Lin v. Cruz

• Decision Date: 30 September 2020
• Docket Number: No. 2944, Sept. Term, 2018,2944, Sept. Term, 2018
• Citation: 239 A.3d 720,247 Md.App. 606
• Parties: QUN LIN v. Jose Reyes CRUZ, et al.
• Court: Court of Special Appeals of Maryland

247 Md.App. 606

239 A.3d 720

QUN LIN

v.Jose Reyes CRUZ, et al.

No. 2944, Sept. Term, 2018

Court of Special Appeals of Maryland.

September 30, 2020

Argued by: Jonathan Y. Ai (Ai & Associates on the brief) Rockville, MD, for Appellant

Argued by: Anthony G. Bizien (Michael K. Amster, Zipin, Amster & Greenberg, LLC on the brief) Silver Spring, MD, for Appellee

Panel: Fader, C.J., Leahy, Deborah S. Eyler (Senior Judge, Specially Assigned), JJ.

Leahy, J.

In this appeal concerning a complaint for unpaid wages, we discuss the framework for application of the "economic reality test" first articulated by the Supreme Court in Rutherford Food Corp. v. McComb , 331 U.S. 722, 726-27, 67 S.Ct. 1473, 91 L.Ed. 1772 (1947). Although it sounds like something in the nature of an investment strategy, the "economic reality test" springs from cases construing the Fair Labor Standards Act of 1938, 29 U.S.C. §§ 201 - 219 ("FLSA"), to assess individual liability as an employer for undercompensated employees.

Jose Angel Reyes Cruz, Jose Jorge Perez Gonzalez, and Jesus Emanuel Sanchez Vasquez (collectively, "Employees") were formerly employed by the Teppanyaki Grill & Supreme Buffet ("Teppanyaki Grill") in Rockville, Maryland. They filed a complaint in the Circuit Court for Montgomery County, asserting claims for unpaid wages under the FLSA, the Maryland Wage and Hour Law, Maryland Code, Labor & Employment Article ("LE") (1999, 2016 Repl. Vol., 2018 Supp.), §§ 3-401-431 ("MWHL"), the Maryland Wage Payment and Collection Law, Maryland Code, Labor & Employment Article ("LE") (1999, 2016 Repl. Vol., 2018 Supp.), §§ 3-501-509 ("MWPCL"), and the Montgomery County Minimum Wage Act ("MCMWA"). The Employees initially sued Weiguang Chen and Teppanyaki Grill, later adding Qun Lin (the "Appellant"), and his son, Li Lin.

Teppanyaki Grill failed to answer the complaint and was not represented at trial before a circuit court judge. No business records were introduced showing any of the Employees’ work hours or rates of pay because, as witnesses confirmed in their deposition and trial testimony, no such records were kept. Similarly, there was very little documentary evidence introduced to show who should be held liable as the employer under the relevant statutes. Aside from testimony, the following documents were introduced: (1) the Articles of Incorporation for Teppanyaki Grill, bearing the name and signature, "Weiguang Chen"; (2) a lease for the property where the restaurant was located, signed by Appellant; and (3) two amendments of the lease, all bearing the name and signature of Appellant. Appellant asserted at trial that he only signed the lease as a favor to Mr. Chen and that he did not have any interest in the business.

The court found that Appellant was the owner of the business and held him personally liable for the Employees’ unpaid wages. The judge based his ruling on the amount of financial risk incurred under the lease, as well as the language "Qun Lin, dba Teppanyaki Grill and Supreme Buffet" on the second amendment to the lease. The judge also concluded that he did not have sufficient evidence to hold Mr. Chen liable for the Employees’ unpaid wages.

On appeal, Appellant does not dispute the Employees’ entitlement to unpaid wages or the amount owed. He claims, however, that he is not liable for the unpaid wages because he does not own Teppanyaki Grill or have any stake in the business. Appellant presents four questions¹ for our review, which we reorder and reframe as three:

I. Was it clearly erroneous for the trial judge to credit selected statements from Mr. Chen's deposition testimony after finding other parts incredible?

II. Did the trial court err in finding Appellant was an owner and operator of Co-Defendant Teppanyaki Grill & Supreme Buffet, Inc.?

III. Did the trial court err in awarding attorney's fees?

We conclude that the trial court rightly credited certain parts of Mr. Chen's deposition testimony while doubting other parts because it is the role of a judge in a case tried to the court to make such credibility determinations, and we will not disturb such determinations unless clearly erroneous. In determining whether Appellant was the owner of Teppanyaki Grill, however, the trial judge failed to apply the economic reality test or articulate an alternate legal principle for his assignment of liability for the Employees’ wages. We do not reach the issue of attorney's fees in light of this holding. Accordingly, we remand the case for further proceedings so that the court can apply the appropriate theories of liability discussed in this opinion.

BACKGROUND

The complaint for unpaid wages, filed in the Circuit Court for Montgomery County on February 27, 2017, alleged that the Employees worked at Teppanyaki Grill and that Weiguang Chen² owned and/or operated Teppanyaki Grill at all relevant times during their employment. It also alleged that Mr. Chen had the authority to "hire, fire, suspend, and otherwise discipline" the Employees. The complaint set forth the time periods that the Employees worked at Teppanyaki and alleged that, during the time that they worked there, Mr. Chen failed to pay them minimum wage or overtime pay in violation of federal (FLSA), state (MWHL, MWPCL), and county (MCMWA) law.

Six weeks later, an amended complaint added three other employees as plaintiffs.³ Finally, on June 16, 2017, a second amended complaint added, as defendants, "Yun Lin" (aka Qun Lin, Appellant) and "Li Lin."⁴ It alleged that Appellant and Li Lin were also employers during the time that all of the employees worked at Teppanyaki Grill.

After Mr. Chen filed his answer, the parties who had entered appearances filed a "Joint Motion to Toll and Extend Deadlines" on August 10, 2017. The motion noted that Mr. Chen was asserting that Appellant and Li Lin—father and son—were the rightful owners of Teppanyaki Grill and the rightful defendants in the case. The circuit court granted the motion and tolled the discovery period for "60 days or until Messrs. Lin have filed their answer, whichever is sooner[.]"

Appellant and Li Lin filed their answers on September 18, 2017, as well as oppositions to the order of default that had been entered against them four days earlier. In his opposition, Appellant asserted that he was not the owner of Teppanyaki Grill and, thus, the suit against him failed to state a claim. In support of this contention, he submitted records from the State Department of Assessments and Taxation ("SDAT") that named Mr. Chen as the business owner. He also noted that he lived in Flushing, New York, and alleged that he had no regular contact with either Rockville, Maryland, or Teppanyaki Grill. Li Lin's opposition was virtually identical.

Mr. Chen's Deposition

Mr. Chen was 26 years old (DOB: 12/12/1990) at the time of his deposition on October 16, 2017. Because Mr. Chen refused to appear at trial, his deposition testimony was ultimately admitted in its entirety. Mr. Chen testified in his deposition that, when he moved to Maryland, his first job was working at another restaurant in Laurel, also called Teppanyaki Grill. He claimed that this restaurant was also owned by Appellant and Li Lin, and that both father and son visited the Laurel Teppanyaki Grill once a month while he worked there.

Mr. Chen related that, while he was the manager of the Laurel Teppanyaki Grill, he had to consult with Appellant and Li Lin before he set the rate of pay for new employees and before he fired anyone. He also said that the Lins would determine the hours the employees worked, and that he did not know how the income for the Laurel business was handled but that the Lins would collect the money when they came to visit. Mr. Chen testified that, after managing the Laurel restaurant for 10 months, the Lins asked him to start a new business with them. After he informed them that he didn't have any money to invest, they told him he could simply manage the Teppanyaki Grill in Rockville. He testified that the Lins then raised his salary from $2,800 to $3,000 a month.

Once the Rockville business was open, Mr. Chen was charged with hiring new employees, but he had to call Li Lin to determine how much to pay them. Mr. Chen testified that he did not sign the business's incorporation paperwork that bears his name and signature.⁵ He only realized that he was listed as the business owner when he started receiving business tax forms. After he found out in February of 2017 that all of the incorporation paperwork was in his name, he quit. Teppanyaki Grill closed a short time later. Mr. Chen testified that he had not seen the SDAT incorporation document prior to his deposition.

Mr. Chen acknowledged that, during the time he managed Rockville Teppanyaki Grill, he was responsible for hiring the front-of-house staff and deciding which employee would do each job. He clarified, however, that kitchen staff was not his responsibility, and that when bills came to the restaurant, he would call Li Lin and let him know before writing a check. Mr. Chen also had to let Li Lin know before he fired anyone.

According to Mr. Chen, when the Lins came to Teppanyaki Grill in Rockville, they were often upset because the business was not making enough money. Li Lin came to the restaurant once a month to collect sales records. At one point, Li Lin instructed Mr. Chen to open a business bank account for Teppanyaki Grill. Counsel for the Lins elicited testimony from Mr. Chen that the Lins’ names do not appear on any of the business accounts for Teppanyaki Grill. Mr. Chen also admitted that he had never seen either of the Lins hire an employee for Teppanyaki Grill directly.

All of the front staff were paid in cash, and their work hours were not recorded. Mr. Chen testified, however, that he did not know the Employees in this case or how they were paid because they were kitchen staff, and he only managed the front-of-house employees.

The Lease Agreements

Central to the issues presented at trial was the lease agreement, and...