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CHEN v. STREET BEAT SPORTSWEAR

January 22, 2002

FEN X. CHEN, QIU CHEN, YU ZHENG, CHAI CHEN, DANG ZHENG, HUA CHEN, YONG CHEN, KUN HUANG, AND QI LIU, PLAINTIFFS,
V.
STREET BEAT SPORTSWEAR, INC., ALBERT PAPOUCHADO, MICHAEL AMAR, JIAN WEN LIANG A/K/A RAYMOND LIANG, FEN CHEN A/K/A HUA FEN CHEN, LUN WEI FAN, 1A FASHIONS INC., AND RED ARROW INC., DEFENDANTS



The opinion of the court was delivered by: I. Leo Glasser, United States District Judge

MEMORANDUM AND ORDER

SUMMARY

This action arises out of alleged federal and state violations of the minimum wage and overtime provisions of the Fair Labor Standards Act ("FLSA") and New York Labor Law. Plaintiffs Fen X. Chen, Qui Chen, Yu Zheng, Chai Chen, Dang Zheng, Hua Chen, Yong Chen, Kun Huang, and Qi Liu ("plaintiffs") bring this action against two garment factories, 1A Fashions Inc. and Red Arrow Inc. ("factory defendants"), three individuals who allegedly own and operate said garment factories, a manufacturer of women's sportswear, Street Beat Sportswear, Inc. ("Street Beat"), and its officers and owners, Albert Papouchado ("Papouchado") and Michel Amar ("Amar") (collectively "manufacturer defendant").*fn1 The manufacturer defendants now move pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for dismissal of claims four, five and six of the amended complaint alleging negligence against the manufacturer defendants, and of claim seven, the third-party beneficiary claim, for breach of contract. For the reasons that follow, the motion is denied.

BACKGROUND

For the purpose of deciding this motion, the following facts alleged in the complaint are assumed to be true. See, e.g., Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The factory defendants and the manufacturer defendants are the plaintiffs' "employers or joint employers within the meaning of the [FLSA]." (See amended compl. ¶ 11.) The manufacturer defendants "hired, retained or contracted with the [f]actory [d]efendants" to produce their sportswear providing them with garment designs, sewing instructions, textiles, trimmings and other materials. (Id. ¶¶ 14, 57, 63, 67.) The factory defendants are a "fully integrated element of Street Beat's manufacturing operation," and approximately o of the garments made by the factory defendants are produced for the manufacturer defendants. (Id. ¶¶ 14, 23.)

The plaintiffs worked for the "defendants" from 1996 until 2000 as garment inspectors, hangers, button sewers, iron pressers, or general helpers.*fn2 (Id. ¶ 13.) The plaintiffs worked seven days a week with only one or two days off a year, and often worked from early in the morning until past midnight and into the next morning. (Id. ¶ 17.) The plaintiffs were paid either by the piece or by the hour. and were never paid overtime wages for the hours worked past forty hours a week. (Id. ¶¶ 15, 16, 19.) The factory workers were threatened with the loss of their jobs if they did not comply with this work schedule. (Id. ¶ 20.) The "defendants" maintained false employment records, including false time records, in an effort to conceal their employment practices. (Id. ¶ 21.)

The plaintiffs allege that the manufacturer defendants knew or should reasonably have known that the plaintiffs were not paid minimum wage and overtime pay. (Id. ¶ 24.) Street Beat had a representative present in the factories on an average of three times a week who monitored the production and quality of the plaintiffs' work. (Id. ¶ 25.) In addition, Street Beat was put on notice of prior violations because it had been previously sued by other factory workers, and the United States Department of Labor ("DOL") had found that Street Beat had violated the FLSA in the past. (Id. ¶ 26.) According to the plaintiffs, the manufacturer defendants contracted with the factory defendants at prices too low and at delivery conditions too onerous to allow for payment of minimum wage and overtime pay. (Id. ¶ 28.)

On February 26, 1997, the manufacturer defendants signed a Memorandum of Agreement ("MOA") with the DOL by which the manufacturer defendants entered into an ongoing Augmented Compliance Program Agreement ("ACPA") to ensure factory compliance with the FLSA. (Id. ¶ 31; MOA and ACPA attached to amended compl. as Exs. A (MOA) and B (ACPA).) According to the plaintiffs, the ACPA imposed several duties on the manufacturer defendants, including but not limited to (1) the pre-contract evaluation of the economic feasibility, based on the price terms involved, of a contractor's compliance with the FLSA; (2) the ongoing monitoring of contractor compliance with the ELSA; and (3) in the event that ELSA violations by a contractor were detected by the manufacturer defendants, a suspension of shipment of all goods affected by said violations and payment of all unpaid back wages. (See amended compl. ¶ 31.)

The plaintiffs allege that the manufacturer defendants "completely controlled and dominated" the factory defendants, and "each defendant aided and abetted the wrongful acts of the others." (Id. ¶ 22.) In addition, "each of the defendants was the agent, employee and/or joint venture partner of, or was working in concert with the co-defendants and was acting within the course and scope of such agency, employment and/or joint venture or concerted activity." (Id. ¶ 32.)

In their complaint, the plaintiffs bring, inter alia, three negligence causes of action against the manufacturer defendants, including negligent supervision, negligent hiring, and a negligence per se claim under the federal and state "hot goods" provisions of the FLSA, 29 U.S.C. § 215(a) and 217, and New York Labor Law § 345(10). (Id. ¶¶ 56-70.) The plaintiffs also assert a third-party beneficiary claim for breach of contract alleging that they are the "third-party beneficiaries" to the [DOL's] contract with Street Beat, and that Street Beat "materially beached" the terms of that agreement.*fn3 (Id. ¶¶ 73, 74.) The plaintiffs seek unpaid wages, including minimum wage, overtime pay and spread hours pay, and liquidated damages and/or interest. (Id. at 16-17.)

The manufacturer defendants now move to dismiss these claims, arguing that the negligence claims are barred by the exclusivity provision of the New York Workers' Compensation Law ("WCL"), N.Y. Work. Comp. L. § 29(6), and that the plaintiffs were not the intended beneficiaries of the contract between Street Beat and the DOL.*fn4

DISCUSSION

When deciding a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), the court must take all allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. See Scheuer, 416 U.S. at 236; Ortiz v. Cornetta, 867 F.2d 146, 149 (2d Cir. 1989). The court's consideration on a motion to dismiss is limited to the factual allegations in the complaint; documents incorporated by reference into the complaint; matters of which judicial notice may be taken; and documents either in plaintiffs possession or of which plaintiff had knowledge and relied on in bringing suit. Brass v. Am. Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir. 1993). A complaint should not be dismissed "unless it appears beyond doubt that the plaintiff can prove ...


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