Li v. Ichiro Sushi, Inc.

Background

The Ji Li Plaintiffs—Ji Li, Jianhui Wu, Bin Zhang, De Ping Zhao, and Kai Zhao—brought claims under the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL) against Juhang Wang, New Ichiro Sushi, Inc., Jian Ping Chen, and Ichiro Asian Fusion. Roberto Hidalgo brought FLSA and NYLL claims against New Ichiro Sushi.

The court held a five-day bench trial beginning April 22, 2019. At the close of trial, it found that the Ji Li Plaintiffs had not met their burden of proof as to all claims against Jian Ping Chen and Ichiro Asian Fusion, all of Ji Li’s claims, and claims against Juhang Wang based on the theory that he was the workers’ employer while they worked at Ichiro Sushi. The court ordered further briefing on the remaining claims.

New Ichiro Sushi began operating on September 17, 2014, at the same location where Ichiro Sushi had operated. New Ichiro purchased various assets and the lease from Ichiro Sushi. Juhang Wang owned New Ichiro Sushi. Kai Zhao, Jianhui Wu, and Hidalgo worked at New Ichiro Sushi for some period of time. The court found that Hidalgo worked approximately 72 hours per week and received $550 per week, while Kai Zhao and Jianhui Wu had electronic and mechanical time records.

Successor Liability

The court applied the “substantial continuity” test to determine whether New Ichiro Sushi could be held responsible for Ichiro Sushi’s alleged labor violations. That test considers continuity between the businesses, whether the new business had notice of the predecessor’s legal obligations, and whether the predecessor could provide adequate relief. The court treated notice and the predecessor’s ability to provide relief as essential parts of the inquiry. The party seeking successor liability had the burden of proof.

The court concluded that Juhang Wang could not be held liable as a successor because New Ichiro Sushi, not Wang individually, purchased Ichiro Sushi’s assets. The Ji Li Plaintiffs did not argue that the corporate form should be disregarded to impose individual liability on Wang.

The court also concluded that New Ichiro Sushi was not liable as a successor. The plaintiffs did not show that a lawsuit concerning Ichiro Sushi’s labor practices was pending or had previously been filed when New Ichiro acquired the business. The court also found no evidence that Wang knew about labor violations at Ichiro Sushi. The plaintiffs did not identify sufficient warning signs that should have caused New Ichiro to investigate further. Because the plaintiffs failed to prove notice, the court did not address the other successor-liability factors.

Kai Zhao and Jianhui Wu’s Claims

The court found that Kai Zhao and Jianhui Wu did not prove that they were denied minimum wages, overtime pay, or spread-of-hours pay while working at New Ichiro Sushi. The court did not credit their testimony and found that the discrepancies between their mechanical and electronic time records, without additional evidence explaining the discrepancies, were insufficient to prove underpayment.

The court also found evidence that they received wage statements and no credible evidence that they failed to receive weekly paystubs. It therefore concluded that they were not entitled to damages under the NYLL wage-notice and wage-statement provisions. The court ruled that Kai Zhao and Jianhui Wu had not met their burden of proof on any labor-violation claims against New Ichiro Sushi or Juhang Wang.

Roberto Hidalgo’s Claims

The court found that Hidalgo worked for New Ichiro Sushi through October 2, 2014, worked approximately 72 hours per week, and was paid $550 per week. Using 40 hours as the regular workweek, the court calculated his regular hourly rate as $13.75 and his overtime rate as $20.63. Because he worked 32 overtime hours per week for two weeks without overtime pay, the court awarded $1,320.32 in overtime damages.

Hidalgo also did not receive the required additional hour of pay for shifts lasting more than 10 hours. Because this occurred six days per week for two weeks, the court awarded $96 in spread-of-hours damages.

The court found that Hidalgo did not receive required wage notices or wage statements. It awarded $100 for wage-notice violations and $200 for wage-statement violations, for $300 in statutory damages on those claims.

The court awarded $1,320.32 in liquidated damages because New Ichiro Sushi did not present evidence that it acted in good faith or had reasonable grounds to believe it was complying with the FLSA. The court also awarded prejudgment interest at nine percent simple interest per year on the NYLL wage damages, calculated from September 27, 2014, to the date of judgment.

Sanctions

The Westchester Defendants moved for sanctions against the Ji Li Plaintiffs’ counsel and the Ji Li Plaintiffs under 28 U.S.C. § 1927, the court’s inherent powers, and Federal Rule of Civil Procedure 11. The court found clear evidence that the Ji Li Plaintiffs’ claims against the Westchester Defendants were meritless after the close of evidence and that counsel acted in bad faith by continuing to pursue them after the Westchester Defendants’ Rule 50 motion.

The court imposed sanctions against the Ji Li Plaintiffs’ counsel under § 1927 for that conduct. It did not impose inherent-power sanctions on the Ji Li Plaintiffs themselves, found no clear evidence of bad faith for certain other conduct, and declined to decide whether additional inherent-power or Rule 11 sanctions against counsel were warranted. The Westchester Defendants requested $59,254.53 in fees and costs, but the court reserved judgment on the amount and allowed the Ji Li Plaintiffs to respond within 14 days, with a reply permitted seven days later.

Disposition

The court concluded that New Ichiro Sushi and Juhang Wang were not liable as successors for Ichiro Sushi’s potential labor violations; Kai Zhao and Jianhui Wu were not entitled to payments from them; and Hidalgo was awarded the damages and prejudgment interest described above. The court sanctioned the Ji Li Plaintiffs’ counsel, reserved judgment on the amount, directed the Clerk to enter judgment, and ordered the related cases closed.