Huang v. Shanghai City Corp

Background

The plaintiffs were employees of the Midtown and Flushing Joe’s Shanghai restaurants. They alleged violations of the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL), including failure to pay minimum wages and overtime. One plaintiff also sought reimbursement for certain delivery-related expenses.

The defendants included Shanghai City Corp., which operated the Midtown location; East Brother Corp. and Shanghai Original Inc., which owned or operated the Flushing location at different times; and Shanghai Duplicate Corp. and several individuals connected to the Chinatown location. No plaintiff was alleged to have worked at the Chinatown location.

The defendants made three relevant requests: judgment on the pleadings against the Chinatown defendants; dismissal of the FLSA claims of Lianqin Lu, Hui Zhen Huang, Juan Li, and Haihua Zhai as untimely, along with dismissal of their NYLL claims for lack of supplemental jurisdiction; and an order striking the class allegations because plaintiffs’ counsel had previously represented a class in a related case that was later decertified.

Judgment on the Pleadings Against the Chinatown Defendants

The court applied the same standard used for a motion to dismiss for failure to state a claim. It accepted the complaint’s factual allegations as true and asked whether they plausibly showed that the Chinatown defendants were employers of the plaintiffs.

Under the FLSA, an employer can include an entity or individual that acts directly or indirectly in an employer’s interest. The court explained that employer status depends on the economic reality of the relationship, including who could hire or fire workers, control schedules or working conditions, determine pay, and maintain employment records. Multiple companies may also be treated as one employer when their operations, labor relations, management, and ownership or financial control are sufficiently integrated.

The court held that the plaintiffs had not pleaded enough facts to make the Chinatown defendants’ responsibility plausible. The complaint alleged that the restaurants shared a website and name, that Kiu Sang Si owned 50 percent of both the Midtown and Chinatown locations, that Si had opened all three locations, that Si possessed powers associated with employment at each location, and that Joe’s Shanghai transferred employees among locations. The court found these allegations insufficient because common marketing and partial common ownership did not establish control over the plaintiffs’ employment. Si’s having opened the restaurants decades earlier also did not show current operational control.

The court further found that the allegations about Si’s hiring, supervision, pay, and recordkeeping powers merely repeated legal factors without supporting factual detail. The allegation that employees were transferred among locations was also unsupported because no plaintiff was alleged to have worked at the Chinatown location or to have been transferred to or from it. The claims against Lillian Liou, Cheng Kueng Liu, Yun Cai, John Zhang, and Terry Ho were derivative of the claims against Shanghai Duplicate Corp.; because the complaint did not plausibly state a claim against that corporation, the claims against those individuals also failed.

The court therefore granted the motion for judgment on the pleadings against Shanghai Duplicate Corp., Lillian Liou, Cheng Kueng Liu, Yun Cai, John Zhang, and Terry Ho.

Timeliness and Supplemental Jurisdiction

The court stated that Lianqin Lu, Hui Zhen Huang, Juan Li, and Haihua Zhai did not have timely FLSA claims because none worked at a Joe’s Shanghai restaurant during the applicable three-year period. The opinion then addressed whether their NYLL claims could remain in federal court.

The court held that it had supplemental jurisdiction over those NYLL claims because they arose from the same common set of facts as the FLSA claims. The claims involved the same alleged pattern and practice of wage violations and concerned hours and payments for employees doing the same work for the same employers. The court also declined to give up that jurisdiction because the federal claims remained in the case and none of the statutory grounds for declining supplemental jurisdiction applied.

The court therefore denied the motion to dismiss the NYLL claims for lack of subject-matter jurisdiction.

Class Allegations and Counsel

The defendants asked the court to prevent Troy Law, PLLC, from serving as class counsel because a court in a prior related proceeding had decertified a class after finding problems with counsel’s representation. The court treated the request as a motion to strike the class allegations, not as a motion to disqualify counsel from representing plaintiffs individually.

The court denied the motion to strike the class allegations. It held that the request was premature because the adequacy of proposed class counsel is ordinarily considered when the court evaluates a motion for class certification, after class-certification discovery. The court also explained that the earlier proceeding did not automatically resolve whether counsel would be adequate in this case, because that determination can depend on counsel’s qualifications, resources, and performance in the particular case. The court stated that it would consider counsel’s performance, along with the findings from the earlier proceeding, if and when plaintiffs moved for class certification.

Disposition

The motion for judgment on the pleadings against the Chinatown defendants was granted. The motions to dismiss the NYLL claims for lack of subject-matter jurisdiction and to strike the class claims were denied. The court additionally ordered plaintiffs to file, within one week, a corrected complaint that changed only the paragraph numbering. Defendants’ time to answer would begin when that corrected complaint was filed.