Morana v. Park Hotels & Resorts Inc.

Background

Michael Morana filed a proposed class action on behalf of people who allegedly worked as tipped service workers for Park Hotels & Resorts, Inc., Hilton Worldwide Holdings, Inc., HLT NY Waldorf LLC, Hilton Domestic Operating Co. Inc., and Waldorf=Astoria Management LLC. He alleged that the defendants added mandatory “gratuity and administrative” surcharges of 22% to 23.75% to banquet-service charges but paid service workers only part of those amounts. He asserted four claims: violations of New York Labor Law § 196-d, unjust enrichment, inaccurate wage statements under § 195(3), and failure to provide required written wage notices under § 195(1).

The complaint sought to represent hourly, non-exempt service workers employed by the defendants throughout New York. Its only stated basis for federal subject-matter jurisdiction was the Class Action Fairness Act, which generally requires, among other things, at least 100 proposed class members and more than $5 million in controversy.

Jurisdictional dispute

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which permits dismissal when a federal court lacks authority to hear a case. They argued that Morana had standing to assert claims only for banquet-service employees at the Waldorf Astoria, rather than for workers at all of the defendants’ New York facilities. The defendants also moved under Rules 12(b)(2) and 12(b)(6) and alternatively sought to compel arbitration, but the court did not reach those arguments.

Morana alleged, “upon information and belief,” that the same or a substantially similar surcharge system was used throughout the defendants’ New York facilities. The court found that allegation insufficiently plausible because Morana provided no factual information showing similarities among the hotels or explaining the role of the individual defendants. The court also noted that Morana worked as a banquet server at another New York hotel owned or operated by some defendants but alleged nothing about that hotel’s surcharge policy.

The court therefore limited the potential class, for jurisdictional purposes, to tipped banquet servers at the Waldorf Astoria. The defendants submitted evidence that no more than 162 banquet-service employees worked there during the relevant period and that 96 signed severance agreements releasing claims and waiving the ability to participate in a class or collective action. The court treated 66 employees as potentially eligible class members. Morana did not dispute that number with contrary evidence.

Ruling

Judge Ronnie Abrams concluded that Morana had not proved by a preponderance of the evidence that the proposed class met the Class Action Fairness Act’s 100-member requirement. The court granted the defendants’ motion to dismiss for lack of subject-matter jurisdiction. Because the court lacked jurisdiction, it did not address the defendants’ other grounds for dismissal or their request to compel arbitration.

The court granted Morana permission to amend if he had a good-faith basis to do so. It stated that an amended complaint would need specific, non-conclusory facts showing either that the defendants used a substantially similar surcharge policy at other hotels or that the proposed class otherwise exceeded 100 eligible members. The court also directed any amendment to address possible union membership, any collective bargaining agreement, and other written employment terms. The order stated that the motion to dismiss was granted without prejudice to amendment, required any amended complaint by April 16, 2021, and warned that failure to amend by that date would result in dismissal of the case with prejudice.