Opinion
FSTCV166029385S
08-04-2017
Alberto Gonzales v. Hilton Worldwide, Inc
UNPUBLISHED OPINION
MEMORANDUM OF DECISION re MOTION TO STRIKE (#140.00)
Kenneth B. Povodator, J.
Background
Plaintiffs, wait-staff employees of the defendants, claim/seek to represent all banquet servers, service employees and banquet bartenders (wait-staff employees) employed by the defendants, relating to a claimed right to compensation. They claim a right to funds derived from a 16% service charge that defendants charged and continue to charge its banquet customers. Plaintiffs contend that defendants were required to pass the full 16% service charge on to the plaintiffs' and the putative class members, in effect claiming that the service charge serves the function of a tip to wait-staff working banquet functions. There are two components to that claim: The plaintiffs claim that they have a right to the funds and the related claimed right that all of the 16% was required to be distributed to the classes of employees sought to be represented by the plaintiffs. To the extent that the defendants did not pass through all of the funds to the plaintiffs (and their classes of employees) and instead provided some of the funds to other classes of employees (housemen and captains)-and also may have retained some of the funds for the defendants' own purposes/use-the plaintiffs claim to have been wronged and seek compensation under a number of theories.
By motion to strike, the defendants have challenged the legal sufficiency of three of those claims. The defendants argue that the nature of the claim precludes the plaintiffs' reliance on statutory provisions relating to payment of wages (because the money in question, as a matter of law, cannot be characterized as wages to the plaintiffs), that the claim cannot be characterized as implicating conversion (because they lacked a sufficient possessory interest), and that the plaintiffs have not adequately alleged a claim of fraud (allegations are not sufficiently specific).
Except as specifically needed or appropriate, the court will not recite the well-established principles governing a motion to strike.
Discussion
I. Wage claim
The plaintiffs have asserted, in their First Count, that the practices of the defendants-not distributing among the plaintiffs and their fellow putative class members the full 16% service charge imposed on banquet customers-constitutes a violation of Connecticut law relating to payment of wages, specifically identifying General Statutes § § 31-71e and 31-72.
The intermediary but necessary-to-determine issue is whether the 16% service charge is the functional or legal equivalent of a tip. The defendants do not seem to dispute that characterization as a tip probably would be determinative of the plaintiffs' rights, but they argue that the lack of obligation to disburse the 16% service charge specifically to the plaintiffs (and their classes) precludes treatment of the resulting funds as tips or otherwise payments that might be characterized as wages.
It is helpful to quote an extensive passage from the defendants' brief:
As a matter of law, service charges and other similar surcharges, like the 16% gratuity fee Plaintiff's seek to collect here, are not wages. See https://www.ctdol.state.ct.us/wgwkstnd/wage-hour/restaurant.htm. As the Connecticut Department of Labor has explained:
If the employer chooses to impose a 'service charge, ' 'gratuity charge, ' or any other such surcharge on a customer, that payment belongs to the employer, not the employee(s), regardless of its designation.Id. Such service charges can only be considered 'wages' if the employer in fact distributes the charge to its employees. Id. ('However, if the employer in fact distributes that payment to the banquet employees, it becomes part of the hiring agreement and the employee(s) have earned a right to it on future banquets. Further, when an employer makes a payment of this nature (passing a 'service charge' or 'gratuity charge' on to an employee), the payment is considered as a wage under the wage payment laws.');
The quoted passage stands for the proposition that a service charge presumptively is the property of the employer, unless and until distributed to the employees. Paragraphs 19-20 of the operative complaint effectively assert that the plaintiffs were led to believe and did believe that they were receiving the full 16% (distributed among class members). The court is required to give the non-moving parties the benefit of favorable inferences. Does this suffice to establish that the money actually was distributed to the employees? Under these circumstances, the court must conclude that that is not what the complaint says or implies. It is clear that the focus is on the disparity between what was believed and what actually happened, with " what actually happened" being a negation of the full 16% being distributed to class members.
That, however, is not the end of the story. Actual distribution is, according to the quoted passage, sufficient to make the service charge an element of the employees' contractual rights (" it becomes part of the hiring agreement and the employee(s) have earned a right to it on future banquets.") But that demonstrates that the proper focus is on the scope of the agreement between the parties. Here, while there is an absence of any explicit reference to prior payment of the full 16%, there are numerous assertions of promises and representations that the full 16% would be paid to class members as part of their tip pool. If a seemingly singular payment could become a part of the hiring agreement, can the court disregard, as a matter of law, repeated promises that the plaintiffs would receive (as part of their compensation scheme) the full 16% service charge-and assurances that the full 16% was being paid to them?
As something of an overlay, the webpage in question is not directed to employees and what constitutes wages from an employee perspective-the focus is on the employer's obligation to pay the required minimum wage and the extent to which the employer can credit money paid to the employee on a basis other than direct hourly compensation-specifically, tips and related payments received by the employee. It does not purport to articulate a limit on what an employee can claim to be wages; it identifies the scope of tip-like payments that an employer can consider in determining whether an employee may be paid less than the legal minimum wage due to the receipt of such tip-like payments.
The court finds case law relating to bonuses to be instructive, since bonuses also are not paid in the same manner as periodic hourly or daily or weekly compensation (wages/salary), but for some purposes can be considered " wages." In Ziotas v. Reardon Law Firm, P.C., 296 Conn. 579, 587, 997 A.2d 453 (2010), the court discussed the distinctions to be applied in the context of bonuses, and when an unpaid bonus might be characterized as an unpaid wage. Perhaps the key statement: " Specifically, the defendant contends that, when the amount of a bonus is discretionary and is not ascertainable by applying a formula, the bonus does not constitute wages under the statute. We agree." When there is no real discretion, and when the compensation is ascertainable by applying a formula, the payment could be treated as wages, for purposes of the wage statutes in issue here and in Ziotas .
The plaintiff also relies on this court's statement in Mytych v. May Dep't Stores Co., supra, 260 Conn. at 161, 793 A.2d 1068, that " [t]he purpose of the [wage protection] statutes . . . is to protect the sanctity of the wages earned by an employee pursuant to the agreement she or he has made with her or his employer. The statutes do not dictate the means by which those wages are calculated." In Mytych, however, the specific amount of the wages owed by the employer to the employees was ascertainable by application of a set formula to which the employees had agreed when they were hired.
296 Conn. 592.
Again, the allegations of the complaint-and the court must focus on the complaint for purposes of this motion-assert repeated promises and representations that the plaintiffs would receive the full 16% (via the tip pool). There is no discretion; the " formula" is that the entire 16% would be given to them, as compensation (effectively, tips for services rendered at banquet affairs).
The ability of the plaintiffs to prove these allegations is not before the court. The plaintiffs have asserted that there was promised compensation that was not provided, and the promised compensation, calculable without the exercise of discretion, is sufficient to overcome the defendants' contention that the service charge, as a matter of law, cannot be within the scope of wages, for purposes of legal sufficiency. The court must accept the plaintiffs' allegations as true, and the court is limited to consideration only of the issues actually raised in the defendants' motion, Meredith v. Police Commission, 182 Conn. 138, 140, 438 A.2d 27 (1980). Therefore, the motion is denied in this regard.
II. Conversion Claim
The plaintiffs contend that the failure to pay them the full 16% constitutes conversion. They claim that their entitlement to be paid constitutes a sufficient possessory right to assert such a claim. The defendants contend that the plaintiffs have not alleged a sufficient property interest to support a claim of conversion.
The fatal problem with the conversion claims is that conversion requires a chattel, some form of personal property that has been wrongfully appropriated. In this case, the claimed property is a variation on a debt, whereby there is a claim that money was supposed to be paid over by the defendants to the plaintiffs, but wasn't. In some instances, money can be the subject of conversion, but that is the exception rather than the rule.
Although our case law is clear that a claim for money, not just tangible goods, may be the subject of conversion or statutory theft, a claim for money owed on a debt is not sufficient to establish such causes of action. [N]o Connecticut case holds that money owed by a debtor is the property of the creditor and allows for a cause of action in statutory theft when the debt is not paid. Moreover, in order to establish a valid claim of conversion or statutory theft for money owed, a party must show ownership or the right to possess specific, identifiable money, rather than the right to the payment of money generally. (Internal quotation marks and citations, omitted.) Mystic Color Lab, Inc. v. Auctions Worldwide, LLC, 284 Conn. 408, 421, 934 A.2d 227, 236 (2007).
The plaintiffs allege that they had a right to receive money in a general sense, but the claim does not involve " identifiable money" as in the case of a bailment of actual money. See, e.g. See, e.g. Aetna Life and Casualty Co. v. Union Trust Co., 230 Conn. 779, 790-91, 646 A.2d 799 (1994) (and also footnote 6 therein).
A recent example of conversion (and statutory theft) involving money can be found in Village Mortgage Co. v. Veneziano, 175 Conn.App. 59 (2017), where the defendant had embezzled and otherwise taken money from the plaintiff. There was no question as to the plaintiff's ownership and possession of the money at the time it was taken-it was not simply a matter of a debt (or the equivalent) not being paid. In other words, something more than an account entry that is not transferred to a plaintiff is required. Money can be converted but it must have been in the actual possession of the rightful owner-if not when it was taken, then at some prior point (e.g. subsequent entrustment to the defendant). Simplistically, conversion can apply to money that was taken or not returned; it does not apply to money that never was given in the first instance (given in the sense of transfer of possession and control).
The plaintiffs have not disputed that when a customer of the defendants is required to pay a service charge, it is money payable/paid to the defendants. There is a claim that the defendants are then obligated to pay that amount (transfer it) to the plaintiffs by deposit in the tip pool-but in the absence of such a deposit or other transfer of control, there is only a claim to an amount of money, not a claim to specific money in which a possessory interest already exists or had existed. In a simplistic sense, the distinction may seem technical but the consequences are significant-the defendants did not " take" (or refuse to return) something that was or had been in the possession of the plaintiffs but rather did not " give" them something that they claim they were entitled to receive.
The defendants are correct, then, in contending that the plaintiffs have not asserted a viable claim of conversion. The motion to strike is granted, in this respect.
III. Fraud
The defendants challenge the count sounding in fraud because " [p]laintiffs have not alleged sufficient facts to support Count Seven, their Fraud claim, because they have not pled the allegations underlying their fraud claim with sufficient specificity." Citations to trial court decisions generically stating that specific facts must be alleged, even if coupled with conclusory assertions that there are no specific factual allegations, is not sufficient to establish legal insufficiency. How much more specific could the plaintiffs be than to state that they repeatedly were told/assured that the full 16% was being paid to them, and that they were led to believe that the money so distributed was reported under the heading of gratuities on their pay stubs?
A statement about compensation for services rendered has both a current and future component--a present statement as to the terms of remuneration plus a statement that future payments will be made in accordance with that arrangement. Presumably the defendants would not hesitate to state that there never was an agreement or intention whereby the plaintiffs' compensation would include the full 16% as a matter of course or custom; so if the plaintiffs are correct in stating that there were such statements/promises (and for purposes of this motion, the court must assume that such statements/promises were made), then the statements would have been false. Note that even as to the future component, fraud effectively has been alleged; fraud can encompass statements/promises as to future conduct if there was an intention, at the time the statement or promise was made, not to follow through on that promise/statement, Paiva v. Vanech Heights Construction Co., 159 Conn. 512, 515, 271 A.2d 69 (1970), and again, that is what has been alleged.
To the extent that the defendants contend that specific occurrences must be alleged, there are allegations of pervasive statements/promises; under the circumstances, any claim for greater particularity as to date/time of specific occurrences would be requesting (requiring) evidence to be incorporated into the complaint. Practice Book § 10-1 makes the distinction: " Each pleading shall contain a plain and concise statement of the material facts on which the pleader relies, but not of the evidence by which they are to be proved . . ."
With respect to falsity of the statements/promises, aside from the foregoing, the defendants argue that there is nothing demonstrating knowledge of falsity in the complaint: " " Notably, while Plaintiffs allege that Defendants informed them that the 16% service charge would be split among 'wait staff, ' they have not alleged that Defendants informed them that the term 'wait staff' excluded Housemen and Captains." That is a strained reading of the complaint, especially given the court's obligation to read the complaint in a practical manner and giving the non-moving party the benefit of reasonable/favorable inferences. In ¶ 20 of the complaint, the plaintiffs do not use the actively-excluding-type language suggested by the defendants in the quoted language but instead use language describing the plaintiffs as the exclusive intended recipients in an inclusive sense: " These written and oral representations to Plaintiffs by Defendants made it clear that the 16% Tip/Gratuity was the property of the Plaintiffs which was to be distributed to them through the tip/gratuity pool" (emphasis added). The only fair reading of this sentence is that the reference to " property of the Plaintiffs" necessarily excludes any involvement of any class of employees outside of the classes to which the plaintiffs belong and for which they seek representative status. By identifying the 16% as intended to be the property of the plaintiffs, it is unnecessary to add " and excluding the housemen and captains" (or " and excluding everyone else").
The defendants pay least attention to the factor that the court finds to be of greatest concern--reliance. Their brief, somewhat cursorily, states that " Plaintiffs also have not alleged any facts to support the third prong of their fraud claim, that the alleged misrepresentation induced Plaintiffs to work for Defendants, " citing a trial court case in which a motion to strike a fraud claim had been granted, concluding that " although the plaintiffs make various allegations against the defendants, they fail to allege how the defendants' conduct induced them to act to their detriment."
In most instances, when courts discuss reliance on a representation, that entails a change of position or alteration in otherwise likely-to-occur behavior, Cefaratti v. Aranow, 321 Conn. 593, 623, 141 A.3d 752, 770 (2016); DeLuca v. C.W. Blakeslee & Sons, Inc., 174 Conn. 535, 547, 391 A.2d 170, 176 (1978). A claim of " no change" in reliance on a claimed misrepresentation is fatally ambiguous without at least a suggestion that, but for (reasonable) reliance on the misrepresentation, there would have been a change, i.e. that there was a difference as a result of reliance. Does continued working mean that they would have resigned, immediately, but for the expectation/promise of this aspect of payment? Would they have looked for alternate employment? Would they have insisted on higher pay (or else)? Was the reliance wholly independent of how close to the 16% they might have received--would their conduct have been otherwise (e.g., quitting or not starting work) if they had known that they were actually going to receive only a portion of that service charge? To the extent that the defendants contend that some specificity is required, the court agrees that it is required in this regard. (Given multiple plaintiffs, did they all rely? Did they all rely in the same manner? etc.)
Recognizing that the plaintiffs will have an opportunity to plead over and address this deficiency, the motion is granted as to the fraud claim, based on inadequate allegations of reasonable reliance.
Conclusion
A motion to strike requires the court to ask the question: Would the plaintiff be entitled to recover on the facts as alleged, assuming them to be true? The defendants have not established that under these circumstances, a claimed repeated (pervasive) promise that the full 16% would be (and was being) paid to the wait-staff, does not have a contractual quality to it and they have not established that it is subject to any discretion (based on the plaintiffs ' version of the promises/representations made). At trial, the burden will be on the plaintiffs, but for purposes of this motion to strike, the burden is on the defendants to establish legal insufficiency, and this they have not done.
The conversion claim is another matter. It is all too common for parties asserting contractual " you did not pay me" claims to add a claim of conversion, but conversion requires a possessory interest in identified personal property, not merely identification of an amount that is claimed to be due.
Finally, although the defendants seem to overstate the extent to which specificity/particularity is required in allegations of fraud, the issue of reliance requires more than the highly generalized/conclusory language used, particularly given the " individualized" quality of reliance. Everyone in the proposed class would have suffered exactly the same injury (potentially subject to some level of scaling, e.g., based on number of banquets actually worked), and everyone had essentially the same promises/representations made to him/her, and falsity also would be the same for all plaintiffs (in this situation). Reliance, however, is more personal in nature, such that a generalized conclusory claim of continuation of employment does not really address/identify the facts claimed to establish reliance. The court concurs that at least as to this element, a greater degree of specificity/particularity is needed--factual assertions as to the plaintiffs' reliance.
For all these reasons, then, the motion to strike is granted as to the claims based on conversion and based on fraudulent misrepresentation; the motion is denied with respect to the statutory wage claim.