JAROSLAV KROSHNYI, PETER REDAJ, RADOMIR MALER, STEFAN HOLESA, ROBERT ONDUSKO, ANDRZEJ SZYCOWSKI, JACOB IMAS, KEITH MCFARLAND, Plaintiffs-Appellees--Cross-Appellants,
PETER GLAZMAN, U.S. TRANSPORTATION SERVICES, INC., Defendants--Cross-Appellees. [*] PAVEL VYSOVSKY, JANA BULIKOVA, Plaintiffs--Cross-Appellants, JOZEF STOFA, MILAN PETRILAK, STANISLAV TELEKY, STANISLAV BULIK, IRENEUSZ SAWCZYSZYN, Plaintiffs, U.S. PACK COURIER SERVICES, INC., U.S. PACK EXPRESS, LTD., U.S. PACK NETWORK CORP., Defendants-Appellants--Cross-Appellees,
Argued: April 5, 2013.
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Plaintiffs, all of whom worked as delivery drivers for one or more defendant corporations and their owner, Peter Glazman, brought this action alleging violations of the Fair Labor Standards Act (" FLSA" ), Federal Insurance Contributions Act (" FICA" ), New York Labor Law (" NYLL" ), New York Franchise Sales Act (" FSA" ), and other contract-related claims. The United States District Court for the Southern District of New York (Lawrence M. McKenna, Judge) granted summary judgment in favor of defendants on all of plaintiffs' federal claims under the FLSA and FICA, and (as relevant here) similarly granted judgment to defendants on plaintiffs' state law NYLL and contract claims. Following trial on the remaining FSA claims, a jury awarded certain plaintiffs damages, and the district court later granted those plaintiffs their related attorneys' fees and costs. All parties now appeal from the district court's judgment, challenging various pre- and post-trial orders.
We conclude, first, that because this case presented no novel issues of state law and was into its sixth year when the district court dismissed the federal claims, the court did not abuse its discretion in exercising supplemental jurisdiction over the remaining state-law claims. Next, we hold that the FSA's statute of limitations bars the claims of six plaintiffs who entered agreements with defendants as ostensible franchisees more than three years before filing suit. We therefore REVERSE the FSA judgment in favor of those six plaintiffs. We AFFIRM the FSA judgment, however, as to the remaining two plaintiffs. We further VACATE the district court's award of attorneys' fees, and REMAND for recalculation of the fee award in light of plaintiffs' reduced recovery.
We hold also that the district court erred in ruling that the statute of frauds barred plaintiffs' breach of contract and NYLL claims for unpaid commissions: a jury reasonably could find that these claims were based on oral employment agreements terminable at-will, and therefore capable of performance within one year of their making. We therefore VACATE the grant of summary judgment for defendants on these claims and REMAND for further proceedings consistent with this opinion.
AFFIRMED IN PART, REVERSED IN PART, VACATED IN PART, AND REMANDED.
RICHARD G. KASS, Bond, Schoeneck & King, PLLC, New York, New York, for Defendants-Appellants--Cross-Appellees and Defendants--Cross-Appellees.
ROBERT WISNIEWSKI, Robert Wisniewski & Associates P.C., New York, New York, for Plaintiffs-Appellees--Cross-Appellants and Plaintiffs--Cross-Appellants.
Before: PARKER, CARNEY, Circuit Judges, and RAKOFF, District Judge.[**]
Susan L. Carney, Circuit Judge :
This case calls on us to review the district court's resolution of several questions of New York law under its supplemental jurisdiction--primarily, its application of certain state statutes governing franchising and wages to plaintiffs' claims for compensation arising from their work, from the late 1980s through 2000, as delivery drivers for one or more defendant corporations owned by defendant Peter Glazman. Plaintiffs contend that defendants systematically undercompensated them for their work, purporting to treat them as franchisees while reaping disproportionate profits at plaintiffs' expense. On that basis, plaintiffs filed this action in 2001, alleging violations of the Fair Labor Standards Act, 29 U.S.C. § § 201, et seq. (" FLSA" ); the Federal Insurance Contribution Act, 26 U.S.C. § § 3101, et seq. (" FICA" ); the New York Labor Law, N.Y. Labor Law § § 190, et seq. (" NYLL" ); the New York Franchise Sales Act, N.Y. Gen. Bus. Law § § 680, et seq. (" FSA" ); and various contract-related claims.
Six years into in this long-running litigation, the district court dismissed plaintiffs' federal claims under the FLSA and FICA, but elected to exercise its supplemental jurisdiction to adjudicate the remaining state law claims, as to which dispositive motions had been submitted. The district court granted summary judgment to defendants on plaintiffs' NYLL and contract claims for unpaid commissions, holding that the statute of frauds precluded any action premised on defendants' alleged oral agreements to pay those commissions. Plaintiffs then proceeded to trial on their FSA claims, which stemmed from defendants' alleged failure to comply with the Act's registration requirements and alleged use of fraudulent
and unlawful practices in connection with the franchise relationship. After trial, a jury awarded damages to eight plaintiffs on these claims, and (as envisioned by the FSA), the court awarded those plaintiffs their related attorneys' fees.
Defendants now appeal the district court's FSA rulings in plaintiffs' favor, contending principally that it was error for the district court to exercise supplemental jurisdiction over these state-law claims, and that plaintiffs' claims were in any event barred by the statute of limitations. Plaintiffs cross-appeal, challenging inter alia the district court's ruling that the statute of frauds barred their NYLL and contract claims for unpaid commissions.
For the reasons set forth below, we find no abuse of discretion in the district court's exercise of supplemental jurisdiction. We further conclude that the statute of limitations barred the FSA claims of six of the eight plaintiffs. Although we affirm the FSA award as to the remaining two plaintiffs, we determine that the related attorneys' fee award must be recalculated to reflect that modification in the substantive award. Finally, we decide--contrary to the district court--that the statute of frauds does not preclude plaintiffs from pursuing their NYLL and contract claims against defendants. Accordingly, we remand to the district court for further proceedings on these state-law claims and for recalculation of the FSA-related attorneys' fees.
A. The Parties and the Relevant Agreements
Defendant Peter Glazman (also known as Peter Glassman) owns or controls defendants U.S. Pack Courier Services, Inc. (" USP Courier" ) and U.S. Pack Network Corp. (" USP Network" ) (collectively, " U.S. Pack" or " defendants" ), corporations that provide package delivery services in the New York City metropolitan area. Glazman served as president of USP Network throughout the plaintiffs' relationship with the U.S. Pack companies starting in the late 1980s. He became USP Courier's president after that corporation was formed in 1998. USP Network and USP Courier share offices and employees.
Over the years, Glazman has sought to expand his package-delivery business through franchising (i.e., the granting of rights to others to engage in the company's business under a prescribed brand and marketing plan, in exchange for a fee). The New York Franchise Sales Act, N.Y. Gen. Bus. Law § 683(1), requires anyone who intends to sell franchises in the State to file an offering prospectus
before sales of, or even offers to sell, franchises. Thus, in July 1996, USP Network filed a franchise offering prospectus with the New York State Department of Law. That franchise registration expired, however, on February 1, 1998. And although USP Courier--USP Network's successor--continued to sell franchises under similar terms, it never filed a franchise offering prospectus with the State.
A form Subscription Agreement (" SA" ), which outlined the basic terms of the franchise arrangement, was attached as an exhibit to USP Network's 1996 prospectus. The SA required each subscriber to pay a $15,000 " subscription fee" in exchange for the right to receive delivery assignments through USP Network's central dispatch, and entitled each subscriber to a weekly paycheck based on accumulated commissions earned for deliveries made. Although subscribers could pay the entire subscription fee up front, many chose to pay in installments that were deducted weekly from their paychecks. Interest was due on the unpaid balance, however, and as of the publication of the 1996 prospectus, USP Network set the interest rate at 10% per annum.
USP Network also charged subscribers a one-time " training fee" of $50, a $30 generic " weekly fee," and a " beeper fee" of $5 to $7.50 per week. Moreover, according to the prospectus, subscribers were personally responsible for a host of operational expenditures, including the purchase or rental of a white cargo van (for purchase, estimated at $15,000 to $20,000); insurance premiums (estimated at $2,500 to $4,000); vehicle registration fees and motor vehicle taxes (estimated at $60 to $110); gasoline (estimated at $25 per tank); and other items, such as uniforms, hand truck equipment, and maps. USP Network treated subscribers as independent contractors and, accordingly, did not withhold any taxes from subscribers' paychecks.
The SA provided that commission payments made by U.S. Pack to subscribers for deliveries would be based principally on the " type of delivery service requested [by the customer],"  and " the distance of the delivery." J.A. 190. A " Schedule of Amounts to be Paid to Subscribers," appended to the SA, contained tables listing related payment amounts. Id. at 226-93.
On various dates between 1987 and 2000, each plaintiff began to work as a delivery driver for U.S. Pack. Almost all plaintiffs
were recent Eastern European immigrants, and many had limited proficiency in the English language. In deposition testimony or at trial, most plaintiffs acknowledged having signed some form of written agreement with U.S. Pack; some denied, however, that the document signed was the SA attached to the USP Network offering prospectus. Some plaintiffs also testified that defendants did not give them sufficient time to review the documents they were asked to sign and did not provide them copies of the documents, even when plaintiffs specifically requested them. In total, defendants produced signature pages signed by only six plaintiffs.
The parties agree that defendants promised, in one form or another, to pay plaintiffs a fee for each delivery completed, rather than an hourly wage. They disagree, however, on how that fee was to be calculated. Plaintiffs contend that defendants orally promised to pay them a 60% commission on each delivery--that is, 60% of whatever the customer paid U.S. Pack for the delivery. Several plaintiffs testified that--although they sometimes suspected they were not receiving the promised rates--each time they asked defendant Glazman about their pay, Glazman reaffirmed that U.S. Pack paid its drivers 60% commissions. Defendants contend, however, that there was no agreement, oral or otherwise, to pay 60% commissions. Presumably referring to the " Schedule of Amounts to be Paid to Subscribers" appended to the SA, Glazman testified at trial that there was " a price list which we agreed to pay at a minimum to the driver," but he qualified the assertion by saying further that " the terms changed all the time, depends on the client you acquire or the work you do." J.A. 684:12-16.
B. Procedural History
In 2001, plaintiffs filed their initial complaint, alleging principally violations of the FLSA and its state counterpart, the NYLL, as well as violations of the FSA
and breach of contract. Plaintiffs averred that, despite defendants' desire to treat them as " independent contractors" for tax and labor law purposes, they were actually defendants' " employees," because defendants controlled the manner in which they performed their work. Accordingly, plaintiffs invoked the protections of the FLSA and the NYLL. As relevant here, plaintiffs alleged that defendants violated section 198 of the NYLL, because defendants failed to pay them all the wages they were owed--that is, the difference between the 60% commissions they were promised and the amounts they were actually paid for each delivery. The same allegations formed the basis for plaintiffs' breach of contract claims.
Additionally, plaintiffs claimed that defendants violated two provisions of the FSA: section 683(1), which prohibits a franchisor from selling a franchise without first registering an " offering prospectus" with the New York State Department of Law (the " prospectus claim" ); and section 687(2), which prohibits fraud in connection with the offer or sale of a franchise (the " fraud claim" ). As to the fraud claim, plaintiffs alleged that, to induce plaintiffs' purchase of the ...