Martinez v. 189 Chrystie Street Partners, LP d/b/a The Box

Background

Shanell Martinez alleged that she worked as a bottle server at The Box from 2017 until she was furloughed in early 2020. She claimed that the individual defendants made sexually and racially charged comments, engaged in unwanted sexual conduct, required her to tolerate or provide sexual attention to patrons and employers, and reduced her work hours after she rejected sexual advances or complained.

Martinez also alleged wage violations, including unpaid overtime, unpaid time spent on call and in staff meetings, unpaid commissions, wage rates below New York City’s applicable minimum wage for tipped employees, and improper tip-pooling practices. She asserted claims under the New York State Human Rights Law, New York City Human Rights Law, Fair Labor Standards Act, New York Labor Law, and Trafficking Victims Protection Act, as well as claims for fraud and unjust enrichment.

Purported Settlement Agreement

The defendants moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6), arguing primarily that a purported preliminary settlement agreement resolved the dispute. The court declined to enforce the agreement at the motion-to-dismiss stage because the submitted document was an unsigned draft and the parties exchanged edits afterward. The court found a factual issue about whether the document accurately stated the scope and terms of the alleged agreement, including potentially relevant release language.

The court held that the defendants had not yet met their burden of proving the existence and terms of the settlement. It therefore declined to enforce the purported agreement at that stage, while stating that the defendants could raise the issue again on a fuller record. This denial was expressly without prejudice as to that settlement-enforcement issue.

Trafficking Victims Protection Act Claim

The court denied the defendants’ request to dismiss Martinez’s claim under the Trafficking Victims Protection Act. At the pleading stage, the court had to accept well-pleaded factual allegations as true and decide whether they plausibly stated a claim, rather than determine whether the allegations were ultimately proven.

The court concluded that the statute did not require Martinez to allege that she actually completed a commercial sex act. It held that she adequately alleged unwanted sexual touching and other sexual conduct, that the alleged conduct was commercial because she expected improved job opportunities or assignments in exchange for acquiescing to sexual demands, and that force, threats, and promises of job opportunities plausibly caused or enticed the alleged conduct. The court also explained that the benefit requirement applies to defendants who aid or assist sex trafficking, and it noted that the allegations were thinner concerning whether individual defendants other than Nenad Karac benefited from or directly engaged in the alleged trafficking.

Standing and Recordkeeping Claims

The court separately questioned whether Martinez had standing to pursue her Eleventh and Twelfth causes of action under the New York Labor Law for recordkeeping violations. Standing requires a plaintiff to allege a concrete injury that is fairly traceable to the challenged conduct and likely to be redressed by a favorable decision.

Although the defendants had not moved to dismiss those claims on standing grounds, the court raised the issue itself. It found that Martinez had not adequately alleged a concrete consequence resulting from the alleged recordkeeping violations. The court ordered her, by August 31, 2023, either to show cause why those claims should not be dismissed for lack of standing or to move for leave to file a second amended complaint. The court stated that the recordkeeping claims would be dismissed without prejudice for lack of standing if she did neither.

Disposition

Judge Valerie Caproni denied the defendants’ motion to dismiss, lifted the stay on discovery, and directed the parties to proceed toward an initial pretrial conference. The order did not dismiss the recordkeeping claims at that time; it required Martinez to respond to the standing issue first.