Opinion
22-CV-04841 (PGG) (RWL)
11-14-2023
KAIYUN LIANG and XIAOHAO FANG, individually and on behalf of all others similarl situated, Plaintiffs, v. USA QR CULTURE INDUSTRIAL DEVELOPMENT LLC d/b/a HUTAOLI MUSIC RESTAURANT & BAR, WEI YOU, and “JANE YOU, Defendants.
REPORT AND RECOMMENDATION TO HON. PAUL G. GARDEPHE: MOTION TO DISMISS
ROBERT W. LEHRBURGER, UNITED STATES MAGISTRATE JUDGE
Plaintiffs Kaiyun Liang (“Liang”) and Xiaohao Fang (“Fang”) are former employees of Defendant USA QR Culture Industrial Development LLC (“USA QR”). On behalf of themselves and all others similarly situated, they assert claims for violations of the Fair Labor Standards Act (“FLSA”), the New York Labor Law (“NYLL”), the New York Wage Theft Prevention Act (“WTPA”), and New York Codes, Rules, and Regulations (“NYCRR”). Defendants moved to dismiss Plaintiffs' claims under the NYLL, namely counts two, three, and four arising, respectively, under NYLL §§ 191 (concerning frequency of payment), 195(1)(a) (requiring wage notices), and 195(3) (requiring wage statements). For the reasons set forth below, I recommend that Defendants' motion to dismiss be DENIED with respect to NYLL § 191 and GRANTED, with leave to amend, with respect to NYLL §§ 195(1)(a) and 195(3).
The Complaint errantly references NYLL § 195-1(d) instead of § 195(3), although it is clear from the context that the basis of Plaintiffs' wage statement claim is the latter.
The facts are drawn from the Complaint (“Compl.”), filed at Dkt. 1. These facts are assumed as true for the purposes of this Report and Recommendation. See Interpharm, Inc. v. Wells Fargo Bank, National Association, 655 F.3d 136, 141 (2d Cir. 2011) (explaining that on a motion to dismiss pursuant to Rule 12(b)(6), the court must “assum[e] all facts alleged within the four corners of the complaint to be true, and draw[ ] all reasonable inferences in plaintiff's favor”).
Defendant USA QR owns and operates the Hutaoli Music Restaurant and Bar (“Hutaoli”) located in New York City. (Compl. at ¶ 10.) Defendants Wei You and “Jane” You co-own USA QR. (Compl. ¶¶ 13-15.)
Plaintiffs Kaiyun Liang and Xiaohao Fang were employed at Hutaoli and worked as servers in the restaurant. (Compl. ¶¶ 8-9.) Liang worked at Hutaoli from approximately May 27, 2021, through December 10, 2021. (Compl. ¶ 46.) Fang worked at Hutaoli from approximately May 30, 2021, through about Thanksgiving of 2021. (Compl. ¶ 59.) Plaintiffs allege that during their time working at Hutaoli, Defendants routinely paid employees in the restaurant up to six weeks after they performed their work. (Compl. ¶ 38.) Plaintiffs Liang and Fang allege that they complained to Defendants about the payment practices, but the practices did not change. (Compl. ¶¶ 39-40.) Plaintiffs also allege Defendants failed to provide Plaintiffs with wage notices and wage statements. (Compl. ¶ 45.)
Procedural Background
Plaintiffs commenced the action on June 9, 2022. (Dkt. 1.) Defendants filed their partial motion to dismiss on March 6, 2023. (Dkt. 43.) Plaintiffs filed their opposition on April 3, 2023. (Dkt. 45.) Defendants filed their reply on May 17, 2023. (Dkt. 48.) The matter has been referred to me for report and recommendation. (Dkt. 49.)
Legal Standard
To survive a Rule 12(b)(6) motion, a complaint must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when the factual content pleaded allows a court “to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “Where a complaint pleads facts that are ‘merely consistent with' a defendant's liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.'” Id. (quoting Twombly, 550 U.S. at 557).
In considering a motion to dismiss for failure to state a cause of action, a district court “accept[s] all factual claims in the complaint as true, and draw[s] all reasonable inferences in the plaintiff's favor.” Lotes Co. v. Hon Hai Precision Industry Co., 753 F.3d 395, 403 (2d Cir. 2014) (internal quotation marks and citation omitted). This tenet, however, is “inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. Rather, the complaint's “[f]actual allegations must be enough to raise a right to relief above the speculative level, ... i.e., enough to make the claim plausible.” Arista Records LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010) (internal quotation marks and citations omitted). A complaint is properly dismissed where, as a matter of law, “the allegations in [the] complaint, however true, could not raise a claim of entitlement to relief.” Twombly, 550 U.S. at 558.
Discussion
Defendants move to dismiss Plaintiffs' claims for untimely payment of wages under NYLL § 191 for lack of both a private right of action and standing. They move to dismiss the wage notice and wage statement claims under §§ 195(1)(a) and 195(3) for lack of standing. The motion has partial merit. Defendants' motion should be denied with respect to § 191 and granted, without prejudice to replead, with respect to § 195(1)(a) and § 195(3).
A. NYLL § 191: Frequency Of Payment (Second Cause Of Action)
The relevant portion of NYLL § 191 directs that “[a] clerical and other worker shall be paid the wages earned in accordance with the agreed terms of employment, but not less frequently than semi-monthly, on regular pay days designated in advance by the employer.” NYLL § 191(1)(d). Plaintiffs claim that they routinely were paid up to as late as six weeks after the work performed and therefore are due damages for Defendants' violation of the frequency-of-pay law. Defendants advance two main arguments for dismissing Plaintiffs' untimely payment claim. First, they contend that NYLL § 191 does not provide a private right of action. (Dkt. 44 at 4.) Second, Defendants argue that Plaintiffs lack standing under Article III of the U.S Constitution, as they have not alleged an actual injury that can be remedied by the Court. (Dkt. 44 at 7.) Those arguments are not persuasive.
1. Private Right Of Action
Defendants argue that § 191 does not provide a private right of action, either express or implied. (Dkt. 44 at 12.) They claim that as the statute allows for the New York Commissioner of Labor to issue civil penalties for violations, a private right of action would be incompatible with the enforcement mechanism chosen by the legislature. (Dkt. 44 at 12-13.) However, the controlling New York State case addressing the issue has held that § 191 provides a private right of action. District courts consistently have followed suit.
In Vega v. CM & Associates Construction Management, LLC, the New York Appellate Division First Department held that NYLL § 191, in conjunction with the remedial provisions of § 198, provide workers with a private right of action for untimely payment of wages. 175 A.D.3d 1144, 1146, 107 N.Y.S.3d 286, 288 (1st Dep't 2019). Section 198 expressly provides for recovery of damages and other remedies for underpayment in violation of the wage claim laws. NYLL § 198(1-a). The Vega court interpreted § 198's remedial provisions to encompass late payments in violation of § 191, explaining that “[t]he word underpayment is the noun for the verb underpay; underpay is defined as ‘to pay less than what is normal or required' ... The moment that an employer fails to pay wages in compliance with section 191(1)(a), the employer pays less than what is required.” Id. at 1145, 107 N.Y.S.3d at 288. The Court went on to explain that even if § 198 did not expressly provide a private right of action, it carried an implied private right of action for violation of § 191. Absent an express right of action, the court reasoned, “a remedy may be implied since plaintiff is one of the class for whose particular benefit the statute was enacted, the recognition of a private right of action would promote the legislative purpose of the statute and the creation of such a right would be consistent with the legislative scheme.” Id. at 1145-46, 107 N.Y.S.3d at 289.
NYLL § 198 provides in relevant part: “In any action instituted in the courts upon a wage claim by an employee or the commissioner in which the employee prevails, the court shall allow such employee to recover the full amount of any underpayment, all reasonable attorney's fees, prejudgment interest as required under the civil practice law and rules, and, unless the employer proves a good faith basis to believe that its underpayment of wages was in compliance with the law, an additional amount as liquidated damages equal to one hundred percent of the total amount of the wages found to be due.” NYLL § 198 (1-a).
The subsection of § 191 discussed in Vega - § 191(1)(a) - concerns “manual workers,” whereas the subsection involved here - § 191 (1)(d) - concerns “clerical and other workers.” There is no material difference between those subsections that would warrant any different outcome with respect to there being a private right of action.
Defendants urge the Court not to follow Vega, characterizing the state court's decision as contrary to precedent and resting on a faulty definition of “underpayment.” (Dkt. 44 at 10-11.) Yet, courts in this Circuit repeatedly have followed the ruling in Vega. See, e.g., Macchiavello v. ABB/CON-CISE Optical Grp. LLC, No. 22-CV-8468, 2023 WL 4625009, at *5 (S.D.N.Y. July 19, 2023); Ramos v. Apple Inc., No. 22-CV-02761, 2023 WL 5803739, at *2 (S.D.N.Y. Sept. 6, 2023). Even those courts that have questioned the reasoning of Vega have adhered to its holding. See Espinal v. Sephora USA, Inc., No. 22-CV-0303, 2022 WL 16973328, at *8 (S.D.N.Y. Nov. 16, 2022) (“While we find Sephora's arguments against finding a private right of action - whether express or implied - to be cogent, our doubts about the correctness of the holding in Vega do not constitute sufficiently ‘persuasive data' to cause us to believe that the New York Court of Appeals would reject Vega's conclusions”), R&R adopted, 2023 WL 2136392 (S.D.N.Y. Feb. 21, 2023); Harris v. Old Navy, LLC, No. 21-CV-9946, 2022 WL 16941712, at *7 (S.D.N.Y. Nov. 15, 2022) (“While we would likely not reach this conclusion ourselves if the issue were presented afresh, for reasons explained further below, we feel bound to follow Vega's holding on this point”), R&R adopted, 2023 WL 2139688 (S.D.N.Y. Feb. 20, 2023). Other courts similarly have rejected attempts to “relitigate” the holding in Vega. See Ramos, 2023 WL 5803739, at *2) (“In the face of this District's uniform practice in following Vega, this Court is reluctant to relitigate Vega and instead chooses to follow it”); Rankine v. Levi Strauss & Co., No. 1:22-CV-03362, 2023 WL 3582323, at *6 (S.D.N.Y. May 22, 2023) (“Defendant's other arguments, which seek to relitigate Vega ... are unavailing”).
Despite Defendants' invitation to depart from Vega, the intermediate court of appeals' decision stands as the prevailing interpretation of New York law, and Defendants have provided no persuasive reason to believe that New York's highest appellate court would conclude otherwise. This court is “bound to apply the [state] law as interpreted by [the] state's intermediate appellate courts unless there is persuasive evidence that the state's highest court would reach a different conclusion.” V.S. v. Muhammad, 595 F.3d 426, 432 (2d Cir. 2010); see also Gillett v. Zara USA, Inc., No. 20-CV-3734, 2022 WL 3285275, at *11 (S.D.N.Y. Aug. 10, 2022). Accordingly, Defendants' motion to dismiss Plaintiffs' claim under NYLL § 191, in contravention of Vega, should be denied.
2. Standing
Defendants also argue that Plaintiffs do not have Article III standing to bring a claim for a violation of § 191, as Defendants have not incurred an injury that a court can remedy. (Dkt. 44 at 7.) Defendants contend that since Plaintiffs have been paid all wages - an allegation Plaintiffs dispute - the amount of wages due under the statute is zero despite the belated timing of those payments. (Dkt. 44 at 8.) Defendants are incorrect. Courts have found that being paid late is a concrete injury for which liquidated damages may be recovered pursuant to § 198, even if the employee has been paid in full before the action was brought.
“The requirements of Article III standing are well established: ‘[A] plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.'” Lacewell v. Office of Comptroller of Currency, 999 F.3d 130, 141 (2d Cir. 2021) (quoting Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016)). The Supreme Court in Transunion v. Ramirez described the injury in fact requirement as being “concrete, particularized, and actual or imminent.” TransUnion LLC v. Ramirez, U.S., 141 S.Ct. 2190, 2203 (2021). The Court went on to explain, “certain harms readily qualify as concrete injuries under Article III. The most obvious are traditional tangible harms, such as physical harms and monetary harms. If a defendant has caused physical or monetary injury to the plaintiff, the plaintiff has suffered a concrete injury in fact under Article III.” Id. 141 S.Ct. at 2204.
Courts confronted with the same question posed here found that workers paid on an untimely basis necessarily incur a concrete harm due to the time value of money and thus have Article III standing to claim damages under the same provisions. Gillett v. Zara USA, Inc., No. 20 CIV. 3734, 2022 WL 3285275, at *6 (S.D.N.Y. Aug. 10, 2022) (“It is a basic princip[le] of economics and accounting that a dollar today is worth more than a dollar tomorrow.”) (internal quotation marks and citations omitted); Caul v. Petco Animal Supplies, Inc., No. 20 Civ. 3534, 2021 WL 4407856, at *4 (E.D.N.Y. Sept. 27, 2021) (explaining that the injury stemming from the loss of the time value of money is “especially acute for those workers who are generally dependent upon their wages for sustenance”) (internal quotation marks and citations omitted). Likewise, Courts have determined that under § 198, liquidated damages are available as a remedy for wages that were paid late, not merely those that were never paid. Bemejo v. Shaker Contractors, Corp., No. 22-CV--1427, 2022 WL 17251667, at *5-6 (S.D.N.Y. Nov. 28, 2022); see also Carrera v. DT Hospitality Group, No. 19-CV-4235, 2021 WL 6298656, at *10-11 (S.D.N.Y. Nov. 1, 2021) (awarding liquidated damages on default judgment for untimely bi-weekly payments in violation of NYLL § 191), R & R adopted, 2021 WL 6298654 (S.D.N.Y. Dec. 7, 2021).
In sum, Plaintiffs have standing and may bring a private right of action for untimely payment of wages in violation of NYLL § 191. Plaintiffs' second cause of action is viable and should not be dismissed.
B. NYLL §§ 195(1)(A) And 195(3): Failure To Provide Wage Notices And Statements (Third And Fourth Causes Of Action)
Plaintiffs bring their third and fourth causes of action under NYLL §§ 195(1)(a) and 195(3) for Defendants' failure to provide, respectively, wage notices and wage statements. Under the law, upon hiring an employee, an employer must provide to each employee a wage notice that includes such information as the rate and times of pay and any allowances or benefits. NYLL § 195(1)(a). The statute also requires that along with each payment of wages, employers provide employees wage statements that include, among other information, the rates of pay and dates of work covered by that wage payment. NYLL § 195(3). The remedies provision of the NYLL, § 198, expressly provides that the employer must pay a penalty for violating either wage notice or wage statement requirements. NYLL §§ 198(1-b)-(1-d). Defendants nonetheless assert that Plaintiffs cannot establish Article III standing as they have not alleged any harm to them stemming from the lack of wage notices or wage statements. Defendants further assert that a statutory violation without more does not amount to an injury in fact. (Dkt. 44 at 9.) The Court agrees that, as plead, Plaintiffs' allegations do not establish standing.
In TransUnion, the Supreme Court, addressing standing under provisions of the Fair Credit Reporting Act, observed that “this Court has rejected the proposition that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right. ... Article III standing requires a concrete injury even in the context of a statutory violation.” U.S., 141 at 2205 (internal quotation marks omitted). The Court found that the plaintiffs had not identified any “downstream consequences” from failing to receive the statutorily required information at issue and stated that an “asserted informational injury that causes no adverse effects cannot satisfy Article III.” U.S., 141 S.Ct. at 2214.
Following TransUnion, courts considering standing under New York's labor law have declined to find standing where plaintiffs have not sufficiently alleged injuries stemming from a lack of wage notices and wage statements. See, e.g., Neor v. Acacia Network, Inc., No. 22-CV-4814, 2023 WL 1797267, at *4-5 (S.D.N.Y. Feb. 7, 2023) (dismissing wage notice and wage statement claims due to failure to plead facts demonstrating employees' standing); Guthrie v. Rainbow Fencing Inc., No. 21-CV-5929, 2023 WL 2206568, at *4-6 (E.D.N.Y. Feb. 24, 2023) (dismissing wage notice and wage statement claims where plaintiffs did not provide any factual allegations to support standing or actual injuries suffered); Beh v. Community Care Companions Inc., No. 19-CV-01417, 2022 WL 5039391, at *7-8 (W.D.N.Y. Sept. 29, 2022) (“[w]hile the deficiencies in defendants' provisions of hiring notices may amount to violations of the labor law, neither plaintiffs nor the record demonstrates how those technical violations led to either a tangible injury or something akin to a traditional cause of action, as required by the Supreme Court”); Sevilla v. House of Salads One LLC, 20-CV-6072, 2022 WL 954740, at *7 (E.D.N.Y. March 30, 2022) (“[w]hile Defendants did not provide proper wage notice and statements to Plaintiffs, Plaintiffs lack standing to maintain these claims”).
Conversely, courts that have found standing for wage notice and wage statement claims under New York law after TransUnion have done so where plaintiffs alleged specific injuries stemming from the lack of those documents. See, e.g., Lipstein v. 20X Hospitality LLC, No. 22-CV-04812, 2023 WL 6124048, at *9 (S.D.N.Y. Sept. 19, 2023) (finding standing where plaintiff alleged that the lack of wage notices and wage statements kept him from realizing that he was being underpaid and thereby preventing him from taking appropriate action to obtain the payments due to him); Metcalf v. TransPerfect Translations International, Inc., No. 19-CV-10104, 2023 WL 2674743, at *6 (S.D.N.Y. Mar. 29, 2023) (finding standing where plaintiffs alleged that inaccurate wage notices and wage statements prevented them from knowing whether and to what extent they had been underpaid).
Here, Plaintiffs claim that Defendants violated the wage notice and wage statement requirements, but they have not alleged any concrete downstream injuries stemming from the alleged violation. (Compl. ¶¶ 115-123.) Instead, they merely allege that Defendants “intentionally failed to provide notice to employees in violation of NYLL § 195,” and “did not provide the true and accurate paystub information on or after each payday”. (Compl. ¶¶ 117, 122.) The Complaint is devoid of any allegation of concrete injury flowing from those failures.
Plaintiffs argue that their state law claims are not subject to Article III's standing requirements and that Defendants have not provided authority that “state causes of action should be construed narrowly to ensure that federal courts can adjudicate them”. (Dkt. 45 at 6-7) (internal quotation marks and citation omitted). However, “a plaintiff must demonstrate standing for each claim he seeks to press.” DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006). Standing requirements apply to federal law claims as well as state law claims brought under supplemental jurisdiction. (Id. at 351-52). Without establishing Article III standing for state law claims, a federal court cannot exercise jurisdiction over that claim. (Id.). Plaintiffs' claims under NYLL §§ 195(1)(a) and 195(3) are subject to Article III standing requirements. Bare allegations, such as those made by Plaintiffs, of a statutory violation alone do not give rise to Article III standing. Therefore, counts three and four should be dismissed for lack of standing.
Conclusion
For the foregoing reasons, I recommend that Defendants' motion to dismiss be DENIED IN PART and GRANTED IN PART. Plaintiffs' second cause of action for violation of NYLL § 191 claim should not be dismissed. Plaintiffs' third and fourth causes of action for violation of NYLL §§ 195(1)(a) and 195(3) should be dismissed without prejudice and with leave to replead in the event Plaintiffs are able to sufficiently allege concrete injury. To the extent not discussed herein, the Court has considered the parties' arguments and determined them to be without merit.
Deadline For Filing Objections And Preserving Appeal
Pursuant to 28 U.S.C. § 636(b)(1) and Rules 72, 6(a), and 6(d) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days to file written objections to this Report and Recommendation. Any party shall have fourteen (14) days to file a written response to the other party's objections. Any such objections and responses shall be filed with the Clerk of the Court, with courtesy copies delivered to the Chambers of the Honorable Paul G. Gardephe, United States Courthouse, 40 Foley Square, New York, New York 10007, and to the Chambers of the undersigned, at United States Courthouse, 500 Pearl Street, New York, New York 10007. Any request for an extension of time for filing objections must be addressed to Judge Paul G. Gardephe. Failure to file timely objections will result in a waiver of the right to object and will preclude appellate review.