Zhang v. Akami Inc. et al

Filing 37

MEMORANDUM & OPINION: For the foregoing reasons, Defendants' motion to dismiss the Amended Complaint is GRANTED with regard to Counts XII and XIII, and DENIED with regard to Counts I through XI. Plaintiff's motion to dismiss the Counterc laims is GRANTED and Defendants' Counterclaims are dismissed without prejudice to such claims being asserted in state court. The motions of Plaintiff and Defendants to amend their respective pleadings are DENIED. The Clerk of Court is respectf ully directed to terminate the open motions at Documents 26 and 29, and as further set forth in this order. Motions terminated: 26 MOTION to Dismiss Defendants' Counterclaims, filed by Yahui Zhang, 29 FIRST MOTION to Dismiss, filed by Yuan Hong Chen, Liang Jin Zhuo, John Doe, Jane Doe, Akami Inc. (Signed by Judge Vernon S. Broderick on 9/26/2017) (ap)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------- X
:
YAHUI ZHANG, individually and on behalf of :
:
those similarly situated
:
Plaintiffs,
:
:
- against :
:
:
AKAMI INC., d/b/a AKAMI SUSHI, et al.
:
:
Defendants :
:
---------------------------------------------------------- X

9/26/2017

15-CV-4946 (VSB)
MEMORANDUM & OPINION

Appearances:
John Troy
Troy Law, PLLC
Flushing, New York
Counsel for Plaintiffs
Eugene Kroner
Michael Aaron Brand
Vincent Wong
Law Offices of Vincent S. Wong
New York, New York
Counsel for Defendants
VERNON S. BRODERICK, United States District Judge:
Before me is the motion of Defendants Akami Inc. (“Akami”), Yuan Hong Chen a/k/a
Andy Chen, Liang Jin Zhuo, and Jane Doe (collectively, “Defendants”) to dismiss certain claims
alleged in Plaintiff Yahui Zhang’s amended complaint for failure to state a claim upon which
relief can be granted under Federal Rule of Civil Procedure 12(b)(6) and lack of subject matter
jurisdiction under Rule 12(b)(1). (Doc. 29.) Also before me is the motion of Plaintiff to dismiss
the counterclaims of Defendants for lack of subject matter jurisdiction pursuant to Rule 12(b)(1),
or in the alternative, for failure to state a claim upon which relief can be granted under Rule

12(b)(6). (Doc. 26.) For the reasons that follow, Defendants’ motion is GRANTED with regard
to Counts XII and XIII, and DENIED with regard to Counts I through XI. Because I find there is
no subject matter jurisdiction over Defendants’ counterclaims, Plaintiff’s motion is GRANTED
without prejudice to Defendants’ counterclaims being asserted in state court.
Background1
Plaintiff Zhang, on behalf of himself and other employees similarly situated, brought this
action against Defendants for alleged violations of the Fair Labor Standards Act (the “FLSA”),
29 U.S.C. § 201 et seq. (Counts I & III), the New York Labor Law (the “NYLL”) (Counts II,
IV–V, & VII–X), breach of implied contract (Counts VI & XI), fraudulent filing of Internal
Revenue Service (“IRS”) returns (Count XII), and deceptive acts and practices in violation of
New York General Business Law (“GBL”) § 349 (Count XIII). Plaintiff alleges a systemic
practice of Defendants failing to pay their employees minimum wage and overtime
compensation, refusing to properly record time spent by employees working, failing to provide
Time of Hire Notices, and failing to provide employees with accurate paystubs. (Am. Compl.
¶¶ 2–5.)2 Plaintiff further claims that he was required to commit over twenty percent of his
workday to doing non-tipped work—including cutting oranges, putting in salad dressing and soy
sauce, loading and unloading grocery items, and cutting the cardboard used in delivery bags—
without receiving notification of the tip credit claimed by Defendants. (Id. ¶¶ 24–26.) Finally,
Plaintiff alleges that Defendants failed to post the required New York State Department of Labor
posters informing their employees about the minimum pay rates, overtime pay, tip credit, and

1
The following facts are taken from the amended complaint filed on August 6, 2015 (“Amended Complaint”) and
from the counterclaims filed on July 24, 2015 (“Counterclaims”), and are assumed to be true for purposes of these
motions. See Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508 n.1 (2002); see also Berman v. Sugo LLC, 580 F.
Supp. 2d 191, 197 (S.D.N.Y. 2008). However, my references to the factual allegations should not be construed as a
finding as to their veracity, and I make no such findings.
2

“Am. Compl.” refers to the Amended Complaint, filed in this action on August 6, 2015. (Doc. 17.)

2

payday information. (Id. ¶ 34.)
Akami originally hired Zhang to work as a deliveryman on or about August 20, 2014.
(Id. ¶ 35.) From August 20, 2014 until May 4, 2015, Zhang worked twelve hours on
Wednesdays through Sundays, and six hours on Tuesdays, for a total of sixty-six hours a week.
(Id. ¶¶ 36–37.) Not only did Defendants not maintain, establish, or preserve weekly payroll
records, but Defendants also required Zhang to sign papers affirming false hours worked. (Id.
¶¶ 93–94.) Defendants did not give Zhang a fixed time for lunch or dinner, and paid him
$550.00 every half month, (id. ¶¶ 38–39), did not compensate him for overtime, nor did they
give him “spread of hours” premium for shifts lasting longer than ten hours, (id. ¶¶ 40–41).
With respect to the delivery vehicles of all deliverymen, which includes bicycles and
electric bicycles, Defendants required deliverymen to bear all out-of-pocket costs. (Id. ¶¶ 78–
79.) The deliverymen performed these deliveries for the sole benefit of Defendants, but
Defendants never compensated Zhang or other similarly situated employees for any expenses
incurred in connection with their delivery vehicles. (Id. ¶¶ 82, 85.)
Additionally, as part of their answer to the original complaint, Defendants asserted
counterclaims for intentional infliction of emotional distress, sexual harassment, and prima facie
tort. (See generally Countercl.)3 Defendants claim that from about September 2014 to May
2015, the approximate period of Zhang’s employment, Zhang sent Defendants inappropriate,
vulgar, sexual, harassing, demeaning, and disturbing messages via telephone or electronic
messenger service, including pictures and videos. (See generally id.)

3
“Countercl.” refers to the counterclaims filed by Defendants on July 24, 2015 (the “Counterclaims”), beginning on
page 16 of Defendants’ Answer to the Complaint With Counterclaims. (Doc. 10.)

3

Procedural History
Plaintiff commenced this action by filing a putative collective and class action complaint
on June 25, 2015 (the “Complaint”). (Doc. 1.) On July 24, 2015, Defendants answered the
Complaint, and in their answer asserted the Counterclaims. (Doc. 10.) Plaintiff filed a letter
requesting a pre-motion conference concerning his anticipated motion to dismiss the
Counterclaims on July 30, 2014, (Doc. 14), and Defendants filed a response on August 3, 2015,
(Doc. 15). Plaintiff filed his Amended Complaint on August 6, 2015. (Doc. 17.)
On August 20, 2015, Defendants filed a letter requesting a pre-motion conference on
their anticipated motion to dismiss the Amended Complaint, (Doc. 20), and on August 26, 2015,
Plaintiff filed his response, (Doc. 21). After the pre-motion conference, which was held on
August 27, 2015, and in response to issues raised during the conference, Plaintiff submitted a
letter providing me with case law to support his position regarding Counts XII and XIII in the
Amended Complaint, (Doc. 22), and thereafter submitted another letter on September 10, 2015
to advise me that he intended to pursue his motion to dismiss the Counterclaims, (Doc. 23). On
September 11, 2015, Defendants filed a letter representing that Defendants did not gross
$500,000.00 annually as required to impose liability under the FLSA, and indicating their
intention to file a motion to dismiss. (Doc. 24.)
On October 13, 2015, Plaintiff filed his motion to dismiss Defendants’ Counterclaims,
(Docs. 26–28), and Defendants filed their motion to dismiss the Amended Complaint, (Docs. 29–
31). On November 10, 2015, Plaintiff and Defendants, respectively, filed their oppositions,
(Docs. 32–33; Doc. 34), and on November 24, 2015, filed their replies, (Doc. 35; Doc. 36).

4

Legal Standard
Rule 12(b)(1)
A claim may be “properly dismissed for lack of subject matter jurisdiction under Rule
12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it.”
Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). To survive a Rule 12(b)(1) motion
to dismiss, “the district court must take all uncontroverted facts in the complaint . . . as true, and
draw all reasonable inferences in favor of the party asserting jurisdiction.” Tandon v. Captain’s
Cove Marina of Bridgeport, Inc., 752 F.3d 239, 243 (2d Cir. 2014). However, “jurisdiction must
be shown affirmatively, and that showing is not made by drawing from the pleadings inferences
favorable to the party asserting it.” Morrison v. Nat’l Australia Bank Ltd., 547 F.3d 167, 170 (2d
Cir. 2008) (quoting APWU v. Potter, 343 F.3d 619, 623 (2d Cir. 2003)). Furthermore, “[i]n
resolving a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) a district
court may consider evidence outside the pleadings.” Id.
Rule 12(b)(6)
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), “a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). A claim will have “facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Id. This standard demands “more than a sheer possibility
that a defendant has acted unlawfully.” Id. “Plausibility . . . depends on a host of considerations:
the full factual picture presented by the complaint, the particular cause of action and its elements,
and the existence of alternative explanations so obvious that they render plaintiff’s inferences

5

unreasonable.” L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 430 (2d Cir. 2011).
In considering a motion to dismiss, a court must accept as true all well-pleaded facts
alleged in the complaint and must draw all reasonable inferences in the plaintiff’s favor. Kassner
v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007). A complaint need not make
“detailed factual allegations,” but it must contain more than mere “labels and conclusions” or “a
formulaic recitation of the elements of a cause of action.” Iqbal, 556 U.S. at 678 (internal
quotation marks omitted). Although all allegations contained in the complaint are assumed to be
true, this tenet is “inapplicable to legal conclusions.” Id.
Rule 15(a)
A party may amend its pleading once as a matter of course within twenty-one days after
serving it, or twenty-one days after service of a responsive pleading, or after service of a motion
under Rules 12(b), 12(e), or 12(f) of the Federal Rules of Civil Procedure, whichever is earlier.
Fed. R. Civ. P. 15(a)(1). Otherwise, a party may amend its pleading with the opposing party’s
written consent, or upon leave of the court. Fed. R. Civ. P. 15(a)(2). Generally, leave of court to
amend a pleading should be freely granted “when justice so requires.” Id.; see also A.V.E.L.A.,
Inc. v. Estate of Monroe, 34 F. Supp. 3d 311, 315 (S.D.N.Y. 2014). However, the Second
Circuit has held that “[l]eave to amend, though liberally granted, may properly be denied for:
undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue
of allowance of the amendment, futility of amendment, etc.” Ruotolo v. City of N.Y., 514 F.3d
184, 191 (2d Cir. 2008) (internal quotation marks and citation omitted). Absent a showing of
bad faith or undue prejudice, however, “[m]ere delay . . . does not provide a basis for the district
court to deny the right to amend.” Id. (internal quotation marks omitted).

6

“Leave to amend may be denied as futile when the pleading would not survive a motion
to dismiss.” A.V.E.L.A., 34 F. Supp. 3d at 319. Under that standard, the proper inquiry “is not
whether a [moving party] will ultimately prevail but whether [that party] is entitled to offer
evidence to support the claims.” Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir. 2001)
(quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). A court must accept as true all wellpleaded facts and draw all reasonable inferences in the moving party’s favor. DiFolco v.
MSNBC Cable LLC, 622 F.3d 104, 110–11 (2d Cir. 2010).
Discussion
Defendants’ Motion to Dismiss the Amended Complaint
Defendants move pursuant to Rule 12(b)(6) to dismiss Counts I, III, XII, and XIII4 of the
Amended Complaint for failure to state a claim. (Defs.’ Mem. 2.)5 Defendants also claim lack
of supplemental jurisdiction over Counts VI and XI, Plaintiff’s breach of implied contract
claims. (Id.) Finally, Defendants conditionally move to dismiss Counts II, IV–V, and VII–X, all
brought under the NYLL, for lack of supplemental jurisdiction if I dismiss the FLSA claims.
(See id.) I will now address these arguments in turn.
1. Failure to State a Claim
a. Deceptive Acts and Practices Under GBL § 349 (Count XIII)
Section 349 prohibits “[d]eceptive acts or practices in the conduct of any business, trade
or commerce or in the furnishing of any service in this state.” N.Y. Gen. Bus. Law § 349(a). To
state a § 349 claim, a plaintiff must allege that “(1) the act or practice was consumer-oriented;

4

Counts I and II of the Amended Complaint allege violations of the FLSA, Count XII alleges fraudulent filing of
federal tax returns pursuant to 26 U.S.C. § 7434, and Count XIII asserts a claim for deceptive acts and practices in
violation of New York General Business Law (“GBL”) § 349.
5

“Defs.’ Mem.” refers to the Memorandum of Law submitted in support of Defendants’ motion to dismiss. (Doc.
30.)

7

(2) the act or practice was misleading in a material respect; and (3) the plaintiff was injured as a
result.” Spagnola v. Chubb Corp., 574 F.3d 64, 74 (2d Cir. 2009); see also Maurizio v.
Goldsmith, 230 F.3d 518, 521 (2d Cir. 2000).
With regard to the first element, Zhang must plead “consumer-oriented” conduct.
Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank N.A., 85 N.Y.2d 20, 25
(1995). “The ‘consumer-oriented’ requirement may be satisfied by showing that the conduct at
issue potentially affects similarly situated consumers.” Wilson v. Northwestern Mutual Ins. Co.,
625 F.3d 54, 64 (2d Cir. 2010). “Although consumer-oriented conduct does not require a
repetition or pattern of deceptive conduct, a plaintiff must demonstrate that the acts or practices
have a broader impact on consumers at large.” Id. In light of this broader-impact requirement,
New York courts have recognized that various activities do not fall within the reach of this
statute, including “[p]rivate contract disputes, unique to the parties.” Oswego Laborers’ Local
214 Pension Fund, 85 N.Y.2d at 25.
In his opposition, Zhang does not address or respond to Defendants’ motion to dismiss
Count XIII. Therefore, I find that Zhang has abandoned his GBL claim alleged in Count XIII
and could grant Defendants’ motion to dismiss with regard to Count XIII on that basis alone.
See Jackson v. Fed. Exp., 766 F.3d 189, 197–98 (2d Cir. 2014) (“Where a partial response to a
motion is made . . . a court may, when appropriate, infer from a [counseled] party’s partial
opposition that relevant claims or defenses that are not defended have been abandoned.”).
In any event, addressing the substance of the allegation and construing the Amended
Complaint in a light most favorable to Zhang, I find that Defendants’ alleged conduct does not
amount to “consumer oriented” conduct. The only allegation asserted by Zhang in support of his
claim under section 349 is that it “provides that if any person willfully files a fraudulent

8

information return with respect to payments purported to be made to any other person, such other
person may bring a civil action for damages against the person so filing such a return.” (Am.
Compl. ¶ 121.) As an initial matter, section 349 contains no such language, and Plaintiff has not
cited case law applying section 349 to the filing of fraudulent information returns under similar
factual circumstances to this case. In addition, the alleged filing of fraudulent tax returns—itself
based on speculative and conclusory assertion that “it is highly unlikely that Defendant[s]
reported accurate information on their federal and state income tax returns,” (Pl.’s Opp. 7–8)6—
is not consumer-oriented conduct. See City of N.Y. v. Cyco.Net, Inc., 383 F. Supp. 2d 526, 562–
63 (S.D.N.Y. 2005) (“The act of not filing reports understandably results in the City not knowing
which consumers to tax, but the Court finds there is no basis for the City to claim that the act of
not filing the reports misleads consumers in any way, as required under the statute.”); cf. Chiste
v. Hotels.com L.P., 756 F. Supp. 2d 382, 405–06 (S.D.N.Y. 2010) (permitting a § 349 claim to
survive a motion to dismiss where the claim was based on the defendant Hotels.com charging
consumers more taxes than it pays the hotels, and also where the specific wording of an
agreement allowed the claim to proceed). None of the allegations in the Amended Complaint
support an assertion that Defendants participated in consumer-oriented conduct. Rather, the
Amended Complaint describes conduct of a private employer-employee dispute with no
perceived impact on consumers.
Therefore, I find that the Amended Complaint does not allege a plausible claim under
GBL § 349. Defendants’ motion to dismiss Count XIII is GRANTED.

6

“Pl.’s Opp.” refers to Plaintiff’s Memorandum of Law in Opposition to Defendants’ Motion to Dismiss. (Doc. 34.)

9

b. Violations of 26 U.S.C § 7434 (Count XII)
“If any person willfully files a fraudulent information return with respect to payments
purported to be made to any other person, such other person may bring a civil action for damages
against the person so filing such return.” 26 U.S.C. § 7434(a); see also Katzman v. Essex
Waterfront Owners LLC, 660 F.3d 565, 566 (2d Cir. 2011) (per curiam) (§ 7434 is a “provision
that creates a civil damages remedy for the willful filing of fraudulent ‘information return[s]’”)
(alteration in original). An “information return” is defined as “any statement described in section
6724(d)(1)(A),” which includes, among other things, statements related to information returns
“with respect to income tax withheld.” 26 U.S.C. § 6724(d)(1)(A)(vii).
The plain language of the statute requires that a person “willfully files” a fraudulent
information return. See Katzman, 660 F.3d at 568. “[A]n allegation that a person intentionally
failed to file a required information return does not state a claim under § 7434.” Id. “An
actionable claim only arises . . . when ‘the information return itself’ is fraudulent.” Katzman v.
Essex Waterfront Owners LLC, No. 09 Civ. 7541(DAB), 2010 WL 3958819, at *3 (S.D.N.Y.
Sept. 29, 2010) (citation omitted), aff’d, 660 F.3d 565 (2d Cir. 2011).
The Amended Complaint does not allege that Defendants willfully filed a fraudulent
information return. Rather, the Amended Complaint merely parrots the statutory requirements
and outlines its claim for relief. (See Am. Compl. ¶¶ 117–19.) Although Plaintiff in his
opposition identifies facts related to his claims under the FLSA and NYLL as support for his
§ 7434 claim, the only relationship between these claims is that Defendants are required to report
wage compensation on their information returns with respect to income tax withheld and given to
Plaintiff. Plaintiff then asserts that since he was not properly compensated for non-tipped work,
“[i]t is highly unlikely that Defendants reported accurate information on their federal and state

10

income tax returns.” (Pl.’s Opp. 7–8.) These assertions do not appear in the Amended
Complaint, and even if they did they are insufficient to plead a plausible claim, much less a
“willful” filing of information returns.
Therefore, Defendants’ motion to dismiss Count XII is GRANTED.
c. Violations of the FLSA (Counts I & III)
Defendants also seek to dismiss Plaintiff’s claim that Defendants failed to pay him, and
other similarly situated employees, the required minimum and overtime wages in violation of the
FLSA. (See generally Am. Compl.) Defendants seek dismissal of these counts based upon
Plaintiff’s purported failure to allege that Defendants are an “enterprise engaged in commerce,”
subject to liability under the FLSA. (Defs.’ Mem. 9–11.)
The FLSA provides coverage under its minimum wage and overtime provisions to each
employee who “is engaged in commerce or in the production of goods for commerce, or is
employed in an enterprise engaged in commerce or in the production of goods for commerce.”
29 U.S.C. §§ 206, 207. These two types of coverage under the FLSA have been termed
“individual coverage” and “enterprise coverage.” Padilla v. Manlapaz, 643 F. Supp. 2d 298, 299
(E.D.N.Y. 2009) (citing Bowrin v. Catholic Guardian Society, 417 F. Supp. 2d 449, 457
(S.D.N.Y. 2006)).
The FLSA defines “commerce” as “trade, commerce, transportation, transmission, or
communication among the several States or between any State and any place outside thereof.”
29 U.S.C. § 203(b). In relevant part, the FLSA also defines an “enterprise engaged in commerce
or in the production of goods for commerce” as an enterprise that (1) “has employees engaged in
commerce or in the production of goods for commerce” or “has employees handling, selling, or
otherwise working on goods or materials that have been moved in or produced for commerce by

11

any person”; and (2) has “an annual gross volume of sales made or business done [totaling at
least] $500,000 (exclusive of excise taxes at the retail level that are separately stated).” Id.
§ 203(s)(1); see also Locke v. St. Augustine’s Episcopal Church, 690 F. Supp. 2d 77, 84
(E.D.N.Y. 2010).
Zhang alleges in his Amended Complaint that Defendant Akami “is a business engaged
in interstate commerce that has gross sales in excess of Five Hundred Thousand Dollars
($500,000) per year” and that Akami “purchased and handled goods moved in interstate
commerce.” (Am. Compl. ¶¶ 10–11.) Contrary to Defendants assertion, these are not “legal
conclusion[s] couched as [] factual allegation[s].” (Defs.’ Mem. 11.) The allegations are factual
assertions.
Counsel for Defendants asserted in a letter submitted to me that upon “reviewing several
tax documents,” it appears that Defendants did not gross $500,000.00 annually. (Doc. 24).7 In
any event, Defendants do not raise this argument in their opposition, nor did they attach any
supporting documents purporting to demonstrate Defendants gross annual income was below
$500,000 during the relevant time period.8 I find the allegations in Plaintiff’s Amended
Complaint sufficient state claims under the FLSA. See Jia Hu Qian v. Siew Foong Hui, No. 11
Civ. 5584 (CM), 2012 WL 1948820, at *3 (S.D.N.Y. May 30, 2012) (facts pled sufficient to

7

In any event, I cannot consider matters outside of the pleadings without converting this motion into a motion for
summary judgment and giving both parties the opportunity to “conduct appropriate discovery and submit the
additional supporting material contemplated by Rule 56.” See Chambers v. Time Warner Inc., 282 F.3d 147, 154
(2d Cir. 2002); see also Velez v. Vassallo, 203 F. Supp. 2d 312, 328–33 (S.D.N.Y. 2002) (finding that whether a
defendant is an “enterprise engaged in commerce” is not jurisdictional). However, I note that courts in this district
have held that tax returns, some of which were unsigned, were insufficient to support a motion for summary
judgement where the plaintiffs submitted evidence at odds with the volume of business that the defendants
professed. See Jai Fu Chen v. New 9th Ave Pearl on Sushi Inc., No. 14-CV-580 (JPO), 2015 WL 3947560, at *3
(S.D.N.Y. June 29, 2015).
8

Because I find that Plaintiff sufficiently stated a claim under the FLSA, I do not reach the issue of lack of
supplemental jurisdiction over the NYLL claims. (See Defs.’ Mem. 11.)

12

allege enterprise coverage over defendant restaurant where the complaint alleged merely that
defendant had employees engaged in commerce or the production of goods for commerce and
handled, sold, or otherwise worked on good or materials that had been moved in or produced for
commerce by any person, and had an annual gross volume of sales of not less than $500,000); cf.
Archie v. Grand Cent. P’ship, Inc., 997 F. Supp. 504, 530 (S.D.N.Y. 1998) (noting the
“legislative history clearly demonstrates that Congress intended to extend the coverage of the
FLSA to companies that use products that have moved in interstate commerce” and that the
amendment “leads to the result that virtually every enterprise in the nation doing the requisite
dollar volume of business is covered by the FLSA”).
Defendants’ motion to dismiss Counts I and III of the Amended Complaint is therefore
DENIED.
2. Lack of Supplemental Jurisdiction
a. Breach of Implied Contract (Counts VI and XI)
Zhang claims breach of an implied contract for the reimbursement of all costs and
expenses of bicycles or electric delivery vehicles, including any depreciation, insurance,
maintenance, and repairs. (Am. Compl. ¶¶ 77–86, 107–16.) According to Zhang, (1)
Defendants required their deliverymen to bear all out-of-pocket expenses associated with their
delivery vehicles, (2) plaintiffs purchased delivery vehicles at their own expense, (3) plaintiffs
performed deliveries for the sole benefit of Defendants, (4) there was an implied contract
whereby Defendants would compensate plaintiffs for the out-of-pocket costs associated with
their delivery vehicles, and (5) Defendants never compensated plaintiffs. (See id.) Plaintiff
makes these claims with respect to all potential plaintiffs (Count VI) and himself (Count XI).
Defendants move to dismiss Zhang’s breach of implied contract claims asserting that (1) there is

13

a lack of subject matter jurisdiction because the underlying facts are insufficiently related to the
FLSA claims, and (2) the claims are duplicative of one another. (See Defs.’ Mem. 12–14.)
It is well established that “[f]ederal courts are courts of limited jurisdiction whose power
is limited strictly by Article III of the Constitution and congressional statute.” United Food &
Commercial Workers Union v. Centermark Props. Meriden Square, Inc., 30 F.3d 298, 303 (2d
Cir. 1994). “If the court determines at any time that it lacks subject-matter jurisdiction, the court
must dismiss the action.” Fed. R. Civ. P. 12(h)(3).
“[I]n any civil action of which the district courts have original jurisdiction, the district
courts shall have supplemental jurisdiction over all other claims that 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.” 28 U.S.C. § 1367(a). Claims form part of
the “same case or controversy” for purposes of § 1367(a) if “the federal claim and state claim []
stem from the same ‘common nucleus of operative fact.’” Montefiore Med. Ctr. v. Teamsters
Local 272, 642 F.3d 321, 332 (2d Cir. 2011) (quoting United Mine Workers v. Gibbs, 383 U.S.
715, 725 (1966)); see also Shahriar v. Smith & Wollensky Rest. Grp., Inc., 659 F.3d 234, 245 (2d
Cir. 2011) (citing Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 308 (2d Cir.
2004)).9
“To make this determination, courts ‘have traditionally asked whether the facts
underlying the federal and state claims substantially overlapped or the federal claim necessarily

9

Although the Second Circuit has noted that the Seventh Circuit’s decision in Channell v. Citicorp National
Services, Inc., 89 F.3d 379, 385 (7th Cir.1996), suggests that only a “loose factual connection” between the federal
and state law claims is necessary for a court to exercise supplemental jurisdiction, the Second Circuit has not
endorsed that test, but rather continues to apply the well-known Gibbs test of “a common nucleus of operative
facts.” See Jones v. Ford Motor Credit Co., 358 F.3d 205, 213 (2d Cir. 2004); see also LaChapelle v. Torres, 37 F.
Supp. 3d 672, 680–81 (S.D.N.Y. 2014) (noting that “loose factual connection” standard has not been adopted in the
Second Circuit).

14

brought the facts underlying the state claim before the court.’” LaChapelle, 37 F. Supp. 3d at
680 (quoting Achtman v. Kirby, McInerney & Squire LLP, 464 F.3d 328, 335 (2d Cir. 2006)).
As such, “supplemental jurisdiction should not be exercised ‘when the federal and state claims
rest on essentially unrelated facts.’” Chaluisan v. Simsmetal E. LLC, 698 F. Supp. 2d 397, 401
(S.D.N.Y. 2010) (quoting Lyndonville Sav. Bank & Trust Co. v. Lussier, 211 F.3d 697, 704 (2d
Cir. 2000)).
If the standard for exercising supplemental jurisdiction under § 1367(a) is satisfied, a
court may decline to exercise supplemental jurisdiction only if one of the categories listed in
§ 1367(c) apply: “(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.” 28 U.S.C. § 1367(c); see also Shahriar, 659 F.3d at 245 (citing Itar–Tass Russian
News Agency v. Russian Kurier, Inc., 140 F.3d 442, 448 (2d Cir. 1998)). Additionally, the
Second Circuit has held that if one of the § 1367(c) factors is applicable, a district court should
still not decline to exercise supplemental jurisdiction unless doing so would not promote the
values articulated in Gibbs: judicial economy, convenience, fairness, and comity. See Shahriar,
659 F.3d at 245 (citing Jones, 358 F.3d at 214).
“The FLSA prohibits employers from requiring employees to purchase the tools of their
trade or give any money back to their employers, ‘when the cost of such tools purchased by the
employee cuts into the minimum or overtime wages required to be paid him under the Act.’” Jin
M. Cao v. Wu Liang Ye Lexington Rest., Inc., No. 08 Civ. 3725(DC), 2010 WL 4159391, at *4
(S.D.N.Y. Sept. 30, 2010) (quoting 29 C.F.R. § 531.35); see also Maldonado v. La Nueva

15

Rampa, Inc., No. 10 Civ. 8195(LLS)(JLC), 2012 WL 1669341, at *7 (S.D.N.Y. May 14, 2012)
(“‘[E]mployers can require employees to bear the costs of acquiring and maintaining tools of the
trade so long as those costs, when deducted from the employees’ weekly wages, do not reduce
their wage to below the required minimum.’” (quoting Lin v. Benihana Nat’l Corp., 755 F. Supp.
2d 504, 511–12 (S.D.N.Y. 2010))). Although involving a decision issued following a trial, Yu G.
Ke v. Saigon Grill, Inc., 595 F. Supp. 2d 240 (S.D.N.Y. 2008), is instructive here. In Yu G. Ke,
Magistrate Dollinger considered the expenses incurred by deliverymen in buying or repairing
bicycles or other means of transportation in the context of measuring whether the defendants
complied with minimum wage and overtime requirements. Id. at 256. Judge Dollinger decided
that vehicular transportation was “a necessary component of the job of the deliverymen,” and
without such transportation “it would have been impossible for the deliverymen to carry out their
job in a manner that satisfied the business needs of the restaurant and the defendants’ demands
about performance.” Id. at 257–58. As the plaintiffs there testified that they used the bicycles
primarily for work, Judge Dollinger took into account the costs incurred in purchasing and
repairing these bicycles when measuring the plaintiffs’ wages. Id. at 258; see also Jin M. Cao,
2010 WL 4159391, at *4 (delivery workers entitled to damages for money spent on bicycles,
found to be “tools of the trade”). Calculation of the minimum wage under the FLSA claims
asserted by Plaintiff will likely involve the same core facts supporting the breach of implied
contract claims.
As pertaining to Defendants’ argument that the claims in Counts VI and XI are
duplicative of one another, Count VI asserts the implied contract claims with regard to all
plaintiffs and Count XI asserts such claims only as to Plaintiff Zhang. At this stage of the
litigation I will allow both claims to proceed, as to do otherwise would elevate form over

16

substance.
In light of the foregoing, I find that the FLSA claims and implied contract claims share a
common nucleus of operative facts, such that my exercise of supplemental jurisdiction is
warranted, and decline at this stage to dismiss either Counts VI or XI as duplicative.
Accordingly, Defendants’ motion to dismiss Plaintiff’s breach of implied contract claims is
DENIED.
Plaintiff’s Motion to Dismiss Defendants’ Counterclaims
In determining whether to exercise supplemental jurisdiction over Defendants’
Counterclaims, I apply the same legal standard discussed above in relation to Plaintiff’s cause of
action for breach of implied contract. Defendants assert Counterclaims for intentional infliction
of emotional distress, sexual harassment, and prima facie tort. (Countercl. ¶¶ 11–29.) Zhang
argues that supplemental jurisdiction over Defendants’ Counterclaims does not exist because
there is only a “tenuous factual link” between the Counterclaims and the FLSA claims—namely,
“Plaintiff’s employment at Defendants’ business.” (Pl.’s Mem. 4.)10 Plaintiff argues that the
facts underlying Defendants’ Counterclaims involve “graphic messages” that are in no way
relevant to the facts underlying the FLSA claims. (Id. at 5.) In response, Defendants assert that
the Counterclaims and the FLSA claims share a same common nucleus of operative facts
because the time and dates of the improper messages “will show that Plaintiff was not at work as
Plaintiff alleges,” and both the FLSA claims and Counterclaims “will require testimony from the
same witnesses, reliance on the same documents, and determination of the same facts.”11 (Defs.’

10

“Pl.’s Mem.” refers to Plaintiff’s Memorandum of Law in Support of its Motion to Dismiss Defendants’
Counterclaims. (Doc. 27.)

11

Defendants also argue that Plaintiff’s motion to dismiss the Counterclaims is premature since they have not filed
an answer to the Amended Complaint. I find this argument unpersuasive. Although an amended complaint
“ordinarily supersedes the original and renders it of no legal effect,” Int’l Controls Corp v. Vesco, 556 F.2d 665,
668–69 (2d Cir. 1977) (citations omitted), courts within and outside of this district have suggested that

17

Opp. 8.)12 I agree with Plaintiff.
Supplemental jurisdiction for claims arising from the employment relationship is
“‘[t]ypically . . . appropriate . . . because those claims arise from the same underlying period.’”
Chaluisan, 698 F. Supp. 2d at 405 (alteration in original) (citations omitted). However, where
the employment relationship is the sole connecting thread between claims, it is insufficient to
support subject matter jurisdiction. See, e.g., Ozawa v. Orsini Design Assocs., Inc., No. 13-CV1282 (JPO), 2015 WL 1055902, at *12 (S.D.N.Y. Mar. 11, 2015) (where there was “little beyond
the employment relationship” joining the state law counterclaim of unjust enrichment with the
plaintiff’s FLSA overtime claims, supplemental jurisdiction was not warranted); Nicholsen v.
Feeding Tree Style, Inc., No. 12 Civ. 6236(JPO), 2014 WL 476355, at *2 (S.D.N.Y. Feb. 6,
2014); Torres v. Gristede’s Operating Corp., 628 F. Supp. 2d 447, 468 (S.D.N.Y. 2008) (“[T]he
employment relationship does not establish a ‘common nucleus of operative fact’ where it is the
sole fact connecting Plaintiffs’ federal overtime claims and [Defendants’] state law
counterclaims.”).
Although Defendants’ Counterclaims state three separate claims for relief, the gravamen
of each claim is the same—that during the course of his employment, Zhang sent “inappropriate,
vulgar, sexual, harassing, insulting, demeaning, disturbing, and improper messages via telephone

counterclaims can survive a subsequent amended complaint, assuming that the counterclaims are not otherwise
withdrawn in an answer to that amended complaint. Cf. Ground Zero Museum Workshop v. Wilson, 813 F. Supp. 2d
678, 705–06 (D. Md. 2011) (failure to reassert counterclaims when responding to an amended complaint did not
waive them, given that the counterclaims do not need to be contained in an answer but only a pleading, and
defendant otherwise manifested an intent to pursue the counterclaims by moving against the plaintiffs’ motion to
dismiss them and moving to amend them); Am. Home Assur. Co. v. Merck & Co., 354 F. Supp. 2d 318, 320–21
(S.D.N.Y. 2005) (motion to dismiss the counterclaims moot given that the amended answer no longer charged either
company with fraud). Here, Defendants concede that they intend to assert the same Counterclaims in any answer
they file in response to the Amended Complaint. (8/27 Tr. 3:2-7.) “8/27 Tr.” refers to the transcript of the August
27, 2015 pre-motion conference held in this matter.
12
“Defs.’ Opp.” refers to Defendants’ Memorandum of Law in Opposition to Plaintiff’s Motion to Dismiss. (Doc.
34.)

18

and/or electronic messenger service.” (Countercl. 16 ¶ 1.) Here, while Defendants attempt to
forge a link to the alleged minimum wage and overtime violations by arguing in their opposition
that the sexually explicit messages will cast doubt on the hours Plaintiff worked, (see generally
Defs.’ Opp.), I find that the facts underlying the FLSA claims and Counterclaims do not
substantially overlap. See LaChapelle, 37 F. Supp. 3d at 680 (quoting Achtman, 464 F.3d at
335); see also Thomas v. EONY, LLC, No. 13-CV-8512 (JPO), 2015 WL 1809085, at *5–6
(S.D.N.Y. Apr. 21, 2015) (finding that the sexual harassment, disability discrimination, and tort
claims involved a significantly different set of facts, such that there would be little evidentiary
overlap and explaining that, with respect to proving intentional infliction of emotional distress,
“[t]he evidence of Plaintiffs’ hours worked and their status as employees will have no material
overlap with any of the conduct set out in the complaint that could be categorized as ‘extreme
and outrageous’”); Rivera v. Ndola Pharmacy Corp., 497 F. Supp. 2d 381, 393 (E.D.N.Y. 2007)
(declining to exercise supplemental jurisdiction over sexual harassment claims brought by the
plaintiff because the only factual link to the FLSA claims was that both events occurred during
the course of the plaintiff’s employment); cf. Chaluisan, 698 F. Supp. 2d at 402–03 (state
common law claims involving failure to pay a vested vacation pay and bonus would require
consideration of similar evidence as the plaintiff’s FLSA claim, including analysis of the
employment agreement and records).
Judge Paul A. Crotty’s decision in Torres is instructive here. The plaintiff in Torres
brought a class action under the FLSA and other state law claims. Torres, 628 F. Supp. 2d at
453. The defendant brought counterclaims under the faithless servant doctrine, which states that
an employer can recover compensation paid to a faithless servant upon showing “that the
employee’s disloyal activity was related” to his duties, and “that the disloyalty permeated the

19

employee’s service in its most material and substantial part.” Id. at 466. The defendant
specifically alleged that the plaintiff sexually harassed coworkers and falsified information on his
employment application. See id. In deciding not to exercise supplemental jurisdiction over the
counterclaims, Judge Crotty noted that while the plaintiffs’ wage-and-hour claims centered on
the defendant’s compensation practices, the counterclaims focused on “discrete allegations of
misconduct” pertaining to only two of the plaintiffs, and the “essential facts . . . ‘[were] not so
closely related that resolving both sets of issues in one lawsuit would yield judicial efficiency.’”
Id at 467–68 (citation omitted) (emphasis added).
Like the sexual harassment and other state law claims alleged by the defendants in
Torres, the essential facts Defendants will have to establish to prove their Counterclaims are
significantly different from those necessary to prove wage and overtime violations under the
FLSA. Indeed, most of the facts integral to Defendants’ Counterclaims are in no way related to
the FLSA claims, including, without limitation, the facts necessary to establish extreme and
outrageous conduct, intent to cause severe emotional distress, and the intentional infliction of
emotional harm without any excuse or justification. These facts have “little to do with Plaintiff’s
wage and hour claim” and the “‘potential for some slight factual overlap’” between the
Counterclaims and the FLSA claims is alone “insufficient to ‘provide the necessary common
nucleus of operative fact’ required for the exercise of supplemental jurisdiction.’” Moran v.
Tryax Realty Mgmt., Inc., No. 15-cv-8570 (RJS), 2016 WL 3023326, at *3 (S.D.N.Y. May 23,
2016).
Even assuming that § 1367(a) was satisfied here, I still would decline to exercise
supplemental jurisdiction pursuant to 28 U.S.C. § 1367(c)(2), for reasons similar to those stated
above. Retaining jurisdiction over the Counterclaims would necessarily involve discovery

20

pertaining to numerous facts not otherwise at issue, thus overly complicating this relatively
straightforward FLSA case. See, e.g., Thomas, 2015 WL 1809085, at *8 (attempts to litigate
sexual harassment, disability discrimination, and tort claims would require more discovery and
“result in the engrafting of a distinct, more complicated litigation onto a straightforward wage
and hour case”); Moran, 2016 WL 3023326, at *3–4 (declining to exercise supplemental
jurisdiction on this alternative basis because requiring document production and depositions on
the plaintiff’s alleged schemes “would unduly complicate this otherwise straightforward
overtime case”). As such, I find that Defendants’ Counterclaims would “substantially
predominate[]” over Plaintiff’s FLSA claims. See 28 U.S.C. § 1367(c)(2).
Moreover, judicial economy, convenience, fairness, and comity do not counsel in favor of
exercising jurisdiction. See Shahriar, 659 F.3d at 245 (citing Jones, 358 F.3d at 214). Rather,
exercising supplemental jurisdiction over Defendants’ Counterclaims would complicate this
proceeding with “no indication that either judicial economy or convenience would be advanced.”
Moran, 2016 WL 3023326, at *4. In fact, this case is still in its early stages, with discovery yet
to formally commence, minimizing any possible inconvenience to Defendants to file their
Counterclaims in state court. See In re LIBOR-Based Fin. Instruments Antitrust Litig., 935 F.
Supp. 2d 666, 735 (S.D.N.Y. 2013) (“[I]n light of the early stage of the proceedings, it would not
be particularly inconvenient for plaintiffs to refile their amended complaint in state court.”).
Accordingly, I dismiss the Counterclaims pursuant to Rule 12(b)(1) without prejudice to
such claims being asserted in state court. See Siegel v. Apergis, 610 F. App’x 15, 16 (2d Cir.
2015) (summary order) (“[W]hen a court dismisses for lack of subject-matter jurisdiction, that
dismissal must be without prejudice.”).

21

The Requests to Amend
Almost as an aside, Plaintiff and Defendants each request leave to amend their pleadings
under Federal Rule of Civil Procedure 15(a). (See Defs.’ Opp. 16–17; Pl.’s Opp. 8.) Neither
party attaches the proposed amendments to their briefs, nor do they bring formal motions.
1. Defendants’ Request to Amend the Counterclaims
When addressing a motion to dismiss based on Rule 12(b)(1), it is generally the case that
“defective allegations of jurisdiction may be amended.” 28 U.S.C. § 1653. Section 1653 is
“construed liberally” to allow an action to proceed forward “if it is at all possible to determine
from the record that jurisdiction exists.” Corporacion Venezolana de Fomento v. Vintero Sales
Corp., 477 F. Supp. 615, 618 (S.D.N.Y. 1979) (citations omitted). Without referencing § 1653,
courts have also permitted amendments when those amendments “change the entire theory of
subject matter jurisdiction upon which the parties rely.” Id. (citations omitted). The fact that it is
defendants who seek to amend pleadings is not a bar to amendment when the defendants are
asserting counterclaims. See id. at 619 n.6.
As stated above, I find that dismissal of Defendants’ Counterclaims is warranted under
Rule 12(b)(1). To the extent that Defendants intend to amend the Counterclaims to assert
“essentially the same claim,” and to the extent that Defendants would simply “flesh out the
connection [to the FLSA claims] a bit more” by making it “more clear” that the sexual messages
occurred during Plaintiff’s period of employment, (8/27 Tr. 3:2-4:23), there are no averments
Defendants could add to their Counterclaims to alter my decision that I lack supplemental
jurisdiction over those particular claims. In other words, I find any amendment along these lines
would be futile. As a result, Defendants’ request for leave to amend is DENIED without
prejudice to Defendants asserting appropriate counterclaims in response to Plaintiff’s Amended

22

Complaint consistent with this decision.
2. Plaintiff’s Request to Amend the Amended Complaint
Plaintiff requests to amend the Amended Complaint to “bolster existing claims.” (Pl.’s
Opp. 8.) Defendants oppose this request, arguing that (1) Plaintiff has already amended the
complaint, and (2) prior to Defendants filing their motion to dismiss and following the premotion conference held before me, I allowed Plaintiff several weeks to consider whether he
wished to amend the pleadings, in particular with respect to Counts XII and XIII, prior to the
commencement of briefing. (Defs.’ Reply 10–11; 8/27 Tr. 12:4-13:16.)13 Thus, Defendants
argue that Plaintiff request to amend in being made in bad faith and with undue delay. (Defs.’
Reply 10–11.) Defendants further claim that any amendment with respect to Counts XII and
XIII would be futile. (Id. at 11.)
Because Plaintiff’s request to amend is conditioned on my finding the Amended
Complaint insufficient in its pleadings, (Pl.’s Opp. 8), in evaluating Plaintiff’s request I consider
only the merits of any amendment of Counts XII and XIII. I note at the outset that while
Plaintiff was given an opportunity to amend for a second time before briefing and chose not to
do so, this case is still at the early stages and, as such, I would not deny the motion to amend
based solely on any undue delay. But see Smiga v. Dean Witter Reynolds, Inc., 766 F.2d 698,
703 (2d Cir. 1985) (“The purpose of amending a pleading ‘is to assert matters that were
overlooked or were unknown . . . at the time . . . [of the] original complaint or answer.’”
(alteration in original) (citation omitted)). Still, I do consider Plaintiff’s choice not to amend as
somewhat telling—although not determinative—with respect to whether the amendments would

13

“Defs.’ Reply” refers to Defendants’ Reply Memorandum of Law in Support of Defendants’ Motion to Dismiss.
(Doc. 36.)

23

cure the defects in the pleadings. In any event, I find that any amendment of Counts XII and
XIII would be futile and, in this regard, deny Plaintiff’s motion to amend.
First, with respect to Count XII (violations of 26 U.S.C. § 7434), any supporting facts
would be rank speculation. To the extent that Plaintiff intends, as expressed during the
conference before me, to add allegations that the restaurant pays in cash and does not give out
W2 forms, (8/27 Tr. 7:22-8:14), this would not be sufficient to state a claim under § 7434 for the
same reasons noted above.
Similarly, Plaintiff’s request to amend his section 349 claim is futile. Even if Plaintiff
were to supplement his Amended Complaint with additional facts bolstering his allegations
regarding Defendants’ behavior toward their employees, this would not transform this
employment dispute into a case concerning “consumer-oriented” conduct with a broader impact
on consumers. See Oswego Laborers’ Local 214 Pension Fund, 85 N.Y.2d at 25. As a result, I
find that amending Counts XII and XIII in the Amended Complaint would be futile and deny
Plaintiff’s request to amend.

24

Conclusion
For the foregoing reasons, Defendants’ motion to dismiss the Amended Complaint is
GRANTED with regard to Counts XII and XIII, and DENIED with regard to Counts I through
XI. Plaintiff’s motion to dismiss the Counterclaims is GRANTED and Defendants’
Counterclaims are dismissed without prejudice to such claims being asserted in state court. The
motions of Plaintiff and Defendants to amend their respective pleadings are DENIED. The Clerk
of Court is respectfully directed to terminate the open motions at Documents 26 and 29.

SO ORDERED.
Dated: September 26, 2017
New York, New York
______________________
Vernon S. Broderick
United States District Judge

25