In this putative class action to obtain overtime payments for workers at defendant Town Sports International d/b/a New York Sports Club (TSI), defendant moves to dismiss a portion of plaintiffs' damage claim in the complaint dated June 18, 2007. The motion raises significant statute of limitations and "relation back" issues.

Plaintiff Sarah Cruz (Cruz) initially commenced a putative class action against TSI in February 2005, seeking overtime pay for a class consisting of personal trainers, assistant fitness managers, and others with similar titles. In March 2005, plaintiff Mathew Dockswell joined Cruz in an amended complaint (Original Complaint). On May 23, 2005, the parties agreed to stay the action so that they could discuss the possibility of settlement. At the first meeting, plaintiffs informed defendant that they had discovered that TSI had routinely deleted compensable time from hourly employees' time records in violation of Labor Law Articles 6 and 19 (time-shaving claims). Plaintiffs contend that, at the same meeting, they also informed TSI that all of their claims applied to all hourly employees.

The parties negotiated and exchanged discovery materials over the course of 20 months. Plaintiffs drafted a proposed Second Amended Complaint (SAC) that included the time-shaving claims. When the negotiations between the parties proved unsuccessful, plaintiffs sought to have defendant stipulate to amending the complaint. Although defendant may have initially showed a willingness to agree to permit the amendment, when plaintiffs submitted a new copy of the proposed SAC, plaintiffs had expanded the class to include all hourly employees. Defendant refused to agree to that expansion, and plaintiff moved to amend the complaint.

At the Court's suggestion, the parties stipulated that plaintiffs would file a new complaint containing the claims that would have been added by the SAC. The stipulation provides:

4. Both sides preserve their respective rights and arguments with respect to the applicability of the doctrine of relation back and applicable statutes of limitations.

5. The intent of the parties is to not prejudice either parties' procedural and substantive rights by the mere fact of plaintiffs' withdrawal of the motion ... and the filing of a separate complaint as opposed to the amendment of the existing complaint.

The complaint in this action asserts claims for TSI's alleged failure to pay employees proper wages, including, but not limited to, overtime wages. Plaintiffs allege that TSI has encouraged its staff to regularly delete or edit hours actually worked by hourly employees from its time and attendance and payroll systems. The class includes "all persons who work or have worked for TSI as hourly employees at TSI's health clubs located in the State of New York ... ." Complaint, ¶ 31.

In this motion, defendant seeks to limit any damages for hourly employees, and for time-shaving claims, to six years before this complaint was filed. Plaintiffs seek to use the relation back doctrine of CPLR 203(f) to permit recovery for all plaintiffs on all claims to six years prior to February 2005.

Defendant contends that the time-shaving claims in this action are qualitatively different from [*2]the claim of failure to pay overtime in the original action. Plaintiffs disagree, and, in addition, assert that if the time-shaving claims are found to be different, defendant should be estopped from contesting the use of the relation back doctrine because of the ongoing settlement negotiations, defendant's awareness of the claim, and defendant's initial agreement to stipulate to amend the complaint, which was later withdrawn.

In the Original Complaint, plaintiffs alleged that TSI has "failed and/or refused to pay [employees] for hours that they have worked" (Original Complaint, ¶ 5); "TSI does not pay its personal trainers for many hours that they work for TSI's benefit, including hours that they work in excess of 40 hours per workweek" (id., ¶ 8); and raises questions of law including "whether TSI has failed and/or refused to pay Plaintiffs and the Class overtime compensation for hours worked in excess of 40 hours per workweek" (id., ¶ 38[a]); "whether TSI has failed to keep true and accurate time records for all hours worked by Plaintiffs and the Class" (id., ¶ 38[c]); "whether TSI has engaged in a policy and pattern or practice of not paying personal trainers overtime compensation for hours worked over 40 per workweek" (id., ¶ 38[e]); and "whether TSI's failure to pay overtime compensation as required ... was done willfully or with reckless disregard of the statute" (id., ¶ 38[g]). Plaintiffs also asserted that TSI has a policy or pattern or practice of "requiring, suffering, and/or permitting its employees ... to work many hours beyond 40 in a workweek without paying them overtime wages as required by law" (id., ¶ 46 [b]); "willfully fail[ed] to keep payroll records with respect to Plaintiffs and the Class" (id., ¶ 46[c]); and "willfully fail[ed] to record all of the time that employees ... have worked for the TSI's benefit" (id., ¶ 46[d]).

In the complaint in this action, plaintiffs allege that defendant "encouraged and permitted its staff to regularly delete or edit hours actually worked by hourly employees from its time and attendance and payroll systems." Complaint, ¶ 6. Defendant contends that this claim, of time-shaving, is qualitatively different from merely failing to pay overtime, and should not, therefore, be permitted to relate back to the Original Complaint. Defendant's position is unconvincing.

In the Original Complaint, plaintiffs did not specify how defendant effectuated its failure to pay it employees appropriately except in very general terms. Apparently, after discovery commenced, plaintiffs found that defendant was involved in actively changing the time records, not merely failing to record the time properly at the outset. However, the Original Complaint is broad enough in its language to include time-shaving. Allegations of failing to keep accurate records do not preclude allegations of altering the records - the former is a general allegation that the time records were not accurate which can encompass both omissions and acts, whether deliberate, negligent or inadvertent. That plaintiffs allegedly discovered active deceit on the part of TSI does not alter their basic claim that the time records were inaccurate, and that TSI failed to pay its employees overtime for hours that they worked in excess of 40 hours per workweek. The Original Complaint gave defendant notice of the transaction or occurrence out of which the claim arose, namely, that the time records were inaccurate. See Bellini v Gersalle Realty Corp., 120 AD2d 345, 347-348 (1st Dept 1986).

Consequently, the time-shaving claims relate back to the Original Complaint, and recovery can be obtained for a time period of six years prior to February 2005.

Expanded Plaintiff Class

In the Original Complaint, plaintiffs sought to represent a class consisting of "all persons who [*3]work or have worked for TSI as personal trainers and assistant fitness managers (or other similar titles) at TSI's health clubs ... ." Original Complaint ¶ 33. In this action, plaintiffs seek to represent all hourly workers as well. Defendant contends that this expansion of the class cannot relate back to the Original Complaint because the Original Complaint did not give notice that those additional workers were involved, and those additional workers are not in the same position as the class initially defined. Plaintiffs contend that the series of transactions or occurrences are the same, and that the new and original plaintiffs are closely related in that they are all current or former employees of defendant, and all were paid through the same unlawful payroll process.

In order for a new party to benefit from the relation back doctrine, the new party "must be so closely related that the original [plaintiff's] claim would have given the [defendant] notice of the proposed [additional plaintiff's] specific claim so that the imposition of the additional claim would not prejudice the [defendant]." Matter of Greater NY Health Care Facilities Assn. v DeBuono, 91 NY2d 716, 721 (1998). Additionally, the claims of the newly joined plaintiffs must be "virtually identical" to the original claim. Insurance Co. of N. Am. v Hellmer, 212 AD2d 665, 666 (2d Dept 1995); Key Intl. Mfg. v Morse/Deisel, Inc., 142 AD2d 448, 458-459 (2d Dept 1988).

Here, plaintiffs seek to add additional plaintiffs who were not part of the Original Complaint. Simply because they too are employees of TSI does not mean that they are closely related to plaintiffs, or that their claims are "virtually identical" to the original class, or indeed, that they would be proper members of the same class. In the Original Complaint, plaintiffs limited the class to personal trainers, assistant fitness managers, and similar titles. The new class seeks to include all hourly workers, irrespective of their jobs. This is a huge expansion of the class, and there is no reason that defendant would have expected such a large class based upon the Original Complaint. Furthermore, plaintiffs have not demonstrated that all hourly workers are paid in the same manner as personal trainers or assistant fitness managers. In fact, defendant has asserted that the personal trainers and fitness managers are paid differently from hourly workers, and are not considered hourly workers. Plaintiffs have not offered any basis to discredit defendant's assertion. In the absence of plaintiffs presenting evidence that the hourly workers are legitimately in the same category as personal trainers and assistant fitness managers, mere allegations that they should be so construed are insufficient.

Plaintiffs contend that, in any event, the doctrine of equitable estoppel should be applied to prevent defendant from opposing the expansion of the class. This claim is unpersuasive.

Equitable estoppel is an extraordinary remedy, which can be invoked only when a plaintiff was induced by fraud, misrepresentations, or deception from filing a timely amendment to a complaint. Pahlad v Brustman, 33 AD3d 518, 519 (1st Dept 2006), affd 8 NY3d 901 (2007). A plaintiff must establish that the defendant's actions caused the failure to bring the suit in a timely manner. Putter v North Shore Univ. Hosp., 7 NY3d 548, 552 (2006).

Here, plaintiffs have not demonstrated that defendant did anything by way of misrepresentation or deception to delay plaintiffs' filing of its motion to amend the complaint. Merely because the parties were involved in settlement negotiations does not constitute grounds for estoppel. Bennett v Metro-North Commuter R.R., 231 AD2d 662, 663 (2d Dept 1996). Neither does the fact that the parties stipulated to stay the action pending settlement negotiations. Plaintiffs could have discontinued the stay at any time had they so desired. Cf. Robinson v City of New York, 24 AD2d 260 (1st Dept 1965). Their failure to do so does not require a finding that defendants misled [*4]them into delaying raising their claim.

It also bears noting that plaintiffs did not raise the issue of expanding the class until after the negotiations terminated. Unlike the time-shaving claim, which was included in a proposed amended complaint early in the parties' negotiations, there was no indication that plaintiffs intended to expand the class at that time. Thus, plaintiffs cannot reasonably claim that defendant knew of the intent to expand the class.

Under these conditions, the expanded class cannot take advantage of the relation back doctrine, and is limited to recovery based upon the six-year statute of limitations from the date that the complaint in this action was filed.

Accordingly, it is hereby

ORDERED that defendant's motion is granted only to the extent that the expanded putative class can seek damages only for the six-year period prior to the filing of this complaint, and cannot use the relation back doctrine in order to obtain recovery for six years prior to the original complaint, as can the personal trainers and assistant fitness managers and those with

similar titles; and it is further

ORDERED that the time-shaving claims relate back to the date of the February 2005 complaint.

Dated: August 21, 2008ENTER:

New York, New Yorks/

_________________________

J.S.C.