Kraft v. Marriott Int'l

• Decision Date: 22 November 2022
• Docket Number: 1:20-cv-1302-JLS-JJM
• Parties: KRISTINA KRAFT, individually and on behalf of all others similarly situated Plaintiff, v. MARRIOTT INTERNATIONAL INC. and NFNY HOTEL MANAGEMENT LLC, Defendant.
• Court: U.S. District Court — Western District of New York

KRISTINA KRAFT, individually and on behalf of all others similarly situated Plaintiff,
v.
MARRIOTT INTERNATIONAL INC. and NFNY HOTEL MANAGEMENT LLC, Defendant.

No. 1:20-cv-1302-JLS-JJM

United States District Court, W.D. New York

November 22, 2022

REPORT AND RECOMMENDATION

JEREMIAH J. MCCARTHY, UNITED STATES MAGISTRATE JUDGE.

Before the court are motions for summary judgment pursuant to Fed.R.Civ.P. (“Rule”) 56 by defendant NFNY Hotel Management LLC (“NFNY”) [109]^[1]and plaintiff Kristina Kraft [113], which have been referred to me by District Judge John L. Sinatra, Jr. for initial consideration [67]. Having reviewed the parties' submissions [109, 113, 115, 117, 118, 123, 125] and heard oral argument on November 14, 2022 [134], for the following reasons I recommend that the motions be granted in part and denied in part.

BACKGROUND

Plaintiff Kraft was formerly employed by NFNY as a food and beverage server at a TGI Friday's restaurant in Niagara Falls, New York. Her First Amended Class Action Complaint [9] alleged seven causes of action seeking individual and class relief for alleged violations of New York's Labor Law, General Business Law and common law. However, the parties have “agreed to dismiss causes of action two through five”, and Kraft has “abandoned the putative class claims, choosing instead to pursue remedies for herself individually. The parties

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also stipulated to dismiss Marriott International, Inc. as a defendant”. Kraft's Memorandum of Law [113-7] at 8.

NFNY now seeks summary judgment dismissing the remaining causes of action, and Kraft seeks partial summary judgment against NFNY on her seventh cause of action.

DISCUSSION

A. Kraft's First Cause of Action: N.Y. Labor Law §196-d

N.Y. Labor Law §196-d provides that “[n]o employer or his agent or an officer or agent of any corporation, or any other person 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”.

Kraft alleges that “§196-d covers any charge that a reasonable customer would have believed would serve as a gratuity”, and that NFNY “attach[es] a hidden surcharge, misleadingly labeled as a ‘service fee' to all food and beverage sales in the amount of 1% to 3% for food and beverage services. Unwary customers pay these service fees reasonably believing that the entirety of the service fee will be remitted to the service workers as gratuity payment”. First Amended Class Action Complaint [9], ¶¶54, 55.

The surcharge at issue was a “destination marketing fee”, also called a “Dest Mkt Chg” or “DMF”, which was “used to offset NFNY's expenses for marketing its hotels and restaurants in the Niagara Falls area”. Winter Declaration [109-16], ¶¶8, 9. The DMF “was never presented to the customer as a ‘service charge'”. Id., ¶11. “The amount of the DMF varied over time, but was generally around 3.5% of the subtotal of a customer's bill. The amount of the DMF is fully disclosed on its invoices to customers”, and “if a customer objects to or complains about the charge, it has always been the policy of NFNY to remove it from the bill”. Id., ¶¶9, 13.

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NFNY attached to its motion “a typical sales invoice that was presented to NFNY's customers at TGI Friday's who were serviced by [Kraft] during her employment at NFNY”. Id., ¶ 14; [109-17] at 2. Although the invoice postdated Kraft's employment at NFNY, she admitted at her deposition that it “depicted the receipt that a customer would receive at the conclusion of their dining or beverage experience”. [109-3] at 42.

“[W]hether a charge purports to be a gratuity is measured by whether a reasonable patron would understand that a service charge was being collected in lieu of a gratuity.” Spicer v. Pier Sixty LLC, 269 F.R.D. 321, 330 (S.D.N.Y. 2010). Although 12 N.Y.C.R.R. §146-2.18(b) creates “a rebuttable presumption that any charge in addition to charges for food, beverage, lodging, and other specified materials or services . . . is a charge purported to be a gratuity”, NFNY's typical invoice clearly rebuts that presumption. The invoice lists a “DestMktgChg” (not a “service charge”) of $0.94, representing 3.5% of the $26.78 charge for food and beverages. [109-17] at 2. Kraft admitted that the “customary tip in the food and beverage industry is 15 or more percent” ([109-3] at 45), and 3.5% in no way “resembles what customers would expect to tip”. Belizaire, 796 Fed.Appx. at 53. Moreover, the invoice contains a separate line for “TIP”, followed by “gratuity recommendations based on the subtotal of your items: 15% is $4.02; 18% is 4.82; 20% is 5.36.”

In Spicer, which (unlike this case) did involve a “service charge”, the court concluded that “no reasonable jury could find that a reasonable customer would believe that the service charge was a gratuity . . . . [The] contract clearly delineates the ‘service charge' from the ‘gratuity' . . . and never refers to the service charge without also referring to the gratuity as a separate, distinct charge . . . . Accordingly, Defendants' motion for summary judgment is

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granted.” 269 F.R.D. at 332-33. For the same reasons, I recommend that NYNY be granted summary judgment dismissing this cause of action.

B. Kraft's Sixth Cause of Action: N.Y. Labor Law §195(3)

N.Y. Labor Law §195(3) requires an employer to “furnish each employee with a statement with every payment of wages”, containing various types of information. Kraft alleges that NFNY violated §195(3) by failing to provide her with an accurate statement with each payment of wages (First Amended Class Action Complaint [9], ¶100), and seeks summary judgment of $5,000 in statutory penalties pursuant to N.Y. Labor Law §198(1-d). See Kraft's Memorandum of Law [113-7].

NFNY admits that the wage notices which it provided to Kraft were not fully compliant with the requirements of Labor Law §195(3). See, e. g., NFNY's Opposing Statement of Material Facts [117-1], Responses 4 and 5. Nevertheless, it argues that “the Labor Law provides an affirmative defense to NYLL §195(3) claims where the employer ‘made complete and timely payment of all wages due' to the employee. NYLL §198-d. Courts have recognized that this affirmative defense was designed to ‘protect employers from a mere technical violation'”. NFNY's Memorandum of Law [117] at 5.^[2]

Kraft responds that NFNY “is not entitled to rely on the NYLL §198 affirmative defense because it failed to assert that defense in its responsive pleading. [Rule 8(c)(1)] requires that'“[i]n responding to a pleading, a party must affirmatively state any avoidance or affirmative defense'”. Kraft's Reply Memorandum [125] at 6.

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NFNY offers several arguments in response. First, it suggests that its “seventh affirmative defense stat[ing that] ‘Plaintiff is not entitled to any monetary payments beyond what she has already been paid' . . . clearly notified Plaintiff that NFNY intended to establish that it had complied with all of its obligations to pay her under the Labor Law, which include requirements for complete and timely payment of all wages due”. NFNY's Reply Memorandum [123] at 15. I disagree. That affirmative defense did not even mention Labor Law §198-d, much less allege that NFNY had made “timely” payments, as required by the statute.

“[T]he plausibility standard of Twombly [Bell Atlantic Corp. v. Twombly, 550 U.S. 544] applies to determining the sufficiency of all pleadings, including . . . an affirmative defense.” GEOMC Co. v. Calmare Therapeutics Inc., 918 F.3d 92, 98 (2d Cir. 2019). An affirmative defense must be “support[ed] . . . with some factual allegations to make [it] plausible”. Id. at 99; Town & Country Linen Corp. v. Ingenious Designs LLC, 2020 WL 3472597, *13 (S.D.N.Y. 2020) (same). Therefore, “[affirmative defenses which amount to nothing more than mere conclusions of law and are not warranted by any asserted facts have no efficacy”. Shechter v. Comptroller of City of New York, 79 F.3d 265, 270 (2d Cir. 1996).

NFNY next argues that Kraft “was also notified of this defense by denials in NFNY's answer. NFNY denied the allegation that ‘Plaintiff files this action to recover all unpaid wages' and ‘compensation,' and ‘seeks to remedy the sweeping practices' of Defendants that...