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Hart v. Rick's N.Y. Cabaret International, Inc.

United States District Court, S.D. New York

January 28, 2014

SABRINA HART and REKA FUREDI, on behalf of themselves and all others similarly situated, and the New York Rule 23 Class, Plaintiffs,
v.
RICK'S N.Y. CABARET INTERNATIONAL, INC., RCI ENTERTAINMENT (NEW YORK), INC., and PEREGRINE ENTERPRISES, INC., Defendants

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[Copyrighted Material Omitted]

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For Sabrina Hart, on behalf of herself, all others similarly situated, and the Proposed New York Rule 23 Class, Plaintiff: Eleanor Michelle Drake, LEAD ATTORNEY, PRO HAC VICE, Nichols Kaster, PLLP, Minneapolis, MN; Anna Purna Prakash, PRO HAC VICE, Nichols Kasters, L.L.P., Minneapolis, MN; Eleanor Michelle Drake, Paul J. Lukas, Rebekah Lynn Bailey, PRO HAC VICE, Nichols Kaster, PLLP, Minneapolis, MN; Michele Renee Fisher, Nichols Kaster & Anderson, PLLP, Minneapolis, MN; Steven Andrew Smith, PRO HAC VICE, Nichols Kaster & Anderson, PLLP, Minneapolis, MN.

For Reka Furedi, on behalf of herself, all others similarly situated, and the Proposed New York Rule 23 Class, Plaintiff: Eleanor Michelle Drake, LEAD ATTORNEY, PRO HAC VICE, Nichols Kaster, PLLP, Minneapolis, MN; Anna Purna Prakash, PRO HAC VICE, Nichols Kasters, L.L.P., Minneapolis, MN; Rebekah Lynn Bailey, Eleanor Michelle Drake, Paul J. Lukas, PRO HAC VICE, Nichols Kaster, PLLP, Minneapolis, MN; Michele Renee Fisher, Steven Andrew Smith, Nichols Kaster & Anderson, PLLP, Minneapolis, MN.

For RCI Entertainment (New York) Inc., Peregrine Enterprises, Inc., Rick's Cabaret International Inc., Defendants: Howard Scott Davis, Meister Seelig & Fein LLP, New York, NY; Jeffrey A. Kimmel, Racquel Crespi Weintraub, Meister Seelig & Fein LLP (45th St.), New York, NY.

For Jane Does 1-5, Intervenor: John H. Weston, LEAD ATTORNEY, Weston, Garrou & DeWitt, Los Angeles, CA.

For RCI Entertainment (New York) Inc., Peregrine Enterprises, Inc., Counter Claimants: Howard Scott Davis, Meister Seelig & Fein LLP, New York, NY; Jeffrey A. Kimmel, Racquel Crespi Weintraub, Meister Seelig & Fein LLP (45th St.), New York, NY.

For Rick's Cabaret International Inc., Counter Claimant: Jeffrey A. Kimmel, Meister Seelig & Fein LLP (45th St.), New York, NY.

For Reka Furedi, on behalf of herself, all others similarly situated, and the Proposed New York Rule 23 Class, Counter Defendant: Eleanor Michelle Drake, LEAD ATTORNEY, PRO HAC VICE, Nichols Kaster, PLLP, Minneapolis, MN; Anna Purna Prakash, PRO HAC VICE, Nichols Kasters, L.L.P., Minneapolis, MN; Eleanor Michelle Drake, Paul J. Lukas, Rebekah Lynn Bailey, PRO HAC VICE, Nichols Kaster, PLLP, Minneapolis, MN; Michele Renee Fisher, Nichols Kaster & Anderson, PLLP, Minneapolis, MN; Steven Andrew Smith, PRO HAC VICE, Nichols Kaster & Anderson, PLLP, Minneapolis, MN.

For Sabrina Hart, on behalf of herself, all others similarly situated, and the Proposed New York Rule 23 Class, Counter Defendant: Eleanor Michelle Drake, LEAD ATTORNEY, PRO HAC VICE, Nichols Kaster, PLLP, Minneapolis, MN; Anna Purna Prakash, PRO HAC VICE, Nichols Kasters, L.L.P., Minneapolis, MN; Rebekah Lynn Bailey, Eleanor Michelle Drake, Paul J. Lukas, PRO HAC VICE, Nichols Kaster, PLLP, Minneapolis, MN; Michele Renee Fisher, Steven Andrew Smith, Nichols Kaster & Anderson, PLLP, Minneapolis, MN.

OPINION

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OPINION & ORDER

Paul A. Engelmayer, United States District Judge.

In this lawsuit, the named plaintiffs bring claims under the Fair Labor Standards Act (" FLSA" ), 29 U.S.C. § § 201 et seq., and a putative class action under New York Labor Law (" NYLL" ) § § 190 et seq . & § § 650 et seq . The Court has advised counsel that it is weighing whether to resolve the FLSA claims first; afterwards, the Court would decide whether to exercise supplemental jurisdiction over the NYLL claims. Plaintiffs have taken the position that the Court would independently have diversity jurisdiction over the NYLL claims under the Class Action Fairness Act, 28 U.S.C. § 1332(d) (" CAFA" ), such that, in the event the federal claims are resolved ahead of the NYLL claims, the NYLL claims would necessarily remain in this Court for resolution. Defendants argue otherwise. Although the issue of CAFA jurisdiction need not be resolved now nor for as long as the Court chooses to exercise supplemental jurisdiction over the NYLL claims, the parties have thoughtfully briefed this issue, and the Court has elected to address it now, inasmuch as it may bear on future case management.

For the reasons that follow, the Court concludes that, based on the present record, it has independent jurisdiction under CAFA over plaintiffs' NYLL claims. However, in the event that the federal claims are resolved ahead of the NYLL claims and that the Court has determined not to continue to exercise supplemental jurisdiction over the NYLL claims, the Court may permit a motion to remand those claims if later-developed facts call into question whether jurisdiction under CAFA exists.

I. Background[1]

On September 10, 2013, the Court issued an Opinion and Order resolving various issues in this case. See Hart v. Rick's Cabaret Int'l, Inc., No. 09 Civ. 3043 (PAE), 967 F.Supp.2d 901, 2013 WL 4822199 (S.D.N.Y. Sept. 10, 2013) (Dkt. 460). The Court held that plaintiffs, who are exotic dancers, were employees of the Rick's Cabaret N.Y. strip club (" Rick's NY" or " the Club" ) entitled to be paid a minimum wage under the FLSA and the NYLL, and that Rick's NY's obligation under the FLSA to pay such a wage was not discharged bye customers' payment to the dancers of " performance fees." Id . The Court further held that defendant Peregrine Enterprises, Inc. (" Peregrine" ) was an employer of plaintiffs and therefore liable to the extent of any finding of liability on any claims in this case. Id . The Court also granted summary judgment to plaintiffs on

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defendants' counterclaim for unjust enrichment. Id .

On November 18, 2013, the Court issued another Opinion and Order that: (1) denied defendants' motion for reconsideration of the Court's holding that plaintiffs were employees of Rick's N.Y. after February 28, 2010; (2) denied defendants' motion to set the class period end-date as February 28, 2010, or alternatively as December 20, 2010; instead, the Court set the class period end-date as October 31, 2012; and (3) granted plaintiffs' motion for summary judgment on Claim Five, holding that the Club's deductions violated NYLL § 193. Hart v. Rick's Cabaret Int'l, Inc., No. 09 Civ. 3043 (PAE), 967 F.Supp.2d 901, (S.D.N.Y. Nov. 18, 2013) (Dkt. 487).

After these decisions, significant issues remained in the case, including whether: (1) customers' performance fees may be applied to satisfy Rick's NY's duty under the NYLL to pay a minimum wage; (2) defendants Rick's N.Y. Cabaret International New York (" RCI NY" ) and Rick's N.Y. Cabaret International, Inc. (" RCII" ) were also employers of plaintiffs and jointly liable to plaintiffs--along with Peregrine--to the extent of any liability; and (3) any violations of the FLSA and the NYLL were willful and/or made other than in good faith.

On November 18, 2013, the Court issued a Case Management Order, in which it raised the possibility that the Court might seek to resolve the FLSA claims first, and then decide whether to exercise supplemental jurisdiction over the NYLL claims. Dkt. 488. The parties were directed to submit a joint letter to the Court with their views on this course of action.

On November 27, 2013, the parties submitted their joint letter. Dkt. 489. Plaintiffs opposed the Court's proposal to try the FLSA claims first. Id . They also asserted that the Court had original--not just supplemental--jurisdiction over plaintiffs' NYLL claims under CAFA, and that no exceptions to CAFA jurisdiction applied. Id . Defendants asserted, however, that the Court did not have original jurisdiction over plaintiffs' NYLL claims, and that, in any case, the Court should decline to exercise CAFA jurisdiction under one of the three statutory exceptions. On December 3, 2013, the Court issued an Order, which, inter alia, set a briefing schedule on the issue of CAFA jurisdiction. Dkt. 490. The Court also directed counsel for both sides to notify the Court, by December 6, 2013, of the relevant facts bearing on the CAFA issue, and to identify any such facts disputed by the parties. Id . On December 6, 2013, the parties submitted their joint letter. Dkt. 492. On December 12, 2013, the Court concluded that there were no factual disputes relevant to CAFA that the Court needed to resolve prior to briefing. Dkt. 493.

On December 12, 2013, plaintiffs filed their " Motion for the Court to Affirm and Retain Jurisdiction" under CAFA. Dkt. 494. With their motion, plaintiffs submitted a supporting memorandum of law, Dkt. 495, and two supporting affidavits, Dkt. 496-97. On December 19, 2013, defendants submitted a memorandum of law in opposition to plaintiffs' motion, Dkt. 500, along with two supporting declarations, Dkt. 501-02.

II. Discussion

A. Burdens of Proof

Under CAFA, as in general, " the party asserting federal jurisdiction [bears] the burden of proving that the case [is] properly in federal court." DiTolla v. Doral Dental IPA of New York, 469 F.3d 271, 275 (2d Cir. 2006) (citation omitted).

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Disputes over CAFA in the federal courts have most often arisen in situations in which a plaintiff files a class action lawsuit in a state court, a defendant removes the case to federal court under CAFA, and the plaintiff moves to remand the case to state court. See, e.g., Blockbuster, Inc. v. Galeno, 472 F.3d 53 (2d Cir. 2006). This case is atypical in that plaintiffs, not defendants, seek to assert federal jurisdiction. The general rule, however, still applies--plaintiffs, as the party seeking to assert federal jurisdiction, bear the burden of establishing the requirements for CAFA jurisdiction. DiTolla, 469 F.3d at 275.

Once CAFA jurisdiction is established, the burden of proof to establish an exception to such jurisdiction rests with " the party opposing the exercise of the Court's established jurisdiction." Brook v. UnitedHealth Group Inc., No. 06 Civ. 12954 (GBD), 2007 WL 2827808, at *3 (S.D.N.Y. Sept. 27, 2007); see also Gold v. New York Life Ins. Co., No. 09 Civ. 3210 (WHP), 2012 WL 1674300, at *1 (S.D.N.Y. May 14, 2012) aff'd, 730 F.3d 137 (2d Cir. 2013) (" [T]he party seeking to avail itself of an exception to CAFA jurisdiction over a case originally filed in federal court bears the burden of proving the exception applies." ) (citation omitted). Again, in the typical CAFA case, plaintiffs are the party seeking to remand the case, and must prove that an exception to CAFA jurisdiction applies. See, e.g., Greenwich Fin. Servs. Distressed Mortgage Fund 3 LLC v. Countrywide Fin. Corp., 603 F.3d 23, 26 (2d Cir. 2010) (" [O]nce the general requirements of CAFA jurisdiction are established, plaintiffs have the burden of demonstrating that remand is warranted on the basis of one of the enumerated exceptions." ) ...


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