Agerbrink v. Model Service LLC et al
Filing
76
MEMORANDUM AND OPINION: For the reasons discussed above, the plaintiff's motion for leave to amend (Docket no. 50) is granted. The plaintiff shall file the Second Amended Complaint within seven (7) days of the date of this order. (As further set forth in this Order.) (Signed by Magistrate Judge James C. Francis on 1/7/2016) (cdo)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - -:
EVA AGERBRINK, individually and
:
on behalf of all others similarly :
situated,
:
:
Plaintiff,
:
:
- against :
:
MODEL SERVICE LLC d/b/a MSA MODELS :
and SUSAN LEVINE,
:
:
Defendants.
:
- - - - - - - - - - - - - - - - - -:
MODEL SERVICE LLC d/b/a MSA MODELS :
and SUSAN LEVINE,
:
:
Counter Claimants, :
:
- against :
:
EVA AGERBRINK,
:
:
Counter Defendant. :
- - - - - - - - - - - - - - - - - -:
JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE
14 Civ. 7841 (JPO) (JCF)
MEMORANDUM
AND ORDER
Eva Agerbrink, on behalf of herself and all others similarly
situated, brings this action against Model Service LLC (“MSA”) and
Susan Levine.
She seeks damages under the Federal Labor Standards
Act (“FLSA”) and New York State statutory and common law for
alleged violations arising out of her employment.
The plaintiff
now moves pursuant to Rules 15(a) and 21 of the Federal Rules of
Civil Procedure for leave to file a Second Amended Complaint to add
a claim for unjust enrichment and to add William Ivers, the Chief
Operating Officer of MSA, as an individually-named defendant; the
defendants oppose the motion.
For the reasons that follow, the
motion is granted.
1
Background
A brief outline of relevant procedural history will suffice
for the purposes of this motion; the factual background of this
dispute is set forth in greater detail in the June 16, 2015 Order
of the Honorable Paul Oetken, U.S.D.J.
Agerbrink v. Model Service
LLC, No. 14 Civ. 7841, 2015 WL 3750674 (S.D.N.Y. June 16, 2015).
The plaintiff filed this action on September 26, 2014, and
filed an amended complaint on January 2, 2015.
The defendants
moved to dismiss. The Honorable Paul Oetken, U.S.D.J., granted the
defendants’ motion as to the plaintiff’s declaratory judgment
Id. at *8.
claim, but denied it as to her wage and hour claims.
The defendants answered and asserted counterclaims, to which the
plaintiff responded on July 23, 2015.
At an initial pre-trial
conference, I entered a Scheduling Order setting February 29, 2016
as the deadline for completion of fact discovery.
Subsequently,
disputes.
an
email
the
parties
intensely
litigated
numerous
The plaintiff moved for a corrective notice relating to
sent
by
Mr.
Ivers
to
putative
class
members.
Additionally, on four separate occasions the parties requested
conferences to address conflicts regarding the purported class
size, the adequacy of class representation, and the scope of
discovery.
On
October
16,
2015,
I
entered
a
Discovery
Confidentiality Order to facilitate document exchange.
The plaintiff now moves to amend her complaint for a second
time to (1) add a claim for unjust enrichment on behalf of a
putative class of all MSA models, and (2) add Mr. Ivers as a
2
defendant.
The defendants argue that the proposed amendment has
been unduly delayed, is made in bad faith, and will be prejudicial.
Discussion
A motion to amend is generally governed by Rule 15 of the
Federal Rules of Civil Procedure, which provides that leave to
amend
a
pleading
should
be
freely
granted
“when
justice
so
requires.” Fed. R. Civ. P. 15(a)(2). Under this liberal standard,
a motion to amend should be denied only if the moving party has
unduly delayed or acted in bad faith, the opposing party will be
unfairly prejudiced if leave is granted, or the proposed amendment
is futile.
See Foman v. Davis, 371 U.S. 178, 182 (1962); McCarthy
v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007); In re
Alcon Shareholder Litigation, 719 F. Supp. 2d 280, 281 (S.D.N.Y.
2010).
Where, as here, the plaintiff also seeks to add an additional
defendant, Rule 21 of the Federal Rules of Civil Procedure permits
such joinder “at any time, on just terms.”
Fed. R. Civ. P. 21; see
also City of Syracuse v. Onondaga County, 464 F.3d 297, 308 (2d
Cir. 2006).
In practice, the standard for deciding whether to
permit joinder under Rule 21 is “the same standard of liberality
afforded to motions to amend pleadings under Rule 15.”
Rush v.
Artuz, No. 00 Civ. 3436, 2001 WL 1313465, at *5 (S.D.N.Y. Oct. 26,
2001) (quoting Soler v. G & U, Inc., 86 F.R.D. 524, 527–28
(S.D.N.Y. 1980)); see also Johnson v. Bryson, 851 F. Supp. 2d 688,
703 (S.D.N.Y. 2012) (“[T]he showing necessary under Rule 21 is the
same as that required under Rule 15(a).”).
3
Thus, the plaintiff’s
motion should be permitted absent a finding of undue delay, bad
faith,
prejudice,
or
futility.
The
defendants
focus
their
arguments on the issues of delay, bad faith, and prejudice.
A.
Delay
In the Second Circuit, “[m]ere delay, [] absent a showing of
bad faith or undue prejudice, does not provide a basis for a
district court to deny the right to amend.”
State Teachers
Retirement Board v. Fluor Corp., 654 F.2d 843, 856 (2d Cir. 1981);
see also Parker v. Columbia Pictures Industries, 204 F.3d 326, 339
(2d Cir. 2000) (“[W]e have held repeatedly that ‘mere delay’ is
not, of itself, sufficient to justify denial of a Rule 15(a) motion
. . . .”).
Where a significant period of time has passed prior to
filing a motion to amend, however, the moving party must provide an
explanation for the delay.
Industries
Inc.,
811
F.
See Park B. Smith, Inc. v. CHF
Supp.
2d
766,
779
(S.D.N.Y.
2011)
(describing burden to explain extended delay and collecting cases).
The premise of the defendants’ undue delay argument is that
the plaintiff was previously aware of the facts underlying her
proposed amendment.
(Defendants’ Opposition to Plaintiff’s Motion
to Amend the Complaint a Second Time (“Def. Memo.”) at 1, 5).
They
claim that she could have asserted her unjust enrichment claim and
named Mr. Ivers as a defendant when she filed her initial complaint
-- thirteen months prior to her motion to amend -- or at least in
January 2015, when she filed the First Amended Complaint -- tenand-one-half months prior.
(Def. Memo. at 1, 5).
Simply alleging
that the plaintiff could have moved to amend earlier than she did,
4
however, is insufficient to demonstrate undue delay.
See Dilworth
v. Goldberg, 914 F. Supp. 2d 433, 460 (S.D.N.Y. 2012) (“[T]he
motion to amend will not be denied by reason of plaintiffs’ delay
in alleging facts that were previously within their knowledge”
(footnote omitted); see also Margel v. E.G.L. Gem Lab Ltd., No. 04
Civ. 1514, 2010 WL 445192, at *11 (S.D.N.Y. Feb. 8, 2010) (“[T]he
court may ‘deny leave to amend “where the motion is made after an
inordinate delay, no satisfactory explanation is offered for the
delay, and the amendment would prejudice” other parties.’” (quoting
Grace v. Rosenstock, 228 F.3d 40, 53-54 (2d Cir. 2000))).
Furthermore, the plaintiff has offered plausible explanations
for the timing of the instant motion.
Specifically, she clarifies
that because “the inclusion of [a] claim for unjust enrichment
would have potentially complicated the Declaratory Judgment Act
claim,” it was only appropriate to add after that claim was
dismissed (in June 2015). (Motion for Leave to Amend the Complaint
and Caption and to Join William Ivers as a Defendant (“Pl. Memo.”)
at 23).
She characterizes the decision to bring the unjust
enrichment claim on behalf of all MSA models as the logical
outgrowth of (1) the defendants’ disclosure of the size of the fit
model
class
and
(2)
“Plaintiff’s
counsel’s
independent
investigation[] that the scope of the proposed expanded class would
likely be certifiable, appropriate, and manageable.”
(Declaration
of Cyrus E. Dugger dated Oct. 19, 2015 (“Dugger Decl.”), ¶¶ 35-36;
Pl. Memo. at 23).
With respect to adding Mr. Ivers as a defendant,
the plaintiff acknowledges that she considered joining him earlier
5
in the litigation. (Pl. Memo. at 24-25). However, she states that
her discovery in July 2015 of Mr. Ivers’ email to MSA fit models
regarding
this
lawsuit
prompted
this
amendment,
as
it
was
“compelling additional evidence that he meets the requirements of
an ‘employer’ under the FLSA and NYLL.”
(Pl. Memo. at 25; Dugger
Decl., ¶ 38). Lastly, as the plaintiff notes, this action has been
intensively litigated to date (Pl. Memo. at 23, 25); in this
context, the delay is not substantial.
Indeed, even if, as the defendants contend, the plaintiff had
not offered a satisfactory explanation for the delay (Def. Memo. at
5), courts have allowed amendment despite similar -- and even much
longer -- intervals between a party’s discovery of relevant facts
and
filing
of
an
amended
pleading,
see,
e.g.,
Richardson
Greenshields Securities, Inc. v. Lau, 825 F.2d 647, 653 n. 6 (2d
Cir. 1987) (collecting cases where leave to amend granted after
delays ranging from two to five years); Affiliated FM Insurance Co.
v. Liberty Mechanical Contractors, Inc., No. 12 Civ. 5160, 2013 WL
4526246, at *5 (S.D.N.Y. Aug. 27, 2013) (allowing amendment after
nine months despite movant’s knowledge of relevant information at
time of initial pleading because party “need not prove that they
uncovered new facts or law” to receive leave to amend); Valentini
v. Citigroup, Inc., No. 11 Civ. 1355, 2013 WL 4407065, at *7
(S.D.N.Y.
Aug.
16,
2013)
(finding
delay
of
eighteen
months
“insufficient ground to warrant denial of [] motion to amend” where
non-moving
party
“failed
to
establish
bad
faith
or
undue
prejudice”); cf. Duling v. Gristede’s Operating Corp., 265 F.R.D.
6
91, 98 (S.D.N.Y. 2010) (allowing amendment two and one-half years
after case began and noting that “even vague or ‘thin’ reasons [for
delay] are sufficient, in the absence of prejudice or bad faith”).
The defendants argue that the plaintiff’s delay in “seek[ing]
to amend her complaint to add defendants and claims she clearly
knew she wished to pursue months before [] is a tactic designed to
burden [them].”
(Def. Memo. at 5).
This is exactly the type of
conclusory allegation of bad faith that courts consistently reject.
See, e.g., Blagman v. Apple, Inc., No. 12 Civ. 5453, 2014 WL
2106489, at *3 (S.D.N.Y. May 19, 2014) (“To the extent that the
defendants claim that [plaintiff’s] delay was strategic . . ., they
provide no showing of bad faith apart from the delay itself.”);
Randolph Foundation v. Duncan, No. 00 Civ. 1172, 2002 WL 32862, at
*3 (S.D.N.Y. Jan. 11, 2002) (“[T]he fact that a party may have had
evidence to support a proposed amendment earlier in the litigation
does not, by itself, give rise to an inference of bad faith.”);
Primetime 24 Joint Venture v. DirecTV, Inc., No. 99 Civ. 3307, 2000
WL 426396, at *5 (S.D.N.Y. April 20, 2000) (“[W]hen the opponent of
an amendment asserts that the movant is acting in bad faith, there
must be something more than mere delay or inadvertence for the
court to refuse to allow the amendment.”).
Because the defendants
have not shown that the plaintiff unduly delayed or acted with a
dilatory motive, they must show prejudice in connection with the
delay to warrant denial of the motion to amend.
B.
Prejudice
Although “[p]rejudice to the opposing party . . . has been
7
described as the most important reason for denying a motion to
amend,” Frenkel v. New York City Off–Track Betting Corp., 611 F.
Supp.
2d
391,
394
(S.D.N.Y.
2009)
(quoting
Turkenitz
v.
Metromotion, Inc., 97 Civ. 2513, 1997 WL 773713, at *8 (S.D.N.Y.
Dec. 12, 1997)), only undue prejudice warrants denial of leave to
amend, A.V. by Versace, Inc. v. Gianni Versace S.p.A., 87 F. Supp.
2d 281, 299 (S.D.N.Y. 2000); see also Oneida Indian Nation of New
York State v. County of Oneida, 199 F.R.D. 61, 77 (N.D.N.Y. 2000)
(noting that where moving party provides explanation for delay,
opposing party must make “greater showing” of prejudice).
In
deciding whether such prejudice exists, courts evaluate whether the
amendment would “(i) require the opponent to expend significant
additional resources to conduct discovery and prepare for trial;
(ii) significantly delay the resolution of the dispute; or (iii)
prevent the plaintiff from bringing a timely action in another
jurisdiction.” Monahan v. New York City Department of Corrections,
214 F.3d 275, 284 (2d Cir. 2000) (quoting Block v. First Blood
Associates, 988 F.2d 344, 350 (2d Cir. 1993)).
Courts also
consider the particular procedural posture of the case. See, e.g.,
Ruotolo v. City of New York, 514 F.3d 184, 192 (2d Cir. 2008)
(“Undue prejudice arises when an ‘amendment [comes] on the eve of
trial and would result in new problems of proof.’” (alteration in
original) (quoting State Teachers Retirement Board, 654 F.2d at
856)); Grochowski v. Phoenix Construction, 318 F.3d 80, 86 (2d Cir.
2003) (upholding denial of leave to amend sought after discovery
had closed and while summary judgment motion was pending).
8
This
“inquiry involves a balancing process,” weighing any potential
prejudice to the opposing party against the prejudice that the
moving party would experience if the amendment were denied. Oneida
Indian Nation of New York, 199 F.R.D. at 77.
The non-moving party
bears the burden “of demonstrating that substantial prejudice would
result were the proposed amendment to be granted.”
Id.; see also
ResQNet.com v. Lansa, Inc., 382 F. Supp. 2d 424, 449 (S.D.N.Y.
2005), rev’d on other grounds, 594 F.3d 860 (Fed. Cir. 2010).
The defendants indicate that allowing this amendment will
necessitate additional, expanded discovery on a claim unrelated to
the claims in the First Amended Complaint.
(Def. Memo. at 6-8).
This alleged prejudice does not rise to a level that justifies
denying leave to amend.
First, the plaintiff filed her motion
See Scott v. Chipotle Mexican
before the close of discovery.
Grill, Inc., 300 F.R.D. 193, 200 (S.D.N.Y. 2014) (“A court is more
likely to find an amendment prejudicial if discovery has closed.”).
Although the parties disagree on the status of discovery (Pl. Memo.
at 27; Def. Memo. at 4-5), discovery is still underway, and neither
a summary judgment briefing schedule nor a trial date has been set,
see JPMorgan Chase Bank, N.A. v. IDW Group, LLC, No. 08 Civ. 9116,
2009 WL 1357946, at *5 (S.D.N.Y. May 12, 2009) (allowing amendment
and citing lack of pending dispositive motions or trial date); A.V.
by Versace, Inc., 87 F. Supp. 2d at 299 (granting leave to amend
where
trial
date
had
not
been
set,
discovery
had
not
been
completed, and claims against new defendants did “not raise factual
claims unrelated to the events in [the] original [] complaint”).
9
Therefore, although the amendment may warrant additional discovery,
it should not significantly prolong the resolution of the action.
Second,
the
defendants’
protestations
that
allowing
the
proposed amendment will “impose an undue burden on Defendants” by
expanding the scope of discovery (Def. Memo. at 6-7)1 are also
insufficient.
While some additional discovery will certainly be
necessary, the possibility “that an amendment will require the
expenditure
of
additional
time,
constitute ‘undue prejudice.’”
effort,
or
money
[does]
not
A.V. by Versace, 87 F. Supp. 2d at
299 (quoting Block, 908 F.2d at 351); see also Margel, 2010 WL
445192, at *12 (noting that any “prejudice that would flow from any
additional
required
discovery
can
generally
be
mitigated
by
adjustments to the discovery schedule,” and collecting cases);
JPMorgan Chase Bank, N.A., 2009 WL 1357946, at *4 (“[An] adverse
party’s burden of undertaking discovery, standing alone, does not
suffice to warrant denial of a motion to amend a pleading.”
(quoting United States v. Continental Illinois National Bank &
Trust Co., 889 F.2d 1248, 1255 (2d Cir. 1989))).
Moreover, as the
plaintiff points out, much of the discovery relevant to the unjust
enrichment claim overlaps with that required for current claims.
(Pl. Memo. at 27); cf. A.V.E.L.A., Inc. v. Estate of Monroe, 34 F.
Supp. 3d 311, 317 (S.D.N.Y. 2014) (allowing
1
amendment that “will
The defendants do not argue that adding Mr. Ivers as a
defendant will cause undue prejudice and I agree with the plaintiff
that, “given COO Ivers’ current substantial involvement in this
litigation, his formal inclusion as an individual defendant will
not significantly increase discovery beyond that which Plaintiff
would otherwise require.” (Pl. Memo. at 28).
10
implicate discovery . . . into areas that [defendants] view as
outside the scope of this litigation” because “any additional
documentation sought will likely be in [defendants’] possession and
therefore can be expeditiously produced.”).
Finally, the proposed unjust enrichment claim arises from the
same facts pled in the First Amended Complaint.
Whether a party
had prior notice of a claim and whether the new claim arises from
the same transaction as the claims in the original pleading are
central to the undue prejudice analysis.
See Monahan, 214 F.3d at
284; accord Ho Myung Moolsan Co. v. Manitou Mineral Water, Inc.,
665 F. Supp. 2d 239, 262 (S.D.N.Y. 2009).
This is because
“prejudice occurs if the opposing party would experience undue
difficulty in defending a lawsuit because of a change in tactics or
theories on the part of the movant.”
Henry v. Murphy, No. M-82,
2002 WL 24307, at *2 (S.D.N.Y. Jan. 8, 2002), aff’d, 50 F. App’x 55
(2d Cir. 2002).
The defendants argue that the new claim is
“unrelated,” “not central to the main crux of the action,” and
effectively a “a new action.”
(Def. Memo. at 6, 7-8).
But, as the
plaintiff notes, it is based on the liquidated damages provision in
MSA’s modeling contract and therefore “overlaps substantially with,
and is ‘foreshadowed’ by, Plaintiff’s [New York Labor Law] § 193
claims for illegal deductions concerning this same contractual
penalty provision.” (Pl. Memo. at 23-24, 27). Furthermore, to the
extent the defendants withheld wages as “security” pursuant to the
liquidated damages provision, the unjust enrichment claim also
relates to the plaintiff’s FLSA claim for failure to remit wages
11
promptly.
as
Exh.
(See, e.g., Proposed Second Amended Complaint, attached
1
to
Dugger
Decl.
(“2nd
Am.
Compl.”),
¶¶
167-73).
Therefore, although the amendment expands the putative class, the
“new claim” it asserts is related to the plaintiff’s existing
claims.2 Accordingly, the defendants have not carried their burden
of demonstrating they will be unduly prejudiced by the proposed
amendment.
C.
Futility3
“It is well established that ‘[l]eave to amend need not be
granted . . . where the proposed amendment would be futil[e].’”
Williams v. Citigroup Inc., 659 F.3d 208, 214 (2d Cir. 2011)
(alterations in original) (quoting Advanced Magnetics, Inc. v.
Bayfront Partners, Inc., 106 F.3d 11, 18 (2d Cir. 1997)).
To
determine whether a proposed pleading is futile, courts analyze
whether it would withstand a motion to dismiss.
See AEP Energy
Services Gas Holding Co. v. Bank of America, N.A., 626 F.3d 699,
2
To the extent that the defendants complain that when
plaintiff’s counsel informed defendants’ counsel in July 2015 of
the plaintiff’s intent to add a claim for unjust enrichment and to
add Mr. Ivers as a defendant, he did not mention that the unjust
enrichment claim would be brought on behalf of an expanded class
(Pl. Memo. at 27; Def. Memo. at 6 nn. 2-3; Dugger Decl. ¶ 4), this
omission, by itself, does not prejudice the defendants, see
Kent-Chojnicki v. Runyon, No. 96 CV 360, 1998 WL 474191, at *4
(W.D.N.Y. April 28, 1998) (allowing amendment of complaint that
expanded scope of purported class).
3
As noted above, the defendants focus their opposition on
delay, bad faith, and prejudice.
They do not argue that the
amendment would be futile.
Cf. Amaya v. Roadhouse Brick Oven
Pizza, Inc., 285 F.R.D. 251, 253 (E.D.N.Y. 2012) (party opposing
motion to amend bears burden of establishing futility); Sotheby’s,
Inc. v. Minor, No. 08 Civ. 7694, 2009 WL 3444887, at *3 (S.D.N.Y.
Oct. 26, 2009) (same). Nevertheless, in order to stave off further
motion practice, I address this issue.
12
726 (2d Cir. 2010) (“Leave to amend may be denied on grounds of
futility if the proposed amendment fails to state a legally
cognizable claim or fails to raise triable issues of fact.”);
Dougherty v. Town of North Hempstead Board of Zoning Appeal, 282
F.3d 83, 88 (2d Cir. 2002).
Accordingly, the plaintiff must plead
sufficient facts to “state a claim to relief that is plausible on
its face.”
(2007).
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
As when considering a motion to dismiss under Rule
12(b)(6), the court must accept as true all well-pleaded facts and
draw all reasonable inferences in the moving party’s favor.
See
Dougherty, 282 F.3d at 91-92 (reversing district court’s denial of
amendment
as
dispute[d]”
futile
because,
plaintiff’s
although
version
of
defendants
events,
“vigorously
“proposed
amended
complaint adequately set[] forth specific facts, which if proven,
c[ould] support a finding of [defendants’ liability]”); Avila v.
Lease Finance Group, LLC, No. 11 Civ. 8125, 2012 WL 3165408, at *5
n. 3 (S.D.N.Y. July 31, 2012).
1.
William Ivers
The decisive question in evaluating the futility of joining
Mr. Ivers as a defendant is whether the proposed Second Amended
Complaint
alleges
facts
that
plausibly
suggest
definition of “employer” under the FLSA.”4
4
he
meets
the
Section 3(d) of the
“District courts in this Circuit have interpreted the
definition of employer under the New York Labor Law coextensively
with the definition used by the FLSA.” Sethi v. Narod, No. 11 CV
2511, 2013 WL 5453320, at *23 (E.D.N.Y. Sept. 30, 2013) (quoting
Spicer v. Pier Sixty LLC, 269 F.R.D. 321, 335 n. 13 (S.D.N.Y. 2010)
and collecting cases). Although the New York Court of Appeals has
not yet resolved this question, “there is no case law to the
13
FLSA broadly defines “employer” as “any person acting directly or
indirectly in the interest of an employer in relation to an
employee.”
Services
29 U.S.C. § 203(d); accord Herman v. RSR Security
Ltd.,
172
F.3d
132,
139
(2d
Cir.
1999).
However,
“[e]vidence that [the] individual is an owner or officer of a
company, or otherwise makes corporate decisions that have nothing
to do with an employee’s function” is insufficient to establish
liability.
2013).
Irizarry v. Catsimatidis, 722 F.3d 99, 109 (2d Cir.
Rather, the individual “must possess control over a
company’s actual ‘operations’ in a manner that relates to a
plaintiff’s employment.”
Id. (quoting RSR Security Services Ltd.,
172 F.3d at 140). In other words, “the determination of whether an
employer-employee relationship exists for purposes of the FLSA
should be grounded in economic reality rather than technical
concepts.”
Id. at 104 (quoting Barfield v. New York City Health
and Hospitals Corp., 537 F.3d 132, 141 (2d Cir. 2008)).
Thus, in answering whether an individual is an employer under
the FLSA, the Second Circuit is guided by the “economic reality”
test,
which
analyzes
“the
totality
of
the
circumstances
and
consider[s] whether the alleged employer ‘(1) had the power to hire
and fire the employees, (2) supervised and controlled employee work
schedules or conditions of employment, (3) determined the rate and
contrary.”
Hart v. Rick’s Cabaret International, Inc., 967 F.
Supp. 2d 901, 940 (S.D.N.Y. 2013). Therefore -- and because any
difference between the definitions of employer under the FLSA and
state law “would be immaterial to the facts of this case,” Kalloo
v. Unlimited Mechanical Co. of New York, Inc., 977 F. Supp. 2d 187,
200 (E.D.N.Y. 2013) -- I will conduct one analysis, using the FLSA
standard.
14
method of payment, and (4) maintained employment records.’” Schear
v. Food Scope America, Inc., 297 F.R.D. 114, 134 (S.D.N.Y. 2014)
(quoting RSR Security Services Ltd., 172 F.3d at 139)).
Although
each factor is probative of an alleged employer’s control over an
employee, none is dispositive.
F.3d at 139.
RSR Security Services Ltd., 172
Nor are they exclusive, “[s]ince economic reality is
determined based upon all the circumstances.”
Id.; see also
Irizarry, 722 F.3d at 104–05, 111 (examining whether individuallynamed defendant exercised authority over management, supervision,
and oversight of employer-company’s affairs in general, in addition
to
evidence
Barfield,
of
537
his
F.3d
direct
at
control
142
(noting
over
that
plaintiff-employees);
Second
Circuit
has
established “different sets of relevant factors based on the
factual challenges posed by particular cases”); Zheng v. Liberty
Apparel Co. Inc., 355 F.3d 61, 71 (2d Cir. 2003) (describing Carter
factors as “sufficient to establish employer status,” but not
necessary, and stating that a court is “free to consider any other
factors it deems relevant to its assessment of the economic
realities test”).
The proposed Second Amended Complaint alleges sufficient facts
to infer that Mr. Ivers is an employer under the FLSA.
The
plaintiff claims that he has “operational control” of MSA and
exerts “power over personnel decisions at MSA Models, including
with respect to Plaintiff and similarly situated fit models.” (2nd
Am. Compl., ¶¶ 60, 73-77, 89).
Specifically, she states that Mr.
Ivers plays a significant role in hiring and firing models, setting
15
wages, and controlling schedules.
72, 80-81, 83, 88).
(2nd Am. Compl., ¶¶ 60-62, 64,
The plaintiff also alleges that he signs and
maintains modeling contracts, including the plaintiff’s; “meets and
communicates directly with MSA Fit Models regarding the terms and
conditions of their employment,” including about restrictions on
ability to leave prior to expiration of contract; and handles
complaints by models about terms of their contracts.
Compl., ¶¶ 65-69, 79-80, 84, 87).
(2nd Am.
These allegations plausibly
state a claim for relief against Mr. Ivers.
See Salomon v.
Adderley Industries, Inc., 960 F. Supp. 2d 502, 510-11 (S.D.N.Y.
2013) (allegations that “proposed individual defendants were owners
and corporate officers of [defendant companies], and had authority
over matters including payroll, personnel, and the supervision and
hiring and firing of employees . . . . are sufficient to plausibly
allege employer status” (internal citations omitted)); Severin v.
Project OHR, Inc., No. 10 Civ. 9696, 2011 WL 3902994, at *6
(S.D.N.Y. Sept. 2, 2011) (refusing to dismiss FLSA claims against
individual defendant where plaintiffs “assert[ed] that in her
capacity as Executive Director of [defendant company], [individual
defendant] controlled personnel decisions, and had the power to
hire and fire, set wages, and otherwise control the terms and
conditions of the plaintiffs’ employment”); Hosking v. New World
Mortgage, Inc., 602 F. Supp. 2d 441, 447 (E.D.N.Y. 2009) (granting
motion to amend to add individual defendants allegedly involved in
day to day business operations and who hired and fired employees,
directed and supervised employees, signed payroll checks, and made
16
decisions
regarding
employee
compensation
and
capital
expenditures); see also Irizarry, 722 F.3d at 116-17 (describing
“the expansive interpretation that courts have afforded the [FLSA]”
as
“cousel[ing]
in
favor
of
finding
that
[individually-named
defendant] was an ‘employer’”).
For the reasons set forth above, the proposed joinder of Mr.
Ivers is not futile.
2.
Unjust Enrichment
To state a claim for unjust enrichment under New York law,
plaintiff must allege that:
at
the
expense
of
the
a
“(1) the defendant was enriched, (2)
plaintiff,
and
(3)
that
it
would
be
inequitable to permit the defendant to retain that which is claimed
by the plaintiff.”
Clifford R. Gray, Inc. v. LeChase Construction
Services, LLC, 31 A.D.3d 983, 988, 819 N.Y.S.2d 182, 187 (3d Dep’t
2006); see also Briarpatch Ltd. v. Phoenix Pictures, Inc., 373 F.3d
296, 306 (2d Cir. 2004).
Simply claiming that the defendant
received a benefit is insufficient to establish a cause of action
for unjust enrichment, Old Republic National Title Insurance Co. v.
Cardinal Abstract Corp., 14 A.D.3d 678, 680, 790 N.Y.S.2d 143, 145
(2d Dep’t 2005); a plaintiff must also demonstrate that the
defendant should have to compensate the plaintiff for the benefit
conferred, Clark v. Daby, 300 A.D.2d 732, 732, 751 N.Y.S.2d 622,
623 (3d Dep’t 2002); see also Kagan v. K–Tel Entertainment, Inc.,
172 A.D.2d 375, 376, 568 N.Y.S.2d 756, 757 (1st Dep’t 1991)
(describing plaintiff’s burden to “demonstrate that services were
performed for the defendant resulting in [defendant’s] unjust
17
enrichment” and noting that mere fact that plaintiff bestowed a
benefit
on
defendant
is
insufficient
to
support
claim).
Furthermore, the alleged “benefit must be ‘specific’ and ‘direct.’”
In re Bayou Hedge Funds Inv. Litig., 472 F. Supp. 2d 528, 532
(S.D.N.Y. 2007) (quoting Kaye v. Grossman, 202 F.3d 611, 615 (2d
Cir. 2000)).
While the existence of a contract generally bars recovery
based on the quasi-contract theory of unjust enrichment, see IDT
Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 142, 879
N.Y.S.2d 355, 361 (2009)(“Where the parties executed a valid and
enforceable written contract governing a particular subject matter,
recovery on a theory of unjust enrichment for events arising out of
that subject matter is ordinarily precluded.”), a claim for unjust
enrichment may survive a motion to dismiss where the plaintiff
challenges the contract’s validity, see Gao v. JPMorgan Chase &
Co., No. 14 Civ. 4281, 2015 WL 3606308, at *5 (S.D.N.Y. June 9,
2015) (rejecting argument that unjust enrichment claim was barred
by existence of written contract where plaintiffs brought claim “in
the
alternative,
alleging
that
the
contract
[wa]s
not
enforceable”); DeWitt Stern Group, Inc. v. Eisenberg, 14 F. Supp.
3d 480, 485 (S.D.N.Y. 2014) (observing that where plaintiff claimed
contract “[wa]s by its terms unenforceable as written,” she had
“the right to plead a claim for equitable relief in the alternative
should certain provisions of the contract be found invalid”).
Accordingly, although the relationship between the defendants and
the plaintiff is governed by a contract (MSA Models Management
18
Agreement (“MSA Contract”), attached as Exh. A to Plaintiff’s
Amended
Class
and
Collective
Action
Complaint),
her
unjust
enrichment claim is not barred, Spirit Locker, Inc. v. EVO Direct,
LLC, 696 F. Supp. 2d 296, 305 (E.D.N.Y. 2010) (explaining that
where “the contract imposed the allegedly unlawful penalty in the
first
place[,]
[]
the
subject-matter
of
[plaintiff’s]
unjust
enrichment suit is not covered by a valid, enforceable contractual
obligation”); cf. Air Atlanta Aero Engineering Ltd. v. SP Aircraft
Owner I, LLC, 637 F. Supp. 2d 185, 196 (S.D.N.Y. 2009) (dismissing
unjust enrichment claim and noting that “[plaintiff’s] failure to
allege that the contracts at issue [were] invalid or unenforceable
preclude[d] it . . . from seeking quasi-contractual recovery for
events arising out of the same subject matter”).
The
proposed
Second
Amended
Complaint
alleges
that
the
defendants, by keeping the plaintiff’s earned wages pursuant to an
“illegal and unenforceable contractual penalty provision,” have
“received and retained a benefit conferred by Plaintiff . . . . ,
which in equity and good consciousness [sic] [they] should not be
permitted to retain.”
(2nd Am. Compl., ¶ 361-362).
The crux of
this claim -- that the defendants have been unjustly enriched by
retaining payments from clients and owed to the plaintiff for work
performed -- is that the defendants are not entitled to these
monies because the MSA Contract’s liquidated damages provision is
unenforceable.
assertions
that
The Second Amended Complaint contains a number of
plausibly
suggest
that
the
liquidated
damage
provision is an illegal penalty and therefore invalid, namely, that
19
it is not “a reasonable measure of anticipated loss” but rather is
“a means by which Defendants . . . intimidate MSA models into
compelled continued performance.”
(2nd Am. Compl., ¶¶ 290-291,
294-295); see Kingsbridge Medical Center, P.C. v. Hill, 357 F.
Supp. 2d 754, 758 (S.D.N.Y. 2005) (stating that where liquidated
damage clause “is plainly or grossly disproportionate to the
probable loss, the provision calls for a penalty and will not be
enforced.”); Del Nero v. Colvin, 111 A.D.3d 1250, 1252, 975
N.Y.S.2d 825, 828 (4th Dep’t 2013) (“[T]he liquidated damages
clause here eliminates the balance due under the Agreement based on
minor breaches of the covenant not to compete such that it is an
‘unconscionable penalty and should not be enforced’” (quoting Clubb
v. ANC Heating & Air Conditioning, Inc., 251 A.D.2d 956, 958, 675
N.Y.S.2d 176, 178 (3d Dep’t 1998)).
Accordingly,
the
proposed
Second
Amended
Complaint
sufficiently pleads an unjust enrichment claim premised on the
defendants’ application of an invalid liquidated damages clause.5
5
The defendants do not make any arguments concerning futility
in their opposition beyond briefly contesting the “plaintiff’s []
assum[ption] that the liquidated damages clause in the Management
Agreement is somehow per se unlawful under New York contract law.”
(Def. Memo. at 6). But this argument goes to the merits of the
claim, not the sufficiency of the complaint.
I note, too that the defendants also state that “this very MSA
contract was recently held valid by the New York State Supreme
Court.” (Def. Memo. at 7 (citing Model Service LLC v. MC2 Models
Management LLC, No. 160519/13 (N.Y. Sup. Ct. Sept. 18, 2015)).
However, this assertion is wildly misleading. The defendants imply
that the New York State Supreme Court examined and upheld the
liquidated damages provision at issue in this litigation. It did
not.
Instead, it merely noted that neither party disputed the
existence of a valid and enforceable contract. Model Service LLC,
No. 160519/13 at 20.
20
See Spirit Locker, Inc., 696 F. Supp. 2d at 309 (denying motion to
dismiss unjust enrichment claim premised on defendant’s retention
of
monies
pursuant
to
purportedly
invalid
liquidated
damages
provision); cf. Brody v. Brody, No. 07 Civ. 7981, 2009 WL 436404,
at *5 (S.D.N.Y. Feb. 17, 2009) (finding dismissal of unjust
enrichment claim “unwarranted” at motion to dismiss stage “because
it is unclear whether or not Plaintiff will be able to meet this
standard”).
3.
Class Certification
The fact that the unjust enrichment claim is brought on behalf
of a new and larger putative class does not alter my analysis of
the claim’s futility. “[T]he court’s inquiry into the class action
requirements
at
the
pleading
amendment
stage[]
is
limited.”
Hallmark v. Cohen & Slamowitz, LLP, 283 F.R.D. 136, 141 (W.D.N.Y.
2012); see also Duling v. Gristede’s Operating Corp., 265 F.R.D.
91, 104 n. 6 (S.D.N.Y. 2010) (“[T]he court may limit its inquiry
into the class action requirements at the amendment stage when
certification will occur at a later time.” (quoting Presser v. Key
Food Stores Cooperative, Inc., 218 F.R.D. 53, 57 (E.D.N.Y. 2003)).
Although pre-certification motions to amend have been denied on
grounds related to the viability of a class action, see Presser,
218 F.R.D. at 57 (denying in part motion to amend to convert
individual claim into class action), such amendments are generally
rejected only where they fail to overcome deficiencies already
identified in a class certification motion, see, e.g., Orthocraft,
Inc. v. Sprint Spectrum L.P., No. 98 CV 5007, 2002 WL 31640477, at
21
*2 (E.D.N.Y. Nov. 16, 2002); Luedke v. Delta Air Lines, Inc., No.
92 Civ. 1778, 1993 WL 313577, at *4 (S.D.N.Y. Aug. 10, 1993).
The present motion to amend precedes any class certification
motion. Furthermore, the defendants do not challenge the viability
of the class; their arguments against the expanded class definition
focus entirely on the plaintiff’s delay and their anticipated
discovery
burdens
resulting
from
the
new
putative
class.
Accordingly, a detailed inquiry into the requirements of Rule 23 is
unnecessary.
The
proposed
Second
Amended
Complaint
alleges
that
the
defendants withheld “at least $17,946.41 of Plaintiff’s wages as
liquidated damages” pursuant to an “illegal penalty provision” in
the plaintiff’s contract.
(2nd Am. Compl., ¶¶ 168-169, 289).
It
further alleges that “all, or the vast majority, of MSA Models
modeling contracts contain an identical or similar illegal penalty
provision” and that the defendants have “a widespread pattern,
policy, and/or practice of invoking” this provision.
Compl., ¶ 286-289).
(2nd Am.
These allegations raise plausible grounds for
pursuing class claims.
See Agerbrink, 2015 WL 3750674, at *7
(finding “allegations supporting the conclusion that there are
other [] models similarly situated to Plaintiff” sufficient to
render class and collective claims plausible); see also Kassman v.
KPMG LLP, 925 F. Supp. 2d 453, 464 (S.D.N.Y. 2013) (“[T]he relevant
question is whether, based on the allegations in the [proposed
amended complaint], ‘it is plausible that plaintiffs will come
forth with sufficient evidence at the class certification stage to
22
----
·--~-·-···-,_,.
____,"'···-,---------·-----'
demonstrate
commonality."'
Corp.,
F.
893
proposed
unJust
Supp.
2d
(quoting Calibuso v.
374,
enrichment
390
claim
(E.D.N.Y.
brought
Bank of America
2012) I I.
on
behalf
Thus,
of
all
the
MSA
models is not futile.
Conclusion
For the reasons discussed above,
leave to amend
(Docket no.
50)
the plaintiff's motion for
is granted.
The plaintiff shall
file the Second Amended Complaint within seven (7) days of the date
of this order.
SO ORDERED.
C·~~~_l!-s
lJ
Dated:
C. FRANCIS IV
ED STATES MAGISTRATE JUDGE
New York, New York
,January 'I, 2016
Copies transmitted this date:
Cyrus E. Dugger, Esq.
The Dugger Law Firm, PLLC
154 Grand St.
New York, NY 10013
Evan J. Spelfoge~, Esq.
Janie F. Friedman, Esq.
Ronald M. Green, Esq.
Epstein, Becker & Green,
250 Park Ave.
New York, NY 10177
P.C.
23
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?