In November we reported on Wigdor v SoulCycle, which had been filed in New York Supreme Court, New York County.  In that action a well-known plaintiff’s attorney, Douglas Wigdor, alleged that SoulCycle retaliated against him by banning him from the Company’s establishments because Wigdor had filed a putative wage and hour class action against SoulCycle.

This action reminded us of Jerry Seinfeld’s “Soup Man,” who would decline to serve customers that did not properly place a soup order.  We had previously asked whether the owner of a store has a right to prevent counsel from entering, for example, to solicit business in their establishment.  The answer is apparently: yes …. and no.

In Wigdor v SoulCycle, Mr. Wigdor asserted four claims: (1) retaliation under New York Labor Law (NYLL) § 215; (2) retaliation under California Labor Code (CLC); (3) prima facie tort; and (4) breach of an obligation of good faith and fair dealing.  SoulCycle moved to dismiss all claims for failure to state a claim, and now the Court has issued a decision on that motion.

The Court dismissed three of the four claims – the retaliation claims under NYLL and CLC as well as the prima facie tort claim – but declined to dismiss the claim for good faith and fair dealing.  See Wigdor v SoulCycle, Index 161572/2014 (Sup. Ct, NY County April 13, 2015).  In dismissing the NYLL and CLC retaliation claims the Court recognized, as we noted in the November blog, that both statutes prohibit retaliation against an “employee.”  Indeed, NYLL § 215 states: “No employer … shall discharge, penalize, or in any other manner discriminate against any employee because such employee has made a complaint to his employer….” id. (emphasis supplied).  The CLC contains a similar provision.  Yet neither statute references protection for the employee’s lawyer.  The Court explained:

Contrary to the plaintiff’s contention, the text of Labor Law § 215 does not reveal a clear intent to authorize a claim where an employer retaliates against an attorney that represents a former employee of the employer.  Indeed, neither the plain language of the statute nor its legislative history, as revealed by the 1967 bill jacket accompanying its enactment and the 1986 bill jacket accompanying its amendment, contemplates an action by someone other than an employee making complaints regarding a former employer.

Id.  Additionally, the Court dismissed the claim for prima facie tort because “other than conclusory contentions, there are no facts supporting the assertion that defendants sole motivation for banning plaintiff from SoulCycle premises was intended to maliciously injure plaintiff.”   Id.  Thus, Seinfeld’s Soup Man would appear to be vindicated.

Unfortunately, the case took a turn for the worse for SoulCycle as the Court refused to dismiss the final claim for breach of good faith and fair dealing.  A prerequisite for asserting such a claim under New York law is that a plaintiff must plead and prove that there was a contractual relationship between the plaintiff and defendant.  SoulCycle argued that it never had a contractual relationship with Wigdor and therefore the claim should be dismissed. The Court disagreed concluding that when Wigdor plead that he had “electronically agreed to SoulCycle’s terms and conditions” he established, at least for the purpose of stating a claim, that a contractual relationship was created.   Accordingly, the breach of good faith and fair dealing claim survives, for now.

Thus, it seems the Court’s ruling does give some guidance to our inquiry as to when a business owner has an appropriate say in deciding who should not be allowed to patronize his/her business.  Certainly, had there been no prior business relationship between Wigdor and SoulCycle, and then this case would have been dismissed.  Yet, apparently when there is some prior “contractual relationship” then the lines become a little cloudy as to when the business owner can decide whether someone should continue to patronize the business.  We are now left to ask, merely because someone had patronized the business before and abided by the terms and conditions of the business owner, such as paying for the goods and services rendered, when can the business owner end that relationship?  How long does the former patron get to ask, as Oliver Twist might – “Please Sir, can I have some more?”

On Friday, February 20, 2015, a federal judge issued an unusual order in Fujiwara, et al. v. Sushi Yasuda, LTD, et al, 12-cv-8742(WHP) (S.D.N.Y. Feb. 20, 2015).  After receiving an anonymous letter in an FLSA lawsuit, United States District Judge William H. Pauley directed counsel for the parties to conduct an investigation into the circumstances concerning the allegations asserted in the anonymous letter and to submit a joint report by next Monday, March 2, 2015 on the status of the investigation.

The lawsuit claimed that a sushi restaurant, Sushi Yasuda, improperly withheld gratuities from employees, and violated the minimum wage and overtime requirements of the FLSA and New York Labor Law (NYLL).  After taking initial discovery, Plaintiffs moved for class certification of their NYLL claims.  However, before Sushi Yasuda filed any opposition, the parties entered into a settlement agreement on a class-wide basis, which the court eventually approved in January 2015.  Thus, the lawsuit had been settled before the anonymous letter was sent to the court.   However, the letter, purportedly sent by an unknown chef at the restaurant, indicated that class members were being pressured by unnamed managers not to cash their settlement checks under the threat of losing their job and work visa.

Certainly, the anonymous letter would trigger concerns of prohibited retaliation under the FLSA, see 29 USC § 215, which explains why Judge Pauley took the unusual step of having counsel for the parties investigate the circumstances surrounding the letter.  Indeed, the court’s reaction to the letter demonstrates that retaliation can occur even after a settlement has been reached between the parties and approved by the court.

However, the letter does raise additional questions.  Because the letter is anonymous there is no way to know whether the author was a named plaintiff, an opt-in plaintiff, or a class member that never affirmatively joined the litigation.  The FLSA anti-retaliation provision, however, prohibits any retaliatory conduct “against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to [the FLSA] or has testified or is about to testify in any such proceeding …” Id. at §215(a)(3).   Thus, one question is presented as to whether a claim of FLSA retaliation can involve an individual who engaged in no protected activity.  Additionally, in this case there was no determination on the class certification under Rule 23 or under state law.  Thus, there could not be retaliation based on the unknown author’s standing as a class member involved in the litigation.  Because the FLSA relies on an “opt-in” procedure, as opposed to Rule 23 class certification, an individual who does not opt-in to the litigation, is not presenting any FLSA claim or bound by any determination concerning such claims in that litigation.  See, e.g., Guzman v. VLM, Inc., 07-cv-1126 (JG), 2008 WL 597186 at *10 (E.D.N.Y. Mar. 2, 2008); Butler v. American Cable & Tel, LLC, 09-cv-5336, 2011 WL 4729789, at *12 (N.D.Ill. Oct. 6, 2011).

Of course, the argument can be made that, by virtue of sending the letter, the anonymous-chef author has engaged in some type of protected activity, even if he/she is not a named Plaintiff or opt in Plaintiff.  Thus raising the question as to whether such activity, merely sending a letter to the judge, actually satisfies the requirements of Section 215.

Putting those questions aside, there is no question that the court, by virtue of its inherent authority to supervise the settlement and ensure that the settlement is fairly effectuated, would have jurisdiction to address the possibility of any conduct which could impact the settlement and to punish anyone who threatens the fair and efficient resolution of the settlement.  Exercising such jurisdiction inevitably requires a determination as to whether any threat was actually made, and if so, what exactly was stated or threatened.

Whatever the answer to the questions posed above, it is important for any employer to impress on its managers that they may not threaten any employee for asserting an FLSA claim.  Certainly, any such threats could result in additional claims of retaliation, which will inevitably cost the employer more to defend.  Indeed, in order to truly realize the benefit of the settlement agreement and finally resolve these wage and hour claims, the employer should want the settlement payment to be fulfilled so that the employer can move on and return to business without further issues.

Jerry Seinfeld’s sitcom famously portrayed the “Soup Man” as the temperamental owner of a soup stand who would decline to serve customers that did not properly place a soup order.    Placing the humor aside, a new lawsuit raises the question as to whether a business can ban a lawyer who has initiated a lawsuit against it. 

In a complaint captioned Wigdor v SoulCycle, filed in the New York County Supreme Court, a well-known plaintiff’s attorney, Douglas Wigdor, complains that SoulCycle retaliated against him for representing an employee of the business in a wage and hour lawsuit against the company.  Wigdor complains that he was banned from SoulCycle because he initiated the action against it. 

Significantly, Wigdor is being represented by another well-known member of the plaintiffs’ bar, Anne Vladeck.  It would seem that they have a common interest (more than just to “spin”), but what about the interest and rights of the business owner?  Should the owner of a restaurant or retail store have a right to prevent counsel from entering, for example, to solicit business in their establishment?  Moreover, if an action is presently pending, does the lawyer risk making him/herself a witness or engaging in improper communication with the owner or manager of the business? 

Perhaps, this is all a question of timing.  Indeed, Wigdor relies on both New York and California law to assert a claim of retaliation – that he was banned because he initiated an action against SoulCycle.  Yet, if Soul Cycle had banned Wigdor before he initiated the action, that conduct could not be “in retaliation” for anything.  Moreover, there is a question as to whether the New York Labor Law, which prohibits retaliation against an employee, could even apply to that attorney’s lawyer.  New York Labor Law §  215 prohibits retaliation against an “employee,” and states: “No employer … shall discharge, penalize, or in any other manner discriminate against any employee because such employee has made a complaint to his employer…” Id. (emphasis supplied).  Yet, no mention of the employee’s lawyer.  Indeed, the Courts have regularly explained that the adverse action against an employee constituting retaliation is such an action that “might have dissuaded a reasonable worker from making or supporting similar charges.  See Copantitla v. Fiskardo Estiatorio, Inc., 788 F.Supp.2d 253, 303 (SDNY 2011)(emphasis supplied).  The references are to an “employee” or “worker” – not counsel.   

However, Wigdor’s complaint doesn’t stop with the claim of retaliation.  Instead, Mr. Wigdor further boldly complains that “such a ban will operate as a restraint of trade that will inure to the detriment of the public by restricting the available pool of lawyers for individuals contemplating legitimate legal action and deter those potential claimants from seeking representation.”  The argument is interesting if not fanciful.  At some point a balance needs to be reached where the business owner has an appropriate say in deciding who should not be allowed to patronize his/her business.  It seems Seinfeld’s Soup Man has meet Oliver Twist – “Please Sir, can I have some more?”

 

FLSA lawsuits are exploding – on nationwide basis annual FLSA filings have increased more than 400% since 2001.  The vast majority of these actions ultimately result in a settlement. The question has now been raised as to whether the FLSA settlements can result in an overpayment of class counsel providing them with “more than a fair day’s pay for a fair day’s work.”  Recognizing the unique circumstances under which FLSA settlements are negotiated and structured, Southern District Judge William Pauley has raised this question while significantly slashing the FLSA class counsel fees in one recent settlement.  See Fujiwara v Sushi Yasuda Ltd, 12-cv-8742.

The Courts have found that when cases settle, the adversarial process between counsel often  melts away.  With this in mind, Judge Pauley observed that once an FLSA settlement figure has been established, settling defendants tend to lose interest in how the settlement monies are distributed, and thus a natural tension arises between plaintiffs’ counsel and the class they represent.  Indeed, after reviewing the proposed settlement agreement in Fujiwara, Judge Pauley was struck by the “extreme similarities in the wording of several decisions” relied on by Plaintiffs’ counsel to support their fee application.  The Judge discovered that many of the authorities cited by Plaintiffs’ counsel were the “proposed orders drafted by the class action plaintiffs’ bar and entered with minimal, if any, edits by judges.”  Thus, Judge Pauley concluded that “the vacuum created by proposed FLSA class action settlements has permitted plaintiffs’ attorneys to write much of the law on what constitutes a reasonable attorney’s fee.”  Accordingly, the Judge cautioned that “little precedential value” should be given to the proposed orders drafted by counsel, which make findings of fact and conclusions of law that award counsel their own fees.

The Fujiwara case achieved a settlement of $2.4 million, and the initial proposed settlement sought one-third of this amount, $800,000.00, in fees and costs to Plaintiff’s counsel.  While  Judge Pauley lauded the work performed by class counsel, and noted that they billed fewer than 650 hours on this matter, the Judge was wary of granting such a high amount of fees.  Given the unique circumstances of FLSA class settlements, Judge Pauley explained that “it is the judges alone who are left to safeguard the interests of the class.”  With that in mind Judge Pauley reduced the award of counsel fees and costs from $800,000.00 to $500,020.18.

Thus, in structuring FLSA settlements counsel need to be aware of the potentially heightened judicial scrutiny to ensure that class counsel do not receive inflated fees at the cost of the class they represent.   Ultimately, FLSA settlements will need to trim attorney’s fees to ensure judicial approval.

Small business owners now have additional wage and hour concerns that need to be addressed in deciding where to open for business in New York City.  The minimum wage could be higher right across the street.

On Tuesday, September 30th, New York City Mayor Bill de Blasio signed an Executive Order which expands the “living wage” requirements for real estate projects that receive $1 million or more in New York City subsidies.  Previously, only direct recipients of City subsidies in excess of $1 million had to pay the “living wage” to their employees.  The September 30th Executive Order greatly expands this requirement beyond the direct recipients.  Now tenants, subtenants, leaseholders, subleaseholders, and concessionaires of buildings/properties that receive at least $ 1 million in City subsidies on or after September 30, 2014 will also have to pay the “living wage” to their employees.   The Executive Order does not impact buildings/properties that received such subsidies prior to September 30, 2014.  Further, the executive Order will also not apply to certain residential properties that provide 75 or more “affordable units,” manufacturers, or businesses with less than $3 million in gross income.

Businesses that take space in subsidized buildings/properties will now be required to pay a minimum wage of $13.13 per hour for employees who are not offered health care, and $11.90 for employees that are offered health care.   These wage levels are expected to increase every year.  This Executive Order will have the greatest impact on restaurants, bars and retailers that take space in the major developments substantially raising labor costs for such businesses which have a large number of minimum-wage or near-minimum wage employees.  Moreover, the regulation permits private causes of action, which can include punitive damage awards and attorney’s fees, against businesses that violate these higher minimum wage requirements.

The Executive Order creates significant concerns as to how the order’s directives will be implemented.  Oversight of the implementation will be handled by the Department of Consumer Affairs, whose mission and training has not been in labor relations, wages or the workplace.  These concerns include how prospective tenants will be placed on notice of the new increased wage requirements, who will be responsible for violations of the regulation, and how does this regulation impact other labor issues such as tip and meal credits, which are currently permitted under federal and state law, and collective bargaining agreements.

As a result of this new Executive Order, small businesses will again be asked to bear heavier and heavier burdens.  The small business owner will now need to think long and hard about where to open for business in New York City.  Thus, giving new meaning to the familiar real estate mantra: location, location, location.