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Westchester County Roundup: April 2019


Judge Román Denies FLSA Plaintiffs’ Motion to Dismiss Defendant’s Counterclaim for Unjust Enrichment

In Franze v. Bimbo Foods Bakeries Distribution, LLC, 7:17-cv-03556(NSR)(JCM), 2019 WL 1244293 (S.D.N.Y. Mar. 15, 219), Judge Nelson S. Román denied Plaintiffs’ motion to dismiss Defendant’s unjust enrichment counterclaim in a Fair Labor Standards Act class action. Plaintiffs worked for Defendant bakery as distributors pursuant to certain Distributor and Advertising Agreements. Those contracts classified Plaintiffs as “independent contractors.” Plaintiffs alleged that they were “employees” and thus were owed overtime and repayment of business deductions under the FLSA. In response, Defendant asserted a counterclaim for unjust enrichment, arguing that Plaintiffs were reclassified as employees but were allowed to retain bonuses and other monies they had received pursuant to the Distributor and Advertising Agreements, they would be unjustly enriched by deriving benefits from both classifications at once. Plaintiffs moved to dismiss, arguing unjust enrichment was unavailable to Defendant because (a) there were valid contracts between the parties and (b) Defendant’s claim was barred by the voluntary payment doctrine.

The Court rejected both arguments and denied Plaintiffs’ motion. Judge Román first explained that while the existence of a valid and enforceable contract covering the subject matter of the unjust enrichment claim requires dismissal of that claim, such a claim survives where the contract’s validity is challenged. Here, Defendant’s unjust enrichment claim was pled as an alternative theory in the event Plaintiffs were deemed employees and the contracts between the parties found invalid. Thus, any ruling on the unjust enrichment claim was premature until Plaintiffs’ employment status was determined. Second, Plaintiffs asserted that Defendant’s claim was barred by the voluntary payment doctrine, which precludes recovery on an unjust enrichment theory when the payments were made knowingly and voluntarily with no mistake of law or fact. The court rejected this argument as well, holding that the doctrine was an affirmative defense and so Defendant was not required to preemptively plead facts refuting it in their counterclaim. Judge Román further concluded that there was a question as to whether Defendant’s made the independent contractor payments to Plaintiffs under a mistake of law or fact because there the proper classification of Plaintiffs and the validity of the contracts had yet to be determined.

Judge Briccetti Grants in Part and Denies in Part Defendant’s Motion to Dismiss Plaintiff’s Deceptive Business Practices and Consumer Protection Action

In Suarez v. California Natural Living, Inc., 17 CV 9847 (VB), 2019 WL 1046662 (S.D.N.Y. Mar. 5, 2019), Judge Vincent Briccetti granted in part and denied in part Defendant’s motion to dismiss Plaintiff’s putative nationwide class action alleging violations of consumer protection laws, breach of express warranty, New York General Business Law (“GBL”) § 349 and 350, and the Magnuson-Moss Warranty Act (“MMWA”). Plaintiff allegedly purchased three of Defendant’s cosmetic products because they were marketed as “natural.” Plaintiff claimed that Defendant intentionally marketed its products to appeal to health-conscious consumers, even though each of the products contained one or more synthetic ingredients. Defendant moved to dismiss for lack of jurisdiction and failure to state a claim. Defendant first argued Plaintiff lacked standing to assert claims for injunctive relief for products she did not purchase, and on behalf of class members foreign to New York. The Court agreed that Plaintiff lacked standing to bring injunctive claims, because she did not plead that she intended to purchase the products in the future, but otherwise denied the motion. Judge Briccetti found Plaintiff had standing to assert claims for products that she did not purchase because they were sufficiently similar to products that she had purchased; and declined to address Defendant’s argument against nationwide class status at the pleading stage. Judge Briccetti similarly declined to rule on Defendant’s argument that the Court lacked specific personal jurisdiction over Defendant with respect to claims made on behalf of the proposed nationwide class, finding that issue was also better suited to the class certification stage. Turning to the merits of the Complaint, Defendant argued (a) the contested descriptions were non-actionable puffery, (b) the GBL claims should be dismissed because Plaintiff failed to allege that reasonable consumers would find the descriptions materially deceptive or misleading, (c) Plaintiff could not state a claim for breach of express warranty because there was no privity and she failed to provide pre-suit notice, and (d) the MMWA claim was pled insufficiently. The Court disagreed and denied Defendant’s Rule 12(b)(6) motion.

Judge Briccetti rejected Defendant’s puffery argument, citing precedent that the word “natural” was an affirmative claim about a product’s qualities. The Court next held that the GBL claims were pled sufficiently and the fact that synthetic ingredients were listed on the back label did not defeat those claims as a matter of law. On the express warranty claims, Judge Briccetti held a claim alleging breach of express warranty arising from public advertisement does not require privity between the parties, and the allegation in the complaint that Plaintiff sent a Pre-Suit Notice letter on June 2, 2017 was sufficient to comply with the pre-suit notice requirement. Finally, the Court summarily upheld the MMWA claims because Plaintiff’s underlying state warranty claims survived dismissal.

Judge Seibel Grants Plaintiff’s Motion for Attorney’s Fees in ERISA Action

In Tedesco v. I.B.E.W. Local 1249 Insurance Fund, 14-CV-3367 (CS), 2019 WL 140649 (S.D.N.Y. Jan. 9, 2019), Judge Cathy Seibel granted Plaintiff’s motion for attorney’s fees under ERISA following the resolution of the underlying litigation. Plaintiff was a beneficiary of the IBEW Local 1249 Insurance Fund Plan and suffered from severe OCD. In 2013, the Fund initiated a review of Plaintiff’s claims for treatment. Although the Fund’s expert only spoke to one of Plaintiff’s two treating psychiatrists, the Fund notified Plaintiff that she would only be covered for once-weekly visits to one of the psychiatrists in the future. After her appeal of the Fund’s decision yielded a similar result, Plaintiff commenced litigation, asserting four claims under ERISA: (i) the Fund violated the terms of the Insurance Plan by denying her medically necessary visits to her psychiatrists; (ii) the Fund did not have a right to offset future payments based on erroneous overpayments; (iii) the Fund unlawfully terminated coverage; and (iv) the Fund’s Administrator failed to provide information required by ERISA. Additionally, Plaintiff asserted a claim alleging violation of the Mental Health Parity and Addiction Equity Act of 2008 by requiring her to re-establish the medical necessity of treatment. The case was assigned to Judge Forrest who dismissed all of the claims on summary judgement.

On appeal, Plaintiff’s first cause of action was reinstated and remanded. Cross-motions for summary judgement were re-filed and, after the Court’s acknowledgement that Plaintiff seemed to have a stronger position, the parties settled the remaining claim. Plaintiff then filed a motion for attorney’s fees, which the district court denied. On appeal, the Second Circuit vacated the denial of attorney’s fees and instructed the district court to consider whether Defendant’s culpability, combined with Plaintiff’s partial success weighed in favor of granting attorney’s fees.

Plaintiff then filed the instant motion for attorney’s fees, which was reassigned to Judge Seibel. The Court began its opinion by explaining that courts must consider whether a party obtained some degree of success on the merits when deciding whether to award attorney’s fees, and also have discretion to consider the five Chambless factors: (i) degree of the offending party’s culpability, (ii) ability of the offending party to satisfy an award of attorney’s fees, (iii) whether an award of fees would deter others, (iv) relative merits of the parties’ positions, and (v) whether the action conferred a common benefit on a group of plan participants. Beginning with the “some success” factor, the Court noted that the Second Circuit had already concluded Plaintiff had achieved “some success” by settling the claim and further noted Judge Forrest’s statement on the second summary judgment motion that Plaintiff had a stronger case than Defendant on one issue. Judge Seibel went on to analyze the Chambless factors, finding each favored Plaintiff. Accordingly, the Court granted Plaintiff’s motion. However, Judge Seibel substantially reduced the fees sought by Plaintiff’s counsel, finding them excessive in terms of the number of hours spent on the case and in light of the fact that Plaintiff lost on most of her claims.

Judge Karas Grants in Part and Denies in Part Defendant’s Motion to Dismiss Plaintiff’s Employment Discrimination Complaint

In Melendez v. New York Foundling, Inc., No. 17-CV-6162 (KMK), 2019 WL 1084776 (S.D.N.Y. Mar. 7, 2019), Judge Kenneth M. Karas granted in part and denied in part Defendant’s motion to dismiss Plaintiff’s complaint alleging Title VII gender discrimination, violations of the New York Whistleblower Act, and failure to pay severance under an ERISA plan. Plaintiff worked for Defendant as an Assistant Vice President. He noticed problems relating to safety and training at his location, reported them to his superior and requested additional resources for training, but no action was taken. Not long after, the New York State Office for People with Developmental Disabilities conducted an audit of Plaintiff’s location and found serious safety deficiencies for which it issued two Statements of Deficiency. When asked for a written explanation of the cause, Plaintiff submitted a report and was subsequently transferred to another location. Plaintiff’s new location was audited by the Office one year later, and again, the Office issued a Statement of Deficiency. Three days later, Plaintiff was terminated by written memorandum, citing the three Statements of Deficiency and an alleged demotion. Plaintiff then filed suit alleging reverse gender discrimination, retaliation for complaining about safety issues, and ERISA violations. Defendant moved to dismiss the Complaint arguing that the NYWA contains a waiver provision that precluded Defendant’s federal gender discrimination claim and that Plaintiff did not allege facts showing that Defendant’s severance plan was covered by ERISA. Defendant also asked the Court to decline to exercise supplemental jurisdiction over the NYWA claim upon dismissal of the federal claims.

Judge Karas denied the motion as to the Title VII and NYWA claims but dismissed the ERISA claim. On the Title VII claim, Judge Karas followed other federal courts in the Second Circuit by construing the NYWA waiver narrowly to apply only to rights and remedies concerning whistleblowing. Because Plaintiff’s Title VII claim concerned the separate issue of gender discrimination, the Court held it was not waived and denied Plaintiff’s motion to dismiss that claim. Turning to the ERISA claim, Judge Karas found it was unnecessary to determine whether Defendant’s plan was covered by ERISA because by its terms the plan was never triggered. The plan only provided for severance pay upon certain qualifying events, and Plaintiff’s termination did not meet those conditions. Finally, because the Title VII claim survived, there was no basis to decline supplemental jurisdiction over the NYWA claim.

Westchester Supreme Court Justice Ruderman Grants Summary Judgment to Defendant Parents in Action Seeking Payment for Medical Bills of Adult Child

In Westchester County Health Care Corp. v. Ceus, 92 N.Y.S.3d 861 (N.Y. Sup. Ct. 2019), Justice Terry J. Ruderman granted summary judgement against Plaintiff healthcare provider who was attempting to collect a debt owed by Defendant’s 21-year old daughter. Defendant was listed as the primary insured on her adult child’s insurance card. Plaintiff contended this constituted a guarantee by Defendant to pay for any services rendered to the adult child. Proceeding on that theory, Plaintiff initiated the instant action to recover unpaid hospital and medical bills for treatment rendered to the Defendant’s daughter. Defendant moved for summary judgement. As an initial matter, the Court noted that parents are not liable for the support and maintenance of an adult child absent a statutory obligation. Although the Patient Protection and Affordable Care Act requires parents to provide coverage for children up to 26 years old, it contains no mandate that parents continue to be liable for non-covered medical expenses incurred by children 21 and older.

Justice Ruderman also rejected Plaintiff’s guarantee argument, finding guarantees must be in writing and executed by the guarantor, neither of which was present. Because Plaintiff had no cognizable legal right to relief, the court granted summary judgement in favor of Defendant.