Chen v. Shanghai Cafe Deluxe, Inc.

Background

Cindy Chen brought the action on behalf of herself and others similarly situated against Shanghai Cafe Deluxe, Inc., doing business as Shanghai Café, and Eile Wan, Ping Lin, and Xinsheng Gu. She alleged violations of the Fair Labor Standards Act (FLSA), the New York Labor Law (NYLL), and New York labor regulations. The opinion states that Chen worked as a waitress from April 15, 2012, through January 26, 2016. She alleged that she worked 57 hours per week, received no meal break, was paid a fixed weekly amount, was not told that the defendants would take a tip credit, and did not receive required written wage notices.

The defendants initially answered and participated in discovery. Their lawyer later withdrew, and the defendants did not obtain new counsel or continue participating. The Clerk entered default against Shanghai Café and the three individual defendants. The defendants did not oppose Chen’s renewed motion for default judgment, her damages submissions, or her request for attorneys’ fees.

Default-judgment standard

Because of the defendants’ default, the court treated the well-pleaded factual allegations in the Second Amended Complaint as admitted for purposes of liability, but it did not treat the claimed damages as automatically established. The court reviewed Chen’s affidavit and other submissions to determine the damages with reasonable certainty. It concluded that a separate damages hearing was unnecessary because Chen’s submissions supplied the information needed for the calculation.

Liability findings

The court found that the defendants were Chen’s employers under both the FLSA and the NYLL. The allegations showed that Shanghai Café was a restaurant, that Chen’s work was integral to its business, and that Wan, Lin, and Gu controlled hiring, firing, work conditions, schedules, compensation, and records. The defendants were therefore jointly and severally liable for damages under the FLSA and NYLL.

The court found that the FLSA’s interstate-commerce requirement was satisfied by allegations that Shanghai Café handled goods that moved in interstate commerce and had annual gross sales exceeding $500,000. The court applied the NYLL’s longer six-year limitations period where it provided greater relief than the FLSA.

The court found liability for unpaid minimum wages. Chen worked all of her claimed hours because she did not receive bona fide meal breaks. The defendants could not reduce their minimum-wage obligation through a tip credit because Chen alleged, and the defendants did not rebut, that they failed to provide the required notice. The court also found liability for unpaid overtime because Chen worked 17 hours above 40 hours each week without overtime pay.

The court found that Chen was entitled to spread-of-hours pay under New York law because she worked more than 10 hours per day at a restaurant. It also found liability under New York law for unlawful tip retention because the defendants allegedly shared tips with people who did not customarily receive tips, including an owner who worked as a cashier and a kitchen worker. The court explained that Chen could recover retained tips under the NYLL, but not under the FLSA. Chen did not, however, prove the amount of tips the defendants required her to contribute and therefore received no damages for that claim.

The court found that Chen was entitled to statutory damages for failure to provide the hiring wage notice required by NYLL section 195(1), but not for failure to provide wage statements under section 195(3). Although Chen alleged that she did not receive written wage statements, her affidavit said that each check came with a paystub, and the submitted paystubs appeared to contain some required information.

The court rejected Chen’s separate claims for damages based on New York recordkeeping requirements and meal-break requirements because it found no private cause of action for those violations. It also found that Chen had not established a claim under New York General Business Law section 349 because she did not plead the required consumer-oriented deceptive conduct and resulting injury. The court rejected the claim under 26 U.S.C. § 7434 because Chen did not allege that the defendants filed a fraudulent information return with the Internal Revenue Service.

Damages

The court calculated Chen’s unpaid straight-time wages at $38,386. It calculated unpaid overtime wages at $37,094 and spread-of-hours pay at $7,273.25. These amounts totaled $82,753.25 in unpaid wages.

The court awarded an equal amount, $82,753.25, in liquidated damages under the NYLL. It also awarded $5,000 in statutory damages for failure to provide the required wage notice. The total damages award was therefore $170,506.50, excluding attorneys’ fees, costs, and interest.

The court awarded prejudgment interest at nine percent per year on the $82,753.25 in actual wage damages, calculated from March 6, 2014, to the date judgment is entered. It also awarded post-judgment interest on the money awards from entry of judgment until payment, using the federal statutory rate.

Attorneys’ fees and costs

Chen requested $135,623 in attorneys’ fees for 290.52 hours. Applying the lodestar method—the reasonable hourly rate multiplied by the reasonable hours—the court reduced several requested hourly rates and applied a 10-percent reduction to the hours because of excessive, clerical, or inadequately described entries. The court awarded $55,022.48 in attorneys’ fees.

The court awarded $400 for the filing fee. It denied the remaining requested costs because Chen’s counsel did not provide documentation substantiating the process-server fees, shipping and postage costs, or deposition-transcript costs.

Disposition

The court entered default judgment against the defendants and awarded Chen $170,506.50 in damages, $55,022.48 in attorneys’ fees, and $400 in costs. It also awarded post-judgment interest and directed the Clerk to calculate the specified prejudgment interest. Chen was directed to serve the order on the defendants and file proof of service.