Flores Moreno v. JJ Food Market Corp.

Background

Aurelio Flores Moreno and Lucino Morales Victoria brought claims under the Fair Labor Standards Act, New York Labor Law, and related New York regulations based on their employment at JJ Food Market. The opinion states that Morales Victoria worked at the Market beginning in June 2010 and Flores Moreno beginning in March 2012, and that both stopped working there in September 2016. They alleged that they worked long hours, were paid fixed weekly amounts in cash regardless of hours worked, and did not receive required meal breaks, rest periods, wage notices, or wage statements.

The court had previously entered a default judgment against JJ Food Market Corp. The motion addressed two narrower issues: whether Julian Ramos qualified as an employer under the federal and New York wage laws, and whether 153 J and J Food Market Corp. was liable as JJ Food Market Corp.’s successor.

Summary-Judgment Standard

Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment is appropriate only when there is no genuine dispute about any material fact and the moving party is entitled to judgment as a matter of law. The court must draw reasonable inferences in favor of the party opposing the motion. A fact is material if it could affect the outcome, and a dispute is genuine if the evidence could allow a reasonable jury to decide for the opposing party.

Ramos’s Employer Status

The Fair Labor Standards Act defines an employer to include a person acting directly or indirectly in the interest of an employer in relation to an employee. The court explained that employer status is determined from the totality of the circumstances, with particular attention to whether the person had operational control over employees. Relevant considerations include the power to hire and fire, control over schedules or working conditions, authority over pay, and maintenance of employment records. The court also noted that courts in the Second Circuit generally interpret the New York Labor Law’s employer definition consistently with the federal law’s definition.

The plaintiffs relied on evidence that Ramos hired Flores Moreno, physically paid him, was present when workers received schedules and pay rates, and transmitted work orders. Ramos, however, stated that he acted on behalf of Maida Luna, who owned the Market during the relevant period and had final authority over hiring, firing, pay, and schedules. He also stated that he was prohibited from working at the Market between June and October 2016. Because the evidence about Ramos’s role conflicted, the court held that the plaintiffs had not shown that no material factual dispute existed about whether Ramos was their employer. The court therefore did not grant summary judgment on that issue.

Successor Liability

The court explained that federal courts in New York use either a New York common-law standard or a “substantial continuity” test to determine whether a business may be liable for a prior employer’s labor-law violations. Under the common-law standard, liability may arise when the buyer formally assumes the seller’s debts, the transaction defrauds creditors, the businesses effectively merge, or the buyer is merely a continuation of the seller. The substantial-continuity test considers, among other things, whether the successor had notice of the claims, whether the predecessor could provide relief, and whether business operations substantially continued.

The Market’s control was transferred to 153 J and J Food on or about October 21, 2016. The Market retained several features, including its exterior sign, deli menu, lease, vendors, and much of its machinery and equipment. But the plaintiffs and Luna left, and Ramos apparently took on additional managerial duties.

The court held that the plaintiffs had not shown the absence of material factual disputes concerning successor liability. Under the common-law standard, the record did not establish that 153 J and J Food assumed JJ Food Market Corp.’s debts, that the transaction was intended to defraud creditors, or that the entities merged or that 153 J and J Food was merely a continuation of JJ Food Market Corp. Under the substantial-continuity test, the record contained no evidence concerning two more significant factors: whether 153 J and J Food knew about the plaintiffs’ wage claims before acquiring control of the Market and whether JJ Food Market Corp. could provide relief. The court also found that the remaining continuity factors produced a mixed result.

Disposition

Judge Laura Taylor Swain denied the plaintiffs’ motion for summary judgment. The order resolved the motion identified as Docket Entry No. 73. It also directed the parties to meet and confer about settlement and to report whether they wanted court-supervised settlement negotiations or mediation.