Perry v. Furman's Lab LLC et al

Filing 30

ORDER ADOPTING REPORT AND RECOMMENDATIONS, For the foregoing reasons. Judge Mann's R&R is adopted, in its entirety, as the opinion of the Court, with judgment to be entered in favor of Perry, against Furman's Lab LLC andEnmanuel De Jesus, jointly and severally, in the amount of $31,031.78. This sum represents $3,780 in unpaid minimum wages, $6,142.50 for unpaid overtime, $619.50 in spread-of-hours pay, $2,950 in statutory damages for notice violations, $9 ,922.50 in liquidated damages, $700 in unpaid tips, $6,321.42 in attorney's fees, and $595.86 in costs. The Court certifies, pursuant to 28 U.S.C. § 1915(a)(3), that any appeal from this Order would not be taken in good faith and, therefore, in forma pauperis status is denied for purpose ofan appeal. Coppedge v. United States, 369 U.S. 438,444-45, 82 S. Ct. 917, 920-21, 8 L. Ed. 2d 21 (1962). The Clerk of Court is directed to enter judgment accordingly, to mail a copy of this order to the pro se defendant, and to close this case for administrative purposes. (Ordered by Judge Eric N. Vitaliano on 10/28/18) c/m Fwd. for Judgment. (Galeano, Sonia)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

BROOKLYN OFFICE

i'

(

ROBERTS PERRY,
Plaintiff,
MEMORANDUM AND ORDER

-against17-CV-6107(ENV)
(RLM)
FURMAN'S LAB LLC and ENMANUEL DE JESUS,
Defendants.

VITALIANO,D.J.

On October 19, 2017, Roberts Perry filed this suit against Furman's Lab LLC and

Enmanuel De Jesus. He sought unpaid minimum wage and overtime payments, pursuant to the
Fair Labor Standards Act("FLSA"),29 U.S.C. §§ 206(a), 207(a)(1), and the New York Labor

Law("NYLL"),NYLL §§ 652(1)(a)(ii), 170. He also sought unpaid spread-of-hours pay under
NYLL, 12 NYCRR § 146-1.6, civil damages for recordkeeping violations, pursuant to the New

York Wage Theft Prevention Act("WTPA"),NYLL § 195, and civil damages for common-law
conversion of earned tips. See Compl.

1-2(ECF No. 1). Having failed to answer or otherwise

respond to the complaint, the Clerk of Court, on January 11, 2018, entered a certificate of default
against both defendants. See Clerk's Entry of Default(ECF No. 13). Pursuant to Rule 55(b)(2)
ofthe Federal Rules of Civil Procedure, plaintiff moved for defaultjudgment,see Mot. for

Default J.(ECF No. 14), which, on March 27, 2018, was granted with respect to liability, with
the balance of the motion referred to Chief Magistrate Judge Roanne L. Mann to conduct an

inquest on damages. See Order Referring Mot.(Mar. 27,2018).

In her Report & Recommendation("R&R")as to damages, Judge Mann recommended

the entry ofjudgment against both defendants,jointly and severally, in the total amount of
$31,031.78: $3,780 in unpaid minimum wages,$6,142.50 for unpaid overtime, $619.50 in
spread-of-hours pay, $2,950 in statutory damages for notice violations, $9,922.50 in liquidated
damages,$700 in unpaid tips, $6,321.42 in attorney's fees, and $595.86 in costs. R&R at 16

(ECF No. 27). For the reasons set forth below. Judge Mann's R&R is adopted in its entirety as
the opinion of the Court.
Background

Perry met De Jesus while working at La Colombo coffee shop in Manhattan. R&R at 2.
De Jesus proposed that they start a coffee shop together. Id. at 3. Perry agreed to take a 40%

interest in the coffee shop,and De Jesus agreed to take a 60% interest. Id.' Plaintiff was to
contribute his labor; De Jesus was to contribute his capital. Id. Most importantly, this agreement
was never reduced to a signed writing. Id.

Perry began to work at the newly organized coffee shop, Furman's Lab, on June 19,
2017. Id. He worked approximately 87.5 hours per week for two months but received no

pecuniary compensation other than cash tips and a check for one month of credit card tips. Id.
The parties would trade bad faith charges, with Perry accusing De Jesus of withholding his 40%
interest and De Jesus claiming that Perry had not done any work at Furman's Lab and that he, in
any event, had not agreed to share equity in the business. Id.

'In his objections, De Jesus asserts that he was to take a 40% interest, and the remaining 60%
was to be divided between Perry and Kyle Hart. Objs. at 1. The precise division ofequity is of
no moment to the resolution ofthis motion, so the Court need not consider the disagreement.

Moreover, having defaulted, defendants are deemed to have admitted the well-pleaded
allegations of the complaint, except as to damages. See Greyhound Exhibitgroup, Inc. v.
E.L.U.L Realty Corp., 973 F.2d 155,168(2d Cir. 1992).

With defendants failing to appear and contest damages at inquest, Judge Mann filed her

R&R on August 31,2018. See R&R. But,in an unusual twist, De Jesus filed timely objections

to it on September 17,2018. See Letter from Enmanuel De Jesus(ECF No. 29)("Objs.").
Legal Standard

In reviewing the report and recommendation of a magistrate judge, a districtjudge "may

accept, reject, or modify, in whole or in part, the findings or recommendations made by the
magistrate judge." 28 U.S.C. § 636(b)(1);

also Fed. R. Civ. P. 72(b)(3). The districtjudge

reviewing an R&R is required to "determine de novo any part ofthe magistrate judge's

disposition that has been properly objected to." Fed. R. Civ. P. 72(b)(3); see also 28 U.S.C. §

636(b)(1). "The district court may adopt those portions ofthe recommended ruling to which no
timely objections have been made, provided no clear error is apparent from the face ofthe

record." Dafeng Hengwei Textile Co. v. Aceco Indus. & Commercial Corp.,54 F. Supp. 3d 279,
283(E.D.N.Y. 2014). "The clearly erroneous standard also applies when a party makes only
conclusory or general objections, or simply reiterates its original arguments." Id.
Discussion

Despite De Jesus's timely objections, defendants are not entitled to de novo review.
Federal courts have overwhelmingly held that when a party does not raise an argument before a

magistrate judge, it is precluded from raising it in its objections to an R&R. See, e.g., Fairjield
Fin. Mortg. Grp., Inc. v. Luca, No. 06-cv-5962(JS)
(WDW),2011 WL 3625589, at *2
(E.D.N.Y. Aug. 16, 2011); Kennedy v. Adamo,No.02-cv-1776(ENV)
(RML),2006 WL
3704784,at *1 (E.D.N.Y. Sept. 1, 2006); Wesley v. Alexander, No. 99 Civ. 2168(LAK),2005
WL 1352593, at *6(S.D.N.Y. June 8,2005); Haynes v. Quality Markets, No.02-cv-250,2003
WL 23610575, at *3(E.D.N.Y. Sept. 22,2003); accordRidenour v. Boehringer Ingelheim

Pharm., Inc., 679 F.3d 1062,1067(8th Cir. 2012); Fireman's Ins. Co. v. Todesca Equip. Co.,

Inc., 310 F.3d 32, 38(1st Cir. 2002). Here, defendants did not even appear before Judge Mann.
Any objection they have raised is improper. Moreover, because a limited liability company may

not appear in federal court except through a licensed attorney, Lattanzio v. COMTA,481 F.3d
137,140(2d Cir. 2007), De Jesus's objections may not be attributed to Furman's Lab LLC. As a
result, the Court need only evaluate the R&R for clear error. However, out of an overabundance
of solicitude to De Jesus, who is proceeding pro se, the Court will consider de novo components
of the R&R to which he has objected.
I.

Liabilitv

After a notice of default has been entered, a defaulting party, generally, cannot contest

liability. Instead, that party is limited to arguments regarding damages. Finkel v. Romanowicz,

577 F.3d 79, 83 n.6(2d Cir. 2009); see also note 1,supra. A court, however, always retains the
discretion to determine whether a final defaultjudgment is appropriate. Finkel v. Triple A Grp.,

Inc., 708 F. Supp. 2d 277,280(E.D.N.Y. 2010)(citing Enron Oil Corp. v. Diakuhara, 10 F.3d
90,95(2d Cir. 1993)). Indeed, awarding damages in the face of insufficient allegations, even

after defaultjudgment is entered, would be inconsistent with the threshold requirement that a
complaint be well-pleaded. See Levesque v. Kelly Commc'ns, /wc.. No. 91 Civ. 7045,1993 WL
22113, at *6(S.D.N.Y. Jan. 25, 1993). Ultimately, it is this retained discretion that De Jesus

seeks to tap, since his objections go only to liability.^ Moreover, they do not address the
adequacy ofthe pleadings but, rather, rely on new factual assertions. Therefore, his objections
may be considered only if his default should now be excused.

^ De Jesus's filing also accuses Perry of being a poor employee and stealing from the coffee
shop,see, e.g., Objs. at 3, but these allegations are irrelevant to the claims in this action.
4

The gateway to the relief De Jesus seeks is Rule 55(c), which permits a court to set aside

an entry ofdefault "for good cause." Fed. R. Civ. P. 55(c).^ It is a rule ofthumb in the Second
Circuit that three criteria bear on this determination: "(1) whether the default was willfiil;(2)

whether setting aside the default would prejudice the adversary; and (3)whether a meritorious
defense is presented." Enron, 10 F.3d at 96.

Applying this standard, De Jesus does not fare well. His excuses for his default are
limited and stale by a year. They are a lament about debt and troubles at work and on the home
front. See Objs. at 4. There is no hint of surprise, fraud, or attorney misconduct. Indeed, his
excuses confirm that the default was "the result of a shortcoming more [intentional] than [caused

by] negligence or even gross negligence." See SEC v. McNulty, 137 F.3d 732,738(2d Cir.
1998).'* In fact, they confirm that plaintiff chose to attend to other priorities instead ofcomplying
with the summons and complaint he had received. De Jesus's excuses, in short, do not qualify as

good cause. Moreover, as shown below,the lack of a meritorious defense is independently fatal
to his effort to gain relieffrom the entry of default.

More specifically, the proffered meritorious defense tells of how he and Perry agreed by
contract that Perry "was going to collect $15 dollars [.sic] an hour for a maximum of40 hours a

week regardless of how many hours a week he went over." Objs. at 2. By his reading ofthe
contract, De Jesus claims that Perry is not entitled to any pay beyond the 40-hour limitation.

^ De Jesus has not styled his filing as a motion to set aside his default, but because he is
proceeding pro se, the Court, out of solicitude, will construe his letter, in part, as such a motion.
In a similar vein, though De Jesus's self-representation cannot cure the default ofthe defendant
business entity, should he actually prevail on the merits and defeat liability, the Court will take
notice of any such finding and make any modification ofthe judgment against the entity in the
interest ofjustice.

^ De Jesus's limited financial resources may render him unable to satisfy ajudgment and explain
his inability to hire an attorney, but they clearly provide no excuse for not filing an answer.

But, this is precisely the sort ofemployment arrangement that is unlawful under FLSA and
NYLL. Bluntly, it is a textbook violation of29 U.S.C. § 207. His defense is not a defense; it is a
concession.

Struggling to stay afloat, De Jesus circles back to the idea that Perry was not an employee
at all. He alludes to a partnership agreement, according to which De Jesus would own 40% of
Furman's Labs LLC and somehow be entitled to 100% ofthe profits. Objs. at 1. While the math

defies logic, assuming his "partnership" might qualify Perry as an "owner," it does not mean that
he is not an "employee" for FLSA purposes. See Clackamas Gastroenterology Assocs., P.C. v.
Wells, 538 U.S. 440,450, 123 S. Ct. 1673,155 L. Ed. 2d 615 (2003). That is because

"employment under FLSA is a 'flexible concept to be determined on a case-by-case basis by
review of the totality ofthe circumstances.'" Godoy v. Rest. Opportunity Ctr. ofN.Y., Inc., 615
F. Supp. 2d 186, 192(S.D.N.Y. 2009)(quoting Barfield v. N.Y.C. Health & Hasp. Corp., 537
F.3d 132,141-42(2d Cir. 2008)). "[PJutative co-owners" of a business may count as employees

when they "assume[] the risks ofloss and liabilities ofthe venture, and ha[ve] a real opportunity
to share in its profits upon success," id. at 189, but here, even by De Jesus's account, Perry had
no opportunity to share in the profits ofthe business. His proposed compensation was entirely in

the form of wages and tips. ^
Additionally, and crucially, there is absolutely no dispute that the partnership agreement
was never reduced to a signed writing. The fact that the agreement was drafted but never signed

strongly suggests that the parties did not mutually assent to its terms or intend to be bound by it.^

^ Immaterially, De Jesus contends that Perry also enjoyed "first order of refusal when it came to
selling" his share ofthe coffee shop. Objs. at 1.

^ To determine whether an unsigned agreement creates a binding contract, courts in the Second
Circuit consider several factors, but "whether there is an expressed reservation of the right not to
be bound in the absence of a writing" is "frequently the most important." Brown v. Cara,420

Given Perry's weeks of labor at the coffee shop, with no prospect of receiving a share ofthe

profits or lawful wage and hour compensation, it is evident that he was an employee and that
defendants were the employers. The proffered unsigned agreement offers no refuge.
In a nutshell, the effort by De Jesus to cure his default fumbles both required showings.
Because his default is unexcused, his objections as to the finding of liability are not properly

before the Court. In any event, as to the second prong, the objections lack substantive merit,
meaning that the Court's finding of liability will stand undisturbed. Applying the clear error

standard of review, Dafeng Hengwei Textile Co., 54 F. Supp. 3d at 283,to ancillary findings of
liability made by Judge Mann in her R&R,the Court has thoroughly examined those findings
and concludes that they are correct, well-reasoned, and free of any clear error. Judge Maim

conducted a further inquiry into "whether [plaintiffs] allegations establish [defendants'] liability
as a matter of law," City ofNew York v. Mickalis Pawn Shop, LLC,645 F.3d 114, 137(2d Cir.

2011)(quoting Finkel v. Romanowicz,577 F.3d 79,84(2d Cir. 2009)), and the Court adopts

Judge Mann's R&R answering that question in the affirmative, which supplements the opinion of
the Court on this issue.
11.

Damages

The chief reason for the referral of plaintiffs motion for defaultjudgment to Judge Mann

was to conduct an inquest as to damages. But, because De Jesus has filed no objection as to

Judge Mann's calculation of damages, the Court need only evaluate the R&R for clear error. See

F.3d 148, 154(2d Cir. 2005); see also Vornado Realty Tr. v. Marubeni Sustainable Energy, Inc.,
987 F. Supp. 2d 267,279(E.D.N.Y. 2013). Dispositively, De Jesus concedes that the parties
intended "to review and ... discuss it and make final revisions to [send to their] lawyers and

sign," but Perry "never came around to signing the agreement." Objs. at 3. De Jesus appears to
have brought up the subject ofthe agreement several times, which made Perry "extremely
uncomfortable every time." Id. This suggests that the parties were several steps removed from a
final agreement and did not expect to be bound until the agreement was signed.

Dafeng Hengwei Textile Co., 54 F. Supp. 3d at 283. In accordance with this standard of review,
the Court has carefully reviewed Judge Mann's R&R and, as it did with her analysis and
recommendation as to liability, finds her analysis and recommendation as to damages to be
correct, well-reasoned, and free of any clear error. That portion ofthe R&R is also adopted as
the Court's opinion.
Conclusion

For the foregoing reasons. Judge Mann's R&R is adopted, in its entirety, as the opinion

ofthe Court, with judgment to be entered in favor of Perry, against Furman's Lab LLC and
Enmanuel De Jesus,jointly and severally, in the amount of$31,031.78. This sum represents

$3,780 in unpaid minimum wages, $6,142.50 for unpaid overtime,$619.50 in spread-of-hours

pay, $2,950 in statutory damages for notice violations, $9,922.50 in liquidated damages,$700 in
unpaid tips, $6,321.42 in attorney's fees, and $595.86 in costs.

The Court certifies, pursuant to 28 U.S.C. § 1915(a)(3), that any appeal from this Order

would not be taken in good faith and, therefore, informa pauperis status is denied for purpose of

an appeal. Coppedge v. United States, 369 U.S. 438,444-45,82 S. Ct. 917,920-21,8 L. Ed. 2d
21 (1962).

The Clerk of Court is directed to enterjudgment accordingly, to mail a copy ofthis order

to the pro se defendant, and to close this case for administrative purposes.
So Ordered.

Dated: Brooklyn, New York

October 28,2018

/s/ USDJ ERIC N. VITALIANO
ERICN. VITALIANO

United States District Judge