person," and that has gross annual revenues of $500,000 or more.
In the Amended Complaint, Plaintiffs allege that they were employees of
Defendants; that Defendants owned and operated numerous parking garages
in New York City; that Defendants constituted an enterprise engaged in
commerce; and that Defendants' gross revenues exceeded $500,000.
(Am.Compl.¶¶ 3-9, 11, 13.) In the instant motion, Defendants claim that
Plaintiffs, who "merely parked cars," were not engaged in commerce.
(Defs. Mem. at 5.) Defendants further argue that their gross revenues do
not exceed $500,000 per year. On these two grounds, Defendants claim they
cannot be liable as an "enterprise engaged in commerce" as defined at
29 U.S.C. § 203 (s)(1), and that this deprives the Court of subject
matter jurisdiction over this action.
Defendants offer scant evidence in support of these assertions. Mr.
Vassallo affirms that "[n]either JK, nor I have ever earned $500,000 in a
year, nor are we engaged in interstate commerce or the movement of goods
across state lines." (Vassallo Aff. ¶ 7.) Additionally, Mr. Gold, the
attorney and accountant, affirms that he has represented Mr. Vassallo and
his wife for more than ten years in financial matters relating to their
personal and business activities, and that "[n]either of the Vassallos
personally, nor JK Improvements, Inc. have ever earned $500,000 or more
per year in gross revenues." (Order to Show Cause, Affidavit (Second) of
Jay Gold ("Second Gold Aff.") ¶ 3.) Although Mr. Gold states that he has
prepared tax returns and "other financial documents" for the Vassallos and
their business (id.), Defendants do not attach any such documents or tax
returns to their submissions.
It seems clear that Defendants' motion would have no chance of
succeeding on the merits. Defendants' assertion that there is an
insufficient nexus between Plaintiffs' work and interstate commerce
radically misapprehends the nature of enterprise coverage under the
FLSA.*fn12 Since 1974, when Congress significantly broadened the
coverage of the FLSA, the definition of "enterprise engaged in commerce"
has included any company doing the requisite dollar amount of business
"that has employees handling . . . goods or materials that have been moved
in or produced for commerce by any persons." 29 U.S.C. § 203 (s). See
generally Archie v. Grand Cent. P'ship, 997 F. Supp. 504, 529-30
(S.D.N.Y. 1998)(Sotomayor, J.) (discussing effect of 1974 amendments).
Thus, "the employee does not himself need to be involved in an activity
that affects interstate commerce," see Boekemeier, 86 F. Supp.2d at
285; even a "local laundry" is covered if the soap it uses moved in
interstate commerce, see Marshall v. Baker, 500 F. Supp. 145, 151
(N.D.N.Y. 1980), quoted in Archie, 997 F. Supp. at 530. Indeed, it has
been noted that the 1974 amendments effectively signify "that virtually
every enterprise in the nation doing the requisite dollar volume of
business is covered by the FLSA." Archie, 997 F. Supp. at 530 (quoting
Dunlop v. Indus. Am. Corp., 516 F.2d 498, 501-02 (5th Cir. 1975)). As
the recent Archie opinion points out, "[s]ince 1974,
courts facing the issue presented here have unanimously come to the same
conclusion: local business activities fall within the reach of the FLSA
when an enterprise employs workers who handle goods or materials that
have moved or been produced in interstate commerce." Id. at 530
(collecting numerous cases). In Archie, the goods in question included
cleaning supplies and other everyday items such as radios, clipboards,
and books, "some of which , "the court concluded, "undoubtedly moved in
interstate commerce to New York City." Id. Here, Defendants' employees
handled cars that were brought to public parking garages in New York
City; such cars surely epitomize "goods or materials that have been moved
in or produced for" interstate commerce. Even Defendants do not attempt
to argue otherwise. Defendants' assertion that Plaintiffs' work "did not
encompass the production or handling of goods for commerce" (Defs. Mem.
at 5) is thus premised on a egregious misunderstanding, or a willful
misreading, of the law.*fn13
Defendants' other argument with respect to FLSA enterprise coverage,
that they do not meet the $500,000 gross revenues threshold, appears
equally baseless. As Plaintiffs note, Defendants proffer no evidence in
support of Mr. Vassallo's and Mr. Gold's naked assertions that neither JK
Improvements nor Mr. Vassallo has ever earned more than $500,000 a year.
(Vassallo Aff. ¶ 7; Second Gold Aff. ¶ 3). More importantly, Defendants
nowhere address the gross revenues of the eight other corporate
Defendants that Plaintiffs have alleged, and that Defendants have not
disputed, form a unified enterprise along with JK Improvements.*fn14
Defendants conclusory assertions — that they are not an
enterprise engaged in commerce and that their gross revenues do not
exceed $500,000 — are thus premised on a fundamental
misunderstanding of the scope of the FLSA and are not supported by
evidence sufficient to merit a hearing. Nevertheless, given the Court's
recommended disposition of Defendants' subject matter jurisdiction claim
on other grounds, resolution of Defendants' motion on these grounds is
Notwithstanding its evident lack of merit, this Court recommends the
denial of Defendants' jurisdictional claim for a more fundamental
reason. Defendants' claim, made in a motion under Rule 60(b)(4), is based
on the assumption that whether or not their businesses constitute an
"enterprise engaged in commerce" is a question of subject matter
jurisdiction, and not of the merits of Plaintiffs' case. This Court
disagrees with that assumption, and thus finds that Defendants allege no
proper grounds for relief under Rule 60(b)(4).
To prevail on a claim under the FLSA, a plaintiff must, of course,
demonstrate that the defendant is covered by the Act, such as by showing
that the defendant constitutes an enterprise engaged in commerce.
However, this required showing is simply an element of the cause of
action. See Marchak v. Observer Publs., Inc., 493 F. Supp. 278, 282
(D.R.I. 1980). A plaintiffs failure to make this showing constitutes a
failure on the merits. As the district court in Marchak observed, "[E]ven
if it were to be found that [defendant] is not an "enterprise' within the
meaning of the statute, this would not affect the Court's subject matter
jurisdiction." Id. at 282. Other courts have similarly recognized that
whether or not a defendant is statutorily excluded from coverage under
the FLSA goes to the merits of the claims against it and not to the
jurisdiction of the Court. See Freudenberg v. Harvey, 364 F. Supp. 1087,
1090 (E.D.Pa. 1973); see also Reed v. Johnson, No. 93 Civ. 1652, 1995 WL
562299, at *1 (E.D.La. 1995) (following Freudenberg).
It is true that courts sometimes refer to the plaintiffs obligation to
prove a defendant's covered status as "jurisdictional." See, e.g., Lamont
v. Frank's Soup Bowl, Inc., No. 99 Civ. 12482 (JSM), 2001 WL 521815, at
*3 (S.D.N.Y. May 16, 2001) ("[T]here is clearly no federal jurisdiction
over Plaintiffs claims for overtime wages because neither he nor his
employer engaged in conduct over which Congress chose to exercise
jurisdiction."); Boekemeier, 86 F. Supp.2d at 285 (whether defendant is
an "enterprise," and whether plaintiff was "engaged in commerce," are
"jurisdictional prerequisites"); Monaia v. Grinell, No. 96 Civ. 9769
(LMM), 1997 WL 363813, at *1 (S.D.N.Y. July 1, 1997) (whether defendant
is an "enterprise" is a "jurisdictional fact"). However, as discussed
below, "jurisdiction" is an overused term, and one that is often used
without explicit consideration of whether the court's "authority to
adjudicate the type of controversy involved in the action" is really at
stake. Da Silva v. Kinsho Int'l Corp., 229 F.3d 358, 362 (2d Cir. 2000)
(quoting Restatement (Second) of Judgments § 11 (1980)). This Court
therefore takes guidance from those opinions, discussed above, that have
more squarely considered the issue of what is properly "jurisdictional"
under the FLSA.
Recent Second Circuit opinions regarding other statutes have affirmed
the longstanding practice of "granting jurisdiction in most cases and
dismissing for lack of subject matter jurisdiction only under narrow
circumstances." Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182,
1188 (2d Cir. 1996); see also Da Silva, 229 F.3d at 361; Bleiler v.
Cristwood Constr., Inc., 72 F.3d 13, 15 n. 1 (2d Cir. 1995). See
generally Fogel v. Chestnutt,
668 F.2d 100, 105-07 (2d Cir. 1981) (Friendly, J.). As the Court
explained in Nowak
in cases where the asserted basis for subject matter
jurisdiction is also an element of plaintiffs
allegedly federal cause of action, we ask only whether
— on its face — the complaint is drawn so
as to seek recovery under federal law or the
Constitution. If so, then we assume or find a
sufficient basis for jurisdiction, and reserve further
scrutiny for an inquiry on the merits.
Id. at 1188. Dismissal for lack of subject matter jurisdiction is only
proper where an alleged federal claim "clearly appears immaterial and made
solely for the purpose of obtaining jurisdiction or where such a claim is
wholly insubstantial and frivolous." Id. at 1188 (quoting Bell v. Hood,
327 U.S. 678, 682-83, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946)). Thus, in
Nowak, the Court found that the plaintiffs ERISA claim, though arising
out of events predating the Act's effective date, as provided by
statute, nevertheless fell within the district court's federal question
jurisdiction; dismissal of the claim should have been on the merits. Id.
at 1191; see also Bleiler, 72 F.3d at 15 n. 1 (where neither defendant
was an "employer" within the statutory definition of ERISA, dismissal
should have been for failure to state a claim, not lack of subject matter
More recently, the Second Circuit held that the statutory definition of
"employer" under Title VII, which includes a fifteen-employee minimum,
was not jurisdictional. Da Silva 229 F.3d at 366. Thus, it concluded that
subject matter jurisdiction existed in the case before it because the
plaintiffs claim "alleged a violation by an employer that could plausibly
be regarded with its parent company as a single employer, thereby
potentially meeting the fifteen-employee requirement. Her ultimate failure
to prove single employer status is not a ground for dismissing for lack
of subject matter jurisdiction." Id. at 365. The Court noted that courts
often dismiss "for lack of jurisdiction" when a plaintiff has failed to
establish a threshold fact, without considering whether such dismissal
might more properly be for failure to state a claim. See id. at 361; see
also 2 Moore's Federal Practice § 12.30, at 12-36 (3d ed.
2000)("Subject matter jurisdiction in federal-question cases is sometimes
erroneously conflated with a plaintiffs need and ability to prove the
defendant bound by federal law asserted as a predicate for relief
— a merits-related determination."), quoted in Da Silva 229 F.3d at
Though its holdings in Nowak and Da Silva are limited to provisions in
ERISA and Title VII, respectively, the Court's reasoning in both cases
sweeps much more broadly. The opinions both contain expansive theoretical
discussions of the jurisdiction/merits dichotomy, and both cite to
wide-ranging cases dealing with other statutes and to general treatises
on jurisdiction. See Da Silva, 229 F.3d at 361-65; Nowak, 81 F.3d at
1187-91. Further, the Da Silva opinion provides a generally applicable
policy justification for narrowing the scope of issues that affect
jurisdiction. As explained in the Restatement of Judgments, which the
Court quotes with approval,
"[w]hatever the context, the underlying question is
how far to go in the direction of policing the
boundaries of a court's subject matter jurisdiction,
when the cost of intensive policing is to enlarge the
vulnerability of the proceeding . to belated attack
after it has gone to judgment . . . . [T]he modern
direction of policy is to reduce the vulnerability of
final judgments to attack on the ground that the
tribunal lacked subject matter jurisdiction."
Id. at 363 n. 2 (quoting Restatement § 11 cmt. e). Needless to say,
such policy considerations bear directly on the instant matter. As the
Court further noted, "the institutional requirements of a judicial system
weigh in favor of narrowing the number of facts or circumstances that
determine subject matter jurisdiction." Id. at 365.
Other judges in this Court have recognized the distinction between
subject matter jurisdiction and failure on the merits in applying a
variety of federal statutes. See, e.g., Int'l Brotherhood of Teamsters
v. Carey, 163 F. Supp.2d 271, 278 (S.D.N.Y. 2001)(dismissing RICO action
for failure to state a claim, rather than lack of subject matter
jurisdiction, because the ""contested basis of jurisdiction [was] also an
element of the plaintiffs federal claim") (citation and internal
quotation marks omitted); Aerogroup Int'l, Inc. v. Marlboro Footworks,
Ltd., 955 F. Supp. 220, 222 & n. 1 (S.D.N.Y. 1997)(whether or not
Lanham Act reaches Canadian sales goes to merits, not subject matter
jurisdiction), aff'd, 152 F.3d 948, 1998 WL 169251 (2d Cir. 1998);
Muhlrad v. Mitchell, No. 96 Civ. 3568 (DLC), 1997 WL 182614, at *4 n. 2
(S.D.N.Y. Apr. 14, 1997) (whether state agency is "employer" under Labor
Management Relations Act and National Labor Relations Act does not go to
subject matter jurisdiction).
The foregoing persuades this Court that resolution of the question of
whether or not Defendants actually are "an enterprise engaged in
commerce" within the meaning of 29 U.S.C. § 203 (s)(1) is an issue
that goes to the merits of Plaintiffs' claims rather than the Court's
subject matter jurisdiction. This conclusion is supported by those
cases, discussed above, directly considering the FLSA, as well as by the
reasoning of Nowak and Da Silva. This conclusion also fully comports with
the text of the FLSA itself. Nowhere is the word "jurisdiction" even
mentioned in the statutory provisions, which Defendants now invoke, that
are applicable to Plaintiffs' cause of action.*fn15 Rather, the statute
under which Plaintiffs sued, 29 U.S.C. § 216 (b), provides simply
that "[a]ny employer who violates the provisions of section 206 or section
207 of this title [which govern minimum wage and overtime] shall be liable
to the employee or employees affected." To prove a violation of either
§ 206 or § 207, Plaintiffs would have had to demonstrate, inter
alia, that Defendants constituted an enterprise engaged in commerce, see
29 U.S.C. § 206, 207; as mentioned, the term "enterprise engaged in
commerce' (as well as other relevant terms such as "employee,"
"employer," and "commerce") is defined at 29 U.S.C. § 203. of
course, had this case proceeded to trial on the merits, Plaintiffs would
have also had to prove, for example, that they were paid less than the
minimum wage per hour, see 29 U.S.C. § 206, or that they were not
compensated at the proper rate for overtime work, see 29 U.S.C. § 207.
All of these requirements formed part of Plaintiffs' burden of proof. Had
Plaintiffs' failed to show that Defendants constituted an "enterprise
engaged in commerce" — for example, because Defendants gross annual
revenues did not exceed $500,000 — dismissal on "jurisdictional"
grounds would have been no more appropriate than if Plaintiffs had failed
to show that they were paid at sub-par wages, or if Defendants had shown
that Plaintiffs were independent contractors rather than "employees." The
latter two issues, just as Defendants'
status as an enterprise engaged in commerce, go to the merits of
Plaintiffs' claims, which have been deemed proven by Defendants'
default. See Au Bon Pain Corp. v. Artect, Inc. 653 F.2d 61, 65 (2d Cir.
1981); Ciner Mfg. Co. v. S.M. Gold Fashion Mfg. Corp., No. 94 Civ. 3831
(JFK), 1997 WL 193330, at *1 (S.D.N.Y. Apr. 21, 1997). Subject matter
jurisdiction, on the other hand, was established by Plaintiffs' claims
for relief under 29 U.S.C. § 216 (b), and by their nonfrivolous
allegations in support thereof. See Bell v. Hood, 327 U.S. at 682-83, 66
S.Ct. at 776.
Had Defendants appeared in the litigation and come forth with evidence
that some or all of Plaintiffs' allegations about Defendants' status or
their nonpayment of mandated wages were untrue, they might have defeated
Plaintiffs' action on the merits. However, having chosen to default,
Defendants have irretrievably lost the opportunity to challenge the
claims against them.
Accordingly, because Defendants' motion under Rule 60(b)(4) raises no
issue of subject matter jurisdiction, the Court recommends that it be
II. Rule 60(b)(6)
Finally, Defendants invoke this Court's "grand reservoir" of equitable
power in seeking an order vacating the judgments under Fed.R.Civ.P. 60
(b)(6). Defendants assert, inter alia, that one of the Plaintiffs never
even worked for Defendants, and that one of the original named
Defendants, West 21st Street Parking Corp., is not controlled by Mr.
Vassallo and "was dissolved."*fn16 (Defs. Mem. at 9.) Plaintiffs argue
that equitable relief is unwarranted because of Defendants' gross
laches, among other things.
A motion under Rule 60(b) is addressed to the sound discretion of the
trial court. See Mendell in Behalf of Viacom, Inc. c. Gollust,
909 F.2d 724, 731 (2d Cir. 1990) (citing Nemaizer v. Baker, 793 F.2d 58,
61 (2d Cir. 1986)); Ovadiah v. New York Ass'n for New Americans, No. 95
Civ. 10523 (SS), 1997 WL 342411, at *5 (S.D.N.Y. June 23, 1997). Rule
60(b) is designed to strike a balance between the interests of fairness
and the finality of judgments; nevertheless, "final judgments should not
be lightly reopened." Nemaizer, 793 F.2d at 61; see also Ovadiah, 1997 WL
342411, at *5; Jedrejcic v. Croatian Olympic Comm., 190 F.R.D. 60, 76
(E.D.N.Y. 1999). Relief provided under Rule 60(b) in general is equitable
in nature and is to be guided by equitable principles. See 11 Charles A.
Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and
Procedure ("Wright, Miller & Kane") § 2857, at 255 (2d ed.
1995). Relief under Rule 60(b)(6) in particular is available only in
"extraordinary circumstances." Transaero, Inc. v. La Fuerza Area
Boliviana, 24 F.3d 457, 461 (2d Cir. 1994) (quoting Ackermann v. United
States, 340 U.S. 193, 199, 71 S.Ct. 209, 212, 95 L.Ed. 207 (1950)). By
definition, such circumstances are rare, and courts will deny relief
where "the movant made a fair and deliberate choice at some earlier time
not to move for relief." Wright, Miller & Kane § 2864; see also
Romania v. Wildenstein & Co., 147 F.R.D. 62, 65 (S.D.N.Y. 1993)
(denying motion where movant's earlier derelictions were "best
characterized as a deliberate litigation strategy"); Wagner Spray Tech
Corp. v. Wolf 113 F.R.D. 50, 51 (S.D.N.Y. 1986) ("[The movant's] interest
in undoing the results of a litigation strategy which, in hindsight,
appears unwise fails to outweigh
the judiciary's interest in the finality of judgments.").
To understate the matter, the circumstances of this case do not warrant
the exercise of this Court's equitable powers. Defendants' lamentable
conduct throughout the litigation completely undermines their appeal to
equity. Defendants were fully aware of the pendency of the action well
before judgment was entered. They were served with documents relating to
Plaintiffs' request for a default, and to Plaintiffs' damages request.
Nevertheless, Defendants sat on their hands as Plaintiffs and this Court
invested substantial time and effort in addressing Plaintiffs' claims.
They waited almost a year and a half from the Court's Order directing
entry of the default, and almost a year from the entry of the final
monetary Judgment, before appearing to contest the litigation. As
Plaintiffs point out, Defendants do not even attempt to offer an
explanation for the delay. Rather, as noted above, Defendants' own
attorney acknowledged at oral argument this his clients' default was
against his advice and without justification. In sum, Defendants'
deliberate default despite clear notice of the lawsuit; their equally
unjustified delay in seeking relief from the Judgment; and their
submission to this Court of affidavits of dubious veracity — not to
mention their frivolous request for sanctions against Plaintiffs —
clearly disentitle them to equitable relief vacating this Court's
Accordingly, this Court recommends the dismissal of Defendants' motion
under Rule 60(b)(6).
For the foregoing reasons, I respectfully recommend that the
Defendants' motion be denied in its entirety.
Pursuant to 28 U.S.C. § 636 (b)(1)(C) and Rule 72(b) of the Federal
Rules of Civil Procedure, the parties shall have ten days from service of
this Report to file written objections. See also Fed.R.Civ.P. 6(a) and
(e). Such objections shall be filed with the Clerk of the Court, with
extra copies delivered to the chambers of the Honorable Lewis A. Kaplan,
U.S.D.J., and to the chambers of the undersigned, Room 1660. Any requests
for an extension of time for filing objections must be directed to Judge
Kaplan. Failure to file objections will result in a waiver of those
objections for purposes of appeal. See Thomas v. Am, 474 U.S. 140, 149-52,
106 S.Ct. 466, 88 L.Ed.2d 435 (1985), reh'g denied, 474 U.S. 1111,
106 S.Ct. 899, 88 L.Ed.2d 933 (1986); IUE AFL-CIO Pension Fund v.
Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993), cert. denied, 513 U.S. 822,
115 S.Ct. 86, 130 L.Ed.2d 38 (1994); Frank v. Johnson, 968 F.2d 298, 300
(2d Cir.), cert. denied, 506 U.S. 1038, 113 S.Ct. 825, 121 L.Ed.2d 696
(1992); Small v. Sec'y of Health & Human Servs., 892 F.2d 15, 16 (2d