and was negotiated while both parties knew of the suit; enforceability not foreclosed |
Key Cases Cited
- Herman v. RSR Security Servs. Ltd., 172 F.3d 132 (2d Cir. 1999) (no right of contribution or indemnification under the FLSA as applied in that case)
- Gustafson v. Bell Atl. Corp., 171 F. Supp. 2d 311 (S.D.N.Y. 2001) (refused to enforce indemnity that would shift employer FLSA liability onto misclassified worker)
- Amaya v. Garden City Irrigation, Inc., 645 F. Supp. 2d 116 (E.D.N.Y. 2009) (discusses risk-management mechanisms like insurance in employment-liability contexts)
- N.Y. State Elec. & Gas Corp. v. FirstEnergy Corp., 766 F.3d 212 (2d Cir. 2014) (discusses successor liability principles relevant to potential purchaser liability)