Lange v. Empire Holdings and Investments, LLC

Background

Megan Lange sued Empire Holdings and Investments, LLC; TMPL Lexington LLC; Empire Hells Kitchen TMPL LLC; JI Fitness LLC; and Patrick Walsh. She alleged retaliation under Title VII of the Civil Rights Act of 1964, the New York State Human Rights Law, the New York City Human Rights Law, and the New York Labor Law. She also alleged fraud and fraudulent inducement, unpaid minimum wages under the Fair Labor Standards Act and the New York Labor Law, and other New York wage violations.

Lange alleged that she worked for the defendants and had a consensual romantic relationship with Walsh. She claimed that Walsh encouraged her to move from employee to consultant, become involved in a champagne lounge business, and resign as Brand Director. She further alleged that Walsh later failed to follow through on promises about compensation and the business, and that she was not fully paid for later work. She also alleged that she complained about Walsh’s conduct, filed a charge with the Equal Employment Opportunity Commission, and later resigned from TMPL.

Retaliation Claims

The court dismissed Lange’s retaliation claims under Title VII, the New York State Human Rights Law, the New York City Human Rights Law, and the New York Labor Law. The court concluded that her complaints to Walsh about his possible relationships with other employees, the appearance of those relationships, and his marketing views did not plausibly show that she was opposing conduct prohibited by the relevant laws. The court also found that her complaints to human resources did not plausibly establish a protected complaint, a retaliatory employment action, or a connection between the complaint and an adverse action.

The court also rejected Lange’s theory that she was forced to resign after Walsh asked her to stop pursuing her legal claims. It concluded that the alleged conduct did not plausibly make her working conditions intolerable enough to constitute a forced resignation, particularly because she voluntarily continued a romantic relationship and regular contact with Walsh during the relevant period. The court dismissed the retaliation claims and denied leave to amend them because amendment would be futile.

Proposed Sex-Discrimination Claims

Lange sought to add sex-based discrimination claims, including claims based on a sexual quid pro quo theory. The court denied that request as futile. It relied on the allegations that Lange and Walsh had a consensual relationship and concluded that the proposed allegations did not show unwelcome sexual conduct or that employment decisions were based on her response to such conduct. The court also stated that the proposed Title VII claim would fail because Lange had not exhausted the claim through the required administrative process.

Wage Claims

The court dismissed Lange’s wage-related Claims Six through Ten under the Fair Labor Standards Act and the New York Labor Law. Lange did not contest the defendants’ arguments that her amended complaint lacked sufficient details, including information about the work performed, unpaid hours, and the defendants for whom she worked. The court nevertheless granted her leave to amend because the proposed amendment suggested that she could plausibly state wage claims and amendment would not be futile.

The court also addressed Lange’s allegation that she was paid biweekly rather than weekly even though she performed physical work. New York appellate courts had disagreed about whether the New York Labor Law allows a private lawsuit for that type of payment-frequency violation. The court followed the reasoning that recognizes such a claim and concluded that amendment would not be futile. Lange must file a Second Amended Complaint within 30 days of the order.

Arbitration of Fraud Claims

The court granted the defendants’ motion to compel arbitration of Lange’s fraud and fraudulent-inducement claims against Walsh. Lange and Walsh had signed an operating agreement for Seven/Twenty Hospitality Group, LLC. That agreement required disputes concerning the company’s operations or the agreement to be submitted to arbitration.

The court concluded that Lange’s claims—based on allegations that Walsh misrepresented the validity of the champagne lounge’s sublease and thereby induced her to resign as Brand Director—fell within that arbitration provision. Lange argued that she was suing Walsh rather than the company named in the operating agreement, but the court found that the provision covered disputes between the agreement’s members, Lange and Walsh. The court also explained that Lange challenged the operating agreement generally, not the arbitration clause specifically; under those circumstances, the fraud claims themselves were subject to arbitration.

Disposition

The court granted the motion to dismiss. It dismissed Lange’s retaliation claims and denied leave to amend those claims; denied leave to add sex-based discrimination claims; dismissed the wage-related claims while granting leave to amend them; and granted the motion to compel arbitration of the fraud and fraudulent-inducement claims against Walsh. Judge Margaret M. Garnett directed Lange to file a Second Amended Complaint addressing the wage claims within 30 days.