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noting that a complaint's allegation that the amount in controversy exceeded $5 million “create[d] a presumption” that the amount-in-controversy requirement had been met
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19 Civ. 10104 (ER)
2022-09-30
Michele METCALF and Hannah Lawson, individually and on behalf of all others similarly situated, Plaintiffs, v. TRANSPERFECT TRANSLATIONS INTERNATIONAL, INC., Defendant.
Jeremìah Lee Frei-Pearson, Andrew Charles White, Finkelstein, Blankinship, Frei-Pearson & Garber, LLP, White Plains, NY, Nona Yegazarian, Nathan M. Smith, Brown Neri Smith and Khan LLP, Los Angeles, CA, Daniel Shay Kirschbaum, Derek Smith Law Group, New York, NY, for Plaintiff Michele Metcalf. Daniel Shay Kirschbaum, Derek Smith Law Group, New York, NY, Jeremiah Lee Frei-Pearson, Finkelstein, Blankinship, Frei-Pearson & Garber, LLP, White Plains, NY, for Plaintiff Hannah Lawson. Daniel Turinsky, DLA Piper US LLP, New York, NY, Ryan Patrick O'Connor, DLA Piper LLP (US), Short Hills, NJ, for Defendant TransPerfect Translations International, Inc.
Jeremìah Lee Frei-Pearson, Andrew Charles White, Finkelstein, Blankinship, Frei-Pearson & Garber, LLP, White Plains, NY, Nona Yegazarian, Nathan M. Smith, Brown Neri Smith and Khan LLP, Los Angeles, CA, Daniel Shay Kirschbaum, Derek Smith Law Group, New York, NY, for Plaintiff Michele Metcalf. Daniel Shay Kirschbaum, Derek Smith Law Group, New York, NY, Jeremiah Lee Frei-Pearson, Finkelstein, Blankinship, Frei-Pearson & Garber, LLP, White Plains, NY, for Plaintiff Hannah Lawson. Daniel Turinsky, DLA Piper US LLP, New York, NY, Ryan Patrick O'Connor, DLA Piper LLP (US), Short Hills, NJ, for Defendant TransPerfect Translations International, Inc. OPINION & ORDER Ramos, District Judge:
Michele Metcalf and Hannah Lawson ("Plaintiffs") brought this putative class action alleging that TransPerfect Translations International, Inc., violated various provisions of the New York Labor Law ("NYLL"). In brief, the claims concern overtime pay that TransPerfect allegedly failed to pay Plaintiffs.
Before the Court is the Report and Recommendation ("R & R") dated July 11, 2022, of Magistrate Judge Katharine H. Parker, to whom this matter was referred for judicial review of TransPerfect's motion to dismiss the Second Amended Complaint ("SAC") for lack of subject matter jurisdiction pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(h)(3). See Doc. 131, 171. In the R & R, Judge Parker recommended (1) denying TransPerfect's motion to dismiss for lack of subject matter jurisdiction and (2) dismissing Plaintiffs' NYLL § 195(3) claims without prejudice for failure to adequately plead standing to bring such claims. Doc. 171. TransPerfect filed objections to the R & R, and Plaintiffs responded. Doc. 179, 184. For the reasons stated herein, the Court ADOPTS Judge Parker's R & R.
NYLL § 195(3) provides that employers must furnish their employees with wage statements. Plaintiffs alleged that TransPerfect failed to provide putative class members with wage statements that listed the overtime rate of pay following a change to the NYLL's threshold for earning such pay in New York City. Doc. 62 ¶¶ 28-29.
I. BACKGROUND
A. Factual Background
Plaintiffs Michele Metcalf and Hannah Lawson brought this action on behalf of themselves and all of TransPerfect's "salaried employees being compensated at less than $1,125.00 per week" who worked overtime in its New York City office between December 31, 2018, and January 13, 2020. Doc. 62 ¶¶ 1-4. Metcalf and Lawson each worked at that office for various months during 2019. Id. ¶¶ 5-7. Both earned a weekly salary of less than $1,125, and regularly worked more than forty hours a week. Id.
The facts stated herein are drawn from Plaintiffs' SAC. Doc. 62. They are assumed true for the purpose of adjudicating the instant motion to dismiss. See McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007) ("In reviewing a motion to dismiss . . . we accept as true all factual statements alleged in the complaint . . . .") (citation omitted); see also J.S. ex rel. N.S. v. Attica Cent. Sch., 386 F.3d 107, 110 (2d Cir. 2004).
Metcalf is a citizen of California who worked for TransPerfect from approximately November 2015 to September 2019. Id. at ¶ 5. She held various roles during that period. Id. In January 2018, Metcalf transferred to TransPerfect's New York office where she earned an annual salary of $51,000, which amounted to approximately $980 per week. Id. Later that year, in November 2018, she was promoted to Senior Client Services Executive with an annual salary of $56,000, which was approximately $1,077 per week. Id. Metcalf held that position until June 2019. Id. During her time working in TransPerfect's New York office, she generally worked over 50 to 55 hours per week. Id.
Lawson is a resident of Brooklyn, New York. Id. at ¶ 7. Lawson worked in TransPerfect's New York office from approximately June 18, 2018, to October 9, 2019. Id. While she initially started as a Project Coordinator earning $43,000 per year, she was promoted in December 2018, at which point she began earning $980 per week. Id. Lawson maintained her role as Project Manager until at least April 7, 2019. Id. During this time period, she worked an average of 45 hours weekly. Id.
In addition to Metcalf and Lawson, TransPerfect, a translation services company that is citizen of Delaware and New York, employed at least one hundred other salaried employees in its New York office. Id. at ¶¶ 12-14. They each worked overtime and earned less than $1,125 per week during the proposed class period. Id. at ¶¶ 14, 21.
B. Procedural Background
On August 18, 2019, Metcalf initiated this action by filing a complaint in the District Court for the Central District of California. Doc. 1. She asserted diversity, pursuant to 28 U.S.C. § 1332(a), as the basis for subject matter jurisdiction. Id. at ¶ 8.
On October 23, 2019, the parties submitted a joint stipulation to transfer the case to the Southern District of New York pursuant to 28 U.S.C. § 1404(a). Doc. 22. The federal court in California granted that and the case was transferred to this District. Doc. 24, 25. On November 15, 2019, TransPerfect filed a motion to dismiss the Complaint on the grounds that there was no subject matter jurisdiction because Metcalf had not sufficiently alleged the amount in controversy exceeded $75,000. Doc. 38. Metcalf subsequently amended her Complaint on December 19, 2019. Doc. 45. The First Amended Complaint ("FAC") added Lawson as a named plaintiff and additional TransPerfect entities as defendants. Id. ¶¶ 7-13. It otherwise asserted substantially the same claims and once again asserted diversity jurisdiction. See generally Doc. 45.
On December 10, 2019, TransPerfect filed a letter with the Court arguing that the addition of Lawson to Metcalf's FAC divested the Court of diversity jurisdiction because both Lawson and TransPerfect are New York citizens. Doc. 50. Plaintiffs then filed the SAC on January 13, 2020, asserting jurisdiction based on the Class Action Fairness Act of 2005 ("CAFA"). Doc. 62 ¶ 15. The SAC alleges that the amount in controversy exceeds $5 million, including the individual claims of a proposed class of more than 100 individuals. Id.
On January 27, 2020, TransPerfect moved to dismiss for lack of subject matter jurisdiction and for failure to state a claim. Doc. 65. In that motion, TransPerfect did not contest that the amount in controversy threshold for CAFA jurisdiction was met. See Doc. 66 at 9-10. Rather, TransPerfect argued that exceptions to the exercise of CAFA jurisdiction applied to the case. Id.
On November 30, 2020, the Court denied TransPerfect's motion to dismiss for lack of subject matter jurisdiction and granted its motion to dismiss for failure to state a claim against any "joint employers." See generally Doc. 83. Accordingly, all corporate entities besides TransPerfect Translations, Inc., were dismissed. See id. at 12-13.
Following a period of discovery and settlement discussions, TransPerfect subsequently filed the instant motion to dismiss on February 25, 2022, this time alleging that there is no factual basis to support the contention that the amount in controversy exceeds the $5 million threshold required by CAFA. Doc. 131-32. On July 11, 2022, Judge Parker issued the R & R. Doc. 171. It recommended that TransPerfect's motion to dismiss be denied, and that Plaintiffs' NYLL § 195(3) wage statement claims be dismissed without prejudice due to Plaintiffs' failure to adequately plead standing to bring those claims. See id. at 1.
Thereafter on July 25, 2022, TransPerfect filed its objection to the R & R's recommendation that TransPerfect's motion to dismiss be denied. Doc. 179. It did not object to the recommendation regarding Plaintiffs' NYLL § 195(3) wage statement claims. See generally id. Plaintiffs responded on August 8, 2022. Doc. 184. They did not object to either recommendation. See generally id.
II. STANDARD OF REVIEW
A district court reviewing a magistrate judge's report and recommendation "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1)(C). Parties may raise "specific," "written" objections to the report and recommendation "[w]ithin fourteen days after being served with a copy." Id.; see also Fed. R. Civ. P. 72(b)(2). A district court reviews de novo those portions of the report and recommendation to which timely and specific objections are made. 28 U.S.C. § 636(b)(1)(C); see also United States v. Male Juv. (95-CR-1074), 121 F.3d 34, 38 (2d Cir. 1997). The district court may adopt those parts of the report and recommendation to which no party has timely objected, provided no clear error is apparent from the face of the record. Lewis v. Zon, 573 F. Supp. 2d 804, 811 (S.D.N.Y. 2008). The district court will also review the R & R for clear error where a party's objections are "merely perfunctory responses" argued in an attempt to "engage the district court in a rehashing of the same arguments set forth in the original petition." Ortiz v. Barkley, 558 F. Supp. 2d 444, 451 (S.D.N.Y. 2008) (citations and internal quotation marks omitted).
III. DISCUSSION
A. CAFA Jurisdiction - Amount in Controversy Dispute
Federal Rule of Civil Procedure 12(b)(1) requires that an action be dismissed for lack of subject matter jurisdiction when the district court lacks the statutory or constitutional power to adjudicate the case. See Mason Tenders Dist. Council of Greater New York and Long Is. v. CAC of New York, Inc., 46 F. Supp. 3d 432, 435 (S.D.N.Y. 2014). The party asserting subject matter jurisdiction carries the burden of establishing, by a preponderance of the evidence, that jurisdiction exists. See Morrison v. Nat'l Australia Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)). On a Rule 12(b)(1) motion challenging the district court's subject matter jurisdiction, evidence outside of the pleadings, such as affidavits, may be considered by the Court to resolve the disputed jurisdictional fact issues. See Zappia Middle E. Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir. 2000); see also Morrison, 547 F.3d at 170 (citing Makarova, 201 F.3d at 113). When evaluating a motion to dismiss for lack of subject matter jurisdiction, the Court accepts all material factual allegations in the complaint as true, but it does not necessarily draw inferences from the complaint favorable to the plaintiff. See Attica Cent. Sch., 386 F.3d at 110 (citing Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998)).
Likewise, the Court has the authority to dismiss a complaint, even when the plaintiff has paid the fees to bring a federal civil action, if the Court determines that it lacks subject matter jurisdiction, see Fed. R. Civ. P. 12(h)(3); Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999). The standards that govern TransPerfect's Rule 12(h)(3) motion are the same as those that govern its Rule 12(b)(1) motion. Greystone Bank v. Tavarez, No. 9 Civ. 5192 (ST), 2010 WL 3325203, at *1 (E.D.N.Y. Aug. 19, 2010).
CAFA confers federal jurisdiction over class actions where: (1) the proposed class contains no fewer than 100 members, (2) there is minimal diversity between the parties, and (3) the aggregate amount in controversy exceeds $5 million. Blockbuster, Inc. v. Galeno, 472 F.3d 53, 57 (2d Cir. 2006). The amount in controversy is established as of the date of the complaint, and it may not be re-evaluated based on post-filing events. Hall v. EarthLink Network, Inc., 396 F.3d 500, 506 (2d Cir. 2005).
The party invoking jurisdiction bears the burden of proving that the amount in controversy exceeds the CAFA threshold. Id. at 58. This is not a heavy burden. Blockbuster, Inc., 472 F.3d at 58 (holding that a party need only show "to a reasonable probability" that the aggregate claims exceed $5 million); see also Ocean Ships, Inc. v. Stiles, 315 F.3d 111, 116 (2d Cir. 2002) (recognizing a rebuttable presumption that the face of the complaint is a "good faith" representation of the amount in controversy). Once the party invoking jurisdiction has made a good faith representation as to the amount in controversy, the burden shifts to the opposing party, who must demonstrate "to a legal certainty" that the claim does not add up to $5 million. Chase Manhattan Bank, N.A. v. Am. Nat. Bank and Trust C. of Chicago, 93 F.3d 1064, 1070 (2d Cir. 1996) (concluding that the "legal impossibility of recovery must be so certain as to virtually negat[e] the plaintiff's good faith in asserting the claim") (quoting Tongkook Am. Inc. v. Shipton Sportswear Co., 14 F.3d 781, 785-86 (2d Cir. 1994)) (internal quotations omitted).
In its objections to the R & R, TransPerfect raised three reasons why Plaintiffs allegedly fail to meet the $5 million threshold to a legal certainty. See generally Doc. 179. First, TransPerfect claims that Judge Parker erroneously failed to extrapolate Plaintiffs' damages across the class to determine the amount in controversy. Id. at 13-16. Second, TransPerfect alleges that Judge Parker applied a higher number of overtime hours than was supported by the evidence while simultaneously incorporating "an unsupported assertion" that Plaintiffs' attorney's fees could amount to or exceed $2 million. Id. at 13. Finally, TransPerfect asserts that Judge Parker applied the incorrect rate of compensation for determining CAFA jurisdiction—erroneously using the employees' regular rate rather than the minimum wage. Id. The Court considers these objections in light of the burden-shifting framework discussed above.
i. Overtime Hours, Compensation Rate, and Attorney's Fees
Judge Parker determined that the face of the Complaint shows to a reasonable probability that the aggregate claims exceed the CAFA amount in controversy threshold. Doc. 171 at 7-9. The R & R conducted "some back-of-the-envelope calculations" to come to this determination. Id. at 8. Setting forth the fact that compensatory damages are calculated as the product of the number of uncompensated overtime hours at the applicable rate, Judge Parker noted that the SAC alleged that putative class members worked up to 15 overtime hours per week over the course of 54 weeks. Id. at 8; see also Doc. 62 at ¶¶ 1-2. Judge Parker also stated that pursuant to 12 N.Y.C.4.4. § 142-2.2, the presumptive overtime rate is 1.5 times the employee's hourly pay rate, here, $40.38 per hour ($26.92 per hour x 1.5). Doc. 171 at 8; see also Doc. 62 at ¶ 5. From there, Judge Parker noted that the SAC alleged a putative class of at least 100 members. Doc. 171 at 8.
Both parties now agree that the putative class is indeed larger; however, Judge Parker used this figure for preliminary calculations based on the SAC. Doc. 171 at 8; see also Doc. 132 at 6; Doc. 179 at 16.
Multiplying these figures together, Judge Parker determined that the compensatory damages amount to approximately $3.3 million (15 overtime hours x 54 weeks x $40.38 per hour x 100 class members). Id. at 8-9. Adding another $3.3 million in liquidated damages, Judge Parker determined that the total damages amounted to $6.6 million, and accordingly, the $5 million CAFA threshold was easily met. Id. at 9; Gomez v. MLB Enters., Corp., No. 15 Civ. 3326 (CM), 2018 WL 3019102, at *10 (S.D.N.Y. June 5, 2018). She then noted that attorneys' fees could be included in the calculation, which could plausibly amount to an additional $2.2 million based on the rate awarded in typical NYLL cases, namely, one-third of the total damages recovery. Doc. 171 at 9; Fields v. Sony Corp. of Am., No. 13 Civ. 6520 (GBD), 2014 WL 3877431, at *2 (S.D.N.Y. Aug. 4, 2014) (concluding that prevailing plaintiffs are entitled to attorney's fees and those fees may be included in the amount in controversy calculation); Ramirez v. Oscar De La Renta, LLC, No. 16 Civ. 7855 (RA), 2017 WL 2062960, at *6 (S.D.N.Y. May 12, 2015) (noting that courts typically award attorneys' fees representing one-third of the total recovery).
TransPerfect challenges the amounts used for the total amount of overtime hours, the applicable rate of overtime pay, and the sum and application of the $2.2 million in attorneys' fees. Doc. 171 at 8; see Blockbuster, Inc., 472 F.3d at 58.
First, TransPerfect contends that the operative number of overtime hours per week should be 6.56 rather than 15. Doc. 179 at 16-17. In support of that contention, TransPerfect asserts that this number is "undisputed" by the parties, and is allegedly supported by the calculations carried out over the course of this litigation. Id. at 17. While the parties do agree that the 6.56 number is the result of the analysis done to date based on produced data corresponding to five percent of the putative class, Doc. 143 at 16-17, Plaintiffs have repeatedly emphasized that that number is based on limited discovery and may not be representative of the entire class, Doc. 184 at 23.
As Judge Parker noted, these calculations relied on conservative estimates that made multiple assumptions in favor of TransPerfect and were based on documents representing only a small percentage of the putative class members. Doc. 171 at 11; see also Doc. 143 at 16-17.
Accordingly, despite TransPerfect's contentions, this is not a situation wherein new information—here, the parties' 6.56-hour calculation based on limited document production—so "contradicts" the material allegations of the Complaint that it is an error to set aside or contextualize that number in assessing Plaintiffs' low burden. Doc. 179 at 17; see also Doc. 171 at 8 n.4 (noting that even on a motion for summary judgment where an employer's records are limited, plaintiffs may show the amount of uncompensated work through estimates based on their recollection) (citing Vasquez v. NS Luxury Limousine Serv., Ltd., No. 18 Civ. 10219 (AN), 2021 WL 1226567, at *12 (S.D.N.Y. Mar. 31, 2021)). TransPerfect's reliance on Tandon v. Captain's Cove Marina of Bridgeport, Inc., 752 F.3d 239, 243 (2d Cir. 2014) and Crescent Publ'g Grp., Inc. v. Playboy Enterprises, Inc., 246 F.3d 142, 146 (2d Cir. 2001) fail to bolster its argument. Id. at 17-18. Both cases deal with situations where, based on the record, the courts endorsed a "clearly erroneous assessment of the evidence." See, e.g., Playboy Enterprises, Inc., 246 F.3d at 146. That is not the case here. At this stage of the litigation, it is not at all clear that the calculations based on five percent of the class discredit the 15-hour figure set out in the SAC. Indeed, discovery as to the remaining 95% of the putative class may very well bring the average number of overtime hours much closer to 15.
Critically, the R & R used the 15-hour figure for the first step of the amount in controversy analysis, wherein the Court must assess whether Plaintiffs met their modest, good faith burden to show that the aggregate claims exceed $5 million to a reasonable probability. Blockbuster, Inc., 472 F.3d at 58; Stiles, 315 F.3d. at 116. While TransPerfect urges that the 6.56-hour figure is the appropriate measure and, if used, proves that Plaintiffs' damages do not reach the CAFA threshold to a "legal certainty," that number need not be applied by the Court in its analysis of Plaintiffs' initial burden. Chase Manhattan Bank, N.A., 93 F.3d at 1070 (noting that the good faith sum claimed by a plaintiff controls the analysis unless an opposing party demonstrates "to a legal certainty that the claim is really for less than the jurisdictional amount") (citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 82 L.Ed. 845 (1938)).
See Section III(A)(ii) infra.
TransPerfect also challenges the rate of pay used to assess whether Plaintiffs met their burden. It insists that the applicable rate is 1.5 times the minimum wage, rather than 1.5 times the hourly rate of class members. Doc. 179 at 20-22 (citing 12 N.Y.C.4.4. § 142-2.2). But 12 N.Y.C.4.4. § 142-2.2 makes clear that TransPerfect's contention is only true if the putative class members are subject to the Fair Labor Standards Act ("FLSA") exemptions laid out in that provision. See also Hayward v. IBI Armored Servs., Inc., 954 F.3d 573, 575 (2d Cir. 2020). Here, TransPerfect fails to show that an exemption applies, much less "to a legal certainty." Chase Manhattan Bank, N.A., 93 F.3d at 1070. Indeed, as Judge Parker noted, Plaintiffs challenge this contention, and TransPerfect fails to conclusively establish which FLSA exemption applies and how it applies. Doc. 171 at 12-13; see generally Doc. 179 at 20-22. Perhaps most importantly, TransPerfect concedes that an FLSA exemption is an affirmative defense. Doc. 179 at 20. And the Second Circuit has long held that affirmative defenses may not be used "to whittle down the amount in controversy" for the purposes of evaluating subject matter jurisdiction. Scherer v. Equitable Life Assurance Soc'y of U.S., 347 F.3d 394, 397 (2d Cir. 2003) (citing Zacharia v. Harbor Island Spa, Inc., 684 F.2d 199, 202 (2d Cir. 1982)). While TransPerfect is free to raise this defense at the appropriate time, it does not affect the amount in controversy analysis here.
With respect to attorneys' fees, TransPerfect objects to the calculation of a total of $2.2 million. Doc. 179 at 18. However, TransPerfect acknowledges that "[c]ourts in this Circuit have consistently recognized that when determining the amount in controversy for CAFA purposes, attorneys' fees are calculated as one-third of total recovery in wage-and-hour cases brought under the NYLL." Id. at 18. Judge Parker relied precisely on that assumption to derive the $2.2 million figure. Doc. 171 at 9. The R & R specifically states as follows:
NYLL also provides that prevailing plaintiffs are entitled to attorneys' fees, and Plaintiffs may therefore include attorneys' fees in their calculation. Fields v. Sony Corp. of Am., 2014 WL 3877431, at *2 (S.D.N.Y. Aug. 4, 2014) (citation omitted). In cases brought under NYLL, courts typically award attorneys' fees representing one third of the total recovery. Ramirez v. Oscar De La Renta, LLC, 2017 WL 2062960, at *6 (S.D.N.Y. May 12, 2017). One third of the above roughly calculated damages equals $2,200,000. Therefore, the allegations in the SAC plausibly allege that approximately $2.2 million in attorneys' fees is in controversy. Together, compensatory damages, liquidated damages, and attorneys' fees as calculated based solely on the allegations in the SAC amount to $8.8 million, which far exceeds the $5 million threshold.Id. Contrary to TransPerfect's objection, Judge Parker's calculation was not "inconsistent with applicable law." Doc. 179 at 19. That the R & R later mentioned various methods that the Court may subsequently use to calculate attorneys' fees does not call into question its application of the broadly accepted "one-third" method to estimate attorneys' fees for the purpose of the amount in controversy determination at this stage. See generally Doc. 171 at 16 (noting that the Court need not engage in the parties' dispute regarding the appropriate method for calculating attorneys' fees because both proposed methods are sufficient to establish the necessary amount in controversy).
ii. Extrapolation of Plaintiff's Damages
TransPerfect also objects to the methodology in the R & R. Doc. 179 at 13-16. It contends that the named plaintiffs' purported damages should be extrapolated across the entire class, rather than being calculated based on the allegations set out in the SAC. Doc. 179 at 13. Specifically, TransPerfect insists that the Court must calculate the amount in controversy by multiplying the exact unpaid overtime damages estimated by the named Plaintiffs at the outset of this litigation (namely, $6,153 for Metcalf and $7,019.22 for Lawson) by the total number of class members. Id. at 13-14. In response, Plaintiffs assert that while it may be proper to extrapolate damages across the entire class in some cases, this cannot and should not be limited to the "preliminary and tentative" calculations prepared by the named plaintiffs in their initial interrogatory responses—particularly where there are indications that the class members' damages may vary. Doc 184 at 14-15; Doc 141 at 20.
Central to Plaintiffs' response is the fact that they updated their damages estimations after TransPerfect produced documents over the course of discovery. Doc. 184 at 14-15; see also Doc. 141 at 20-21. Thereafter, Metcalf revised her compensatory and liquidated damages to a total of approximately $18,000—almost three times the original estimate of her damages. Doc. 141 at 26; Doc. 142-1 at 8-9. Critically, these revisions came after TransPerfect provided Plaintiffs with additional data that prompted Plaintiffs to shift their initial calculations, which were based on data from TransPerfect's prior, more limited disclosures. Doc. 184 at 15, 20.
TransPerfect nevertheless claims that the Court cannot, at this stage, consider those adjustments because precedent "is clear that courts may not rely upon sworn statements, such as affidavits, which directly contradict" prior testimony, namely, Plaintiffs' initial damages estimates. Doc. 179 at 15. That is certainly true in cases where, as Plaintiffs note, a litigant simply revises deposition testimony with a contradictory affidavit based only "a new recollection or realization, not new evidence." Doc. 184 at 18; see, e.g., Margo v. Weiss, 213 F.3d 55, 58-59 (2d Cir. 2000). But here, Plaintiffs revised their calculations after receiving employer records from TransPerfect that provided a more complete picture of their actual payment history—not merely after realizing that they simply forgot to add overtime hours to their initial calculations. Doc. 184 at 15-18, 20. Accordingly, the Court sees no reason why it should not consider the revised damages calculations.
This renders TransPerfect's extrapolation argument futile. As Judge Parker noted in her R & R, TransPerfect acknowledges that there are at least 235 class members. Doc. 171 at 10; Doc. 132 at 6; Doc. 179 at 16. Applying TransPerfect's logic, if the putative class members all have damages comparable to Metcalf's, the total damages in controversy would be more than $4 million, exclusive of attorneys' fees. Plaintiffs thus easily clear the $5 million threshold even under TransPerfect's extrapolation theory. Fields, 2014 WL 3877431, at *2; see also Ramirez, 2017 WL 2062960, at *6. At minimum, this theory fails to demonstrate "to a legal certainty" that Plaintiffs' claims do not meet the $5 million CAFA threshold. Chase Manhattan Bank, N.A, 93 F.3d at 1070.
B. Standing to Bring NYLL § 195(3) Claims
In the R & R, Judge Parker concluded that Plaintiffs failed to sufficiently plead standing to bring claims pursuant to NYLL § 195(3) for TransPerfect's alleged failure to furnish its employees with accurate wage statements. Doc. 171 at 16-17. Neither party challenged this portion of the R & R. See generally Doc. 178; Doc. 184. Having reviewed the NYLL § 195(3) standing analysis for clear error, the Court adopts Judge Parker's recommendation that such claims be dismissed without prejudice.
IV. CONCLUSION
The Court has reviewed Judge Parker's thorough R & R and finds no error, clear or otherwise. Judge Parker reached her determinations after a careful review of the parties' submissions and arguments, and appropriately relied on pertinent assumptions to determine that the CAFA threshold was met. Doc. 171. The Court therefore ADOPTS Judge Parker's recommendations and (1) denies Defendant's motion to dismiss under CAFA and (2) dismisses Plaintiffs' NYLL § 195(3) claims for failure to adequately plead standing without prejudice.
It is SO ORDERED.
REPORT AND RECOMMENDATION ON MOTION TO DISMISS
KATHARINE H. PARKER, United States Magistrate Judge
TO: HONORABLE EDGARDO RAMOS, UNITED STATES DISTRICT JUDGE
FROM: KATHARINE H. PARKER, UNITED STATES MAGISTRATE JUDGE
Plaintiffs bring this putative class action against TransPerfect Translations International Inc., alleging violations of the New York Labor Law ("NYLL"). Although Plaintiffs only bring state law claims, they argue federal jurisdiction exists over this action pursuant to the Class Action Fairness Act of 2005 ("CAFA"), Pub. L. No. 109-2, 119 Stat. 4 (2005) (codified in relevant part at 28 U.S.C. § 1332(d)). Before me for a report and recommendation is Defendant's Motion to Dismiss the Second Amended Complaint ("SAC") for lack of subject matter jurisdiction pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(h)(3). Defendant argues that the amount in controversy does not reach CAFA's $5 million jurisdictional threshold. (ECF No. 131.) For the reasons stated below, I recommend denying the motion.
Separately, for the reasons stated below, Plaintiffs have failed to adequately plead standing to bring claims for Defendant's failure to provide wage statements pursuant to NYLL § 195(3). Thus, I recommend dismissing this claim without prejudice.
BACKGROUND
1. Plaintiffs' Claims
Plaintiffs Michele Metcalf and Hannah Lawson are former employees of Defendant, a corporation with its principal place of business in New York. (SAC ¶¶ 5, 7, 9.) Both worked in Defendant's New York City office for several months in 2019. (Id. ¶¶ 5, 7.) During the time Plaintiffs worked in Defendant's New York City office, each earned less than $1,125.00 per week and regularly worked more than forty hours a week. (Id.)
NYLL provides that, unless an exemption applies, New York employers must pay certain employees 1.5 times their regular rate of pay for any hours worked "overtime," which is any time over forty hours per week. N.Y. Comp. Codes R. & Regs. tit. 12 ("12 NYCCRR") § 142-2.2. Employers are not required to pay overtime to employees working in an "executive, administrative, or professional capacity" if their weekly pay meets or exceeds a certain threshold. Id. § 142-2.14(4). The threshold differs by the employer's size and location. Id. For New York City employers that employ 11 or more employees, the threshold as of December 31, 2018 was $1,125.00. Id. Since December 31, 2018, employees earning less than this minimum threshold must be paid for overtime even if they worked in an "executive, administrative, or professional capacity." Id.
Plaintiffs bring claims on behalf of themselves and all of Defendant's salaried employees being compensated at less than $1,125.00 per week who worked in Defendant's New York City offices from December 31, 2018 to the present and who worked overtime. (SAC ¶ 30.) Plaintiffs allege that beginning on December 31, 2018 until the present, class members worked up to approximately 15 hours of overtime a week but were not paid for overtime in violation of NYLL. (SAC ¶ 2.) Defendant acknowledges there are at least 235 putative class members. (ECF No. 132 at 2.)
2. Pertinent Procedural History
Metcalf commenced this action on August 18, 2019 by filing a Complaint in the District Court for the Central District of California. (ECF No. 1.) By September 21, 2019, a majority of the putative class, including Metcalf and Lawson, received retroactive salary payments in an attempt to compensate them for the difference between their then-existing salaries and the salary threshold for exemption from overtime pay under NYLL for employees working in an executive, administrative, or professional capacity. (ECF 132 at 2-3.) Plaintiff alleges all retroactive payments occurred after this action was filed. (ECF No. 141 at 12.)
On October 28, 2019, the California district court transferred the case to the Southern District of New York pursuant to 28 U.S.C. § 1404(a). (ECF No. 24.) Metcalf amended the Complaint on December 9, 2019, adding Lawson as a plaintiff and adding several TransPerfect corporations as Defendants. (ECF No. 45.) On January 13, 2020, Plaintiffs filed the SAC asserting jurisdiction based on CAFA. (ECF No. 59.) The SAC alleges that the amount in controversy exceeds the sum of $5 million. (Id. at ¶ 15.)
On January 27, 2020, Defendants moved to dismiss the SAC for lack of subject matter jurisdiction and failure to state a claim. (ECF No. 65.) Defendants did not contest that the amount in controversy was met, and instead argued that certain exceptions to the exercise of CAFA jurisdiction applied. The Honorable Alison J. Nathan denied the motion, finding that the "requirements for establishing CAFA jurisdiction" were met and no exceptions applied. Metcalf v. TransPerfect Glob., Inc., 2020 WL 7028644, *3 (S.D.N.Y. Nov. 30, 2020) (citations omitted). Judge Nathan dismissed the claims against all defendants except TransPerfect Translations International Inc. for failure to state a claim because Plaintiffs did not plausibly allege that the other defendants were "joint employers" of Plaintiffs and the proposed class. Id.
The parties then engaged in discovery, which remains ongoing. (See ECF No. 141 at 6.) Defendant did not maintain or produce records that allow the parties to definitively determine the size of the class or the number of overtime hours worked by putative class members. (ECF 141 at 7.)
On February 25, 2022, Defendant filed a second motion to dismiss the SAC, this time arguing that there is no factual basis to support the contention that the amount in controversy exceeds the minimum $5 million threshold required by CAFA. (ECF No. 132 at 1.) On June 29, 2022, the Court held an oral argument on Defendant's motion to dismiss. (ECF No. 168.)
LEGAL STANDARDS
The same standards govern a motion to dismiss for lack of subject matter jurisdiction under 12(b)(1) and 12(h)(3). Greystone Bank v. Tavarez, 2010 WL 3325203, at *1 (E.D.N.Y. Aug. 19, 2010). A case is properly dismissed for lack of subject matter jurisdiction "when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). Jurisdiction must be shown affirmatively and the court may "refer to evidence outside the pleadings." Id. (citations omitted). The Court must draw all inferences in favor of the party asserting jurisdiction. Id.
CAFA confers federal jurisdiction over class actions where: (1) the proposed class contains at least 100 members; (2) there is minimal diversity; and (3) the aggregate amount in controversy exceeds $5 million. Blockbuster, Inc. v. Galeno, 472 F.3d 53, 57 (2d Cir. 2006).
When the Complaint is filed in federal court in the first instance, the plaintiff has the burden of proving "to a reasonable probability" that "the aggregate claims of the plaintiff class are in excess of $5 million." Id. at 58 (quotation marks and citation omitted). This is a light burden: "the sum claimed by the plaintiff controls if the claim is apparently made in good faith." Wells Fargo Bank, Nat'l Ass'n v. CIT Bank, N.A., 2017 WL 1184296, at *5 (S.D.N.Y. Mar. 29, 2017) (citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288, 58 S.Ct. 586, 82 L.Ed. 845 (1938)). The court presumes that the face of the complaint is a good faith representation of the actual amount in controversy. Wolde-Meskel v. Vocational Instruction Project Cmty. Servs., Inc., 166 F.3d 59, 63 (2d Cir. 1999). Plaintiff is subject to a "liberal" pleading standard, GW Holdings Grp., LLC v. U.S. Highland, Inc., 794 F. App'x. 49, 51 (2d Cir. 2019) (citation omitted), and even cursory allegations that the jurisdictional amount is met may be sufficient, provided the allegations are plausible, Hart v. Rick's NY Cabaret Int'l, Inc., 967 F. Supp. 2d 955, 960 (S.D.N.Y. 2014); see also 14AA Wright & Miller, Fed. Prac. & Proc. Juris. § 3702 (4th ed.) (listing cases finding that plaintiffs met their initial burden where the complaints contained cursory allegations that the amount was met and concluding this is the correct result).
Once a good faith representation has been made, the burden shifts to the defendant to show to a "legal certainty" that the amount recoverable does not meet the jurisdictional threshold. St. Paul Mercury Indem., Co., 303 U.S. at 289, 58 S.Ct. 586. Unlike the plaintiff's burden, the defendant's burden is heavy. "[T]he legal impossibility of recovery must be so certain as virtually to negat[e] the plaintiff's good faith in asserting the claim." Chase Manhattan Bank, N.A. v. Am. Nat. Bank & Trust Co. of Chi., 93 F.3d 1064, 1070 (2d Cir. 1996) (citation omitted). "[E]ven where [the] allegations leave grave doubt about the likelihood of a recovery of the requisite amount, dismissal is not warranted." Zacharia v. Harbor Island Spa, Inc., 684 F.2d 199, 202 (2d Cir. 1982). However, dismissal may be granted where there is no evidence that plaintiffs reasonably could accrue damages amounting to $5 million. See Acevado v. Citibank, N.A., 2019 WL 1437575, at *13 (S.D.N.Y. Mar. 31, 2019).
In considering whether Defendant has met its burden, the court may look at evidence outside the pleadings, including affidavits. Zappia Middle E. Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir. 2000). However, the Court should not look to post-filing events in evaluating the amount in controversy, because "the amount in controversy is established as of the date of the complaint and is not reevaluated based on post-filing events." Hall v. EarthLink Network, Inc., 396 F.3d 500, 506 (2d Cir. 2005). For the same reason, the court should not recalculate the amount in controversy based on jurisdictional discovery, particularly where the damages sought were uncertain at the time the complaint was filed. Id. Affirmative defenses asserted on the merits similarly may not be used to "whittle down the amount in controversy." Scherer v. Equitable Life Assurance Soc'y of U.S., 347 F.3d 394, 397 (2d Cir. 2003) (citation omitted).
ANALYSIS
1. The Amount in Controversy Requirement is Met.
In most CAFA cases addressing amount in controversy, plaintiffs have filed their complaint in state court in the first instance, and the defendant seeks removal to the federal court and must show that federal jurisdiction exists. Hart, 967 F. Supp. 2d at 959-60. Here, Plaintiffs filed this action in federal court, and Defendant is the party disputing jurisdiction. Accordingly, I first consider whether Plaintiffs met their low burden of showing to a reasonable probability that the aggregate claims of the putative class exceed $5 million. As described below, the Plaintiffs easily clear this burden. I next consider whether Defendant has proved to a "legal certainty" that the amount recoverable does not meet the jurisdictional threshold, and find Defendant is not able to meet this heavy burden.
Defendant argues that because jurisdiction is contested, plaintiffs must prove jurisdiction exists "by a preponderance of the evidence" rather than to a "reasonable probability." (ECF No. 132 at 1 n.1). In this context, "it is unclear that these two standards are functionally different," but "Courts in the Second Circuit continue to use the 'reasonable probability' standard." Daly v. United Airlines, Inc., 2017 WL 3499928, at *2 (D. Conn. Aug. 16, 2017). Because challenges to jurisdiction are typically brought before evidence is produced, "the 'reasonable probability' language better captures the preliminary nature of this inquiry" and prevents "extensive and time-consuming litigation over the question of the amount in controversy in CAFA removal cases." Amoche v. Guarantee Tr. Life Ins. Co., 556 F.3d 41, 50-51 (1st Cir. 2009).
a. The Face of the Complaint Shows to a Reasonable Probability that the Aggregate Claims Exceed $5 Million.
Plaintiffs assert that the alleged class-wide damages exceed the jurisdictional threshold amount of $5 million. (SAC ¶ 15). Plaintiffs bring claims on behalf of a class of over 100 individuals stemming from Defendant's failure to pay overtime from December 31, 2018 until the "present" (i.e., the date the SAC was filed, which is January 13, 2020). (SAC ¶¶ 1, 15.) Plaintiffs seek compensatory and liquidated damages under NYLL, as well as attorneys' fees and any further relief that the Court deems proper. (Id. ¶ 48.)
Plaintiffs also seek statutory penalties for Defendant's alleged violations of NYLL § 195(3). However, as described below, Plaintiffs have not pled that they have standing to bring claims for statutory violations, and accordingly the Court did not consider damages relating to such violations in evaluating the amount in controversy. See Cellucci v. O'Leary, 2021 WL 242806, at *2 (S.D.N.Y. Jan. 25, 2021) ("Without standing to bring this claim, Plaintiffs cannot rely on it to satisfy the amount in controversy threshold.").
The SAC's allegation that the amount in controversy exceeds $5 million creates a presumption that the amount in controversy requirement is met. Hart, 967 F. Supp. 2d at 960. Moreover, the SAC alleges more than sufficient facts to support the allegation that the requirement is met. The exact amount of damages at issue was not known at the time the Complaint was filed, and remains uncertain due to Defendant's insufficient recordkeeping. However, some back-of-the-envelope calculations based on the plausible allegations in the SAC demonstrate a reasonable probability that the amount in controversy exceeds $5 million.
At this stage, rough calculations are sufficient given that the amount in controversy is not the sum ultimately due, but the sum demanded in good faith. Kurland & Assocs., P.C. v. Glassdoor, Inc., 2020 WL 4016816, at *2 (S.D.N.Y. July 16, 2020); see also Payne v. Tri-State Careflight, LLC, 322 F.R.D. 647, 678 (D.N.M. 2017) (explaining that "rough, back-of-the-envelope calculations" are sufficient for determining the amount in controversy).
To start, compensatory damages are calculated as the product of the number of uncompensated overtime hours worked and the applicable overtime rate. The presumptive overtime rate is 1.5 times the employee's regular hourly rate of pay. 12 N.Y.C.R.R. § 142-2.2; Hayward v. IBI Armored Servs., Inc., 954 F.3d 573, 575 (2d Cir. 2020). The relevant time period is December 31, 2018 until January 13, 2020, which totals 54 weeks, and the SAC alleges putative class members worked up to 15 overtime hours per week. (SAC ¶¶ 1-2.) This amounts to 810 uncompensated hours per putative class member over the period at issue. The Complaint alleges there are over 100 class members, but assuming for now that there are just 100 (though Defendant admits there are at least 235 class members), this amounts to approximately 81,000 uncompensated hours for the class. Regarding the applicable overtime rate, the SAC alleges that Plaintiff Metcalf earned $1,076.92 per week, which is $26.92 per hour. (SAC ¶ 5.) The applicable overtime rate is 1.5 times this amount, which is $40.38. Assuming for now that this rate of pay is equal across the class, compensatory damages amount to 81,000 multiplied by $40.38, which totals $3,270,780. See, e.g., Hart, 967 F. Supp. 2d at 961-62 (multiplying estimated damages for named plaintiff by the number of putative class members to calculate amount in controversy, even though "not every class member will be entitled to" damages equal to named plaintiff's). Prevailing plaintiffs are also entitled to recover liquidated damages under NYLL in the amount equal to their actual damages for unpaid wages. Gomez v. MLB Enters., Corp., 2018 WL 3019102, at *10 (S.D.N.Y. June 5, 2018). The SAC therefore plausibly alleges sufficient facts showing it is reasonably probable that approximately $3.3 million in compensatory damages and $3.3 million in liquidated damages is in controversy. This totals $6.6 million, which exceeds the $5 million threshold requirement.
Note that even on a motion for summary judgment, where, as here, an employer's records are inadequate, plaintiffs may show the amount and extent of uncompensated work through estimates based on their own recollection. Vasquez v. NS Luxury Limousine Serv., Ltd., 2021 WL 1226567, at *12 (S.D.N.Y. Mar. 31, 2021).
If the putative class size is 235, the amount of reasonably probable compensatory damages alleged in the SAC equals $7,686,333, which far exceeds the jurisdictional minimum, not even considering other damages.
NYLL also provides that prevailing plaintiffs are entitled to attorneys' fees, and Plaintiffs may therefore include attorneys' fees in their calculation. Fields v. Sony Corp. of Am., 2014 WL 3877431, at *2 (S.D.N.Y. Aug. 4, 2014) (citation omitted). In cases brought under NYLL, courts typically award attorneys' fees representing one third of the total recovery. Ramirez v. Oscar De La Renta, LLC, 2017 WL 2062960, at *6 (S.D.N.Y. May 12, 2017). One third of the above roughly calculated damages equals $2,200,000. Therefore, the allegations in the SAC plausibly allege that approximately $2.2 million in attorneys' fees is in controversy. Together, compensatory damages, liquidated damages, and attorneys' fees as calculated based solely on the allegations in the SAC amount to $8.8 million, which far exceeds the $5 million threshold.
Discovery may show that the available damages are higher or lower than this amount, but Plaintiffs "are not required at this stage to conclusively establish total damages." Hart, 967 F. Supp. 2d at 961-62. At this stage, Plaintiffs have met their initial, low burden to demonstrate through the allegations in the complaint that it is reasonably probable that an excess of $5 million is in controversy here.
b. Defendant has not shown to a legal certainty that $5 million is not in controversy.
Defendant brings four main arguments in an attempt to rebut the presumption that the SAC satisfies the amount in controversy requirement. This is a very high bar, and Defendant has not met it. See Chase Manhattan Bank, N.A., 93 F.3d at 1070.
First , Defendant argues that discovery has revealed damages are lower than $5 million, but this is not true. Specifically, Defendant argues that Plaintiffs Metcalf and Lawson provided interrogatory answers stating that their total compensatory and liquidated damages equaled $6,153 and $7,019.22, respectively, and that the Court should assume total damages for the class are comparable to these figures. (ECF No. 132 at 11.) But Defendant cites old damages estimations that Plaintiffs stated were "preliminary and tentative" at the time they shared them with Defendant. (ECF No. 141 at 20). Plaintiffs have since provided Defendant with updated damages estimations following additional limited discovery and informed Defendant that Plaintiff Metcalf's total compensatory and liquidated damages are likely closer to $18,000. (ECF No. 141 at 20.) Thus, by Defendant's logic, if there are 235 putative class members all with damages comparable to Metcalf's, the total amount in controversy before attorneys' fees would be $4.2 million. Attorneys' fees calculated as a third of that amount easily bring this number above $5 million.
It is also well established that class members' damages may "vary" from those of the named plaintiffs. NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145, 164-65 (2d Cir. 2012). Thus, there is no reason to assume total damages for the class are limited by the damages owed to the named Plaintiffs. Defendant presents no proof that its assumptions are correct; no time records or pay rates for the 200 + members of the putative class are provided. Defendant's assumptions about damages across the putative class clearly fall short of the "legal certainty" standard required to contest the jurisdictional amount.
Additionally, at the oral argument, Defendant argued that even using Plaintiffs' calculations in their brief opposing Defendant's motion to dismiss, it is clear that "it is impossible" for Plaintiffs to "get above $5 million." (ECF No. 169, Tr. 13:4-5.) Plaintiffs' calculations relied on "conservative" estimates and made multiple assumptions in favor of Defendant. (ECF No. 143 at 10.) Using these calculations, Plaintiffs calculated that there is at least $2.98 million in actual compensatory damages and liquidated damages in controversy, and at least approximately $2 million in attorneys' fees in controversy. Using these conservative calculations, Plaintiffs showed that at least $4.98 million is in controversy—a number Defendant implausibly characterized at oral argument as "not even remotely close to $5 million." (ECF No. 169, Tr. 13:14.) Plaintiffs also clarified that these calculations do not represent "a cap or a limit" on what damages are in controversy, and in fact class-wide discovery might show damages that are significantly higher. (Id. at 21:20-21.)
As such, Defendant has not shown that discovery to date in any way forecloses the possibility that the amount in controversy exceeds $5 million. To the contrary, calculations based on available discovery, though incomplete, only support the notion that at least $5 million is in controversy here.
Second , Defendant argues that the applicable overtime rate in calculating damages should be 1.5 times the minimum wage rather than 1.5 times the hourly rate of putative class members. Defendants cite 12 N.Y.C.R.R. § 142-2.2, which provides that payment of overtime shall be made:
[I]n the manner and methods provided in and subject to the exemptions of sections 7 and 13 of 29 USC 201 et seq., the Fair Labor Standards Act of 1938, as amended . . . . In addition, an employer shall pay employees subject to the exemptions of section 13 of the Fair Labor Standards Act . . . overtime at a wage rate of one and one-half times the basic minimum hourly rate.12 N.Y.C.R.R. § 142-2.2 (emphasis added). The Second Circuit has explained that the provision requires employers to pay employees that are subject to a Fair Labor Standards Act ("FLSA") exemption under section 13 overtime compensation at a rate of 1.5 times the minimum wage rather than 1.5 times their hourly rate. Hayward, 954 F.3d at 575.
Remarkably, Defendant argues that Plaintiffs must be subject to an FLSA exemption under section 13 without stating which exemption applies or showing how it applies to Plaintiffs and all members of the putative class. Plaintiffs dispute that they are subject to any exemptions that might impact the applicable overtime rate. (ECF No. 157 at 2-3.) Plaintiffs are not required to bring claims under FLSA or to allege that they were not exempt under FLSA or NYLL. Black v. Coughlin, 76 F.3d 72, 75 (2d Cir. 1996). Rather, an exemption is an affirmative defense, Dejesus v. HF Mgmt. Servs., LLC, 726 F.3d 85, 91 (2d Cir. 2013), and it is Defendant's burden to prove an exemption applies, Chen v. Major League Baseball Props., Inc., 798 F.3d 72, 82 (2d Cir. 2015). Moreover, even if Defendant somehow proved an exemption applied, an affirmative defense cannot be used "to whittle down the amount in controversy." Scherer, 347 F.3d at 397 (citation omitted). Defendant's argument regarding the applicable overtime rate thus fails to meet the "legal certainty" standard required to contest the jurisdictional amount.
Third , Defendant argues that retroactive payments it made to putative class members offset the amount of compensatory damages owed, and accordingly offset the amount in controversy. (ECF 151 at 7.) This argument fails for several reasons.
To start, Defendant alleges that by September 21, 2019, most putative class members received retroactive salary payments to compensate them for the difference between their salaries and the effective salary threshold for exemption under NYLL. But Defendant has not provided data showing that these payments were sufficient to bring putative class members within the salary requirements to qualify them for an NYLL exemption. Moreover, in order to qualify for an NYLL exemption, employees must meet both a salary requirement and the duty requirements. Torres v. Gristede's Operating Corp., 628 F. Supp. 2d 447, 455 (S.D.N.Y. 2008). In other words, employees' duties must fall within certain definitions outlined in the statute. Defendant alleges its retroactive payments brought putative class members' salaries above the threshold to qualify them for an NYLL exemption, but it does not show that their workplace duties also satisfied the requirements to qualify for an NYLL exemption.
Additionally, Defendant cites no case law supporting the notion that late payments can be used to retroactively bring employees within the salary threshold required for an NYLL exemption. Defendant similarly cites no case law supporting the position that damages for failure to pay overtime should be offset as a result of a retroactive salary increase. NYLL requires that overtime payments be made in full on a weekly basis, and payments earned by an employee after they were due generally do not satisfy the employer's obligations. 12 NYCCRR § 146-2.6; Karic v. Major Automotive Cos., 992 F. Supp. 2d 196, 201 (E.D.N.Y. 2014). The Second Circuit has rejected the notion that "overpayments" of overtime in certain weeks can offset an employer's liability for other weeks under the analogous federal statute, the FLSA. Harold Levinson Assocs., Inc. v. Chao, 37 F. App'x 19, 22 (2d Cir. 2002). Similarly, numerous courts in this District have held that retroactive payments of overtime under the FLSA cannot be used to offset overtime liability. See, e.g., Lynch v. City of New York, 291 F. Supp. 3d 537, 548 (S.D.N.Y. 2018); Conzo v. City of New York, 667 F. Supp. 2d 279, 291 (S.D.N.Y. 2009). Accordingly, it is far from "legally certain" that the retroactive salary payments here could offset damages for purposes of assessing whether the CAFA amount in controversy is met—the inquiry before the Court on this motion.
Finally, even if the retroactive payments can be used to offset damages, this does not impact the amount in controversy because Plaintiffs allege no retroactive payments were made prior to the filing of the action. It is black-letter law that "the jurisdiction of the court depends upon the state of things at the time of the action brought." Grupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567, 570, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004) (citing Mollan v. Torrance, 22 U.S. 537, 539, 9 Wheat. 537, 6 L.Ed. 154 (1824)). This is known as the "time-of-filing" rule, and it means that "if jurisdiction exists at the time an action is commenced, such jurisdiction may not be divested by subsequent events." Freeport-McMoRan, Inc. v. K N Energy, Inc., 498 U.S. 426, 428, 111 S.Ct. 858, 112 L.Ed.2d 951 (1991). The court must look to "the date that suit is filed" to determine the amount in controversy. Kuhl v. U.S. Bank Tr. Nat'l Ass'n as trustee for Legacy Mortg. Asset Tr. 2018GS-1, 2020 WL 5775092, at *3 (S.D.N.Y. Sept. 28, 2020) (rejecting the argument that the defendant's payment of additional insurance proceeds to the plaintiff after commencement of the suit lowered the amount in controversy); see also Hall, 396 F.3d at 507. Because the plaintiff alleges retroactive payments were made after the suit was filed, the Court cannot consider these payments in calculating the amount in controversy.
Tongkook Am. v. Shipton Sportswear Co., 14 F.3d 781 (1994) is not to the contrary. There, the complaint mistakenly alleged an amount of contract damages that subsequent discovery revealed was legally impossible for plaintiffs to recover, because at the time the suit was commenced, the balance due on the contract at issue was actually below the requisite amount. Tongkook, 14 F.3d at 783. Thus, it was a legal certainty "from the outset" that plaintiff could not recover the statutory jurisdictional amount. Id. at 785. Here, Defendant has provided no evidence that at the time the action was commenced, it was legally impossible for Plaintiffs to recover $5 million.
Defendant argues that rather than looking to "the state of things" at the time the action was filed, the relevant period to consider is the moment the SAC was filed. (ECF No. 151 at 7.) This is incorrect, and the argument touches upon an important nuance worth elaborating upon. That is, when considering facts that impact jurisdiction, the court must consider them as they existed at the time of the filing of the action, but the court should look to the operative complaint when considering allegations that impact jurisdiction. Rockwell Int'l Corp. v. United States, 549 U.S. 457, 474, 127 S.Ct. 1397, 167 L.Ed.2d 190 (2007); Gale v. Chi. Title Ins. Co., 929 F.3d 74, 78 (2d Cir. 2019). As the Second Circuit explained, "[t]he time-of-filing rule applies to changes of the 'state of things,' but not to changes of the 'alleged state of things.' " Gale, 929 F.3d at 78 (citing Rockwell, 549 U.S. at 473, 127 S.Ct. 1397).
Accordingly, when a plaintiff files a complaint in federal court and then amends the complaint, as occurred here, courts look to the allegations in the amended complaint to determine jurisdiction. Rockwell, 549 U.S. at 473-74, 127 S.Ct. 1397 (2007). This rule does not impact the time-of-filing rule, because "[t]he state of things and the originally alleged state of things are not synonymous." Id. at 473, 127 S.Ct. 1397. Thus, it is irrelevant in calculating the amount in controversy that retroactive payments may have been made between the filing of the action and the filing of the SAC. See Gale, 929 F.3d at 78; accord James River Ins. Co. v. Liberty Surplus Ins. Corp., 2018 WL 11346744, at *5-6 (C.D. Cal. Mar. 6, 2018) (considering the jurisdictional amount at the time the first complaint was filed even though the defendant made retroactive payments prior to the filing of the amended complaint).
This is why the Court relies on the allegations in the SAC, as opposed to the initial Complaint, to determine whether it has CAFA jurisdiction. Gale, 929 F.3d at 78.
Thus, this argument falls well short of the "legal certainty" requirement necessary to rebut the presumption that the amount in controversy is satisfied.
Fourth , Defendant argues Plaintiffs are not entitled to the amount of attorneys' fees to which they claim they are entitled. Specifically, Plaintiffs claim they will be entitled to attorneys' fees using the lodestar method, which is the product of the number of hours billed and the attorneys' hourly rate. (ECF No. 141 at 17.) Courts in this Circuit have the discretion to award attorneys' fees using the lodestar method, and as such, Plaintiffs may use this method to establish the amount of attorneys' fees in controversy. Morris v. Affinity Health Plan, Inc., 859 F. Supp. 2d 611, 622 (S.D.N.Y. 2012) (citing McDaniel v. County of Schenectady, 595 F.3d 411, 417 (2d Cir. 2010)). However, even when calculating attorneys' fees as one third of damages, which Defendant admits is typical in this District, (ECF No. 151 at 8-9), attorneys' fees as alleged in the SAC are sufficient to ensure the amount in controversy is well over $5 million. See Wells Fargo Bank, Nat'l Ass'n, 2017 WL 1184296, at *5 (finding that although it was uncertain what the attorneys' fees would be, it was not legally certain that the plaintiff would be unable to recover the jurisdictional amount that included an estimation of attorneys' fees). The Court thus need not engage in the parties' dispute regarding the appropriate method of calculating attorneys' fees because both methods are sufficient to bring the amount in controversy over $5 million.
As none of its arguments is availing, Defendant falls far short of demonstrating to a legal certainty that $5 million is not in controversy here. As such, jurisdiction under CAFA exists.
2. Plaintiffs Lack Standing to Bring Claims for Statutory Penalties.
Separate from the amount in controversy question, I consider whether Plaintiffs have standing to bring claims pursuant to NYLL § 195(3), which provides that employers must furnish their employees with accurate wage statements. Plaintiffs allege Defendant failed to provide putative class members with wage statements that listed the overtime rate of pay to which they were entitled. (ECF No. 141 at 14). Defendant challenges Plaintiffs' standing to bring this claim for the first time on reply, and Defendant did not move to dismiss the statutory wage statement claims. However, the Court is required to consider the issue to ensure it has jurisdiction to hear the claims. Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, LLC, 433 F.3d 181, 198 (2d Cir. 2005). Recent precedent demonstrates that Plaintiffs failed to adequately allege that they have standing to bring such claims.
At the motion to dismiss stage, the plaintiff "bears the burden of alleging facts that affirmatively and plausibly suggest" they have standing. Calcano v. Swarovski N. Am. Ltd., 36 F.4th 68, 75 (2d Cir. 2022) (citation omitted). Article III of the United States Constitution confines the judicial power of the federal courts to cases where the plaintiff shows, inter alia, that she suffered a concrete injury in fact. TransUnion LLC v. Ramirez, — U.S. —, 141 S. Ct. 2190, 2203, 210 L.Ed.2d 568 (2021) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). A plaintiff cannot rely on the fact that the defendant committed a statutory violation: an "injury in law" does not amount to an "injury in fact" for purposes of Article III standing. Id. at 2205. Rather, a "concrete" harm is something with at least a " 'close relationship' to a harm 'traditionally' recognized as providing a basis for a lawsuit in American courts—such as physical harm, monetary harm, or various intangible harms." Id. at 2200 (citing Spokeo, Inc. v. Robins, 578 U. S. 330, 340-41, 136 S.Ct. 1540, 194 L.Ed.2d 635, (2016)). "[A] material risk of future harm" cannot satisfy the concrete-harm requirement for a claim of damages, nor can an "informational injury" absent any actual "adverse effects." Id. at 2213-14. Such adverse harms must be pled in the Complaint. Maddox v. Bank of New York Mellon Tr. Co., N.A., 19 F.4th 58, 65-66 (2d Cir. 2021); see also Epstein v. JPMorgan Chase & Co., 2014 WL 1133567, at *7 n.6 (S.D.N.Y. Mar. 21, 2014) (declining to infer standing based on harms plaintiff claimed to have suffered where plaintiff failed "to make this claim in his papers").
In TransUnion, the Supreme Court considered whether plaintiffs had standing to bring claims against a credit reporting agency for violating several provisions of the Fair Credit Reporting Act, including a requirement to send certain mailings in a specific format. The Court found the plaintiffs did not demonstrate that the improperly formatted mailings caused them a concrete harm because there was no evidence the plaintiffs even opened the mailings or that they "were confused, distressed, or relied on the information in any way." Id. at 2213 (citation omitted). The plaintiffs never alleged—as Plaintiffs do here—that they received incorrect information, but the Supreme Court explained that even if the plaintiffs had alleged an "informational injury," they would still need to show the "downstream consequences" they experienced "from failing to receive the required information." Id. at 2214 (citation omitted); accord Kola v. Forster & Garbus LLP, 2021 WL 4135153, at *7 (S.D.N.Y. Sept. 10, 2021) (holding plaintiff did not show "concrete harm" after receiving a misleading letter from a debt collector because plaintiff did not rely on the statements in the letter).
At oral argument, Plaintiff noted that the Ninth Circuit in Magadia v. Wal-Mart Assocs. Inc., 999 F.3d 668 (9th Cir. 2021) held that employees have a "concrete interest" for standing purposes in "receiving accurate information about their wages in their pay statements." (ECF No. 169, Tr. 7:11-18.) Magadia was decided about a month prior to TransUnion, which clarified that an informational injury, without some downstream consequences, is insufficient for standing.
Citing TransUnion, the Honorable Pamela K. Chen of the Eastern District of New York held, in three seriatim decisions, that plaintiffs lacked standing to maintain claims in federal court for violations of statutory wage statement requirements under NYLL § 195(3). See Sevilla v. House of Salads One LLC, 2022 WL 954740, at *7 (E.D.N.Y. Mar. 30, 2022); Wang v. XBB, Inc., 2022 WL 912592, at *13 (E.D.N.Y. Mar. 29, 2022); Francisco v. NY Tex Care, Inc., 2022 WL 900603, at *7 (E.D.N.Y. Mar. 28, 2022). Judge Chen explained that the plaintiffs in those cases did not demonstrate how the lack of accurate wage statements "led to either a tangible injury or something akin to a traditional cause of action." Francisco, 2022 WL 900603, at *7.
Accordingly, to state a viable claim for statutory violations, the complaint must provide factually specific, non-conclusory allegations that they suffered a concrete harm as a result of the violations. Here, the SAC has not alleged any such harm. The SAC does not allege that Plaintiffs even read the wage statements or relied on them in any way, or that the wage statements caused Plaintiffs confusion or distress.
At oral argument, Plaintiff's counsel argued that the lack of accurate wage statements may have resulted in actual adverse effects; specifically, inaccurate information may have prevented putative class members from realizing they were being underpaid and from taking appropriate action to obtain the payments due to them. (ECF No. 169, Tr. 5:2-5.) If putative class members indeed reviewed the wage statements and, based on this review, wrongly believed that they were being paid fully and therefore failed to take action to correct the situation, this would likely constitute "concrete harm" that is sufficient for standing. See TransUnion, 141 S. Ct. at 2203 (explaining that identification of "downstream consequences" resulting from an informational injury is sufficient for standing, such as that the information deficit hindered plaintiffs' ability to correct erroneous information before it was sent to others).
However, Plaintiffs failed to identify such "downstream consequences" in the SAC, and they noted them for the first time at oral argument. This is not sufficient to plead standing. Maddox, 19 F.4th at 65-66; see also Bd. of Managers of Mason Fisk Condo. v. 72 Berry St., LLC, 801 F. Supp. 2d 30, 39 (E.D.N.Y. 2011) (declining to consider theory of standing raised for first time at oral argument).
Therefore, the SAC does not sufficiently allege an injury in fact sufficient to establish standing to assert claims for wage statement violations under NYLL. For this reason, the Court did not consider damages relating to such violations in evaluating the amount in controversy above. Cellucci, 2021 WL 242806, at *2. I recommend that Plaintiffs be granted leave to amend the complaint in order to plead downstream injuries they suffered, if any, as a result of the inaccurate wage statements. See, e.g., Clark v. Burger King Corp., 255 F. Supp. 2d 334, 345 (D.N.J. 2003) (finding complaint did not plead standing and granting leave to amend the complaint because it may have been possible for the plaintiff to cure the deficiency).
CONCLUSION
In sum, Plaintiffs have plausibly alleged that at least $5 million in damages is in controversy. Despite Defendant's enthusiastic efforts, it has not shown that recovery of this amount is legally impossible. Therefore, I respectfully recommend that Defendant's Motion to Dismiss for lack of subject matter jurisdiction (ECF No. 131) be DENIED.
Additionally, as Plaintiffs have not adequately pled standing to assert claims for failure to provide wage statements based on the allegations in the SAC, I respectfully recommend that claims for wage statement violations (SAC ¶¶ 28-29) be dismissed without prejudice.
NOTICE
The parties shall have fourteen days from this date to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Fed. R. Civ. P. 72(b) to this Report and Recommendation. If Defendant files written objections to this Report and Recommendation, Plaintiffs may respond to the objections within fourteen days after being served with a copy. Fed. R. Civ. P.72(b)(2). If Plaintiffs file written objections, Defendant may respond to the objections within fourteen days.
Objections and responses to objections shall be filed with the Clerk of the Court, with courtesy copies delivered to the Hon. Edgardo Ramos at 40 Foley Square New York, NY 10007-1312, to the chambers of the undersigned magistrate judge, and to any opposing parties. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 6(a), 6(d), 72(b). Any request for an extension of time to file objections must be directed to Judge Ramos. Failure to file timely objections will result in a waiver of those objections for purposes of appeal. See 28 U.S.C.§ 636(b)(1); Fed. R. Civ. P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985).