Chen et al v. WAI ? Cafe Inc. et al

Filing 65

MEMORANDUM AND ORDER granting 63 Motion to Dismiss. For the foregoing reasons, I decline to continue to exercise supplemental jurisdiction. The defendant's motion to dismiss (Docket no. 63) is granted, and the plaintiffs' NYLL claims are dismissed without prejudice to refiling in state court. The Clerk of Court is directed to enter judgment: (1) dismissing the plaintiffs' NYLL claims against Wai Yin Chan without prejudice, and (2) dismissing the FLSA claims with prejudice. The Clerk of Court is further requested to close this case. SO ORDERED. (Signed by Magistrate Judge James C. Francis on 8/2/2017) Copies Transmitted this Date By Chambers. (anc)

(“Compl.”), ¶¶ 19-42).

They further alleged that Wai ? Café had

failed to pay them properly under the Fair Labor Standards Act
(“FLSA”) and the NYLL.

(Compl., ¶¶ 43-45).

Accordingly, they

sought damages for unpaid minimum wages, overtime wages, and
spread of hours pay, and, in addition, sought liquidated and
punitive damages.

(Compl. at 9-10).

In response, the defendants denied any liability.
¶¶ 1-2).
the

(Answer,

As an affirmative defense, the defendants claimed that

first

named

plaintiff,

employed by Wai ? Café.

Yong

Kui

Chen,

had

(Answer, ¶¶ 35-38).

never

been

They further

alleged that the other five named plaintiffs had entered into a
contract with Wai ? Café in February 2010 that precluded the
claims

because

it

provided

the

plaintiffs

with

additional

compensation and altered the nature of their relationship to Wai
? Café by giving them a stake in the sale of the business.
(Answer, ¶¶ 39-48).

The defendants then asserted a counter-

claim against the plaintiffs for allegedly accepting a payment
pursuant

to

agreement.
B.

the

contract

with

no

intention

of

honoring

the

(Answer, ¶¶ 53-68).
Procedural History
1.

Trial

A jury trial was held on February 6 and 7, 2012.

Yong Kui

Chen v. Wai? Café Inc., No. 10 Civ. 7254, 2012 WL 997004, at *1
2

(S.D.N.Y. March 26, 2012), aff’d in part, rev’d in part sub nom.
Yong Kui Chen v. Wai Yin Chan, 615 F. App’x 10 (2d Cir. 2015).
Defendants’ counsel was relieved shortly before trial; Mr. Chan
proceeded pro se, and Wai ? Café was held to be in default for
failing to appear by counsel.

Id.

I dismissed the claims of

plaintiff Yong Kui Chen as he did not attend the trial, but the
claims of another plaintiff not named in the Complaint, Jian Hui
Lin, were submitted to the jury after he filed a form indicating
his consent to sue under the FLSA.

Id.

During the course of trial, Mr. Chan sought to introduce
documents

into

evidence

that

the

plaintiffs

objected

to,

including a purported contract between the parties and records
indicating

additional

payments

Transcript (“Tr.”) at 80, 109).

to

the

plaintiffs.

(Trial

I deemed these documents to be

precluded from admission at trial because plaintiffs’ counsel
represented
discovery.

to

me

that

they

had

not

been

turned

over

in

(Tr. at 84, 110-12).

Based on the plaintiffs’ failure to show that Wai ? Café
had gross receipts exceeding $500,000.00, the FLSA claims were
dismissed.
supplemental

Yong Kui Chen, 2012 WL 997004, at *1.
jurisdiction

over

the

plaintiffs’

I retained

NYLL

claims,

however, because the case had already been tried and substantial
resources had been expended in preparation.
3

Id.; see generally

Motorola Credit Corp. v. Uzan, 388 F.3d 39, 56 (2d Cir. 2004).
On

those

claims,

the

jury

found

the

defendants

liable

for

minimum wage, overtime, and spread of hours pay, but not for
liquidated damages as Mr. Chan had not acted willfully.

Yong

Kui Chen, 2012 WL 997004, at *2.
All

parties

were

invited

to

propose

damage

calculations

after trial, but only the plaintiffs did so.

Id.

their

owed

submission,

plaintiff.

Id.

I

determined

damages

to

each

Judgment was entered against the defendants Wai

? Café and Mr. Chan accordingly.
2.

the

Following

Id. at *3.

Appeal

After I issued my decision, Mr. Chan filed a motion for
reconsideration of damages, which I denied.
Wai?

Café

Inc.,

No.

10

Civ.

(S.D.N.Y. April 30, 2012).
the

United

States

Court

7254,

2012

Yong Kui Chen v.
WL

1506174,

at

*1

Mr. Chan also filed an appeal with
of

Appeals

for

the

Second

Circuit.

(Notice of Appeal in a Civil Case dated April 24, 2012, ECF No.
27).

On appeal, counsel was appointed for Mr. Chan, and the

plaintiffs appeared pro se.

(Affirmation of C.K. Lee dated Aug.

8, 2015, ¶¶ 5-8).
The

Second

Circuit

vacated it in part.

affirmed

the

judgment

in

part

Yong Kui Chen, 615 F. App’x at 11.

and
The

Circuit found that documents may have been improperly excluded
4

at

trial

and

opportunity

that

to

Mr.

contact

Chan

his

should

former

have

attorney

been
to

given

determine

counsel had proffered those documents to the plaintiffs.

the
if

Id. at

12-13.
Mr. Chan also argued on appeal that he was entitled to tip
and meal allowances in any damage calculations because the NYLL,
unlike the FLSA, “imposed no notice requirements before letting
an employer take advantage of either allowance” for the relevant
time period.

Id. at 14.

The Second Circuit noted that it was

an unsettled question of law whether notices were required, so I
was instructed to consider those arguments on remand.
3.
On

Id.

Post-Appeal

remand,

Mr.

Chan

appeared

with

counsel.

Although

plaintiffs’ counsel moved to withdraw, I initially denied that
motion.

(Order dated Sept. 16, 2015).

plaintiffs’
question,

counsel
and

had

Mr.

in

Chan

fact

moved

It became clear that

received
for

the

documents

sanctions

against

in
the

plaintiffs, including dismissal of their claims, based on the
allegedly

fraudulent

made to the Court.

representations

that

I denied that motion and granted a

motion by plaintiffs’ counsel to withdraw.
Café

Inc.,

counsel

(Memorandum of Law in Support of Defendants’

Motion for Sanctions at 1).

Wai?

plaintiffs’

No.

10

Civ.

7254,
5

2016

Yong Kui Chen v.
WL

722185,

at

*7

(S.D.N.Y.

Feb.

concession

19,

that

2016).

the

Based

documents

Mr.

on

plaintiffs’

Chan

was

counsel’s

barred

from

introducing at trial had in fact been turned over to him in
discovery (Declaration of C.K. Lee dated Dec. 23, 2015, ¶¶ 5-6),
I determined that a new trial was required.

Yong Kui Chen, 2016

WL 722185, at *6.
Mr.

Chan

then

filed

a

motion

asking

me

to

decline

to

exercise supplemental jurisdiction over the plaintiffs’ claims
and dismiss the case.
2016).

(Notice of Motion to Dismiss dated May 4,

I denied this motion without prejudice to refiling once

new counsel had appeared on behalf of the plaintiffs or efforts
to locate pro bono counsel for the plaintiffs proved futile.
(Order dated May 5, 2016).

After the Pro Se Office of the Court

was unable to find counsel for the plaintiffs, I issued an order
scheduling a pretrial conference.

(Order dated Jan. 5, 2017).

Following that conference, I issued an order instructing Mr.
Chan to re-submit his motion to dismiss (Order dated Jan. 31,
2017), which he did (Notice of Motion to Dismiss dated March 31,
2017).

The plaintiffs did not answer the motion.

Discussion
A.

Supplemental Jurisdiction

When a district court has original jurisdiction, that court
“shall have supplemental jurisdiction over all other claims that
6

are so related to claims in the action within such original
jurisdiction that they form part of the same case or controversy
under Article III of the United States Constitution.”
§ 1367(a).
common

28 U.S.C.

Claims meet this requirement if they “derive from a

nucleus

of

operative

fact.”

Shahriar

v.

Smith

&

Wollensky Restaurant Group, Inc., 659 F.3d 234, 245 (2d Cir.
2011) (quoting Briarpatch Ltd. v. Phoenix Pictures, Inc., 373
F.3d

296,

308

“[t]ypically,

(2d

Cir.

supplemental

2004)).

In

jurisdiction

wage
is

and

hour

cases,

appropriate

for

[NYLL] claims during the employment relationship because those
claims arise from the same underlying factual basis [as FLSA
claims].”

Rivera v. Ndola Pharmacy Corp., 497 F. Supp. 2d 381,

393 (E.D.N.Y. 2007); see also Shahriar, 659 F.3d at 245 (holding
that plaintiff’s FLSA and NYLL actions “clearly derive from such
a common nucleus of operative facts since they arise out of the
same compensation policies and practices of [the defendant]”).
In cases in which both federal and state claims are pled,
28 U.S.C. § 1367(c) provides that
[t]he
district
court[]
may
decline
to
exercise
supplemental jurisdiction . . . if (1) the claim raises
a novel or complex issue of State law, (2) the claim
substantially predominates over the claim or claims
over
which
the
district
court
has
original
jurisdiction, (3) the district court has dismissed all
claims over which it has original jurisdiction, or (4)
in
exceptional
circumstances,
there
are
other
compelling reasons for declining jurisdiction.
7

The decision whether to exercise supplemental jurisdiction is a
discretionary one left to the district court.

Kolari v. New

York Presbyterian Hospital, 455 F.3d 118, 122 (2d Cir. 2006).
In

determining

these

whether

exceptions,

to

a

decline

district

jurisdiction

court

should

under

one

“balance[]

of
the

traditional ‘values of judicial economy, convenience, fairness,
and

comity.’”

Id.

(quoting

Carnegie-Mellon

University

v.

Cohill, 484 U.S. 343, 350 (1988)).
Although § 1367(c) is “permissive rather than mandatory[,]
. . . the district court’s discretion . . . is not boundless.”
Valencia ex rel. Franco v. Lee, 316 F.3d 299, 305 (2d Cir.
2003).

The

factors

toward

declining

state

law

to

claims”

to

Circuit

has

considered

exercise
in

eliminated before trial.
Second

be

will

jurisdiction

cases

when

the

generally

over

the

federal

“point

remaining

claims

Cohill, 484 U.S. at 350 n.7.

“repeatedly

held

that

a

district

are
The
court

particularly abuses its discretion when it retains jurisdiction
over

state

following

law

claims

dismissal

of

raising
all

unsettled

questions

original-jurisdiction

of

law

claims.”

Kolari, 455 F.3d at 124 (collecting cases).
B.

Application to the Plaintiffs’ NYLL Claims

In support of his motion, Mr. Chan argues that I should
decline

to

exercise

jurisdiction
8

over

the

plaintiffs’

NYLL

claims

because

exceptions.

the

case

now

meets

two

of

the

§

1367(c)

Namely, all of the original jurisdiction claims

have been dismissed, and the state law claims raise a novel or
complex issue of law.
The former proposition is undoubtedly true.
of

the

original

trial,

the

federal

claims

original jurisdiction were dismissed.
997004, at *1.

At the close

over

which

I

had

Yong Kui Chen, 2012 WL

Accordingly, we now approach a new trial based

only on state law claims.
It is also true that the plaintiffs’ remaining state law
claims likely would require this Court to decide a novel state
law issue.

The NYLL allows for some employers to claim a “tip

credit” to pay a rate less than minimum wage to an employee who
has tips that make up the difference.

NYLL § 652(4).

As of

January 1, 2011, restaurant employment practices are governed by
a

wage

order

for

the

hospitality

industry,

which

explicitly

requires employers to meet certain notice requirements in order
to be eligible for tip credits.

N.Y. Comp. Codes R. & Regs.

(“NYCRR”)

However,

tit.

throughout
restaurants
restaurant

12,

the
were

§

146-1.3.

entire

time

covered

industry,

NYCRR

period

by

a

tit.

wage
12,

prior

relevant
order
§

137

https://www.labor.ny.gov/formsdocs/wp/CR137.pdf.
9

to

to

2011

this

specific

and

case,
to

(repealed
This

the

2011),
wage

order required employers to provide certain notices to their
employees,

NYCRR

tit.

12,

§

137-2.2,

2.3,

and

it

allowed

employers to take tip credits, NYCRR tit. 12, § 137-1.5.

But it

did not explicitly say that an employer had to comply with the
order’s notice requirements to be eligible to take a tip credit,
though many courts have found such a requirement.

See, e.g.,

Yong Kui Chen, 615 F. App’x at 14 n.2 (collecting cases).
district courts have found otherwise.
cases).
this

Other

Id. at 14 (collecting

State court decisions do not provide any clarity on

issue,

and

I

would

have

plaintiffs were to prevail.

to

decide

the

issue

if

the

Thus, the claims brought by the

plaintiffs raise a novel or complex issue of state law.
As

this

case

falls

under

the

exceptions

listed

in

§

1367(c), it is left to my discretion to determine whether I
should exercise supplemental jurisdiction over the plaintiffs’
claims.

See Kolari, 455 F.3d at 122.

However, the Second

Circuit has repeatedly found that a district court abuses its
discretion when it exercises jurisdiction over state law claims
raising

unsettled

issues

after

dismissing

the

claims

that

provided the jurisdictional hook, as would be the case here.
See id. at 124 (collecting cases); Valencia, 316 F.3d at 306
(same).
district

In one such case, the Second Circuit concluded that the
court

had

abused

its
10

discretion

to

exercise

supplemental

jurisdiction

over

a

novel

state

law

issue

even

though all parties had assented to a court-proposed agreement by
which the plaintiffs would drop their federal claims but would
present one remaining state claim to the court for adjudication.
Seabrook v. Jacobson, 153 F.3d 70, 73 (2d Cir. 1998).
Consideration

of

the

appropriate

factors

favors denying supplemental jurisdiction.
proper

respect

for

state

functions,”

in

this

case

Comity “reflects a

pointing

allowing state courts to decide state law.

in

favor

of

Chenensky v. New

York Life Insurance Co., 942 F. Supp. 2d 388, 395 (S.D.N.Y.
2013) (quoting Levin v. Commerce Energy, Inc., 560 U.S. 413, 421
(2010)).
no

As this case raises an unsettled state law issue and

longer

involves

especially heavily.
avoided . . . .”

a

federal

claim,

this

factor

weighs

“Needless decisions of state law should be
United Mine Workers of America v. Gibbs, 383

U.S. 715, 726 (1966).
The remaining factors are complicated by the fact that I
have already held a complete trial on the plaintiffs’ claims.
However, the analysis should be forward-looking.

This case is

proceeding toward a new trial with a new jury.

With this in

view,

in

none

of

the

other

maintaining jurisdiction.
to

date

are

simply

sunk

factors

weigh

heavily

favor

of

The resources that have been expended
costs,
11

and

neither

party

will

be