Labor Law § 196-d; Consolidation; Class Action Certification; Motion to Dismiss; Statute of Limitations; CPLR 901(b); Tolling Class Actions
By: Katherine Sullivan | Staff Writer
Plaintiffs are a class of employees working for Defendant at different times. Defendant is the owner of various restaurants and catering venues. In the course of owning such venues, Defendants charged banquet customers a mandatory “20% service personnel charge” with no specifications as to what this charge went toward. Defendants instructed Plaintiffs to inform customers that such charge was a gratuity. Customers, therefore, reasonably believed this was the “20% service personnel charge.” Defendant, however, retained the gratuity for itself.
As a result of being denied such gratuities, Plaintiffs filed suit on the basis that Defendant violated Labor Law § 196-d when it retained the gratuity for itself. Plaintiffs requested for consolidation of this case with a previous case, Picard v. Bigsbee Enters., Inc. They argued that both cases involved a common question of law or fact. Plaintiffs also moved for certification as a class. Within the class, Plaintiffs proposed two subclasses—pre-2011 and post-2011 servers employed by Defendant—on the basis that a rebuttable presumption existed for additional charges that were considered a gratuity after the Department of Labor’s 2011 Regulations. Plaintiffs moved for class certification for five reasons: (1) each subclass had approximately 100 members; (2) the common and predominate issue for all class members was the gratuity withholding; (3) the claims of the representative were virtually identical to the claims of the class members because they all related to the same class period and were similarly denied gratuities; (4) Plaintiffs’ lawyers have the requisite experience to adequately represent the class; (5) creating a class action avoids the possibility of inconsistent outcomes and eliminates impediments to litigating modest claims.
Defendant opposed the motions and cross-moved to dismiss on the following bases: (1) the statute of limitations had expired for all incidents prior to July 10, 2008 pursuant to the six-year statute of limitations under Labor Law § 198(3); (2) failure to state a claim for all incidents prior to January 1, 2011 for claims asserted before the 2011 Regulations because the mere existence of a service charge did not violate Labor Law §196-d; (3) Plaintiff cannot utilize a class action under CPLR 901(b), when such use is to “to recover a penalty, or minimum measure of recovery created or imposed by statute.”
The Court denied Defendant’s motion to dismiss and granted Plaintiffs’ motions to consolidate and for class certification. First, the Court held that the statute of limitations did not expire for the action. The statute of limitations tolls for members of a proposed class at the timely commencement of a putative class action. Here, a statute of limitations tolled from the filing of the original Picard Action, which meant that the statute of limitation did not run for the action. Second, the Court held that Plaintiffs adequately stated a claim to sustain a motion to dismiss. A mandatory service charge falls under § 196-d when customers are told or allowed to believe the service charge was an employee gratuity. Here, a reasonable banquet patron could believe the “20% service personnel charge” to be an employee gratuity because employees were instructed to inform all customers of such charge. Therefore, the complaint was legally sufficient for incidents prior to January 1, 2011. Third, the Court held that CPLR 901(b) did not prohibit the use of class actions to recover a penalty. Under CPLR 901(b), class action lawsuits cannot recover a penalty or minimum measure or recovery imposed by statute. A plaintiff may waive liquidated damages on behalf of herself and the punitive class. Here, the named Plaintiffs may waive these damages. Next, the Court granted Plaintiffs’ motion to consolidate this case with Picard. A Court may consolidate under CPLR 602 (a) upon motion where actions involve common questions of law or fact. Here, the Court found that Defendant failed to meet its burden of demonstrating that the consolidation would burden a substantial right.
Finally, the Court granted Plaintiffs’ motion for class certification. To sustain a motion for class certification, Plaintiffs must prove five prerequisites listed in CLPR 901(a)(1)-(5). Plaintiffs must show that: (1) the class be large enough that joinder is impracticable; (2) a commonality of issues and predominance of those issues over individual ones; (3) the claims of the representatives of the class are typical of the members of the class; (4) the representative parties will fairly and adequately protect the interests of the members; (5) the class action is the best method for resolving the conflict fairly and efficiently. Here, there were 100 members for each subclass, which Defendant did not dispute, so the first element was established. Second, the Court found commonality and predominance of issues in the class members who served at any particular class banquet and that the reasonable customer need not rely on individualized inquiry. Thus, commonality and predominance was established. As to the third element, the Court found that Plaintiffs sufficiently demonstrated that their claims were typical of the members of the class because they worked for Defendant in the time alleged and similarly denied gratuities. Fourth, Plaintiffs’ attorneys had sufficient legal experience and adequate knowledge of the underlying facts of the action. Finally, the Court found superiority to be established because the claims of the members fall or stand together, and there was no need for intensive individualized inquiry within the class.
Adams v. Bigsbee Enterprises, Inc., Index No. 3615-14, 9/15/15 (Platkin, J.).