Ray v. 1650 Broadway Associates Inc.

Background

Kevin Ray, Brian Esposito, Samuel Ladd, and Jenna Miller sued 1650 Broadway Associates Inc., doing business as Ellen’s Stardust Diner, and Kenneth Sturm under the Fair Labor Standards Act and New York Labor Law. The plaintiffs alleged that the defendants failed to pay proper minimum wages, required servers to share tips with employees who were not eligible to receive them, kept portions of gratuity charges from customers who hosted parties, and issued wage statements that inaccurately reported hours, the regular hourly rate, and the claimed tip credit.

The defendants answered the amended complaint and asserted counterclaims and claims involving conversion, civil theft, aiding and abetting, breach of loyalty and fiduciary duties, unjust enrichment, fraud, theft by deception, and the Computer Fraud and Abuse Act. After six months of discovery, the parties mediated before Carol Wittenberg and reached agreement on a settlement amount and other settlement terms. The plaintiffs then filed an unopposed motion seeking preliminary settlement approval and related class and notice orders.

Rulings

The court granted the motion. It conditionally approved the proposed settlement, finding that it resulted from arm’s-length negotiations assisted by a neutral mediator and fell within the range of possible approval. The court also found reasonable a general release that applied to the named plaintiffs because it was consideration for their service awards. The opinion states that the release did not apply to other class members.

The court provisionally certified a Rule 23 New York settlement class of 256 current and former servers for New York Labor Law claims. It found the proposed class sufficiently numerous and that common questions included whether the defendants diverted tips to ineligible employees, kept portions of party-package gratuities, and provided deficient wage statements and wage notices. The court also found the named plaintiffs’ claims typical of the class, the representation adequate, and class treatment superior to individual litigation.

The court separately provisionally certified an FLSA collective settlement class of 91 employees who worked as tipped servers for the defendants from December 21, 2010, to December 14, 2020, as stated in the opinion. Because the court concluded that the plaintiffs met the higher Rule 23 certification standard, it found that they also met the standard for provisional certification of the FLSA collective.

Appointments and Notice

The court appointed Eisner & Dictor, P.C. and Roger J. Bernstein as class counsel and appointed Kevin Ray, Brian Esposito, Samuel Ladd, and Jenna Miller as class representatives. It appointed Rust Consulting as claims administrator. The court approved the proposed class notice, finding that it was the best notice practicable under the circumstances and satisfied the due-process requirements listed in Federal Rule of Civil Procedure 23(c)(2)(B).

Settlement Procedure

The order required the defendants to provide class-member information to the claims administrator within 30 days. The claims administrator then had 30 days to mail the notices. Rule 23 class members would have 60 days after mailing to opt out or object. The plaintiffs were required to file a motion for final settlement approval no later than 15 days before the fairness hearing, which the court scheduled by telephone for December 17, 2020.

The order contemplated a later decision on final approval. It stated that, if the court granted final approval and no party appealed, the settlement’s effective date would be 30 days after entry of the final order and judgment; if further review were sought, the effective date would follow resolution of the appeals in favor of final approval. The opinion itself granted preliminary approval and did not state that the settlement received final approval.