Opinion
1784CV02204
07-24-2018
Janine FROST v. MALDEN/DOCKSIDE, INC. et al.
File Date: July 25, 2018
OPINION
Brian A. Davis, Associate Justice of the Superior Court
In this putative class action, plaintiff Janine Frost ("Ms. Frost"), individually and on behalf of others similarly situated, alleges that defendants Malden/Dockside, Inc., Chelsea Dockside, Inc., Dockside at Wakefield, Inc., and Jack Urbaczewski (collectively, "Defendants") violated the Massachusetts Wage Act, G.L.c. 149, § 148, by failing to pay waitstaff overtime compensation required by the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq. Ms. Frost further alleges that Defendants violated the Massachusetts Tips Act, G.L.c. 149, § 152A, by requiring waitstaff to cover shortages (e.g., when a customer departs without paying) out of their tips, and the Massachusetts Minimum Wage Law, G.L.c. 151, §§ 1 and 7, by improperly requiring waitstaff to report for tax purposes more tip income than they actually received.
Ms. Frost filed her initial complaint on July 14, 2017. After Defendants filed and prevailed on a motion to dismiss Ms. Frost’s Wage Act claim, Ms. Frost amended her complaint to correct the deficiencies that resulted in that claim’s dismissal. On April 12, 2018, prior to the completion of discovery, this Court stayed the entire case at the parties’ request. The purpose of the stay was to facilitate the parties’ class settlement discussions. The parties recently filed a motion to extend the stay to facilitate a mediation, which is scheduled to take place on July 26, 2018. During the course of the parties’ discussions, Defendants produced payroll records for the putative class members. Both parties now agree that Defendants failed to pay at least some of their employees overtime compensation as required by the FLSA.
In allowing the motion to dismiss, the Court granted Plaintiff leave to amend.
Beginning sometime in June 2018, Jack Urbaczewski ("Mr. Urbaczewski") started reaching out to current and past employees and inviting them to meet with him individually to discuss this litigation. Mr. Urbaczewski purportedly developed the concept for the original Dockside restaurant, which opened in Boston in 1981, and still is involved in the management of the two Dockside restaurant locations at issue in this case.
Multiple employees accepted Mr. Urbaczewski’s invitation to meet. At each meeting, Mr. Urbaczewski reportedly offered to pay the employee a certain amount of money (with the amount varying by employee) in return for the employee’s agreement to release any claims that he or she may have against Defendants. Mr. Urbaczewski simultaneously presented each employee with a "disclosure letter" (the "Disclosure Letter") and a form "Confidential Settlement Agreement and General Release" (the "General Release"). Copies of the Disclosure Letter and the General Release have been provided to the Court.
The two-page Disclosure Letter describes Ms. Frost’s class action claims and the availability of treble damages under the Wage Act. It also mentions the upcoming mediation, notes the possibility that the amount from any class-wide settlement obtained during mediation could exceed the amount being offered by Mr. Urbaczewski, suggests that the employee consider speaking with an attorney, provides contact information for Ms. Frost’s attorneys, and states (in bold and underlined text) that the employee’s decision regarding the settlement would have no effect on his/her employment. The Disclosure Letter further states, however, that "Dockside does not agree with the factual or legal contentions in [Ms. Frost’s] complaint" and that they "do not believe that [Ms. Frost] is likely to win at trial." The Disclosure Letter makes these statements notwithstanding the fact that Defendants already have acknowledged that they failed to pay at least some of their employees overtime compensation as required by the FLSA, and that Ms. Frost is almost certain to prevail on at least some of her claims under the FLSA as a result.
The Disclosure Letter contains a blank space for insertion of the amount of settlement money to be paid each employee. Of the twenty-eight putative class members who were provided with the letter, four were offered amounts of less than ten dollars (including one, whose Disclosure Letter was provided to the Court and who was offered the sum of $2.47), nine were offered amounts between ten and one hundred dollars, eleven were offered between one hundred and one thousand dollars, and four were offered amounts of more than one thousand dollars.
The General Release attached to the Disclosure Letter is four pages long. It provides, in part, that,
[i]n exchange for the amounts described in Paragraph 1, the mutual commitments, undertakings and agreements stated in this Agreement, the receipt of which Employee hereby acknowledges as good, valuable and adequate consideration, Employee, his representatives, agents, heirs, successors and assigns ("Releasor"), absolutely and unconditionally hereby releases, remises, discharges, covenants not to sue, indemnifies and holds harmless the Dockside Parties, their insurers, and/or any of their former and current officers, employees, trustees, agents, attorneys and directors and all persons acting by, through, under or in concert with any of them, all both individually, in their capacity acting on behalf of the Dockside Parties and in their official capacities (collectively, "Releasees"), from any and all actions or causes of action, suits, claims, complaints, liabilities, agreements, promises, contracts, torts, debts, damages, controversies, judgments, rights and demands, whether existing or contingent, known or unknown, including: (i) any and all claims arising out of or in connection with Employee’s employment with the Dockside Parties; (ii) any and all claims arising out of or in connection with any relationship between Employee and the Dockside Parties; (iii) any and all claims based on any federal, state or local law, constitution or regulation regarding either payment of employment benefits or wages, including, without limitation, any claims that Employee may have under the Fair Labor Standards Act or the Massachusetts Wage Act.
General Release at § 4. Thirteen employees signed the General Release.
On July 5, 2018, two days after the parties filed their joint motion to extend the stay, counsel for Ms. Frost learned from a former Dockside employee that Defendants were seeking and obtaining releases from putative class members whose claims are the subject of this litigation. Counsel immediately sought and obtained a temporary restraining order on July 6, 2018, and now seeks a preliminary injunction enjoining Defendants from engaging in further settlement communications with the putative class members until the Court has ruled on the issue of class certification.
The Court conducted a hearing on Ms. Frost’s motion for a preliminary injunction on July 16, 2018. All parties appeared. Upon consideration of all of the written materials submitted by the parties, the information provided at the motion hearing, and the oral arguments of counsel, Ms. Frost’s motion is ALLOWED for the reasons summarized, briefly, below.
Rule 23(d) of the Massachusetts Rules of Civil Procedure grants the Court broad authority to exercise control over a class action and the conduct of counsel and parties. See Chambers v. RDI Logistics, Inc., 476 Mass. 95, 111 (2016). Among other things, it expressly empowers the Court, "at any stage" of an class action proceeding, to "require such security and impose such terms as shall fairly and adequately protect the interests of the class in whose behalf the action is brought or defended." Mass.R.Civ.P. 23(d). This power includes, but is not limited to, the discretion to impose "a protective order ... to prevent ‘[m]isleading or coercive communications with potential class members that could or are intended to undermine participation in a class or collective action.’ "
Chambers, 476 Mass. at 111 (quoting Davine v. Golub Corp., 2014 U.S. Dist. LEXIS 151344, at *9 (D.Mass. Oct. 24, 2014)). Such orders are particularly appropriate in situations where an employer sends communications to putative class members who are its employees because the very nature of their employer/employee relationship creates a "heightened possibility of coercion." Id. See also Belt v. Emcare, Inc., 299 F.Supp.2d 664, 668 (E.D.Tex. 2003) ("where the absent class member and the defendant are involved in an ongoing business relationship, such as employer-employee, any communications are more likely to be coercive"); Kleiner v. First Nat’l Bank, 751 F.2d 1193, 1202 (11th Cir. 1985) (same).
The Court’s authority to regulate pre-certification communications to putative class members pursuant to Rule 23(d) is limited, of course, by the First Amendment to the United States Constitution. Chambers, 476 Mass. at 111. Prior to class certification, all parties in a pending class action lawsuit have the right to communicate with potential class members. See id. Accordingly, the Court only may restrict a party’s communications with putative class members if its decision to do so is "based on a clear record and specific findings that reflect a weighing of the need for a limitation and the potential interference with the rights of the parties" and is "justified by a likelihood of serious abuses." Id. (quoting Gulf Oil Co. v. Bernard, 452 U.S. 89, 101, 104 (1981)).
The Court concludes that a preliminary injunction should enter in this case because Defendants’ communications with Dockside employees are misleading and coercive. The Court finds Defendants’ communications to be misleading in at least two respects. First, the disclosure letter states that Defendants "do not believe that [Ms. Frost] is likely to win at trial." This statement is demonstrably false. As previously noted, Defendants admit that they failed to pay all required overtime compensation to at least some current and past employees, which necessarily means that Ms. Frost likely will prevail on at least her Wage Act claim should this case go to trial. The Disclosure Letter, therefore, misrepresents the strength of Ms. Frost’s case. See Chambers, 476 Mass. at 111 (quoting Kleiner, 751 F.2d at 1202) ("when employers ... send communications to class members, putative or otherwise, ‘it is critical that the class receive accurate and impartial information regarding the status, purposes and effects of the class action’ "). Second, the Disclosure Letter suggests that the settlement pertains to only those claims asserted within this lawsuit. See Letter at 2 ("I am offering you $____ in exchange for your agreement to release any claims that you might have against me and Dockside in the lawsuit ") (emphasis added). However, Section 4 of the Release, which is written in the type of dense, formal legal language difficult for non-lawyers to understand, purports to cover any and all claims that the employee may have against Defendants, even those which are unrelated to the present lawsuit. These contradictory statements risk that the putative class members inadvertently will release much more than they intend, which is particularly problematic given the extremely small sums most employees have been offered. Taken together, these two deficiencies in the Disclosure Letter and the General Release call into question whether Dockside employees have been provided with sufficient, accurate information to make an informed choice.
Similarly, the opening "Whereas" paragraphs and Section 6 of the Release suggest that the employee is only relinquishing the claims related to the present lawsuit.
The Court also finds that the manner in which the Disclosure Letters and General Release forms were provided to Dockside employees to be coercive. Each package was presented in person by Mr. Urbaczewski-the founder of the Dockside restaurant chain and an officer of the Dockside companies-at a one-on-one meeting that Mr. Urbaczewski asked the employee to attend. Although the text of the Disclosure Letter promises that the employee’s decision to sign or not sign the General Release "will not affect your employment at Dockside," the mere fact that Mr. Urbaczewski personally delivered Defendants’ settlement proposals very likely may have put additional and uncomfortable pressure on Dockside employees to sign. The Court further notes that the parties dispute exactly what was said at Mr. Urbaczewski’s meetings with Dockside employees. Had Defendants’ settlement offers been delivered by mail, rather than in face-to-face meetings with Mr. Urbaczewski, there would be no doubt as to precisely what was communicated to Dockside employees and no danger that any unrecorded comments might have influenced their decision-making.
Defendants contend that injunctive relief nonetheless is inappropriate because Ms. Frost’s Wage Act claim, which seeks to recover for FLSA violations, must be brought as a collective action under Section 216(b) of the FLSA, rather than a class action under Mass.R.Civ.P. 23. See Brayak v. New Boston Pie, Inc., 292 F.Supp.3d 520, 523 (D.Mass. 2017) (denying motion to certify class under Fed.R.Civ.P. 23 for Wage Act claim that sought to recover unpaid overtime owed under the FLSA and finding that certification could only be obtained pursuant to Section 216(b)); Trezvant v. Fidelity Employer Servs. Corp., 434 F.Supp.2d 40, 57-58 (D.Mass. 2006) (same). The Court fails to see why this procedural distinction, even if correct, affects the question as to whether preliminary injunctive relief should enter. Regardless of whether class certification will be sought under Section 216(b) or Rule 23, the pool of potential class members is the same, and the risk created by misleading or coercive communications on the part of Defendants prior to a decision on class certification is the same. See Davine, 2014 U.S. Dist. LEXIS 151344, at *8 (quoting Zamboni v. Pepe West 48th St., LLC, 2013 U.S. Dist. LEXIS 34201, at *8 (S.D.N.Y. Mar. 12, 2013)).
Section 216(b) provides a private cause of action against an employer "by any one or more employees for and in behalf of himself or themselves and other employees similarly situated." 29 U.S.C. § 216(b). In contrast to Rule 23 class actions, collective actions under the FLSA require putative class members to opt into the case.
("[T]he same principles that govern communications with putative class members in a class action under Rule 23 also apply to communications with potential opt-in plaintiffs in a collective action brought under the FLSA"); Longcrier v. HL-A Co., Inc., 595 F.Supp.2d 1218, 1226-27 (S.D.Ala. 2008) ("Federal courts have routinely exercised their discretion to restrict communications in class actions, in both the Rule 23 and § 216(b) settings, where a party has engaged in misleading or coercive behavior with respect to prospective class members"). Moreover, Ms. Frost also has asserted class action claims under the Massachusetts Tips Act and the Commonwealth’s Minimum Wage Law. These class claims do not rely on the FLSA and, therefore, are subject in all respects to the procedural requirements and restrictions of Rule 23, including this Court’s power to "impose such terms as shall fairly and adequately protect the interests of the class" at "any stage" of a proceeding. Mass.R.Civ.P. 23(d). The Court hereby exercises that power.
The FLSA, like the Wage Act, favors actions brought on behalf of similarly situated employees. Thus, under both statutes, the Court must exercise extra care in ensuring that any efforts that could or are intended to undermine participation in a collective or class action do not take place. See Rossello v. Avon Prods., 2015 U.S. Dist. LEXIS 83388, at *33 ("The remedial nature of the FLSA and the purposes of Section 216 militate strongly in favor of allowing cases to proceed collectively") (internal quotes omitted); Machado v. System4, LLC, 465 Mass. 508, 514-15 & n.12 (2013) (Wage Act provides a "substantive right" to bring a class action in part "to allow one or more courageous employees the ability to bring claims on behalf of other employees who are too intimidated by the threat of retaliation and termination to exercise their rights under the Wage Act").
As Defendants point out, there is nothing inherently wrong with a putative class action defendant attempting to communicate with potential class members. However, as this case demonstrates, there are many potential pitfalls for a defendant, particularly an employer-defendant, who pursues such a course. For future reference, the Court suggests that, if and when a putative class action defendant wishes to communicate with putative class members about settlement or any other matter, the better course would be to seek and obtain the Court’s approval prior to making any overture. Providing the Court with the opportunity to evaluate the content of the proposed communication and its expected manner of delivery beforehand protects the Court’s ability to safeguard the putative class members’ interests and, at the same time, gives the defendant the peace of mind of knowing that its efforts to create a dialogue will not be misconstrued or undone by the Court after the fact.
Court Order
For the foregoing reasons, IT IS HEREBY ORDERED THAT:
Effective immediately and until the Court rules on a motion for class certification, defendants Malden/Dockside, Inc., Chelsea Dockside, Inc., Dockside at Wakefield, Inc., and Jack Urbaczewski (collectively, "Defendants"), together with their owners, employees, attorneys, and agents, are preliminarily enjoined and restrained from having any settlement communications with any present or former Dockside employees who are part of the putative class in this case.
For purposes of this Order, "settlement communications" means any oral or written communication regarding the actual or potential payment of money or any other form of consideration in return for a full or partial release or waiver of any actual or potential claims arising from the allegations in this case.
This Order shall not preclude Defendants from discussing the merits of the case with any non-represented, present or former Dockside employees who are part of the putative class in this case for purposes of responding to a motion for class certification brought by plaintiff Janine Frost.