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Khurana v. JMP USA, Inc.

United States District Court, E.D. New York

April 5, 2017

NITIN KHURANA, Plaintiff,
v.
JMP USA, INC. and RAVINDER SINGH, Defendants.

          FINDINGS OF FACT AND CONCLUSIONS OF LAW

          STEVEN I. LOCKE, United States Magistrate Judge

         Plaintiff Nitin Khurana (“Plaintiff” or “Khurana) commenced this action against Defendants Ravinder Singh (“Singh” or “Individual Defendant”) and JMP USA, Inc., a New York corporation (“JMP USA” or “Corporate Defendant”) (collectively, “Defendants”), alleging violations of the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. § 201 et seq., and New York Labor Law (“NYLL”), N.Y. Lab. Law § 190 et seq that occurred during his employment as an attendant at USA Gas Station, which Defendants owned and operated. See Docket Entry (“DE”) [1]. This action was assigned to this Court for all purposes pursuant to 28 U.S.C. § 636(c). See DE [27]. As detailed herein, the Clerk of the Court entered a Certificate of Default against the Corporate Defendant on June 30, 2016. With respect to the Individual Defendant, the Court held a bench trial on June 29, 2016. See DE [39], [40]. Included with his Proposed Findings of Fact and Conclusions of law submitted after trial, Khurana also moved for a default judgment against JMP USA. See DE [42].

         Accordingly, the Court herein decides Plaintiff's motion and issues its findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a). Having reviewed the Complaint and considered the evidence adduced at trial, the arguments of counsel, the parties' post-trial submissions, and the controlling law on the issues presented, the Court concludes that Plaintiff has met his burden of proof on all of his overtime and spread of hours claims arising under the FLSA and NYLL, and that he is entitled to $39, 427.44 in damages and prejudgment interest from both JMP USA and Singh, who are jointly and severally liable.

         I. Procedural History

         By way of Complaint filed July 24, 2014, Plaintiff commenced this action, seeking to recover, among other things: (i) unpaid overtime pursuant to the FLSA and NYLL and (ii) unpaid spread of hours compensation pursuant to the NYLL. See Compl. ¶¶ 51-64.

         In their answer to the Complaint, Defendants asserted a counterclaim alleging a discrepancy in the gas pump receipts and records that suggested Plaintiff misappropriated funds from JMP USA during his employment. See Answer, DE [7]. Defendants provide no specificity in the Answer as to the dates on which the thefts are alleged to have occurred or the actual amount that was stolen. See id.

         On October 19, 2015, the Court adopted the Proposed Joint Pre-Trial Order and certified the completion of discovery. See DE [21], [22]. In anticipation of trial, on December 14, 2015, both parties consented to the jurisdiction of this Court for all purposes. See DE [27]. However, on December 30, 2015, Defendants filed a signed consent to relieve their counsel and proceed pro se. DE [28]. After hearing from Defendants and their attorney on January 6, 2016, the Court allowed defense counsel to withdraw. DE [29]. Though the Court warned Singh that day and at each subsequent appearance that JMP USA, as a corporation, could not proceed pro se, he as its sole officer and shareholder nevertheless failed to retain counsel for the Corporate Defendant. DE [29], [31], [32]. Consequently, on June 10, 2016, Plaintiff filed a Request for and, on June 30, 2016, the Clerk of the Court entered a Certificate of Default against JMP USA. DE [36], [38].

         After the Corporate Defendant defaulted, Singh continued as a pro se defendant with respect to his personal liability for the FLSA and NYLL violations alleged in the Complaint. See DE [36], [32]. On June 29, 2016, the Court conducted a bench trial on this question and to determine what if any damages were warranted. See DE [39]. At trial, Plaintiff offered: (i) testimony from himself, (ii) excerpts from Singh's deposition, and (iii) Plaintiff's shift reports that indicated his total weekly pay for 81 out of the 102 weeks of employment at issue. See Id. Defendant Singh offered only his own testimony. See Id. Following the trial, at the Court's direction, the parties submitted their proposed findings of fact and conclusions of law. See DE [42], [42-3]. Plaintiff also sought in its submission a default judgment against the Corporate Defendant. See Plaintiff's Proposed Findings of Fact and Conclusions of Law (“Pl. Findings”) at 10, DE [42].

         II. Default Judgment Against JMP USA

         The Court first turns to Plaintiff's application for a Default Judgment against the Corporate Defendant that was included with Khurana's Proposed Findings of Fact and Conclusions of Law. See id.

         “It is settled law that a corporation may not appear in a lawsuit against it except through an attorney, and that, where a corporation repeatedly fails to appear by counsel, a default judgment may be entered against it pursuant to Rule 55, Fed. R. Civ. P.” Grace v. Bank Leumi Trust Co. of NY, 443 F.3d 180, 192 (2d Cir. 2006) (citing SEC v. Research Automation Corp., 521 F.2d 585 (2d Cir. 1975)) (internal quotations omitted). This rule is fully applicable even where the sole shareholder of the defaulting corporation elects to proceed pro se regarding his personal liability because he is, as a matter of law, situated differently from the corporation, whose interests may at times “overlap but are not identical in all respects.” Grace, 443 F.3d at 192 (internal citations and quotation marks omitted).

         As noted above, JMP USA consented to its attorney's withdrawal prior to trial. See supra at 2-3. Defendant Singh affirmatively acknowledged the consequences of attempting to litigate his personal liability pro se. See the Consent to Change Attorney, DE [28]. Despite the Court's repeated warnings that a failure to retain counsel for the corporation would result in a default, Singh did not retain new counsel for JMP USA. See supra at 3. Accordingly, for the reasons detailed below, the Court grant's Khurana's motion for a default judgment against JMP USA in its entirety.

         A. Legal Standard

         Motions for default judgments are governed by Rule 55 of the Federal Rules of Civil Procedure, which provides for a two-step process. See Fed. R. Civ. P. 55; Priestley v. Headminder, Inc., 647 F.3d 497, 504-05 (2d Cir. 2011). Initially, the moving party must obtain a certificate of default from the Clerk of the Court. See Fed.R.Civ.P. 55(a). Once the certificate of default is issued, the moving party must then apply for entry of a default judgment. Id. Where a default occurs, the well-pleaded factual allegations set forth in a complaint concerning liability are deemed true. See Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); see also Fed. R. Civ. P. 8(b)(6) (“An allegation-other than one relating to the amount of damages-is admitted if a responsive pleading is required and the allegation is not denied.”). However, “just because a party is in default, the plaintiff is not entitled to a default judgment as a matter of right.” Profi-Parikiet Sp. Zoo v. Seneca Hardwoods LLC, 13-CV-4358, 2014 U.S. Dist. LEXIS 71289, at *11 (E.D.N.Y. May 23, 2014) (Report and Recommendation), adopted by, 2014 U.S. Dist. LEXIS 83128 (E.D.N.Y. June 18, 2014) (internal quotation omitted). Rather, the district court must determine whether the plaintiff's allegations establish liability as a matter of law. See City of N.Y. v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011); see also Gunawan v. Sake Sushi Rest., 897 F.Supp.2d 76, 83 (E.D.N.Y. 2012) (holding that a plaintiff seeking a default judgment must establish that its “uncontroverted allegations, without more, establish the defendant's liability on each asserted cause of action”). The decision whether to enter a default judgment “is entrusted to the sound judicial discretion of the court.” Allstate Ins. Co. v. Howell, 09-CV-4660, 2013 WL 5447152, at *1 (E.D.N.Y. Sept. 30, 2013); see also Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993) (“The dispositions of motions for entries of defaults and default judgments . . . are left to the sound discretion of a district court because it is in the best position to assess the individual circumstances of a given case and to evaluate the credibility and good faith of the parties.”).

         In response to Defendants' repeated failure to retain counsel, Plaintiff appropriately requested a Certificate of Default against JMP USA from the Clerk of this Court on June 10, 2016, which was properly served upon the Corporate Defendant. DE [37]. Moreover, the Court repeatedly cautioned JMP USA's principal, the present pro se defendant, that his failure to retain counsel would result in JMP USA defaulting. See DE [29], [31], [32]. The Clerk then issued and entered a Certificate of Default on June 30, 2016. See Entry of Default, DE [38]. Accordingly, as a default judgment would be procedurally appropriate, the Court now examines whether Plaintiff has established the Corporate Defendant's liability.

         B. Discussion

         1. Overtime FLSA Claim

         In the Complaint, Khurana first alleges that JMP USA owes him unpaid overtime compensation pursuant to the FLSA for a period that includes July 2, 2012 through July 6, 2014. See Pl. Findings at 2; Compl. ¶¶ 51-64, Estimated Calculation of Damages (“Est. Calc. of Dams”). For the reasons set forth below, the Court finds that the Corporate Defendant is liable with respect to this claim.

         i. Employer Status

         To prove FLSA overtime liability Plaintiff must first establish that JMP USA was an employer under the FLSA and was engaged in interstate commerce. See 29 U.S.C. § 207; D'Arpa v. Runway Towing Corp., 12-CV-1120, 2013 WL 3010810, at *13 (E.D.N.Y. June 18, 2013). The FLSA defines “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee . . . .” 29 U.S.C. § 203(d). To determine whether an individual is an “employer” under the FLSA, the Second Circuit utilizes the economic realities test, which focuses on “whether the alleged employer (1) had the power to hire and fire the employee[], (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.” Irizarry v. Catsimatidis, 722 F.3d 99, 104-105 (2d Cir. 2013) (citation omitted); see also Graziadio v. Culinary Inst. of Am., 817 F.3d 415, 422 (2d Cir. 2016) (applying factors in FMLA context). In addition, the analysis depends on whether the defendant had “operational control” over employees. Irizarry, 722 F.3d at 110. Operational control does not necessarily require direct contact with employees and workplaces. See Id. Rather, liability exists where the employer exercises control over and makes decisions that “directly affect the nature or conditions of the employees' employment.” Id.

         Here, the Complaint sufficiently alleges that JMP USA was a covered employer under the FLSA. Khurana articulates that the Corporate Defendant owned and operated USA Gas Station where he worked, and also that Singh, in his role as the sole officer of JMP USA, “exercised operational control, … controlled significant business functions …, determined employee salaries, made hiring decisions, and acted on behalf of and in the interest of [the Corporate Defendant] … devising, directing, implementing, and supervising the wage and hour practices and policies relating to the employees.” Id. at ¶ 8. Accordingly, the Court finds that JMP USA is properly classified as an employer.

         Next, the Court must then determine whether the employer is engaged in interstate commerce sufficient to apply the FLSA. Specifically, an employer is liable for wage violations under the FLSA “if it hires an employee who either: 1) is engaged in commerce or in the production of goods for commerce or 2) is employed by an enterprise engaged in interstate commerce or in the production of goods for interstate commerce.” See Valdez v. H & S Rest. Operations, Inc., 14-CV-4701, 2016 WL 3079028, at *2 (E.D.N.Y. Mar. 29, 2016), (Report and Recommendation), adopted by, 2016 WL 3087053 (E.D.N.Y. May 27, 2016). An “enterprise engaged in interstate commerce” is an entity “whose annual gross volume of sales made or business done is not less than $500, 000” and has employees that engage in interstate commerce. 29 U.S.C. § 203(s)(1); Valdez, 2016 WL 3079028, at *2.

         Plaintiff alleges in the Complaint that the gross annual volume of sales made or business done by JMP USA exceeded $500, 000, and that “Defendants … engaged in commerce or in the production of goods for commerce.” Compl. ¶¶ 53-54. Although Khurana does not provide specific instances of interstate commerce, the Court can infer an interstate nexus based upon the factual allegations that the Corporate Defendant operated a gas station and that Plaintiff worked as a clerk selling gasoline to customers - a product reasonably presumed to have originated, at least in part, outside of New York State. See Kinzer v. Stelling, 2012 WL 1405694, at *2-*3 (M.D.Fla. Mar. 28, 2012) (finding FLSA applicable where complaint alleged that defendant operated retail gas station, convenience store, and car repair shop and sold gasoline and other items); see also Cardoza v. Mango King Farmers Mkt. Corp., 14-cv-3314, 2015 WL 5561033, at *4 (E.D.N.Y. Sept. 1, 2015), (Report and Recommendation), adopted by, 2015 WL 5561180 (E.D.N.Y. Sept. 21, 2015) (inferring interstate commerce where defendants were engaged in the food supply industry because it could be reasonably inferred that some of their products originated and/or were sold outside of New York).

         Accordingly, the Corporate Defendant is deemed an employer subject to the FLSA.

         ii. Liability

         The Court now turns to the substance of the Plaintiff's overtime claim. The FLSA provides:

[N]o employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.

29 U.S.C. § 207(a)(1).

         Here, Khurana has established an ongoing overtime violation that includes a period running from July 2012 through to the end of his employment in July 2014. Compl. ¶¶ 9-39. From July 2012 through November 2012, Khuranna alleges that he worked approximately 102 hours per week. See Id. at ¶ 17. From November 2012 through April 2013, Plaintiff claims that he worked approximately 96 hours per week. See Id. ¶ 21. From April 2013 through September 2013, Khurana alleges that he worked 102 hours per week. See Id. ¶ 25. From September 2013 through June 2014, Plaintiff claims to have worked 82 hours per week. See Id. ¶ 31. In June and July of 2014, Khurana alleges that he worked approximately 102 hours per week until the end of his employment. See Id. ¶ 36.

         According to the Complaint, for all of the hours that Plaintiff worked in excess of his initial 40 each week, Defendants only paid him “straight time pay, ” and not the statutorily mandated 150% overtime premium. Id. ¶¶ 44-47. As such, Plaintiff properly makes out a violation of the FLSAs overtime provisions. See Rodriguez v. Almighty Cleaning, Inc., 784 F.Supp.2d 114, 122 (E.D.N.Y. 2011) (“Because the Complaint alleges that Plaintiffs worked more than 40 hours a week and were not paid time-and-a-half for their overtime hours, Plaintiffs have sufficiently pleaded a violation of 29 U.S.C. § 207.”).

         Accordingly, based on the allegations set forth in the Complaint, the Court finds JMP USA liable for failure to pay overtime in violation of the FLSA.

         2. Overtime Claim Under New York Labor Law

         Khurana also asserts that the Corporate Defendant violated the NYLL's overtime provisions for the same period of employment, December 2011 through July 2014. See Compl. ¶¶ 59-64. Applying the standards below, the Court finds JMP USA liable for violating the overtime provisions of the NYLL as well.

         Consistent with the FLSA, the NYLL regulations state that: “[a]n employer shall pay an employee for overtime at a wage rate of one and one-half times the employee's regular rate . . . .” N.Y. Comp. Codes R. & Regs. tit. 12, § 142-2.2; see Santillan v. Henao, 822 F.Supp.2d 284, 292 (E.D.N.Y. 2011) (noting that the NYLL is the “state analogue to the federal FLSA.”). In fact, the NYLL “mirrors the FLSA in compensation provisions regarding overtime wages.” Valdez, 2016 WL 3079028, at *3; D'Arpa, 2013 WL 3010810, at *18 (“[The NYLL] otherwise echoes the FLSA in compensation provisions regarding overtime and minimum wage requirements.”). Consequently, the courts of the Second Circuit routinely impose liability for an overtime violation of the NYLL if it has already found liability under the FLSA. See Jemine v. Dennis, 901 F.Supp.2d 365, 375 (E.D.N.Y. 2012) (“Applying the same reasoning used in the FLSA analysis to the state claims, this Court finds that the undisputed allegations in the complaint and default submissions are sufficient to impose liability on defendants under the NYLL overtime . . . provision[].”). Accordingly, as JMP USA is considered an employer under the FLSA, it is similarly an employer under the NYLL. See Garcia v. La Revise Associates LLC, 08 CIV 9356, 2011 WL 135009, at *5 (S.D.N.Y. Jan. 13, 2011) (“New York's “employer” provisions are equally broad [as that of the FLSA].”) (quoting Spicer v. Pier Sixty LLC, 269 F.R.D. 321, 335 n. 13 (S.D.N.Y. 2010)).

         As an employer subject to the NYLL, the Corporate Defendant is consequently liable for Khurana's properly pled violation of the statute's overtime requirements. Plaintiff pleads that he worked in excess of forty hours per week, stating, in fact, that he regularly worked at least 82 hours per week from January 2011 through July 2014, working either six or seven days each week. Compl. ¶¶ 12-39. During this time period, Defendants compensated him only at the regular hourly rate without any premium compensation for those hours worked in excess of his first 40 per week. Id. ¶¶ 62-63. Accordingly, a default judgment against JMP USA is appropriate not only under the FLSA but also under the NYLL.

         3. Spread of Hours

         The Corporate Defendant is also liable for violating the spread of hours provisions of the NYLL because JMP USA never provided any additional compensation to Plaintiff for Khurana's shifts that exceeded ten hours in length. “The relevant regulation of the New York State Department of Labor ... provides, in pertinent part, that, ‘in addition to the minimum wage, ' if an employee works in excess of 10 hours in a day, ‘[a]n employee shall receive one hour's pay at the basic minimum hourly wage rate.'” Chuchuca v. Creative Customs Cabinets Inc., 13-Civ.-2506, 2014 WL 6674583, at *10 (E.D.N.Y. Nov. 25, 2014) (quoting N.Y. Comp. Codes R. & Regs. tit. 12, § 142-2.4). As of December 31, 2013, the basic minimum hourly wage rate rose to $8.00 per hour in New York State. See 12 N.Y.C.R.R. § 142-2.1. Plaintiff states in the Complaint that, during his entire two years of employment at USA Gas Station, Defendants never paid him any premium beyond his wage of $8.00 per hour even when he worked a shift in excess of ten hours. See Compl. ¶¶ 46-49, 65-68. Thus, from December 31, 2013 through July 7, 2014, Defendant was being paid at the minimum wage. Compare 12 N.Y.C.R.R. § 142-2.1. with Compl. ¶¶ 46-49, 65-68. Accordingly, in addition to the ongoing overtime violation discussed above, Plaintiff is also entitled to unpaid spread of hours compensation for each day he worked for the Corporate Defendant during this time period.

         4. NYLL 195 Wage Notice Statutory Penalties

         Although Khurana is entitled to a judgment against JMP USA regarding his overtime and spread of hours causes of action, the Court denies Plaintiff's demands for NYLL section 195(1) and 195(3) Wage Statement Statutory Penalties as they were not included in the Complaint and instead both raised for the first time in the present motion. As noted above, under Federal Rule of Civil Procedure 55(a) “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, ” the defaulting defendant is deemed to admit every well-pleaded allegation in the complaint. See Greyhound Exhibitgroup, Inc. v. E.L .U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992), cert. denied, 506 U.S. 1080, 113 S.Ct. 1049 (1993) (emphasis added); Montcalm Pub. Corp. v. Ryan,807 F.Supp. 975, 977 (S.D.N.Y. 1992). This presumption is predicated upon the complaint giving the opposing party notice as to what specific relief its adversary seeks and what provision of which law is being invoked. See Vermont Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 245-46 (2d Cir. 2004). Accordingly, a plaintiff may not seek damages tied to causes of action not pled in the unanswered complaint by raising them for the first time as part of a motion for default judgement. See Fed. R. Civ. P. 54(c) (“A default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings.”); Silge v. Merz, 510 F.3d 157, 160 (2d Cir.2007) (declining to award pre-judgment interest where plaintiff failed to include a claim for such damages in the demand clause, and noting that “[b]y operation of Rule 54(c), his failure to do so, intentional or not, ran the risk that his damages would be limited in the event of default.”); Trustees ...


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