The opinion of the court was delivered by: James C. Francis IV United States Magistrate Judge
Ricardo Copantitla, Diego Diaz De La Vega, Ignacio Garcia, Freddy Guachun, Julio Lantigua, Manuel Lizandro, Martin Lopez, Sebastian Lopez, Augustin Maldonado, Henry Matute, Joelito Melendez, Aussencio Ramirez, and Jose Luis Vargas bring this action against Fiskardo Estiatorio, Inc. ("Fiskardo") d/b/a Thalassa Restaurant ("Thalassa"), George Makris, Julia Makris, and Steve Makris. The plaintiffs, who are current and former employees at Thalassa, seek damages and injunctive relief under the Fair Labor Standards Act (the "FLSA"), New York Labor Law ("NYLL"), New York State statutory and common law, and New York City law for alleged violations arising out of their employment.
The plaintiffs now move pursuant to Rules 15(a) and 20(a) of the Federal Rules of Civil Procedure for leave to file a Second Amended Complaint. They seek to add Fantis Foods, Inc. ("Fantis Foods") as a defendant. They also wish to include additional allegations concerning the defendants' violations of a specific section of the NYLL as well as language regarding the defendants' status as employers within the meaning of the New York State Human Rights Law and the New York City Administrative Code. The plaintiffs also move pursuant to Rule 37(a) of the Federal Rules of Civil Procedure for an order compelling discovery from the defendants. Specifically, they seek information regarding non-party employees, including those they believe may be managers; financial information from the defendants in order to determine damages; and information regarding governmental investigations into Thalassa's labor practices or tax-reporting practices. Finally, the defendants move pursuant to Rule 45(c)(3) of the Federal Rules of Civil Procedure to quash subpoenas that were served on two non-parties, Fantis Foods and Fantis Transfer Corp. Inc. ("Fantis Transfer").
For the reasons set forth below, the plaintiffs' motion to amend is granted and their motion to compel is granted in part and denied in part. The defendants' motion to quash is granted in part and denied in part.
Fiskardo is a New York Corporation that has operated as Thalassa, a restaurant located in Manhattan. (Amended Complaint ("FAC"), ¶¶ 20, 22-23). According to the plaintiffs, Julia Makris has been Chairman or Chief Executive Officer of Thalassa (FAC, ¶ 25), and George and Steve Makris have been owners of the restaurant. (FAC, ¶¶ 24, 26). For various time periods from January 2002 through the present, the plaintiffs have worked at the restaurant as dishwashers, busboys, polishers, runners, barbacks, servers, and expediters. (FAC, ¶¶ 7-19, 32).
In their first Amended Complaint, the plaintiffs allege that the defendants did not properly compensate them, in violation of both federal and state law. (FAC, ¶ 43). They contend, among other things, that they were paid below the minimum wage, were not paid for some of the hours they worked, and were not properly compensated when they worked overtime. (FAC, ¶¶ 46-50, 54). The plaintiffs also allege that the defendants did not allow employees to receive gratuities intended for them. They report that the defendants kept for themselves one quarter of Thalassa's required twenty-percent gratuity for banquets and pre-planned parties (the "Service Fee"). (FAC, ¶¶ 73-83). The plaintiffs also contend that Thalassa's management insisted that wait-staff pool their tips and that the managers then distributed the proceeds to restaurant personnel, including managers and polishers, who are not eligible for these tips under the FLSA and NYLL. (FAC, ¶¶ 84-91). Furthermore, the plaintiffs complain that the defendants deducted the cost of their required uniforms from their paychecks and refused to reimburse them for the costs of cleaning and maintaining the uniforms. (FAC, ¶¶ 92-100).
In addition, the plaintiffs claim that the defendants retaliated against them when they complained about labor law violations. (FAC, ¶¶ 101-103). The alleged retaliation consisted of intimations that they would lose their jobs if they continued to complain, threats of physical harm, a drastic reduction of their hours of work, the termination of Mr. De La Vega, Mr. Garcia, and Mr. Lantigua, and the constructive discharge of Mr. Lizandro and subsequent interference with his ability to obtain a new job. (FAC, ¶¶ 104-110).
The plaintiffs further contend that on October 2, 2008, the day after one of them tried to deliver a letter to the defendants notifying them of violations of federal and state labor laws, Mr. Vargas was interrogated in the restaurant's basement office by Steve Makris and "other agents of Defendants" "about the contents of the letter and the names of the workers who had registered complaints." (FAC, ¶¶ 111-115). They claim that two people in the office identified themselves as police officers and displayed badges. (FAC, ¶ 116). According to the plaintiffs, Steve Makris then summoned bona fide police officers to arrest Mr. Vargas, and although the police responded, they did not make an arrest. (FAC, ¶ 118).
Lastly, Mr. Diaz De La Vega and Mr. Melendez claim that they "were subjected to repeated and severe sexual harassment" by Kemal Kurt, one of Thalassa's managers. (FAC, ¶¶ 120-123). Mr. Diaz De La Vega alleges that he was fired from the restaurant as a result of his refusal "to engage in sexual acts" with Mr. Kurt, and Mr. Melendez states that he resigned from his position because Mr. Kurt repeatedly touched him in a sexually provocative manner. (FAC, ¶¶ 122-123).
The Complaint in this action was filed on February 20, 2009. On September 16, 2009, the plaintiffs filed an Amended Complaint that added Mr. Guachun and Mr. Ramirez as plaintiffs. On November 4, 2009, the Honorable Richard J. Holwell, U.S.D.J., set January 8, 2010 as a final deadline for the joinder of parties or amendment of pleadings.*fn1 (Memorandum Endorsement dated Nov. 4, 2009). On December 7, 2009, the plaintiffs served document and deposition subpoenas on Fantis Foods and Fantis Transfer. After the defendants moved to quash these subpoenas, the plaintiffs moved for leave to file a Second Amended Complaint on January 8, 2010. And, finally, on February 4, 2010, the plaintiffs filed a motion to compel certain discovery from the defendants. On March 25, 2010, I heard oral argument on these three motions.
In their proposed Second Amended Complaint, the plaintiffs name Fantis Foods as an additional defendant. They also insert language alleging that all of the defendants are employers within the meaning of the New York State Human Rights Law and the New York City Administrative Code (the "Status Language"). (Second Amended Complaint ("SAC"), ¶¶ 29-33). This language is added to their previous assertion in their Amended Complaint that the defendants were employers under the FLSA and the NYLL. (FAC, ¶¶ 27-30). The plaintiffs contend that they added this language in order to "further clarif[y] that Plaintiffs intend to hold all Defendants liable for the sexual harassment claims, though that point should already be clear in the First Amended Complaint." (Memorandum of Law in Support of Plaintiffs' Motion for Leave of Court to File Plaintiffs' Second Amended Complaint ("Pl. Amend. Memo.") at 3).
Furthermore, the plaintiffs seek to include additional allegations concerning the defendants' violations of NYLL § 196-d (the "§ 196-d Allegations"). The First Amended Complaint alleges that "Thalassa Restaurant's owners regularly demanded and retained approximately one quarter" of the Service Fee in violation of § 196-d. (FAC, ¶¶ 73-74, 83, 164). The Second Amended Complaint broadens this accusation, by alleging that all of the defendants "regularly demanded and retained a significant portion" of the Service Fee and "failed to distribute significant portions" of the Service Fee to the waitstaff. (SAC, ¶ 87). It also asserts that in addition to retaining one quarter of the Service Fee, the defendants sometimes used other portions of the Service Fee to pay restaurant expenses, including employees' wages and compensation owed to the "banquet manager." (SAC, ¶¶ 88-89). The defendants oppose each of the changes, and Fantis Foods filed a separate response, arguing that it should not be joined in the action.
1. Standard for Amendment
A motion to amend is generally governed by Rule 15(a) of the Federal Rules of Civil Procedure, which states that "[t]he court should freely give leave when justice so requires." Fed. R. Civ. P. 15(a)(2). Notwithstanding the liberality of the general rule, "it is within the sound discretion of the court whether to grant leave to amend." John Hancock Mutual Life Insurance Co. v. Amerford International Corp., 22 F.3d 458, 462 (2d Cir. 1994); accord Krumme v. WestPoint Stevens Inc., 143 F.3d 71, 88 (2d Cir. 1998). Regarding the use of this discretion, the Supreme Court has stated:
In the absence of any apparent or declared reason --- such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. --- the leave should . . . be freely given.
Foman v. Davis, 371 U.S. 178, 182 (1962) (internal quotation marks omitted).
Where, as here, a proposed amendment adds new parties, the propriety of amendment is governed by Rule 21 of the Federal Rules of Civil Procedure. Momentum Luggage & Leisure Bags v. Jansport, Inc., No. 00 Civ. 7909, 2001 WL 58000, at *1 (S.D.N.Y. Jan. 23, 2001). That rule states that a party may be added to an action "at any time, on just terms." Fed. R. Civ. P. 21. In deciding whether to permit joinder, courts apply the "same standard of liberality afforded to motions to amend pleadings under Rule 15." Soler v. G & U, Inc., 86 F.R.D. 524, 528 (S.D.N.Y. 1980) (quoting Fair Housing Development Fund Corp. v. Burke, 55 F.R.D. 414, 419 (E.D.N.Y. 1972)); accord Smith v. P.O. Canine Dog Chas, No. 02 Civ. 6240, 2004 WL 2202564, at *12 n.11 (S.D.N.Y. Sept. 28, 2004); Momentum Luggage, 2001 WL 58000, at *2; Clarke v. Fonix Corp., No. 98 Civ. 6116, 1999 WL 105031, at *6 (S.D.N.Y. March 1, 1999). Thus, joinder will be permitted absent undue delay, bad faith, prejudice, or futility. Joinder may be denied as futile if the proposed pleading would not withstand a motion to dismiss pursuant to Rule 12(b)(6). See Oneida Indian Nation of New York v. City of Sherill, 337 F.3d 139, 168 (2d Cir. 2003), rev'd on other grounds, 544 U.S. 197 (2005); Smith v. CPC International, Inc., 104 F. Supp. 2d 272, 274 (S.D.N.Y. 2000). To overcome objections of futility, the moving party must merely show that it has "at least colorable grounds for relief." Ryder Energy Distribution Corp. v. Merrill Lynch Commodities Inc., 748 F.2d 774, 783 (2d Cir. 1984) (citation omitted); see also Kaster v. Modification Systems, Inc., 731 F.2d 1014, 1018 (2d Cir. 1984).
In the Second Amended Complaint, the plaintiffs allege that Fantis Foods, a company located in Carlstadt, New Jersey, is wholly owned by members of the Makris family, including George Makris and Steve Makris. (SAC, ¶¶ 28, 137). They assert that at least during some of the time period of which the plaintiffs complain, George Makris was Chairman or Chief Executive Officer of Fantis Foods. (SAC, ¶ 138). They also claim that during that time, Steve Makris was not an employee of Fiskardo and received no salary from Fiskardo, but rather was Chief Operating Officer of Fantis Foods, and in that capacity, "had significant authority over the terms and conditions of the Plaintiffs' employment, including the power to set wages, hire and fire." (SAC, ¶¶ 139-140).
Further, the plaintiffs allege that Tommy Ziotas, a corporate officer of Fiskardo, also worked for Fantis Foods as General Manager and was the person primarily responsible for managing Thalassa's payroll. (SAC, ¶¶ 141-144). They assert that during part of the time that Mr. Ziotas helped to manage Thalassa's payroll, he was employed only by Fantis Foods and not by Fiskardo. (SAC, ¶ 142). The plaintiffs contend that some of Thalassa's payroll documents "were routinely sent to the Fantis offices" in New Jersey, and that Mr. Ziotas and Fantis Foods "regularly had custody and control over most or all of" the payroll documents. (SAC, ¶¶ 143-144). Finally, the plaintiffs claim that some of the payroll documents issued to them during their employment at Thalassa identified "Fantis" under a heading titled "co." (SAC, ¶ 145).
Based on these assertions, the plaintiffs allege that Fantis Foods was the plaintiffs' employer within the meaning of the FLSA, the NYLL, the New York State Human Rights Law, and the New York City Administrative Code. (SAC, ¶ 33). They claim that Fantis Foods "through its agents, had sufficient authority over the Plaintiffs' employment at Thalassa Restaurant as to render it an employer, and subject it to joint and several liability for the labor law violations." (SAC, ¶¶ 33, 146).
The defendants and Fantis Foods oppose this amendment on the basis of futility. Fantis Foods states that the plaintiffs' motion is "based solely on a misstatement of facts." (Proposed Defendant Fantis Foods, Inc.'s Brief in Opposition to Plaintiffs' Motion for Leave to File a Second Amended Complaint ("Fantis Response") at 1). In support of this contention, Fantis Foods submitted affidavits from Mr. Ziotas and Jerry Makris, the Vice President of Fantis Foods, stating that "Fantis does not manage Thalassa's payroll" and that "Fantis has never been in the business of operating a restaurant." (Affidavit of Tommy Zibtas dated Jan. 22, 2010, ¶ 6; Affidavit of Jerry G. Makris dated Jan. 22, 2010, ¶ 13).
Because Fantis Foods currently is not a party to this action, its standing to contest the plaintiffs' motion "is, at best, dubious." Vasquez v. Summit Women's Center, Inc., No. 301 CV 955, 2001 WL 34150397, at *1 n.1 (D. Conn. Nov. 16, 2001); accord State Farm Mutual Automobile Insurance Co. v. CPT Medical Services, P.C., 246 F.R.D. 143, 146 n.1 (E.D.N.Y. 2007) (non-parties proposed as new defendants lack standing to challenge motion to amend). However, the defendants, who obviously have standing, also rely on the affidavits of Mr. Ziotas and Jerry Makris in their response to the plaintiffs' motion.
Nevertheless, I decline to consider these affidavits. Because determinations of futility on a motion for leave to amend are subject to the same standards as motions under Rule 12(b)(6), "[f]utility is generally adjudicated without resort to any outside evidence." Wingate v. Gives, No. 05 Civ. 1872, 2009 WL 424359, at *5 (S.D.N.Y. Feb. 13, 2009) (citing Nettis v. Levitt, 241 F.3d 186, 194 n.4 (2d Cir. 2001) ("Determinations of futility are made under the same standards that govern Rule 12(b)(6) motions to dismiss.")); accord Cecilio v. Kang, No. 02 Civ. 10010, 2004 WL 2035336, at *17 (S.D.N.Y. Sept. 14, 2004) ("Normally, a motion for leave to amend is adjudicated without resort to any outside evidence."); Dipace v. Goord, 308 F. Supp. 2d 274, 278 (S.D.N.Y. 2004) (same); Durabla Manufacturing Co. v. Goodyear Tire and Rubber Co., 992 F. Supp. 657, 661 n.4 (S.D.N.Y. 1998) ("The Court declines to consider the deposition testimony submitted by defendants in opposition to plaintiff's motion for leave to amend the Complaint."). Accordingly, a decision regarding whether the inclusion of Fantis Foods as a defendant is futile must be based solely on the allegations in the Second Amended Complaint, with all inferences drawn in favor of the plaintiffs. See Neshewat v. Salem, 365 F. Supp. 2d 508, 516 (S.D.N.Y. 2005).
The FLSA defines an employer as one who "suffers or permits" an employee to work. 29 U.S.C. § 203(g). "This definition is necessarily a broad one, in accordance with the remedial purpose of the FLSA." Zheng v. Liberty Apparel Co., 355 F.3d 61, 66 (2d Cir. 2003). "An entity 'suffers or permits' an individual to work if, as a matter of 'economic reality,' the entity functions as the individual's employer." Id. (citing Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28, 33 (1961)). "The regulations promulgated under the FLSA expressly recognize that a worker may be employed by more than one entity at the same time." Id. (citing 29 C.F.R. § 791.2).
To determine if an entity is, as a functional matter, a joint employer for the purposes of the FLSA, "[t]he Second Circuit has declined to circumscribe [a court's] analysis to a precise set of factors, recognizing up to ten common factors while noting that a district court is 'free to consider any other factors it deems relevant to its assessment of the economic realities.'" Lin v. Great Rose Fashion, Inc., No. 08 CV 4778, 2009 WL 1544749, at *12 (E.D.N.Y. June 3, 2009) (quoting Zheng, 355 F.3d at 71-72); accord Herman v. RSR Security Services Ltd., 172 F.3d 132, 139 (2d Cir. 1999) ("[A]ny relevant evidence may be examined so as to avoid having the test confined to a narrow legalistic definition."). The goal of the economic-realities test "is to determine whether the employees in question are economically dependent upon the putative employer." Lopez v. Silverman, 14 F. Supp. 2d 405, 414 (S.D.N.Y. 1998).
The circuit has noted that in deciding whether an entity is a joint employer, "different sets of relevant factors" apply "based on the factual challenges posed by particular cases." Barfield v. New York City Health and Hospitals Corp., 537 F.3d 132, 142 (2d Cir. 2008). Some of the factors that the Zheng Court found important for consideration --- for example, "the extent to which plaintiffs performed a discrete line-job that was integral to [the putative joint employer's] process of production," 355 F.3d at 72 --- were specific to the nature of the job at issue in that case, garment manufacturing. However, other Zheng factors are useful in this case, including: (1) whether the putative joint employer's premises and equipment were used for the plaintiffs' work; (2) the degree to which putative joint employer or its agents supervised the plaintiffs' work; and (3) whether the plaintiffs worked exclusively or predominantly for the putative joint employer. Id. at 72; Barfield, 537 F.3d at 138 n.4.
The plaintiffs rely on Lin in support of the contention that Fantis Foods is a joint employer here because it is "significantly entwined with" Thalassa. (Omnibus Reply in Support of Motion for Leave to File a Second Amended Complaint ("Pl. Amend. Reply") at 4). In Lin, which involved the working conditions at a garment factory, the defendants moved to dismiss on the basis that the plaintiffs lacked standing pursuant to the FLSA. 2009 WL 1544749, at *11. The court denied the motion, holding, among other things, that "[d]iscovery [was] needed to determine whether a functional employment relationship existed between the Plaintiffs and Great Wall [(one of the defendants)] under the Zheng factors." Id. at *15. The court explained that "[n]early every aspect of [the two businesses at issue] was intertwined" and found that "Defendants' dubious uses of the corporate form and the interlocking relationships between the Defendant Corporations are pertinent to the joint employer inquiry in this case." Id. at *16. The court pointed out that (1) evidence had already established that the purported agents of Great Wall supervised the plaintiffs' work in the factory; (2) "[t]he ownership of the premises and the equipment used in the Factory could be imputed to Great Wall, given the tangled leasing relationships" at issue and "the fact that the Factory's space was distinguished from Great Wall's space by nothing more than a pile of paper boxes;" and (3) garments manufactured in the factory were made exclusively for Great Wall. Id. at *15.
While the facts alleged in this case may not support joint employer status as strongly as those in Lin, the plaintiffs have pled enough to survive a motion to dismiss. Most compellingly, they have asserted that Steve Makris, while receiving a salary solely from Fantis Foods, supervised the plaintiffs and had the power to set their wages as well as hire and fire them. (SAC, ¶¶ 139-140). Likewise, they claim that Mr. Ziotas, the primary person responsible for managing Thalassa's payroll, was also at some point only employed by Fantis Foods, not Fiskardo. (SAC, ¶¶ 141-142). Finally, they allege that Fantis Foods often had custody and control over Thalassa's payroll documents and that some of the payroll documents provided to them listed "Fantis" under the heading of "company." (SAC, ¶¶ 143-145). None of these factors is dispositive, but taken together, they provide enough for the plaintiffs to establish Fantis Foods' joint employer status for the purposes of a motion to amend. Although --- in their response papers and at oral argument --- the defendants and Fantis Foods vigorously objected to the plaintiffs' characterization of the facts, the appropriate time for such objections is in a motion for summary judgment, when the plaintiffs have had an opportunity for discovery.
3. The § 196-d Allegations and the Status Language
The plaintiffs also seek to add language that claims that all of the defendants are employers under the New York State Human Rights Law and the New York City Administrative Code (the Status Language) as well as additional allegations under § 196-d that the defendants, on occasion, used portions of the Service Fee to pay restaurant expenses, including employees' wages and the banquet manager's compensation (the § 196-d Allegations).
The defendants contest these changes. They argue that the plaintiffs' request has been unduly delayed because when they filed the Complaint or Amended Complaint, the plaintiffs "knew or should have known" to include the Status Language and also should have been aware of the facts upon which the § 196-d Allegations are based. (Defendants' Brief in Opposition to Plaintiffs' Motion for Leave to File a Second Amended Complaint ("Def. Amend. Response") at 10). They further claim that the plaintiffs have failed to provide a reason for their delay. (Def. Amend. Response at 10). In opposing the plaintiffs' desire to add the Status Language, the ...