Appeal by three former employees of Pan Am from an order entered in the Southern District of New York by Judge Dudley B. Bonsal dismissing for lack of standing and on the merits their motion to amend a stipulation of dismissal between Pan Am and the Secretary of Labor terminating the Secretary's age discrimination suit against Pan Am brought under § 17 of the Fair Labor Standards Act, 29 U.S.C. § 217, and § 7(b) of the Age Discrimination Act of 1967, 29 U.S.C. § 626(b). Appellants' motion sought to clarify that the settlement did not as a matter of federal law or agreement bar their pursuit of their previously filed individual claims of age discrimination under state law. Reversed.
Before Mansfield, Van Graafeiland and Kearse, Circuit Judges.
In this action by the Secretary of Labor ("Secretary") under § 17 of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 217, and § 7(b) of the Age Discrimination Act of 1967 ("ADEA"), 29 U.S.C. § 626(b), against Pan American World Airways, Inc. ("Pan Am"), three former Pan Am employees appeal from an order of Judge Dudley B. Bonsal of the Southern District of New York denying their motion to amend a stipulation of dismissal entered into by Pan Am and the Secretary terminating the action. Appellants moved pro se pursuant to Rule 60(b)(6), F.R.Civ.P., to amend the stipulation by making clear that it did not as a matter of federal law or agreement bar their pursuit of their individual state claims against Pan Am for age discrimination in violation of the New York Human Rights Law, N.Y. Exec. Law § 290 et seq. Appellants' motion was prompted by the N.Y. State Division of Human Rights' dismissal of their earlier-filed state claims, which had been stayed pending resolution of the federal suit, as having been mooted by the federal settlement. The district court, adopting the opinion of U.S. Magistrate Kent Sinclair, Jr., denied the motion on the grounds that appellants lacked standing to invoke Rule 60 and that it was meritless. We reverse.
In August and October of 1974, appellants and three other former Pan Am employees (who are not involved in this appeal) filed separate complaints with the New York State Division of Human Rights ("N.Y. State Division") alleging individual instances of age discrimination in their employment terminations. After investigations into the merits of these claims, the N.Y. State Division determined on December 20, 1974, that there was probable cause to believe that Pan Am had engaged in the unlawful practice of age discrimination and subsequently consolidated the claims for hearing. Before the public hearing scheduled for June 9, 1975, was convened, the Secretary on May 30, 1975, initiated the present federal action pursuant to the FLSA and the ADEA, alleging a pattern of age discrimination in Pan Am's discharge from 1970 to 1975 of 600 employees between the ages of 40 and 65 in violation of § 4 of the ADEA and § 15 of the FLSA.*fn1 Pan Am immediately filed a motion with the N.Y. State Division to dismiss appellants' state claims, contending that dismissal was required by § 14(a) of the ADEA, which provides that the commencement of a federal suit under the ADEA "shall supersede any State action." 29 U.S.C. § 633(a). The Secretary, at the N.Y. State Division's request, filed a statement expressing the Labor Department's view that the ADEA does not pre-empt state law, but only requires that pending state claims be stayed temporarily. The N.Y. State Division on August 25, 1975, denied Pan Am's motion to dismiss, holding that although the state claims were "coterminous" with the federal action, § 14(a) only required that the state claims be stayed.
For the next three years appellants were unable either to pursue their state claims or to participate in the federal suit. Their state claims were held in abeyance while Pan Am and the Secretary engaged in extensive and disputed discovery. They were never informed of the progress of the federal suit, and their only involvement was their return of a questionnaire circulated by the Secretary to a large number of employees and former employees of Pan Am. In August 1978 Pan Am and the Secretary entered into a "Stipulation of Dismissal" with prejudice in the federal action, in which Pan Am agreed to pay $900,000 "in full settlement and discharge of all claims which have been alleged by the Secretary." Specifically, Pan Am and the Secretary agreed that:
"(This dismissal and settlement) shall be deemed to constitute a bar, merger, and estoppel to the institution or prosecution of any further litigation by the Secretary or by any of the individuals described in the first sentence of paragraph III above, to the same extent as if this dismissal had been entered on the merits by the Court."
The Secretary subsequently distributed the $900,000 only to individuals born before 1914, which excluded appellants. The decision to restrict benefits to the pre-1914 class was apparently part of the settlement understanding,*fn2 based on statistical evidence that only those born before 1914 had been discharged in disproportionate numbers. Although the Secretary could have amended the complaint to apply only to the pre-1914 class and could have explicitly excluded appellants from the federal action, the stipulation entered into by him covered all Pan Am employees alleged to have been discharged discriminatorily during 1970-75, including those excluded from any share of the settlement fund.
The Secretary never made any efforts to contact appellants about the settlement or the distribution decision. Appellants only learned about the settlement three months later in November 1978 in response to their inquiry about the progress of the federal suit. In February 1979 appellants by ex parte letter successfully dissolved the stay of their state proceedings in light of the recently-discovered federal settlement. Pan Am by letter sought reconsideration of the dissolution and renewed its original motion to dismiss the state complaints. In its memorandum to the N.Y. State Division Pan Am repeated its earlier contention that the ADEA, as a matter of federal law, requires dismissal of appellants' state claims. In addition, Pan Am advanced the separate argument that by its terms the Stipulation of Dismissal "explicitly and unequivocally extinguished the rights of (appellants) to continue these proceedings." On May 14, 1980, the N.Y. State Division dismissed appellants' state complaints, concluding that pursuit of their claims would involve "what is essentially relitigation," that the state complaints "have been mooted and that further proceedings ... are not required by the Human Rights Law." The Division directed appellants to seek relief in the federal courts from the Secretary's settlement.
This outcome came as a surprise to appellants, who throughout this period had received and relied on numerous assurances from the Secretary that they would be free to pursue their state claims upon resolution of the federal action. Appellants appealed the N.Y. State Division's decision to the State Human Rights Appeal Board pursuant to N.Y. Exec. Law § 297-a*fn3 and also moved pro se in federal district court in August of 1980 to amend the federal settlement pursuant to Rule 60(b)(6) of the Federal Rules of Civil Procedure. While inexpertly worded,*fn4 the motion sought a clarifying amendment providing that the federal settlement did not as a matter of federal law or agreement affect the status of appellants' state claims. Appellants urged that such an amendment would facilitate the proper resolution of their state appeal from the N.Y. State Division's dismissal. The Secretary, at the request of the federal district court, filed an amicus brief in which he indicated that he had "no objection to a modification of the Stipulation herein provided that it imposes on (Pan Am) no greater liability or financial expense under the ... ADEA." The Secretary's brief presented the following "Proposal" to the district court:
"The Secretary respectfully proposes that this Court order an amendment to the record to clarify that the Stipulation of Dismissal with Prejudice under the ADEA does not as a matter of federal law or agreement bar or estop the movants from proceeding under the New York State Executive Law."
Pan Am responded that appellants' motion was properly under 60(b)(1) rather than 60(b)(6),*fn5 that it was therefore time-barred by the former's one-year limitation, and that in any event appellants had failed to show the existence of extraordinary and compelling reasons justifying a 60(b)(6) motion. Pan Am also reasserted that the federal settlement by its terms did bar appellants' state claims and that this was Pan Am's understanding when it agreed to the settlement. The Secretary, however, stated that during the extended negotiations with Pan Am the status of pending state claims, including those of appellants, had been explicitly discussed, that the Secretary had insisted that the federal settlement had no effect on the state claim, and that this was the agreed-upon basis of the settlement.
The district court, adopting the opinion of Magistrate Sinclair, acknowledged that these developments "must surely have been shocking" to appellants. Nevertheless, the district court denied their motion to amend on the ground that appellants lacked standing to invoke Rule 60, since they were not parties to the federal action, were not the legal representatives of the Secretary, and were not in privity with the Secretary. Moreover, the court noted that even if appellants had standing their motion should be dismissed on the merits.
The first issue is whether the relief requested by appellants raises a claim properly before the federal courts. While the pro se motion is inexpertly drafted and confusing, we construe it as a request to amend the Stipulation of Dismissal to provide that neither as a matter of federal law nor agreement does it bar appellants' state claims.*fn6 So construed, the essence of appellants' claim is that the language of the federal settlement could be interpreted as barring appellants' state claims, a result that exceeds the statutory authority of the Secretary under the ADEA.*fn7 Thus the motion merely seeks to bring the preclusive effect of the federal settlement within the bounds of federal law, a matter that is cognizable by the federal courts. As we recently held in National Super Spuds, Inc. v. New York Mercantile Exchange, 660 F.2d 9 (2d Cir. 1981), a federal court is obligated to clarify a federal settlement order whose language might be held ...