Opinion
Index No. 53509/2018
04-23-2020
Yomatee RAMLOCHAN, individually and on behalf of others similarly situated, Plaintiff, v. WESTCHESTER SHORES EVENT HOLDINGS, INC. d/b/a VIP Country Club ; VIP Country Club, LLC ; Eric Brown; Sudha Thakral; Zachary Cessna; Joseph Morelli; Michelino Morelli; Michael Morelli, Jr.; Umberto DiLeo, Defendants.
Brett R. Cohen, Esq., LEEDS BROWN LAW, P.C., 1 Old Country Road, Suite 347, Carle Place, New York 11514, for Plaintiff Eileen M. Burger, Esq., MITCHELL POLLACK & ASSOCIATES, PLLC, 150 White Plains Road, Tarrytown, New York 10951, for WSEH Defendants David Feureisen, Esq., BARTELS & FEUREISEN, LLP, 1025 Westchester Avenue, Suite 402, White Plains, New York 10604, for VIP Defendants
Brett R. Cohen, Esq., LEEDS BROWN LAW, P.C., 1 Old Country Road, Suite 347, Carle Place, New York 11514, for Plaintiff
Eileen M. Burger, Esq., MITCHELL POLLACK & ASSOCIATES, PLLC, 150 White Plains Road, Tarrytown, New York 10951, for WSEH Defendants
David Feureisen, Esq., BARTELS & FEUREISEN, LLP, 1025 Westchester Avenue, Suite 402, White Plains, New York 10604, for VIP Defendants
Terry Jane Ruderman, J.
The following papers were considered on (1) the motion by plaintiff for an order certifying this action as a class action, designating Leeds Brown Law, P.C. as class counsel, approving for publication the proposed notice of Wage & Hour Class Action Lawsuit, and endorsing the proposed Publication Order; (2) the cross-motion by defendants Westchester Shores Event Holdings, Inc. ("WSEH"), Eric Brown, Sudha Thakral and Zachary Cessna (collectively the "WSEH defendants") for summary judgment dismissing the complaint as against them, or granting them summary judgment on their cross-claim against the co-defendants VIP Country Club, LLC, Umberto DiLeo, Michelino Morelli, Joseph Morelli, and Michael Morelli, Jr. (collectively, the "VIP defendants") or, in the alternative, for a protective order pursuant to CPLR 3103 as to any future discovery requests and relieving them from the obligation to respond to the proposed Publication Order notice; (3) the cross-motion by the VIP defendants for an order pursuant to CPLR 3212 dismissing plaintiff's amended complaint as against the individual VIP defendants:
Papers - Sequence 1 Numbered
Notice of Motion (sequence 1), Affirmation, Exhibits A - C, and Memorandum of Law 1
WSEH Affirmation, Affidavits, Exhibits 1 - 15, and Memorandum of Law 2
VIP Affirmation, Affidavits, Exhibits A - J, and Memorandum of Law 3
Reply Memorandum of Law, Reply Affirmation, Exhibit 14
- Sequence 2
WSEH Notice of Cross-Motion (sequence 2), Affirmation, Affidavits, Exhibits 1 - 15, Statement of Material Facts, and Memorandum of Law 5
Plaintiff's Memorandum of Law in Opposition and Statement of Material Facts 6
VIP Affirmation and Memorandum of Law in Partial Opposition to WSEH Cross-Motion 7
WSEH Reply Affirmation, Exhibits 16 - 18, and Reply Memorandum of Law 8
- Sequence 3
VIP Notice of Cross-Motion (sequence 3), Affirmation in Opposition and in Support, Affidavits in Opposition and in Support, Exhibits A - J, and Memorandum of Law in Opposition and in Support 9
Plaintiff's Memorandum of Law in Opposition and in Further Support of Motion, Klein Affirmation in Opposition 10
VIP Reply Memorandum of Law 11
VIP Country Club (the "Club") is a beach and tennis club in New Rochelle, New York, with an on-premises banquet hall in which catered social events and parties are held. The real property on which it is located is owned by The Aqua Club, Inc., while the Club was operated by VIP LLC during the first part of the time period at issue in this lawsuit, up until the Club's acquisition by WSEH on April 13, 2017 from Aqua Club and VIP LLC, pursuant to an Asset Purchase Agreement. WSEH has operated the Club from April 14, 2017 to the present. WSEH emphasizes that it acquired the Club's business assets only, and did not assume any liabilities of the prior owners.
This action was initially commenced on March 13, 2018 by plaintiff Yomatee Ramlochan, on behalf of herself and others similarly situated, against WSEH, Eric Brown, Sudha Thakral, Zachary Cessna, and Joseph Morelli. On April 23, 2018, an amended summons and complaint was filed, adding as defendants VIP Country Club, LLC, The Aqua Club, Inc., Michelino Morelli, Michael Morelli, Jr., Umberto Dileo, and Michael Malagiero. In a subsequent stipulation filed on October 12, 2018, the action was discontinued as against The Aqua Club, Inc. and Michael Malagiero (whose death is said to have predated the filing of the instant action).
The action seeks to recover, for plaintiff and other similarly situated persons who presently or formerly performed food service work for defendants during banquets and catered events at the Club, tips and gratuities allegedly improperly retained by defendants. Specifically, it is alleged that from March 2012 to the present, defendants engaged in a practice of including in their catering contracts a fee which is denominated a "service charge," which those customers would reasonably believe to constitute a gratuity charge, without notifying the customers that the charge is not a gratuity and would not be distributed to the workers who staff the catered event. It is alleged that this practice violates Labor Law § 196-d and Hospitality Industry Wage Order § 146-2.18 (see 12 NYCRR Part 146).
The parties have engaged in some pre-certification discovery, and plaintiff Yomatee Ramlochan, on behalf of herself and others similarly situated, now moves for class certification pursuant to CPLR 901 and 902.
In opposition to plaintiff's motion, the WSEH defendants argue that plaintiff Ramlochan is not a suitable plaintiff under CPLR 901 or to represent a class of WSEH employees in particular, in that she has never been engaged to provide services for WSEH at an event administered under a WSEH contract. They also maintain that plaintiff has not met her burden of proving that she and the class she purports to represent are "employees" as that term is defined under Labor Law § 196-d and Bynog v. Cipriani Group, Inc. (1 NY3d 193 [2003] ), and that the requisite numerosity is not established. The VIP defendants similarly argue that plaintiff has not met her burden of establishing numerosity or satisfied the additional class certification pre-requisites, including "typicality" and "adequacy."
In their cross-motion, the WSEH defendants contend that the complaint must be dismissed as against the individuals who were named as defendants due to their position with WSEH. They assert that: defendant Zachary Cessna merely holds a passive ownership interest in WSEH, and has no part in its operations; Sudha Thakral is employed as the Chief Financial Officer ("CFO") of WSEH, and holds no ownership interest in WSEH or the Club, with no responsibility for supervising the catered events or booking or negotiating event contracts. Similarly, they maintain that Eric Brown is employed as the Chief Operating Officer ("COO") of WSEH, with no ownership interest, who acts as a liaison between the absentee principal of WSEH and the General Manager and Maître D's who handle the day to day operations of the Club; Brown is not responsible for hiring, training, supervising or firing the catering staff or dictating the terms and conditions of their employment or compensation.
Further, the WSEH defendants propose that the time period at issue in the complaint must be divided into three separate periods: period 1, March 2012-April 13, 2017, when the Club was owned and operated by VIP LLC; April 14, 2017-September 21, 2018, when it was owned by WSEH but events during that time included some contracted-for by VIP LLC; and September 21, 2018 to the present. It is their position that the WSEH defendants are entitled to summary judgment for period 1 based on their non-ownership during those years; that they are entitled to summary judgment on their cross-claim against VIP LLC for period 2, to the extent WSEH was hosting events governed by contracts booked when VIP LLC was the owner; and that plaintiff lacks standing to assert claims relating to period 3. In the alternative, they seek issuance of a protective order against further discovery.
In the VIP defendants' cross-motion, they contend that the individual VIP defendants are entitled to summary judgment dismissing them from the action because those individuals were not employers under the controlling law. They rely on case law that an individual cannot be held liable under New York Labor Law merely by serving as an officer, shareholder, member, or agent of a business entity, but only if the officer, shareholder, member, or agent of a business entity qualifies as an "employer" (citing Stognanovic v. Dinolfo , 92 AD2d 729 [4th Dept 1983] ; Audux v. Woodbury Auto Park, Inc. , 30 AD3d 362 [2d Dept 2006] ; Bonito v. Avalon Partners, Inc. , 106 AD3d 625 [1st Dept 2013] ).
Discussion
Class Certification
CPLR Article 9 sets forth the criteria to be considered in deciding whether to grant class action certification, and those criteria are to be liberally construed (see Jacobs v. Macy's East, Inc. , 17 AD3d 318, 319 [2d Dept 2004] ). "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" ( Krebs v. Canyon Club, Inc. , 22 Misc 3d 1125(A), 1125A [Sup Ct, Westchester County 2009] [Scheinkman, J.] citing Weinberg v. Hertz Corp. , 116 AD2d 1, 5 [1st Dept 1986], affd 69 NY2d 979 [1987] ).
CPLR 901 sets forth five pre-requisites to class actions: "the court shall consider whether the class is so numerous that joinder of all members is impracticable; whether common questions of law and fact predominate; whether the plaintiff's claim is typical of the class; whether the plaintiff will fairly and adequately protect the interests of the class; and whether a class action is the superior method for the fair and efficient adjudication of the controversy" ( Canavan v. Chase Manhattan Bank, N.A. , 234 AD2d 493, 494 [2d Dept 1996], citing CPLR 901 [a] ). In addition, CPLR 902 directs that the court consider, among other factors, those specifically named in the provision: the interest of class members in controlling the litigation, the inefficiency of separate actions, the extent of prior litigation of the controversy, the desirability of concentrating the litigation in this forum, and difficulties in managing the class action (see King v. Club Med, Inc. , 76 AD2d 123 [1st Dept 1980] ). 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] ).
Defendants' challenge to the plaintiff's evidence satisfying the numerosity pre-requisite of CPLR 901 (a) (1) must be rejected. The Court of Appeals has cited the Federal Circuit Court for the Second Circuit for the proposition that "numerosity is presumed at a level of 40 members" (see Borden v. 400 E. 55th St. Assoc., L.P. , 24 NY3d 382, 399 [2014], citing Consolidated Rail Corp. v. Town of Hyde Park , 47 F3d 473, 483 [2d Cir 1995] ). The Borden Court also recognized that significantly smaller numbers of class members are sufficient "where the members would have difficulty communicating with each other, such as where ‘barriers of distance, cost, language, income, education or lack of information prevent those who are aware of their rights from communicating with others similarly situated" (Borden , citing Mem. of St Consumer Protection Bd at 3, Bill Jacket, L 1975, ch 207).
Plaintiff points to the staffing sheet from one April 23, 2017 wedding, which was provided during discovery, which showed that the named plaintiff worked alongside over 30 individuals for this event alone. Moreover, defendant Eric Brown testified at his deposition that there could be as many as 35 servers at a given time. Since the different catered events over the six-year period in question were not necessarily staffed by the same roster of servers, it may easily be inferred that far more than 40 individuals are members of the class. There is no requirement that a plaintiff actually name 40 employees. Under these circumstances, plaintiff has satisfied the numerosity prerequisite.
The second and third prerequisites of CPLR 901 (a), "predominance" and "typicality," have no need of extensive analysis. The typicality requirement is satisfied when the named plaintiff's claims derive from the same practice or conduct that gave rise to the claims of the class members and is based upon the same legal theory (see Friar v. Vanguard Holding , 78 AD2d 83, 99 [2d Dept 1980] ), and "questions of law or fact common to the class [must] predominate over any questions affecting only individual members" ( id. at 96 ). Since the same essential issues will apply equally to the named plaintiff and to every employee who served at catered events at the Club — whether the Club received a service charge from the customer, and if so whether it should have been treated as a gratuity and distributes to the employees — these prerequisites are sufficiently satisfied.
On the issue of "representation," that is, "[w]hether the representative party ‘will fairly and adequately protect the interests of the class’ " ( CPLR 901 [a] [4] ), analysis "involves a number of considerations — whether a conflict of interest exists between the representative and the class members, the representative's background and personal character, as well as [her] familiarity with the lawsuit, to determine [her] ability to assist counsel in its prosecution and, if necessary, ‘to act as a check on the attorneys’ and, significantly, the competence, experience and vigor of the representative's attorneys and the financial resources available to prosecute the action" ( Pruitt v. Rockefeller Center Properties, Inc. , 167 AD2d 14, 24 [1st Dept 1991] ).
Defendants suggest that because the named plaintiff was assigned to the job by an employment agency, she cannot be representative of the employees that were direct employees of the Club. However, submitted affidavits of other putative members of the class indicate that there was no way to observe any difference between servers assigned to work at the Club. They all generally wore the same outfits, and all took orders from the same supervisors and worked together. Whether their salary was paid directly by the Club or by an employment agency that was paid by the Club, the gravamen of the action is that all the servers at any given event were entitled to their proportionate share of any contractual "service charge" paid by the customer for that event.
As to defendants' implication that serving as a named plaintiff in a number of similar class action lawsuits renders the named plaintiff unqualified to serve as a class representative, defendants have provided no authority holding that such a circumstance in itself invalidates either the plaintiff's claims or her ability to represent the class. Nor is there any requirement that the named plaintiff have worked for the defendants throughout the entire class period. It is sufficient to allege that the defendants engaged in the complained-of conduct throughout that period, and that the named plaintiff was one of the employees negatively affected by that conduct, and that she has no alleged conflicts with the members of the putative class. That, along with adequately skilled and experienced counsel, is all that is required to meet the "adequacy of representation" prerequisite of CPLR 901 (see Borden v. 400 E. 55th St. Assoc, L.P. , 24 NY3d 382, 400 [2014] ). Nothing in defendants' submissions challenges the skill and experience of plaintiff's counsel.
The applicability here, if any, of the ruling in Bynog v. Cipriani Group, Inc. (1 NY3d 193 [2002] ), cannot be decided in this context. Importantly, Bynog addressed a summary judgment motion in which both sides' facts and allegations were laid bare. Here, the facts of plaintiff's employment, and that of defendants' other servers, have not yet been established. It would be premature to come to any conclusion at this point as to whether plaintiff and any of the workers were independent contractors, and if so how that circumstance impacts on the claim regarding their entitlement to a gratuity, if any.
The fifth prerequisite of CPLR 901, regarding whether a class action is the superior method for the fair and efficient adjudication of the controversy, is established here. It has repeatedly been observed that class actions are often the best method of adjudicating wage and hour disputes (see e.g. Weinstein v. Jenny Craig Operations, Inc. , 138 AD3d 546 [1st Dept 2016] ). The issues presented here can best be decided on a class-wide basis since the central issue, whether defendants' retention of charges categorized as service charges violates the Labor Law, appears to apply equally to all putative class members; if defendants are liable to one putative class member for a charge assessed for a particular event, defendants will be liable to all putative class members who also worked the event, who will be entitled to share in an equal distribution of the unpaid gratuity.
The factors set forth in CPLR 902 militate in favor of granting class action certification. There is nothing submitted by any party indicating that members of the class have any interest in individually controlling the prosecution of their own claims, and, indeed, it would be inefficient in the extreme to have individual servers who worked at Club events prosecute separate actions.
In considering a dispute similar to that raised in the present matter, the court in Krebs v. Canyon Club, Inc. (22 Misc 3d at 1125[A] ), discussed many of the relevant factors:
"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 to 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."
( Krebs , 22 Misc 3d at 1125[A] ). Those observations are equally applicable here.
Nor is there any indication that other such litigation concerning service charges assessed by the Club for catered events is proceeding elsewhere, or that a better forum exists for the issue to be addressed.
Moreover, plaintiff's counsel has shown its ability to manage a class action such as this.
As to the merits of plaintiff's claim, "[w]hile it is appropriate in determining whether an action should proceed as a class action to consider whether a claim has merit, this inquiry is limited, and such threshold determination is not intended to be a substitute for summary judgment or trial" ( Kudinov v. Kel-Tech Constr. Inc. , 65 AD3d 481, 482 [1st Dept 2009] [internal quotation marks and citation omitted] ). "To the extent that inquiry into the merits of a claim is appropriate before certification of a class, the inquiry is to determine whether on the surface there appears to be a cause of action for relief which is neither spurious nor sham" ( Simon v. Cunard Line, Ltd. , 75 AD2d 283, 288 [1st Dept 1980] ).
Sufficient merit is demonstrated here. Labor Law § 196-d provides that "[n]o employer or his agent or an officer or agent of any corporation, or any other person shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee." The Court of Appeals has explained that "the standard under which a mandatory charge or fee is purported to be a gratuity should be weighed against the expectation of the reasonable customer" ( Samiento v. World Yacht Inc. , 10 NY3d 70, 79 [2008] ). Hospitality Industry Wage Order § 146-2.18 (see 12 NYCRR Part 146, Subpart 146-2), provides that "There shall be a rebuttable presumption that any charge in addition to charges for food, beverage, lodging, and other specified materials or services, including but not limited to any charge for "service" or "food service," is a charge purported to be a gratuity." Similarly, § 146-2.19(a) states a "charge for the administration of a banquet, special function, or package deal shall be clearly identified as such and customers shall be notified that the charge is not a gratuity or tip," and § 146-2.19(b) states that "[t]he employer has the burden of demonstrating, by clear and convincing evidence, that the notification was sufficient to ensure that a reasonable customer would understand that such charge was not purported to be a gratuity." Given those provisions, a potentially meritorious claim is therefore stated of violations of Labor Law § 196-d, sufficient to warrant the grant of class certification.
VIP Defendants' Cross-Motion
The VIP defendants argue that the action must be dismissed as against Umberto DiLeo, Michelino Morelli, Joseph Morelli, and Michael Morelli, Jr., based on case law that an individual may not be held liable under New York Labor Law merely by serving as an officer, shareholder, member, or agent of a business entity, but only if that individual falls within the definition of "employer" (citing Bonito v. Avalon Partners, Inc. , 106 AD3d 625 [1st Dept 2013] ; Audux v. Woodbury Auto Park, Inc. , 30 AD3d 362 [2d Dept 2006] ; Stognanovic v. Dinolfo , 92 AD2d 729 [4th Dept 1983], affd 61 NY2d 812 [1984] ). They submit their own affidavits attesting to their roles within the structure of VIP LLC, to establish that they had no operational control over the plaintiff, or any other employees involved with the catering events.
In response, plaintiff emphasizes that those defendants have not submitted to depositions or other discovery. Indeed, during the preclass certification stage VIP only produced information pertaining specifically to the named plaintiff, and declined to produce any documents or information on the "employer" or "control" issues as "beyond the scope of pre-class certification discovery. In so doing, defendants prevented plaintiff from obtaining testimony and documents relevant to the question of which individuals may properly be named in this action, and whether those already named were properly included. The information plaintiff was prevented from eliciting included which representatives may have directed employees, given them their pay, set their schedules, or otherwise controlled their work experience or the policies that resulted in them not receiving gratuities. Under such circumstances, even assuming that the VIP defendants made a prima facie showing that the named individual defendants do not qualify as "employers," since facts necessary to oppose this aspect of the motion are unavailable to the opposing party, it is appropriate to deny summary judgment as premature without prejudice to raising the issue after discovery is complete (see CPLR 3212 [f] ; Korson v. Preferred Mut. Ins. Co. , 39 AD3d 483, 485 [2d Dept 2007] ).
The WSEH Cross-Motion
WSEH, like VIP, also contends that the individual named defendants associated with it may not be held personally liable. In response, plaintiff observes that there has been no opportunity to depose key witnesses, such as WSEH's General Managers, Maître D's and the Individual Defendants. This aspect of WSEH's cross-motion must therefore be similarly denied based on facts unavailable to the opposing party, without prejudice to raising the issue after discovery is complete (see CPLR 3212 [f] ; Korson v. Preferred Mut. Ins. , 39 AD3d at 485 ).
The branch of WSEH's motion seeking summary judgment dismissing the complaint against it, on three separate theories, is denied. Its proposed differentiation between "period 2" and "period 3" does not create a useful distinction, since the issue of who negotiated the contract for the event is not determinative. As long as it was WSEH that collected from the customer the assessed service charge, and then retained those funds, if it is demonstrated that the charge constituted a gratuity as that term is defined in the Labor Law, WSEH may be held liable for violation of Labor Law § 196-d. Therefore, its argument that the named plaintiff has no standing with respect to claims for "period 3" must be rejected. She worked for WSEH during the relevant class period, and that is sufficient (see e.g. Nawrocki v. Proto Constr. & Dev. Corp. , 82 AD3d 534, 535 [1st Dept 2011] ["The fact that plaintiffs only worked for defendants until 2004 does not preclude them from serving as the proposed class representatives of those employees who were employed by defendants in 2007"]; Medina v. Fairway Golf Mgt., LLC , 2017 NY Slip Op 32932[U], 2017 NY Misc LEXIS 5755 [Sup Ct Nassau County 2017], affd 177 AD3d 727, 728 [2d Dept 2019] [a plaintiff need not have worked at every event to allege a common claim of unlawfully retained gratuities on behalf of a class] ). The change in ownership of the Club as of April 13, 2017 does not establish grounds for dismissal of any portion of the claims here, or preclude the possibility of successor liability (see Chen v. DG & S NY, Inc. , 406 F Supp 3d 216, 2016 US Dist LEXIS 135285, *10-11 [ED NY 2016] ).
Nor has WSEH established prima facie entitlement to summary judgment on its cross-claim for indemnification against VIP; its submissions do not establish that VIP has a contractual obligation to indemnify WSEH for liabilities incurred by WSEH resulting from the operation of the Club prior to the closing of the sale of all the assets of the business of the Club. "The right to contractual indemnification depends upon the specific language of the contract," and "[t]he promise to indemnify should not be found unless it can be clearly implied from the language and purpose of the entire agreement and the surrounding circumstances" ( George v. Marshalls of MA, Inc. , 61 AD3d 925, 930 [2d Dept 2009] ). WSEH has not made such a showing here.
WSEH's bare assertion that it provided the requisite disclaimer in its contracts was not supported by any evidentiary showing, and consequently may not form the basis for summary relief.
Finally, WSEH's request for a protective order is denied; any such application must be addressed to the Compliance Part.
Accordingly, it is hereby
ORDERED that plaintiff's motion for an Order: (i) certifying this action as a class action; (ii) designating Leeds Brown Law, P.C. as class counsel; (iii) approving for publication the proposed Notice of Wage & Hour Class Action Lawsuit; and (iv) endorsing the proposed Publication Order is granted, and the separate order is filed simultaneously herewith; and it is further
ORDERED that the WSEH defendants' motion for summary judgment dismissing the complaint as against them or in favor of them on their cross-claim against the VIP defendants is denied; and it is further
ORDERED that the VIP defendants' motion for summary judgment dismissing the complaint is denied; and it is further
ORDERED that the parties are directed to appear in the Compliance Conference Part of the Courthouse at 111 Dr. Martin Luther King Jr. Boulevard, White Plains, New York 10601, on a date and time to be established by the Compliance Part, where all further discovery issues shall be addressed.
This constitutes the Decision and Order of the Court.