Morris et al v. ALLE PROCESSING CORP. et al

Filing 75

ORDER denying Motion to Stay, 72 and 74 . Defendants' motion for a stay is denied. The parties are directed to mail the revised class notice within twenty-one (21) days of this order. Although the heading "TO BE CIRCULATED IN ENGLISH & SPANISH" has been deleted from the notice, the notice shall still be circulated in both languages. Ordered by Magistrate Judge Joan M. Azrack on 11/27/2013. (Attachments: #(1) Revised Class Notice) (Terranova, Robert)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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KINGBORN MORRIS, RAFAEL MATEO, and
DARNELL PIERRE, on behalf of all other persons
similarly situated who were employed by ALLE
PROCESSING CORP., ALBERT WEINSTOCK,
EDWIN WEINSTOCK, SAM HOLLANDER, and
MENDEL WEINSTOCK,

For Online Publication Only

ORDER
08–CV–4874 (JMA)

Plaintiffs,
-againstALLE PROCESSING CORP., ALBERT WEINSTOCK,
EDWIN WEINSTOCK, SAM HOLLANDER, and
MENDEL WEINSTOCK,
Defendants.
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APPEARANCES:
LaDonna Marie Lusher
Virginia & Ambinder LLP
111 Broadway, Suite 1403
New York, NY 10006
Attorney for Plaintiffs
Jeffery A. Meyer
Kaufman, Dolowich, Voluck, & Gonzo, LLP
135 Crossways Park Drive, Suite 201
Woodbury, NY 11797
Attorney for Defendants
AZRACK, United States Magistrate Judge:
Defendants filed a motion to stay this action pending appeal. For the reasons explained
below, defendants’ motion is denied.
On May 6, 2013, I certified a class action, pursuant to Federal Rule of Civil Procedure
23, for plaintiffs’ claims under the New York Labor Law (“NYLL”) § 193. (May 6, 2013 Mem.
and Order, ECF No. 55.) In plaintiffs’ motion for class certification, they sought to waive class

claims for liquidated damages under the NYLL. Plaintiffs believed that such a waiver was
necessary in light of § 901(b) of New York Civil Practice Law and Rules, which bars class
actions where the class seeks a “penalty” such as liquidated damages, N.Y. Civ. Prac. L. R. §
901(b). Defendants responded that class certification should be denied in light of § 901(b). In
the Rule 23 Order, I did not address this issue because I concluded that, after the Supreme
Court’s decision in Shady Grove Orthopedics, P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010),
§ 901(b) does not apply in federal court and, thus, plaintiffs were not required to waive
liquidated damages.
In a subsequent motion for reconsideration, defendants argued that it was inappropriate
for the Court to exercise supplemental jurisdiction over the NYLL claims because doing so
permits plaintiffs to seek liquidated damages—damages which plaintiffs could not recover if
they brought an identical class action in state court.

I rejected this argument along with

defendants’ request for an interlocutory appeal under 28 U.S.C. § 1292(b). (Oct. 22, 2013 Mem.
and Order (“Oct. 22 Order”), ECF No. 69.) Defendants then filed a petition to the Second
Circuit to appeal my decision pursuant to Federal Rule of Civil Procedure 23(f). Currently
pending before me is defendants’ motion to stay this action pending appeal.
“The four factors to be considered in issuing a stay pending appeal are well known . . . .”
In re World Trade Center Disaster Site Litig., 503 F.3d 167, 170 (2d Cir. 2007). Courts look to:
“(1) whether the stay applicant has made a strong showing that he
is likely to succeed on the merits; (2) whether the applicant will be
irreparably injured absent a stay; (3) whether issuance of the stay
will substantially injure the other parties interested in the
proceeding; and (4) where the public interest lies.”
Id. (quoting Hilton v. Braunskill, 481 U.S. 770, 776 (1987)).

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As to the first factor, defendants have not made a strong showing that they are likely to
succeed on their primary argument—namely, that exercising supplemental jurisdiction is
improper if it allows plaintiffs to recover liquidated damages that they could not obtain if they
brought the same class action in state court. Defendants have also not shown that it is likely that
Second Circuit will even hear defendants’ appeal under Rule 23(f). See In re Sumitomo Copper
Litig., 262 F.3d 134, 136 (2d Cir. 2001) (identifying the requirements for an appeal under Rule
23(f)); see also Oct. 22 Order at 25–30.
In any event, even assuming that the Second Circuit is likely to hear defendants’ Rule
23(f) appeal and ultimately agree with defendant’s primary argument, I would still deny the stay
request. Defendants argue that a stay is warranted because, if they were to prevail on appeal, the
class action would be decertified and the class members would have to receive notice of the
decertification. This argument, however, is based on a flawed premise—namely, that if the
Second Circuit disagrees with the Oct. 22 Order, on remand, I would have to decline
supplemental jurisdiction over the NYLL claims and decertify the class. Rather than decertify
the class, I would permit plaintiffs to waive liquidated damages. Such a waiver, along with
minor revisions to the class notice, would render decertification unnecessary.
I will assume, for the sake of the argument, that the Second Circuit will accept
defendants’ position and conclude that a district court should not exercise supplemental
jurisdiction over a NYLL class if doing so allows the class members to recover liquidated
damages that they could not recover if they brought the same class action in state court.
Defendants presume that, under this scenario, the Second Circuit would be left with no choice
but to direct me, on remand, to decline supplemental jurisdiction over the NYLL claims and
decertify the class.

There is, however, an obvious alternative.

3

If the Second Circuit’s

justification for declining supplemental jurisdiction turns on the availability of liquidated
damages in federal court, then plaintiffs could seek to remedy this problem by waiving liquidated
damages—damages that plaintiffs would be required to waive if they refiled the class action in
state court. I am certain that, if presented with this choice, plaintiffs would waive liquidated
damages in the instant action and seek to keep the NYLL claims in federal court. By doing so,
we would come full circle and I again would face the question whether such a waiver renders
class certification improper.
If this question were presented to me on remand, I would find, in accord with decisions
predating Shady Grove, that plaintiffs may pursue a class action for NYLL claims if they waive
liquidated damages and class members are given an opportunity to opt out of the class and
pursue liquidated claims in individual suits. See Iglesias-Mendoza v. La Belle Farm, Inc., 239
F.R.D. 363, 373–74 (S.D.N.Y. 2007); Noble v. 93 Univ. Pl. Corp., 224 F.R.D. 330, 341
(S.D.N.Y. 2004). Even with such a waiver, plaintiffs would still satisfy all of the relevant
elements under Rule 23.
In opposing class certification, defendants contended that a liquidated damages waiver
prevents plaintiffs from establishing Rule 23(b)(3)’s superiority requirement. Rule 23(b)(3)
requires that a class action be “superior to other available methods for fair and efficient
adjudication of the controversy.” Fed. R. Civ. P. 23(b)(3). In considering Rule 23(b)(3)’s
superiority and predominance requirements courts consider, inter alia:
(A) the class members’ interests in individually controlling the
prosecution or defense of separate actions;
(B) the extent and nature of any litigation concerning the
controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the litigation
of the claims in the particular forum; and
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(D) the likely difficulties in managing a class action.
Id.
Defendants cite to one decision, Myers v. Hertz Corp., which questioned, in dicta,
whether a class action would be superior to other options if the class members were required to
waive liquidated damages. See Myers v. Hertz Corp., No. 02-CV-4325, 2007 WL 2126264, at
*7 (E.D.N.Y. July 24, 2007) (denying class certification where plaintiffs failed to meet Rule 23’s
commonality and predominance requirements), aff’d, 624 F.3d 537 (2d Cir. 2010). I do not find
Myers persuasive on this point. A liquidated damages waiver might be a concern, for superiority
purposes, if many class members had an incentive to pursue individual actions in which such
damages would be recoverable. That, however, is not the case here, where the class members
possess relatively small damages claims and are unlikely to bring individual actions. In this suit,
even with the disadvantages of a liquidated damages waiver, a class action would still meet the
superiority requirement. Cf. Klein v. Ryan Beck Holdings, Inc., No. 06-CV-3460, 2007 WL
2059828, at *4 (S.D.N.Y. July 13, 2007) (concluding that liquidated damages waiver would not
render plaintiff an inadequate class representative).
Although I would permit plaintiffs to waive liquidated damages, the class members
would still have to be notified of this waiver and the opportunity to opt-out of the class. Rather
than potentially mail a second notice to the class after defendants’ appeal, I will simply add some
cautionary language to the current notice. The revised class notice, which is attached to this
order, informs the class members that: (1) if defendants prevail on appeal, the class will have to
waive claims to liquidated damages; and (2) unless class members exclude themselves by the
opt-out deadline, they will be bound by any adverse appellate rulings and any liquidated
damages waiver.
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In light of the above, all of the factors relevant to defendants’ stay request weigh against
a stay,1 which would halt the mailing of the class notice and delay the trial of a case that has been
pending since 2008. A stay is not justified because even if defendants prevail on their primary
argument on appeal, the NYLL claims would still remain in federal court and the class would not
be decertified. Accordingly, defendants’ motion for a stay is denied. The parties are directed to
mail the revised notice within twenty-one (21) days of this order.
Dated: November 27, 2013
Brooklyn, New York
/s/
JOAN M. AZRACK
UNITED STATES MAGISTRATE JUDGE

1

The first factor weighs in favor of plaintiffs because, even if the Second Circuit accepts defendants’ primary
argument, defendants are still not likely to succeed in decertifying the class.

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