In this action premised on alleged violations of New York Labor Law § 196-d, defendants move pursuant to CPLR 3211 (a) (7) for dismissal of plaintiff's complaint.

BACKGROUND

According to the "Class Action Complaint" filed in this action, plaintiff Ryan Picard was employed as a server at defendant Bigsbee Enterprises, Inc. d/b/a Mallozzi's Restaurant from March 2011 through December 2012. The complaint further alleges that plaintiff worked as a server at various catering halls operated by defendants at unspecified times.

Throughout plaintiff's employment, defendants allegedly charged all banquet customers a mandatory "20% Service Personnel Charge" in addition to their catering bill. The complaint alleges that customers reasonably would have believed this "Service Personnel Charge" to be a gratuity, but defendants did not distribute this charge to the servers, who were paid a flat hourly rate. Plaintiff also claims that he and other banquet servers were directed to advise customers that they received tips if questioned. It is plaintiff's contention that defendants' alleged retention of the "Service Personnel Charge" violated Labor Law § 196-d, which provides: "No employer or his agent or an officer or agent of any corporation . . . shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee . . . ."

Plaintiff seeks to maintain this action on behalf of himself and a class of similarly situated present and former employees. Plaintiff and the putative class members seek an injunction restraining defendants from continuing their allegedly unlawful practices, recovery of the purported gratuities allegedly retained by defendants, pre-award interest and attorney's fees. The complaint specifically states that plaintiff and the putative class members "do not seek liquidated damages".

ANALYSIS

On a motion pursuant to CPLR 3211 (a) (7) to dismiss for failure to state a claim, "the Court must afford the pleadings a liberal construction, take the allegations of the complaint as true and provide plaintiff the benefit of every possible inference" (EBC 1, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]). The Court's sole criterion is whether the facts alleged in the complaint "fit within any cognizable legal theory" (Leon v Martinez, 84 NY2d 83, 88 [1994]). However, the Court need not "accept as true legal conclusions or factual allegations that are either inherently incredible or flatly contradicted by documentary evidence" (1455 Washington Ave. Assoc. v Rose & Kiernan, 260 AD2d 770, 771 [3d Dept 1999] [internal citations omitted]).

A.CPLR 901 (b)

In moving for dismissal of the class allegations of the complaint, defendants rely upon CPLR 901 (b), which generally prohibits the use of a class action lawsuit "to recover a penalty, [*2]or minimum measure of recovery created or imposed by statute." Pursuant to Labor Law § 198 (1-a), an employee who prevails on a claim brought pursuant to Labor Law § 196-d may recover any underpayment in wages, attorney's fees and interest. Further, "unless the employer proves a good faith basis to believe that its underpayment of wages was in compliance with the law", the court shall allow the employee to recover "an additional amount as liquidated damages equal to one hundred percent of the total amount of the wages found to be due" (id.).

Plaintiff does not dispute that the liquidated damages available under Labor Law § 198 (1-a) constitute a "penalty" within the meaning of CPLR 901 (b). However, plaintiff argues that his complaint validly and properly waives any claim for liquidated damages on behalf of himself and putative class members. Plaintiff further represents that he will seek a form of class notice that advises putative class members of the waiver of liquidated damages and their right to opt-out of the class to pursue individual claims for liquidated damages.

The issue of whether a plaintiff may waive an award of enhanced damages in order to maintain a class action recently was addressed by the Appellate Division, First Department in Downing v First Lenox Terrace Associates (107 AD3d 86, 89 [1st Dept 2013]). In overturning Supreme Court's dismissal of the class allegations of the complaint, the First Department held as follows: "[E]ven where a statute creates or imposes a penalty, the restriction of CPLR 901 (b) is inapplicable where the class representative seeks to recover only actual damages and waives the penalty on behalf of the class, and individual class members are allowed to opt out of the class to pursue their punitive damages claims" (id.). To similar effect are rulings of the Second and Fourth Departments (see Ridge Meadows Homeowners' Assn. v Tara Dev. Co., 242 AD2d 947 [4th Dept 1997]; Super Glue Corp. v Avis Rent A Car Sys., 132 AD2d 604, 606 [2d Dept 1987]). In view of this binding precedent,^[FN1] the Court must reject defendants' contention that CPLR

901 (b) prohibits a plaintiff from waiving liquidated damages in order to pursue a class action.

Defendants' argument that the mandatory nature of liquidated damages under Labor Law § 198 (1-a) precludes a valid waiver also is foreclosed by appellate authority. In Pesantez v Boyle Envtl. Servs., (251 AD2d 11, 12 [1st Dept 1998]), the First Department upheld class certification in an action brought pursuant to Labor Law article 6, reasoning that "[t]o the extent certain individuals may wish to pursue punitive claims pursuant to Labor Law § 198 (1-a), which cannot be maintained in a class action, they may opt out of the class action." The First Department reaffirmed this ruling in Downing in the context of an analogous statute that provides for an award of enhanced damages unless the defendant demonstrates its lack of willfulness (107 AD3d at 88-89). In this connection, the Court finds defendants' reliance upon Asher v Abbott Labs (290 AD2d 208 [1st Dept 2002]) to be unavailing, as that case concerned a statute that makes treble damages the sole measure of recovery (see General Business Law § 340 [5]; see also Downing, 107 AD3d at 89; Gudz v Jemrock Realty Co., LLC, 105 AD3d 625, 625 [1st Dept 2013]).

Accordingly, the branch of the motion seeking dismissal of the class allegations of the [*3]complaint is denied.^[FN2]

B.Individual Defendants

The second branch of defendants' motion seeks dismissal of the complaint as against the two individual defendants, Joseph Mallozzi and John Mallozzi (collectively "Individual Defendants"), on the ground that officers and shareholders of a corporation are not subject to civil liability. In opposition, plaintiff argues that corporate officers, agents and shareholders may be held liable under article 6 of the Labor Law as "employers" and that the complaint alleges sufficient facts for the Individual Defendants to be deemed plaintiff's employer.

Settled law holds that an individual does not bear civil liability for unpaid wages under Labor Law article 6 ("Article 6") merely by serving as an officer, shareholder or agent of a corporation (see Stoganovic v Dinolfo, 92 AD2d 729 [4th Dept 1983], aff'd 61 NY2d 812; Andux v Woodbury Auto Park, Inc., 30 AD3d 362 [2d Dept 2006]). However, Article 6 does impose liability upon "employers" (Labor Law § 190 [3]), and an officer, shareholder or agent of a corporation who qualifies as an "employer" may be subject to a civil suit on that basis (Bonito v Avalon Partners, Inc., 106 AD3d 625, 625-626 [1st Dept 2013] [officer]; Wing Wong v King Sun Yee, 262 AD2d 254, 255 [1st Dept 1999] [shareholder]).

The term "employer" is broadly defined in Article 6 to include "any person, corporation, limited liability company, or association employing any individual in any occupation, industry, trade, business or service." In determining whether an individual may be subject to civil liability as an "employer" under Article 6, courts consider factors such as whether the individual exercises control of the day-to-day operations of the business, including determination of the rate and method of payment of employees (see Bonito, 106 AD3d at 625). Here, the complaint alleges that each of the Individual Defendants "exercises sufficient control of each catering location's day to day operations to be considered an employer of Plaintiff and those similarly situated under New York Labor Law" (Complaint ¶¶ 30-31). Accepting the truth of these allegations and according plaintiff the benefit of all reasonable inferences, the Individual Defendants have failed to demonstrate their entitlement to dismissal of the complaint at this early stage of the litigation.

CONCLUSION

Accordingly,^[FN3] it is

ORDERED that the motion to dismiss is denied in all respects.

This constitutes the Decision and Order of the Court. The original Decision and Order is being transmitted to counsel for plaintiff (Berke-Weiss & Pechman LLP); all other papers are being transmitted to the Albany County Clerk. The signing of this Decision and Order shall not constitute entry or filing under CPLR Rule 2220, and counsel is not relieved from the applicable provisions of that Rule. [*4]

Dated: Albany, New York

September 12, 2013

RICHARD M. PLATKIN, A.J.S.C.

Papers Considered:

Notice of Motion, dated July 1, 2013;

Affidavit of Clemente J. Parente, Esq., sworn to July 1, 2013, with attached exhibit A;

Defendants' Memorandum of Law, dated July 1, 2013;

Plaintiff's Memorandum of Law, dated July 19, 2013;

Affirmation of Louis Pechman, dated July 19, 2013, with attached exhibit A.