Shen et al v. Number One Fresco Tortillas, Inc. et al

Filing 45

REPORT AND RECOMMENDATION. For the reasons discussed in this Report and Recommendation, I recommend that the defendants' motion (Docket no. 19) be denied. (Objections to R&R due by 12/27/2016). (Signed by Magistrate Judge James C. Francis on 12/13/2016) Copies transmitted this date. (rjm).

failed to pay them the minimum wage and overtime compensation.
(Complaint (“Compl.”), ¶¶ 33-34).

Both named plaintiffs were

employed as deliverymen at the defendant John Doe Corporation d/b/a
Fresco Tortillas.

(Compl., ¶¶ 9-10).

owned and operated Fresco Tortillas.

The individual defendants
(Compl., ¶¶ 11-27).

Shen worked at Fresco Tortillas from August 26, 2014, through
January 31, 2016.
from

August

2012

(Compl., ¶ 41).
through

March

Wang worked at Fresco Tortillas
3,

2016.

(Compl.,

¶

56).

Throughout the duration of their employment, they were scheduled
to work six twelve-hour shifts -- 11:00am to 11:00pm -- totaling
seventy-two hours per week.

(Compl., ¶¶ 42, 57).

Shen was

scheduled to work Sunday through Friday (Compl., ¶ 42); Wang was
scheduled to work Monday through Saturday (Compl., ¶ 57).

They

did not receive fixed meal breaks or other breaks during their
shifts.

(Compl., ¶¶ 44-45, 59-60).

They were both compensated at

a flat rate of $1,100 per month and were not paid overtime for
work in excess of forty hours per week (Compl., ¶¶ 43, 46, 58,
61).

They were never informed of their hourly pay rate or of

deductions from their pay credited toward the minimum wage based
on tips they received from deliveries.

(Compl., ¶¶ 46, 61).

The defendants move (1) for summary judgment on the FLSA claim
on the ground that the plaintiffs are not covered by the statute;
and (2) to dismiss the FLSA and NYLL claims on the ground that the
complaint fails to state a claim on which relief can be granted.
2

Discussion
A.

Summary Judgment
1.

Standard

Under Rule 56 of the Federal Rules of Civil Procedure, summary
judgment is appropriate where “the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.”

Fed. R. Civ. P. 56(a); accord

Doninger v. Niehoff, 642 F.3d 334, 344 (2d Cir. 2011).

A dispute

is “genuine” where “the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.”

Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); accord SCR Joint
Venture L.P. v. Warshawsky, 559 F.3d 133, 137 (2d Cir. 2009).

A

material fact is one that “might affect the outcome of the suit
under the governing law.”

Roe v. City of Waterbury, 542 F.3d 31,

35 (2d Cir. 2008) (quoting Anderson, 477 U.S. at 248).

In

assessing whether there is a genuine issue of material fact, “a
court must ‘construe the facts in the light most favorable to the
non-moving party and must resolve all ambiguities and draw all
reasonable inferences against the movant.’”

Seeman v. Local 32B-

32J, Service Employees Union, 769 F. Supp. 2d 615, 620 (S.D.N.Y.
2011) (quoting Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d
775, 780 (2d Cir. 2003)).
The moving party bears the initial burden of identifying those
portions of the record that demonstrate “the absence of a genuine
3

issue of material fact,” Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986), following which the opposing party must come forward
with “specific facts showing that there is a genuine issue for
trial,” Wrobel v. County of Erie, 692 F.3d 22, 30 (2d Cir. 2012)
(emphasis omitted) (quoting Matsushita Electric Industrial Co.,
Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)).

The

parties can support their claims with documents, stipulations,
affidavits, or other discovery materials.
56(c)(1)(A).

However,

“only

admissible

See Fed. R. Civ. P.
evidence

need

be

considered by the trial court in ruling on a motion for summary
judgment.”

Presbyterian Church of Sudan v. Talisman Energy, Inc.,

582 F. 3d 244, 264 (2d Cir. 2009) (quoting Raskin v. Wyatt Co.,
125 F.3d 55, 65 (2d Cir. 1997)).
2.

Analysis

The FLSA’s minimum wage and overtime provisions apply to
employees who are (1) “engaged in commerce or in the production of
goods for commerce” or (2) “employed in an enterprise engaged in
commerce or in the production of goods for commerce.”

29 U.S.C.

§ 207(a)(1); see also Bowrin v. Catholic Guardian Society, 417 F.
Supp. 2d 449, 457 (S.D.N.Y. 2006).
coverage

are

commonly

coverage, respectively.

known

as

These two categories of

“individual”

and

“enterprise”

See Tony & Susan Alamo Foundation v.

Secretary of Labor, 471 U.S. 290, 295 n.8 (1985); Jacobs v. New
York Founding Hospital, 577 F.3d 93, 96 (2d Cir. 2009).
4

The

defendants argue that the plaintiffs do not qualify for either
category of coverage.

(Letter of Brian P. Fredericks dated July

15, 2016, (“Def. Memo.”) at 3-5).

The plaintiffs do not address

individual coverage but contend that there is a genuine dispute of
material fact as to whether they qualify for enterprise coverage.
(Plaintiffs’ Memorandum of Law in Opposition to Defendants’ Motion
for Summary Judgment (“Pl. Rule 56 Memo.”) at 2-6).
An employee qualifies for enterprise coverage if his or her
employer is an “enterprise” under the FLSA, meaning (1) it “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 any person;” and (2) its “annual gross volume of
sales made or business done is not less than $500,000.”

29 U.S.C.

§ 203(s)(1)(A); accord Boekemeier v. Fourth Universalist Society
in the City of New York, 86 F. Supp. 2d 280, 285 (S.D.N.Y. 2000).
The first prong is “rarely difficult to establish.”
F.3d at 99 n.7.

Jacobs, 577

It is satisfied as long as the employer purchases

or uses supplies that have at some point moved in interstate
commerce.

See, e.g., Yang Li v. Ya Yi Cheng, No. 10 CV 4664, 2012

WL 1004852, at *5 (E.D.N.Y. March 23, 2012) (restaurant satisfies
first prong because it purchased “rice and other ingredients” that
“almost certainly crossed state lines before being purchased”);
Velez v. Vassallo, 203 F. Supp. 2d 312, 328 (S.D.N.Y. 2002)
5

(“[E]ven a ‘local laundry’ is covered if the soap it uses moved in
interstate commerce.”).

This “leads to the result that virtually

every enterprise in the nation doing the requisite dollar volume
of business is covered by the FLSA.”

Archie v. Grand Central

Partnership, Inc., 997 F. Supp. 504, 530 (S.D.N.Y. 1998) (quoting
Dunlop v. Industrial America Corp., 516 F.2d 498, 501-02 (5th Cir.
1975)).
Here,

the

plaintiffs

allege

that

they

regularly

handled

cleaning supplies, rice, and beverages such as Coca Cola and Sprite
that

originated

from

out-of-state

or

international

sources.

(Affidavit of Junmin Shen dated July 19, 2016 (“Shen Rule 56
Aff.”), ¶¶ 23-24; Affidavit of Yuzhu Wang dated July 19, 2016
(“Wang

Rule

56

Aff.”),

¶¶

22-23).

Those

facts,

which

the

defendants do not contest, are sufficient for the plaintiff to
survive summary judgment on the first prong of enterprise coverage.
The defendants’ motion for summary judgment focuses on the
second prong, arguing that Fresco Tortillas “do[es] not meet the
requirement of having gross annual sales of at least $500,000.”
(Def. Memo. at 4).

In support of that assertion, they provide

copies of federal income tax returns reflecting gross annual sales
of $241,472 from July 2013 through June 2014, $313,892 from July
2014 through June 2015, and $299,576 from July 2015 through June
2016. (Internal Revenue Service Form 1120 (“IRS Form 1120”), 2013,
2014, attached as Exh. A to Def. Memo.; IRS Form 1120, 2015,
6

attached as Exh. A to Letter of Brian P. Fredericks dated Oct. 27,
2015 (“Reply”)).

An affidavit of the defendant Dan Q. Liu, an

owner of Fresco Tortillas, attests to the authenticity of the
federal forms.

(Undated Declaration of Dan Q. Liu, attached as

Exh. B to Letter of Brian P. Fredericks dated Dec. 7, 2016, ¶¶ 34). The defendants also provide copies of New York State quarterly
sales tax filings from December 2013 through November 2015; like
the federal returns, they purport to “show[] that Fresco never
achieved an annual gross business volume approaching $500,000.”
(Def. Memo. at 4; New York State Department of Taxation and Finance
Quarterly

ST-100

Forms,

attached

as

Exh.

B

to

Def.

Memo.).

Finally, the defendants provide copies of bank statements from
July 2015 through October 2016 with total monthly deposits ranging
from $17,451.66 to $24,581.89; when added over twelve months, those
deposits total “a very close approximation of the Restaurant’s
stated gross annual receipts [] reflected on its tax returns.”
(Reply at 2; Citibank Account Statements, attached as Exh. C to
Reply).

This

documentation,

though

substantial,

fails

to

establish the absence of a genuine dispute of material fact as to
whether Fresco Tortillas does $500,000 of business annually.
First, “[t]here is substantial precedent suggesting that tax
returns are not dispositive and the veracity of those documents
can be questioned by a Plaintiff.”

Jia Hu Qian v. Siew Foong Hui,

No. 11 Civ. 5584, 2013 WL 3009389, at *3 (S.D.N.Y. June 14, 2013).
7

Courts in this Circuit “have expressed skepticism about their
reliability, especially where the returns are unauthenticated or
where

they

conflict

with

other

evidence.”

Shu

Lan

Chen

v.

Gypsophila Nail & Spa, No. 15 Civ. 2520, 2015 WL 3473510, at *3
(S.D.N.Y. June 2, 2015).

Here, the federal and state returns are

not signed by any of the defendants or accompanied by affidavits
from

tax

preparers

attesting

to

their

veracity.

These

deficiencies, though less severe with respect to the federal
returns in light of Mr. Liu’s affidavit, call into question the
reliability of the tax returns.

See Rocha v. Bakhter Afghan Halal

Kababs, Inc., 44 F. Supp. 3d 337, 348 (E.D.N.Y. 2014) (“The absence
of a signature on the tax returns, combined with the absence of an
affidavit from the tax preparer or from the owner of the business
verifying

the

authenticity

of

the

returns

caution

against

presuming their authenticity.”); Monterossa v. Martinez Restaurant
Corp., No. 11 Civ. 3689, 2012 WL 3890212, at *4 (S.D.N.Y. Sept. 7,
2012) (“[T]here is good reason to be cautious in relying on
Defendants' tax returns because . . . the submitted returns are
unsigned and unaccompanied by a statement or affidavit of the tax
preparer.”).
Second, the probative value of the bank statements is limited
because they provide an incomplete record of Fresco Tortillas’
deposits during the plaintiffs’ terms of employment.

They date

back to July 2015, and thus cover only seven of the seventeen
8

months of Shen’s employment and eight of the forty-four months of
Wang’s

employment.

It

is

also

worth

noting

that

they

were

submitted in the defendants’ reply to the plaintiffs’ opposition
motion, meaning the plaintiffs did not have an opportunity to
contest their veracity.

Therefore, the tax returns and bank

statements do not satisfy the defendants’ burden of establishing
the absence a genuine dispute as to whether Fresco Tortillas does
$500,000 of business annually.
Even if they did, the plaintiffs have come forward with facts
that establish a genuine issue for trial.

Their sworn affidavits

contradict the gross sales information in the tax returns and bank
statements, estimating that (1) they made approximately seventy
deliveries per day at an average price of $18.00 to $19.00,
totaling $472,675 per year; (2) fifty customers per day ordered
food to-go at an average price of $18.00 to $19.00, totaling
$337,625 per year; and (3) twenty customers per day ate in the
restaurant at an average price of $13.00 to $14.00, totaling
$98,550 per year. 2

(Pl. Rule 56 Memo. at 5; Shen Rule 56 Aff., ¶¶

2

The plaintiffs arrived at these totals by multiplying the
average price (e.g., $18.50 where the affidavits state an average
price of $18.00 to $19.00) by the number of customers per day by
the number of days in a year (365).
Thus, the plaintiffs’
accounting assumes the restaurant was open 365 days a year.
Neither the plaintiffs nor the defendants directly state how many
days per year the restaurant was open. Drawing all inferences in
the plaintiffs’ favor, as the Court must on a motion for summary
judgment, this assumption is reasonable because the complaint
alleges that at least one of the plaintiffs was scheduled to work
9

12-13, 16-17; Wang Rule 56 Aff. ¶¶ 11-12, 15-16).

Added together,

that would total $908,850 of business annually.
The plaintiffs’ statements regarding the restaurant’s gross
sales “may be self-serving or otherwise inaccurate.”
2012 WL 3890212, at *4.

Monterossa,

Still, courts in this Circuit have

credited similar statements on motions for summary judgment where
they are based on personal knowledge and observation rather than
mere speculation.

Compare Ying Shun Zhao v. Sunny 39 Hotel Corp.,

No. 14 CV 1847, 2015 WL 5307716, at *4 (E.D.N.Y. Sept. 10, 2015)
(denying summary judgment because “a reasonable juror could credit
[the plaintiff’s] estimates . . . of the occupancy rates of the
hotels” where he worked), with Xi Dong Gao v. Golden Garden Chinese
Restaurant, Inc., No. 13 CV 4761, 2014 WL 8843301, at *7 (E.D.N.Y.
Dec. 16, 2014) (granting summary judgment where the plaintiff’s
estimates of the restaurant’s revenue were “mere guesses” based on
purported knowledge of the Chinese restaurant industry).

Such

statements weigh more heavily where, as here, the restaurant “would
gross well over $500,000 annually even if Plaintiffs considerably
overestimated [its] daily earnings.”
at

*4.

plaintiffs’

Accordingly,
estimates

a
of

Monterossa, 2012 WL 3890212,

reasonable
the

juror

could

restaurant’s

credit

gross

the

sales,

particularly in light of concerns about the authenticity the tax

on every day of the week and that the plaintiffs were scheduled to
work every week of the year. (Compl., ¶¶ 41-42, 56-67).
10

returns and the limited probative value of the bank statements.
Thus, the defendants have not established the absence of a genuine
dispute of material fact as to whether the plaintiffs qualify for
enterprise coverage under the FLSA, and summary judgment should be
denied. 3
B.

Dismissal
1.

Standard

Motions to dismiss for failure to state a claim on which
relief can be granted are governed by Rule 12(b)(6) of the Federal
Rules of Civil Procedure.

To survive a motion to dismiss under

Rule 12(b)(6), “a complaint must contain sufficient factual matter
. . . to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

The court’s charge

in ruling on a 12(b)(6) motion to dismiss “is merely to assess the
legal feasibility of the complaint, not to assay the weight of the
evidence which might be offered in support thereof.”

GVA Market

Neutral Master Ltd. v. Veras Capital Partners Offshore Fund, Ltd.,
580 F. Supp. 2d 321, 327 (S.D.N.Y. 2008) (quoting Eternity Global
Master Fund Ltd. v. Morgan Guaranty Trust Co. of New York, 375

3

Because there is a genuine dispute of material fact as to
whether the plaintiffs qualify for enterprise coverage, it is
unnecessary to consider whether there is also a genuine dispute as
to individual coverage.
11

F.3d 168, 176 (2d Cir. 2004)).

The court must construe the

complaint in the light most favorable to the plaintiff, “taking
its factual allegations to be true and drawing all reasonable
inferences in the plaintiff’s favor.”

Harris v. Mills, 572 F.3d

66, 71 (2d Cir. 2009).
2.

Analysis

The defendants’ motion to dismiss relies on Lundy v. Catholic
Health System of Long Island Inc., 711 F.3d 106 (2d Cir. 2013),
which holds that “in order to state a plausible FLSA overtime
claim, a plaintiff must sufficiently allege 40 hours of work in a
given workweek as well as some uncompensated time in excess of the
40 hours.”

Id. at 114.

The defendants argue that “the Complaint

does not allege precisely when, or at what point during their
alleged employment, Plaintiffs worked more than 40 hours and does
not point to any particular workweek . . . during which Plaintiffs
worked uncompensated time more than 40 hours.”
Lundy

involved

three

plaintiffs.

One

(Def. Memo at 5).
alleged

that

she

“typically” worked 37.5 hours per week but “occasionally” worked
an additional 12.5-hour shift.

Id. at 114-15.

She also alleged

that her thirty-minute meal breaks were “typically” missed or
interrupted and that she “typically” worked fifteen minutes of
uncompensated time before and after her shifts.

Id. at 115.

Finally, she alleged that she “typically” attended trainings such
as a monthly thirty-minute staff meetings and an “average” of ten
12

hours per year of respiratory therapy training.

Id.

The Second

Circuit dismissed her claims because she failed to allege that
“she ever completely missed all three meal breaks in a week, or
that she also worked a full 15 minutes of uncompensated time around
every shift.”

Id.

Even if she did, the Second Circuit calculated

that “she would have alleged a total 39 hours and 45 minutes
worked.” Id. The additional 12.5-hour shifts and trainings “could
theoretically put her over the 40–hour mark in one or another
unspecified week . . . but her allegations supply nothing but
low-octane fuel for speculation.”

Id.

The second plaintiff alleged that she “typically” worked
thirty hours per week in four shifts, but worked five to six shifts
“approximately twice per month,” which increased her total to 37.5
to forty-five hours per week.

Id.

She also alleged that her

thirty-minute meal breaks were “typically” missed or interrupted,
she “typically” worked thirty uncompensated minutes before her
shifts, and she “often” worked as many as two uncompensated hours
after her shifts.

Id.

As with the first plaintiff, the Second

Circuit

her

claims

dismissed

because

this

language

“invited

speculation [that] does not amount to a plausible claim under
FLSA.”

Id.

The third plaintiff’s claims were dismissed because

13

he “conceded . . . that he never worked over forty hours in any
given week.” 4

Id.

Here, the plaintiffs allege that they worked six twelve-hour
shifts -- totaling seventy-two hours per week -- “[a]t all relevant
times” to the complaint (Compl., ¶¶ 42, 57) (emphasis added). They
were paid at a flat rate of $1,100 per month without additional
compensation

for

hours

worked

in

(Compl.,

43,

58).

Thus,

the

¶¶

plaintiffs

worked

thirty-two

hours

excess

of

complaint
of

forty

per

alleges

overtime

and

week.

that

the

were

not

compensated for that time in every week that they worked for the
defendants.
“typically”

These are not opaque allegations of meal breaks
missed,

extra

shifts

“occasionally”

uncompensated time “often” worked after shifts.

worked,

or

Rather, the

complaint contains the specific language regarding numerous weeks
of uncompensated overtime that the Second Circuit found lacking in

4

The defendants cite several additional cases that apply
Lundy to dismiss claims involving similar facts.
See, e.g.,
Dejesus v. HF Management Services, LLC, 726 F.3d 85, 89 (2d Cir.
2013) (affirming dismissal of FLSA overtime claim where the
plaintiff “did not estimate her hours in any or all weeks”);
Nakahata v. New York-Presbyterian Healthcare System, Inc., 723
F.3d 192, 201 (2d Cir. 2013) (affirming dismissal “absent any
allegation that Plaintiffs were scheduled to work forty hours in
a given week”); Oram v. Soulcycle LLC, 979 F. Supp. 2d 498, 507
(S.D.N.Y. 2013) (dismissing claim where the complaint “fail[ed] to
state Plaintiff’s actual rate of pay . . . or his total number of
hours worked per week.”).
14