RHC Operating LLC v. City Of New York

Background

RHC Operating LLC owns the Roosevelt Hotel, which closed to the public in December 2020 and had not reopened when the opinion was issued. RHC sued the City of New York, Mayor Bill De Blasio, and New York City Council Members who voted for the Severance Law. RHC sought a preliminary injunction, meaning an order issued before final judgment to temporarily block enforcement of the challenged law.

The Severance Law applied to hotels with at least 100 rooms that had closed or experienced a large workforce reduction after March 1, 2020. It generally required covered hotels to pay eligible laid-off hotel-service employees $500 in severance pay for each week after October 11, 2021, for up to 30 weeks. The law allowed offsets for other severance or similar pay and ended payments when an employee was recalled or, in certain circumstances, when a closed hotel reopened and recalled at least 25% of its March 1, 2020 employees. The law was scheduled to expire on June 1, 2022.

Preliminary-injunction standard

Because the requested injunction would have affected government action taken under a statute, RHC had to show irreparable harm, a likelihood of success on the merits, and that the public interest favored an injunction. The court focused on whether RHC was likely to succeed on its federal claims.

Federal claims

The court held that the Severance Law was likely not preempted by the Employee Retirement Income Security Act (ERISA). ERISA can override state laws that require an employer to establish an employee-benefit plan. But the court reasoned that this law required only temporary, largely clerical tasks: identifying eligible employees, determining whether a hotel had closed or experienced a mass layoff, tracking recalls or reopening, calculating payments, and making payments. The law did not require an ongoing administrative program or an ongoing commitment to provide benefits, so it likely did not require an ERISA plan.

The court also rejected RHC’s arguments under the National Labor Relations Act (NLRA). It concluded that the law did not regulate workers’ rights to organize or bargain collectively, compel employers to commit an unfair labor practice, or require changes to existing collective bargaining agreements. The law supplemented contractual severance obligations by setting a payment floor. The court further held that the law did not interfere with the bargaining process or economic weapons protected by the NLRA and was a valid minimum labor standard that applied equally to union and nonunion employees.

The court concluded that RHC was unlikely to succeed on its Contracts Clause claim. It was unclear whether RHC had rights under the collective bargaining agreement it identified, because RHC had not shown that it or the hotel’s management company was a party to that agreement or that RHC was a third-party beneficiary. In any event, the court reasoned that the Severance Law supplemented rather than repudiated the agreement, imposed a temporary obligation, allowed offsets for overlapping payments, and served significant and legitimate purposes related to protecting hotel workers and promoting economic recovery during the pandemic. The court found the law’s means appropriate and reasonable for those purposes.

The court rejected RHC’s Due Process Clause claims. It found that the law gave people of ordinary intelligence enough information to understand which employees qualified and how much payment was required. The court also concluded that the law was rationally related to legitimate public purposes and that RHC’s allegations of arbitrary or discriminatory conduct were conclusory.

RHC’s Equal Protection claim used a “class of one” theory, which requires showing intentional different treatment from similarly situated comparators without a rational basis. The court found that RHC had not identified sufficiently similar businesses or hotels that were treated differently. It also found rational reasons for applying the law to hotels with at least 100 rooms and not to smaller hotels.

State-law claims

RHC also claimed that the Severance Law was preempted by New York State laws concerning unemployment benefits and labor relations. The court stated that, because RHC was not likely to succeed on its federal claims, it was not likely to retain supplemental jurisdiction over the state-law claims and that considerations of judicial economy, convenience, fairness, and comity would likely favor dismissing those claims without prejudice to refiling in state court. The court alternatively stated that the state-law claims were unlikely to succeed because the City likely had broad authority under New York home-rule principles and RHC had not identified a specific conflict or field-occupation basis for state-law preemption.

Disposition

The court denied RHC Operating LLC’s motion for a preliminary injunction and directed the Clerk of Court to close the motion at Docket Number 19. The opinion addressed the request for preliminary relief rather than entering a final judgment on the underlying claims.