Chen v. Matsu Fusion Restaurant Inc

Background

Guangfu Chen and Peizheng Fan, former deliverymen at a restaurant called Matsu Japanese Fusion, brought claims under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL) against Matsu Fusion Restaurant Inc., J&J Asian Bistro Inc., Apex Japanese Restaurant Inc., Yi Chang Chen (also known as Gary Chen), and Hiuyin Lam (also known as Wendy Lam). J&J and Lam separately moved for summary judgment under Rule 56, arguing that they were not the plaintiffs’ employers under either wage law.

Chen worked from March 2015 to at least March 2019, and Fan worked from August 2015 to July 2017. Until March 2019, Matsu Fusion or Apex owned and operated the restaurant. J&J was established on February 8, 2019, paid $145,000 for Matsu Fusion’s assets, including the restaurant’s lease, on March 21, 2019, and began operating the restaurant on April 1, 2019. J&J and Matsu Fusion had no common owners, shareholders, officers, or directors.

J&J’s Motion

The court held that J&J was entitled to summary judgment on all of the plaintiffs’ claims against it. Although Chen argued that his employment continued into May 2019, the court found no evidence that J&J ever employed him or Fan. The court also rejected the plaintiffs’ alternative theory that J&J was liable as a successor to Matsu Fusion.

The court identified two independent problems with the successor-liability theory. First, the Second Amended Complaint did not plausibly plead successor liability; it only made a conclusory allegation that the entity defendants were joint employers and part of an enterprise. Second, the evidence would not support successor liability under either of the tests discussed by the court.

Under the traditional New York common-law test, the plaintiffs had not shown that J&J assumed Matsu Fusion’s liabilities, that the transaction was fraudulent, or that there was the required continuity of ownership for a merger or continuation theory. Under the more lenient substantial-continuity test, the plaintiffs also failed to establish two factors the court described as indispensable: that J&J had notice of the wage claims and that its predecessor could not provide relief. The court therefore granted J&J’s motion for summary judgment.

Lam’s Motion

The court also granted Lam’s motion for summary judgment. To qualify as an employer under the FLSA or NYLL, an individual must have possessed power to control the workers’ employment. The court considered four commonly used factors: the power to hire and fire, supervision of schedules or working conditions, control over pay, and maintenance of employment records. No single factor was decisive.

The plaintiffs conceded that Lam did not set their pay, sign or distribute their paychecks, or supervise or control their schedules or working conditions. In opposing summary judgment, they submitted affidavits asserting that Lam helped manage the restaurant, acted as a bookkeeper, reviewed sales and tip records, supervised the restaurant when Gary Chen was absent, handled customer complaints, arranged deliveries, and participated in at least one firing.

The court applied the “sham affidavit” doctrine, which prevents a party from creating a genuine factual dispute through an affidavit that materially contradicts the party’s earlier deposition testimony. It found that the plaintiffs’ affidavits sharply conflicted with their depositions. After disregarding the new allegations, the remaining evidence consisted principally of Chen’s testimony that Lam had the “final say” when Gary was absent and that he had witnessed Lam fire another employee. The court concluded that this evidence was insufficient for a reasonable factfinder to determine that Lam was the plaintiffs’ employer under either statute.

Disposition

The court granted the summary-judgment motions of J&J and Lam and dismissed all of the plaintiffs’ claims against each of them. It directed the clerk to terminate J&J Asian Bistro Inc. and Hiuyin Lam, also known as Wendy Lam, as defendants and to terminate the two summary-judgment motions. The court also ordered the parties to submit proposed pretrial materials within thirty days and directed them to confer about settlement.