Rosario v. Fresh Smoothies LLC

Background

Yajaira Rosario sued Fresh Smoothies LLC, Fresh Frutii LLC, Robinson Capello, and John Francis Rivera. The opinion identifies Capello and Rivera as officers, directors, shareholders, and/or persons controlling the companies. Rosario worked as a food prepper at Fresh Frutii from about June 2017 to May 2018 and at Fresh Smoothies from about October 2018 to September 2019.

Rosario alleged that she worked approximately 51 to 59.5 hours per week but was paid the same hourly rate for hours above 40. She also alleged that she was paid below New York’s minimum wage during parts of 2017, 2018, and 2019; that she received no meal or rest breaks; and that the defendants did not provide required payroll notices or wage statements. From January 2019 onward, she alleged that she received part of her compensation by check with tax withholdings and additional compensation in cash without withholdings.

The complaint asserted claims under the Fair Labor Standards Act, the New York Labor Law, and the Internal Revenue Code, as well as a claim that Fresh Frutii and Fresh Smoothies were part of a corporate combine. The defendants were served but did not answer, appear at the initial pretrial conference, or oppose the motion for default judgment.

Default Judgment Standard

Under Federal Rule of Civil Procedure 55, a court first enters a default when a defendant fails to defend and may then enter a default judgment. A default admits well-pleaded factual allegations, but it does not automatically establish legal liability. The court must still decide whether those allegations establish a valid claim. Damages must also be supported by evidence.

Wage Claims

The court held that Rosario’s allegations established violations of the overtime provisions of the Fair Labor Standards Act and New York law. She alleged that she worked more than 40 hours per week without receiving one and one-half times her regular hourly rate for the excess hours.

The court also held that the allegations established violations of New York’s minimum-wage, payroll-notice, and wage-statement requirements. The court calculated $22,033.75 in back wages, consisting of $12,037.50 in unpaid minimum wages and $9,996.25 in unpaid overtime. Because New York law provides liquidated damages equal to the underpayment when the employer does not show a good-faith basis for the underpayment, the court awarded another $22,033.75 in liquidated damages.

The court awarded $5,000 for the payroll-notice violations and $5,000 for the wage-statement violations. It also awarded 9% prejudgment interest on the back wages beginning July 23, 2018, which the court identified as the midpoint of Rosario’s employment within the limitations period. The judgment was also to include post-judgment interest under federal law.

The complaint included a New York claim for timely payment of wages, but Rosario did not pursue that claim in her motion papers. The court deemed that claim abandoned. The court focused its damages analysis on New York law because it provided a higher minimum wage and a longer recovery period, and because the same unpaid wages could not be recovered twice under both the federal and New York statutes.

Internal Revenue Code Claim

The court held that Rosario adequately established a claim under 26 U.S.C. § 7434, which allows a person to sue when another person willfully files a fraudulent information return concerning payments made to her. Rosario alleged that the defendants reported only the wages paid by check on her Internal Revenue Service form, despite also paying her additional wages in cash. The court awarded $5,000 in statutory damages on this claim.

Corporate Combine

The court held that the allegations established that Fresh Frutii and Fresh Smoothies were part of a corporate combine. The allegations included overlapping ownership, control, personnel, equipment, inventory, recordkeeping, and business operations. The judgment was to provide that Fresh Frutii and Fresh Smoothies were jointly liable for the amounts awarded.

Attorney’s Fees and Costs

The court approved 25 hours of attorney work at the requested hourly rates and awarded $7,312.50 in attorney’s fees. It also awarded $782 in costs, including filing and process-server fees.

Disposition

The court ordered entry of default judgment against the defendants, directed the clerk to prepare a judgment reflecting the specified damages, fees, costs, and interest, and directed the clerk to close the case. The opinion does not separately state an additional Fair Labor Standards Act damages award, and it does not detail how the judgment’s liability applies individually to Capello and Rivera beyond entering default judgment against the defendants and stating that Fresh Frutii and Fresh Smoothies are jointly liable.