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certifying a class of "special event food servers, special event bartenders and special event busers"
Summary of this case from Villon v. Marriott Hotel Services, Inc.Opinion
10431/08.
Decided January 2, 2009.
LAW OFFICE OF WILLIAM COUDERT RAND, by: William C. Rand, Esq., Attorney for Plaintiff, New York, New York.
PAUL, HASTINGS, JANOFSKY WALKER LLP, by: Stephen P. Sonnenberg, Esq., Glenn S. Grindlinger, Esq., Emily J. Ratté, Esq., Attorneys for Defendant The Canyon Club, Inc., New York, New York.
Plaintiff Cheryl Krebs ("Krebs" or "Plaintiff") moves for an order permitting this action to proceed as a class action and for related relief. Defendant The Canyon Club, Inc. (the "Club" or "Defendant") opposes the motion.
While the caption of the action lists as defendants "John Does # 1-10", nowhere in the Complaint does Plaintiff either identify who these people are or were intended to be, or set forth a basis for imposing liability upon them. Neither Plaintiff nor the Club address this in their papers and, for present purposes, the Court will ignore it.
RELEVANT BACKGROUND
Krebs commenced this action on or about April 25, 2008. In her unverified Complaint, she alleges that she has worked since July 2007 as a waitress or food server at the Club. The Club is a private golf and country club which is available to the general public as a site for catered events, such as weddings, bar/bat mitzvahs and other functions (Complaint, ¶¶ 9-10). She alleges that the Club imposed on customers a service charge which customers were led to believe was a gratuity intended for employees but which the Club retained for itself in alleged violation of Section 196-d of the New York State Labor Law (Complaint, ¶¶ 13-17). She also asserts other violations of the Labor Law by the Club, such as failing to pay her and others weekly, making improper deductions from pay, failing to notify her and others at the time of hire of the rate of pay and the regular pay day, failing to provide her and others with a statement of wages and deductions, and failing to maintain payroll records for three years (Complaint, ¶¶ 19-23). However, notwithstanding these additional allegations, the Complaint contains only a single cause of action, which is based entirely on the asserted failure to pay over gratuities collected, and the only damages claimed are for the amounts of gratuities retained by Defendant (Complaint, ¶ 34 and VII [b]). The Club answered the Complaint on or about June 25, 2008, denying most of the material allegations of the Complaint and interposing various affirmative defenses. The Club admits in its answer that it has, at times, assessed a "surcharge" to some customers (Answer, ¶ 13).
Krebs served her motion for class certification on August 21, 2008. In an affidavit submitted in support of the motion, Krebs asserts that she has worked as a waitress and/or food server at the Club since July 2007 to the present (Affidavit of Cheryl Krebs, sworn to August 19, 2008 ["Krebs Aff.], ¶ 1). She claims that she worked one or two events each week and that she worked with between 12 to 15 wait staff at each event, with the Club having a total of approximately 50 people available on its wait staff (Krebs Aff., ¶¶ 3-5). According to Krebs, there was a high rate of staff turnover and in any given year there were at least 40 different people on the wait staff (Krebs Aff., ¶ 7).
Krebs states that she was never paid any tip or gratuity, except on one occasion when her supervisor gave her $15, telling her than management had "improperly" taken this money from a church group months before (Krebs Aff., ¶ 9). She alleges, "upon information and belief" that the other wait staff employees were not paid any tip or gratuity (Krebs Aff., ¶ 10). On the other hand, she asserts that, "upon information and belief", the Club was charging customers a 20% surcharge which "the customers believed was a gratuity", as evidenced by customers telling her that her tip was included in the total charge by the Club (Krebs Aff., ¶¶ 11-12).
In opposition to the motion, the Club offers the affidavit of Martin A. Badinelli, Sr., the Club's General Manger. Badinelli acknowledges that the Club, in addition to serving food and beverages to members in a dining room and snack bar, also caters special events (Badinelli Aff., ¶¶ 3-4). To serve the food and beverages at special events and in the dining room and snack bar, the Club hires special event food servers, special event bartenders, special event busers, dining room food servers, dining room bartenders, dining room busers and snack bar attendants (Badinelli Aff., ¶ 5). Krebs worked as a special event food server and, occasionally, as a special event bartender (Badinelli Aff., ¶ 7).
According to Badinelli, the Club allows its employees to accept tips from patrons and tells this to employees, though it discourages the practice (Badinelli Aff., ¶ 9). A customer seeking to host a special event at the Club must negotiate the price with the Club and then enter into a contract with the Club. The price per person differs from event to event (Badinelli Aff., ¶¶ 10-11). "Some contracts include a surcharge', which is a mandatory charge and it is not intended to be a service charge or a gratuity" (Badinelli Aff., ¶ 12). Badinelli states that the nature of this surcharge differs from event to event; the price per person may include all surcharges and sales tax (in which event the surcharge does not appear as a separate line item and its amount is not stated), or may include all surcharges but exclude the sales tax; or exclude surcharges and sales tax (Badinelli Aff., ¶¶ 12,13). Badinelli avers that when customers inquire about the surcharge, they are told that it is not a gratuity and it is not given to the staff (Badinelli Aff., ¶ 16).
The Court notes that this statement by Badinelli seems inconsistent. On the one hand, he states that the surchage is a "mandatory" charge but on the other hand, he states that sometimes the surcharge is imposed and sometimes it is not. A charge that is sometimes imposed and sometimes not would not appear to be mandatory. Also, while Badinelli states that the surcharge is not a "service charge or gratuity", he states that the "nature of this surcharge" differs from event to event and does not explain what the nature of the surcharge is (Badinelli Aff., ¶ 12)
Again, this begs the question of what customers are told the surcharge was.
Badinelli asserts that some contracts contain a provision for a "key personnel gratuity", which is said to be a payment the Club collects and pays over to key staff members at an event, "usually the banquet manager, the person overseeing the event staff, the maitre d', and/or the executive chef" (Badinelli Aff., ¶ 17). Such a gratuity, if added, is a flat fee added to the overall price of the event and may (or may not) be included in the price per person (Badinelli Aff., ¶ 18). Some contracts contain both a surcharge and a key personnel gratuity, some contain only one of these, and some contain neither (Badinelli Aff., ¶ 19).
As for the food and beverage service provided to members, the Club charges a 20% surcharge which appears as a separate line item on the bill. The surcharge does not indicate that it is a service charge or gratuity and it is asserted that it is neither. If a club member inquires about the surcharge, they are informed that it is not a gratuity and is not paid to Club members (Badinelli Aff., ¶ 23).
Once again, Badinelli does not address what members are told the surcharge is, as opposed to what it is not.
THE SUBSTANTIVE CLAIM
Krebs seeks to maintain this action on behalf of herself and others similarly situated for the recovery of gratuities to which they are entitled from the Club pursuant to the New York State Labor Law. Section 196-d of the Labor Law provides that an employer may not demand or accept, directly or indirectly, any part of the gratuities received by an employee and may not "retain any part of a gratuity or of any charge purported to be a gratuity for an employee." Recently, in Samiento v World Yacht Inc . ( 10 NY3d 70 ), the Court of Appeals held that a charge which is not a voluntary payment may be a "charge purported to be a gratuity" within the meaning of the statute. In that case, the defendants operated dining or banquet cruises in New York harbor; plaintiffs, employees on banquet cruises, alleged that a 20% service charge was imposed and that customers were told that the proceeds were remitted to the waitstaff as the gratuity but the proceeds were not so remitted and, because of the service charge, customers did not themselves pay any gratuity. The Court of Appeals addressed whether plaintiffs had stated a cause of action under Labor Law Section 196-d. Defendants asserted that, in order to come within Section196-d, a payment must be voluntary and, therefore, a mandatory charge could not come within the purview of the statute. The Court of Appeals disagreed. It held that the statute is to be liberally construed and that if a charge, even if mandatory, purports to be a gratuity, it is within the reach of the statute. Whether a charge "purports to be a gratuity" is measured by whether a reasonable patron would understand that a service charge was being collected in lieu of a gratuity ( Samiento, 70 NY3d 79.
Since Krebs' complaint contains only a single cause of action relating to non-payment of gratuities and since her motion seeks certification of a class consisting of only of persons to whom gratuities were not paid, the Court will ignore the allegations of the complaint asserting different Labor Law violations, such as failure to pay on time, failure to explain deductions, and making of improper deductions. The Court notes that Krebs does not address any of these other allegations in her affidavit.
In this case, Plaintiff alleges in her complaint that the Club imposed a service charge which to the reasonable customer purports to be a gratuity and that the Club either told or led its customers to believe that the charge was a gratuity (Complaint, ¶¶ 13-14). These allegations appear sufficient to state a cause of action for violation of Section 196-d. While the Club contends that the facts are not what Plaintiff alleges them to be, the inquiry into the merits on a motion for class action certification is limited to a determination as to whether, on the surface, there appears to be a cause of action which is not a sham ( Super Glue Corp. v Avis Rent A Car System, Inc., 132 AD2d 604 [2d Dept 1987]); Brandon v Chefetz, 106 AD2d 162, 168 [1st Dept 1985]).
THE GOVERNING LEGAL STANDARDS
CPLR Article 9, which sets forth the criteria to be considered in granting class action certification, is to be liberally construed ( see Jacobs v Macy's East, Inc. , 17 AD3d 318 , 319 [2d Dept 2004]; Kidd v Delta Funding Corp., 289 AD2d 203 [2d Dept 2001]; Liechtung v Tower Air, Inc., 269 AD2d 363 [2d Dept 2000]; Friar v Vanguard Holding Corp., 78 AD2d 83, 91 [2d Dept 1980]). As a practical matter, a class action may be the only method available for determining a consumer dispute where the damages sustained by any particular consumer are insufficient to justify the expenses of litigation and the number of individuals involved is too large, and the possibility of effective communication between them too remote, to make practicable more traditional means of litigation ( see, e.g., Weinberg v Hertz Corp., 116 AD2d 1, 5 [1st Dept 1986], affd 69 NY2d 979). Since the class action procedure serves a salutary purpose of permitting numerous consumers to band together to address a common wrong, and since a class can always be decertified or revised, the interests of justice require that, where the case is doubtful, the benefit of any doubt should be given to allowing the class action ( Brandon, 106 AD2d at 168; Friar v Vanguard Holding Corp., supra ).
In order to obtain class certification, Plaintiff must satisfy each of the five statutory requirements of CPLR § 901 — numerosity, predominance, typicality, adequacy, and superiority — and show that certification is also appropriate under the five factors set forth in CPLR § 902 interest of class members in controlling the litigation, inefficiency of separate actions, extent of prior litigation of the controversy, desirability of concentrating the litigation in this forum, and difficulties in managing the class action ( see Canavan v Chase Manhattan Bank, 234 AD2d 493, 494 [2d Dept 1996]). Plaintiff bears the burden of establishing that the class exists and that the prerequisites are met ( id. at 494, citing Brady v State of New York, 172 AD2d 17, 24-25 [3d Dept 1991], affd 80 NY2d 596, cert denied 509 US 905; 2 Weinstein-Korn-Miller, NY Civ Prac ¶ 901.08 [2d ed]). "Whether a lawsuit qualifies as a class action matter is a determination made upon a review of the statutory criteria as applied to the facts presented" ( Small v Lorillard Tobacco Co., 94 NY2d 43, 52). Certification cannot be predicated on general, conclusory allegations, but must be supported by a factual record ( see Rallis v City of New York , 3 AD3d 525, 526 [2d Dept 2004]; Yonkers Contr. Co. v Romano Enter. of New York, Inc., 304 AD2d 657, 658 [2d Dept 2003]).
On this later point, the Club contends that Plaintiff's motion is not supported by sufficient, non-hearsay, statements, challenging the sufficiency of the submissions by both Plaintiff and her counsel.
The Court observes that Defendant's memorandum of law is 30 pages in length and, therefore, exceeds the 25 page limit set in Rule 17 of the Rules of the Commercial Division. While the Court has chosen to ignore this breach of rule in this instance, Defendant is cautioned to comply with the Commercial Division Rules and the practices in this Court.
Plaintiff's affidavit is but 2 ½ pages in length and some of it is stated to be predicated upon "information and belief" ( see Krebs Aff., ¶¶ 10, 11). Other portions are stated to be based on what Krebs was told by unnamed customers or by co-workers (Krebs Aff., ¶¶ 10, 11,12) and another statement recounts what she overheard the father and mother of a bride tell each other about leaving tips for the wait staff (Krebs Aff., ¶ 13). But, while Plaintiff's own affidavit is indeed sparse, it does state that she is a member of the Club's special events wait staff and never received a tip from a patron, except once when monies were given to her through a supervisor. This is sufficient to establish that she did not receive tips as a general matter. While it would have undoubtedly been helpful if Plaintiff had submitted affidavits from other wait staff members attesting to their non-receipt of tips, Plaintiff does state that she has been told by at least one named person that she did not receive tips either. While this statement is hearsay, it is not clear how else Plaintiff could indicate that there is a good faith basis for her allegation that there are others situated similarly to her, short of requiring her to submit affidavits from others. The Club has not cited any authority for the proposition that a putative class action plaintiff must secure an affidavit from at least one other class member. All that is required is Plaintiff present sufficient fact-based information that indicates that the claim is not a sham.
It is true that Plaintiff herself does not present any factual information as to whether the Club imposed on its patrons a charge that "purports to be a gratuity." However, it seems clear that a member of a wait staff would not usually be in a position to attest to the financial arrangements between the caterer and its customers. Here, the Club does not argue that Krebs was privy to the contracts between the Club and its clientele and, therefore, could have attested to the terms imposed. Accordingly, the Court cannot fault Plaintiff for not supplying information that she did not possess. While it is true that a key element of Plaintiff's claim is that the Club imposed a charge that purported to be a gratuity, it is also true that the Club itself has supplied a factual affidavit from its general manager which describes the imposition of surcharges. While the general manager contends that the surcharges were not intended to be gratuities for the wait staff, he does not explain what the nature and purpose of the surcharges were. Moreover, Samiento indicates that the important criteria is not what the caterer believed the surcharges were for but what a reasonable patron would believe the surcharges were for. Neither Plaintiff nor the Club have provided any affidavits or statements from patrons. But the Club is in the better position to have knowledge as to what patrons perceived, or to have contacted patrons to secure affidavits or information from them, and the general manager's affidavit does not clearly explain what the surcharges were for. The Court notes that Badinelli states that, when asked by customers about the surcharges, the Club informs them that the surcharge is not a gratuity and is not given to the staff (Badinelli Aff., ¶ 16). This suggests that the Club did not tell customers that the surcharge was not a gratuity unless the customers specifically asked. It also suggests that at least some customers may have perceived that the surcharges were gratuities and were not informed otherwise unless they asked. Hence, the Court cannot conclude, at this stage, that Plaintiff's claim is a sham.
The Court observes that a caterer who imposes surcharges could avoid a Section 196-d claim by uniformly affixing a notice on patron bills or contracts to the effect that the surcharge is not a gratuity and is not given to staff. However, it may be that this practice is not followed because customers may resist paying an unexplained surcharge on top of the price-per-person charge. It seems at least plausible that a reasonable patron might accede to the surcharge based on an uninformed assumption that a surcharge of 20% is a gratuity and the caterer is simplifying matters for a patron who, if he or she intended to tip the waitstaff, would have to remember to bring cash to the event and remember, as the event winds down, to search out the waitstaff and distribute the cash.
The affirmation of counsel does not address the underlying merits of the case but, rather, adds information which addresses counsel's ability to conduct the action as a class action.
ANALYSIS OF THE CPLR 901 PREREQUISITES
CPLR 901(a) sets forth five prerequisites that must be met in all class actions ( see Alexander, Practice Commentary, McKinney's Cons Laws of NY, Book 7B, CPLR C:901:2). The Court will address each of the requirements in turn.
A. Numerosity
Plaintiff asserts that the class is so numerous as to render joinder of all members impracticable (Pltf. Mem. at 6-7). The Club does not directly dispute that Plaintiff has met the numerosity requirement.
Plaintiff contends, "upon information and belief" that the Club failed to pay gratuities to at least 40 wait staff employees (Pltf. Mem. at 6). The Court is not convinced that Plaintiff has actually provided factual information that supports this statement. However, Plaintiff states, without the qualifier of "upon information and belief", that there were at least 40 different wait staff employees at the Club during any given year (Krebs Aff., ¶ 7). This assertion is not denied by the Club's general manager in his affidavit. Moreover, the Club's general manager concedes that no portion of the surcharges imposed was paid over to the waitstaff the question being whether the Club was required to pay those funds over.
There is no mechanical test to determine whether the numerosity requirement has been met; the court is to consider the particular circumstances of each case and the reasonable inferences and common sense assumptions from the facts before it ( Friar v Vanguard Holding Corp., 78 AD2d 83, 96 [2d Dept 1980]). However, both federal and state courts presume that numerosity is satisfied where the proposed class contains around 40 members ( see, e.g., Consolidated Rail Corp. v Town of Hyde Park, 47 F3d 473, 483 [2d Cir 1995], cert denied 515 US 1122; Lee v ABC Carpet Home, 236 FRD 193, 203 [SD NY 2006] [class of 44 carpet installation mechanics]); Dornberger v Metropolitan Life Ins. Co., 182 FRD 72, 77 [SD NY 1998]; Gonzalez v Nicholas Zito Racing Stable, Inc., 2008 WL 941643 [ED NY 2008]; Hoerger v Board of Educ. of Great Neck Union Free School Dist., 98 AD2d 274 [2d Dept 1983] [class of 44 members certified as to breach of contract cause of action against teacher's union]; Galdamez v Biordi Constr. Co., 2006 NY Slip Op 511969[U], 13 Misc 3d 1224 (A) [Sup Ct NY County 2006], affd 50 AD3d 357 [1st Dept 2008] [prevailing wage claim involving 30 to 70 workers]; Jara v Strong Steel Door, Inc., 2008 NY Slip Op 51733[U], 20 Misc 3d 1135 [A], 2008 WL 3823769 [Sup Ct Kings County 2008] [Demarest, J.]). Although there are some nearly 30 year old First Department decisions in which classes as small as 45 and 71 were found not to be sufficiently numerous to warrant certification, those decisions appear to be have been overtaken by more recent authority ( see generally Haig, Commercial Litigation in New York State Courts § 18:5) and Second Department authority appears to support a finding of numerosity in classes of roughly similar size, as does more recent First Department authority.
It seems apparent that joinder of some 40 employees as individual plaintiffs would be impractical and management of the case would be complex and difficult if there were some 40 individual plaintiffs, each entitled to representation by counsel of their own selection.
The number of potential class members may be far greater since Plaintiff alleges that there was a high rate of turnover (Krebs Aff., ¶ 7). Even if there were 40 or so waitstaff members in a given year, with turnover, the number of individuals who were on the waitstaff would could be substantially more than 40. Nevertheless, the Court has used only the smaller number for purposes of this Decision and Order.
Likewise, it would appear that the costs of maintaining separate actions would be prohibitive for the potential class members, obtaining counsel individually may prove difficult because of the relatively small damages, and any potential class members who still work for the Club might not bring individual suits for fear of retaliation ( Lee v ABC Carpet Home, 236 FRD 193, 203 [SD NY 2006]).
Bearing in mind that the Club has not specifically contested numerosity, the Court concludes that the numerosity requirement has been met.
B. Commonality
CPLR 901(a)(2) requires that there be questions of law or fact common to the class which predominate over any questions affecting only individual class members. This standard requires "predominance, not identity or unanimity, among class members" ( Friar v Vanguard Holding Corp., 78 AD2d 83, 98 [2d Dept 1980] [acknowledging that the differences in the manner in which the defendant obtained money from potential class members does not mean that individual questions predominate over common questions]; see also Branch v Crabtree, 197 AD2d 557 [2d Dept 1993] [predominance of questions of fact or law over questions affecting only individual members is the test, not a nice inspection of the claims of each individual member]; Freeman v Great Lakes Energy Partners, LLC , 12 AD3d 1170 , 1170 (4th Dept 2004) [common questions of law and fact means similar, though not identical, claims]; Cherry v Resource America, Inc. , 15 AD3d 1013 , 1013 [4th Dept 2005] [upholding class certification and finding common questions of law and fact predominated concerning defendants' common use of a methodology to manipulate calculation of royalties]). "The statute clearly envisions authorization of class actions even where there are subsidiary questions of law or fact not common to the class" ( Weinberg v Hertz Corp., 116 AD2d 1, 6 [1st Dept 1986] affd 69 NY2d 979).
While Plaintiff presents a list of six common questions of law and fact ( see Pltf. Mem. At 8), a number of those questions appear duplicative or undisputed. Stripped to its essence, the basic, and common, questions are: whether the Club imposed charges that were, or were purported to be, gratuities, as understood by reasonable patrons, whether the Club had an obligation to pay these funds over to members of its waitstaff, and, if a violation of Section 196-d is found, whether the class members should receive monetary compensation and injunctive relief.
There seems to be no dispute that the Club employed people who served on its waitstaff and that the Club did not turn over any portion of the surcharges it imposed to its waitstaff.
The Club does not dispute that there are common questions; however, the Club contends that individual issues predominate over any common ones. The Club asserts that, because Plaintiff must show that customers reasonably believed the surcharges were gratuities or purported gratuities, Plaintiff's claims will require that the Court evaluate the circumstances that gave rise to each customer's belief, an inquiry that, in turn, must focus on the nature of the event and the individual contract made with the Club (Def. Mem. at 9). The Club points out that each contract was unique — some did not contain a surcharge and others did and some customers inquired about the surcharge and others did not (Def. Mem. at 10).
However, these issues are not issues that are unique to Plaintiff or to any of the individual members of the special event waitstaff. Rather, these issues are common to those members of the waitstaff, i.e., these issues are a sub-set of the central issue common to the class of special event waitstaffers whether the Club imposed and collected a gratuity or what was purported to be a gratuity from its patrons. The individual inquiry is not predicated upon factors unique to Plaintiff or other waitstaff members but factors unique to each event which would then be applied to resolved the entitlement, if any, of the waitstaffers who worked that event. While it is reasonably assumed that the individual members of the waitstaff did not work every event, and that the composition of the workers at each event varied, it remains that, according to Plaintiff, 12 to 15 individuals worked as waitstaff at each event (Krebs Aff., ¶ 4) and, therefore, even on an event-by-event basis, the questions identified by the Club are common to at least 12 to 15 people. There are no individual questions presented that are unique to any particular special event waitstaff member. Even as to damages, it would seem that, if a gratuity or purported gratuity was collected and should have been paid over, the damages would be shared pro rata by all of the staff members who worked the event in question. Thus, damage trials focused on the individual claims of staff members would not be required. Indeed, it would appear that a separate damage inquiry would not be necessary at all, as, if liability were established, the amount of damage would be known. All that would be required is to ascertain the names of the persons who worked the particular event (something that would seem not to involve any great effort).
While the Club does not give a total number of special event waitstaffers typically present at each special event, it does state that, at each special event, it has food servers, bartenders, and busers (Badinelli Aff., ¶ 5). It may therefore be inferred that, from the Club's information, there were roughly a dozen or so people on its waitstaff for each event.
The complexity that the Club complains of is a result of the confluence of two events: (a) the establishment of a "reasonable patron" test by the Court of Appeals in Samiento; and (b) the Club's lack of a uniform and consistent policy dealing with surcharges. But the inquiries necessary to resolve these complexities are not unique to any individual class member. Rather, it seems to be more efficient to resolve these issues on an event-by-event basis (as to which the identities of those who worked each event is relevant only to the distribution of damages), rather than a worker-by-worker basis, which would necessitate repeated inquiries into the very same events. Indeed, it may well be that, as to those special events in which surcharges were imposed and no customer inquiry was made, a finding as to what a reasonable patron would have perceived may be made that would govern all such events, which would obviate the need to examine the circumstances of each such event. On the other hand, it could also be that it can be established that the Club had a uniform policy of informing patrons who asked that the surcharge was not intended for the benefit of waitstaff, obviating, or at least reducing, the necessity to inquire into the individual circumstances of certain events.
The cases relied upon by the Club are inapposite. In McKinnon v International Fidelity Insurance Co. ( 281 AD2d 283 [1st Dept 2001]), involving a claim by clients of a bail bond service, proof of liability turned on the personal interactions between individual bail bond sales persons and the client. Similarly, in Carnegie v H R Block, Inc. ( 269 AD2d 145 [1st Dept 2000], lv dismissed 95 NY2d 844), the claim that a putative class of customers were induced to obtain high-interest return anticipation loans was dependent on what each customer was told. These cases reflect the principal that class certification should be denied where the class members' claims require that each member present his or her own proof of the defendant's wrongdoing ( see CLC/CFI Liquidating Trust v Bloomingdales Inc., 2007 NY Slip Op 52062[U], 17 Misc 3d 1118 [A], 2007 WL 3101249 at *4 [Sup Ct NY County 2007], affd 50 AD3d 446 [1st Dept 2008]). Here, the question of the Club's liability does not turn at all on proof of the interaction between class members and the Club. Rather, the Club's liability is dependent upon the interaction between the Club and its customers. While it is true that the Club's conduct was not uniform in dealing with its patrons, its interaction with any single event patron itself presents a common strand upon which liability to at least some club members may rest ( see Compact Electra Corp. v Paul, 93 Misc 2d 807, 809 [App Term, 2d 11th Jud Dists 1993]).
The Club also points out that a different set of facts pertains to whether surcharges imposed upon club member charges in the dining room or at the snack bar are gratuities or purported gratuities. However, the Court observes that Plaintiff does not expressly claim that she worked at other than special events and the Club claims that she worked only at special events, either as a food server or as a bartender. (Badinelli Aff., ¶ 7). Thus, as discussed separately, infra, Plaintiff's claims cannot be considered typical of those waitstaff members who worked only in serving club members. Further, it is clear that, while catering special events potentially hundreds of events, the number of individual transactions involving only member dining or snacks would potentially be in the hundreds of thousands. This complexity can be avoided by limiting the class to only those staff members, such as Plaintiff, who worked on special events and to those gratuities, or alleged gratuities, that were generated by special events.
The Club does not state the number of special events it caters each year. Plaintiff states that she worked one or two events each week (Krebs Aff., ¶ 3). Assuming that there at least one or two events each week that Plaintiff did not work, this would place the number of outside events per year at about 200 per year. As Plaintiff seeks to go back six years in time ( see Labor Law, § 198 [subd. 3] [authorizing recovery of all wages accrued during the six years prior to the commencement of the action]), the number of total events at issue would be about 1,200.
Assuming only a modest 50 transactions per day, the number of transactions per year would be 18,250 and, over six years, well over 100,000.
C. Typicality
CPLR 901(a)(3) requires that the claims or defenses of the representative parties be typical of the claims or defenses of the class. Indeed, "[t]he essence of the requirement of typicality *** is that not only must the representative party have an individual cause of action but the interest of the representative must be closely identified with the interests of all other members of the class ( see Gilman v Merrill Lynch, Pierce, Fenner Smith, Inc., 93 Misc 2d 941, 945 [Sup Ct NY County 1978], quoting 2 Weinstein-Korn-Miller, NY Civ Prac ¶ 901.09, Fed R Civ Pro rule 23[a][3]). Plaintiff's claims need not be identical to those of the class ( see Branch v Crabtree, 197 AD2d 557, 557 [2d Dept 1993]). When a plaintiff's claims derive from the same practice or course of conduct that gives rise to the claims of other class members, and are based upon the same legal theory, the typicality requirement is satisfied ( see Friar v Vanguard Holding Corp., 78 AD2d 83, 99 [2d Dept 1980]).
The Club argues that since Plaintiff did not work every special event, and its liability will vary from event to event, Plaintiff's claims cannot be considered typical of those events at which she did not work. Defendant asserts that, even it is liable to Plaintiff for a specific event at which she worked, that determination "has no bearing on whether the Club is liable to other putative class members for work performed at special events at which Plaintiff did not work" (Def. Mem. at 20). This is not entirely accurate: at least as to events for which surcharges were imposed and nothing explicit was said to the patrons, a finding as to what a "reasonable patron" may have perceived as to whether the surcharge was a purported gratuity may well have relevance as to all such events, whether Plaintiff worked on such events or not. Moreover, it is also true that, if the Club is found liable to Plaintiff for gratuities generated by events at which she worked, it necessarily follows that the Club is just as liable to other members of the waitstaff who worked the event.
Further, the Club has not provided any information as to the number of special events at which surcharges were imposed and the number of special event customers who did not agree to surcharges. Nor has the Club explained whether the number of surcharged special events increased or decreased over time. Thus, there is no basis, at present, for assessing how likely it is that Plaintiff happened to work exclusively on surcharged special events or exclusively at non-surcharged special events or, if she worked on both surcharged and non-surcharged special events, the proportion that she worked at each type of special event. Likewise, there is no basis for determining whether she worked at surcharged special events more or less often than other special event waitstaff members.
There is also the prospect that negotiation resulted in the surcharge being incorporated into the price per person for the event ( see Badinelli Aff., ¶ 12). The Club has also not provided any information as to the number of times this may have occurred.
Clearly, to the extent that all members of the Club's special event waitstaff did not work on every single special event held at the Club, their individual claims are not identical. But identity is not required. Rather, the individual claims of putative class members are best considered as being overlapping, with some members being potentially entitled to receive their share of a gratuity or purported gratuity generated by an event at which they worked, with somewhat different groups of class members being entitled to shares in a gratuities or purported gratuities flowing from other events at which they worked. Plaintiff, based on her unrefuted allegation that she worked one or two events each week, has claims which are typical of the putative class of special event waitstaff workers and she is situated similarly to this group of special event waitstaff workers.
The Club's reliance upon Solomon v Bell Atlantic Corp . ( 9 AD3d 49 [1st Dept 2004]) is misplaced. In that case, there were differences between the individual plaintiffs as to what advertisements they saw, whether they saw any advertisements at all or obtained information from other sources, whether they received billing credits, whether they read the terms and conditions and agreed to them, and other differences. Here, the experiences of the special event waitstaff are identical: they worked at a special event, without any apparent knowledge, or involvement with, the financial arrangements made between the sponsor of the event and the Club. The only differences between the waitstaff are that they did not all work at all the same events. The real variants are not in the knowledge or conduct of the waitstaff, but in the financial arrangements between the Club and the various event sponsors.
The Club points out more persuasively that "because dining room and snack bar patrons are all Club members, they might have a different understanding concerning the nature of the surcharge than non-member special event patrons" and, therefore, Plaintiff, as only a special event waitstaff member, has claims which are not typical of those who provided food, beverage and snack service to club members (Def. Mem. at 20). The Court agrees that, to the extent that Plaintiff seeks to present claims based upon surcharges imposed upon club members, her individual claims cannot be considered typical of this group as Plaintiff worked only special events and did not work in the dining room and snack bar service for members.
D. Adequacy of Representation
CPLR 901(a)(4) provides that the Plaintiffs must be able to "fairly and adequately protect the interests of the class." A class representative acts as a fiduciary with respect to the interests of other class members ( see City of Rochester v Chiarella, 65 NY2d 92, 100-101). The responsibility of a class representative includes the duty to act affirmatively to secure the rights of class members and to oppose adverse interests asserted by others ( id.). In determining whether a named plaintiff is a suitable class representative, the court may consider: (1) whether a conflict of interest exists between the representative and the class members; (2) the representative's background and personal character, as well as his or her familiarity with the lawsuit, to determine the ability to assist counsel in its prosecution; (3) the competence, experience and vigor of the representative's attorneys; and (4) the financial resources available to prosecute the action ( see Pruitt v Rockefeller Ctr. Prop., Inc., 167 AD2d 14, 24 [1st Dept 1991]).
Of these factors, Plaintiff concentrates, in her moving papers, on the experience of her attorney of record in class actions. Little is said regarding Plaintiff's background and personal character, though it seems apparent from her affidavit that she is familiar with this lawsuit. Nothing at all is offered regarding the financial resources available to prosecute the action. On the other hand, the Club's opposition ignores all but one of the factors, concentrating its focus on whether a conflict of interest exists between Plaintiff and the other class members. Because Defendant has focused on the conflict issue exclusively, and has not made an issue of Plaintiff's own character and the financial resources available to her for this lawsuit, the Court will treat Plaintiff's submission, though sparse, as minimally adequate on these issues and deal with Defendant's conflict claim.
The Court is not willing to open a sua sponte inquiry into Krebs' financial condition and her financial arrangements with her counsel, or a sua sponte inquiry into Krebs' personal capacity to appreciate the responsibilities of class representative ( see Wilder v May Dept. Stores Co. , 23 AD3d 646 [2d Dept 2005]). However, the Court notes that, should the action proceed as a class action and Krebs' financial status or class leadership prove inadequate to the task, the Court could entertain an application to replace her as class representative or to decertify the class.
CPLR 901(b) provides that an action to recover a penalty may not be maintained as a class action unless the statute that creates the penalty specifically authorizes a class action. Plaintiff's action is predicated upon Section 196-d of the Labor Law. The parties do not dispute that a claim under Section 196-d is a wage claim. If an individual prevails on a wage claim, and the employer's failure to pay the required wage is found to be willful, the employee may recover the actual wages to which he or she is entitled as well as an additional recovery of liquidated damages in an amount equal to 25% of the total wages found to be due (Labor Law, § 198 [subd. 1-a]). Liquidated damages under the Section 198 of the Labor Law are considered a penalty for purposes of CPLR 901(b) and, accordingly, absent anything more, an action to recover wages and liquidated damages is not maintainable as a class action ( Carter v Frito-Lay, Inc., 74 AD2d 550 [1st Dept 1980], affd for reasons stated in App. Div. mem., 52 NY2d 994). However, this does not end the matter because it is undisputed that an employee may elect to waive his or her right to seek liquidated damages under Section 198 ( see Ridge Meadows Homeowners' Assn., Inc. v Tara Dev. Co., 242 AD2d 947 [4th Dept 1997] [class action allowable after plaintiffs consent to strike that portion of complaint as sought statutory penalty]). Krebs has done so here (Complaint, ¶ 35).
This brings us to the crux of this issue. The Club contends that, while Krebs may waive the statutory availability of liquidated damages for herself, she is an improper class representative because she is, in effect, seeking to waive recovery of liquidated damages for all the other members of the class (Def. Mem. at 22-23). In essence, the Club asserts that Krebs has a fundamental conflict: while, as class representative, she is required to act in the faithful interests of the class, she is proposing, at the very outset, to relinquish an important, statutory benefit to which all members of the class would otherwise be entitled. The Club's argument is supported by Hauptman v Helena Rubinstein, Inc. ( 114 Misc 2d 935 [Sup Ct NY County 1981]), where the Court stated that, by requiring members of the class to waive their claim to liquidated damages, a class representative cannot be considered to have acted fairly and adequately protect the class as required by CPLR 901(a)(4). In addition, in 2000, United States District Judge Colleen McMahon, in a footnote dictum, observed:
Attempts by plaintiffs to get around CPLR 901(b) by waving the liquidated damages remedy have been rejected by courts as undermining putative lead plaintiffs' ability to represent others who have a statutory right to the remedy. See, e.g., Woods v. Champion Courier, Inc., October 9, 1998 N.Y.L.J. 25 (col 1) (Sup.Ct.N.Y.Cnty 1998)( citing Bradford v. Olympic Courier Systems, Inc., Sup Ct Kings County, March 26, 1997) ( Foster v The Food Emporium, 2000 WL 1737858 at *3 n. 3 [SD NY 2000].
However, the New York appellate courts have adopted a more elegant solution to this problem. Notably, the Appellate Division, Second Department, in Super Glue Corp. v Avis Rent A Car System ( 132 AD2d 604, 606 [2d Dept 1987]), after noting that the named plaintiff in a class action may waive a claim to a penalty and bring an action for damages only, stated that, "[s]hould any class member wish to pursue his or her statutory right to minimum and treble damages, he or she may opt out of the class and bring an individual action therefor." Similarly, in Pesantez v Boyle Envtl. Serv., Inc. ( 251 AD2d 11, 12 [1st Dept 1998]), the Appellate Division, First Department, in the context of a class action alleging failure to pay prevailing wages, stated that, "[t]o the extent certain individuals may wish to pursue punitive claims pursuant to Labor Law § 198(1-a), which cannot be maintained as a class action (CPLR 901[b]), they may opt out of the class action." Consequently, the law is now well established in New York that, in the context of an action presenting allegations of Labor Law wage violations, "the correct rule" is that, if the named plaintiff waives the statutory penalty, the action may be maintained as a class action as long as class members are afforded the obtain of opting out so that they may pursue all statutory remedies ( Ansoumana v Gristede's Operating Corp., 201 FRD 81, 95 [SD NY 2001]).
Of moment, Judge McMahon, whose footnote dictum from 2000 is relied upon by the Club, has more recently stated:
New York law allows plaintiffs to waive their liquidated damages claim for overtime wage class actions "as long as putative class members are given the opportunity to opt out of the class in order to pursue their own liquidated damages claims". . . . The court sees no problem with plaintiffs waiving their liquidated damages as long as notice is provided to the Rule 23 class instructing individuals how to opt-out in order to preserve their claims for liquidated damages ( Iglesias-Mendoza v La Belle Farm, Inc., 239 FRD 363, 373-374 [SD NY 2007] [citations omitted]).
This Court therefore concludes that the fact that Krebs has waived for herself claims to statutory liquidated damages does not render her an inadequate class representative, provided that the notice to be sent to the class informs class members of their right to opt-out, informs them of their right to seek liquidated damages by opting-out, informs them that they may preserve their claims for liquidated damages by opting-out, and gives them instructions on how to opt out.
E. Class Action as a Superior Method of Litigation
CPLR 901(a)(5) provides that one of the prerequisites for class action status is a finding that a class action is superior to other methods for the fair and efficient adjudication of the controversy. Krebs argues that a class action is a superior method to resolving this controversy because the class consists largely of members who have individually sustained only small damages and, therefore, most class members will not be motivated to bring a costly lawsuit (Plf. Mem. at 10-11). The Club disagrees. It contends that individual class members can seek greater relief outside a class action, pointing out that liquidated damages are available and, further, the Labor Law authorizes the recovery of attorneys' fees. Thus, the Club states that "there is an incentive for individuals to bring their own lawsuits even when recovery might be small, because the cost of pursing the recovery is likely more than offset by the liquidated damages and attorneys' fees one might recover" (Def. Mem. at 23). The Club also points out that an employee can file a complaint with the New York State Department of Labor and both the Commissioner of Labor and the New York State Attorney General may bring an action on behalf of the employees without waiving liquidated damages (Def. Mem. at 24-25). Plaintiff replies that a class action is the superior mode of proceeding because of the common issues of law and fact, such as which customer contracts had gratuity surcharges and which did not (Plf. Reply Mem. at 8).
In order to resolve whether a class action is the superior method of litigating this controversy, the Court will consider the factors identified in CPLR 902.
ANALYSIS OF THE CPLR 902 FACTORS
In determining whether to certify a class action, the Court must consider the factors listed in CPLR 902: (1) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (2) the impracticality or inefficiency of prosecuting or defending separate actions; (3) the existence of other litigation regarding the same controversy; (4) the desirability of the proposed class forum; and (5) the difficulties likely to be encountered by management of a class action
An assessment of these factors will be guided by the considerations identified in a number of precedents involving wage disputes under the Labor Law.
The Club relies upon Alix v Wal-Mart Stores, Inc . ( 16 Misc 3d 844 [Sup Ct Albany County 2007]), where the Court denied class certification, a decision recently affirmed by the Appellate Division, Third Department (___ AD3d ___, 868 NYS2d 372 {57 AD3d 1044} [3d Dept December 4, 2008]). In that case, two former Wal-Mart employees contended that Wal-Mart had used its store-level managers to implement a corporate-wide policy that involved the manipulation of time records and practices that were designed to compel employees to work "off the clock" without compensation. They sought to represent a class of some 200,000 individuals, employed or formerly employed by Wal-Mart in its stores throughout New York State. In denying class certification, the Supreme Court pointed out that an employee is permitted to file a complaint for unpaid wages with the Commissioner of Labor and that the Commissioner may conduct an investigation and, if the claim is sustained, order payment, with the award subject to Article 78 review ( Alix, 16 Misc 3d at 860-862). Although it was pointed out that whether to act on the complaint is discretionary with the Commissioner, the Court still concluded that this did not mean that a class action was superior to a relatively swift, cost-free administrative resolution of the claims ( Alix, 16 Misc 3d at 862). In affirming, the Third Department likewise observed:
Specifically, an administrative remedy is available by which plaintiffs, in their status as employees, could file wage related complaints with the Department of Labor ( see Labor Law §§ 196,196-a). Simply because the Commissioner of Labor's authority to pursue such claims is discretionary ( see Labor Law, § 196[2]), this does not render such a proceeding less effective than a class action. The availability of the administrative process, and its focus on the particulars applicable to each employee's claim, make it in many ways a superior method by which the claims made by plaintiffs, and the proposed members of the class, can be pursued against defendant ( Alix, ___ AD3d at ___, 868 NYS2d at 376).
But, it is also important to note that, in Alix, establishing the existence of the alleged policies and their impact on a given employee would necessarily require a detailed analysis of the specifics of each employee's complaint ( Alix, ___ AD3d at ___, 868 NYS2d at 376). In particular, it would be necessary to examine each employee's time cards and the corporate pay roll records and testimony would be required as to specific circumstances under which entries were made that resulted in a change in the time card of each employee ( id.).
In Jara v Strong Steel Door, Inc. (2008 NY Slip Op 51733[U], 20 Misc 3d 1135 [A], 2008 WL 3823769 [Sup Ct Kings County 2008]), Justice Carolyn Demarest denied class certification in an action complaining of underpayment of prevailing wages, supplemental benefit rates and overtime wages. The action arose out of the employer's public works construction contracts with governmental entities. The Court observed that the Labor Law provides a myriad of administrative remedies to investigate and determine whether employees have been paid prevailing wages and overtime. Further, no private right of action exists under the statute dealing with prevailing wage claims (Labor Law, § 220) until administrative remedies are exhausted. The Court, citing the Supreme Court's decision in Alix, stated:
It is clear that a judicial forum is not the most efficient venue for plaintiffs to pursue their claims. . . . A trial of this action will consume an enormous amount of time and will significantly delay potential recovery. On other hand, claimants could simply file a complaint individually or collectively with the Department of Labor . . . for their prevailing wage claims and . . . for other underpayment of wage claims. An administrative investigation would then be undertaken. If it were determined that plaintiffs had been underpaid, defendants could be ordered to pay those wages and that order would be subject to an administrative appeal and, if necessary, Article 78 review, a far more efficient process than the lengthy process of litigation in this Court. . . . ( Jara, 2008 WL 3823769 at *17).
On the other hand, a different result was reached in Lamarca v Great Atlantic and Pacific Tea Co. (2007 NY Slip Op 51424[U], 16 Misc 3d 1115 [A], 2007 WL 2127354 [Sup Ct NY County 2007], rearg. denied 2008 NY Slip Op 32115[U], 2008 WL 2958272 [Sup Ct NY County 2008], affd 55 AD3d 487 [1st Dept 2008]). In that case, the complaint alleged that defendants failed to pay overtime and, similar to the contentions in Alix, the LaMarca plaintiffs asserted that defendants engaged in a regular practice of forcing or permitting employees to work "off the clock" without compensation and, also, asserted that defendants made improper "meal deductions" from employee paychecks. In certifying the class, Justice Herman Cahn stated that the fact that the Labor Law provides a remedy of liquidated damages did not preclude plaintiffs from seeking to maintain a class action, though the Court did not specifically address the issue of whether the administrative remedy was superior. However, defendants moved for reargument and, in connection with that application, relied upon the Supreme Court decision in Alix. Justice Cahn denied reargument and concluded that Alix was not binding or controlling, though some factors presented were similar in the two cases. The Appellate Division, First Department, affirmed. Although the First Department did not address the issue of whether an administrative remedy was superior, it did state that class action treatment was appropriate because defendant conceded that all of the stores were managed under a uniform policy and that the corporate policies that drove managers to deprive employees of overtime pay were in effect for all stores during the relevant period ( Lamarca, 55 AD3d at 487).
In Wilder v May Dept. Stores Co. ( 23 AD3d 646 [2d Dept 2005]), the Court held that class action treatment was appropriate as to claims by employees against department stores which the employees sought recovery of amounts deducted from the individual sales receipts upon which their commissions were calculated. The amounts so deducted reflected an apportioned share of so-called "unidentified returns," i.e., merchandise returned to a store by a customer without documentation identifying any particular salesperson as having generated the sale. However, the Court did not address whether any administrative remedy was available and, if so, whether that remedy was preferable to class action certification.
Also, in Mentor v Imperial Parking Sys., Inc. ( 246 FRD 178, 185 [SD NY 2007]), the Court certified a class action, where the claims arose from an allegedly unlawful policy of denying overtime pay to employees, upon a finding that there was no other litigation pending, the common questions predominated over questions affecting only individual members of the class, and the individual class members had little need to control their claims separately and, to the extent that such concerns existed, they would be mitigated by the availability of the opt-out option. Again, though, there was no discussion of the utility of an administrative process, perhaps because the plaintiffs also asserted claims based on federal law.
The Court must also bear in mind other significant policy considerations. It is well settled that CPLR Article 9 is to be liberally construed and any error should be resolved in favor of allowing the class action ( Wilder v May Dept. Stores Co. , 23 AD3d 646 , 649 [2d Dept 2005], Liechtung v Tower Air, Inc., 269 AD2d 363, 364 [2d Dept 2000]; see generally Friar v Vanguard Holding Corp., 78 AD2d 83, 91 [2d Dept 1980]). Class actions are seen as a means of inducing socially and ethically responsible behavior on the part of large and wealthy institutions which will be deterred from carrying out policies or engaging in activities harmful to large numbers of individuals. Absent the class action lawsuit, the theory goes, these institutions will be permitted to operate virtually unchecked and continue to engage in legalized theft which is perpetuated because the injured potential plaintiffs frequently are damaged in a small sum since, realistically speaking, our legal system inhibits the bringing of suits based upon small claims ( Friar v Vanguard Holding Corp., 78 AD2d at 94). Put another way, the mission of class actions "taking care of the little guy" and discouraging behavior harmful to the public ( see CLC/CFI Liquidating Trust, supra, 2007 WL 3101249 at *11). While an employer's practice of retaining gratuities which patrons intended to bestow on employees may not be physically harmful to the public, it does disadvantage the powerless and it also takes unfair advantage of the public as the gratuities may not have been tendered by patrons if they knew that their beneficiaries of generosity would not be the persons who waited on them, but would really just be profit to the caterers whom they separately paid the agreed-upon charge for the event. Indeed, it may be said that, if a caterer retains a surcharge that the customer believed was going to be distributed to the waitstaff and if the customer would not have paid the surcharge but for that belief, the caterer gained additional monies by conduct that at least borders on the fraudulent. The Court observes that since the statutory prohibition of Section 196-d appears in Article 6 of the Labor Law, and knowing violations of Article 6 may be prosecuted criminally (Labor Law § 198-a), the statutory rights that Plaintiff seeks to vindicate reflect significant public policy.
1. Interest in Individual Control
There is no indication that the members of the class have expressed any interest in controlling the prosecution of their own claims. While it is true that, if not presented as class action, an employee can recover statutory liquidated damages, it is also true that the amounts that may be due each particular employee may be small. Since the liquidated damages are fixed as 25% of the unpaid wages (Labor Law, § 198[subd 1-a), the liquidated damages are also likely to be small. Moreover, liquidated damages are available only if the employer's conduct is found to be willful. Some case law indicates that the presence of a bona fide dispute over the employee's entitlement to the monies in question will preclude a finding of willfulness ( see Bigda v Fischbach Corp., 849 F Supp 895, 905 [SD NY 1994]; see also Rosenberg v Comprehensive Community Dev. Corp, 1998 WL 809522 at *3 [SD NY 1998]). At least, the mere fact of non-payment is insufficient to show willfulness ( see Epelbaum v Nefesh Achath B'Yisrael, Inc., 237 AD2d 327 [2d Dept 1997]). Because the amount of liquidated damages may be small, and the road to recovery of them at all is not free of doubt, the Court does not accept the Club's contention that the prospect of a liquidated damages recovery will give class members a significant incentive to bring individual actions.
The Club also argues that the statutory authorization of an award of attorneys' fees to a successful individual plaintiff will also spur class members to sue individually. But this contention is not persuasive. In order to obtain a recovery on the facts presented here, it must be shown what the "reasonable patron" perceived catering surcharges to be. Thus, an individual plaintiff would have to conduct discovery and engage in a trial with respect to the perceptions of the sponsors of the events at which he or she worked. This is likely to be an expensive and time-consuming task and, given the Club's insistence that the surcharge was not a gratuity and was not purported to be one, it seems doubtful that an attorney would be willing to undertake an expensive litigation, where the amount of fees will likely exceed the client's recovery, in which the prospect of obtaining an award of fees is wholly contingent.
The parties have not addressed whether the statutory allowance for attorneys' fees to a successful employee applies in the class action context, though it appears that Krebs implicitly assumes that it does and the Club implicitly assumes that it does not. The Court need not address the issue here.
2. The Impracticality or Inefficiency of Prosecuting Separate Actions
It is obvious that the prosecution of separate actions by each affected member of the Club's catering waitstaff would be highly impractical and very inefficient. Each plaintiff, as noted above, would have to conduct discovery and engage in a trial with respect to the perceptions of the sponsors of the events at which he or she worked. Since at least 10 to 15 waitstaff members worked at each event, if all 40 or so waitstaff members brought separate suits, it is likely that the same patrons would be subject to repeated depositions and trials. The same contracts would have be examined and reviewed repetitively. Not only would this be a wasteful and duplicative procedure from the point of view of plaintiffs and defendants, it would be burdensome on the patrons who, after all, did nothing but contract with the Club for a celebratory event. It would be grossly unfair to subject them to repeated inquiry, bearing in mind that patrons might need to take time from work or other pursuits and might engage their own counsel to protect their interests.
3. The Existence of Other Litigation Regarding the Same Controversy
Neither party has disclosed that there is any other litigation, past, present or threatened, over the present controversy.
4. The Desirability of the Proposed Class Forum
The Club contends that the Supreme Court is not a desirable forum and that the preferred forum would be the administrative forum provided by the New York State Department of Labor, relying upon both Alix v Wal-Mart Stores, Inc . ( 16 Misc 3d 844 [Sup Ct Albany County 2007], affd 7 AD3d 1044 [3d Dept December 4, 2008]) and Jara v Strong Steel Door, Inc. (2008 NY Slip Op 5733[U], 20 Misc 3d 1135 [A], 2008 WL 3823769 [Sup Ct Kings County 2008]) (Def. Mem. at 26).
The Labor Law authorizes employees to file complaints with the Commissioner of Labor and authorizes the Commissioner to investigate and attempt to "adjust equitably" controversies between employers and employees arising under Article 6 of the Labor Law ( see Labor Law §§ 196 [subd 1(a)], 196-a). The Labor Law also authorizes the Commissioner to take assignments of wage claims from employees and to sue employers on those claims, with the Commissioner being empowered to join multiple wage claims against the same employer (Labor Law § 196 [subd 1[b]]). Thus, the Commissioner may investigate claims and pursue them administratively or the Commissioner may bring action on claims or the Commissioner may take no action at all, the Commissioner's authority being entirely discretionary. On the other hand, the Labor Law does not generally preclude employees from bringing their own actions and does not generally require employees to exhaust administrative remedies or obtain any sort of right-to-sue letter from the Commissioner. To the contrary, the Labor Law specifically provides additional remedies to employees who sue successfully, specifically, liquidated damages and counsel fees (Labor Law § 198). Since the Legislature has chosen to give employees the option of filing an administrative claim or filing a lawsuit, it cannot be said that the Legislature has stated a preference for employees to pursue their claims in either an administrative forum or in court.
For this reason, the Jara case is readily distinguishable and does not assist the Club. In Jara, a significant portion of the plaintiffs' claims was predicated upon the failure to pay prevailing wages. As the Jara Court noted, with respect to a claim of non-payment of prevailing wages, no private right of action exists until administrative remedies are first exhausted ( see Marren v Ludlam , 14 AD3d 667 , 669 [2d Dept 2005]). While the Jara plaintiffs did not bring a claim directly under Section 220 of the Labor Law, they were, by claiming breach of contract and trust diversion, seeking the same relief payment of prevailing wages and supplemental benefits that were available administratively ( Jara v Strong Steel Door, Inc., supra at *16). Prevailing wage claims are governed by the provisions of Article 8 of the Labor Law and, in particular, Section 220. Here, Krebs' claims arise under Article 6 of the Labor Law and there is no requirement in Article 6 that administrative remedies must be exhausted before a private action can be maintained.
The Court also finds the Alix case to beinapposite. There, plaintiffs sought to maintain a class action on behalf of some 200,000 current or former employees during a 12 year period, alleging, among other things, systematic manipulation of time records and predicating their claims on, among other laws, regulations promulgated by the Labor Department ( see 22 NYCRR Part 142). To resolve the claims presented, there would have to be a fact-specific inquiry into each individual worker's circumstances and the accuracy of the time records reflecting the hours worked of each worker ( Alix, 2008 WL 5084009 at *3). As the Appellate Division stated in Alix, the administrative processes of the Labor Department focuses on the particulars of each employee's claim ( id.) Here, the claims do not center on the accuracy of the time records of each worker but on the transactions between the Club and its customers; those transactions, in turn, determine the outcome of the claims of multiple workers arising from the transactions. Not only are the number of workers in the proposed class remarkably smaller than the number involved in Alix, the resolution of the case necessary involves inquiry into each customer contract and, significantly, the perceptions of the "reasonable patron" as to whether the surcharges were, or were purported to be, gratuities. There is no indication that the Commissioner of Law has any particular expertise in dealing with an assessment of what a "reasonable patron" would perceive, as distinguished from the Commissioner's expertise in dealing with the Commissioner's own regulations regarding time records. While it appears that the Commissioner of Labor has the authority to subpoena third parties, such as catering patrons, for deposition and to testify at hearings ( see Labor Law, § 39), it does not appear that the time and effort involved in that process will be any more or less time-consuming or difficult than if the process occurs in Court. Further, there is no indication that attending an administrative hearing would be any more or less burdensome for an individual patron than attending court would be. However, the Court does observe that the Court would be in a better position to resolve any disputes regarding discovery and depositions than the Commissioner would be. It would appear than any discovery or deposition subpoenas would have to be issued in the name of the Commissioner, rather than by a party directly, and, any disputes (whether brought by a party or by a third party) would have to be litigated in Court by way of a motion to quash or to enforce ( see CPLR 2304).
Unlike the situation in Alix, this litigation has not been long-pending and no discovery has taken place. Neither side has provided the Court with any information as to how long discovery might take or long the trial might be. However, it seems clear that, while the liability phase of the case could be time-consuming, the damages phase would not be difficult, as, assuming liability is found for any event, it would seemingly be a simple task to ascertain which members of the waitstaff worked the particular event and to distribute the gratuity pro rata. This also distinguishes this case from Alix, where the Supreme Court it would be a "Herculean task" to determine "the individual entitlements of the hundreds of thousands of class members" ( Alix, 16 Misc 3d at 864).
Additionally, even if the Court declined to grant class certification, Krebs, or any other class member, could elect to litigate in court anyway; the Court cannot compel an individual class member to make a complaint to the Commissioner or assign a claim to the Commissioner. Nor can the Court compel the Commissioner to commence an administrative proceeding, commence an action, or commence an action on behalf of multiple claimants. Indeed, if an individuals, such as Krebs, maintain individual actions and the Commissioner brought litigation as well, or even initiated an administrative process, there would be a multiplicity of litigations over the same issues.
The Court does not presently know how many class members would elect to opt-out and bring administrative claims. If all class members elect to stay in the class action, and decide not to opt-out, there would be no risk of multiple proceedings. On the other hand, if all the class members (except, obviously Krebs herself) elected to opt-out, the Court could potentially decertify the class or stay the action pending any administrative actions or proceedings by the Commissioner.
Since the statute does not express a preference for forum, it seems just and appropriate to certify the class and afford class members an informed choice of forum, as well as to give the Club the opportunity to move to decertify the class, if it is so advised, after the period to opt-out has expired.
5. The Difficulties Likely to Be Encountered by Class Action Management
The Club contends that, in order to establish its liability, the Court will need testimony from each special event customer as to his or her perception as to the surcharges imposed at the event (Def. Mem. at 26). While this may well be true, this would also be true in the event Krebs, as is her right, elected to sue just on her own, albeit the number of events involved might be somewhat smaller as she did not work every event. But the fact that there are a multiplicity of events does not make a class action any more difficult to manage than it would be manage a litigation by just one waitstaff worker. Rather, having all claimants in a single forum, would militate in favor of a class action, as it would avoid burdening the parties and the patrons with multiple appearances in multiple forums. Further, having the Court manage discovery would likely make the discovery process more manageable, rather than having multiple patrons make multiple applications to quash administrative subpoenas or to have multiple courts hear the same issues.
The Club also contends that, because Plaintiff seeks to maintain the action on behalf of those employees who also waited on Club members in the dining room and snack bar, the Court would have to hear testimony from every club member as to their understanding of the surcharge (Def. Mem. at 27). While this, again, would not seem to be a problem from a class action management perspective, the Court, as previously stated, will avoid this problem since Plaintiff's claims are not typical of those who worked on member service.
DESIGNATION OF CLASS COUNSEL
Krebs requests that the Court appoint her as class representative and her counsel as class counsel. While the Club has opposed class certification, it has not opposed the designation of Krebs' counsel as class counsel. Krebs is represented by William Coudert Rand who has submitted with his affirmation a description of his experience in litigating class actions. The Court will designate Mr. Rand as class counsel.
The Court notes that Mr. Rand lists Gottlieb Associates, and in particular Jeffrey M. Gottlieb, Esq. and Dana L. Gottlieb, Esq., as "co-counsel". Plaintiff also submits a proposed order that would designate both the Rand Firm and the Gottlieb Firm as counsel for the class.
The Gottliebs have not provided any information regarding themselves and Mr. Rand states only that he is "associated in this matter with Jeffrey M. Gottlieb, Esq., who also has substantial experience prosecuting class actions" (Affirmation of William C. Rand, dated August 21, 2008, at ¶ 6). However, Mr. Rand does not explain this statement nor does he explain why, given his experience, he needs to have Mr. Gottlieb on board.
While the Court has no objection to an attorney of record being assisted by others, whether with the same firm or not, the Court does believe that there should be more than one attorney of record, absent a conflict of interest or other compelling circumstances ( see Kallivokas v Athanasatos, 151 AD2d 396 [1st Dept 1989]; Stinnett v Sears Roebuck Co., 201 AD2d 362 [1st Dept 1994]); Kitsch v Riker Oil Co., 23 AD2d 502 [2d Dept 1965]). Having a single attorney of record, whether a law firm or an individual, enables the Court and opposing counsel to readily identify the attorney who has the authority and responsibility to conduct all appearances and to issue and accept all papers and communications. In addition, the Court is concerned with the potential of undue expense from the separate involvement of two different law firms. For these reasons, as well as because of the lack of information as to the experience of the Gottlieb firm and their precise role in this matter, the Court will designate only Mr. Rand and his law office as class counsel.
THE NOTICE TO THE CLASS
Krebs also seeks an order directing that notice of class certification be sent to the class by first class mail and submits a proposed notice. She also submits a proposed order which, among other things, provides that the Club pay for the costs. The Club objects to both the terms of the proposed notice and to it having to pay for it.
The Court expresses its disapproval of the practice employed by Krebs in burying a request for the Club to pay for the cost of notice in a proposed order, when her Notice of Motion did not contain any such request. In any event, as the Club properly points out (Def. Mem. at 29), CPLR 904(d)(I) requires that the class action plaintiff bear the costs of notification, though the Court can order the defendant to pay "if justice requires." Plaintiff has offered nothing to indicate that justice requires that the Club should pay for the cost of notification. Moreover, the cost of first class mailing to 40 or so people would not exceed $20.00. Accordingly, the costs of notification shall be borne by Plaintiff, without prejudice to allowing Plaintiff to treat this expense as a taxable disbursement in the event Plaintiff prevails in the action, in accordance with CPLR 904(d)(II).
The Club also properly takes issue with the argumentative nature of the proposed class definition (Def. Mem. at 28-29). The Court has other issues with the form of the proposed notice. In particular, the proposed notice does not explain to class members their alternatives, in particular, their right to bring their own action and seek liquidated damages and attorneys' fees and their right to simply file a complaint with the Commissioner of Labor. Further, the only contacts given for further information are the Rand firm and the Gottlieb firm. Apart from the fact that the Gottlieb firm should not be listed, it would seem that class members be given information as to how to contact the Commissioner of Labor. Given that staying in the class means foregoing the prospect of liquidated damages, information, in plain and simple language, should be given to class members so that they can make an informed decision.
While the Court believes it would be appropriate to mail the notice to class members at their addresses on file with the Club, it would also seem appropriate to at least consider the prospect of supplementing the mailed notice with a posting of notice at some appropriate location inside the kitchen or other non-public area of the Club where waitstaff members would observe it.
The Court will conduct a Preliminary Conference on January 23, 2009 and will discuss with counsel at that time the form of notice, as well as the advisability of posting additional notice at the Club and issues of timing, including the date by which the notice shall be transmitted and the date by which class members may request exclusion, as well as any other issues relating to the management of the litigation. Counsel are to exchange drafts of the proposed notice by January 12, 2008 and shall meet in person by January 16, 2009 to attempt to resolve any differences. Counsel shall submit to the Court, by January 20, 2009 either (a) an agreed form of notice; or (b) their respective proposals. Any objections or comments to the proposals of the adverse party shall be submitted to the Court by January 21, 2009.
ORDERED that the motion by Plaintiff Cheryl Krebs to certify this action as a class action, to direct that the class be notified by first class mail, to appoint Cheryl Krebs as class representative and to appoint her counsel as class counsel is granted to the extent set forth below and is otherwise denied; and it is further
ORDERED that this action may be maintained as a class action on behalf of all persons who were employed by Defendant The Canyon Club, Inc., from and after April 22, 2002 and continuing to date as special event food servers, special event bartenders and special event busers and who do not request exclusion from this action by a date to be fixed in a further Order of this Court (the "Class"), without prejudice to a motion by Defendant The Canyon Club, Inc. to decertify the Class, which motion shall be made by a date to be fixed in a further Order of this Court; and it is further
ORDERED that Plaintiff Cheryl Krebs is appointed representative of the Class; and it is further
ORDERED that the Law Office of William Coudert Rand is appointed attorney of record for the Class; and it is further
ORDERED that notice of the commencement and pendency of this action shall be given by first class mail directed to the members of the Class at the most current addresses on file with Defendant The Canyon Club, Inc.; and it is further
ORDERED that the costs of notification shall be borne by Plaintiff Cheryl Krebs, without prejudice to treating this expense as a taxable disbursement in the event Plaintiff prevails in the action, in accordance with CPLR 904(d)(II); and it is further
ORDERED that the Court will conduct a Preliminary Conference on January 23, 2009 at 9:30 a.m. and will discuss with counsel at that time the form of notice, as well as the advisability of posting additional notice at the Club and issues of timing, including the date by which the notice shall be transmitted and the date by which class members may request exclusion, as well as any other issues relating to the management of the litigation; and it is further
ORDERED that counsel for Plaintiff Cheryl Krebs and Defendant The Canyon Club, Inc. shall exchange drafts of the proposed notice by January 12, 2008 and shall meet in person by January 16, 2009 to attempt to resolve any differences; and it is further
ORDERED that counsel for Plaintiff Cheryl Krebs and Defendant The Canyon Club shall submit to the Court, by January 20, 2009 either (a) an agreed form of notice; or (b) their respective proposals; and it is further
ORDERED that any objections or comments to the proposals of the adverse party shall be submitted to the Court by January 21, 2009; and it is further
ORDERED that the schedule set forth herein, and the Preliminary Conference herein ordered, may not be adjourned without the express written permission of the Court.
The foregoing constitutes the Decision and Order of this Court.