RHC Operating LLC v. City of New York
| Docket Number | 21-CV-9322 (JPO) |
| Decision Date | 30 March 2022 |
| Parties | RHC OPERATING LLC, Plaintiff, v. CITY OF NEW YORK, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Two years ago, the COVID-19 pandemic shuttered New York City almost overnight. Many hotels closed soon after, and many more laid off their workers. For a year and a half, the federal government provided supplemental unemployment benefits. When those benefits expired, the City of New York enacted a law generally requiring still-closed hotels to pay laid-off workers five hundred dollars in severance pay for thirty weeks, starting on October 11, 2021. Plaintiff owns the Roosevelt Hotel, which closed to the public in December 2020, and has not reopened.
In this action, Plaintiff challenges the Severance Law, asserting that it is preempted by the Employee Retirement Income Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq., and the National Labor Relations Act of 1935 (“NLRA”), 29 U.S.C. §§ 151, et seq. Plaintiff also claims that the law violates the Contracts Clause, Due Process Clause, and Equal Protection Clause. At the outset, Plaintiff moves for a preliminary injunction to enjoin the enforcement of the law. Because Plaintiff has not shown a likelihood of success on the merits of any federal claim, the motion is denied.
The following background is drawn “from the parties' submissions in connection with [the] motion for a preliminary injunction, ” including the complaint, declarations, and attached exhibits. LSSi Data Corp. v. Time Warner Cable, Inc., 892 F.Supp.2d 489, 494 n.2 (S.D.N.Y. 2012). By March 2020, COVID-19 had arrived in New York City. There was a widespread fear of infection. (See Compl. ¶ 19.) That month, the federal government, the State of New York, and the City of New York each declared a state of emergency. (See Compl. ¶ 18.) They restricted travel, banned gatherings, and prohibited indoor dining. (See Compl. ¶ 18.)
Among everything else, hotels lost revenue. (See Compl. ¶ 19.) In New York City, occupancy rates plummeted to 35 percent. (See id.) By the end of the year, two hundred of the City's seven hundred hotels had closed (see Compl. ¶ 20), including the Roosevelt Hotel, which furloughed most employees in March, laid off the rest in October, and closed in December (see Compl. ¶ 21). Although cases of COVID-19 have dropped since, and many restrictions have been lifted, occupancy rates have not returned to pre-pandemic levels. (See Compl. ¶¶ 19-23.) At least ninety hotels remain closed due to the pandemic. (See 21-CV-8321, Dkt. No. 22 (“Dandapani Declaration”) ¶ 6.) Around sixty percent of the City's hotel workers are still unemployed. (See Dkt. No. 32-1 (“First Committee Report”) at 24.)
At the peak of the pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. See 15 U.S.C. §§ 9001, et seq. Among other things, the CARES Act extended eligibility for workers to apply for additional weeks of unemployment benefits until September 5, 2021. See, e.g., id. § 9021. It also supplemented unemployment benefits for recipients by six hundred dollars a week from March 2020 until July 31, 2020, and three hundred dollars a week from December 26, 2021 until September 5, 2021. See Id. § 9023.
New York City's Severance Law, Int. No. 2397-2021, was introduced on September 9, 2021, and signed into law on October 5, 2021. (See Compl. ¶ 26.) It applies only to hotels that had at least a hundred rooms on March 1, 2020, see Severance Law, § 1, and only to hotels that had a “closure” or a “mass layoff” sometime after March 1, 2020, see Id. A “closure” generally means “the closure of a hotel to the public.” Id. A “mass layoff” generally means a “reduction in force” of “75 percent or more of the employees engaged in hotel service” during “any 30-day period.” Id.
The Severance Law benefits “covered hotel service employee[s]” at such hotels - employees who were “employed by such hotel on March 1, 2020”; had been employed at the time for at least a year “to perform hotel service”; were not at the time “managerial, supervisory or confidential employee[s] and did not otherwise exercise control over the management of such hotel”; and were “laid off after March 1, 2020 due to a closure or a mass layoff.” Ibid.
The Severance Law directs “hotel employer[s]” at such hotels to “provide to each covered hotel service employee $500 in severance pay for each week, after [October 11, 2021, ] that such employee remains laid off, ” for up to 30 weeks. Id. § 2(a). That pay is offset, however, by “any severance or similar pay provided or owed for [those] week[s] to such employee by the hotel employer.” Id. § 2(b). It must be given “within five days after the end of each week.” Id. § 2(c).
The Severance Law provides that a covered hotel need not pay such severance once the covered hotel service employee is “recalled.” Id. § 3(b). Further, a hotel that “experienced a closure” need not pay such severance once it “reopens to the public and has recalled 25% or more of its employees employed as of March 1, 2020.” Id. Finally, a hotel that “has closed permanently and has converted or is in the process of converting to an alternate use” need not pay such severance so long as “every covered hotel service employee at such hotel is offered severance pay specifically for such conversion in an amount that equals no less than pay for 20 days per year of service, at the same rate that such employee is paid for paid days off.” Id. § 3(a).
Where a hotel must pay such severance, any “covered hotel service employee who has not received severance pay . . . may bring an action . . . against a hotel employer” in a New York State Supreme Court. See Id. § 4(a). If a violation is found, the court “shall award . . . twice the amount of severance pay owed . . . and such employee's reasonable attorney's fees and costs.” Id. § 4(b).
The law expires on June 1, 2022. See Id. § 5.
Plaintiff RHC Operating LLC owns the Roosevelt Hotel. (See Compl. ¶ 10.) On November 10, 2021, Plaintiff filed this action against the City of New York, Mayor Bill De Blasio, and the New York City Council Members who voted for the Severance Law. (See Compl. at 1.) The complaint asserts that the Severance Law is preempted by the Employee Retirement Income Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., , ) and the National Labor Relations Act of 1935 (“NLRA”), 29 U.S.C. § 151 et seq., .) It also asserts that the law violates the Contracts Clause (see Compl. ¶¶ 101- 114, 148-153, ) the Due Process Clause (see Compl. ¶¶ 115-130, 154-159, ) and the Equal Protection Clause of the United States Constitution, .) Finally, Plaintiff asserts that the Severance Law is preempted under state law by New York's comprehensive schemes for regulating unemployment benefits, see N.Y.L.L. §§ 550-51; and labor relations, see N.Y.L.L. § 700. (See Compl. ¶¶ 92-100, 144-147.)
Plaintiff moves for a preliminary injunction to “stop Defendants from enforcing” the Severance Law. (Dkt. No. 19 (“Application for Preliminary Injunction”) at 1.) The motion primarily relies on “the allegations made in the Complaint, ” which includes legal argument (id. at 4; see, e.g., Compl. ¶¶ 59-68), and a brief supplemental memorandum of law (see Dkt. No. 30.)
The Hotel Association of New York City (“HANYC”), which has filed a parallel lawsuit, has also filed a memorandum in support of the motion for preliminary injunction as an interested party. (See 21-CV-8321, Dkt. No. 23.)
Federal Rule of Civil Procedure 65 authorizes a court to issue a preliminary injunction. Such injunctions are “never awarded as of right.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). Rather, “a preliminary injunction is an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion.” New York by James v. Griepp, 11 F.4th 174, 177 (2d Cir. 2021) (quoting 11A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 2948 (3d ed. 2021)). Where, as here, “a preliminary injunction will affect government action taken in the public interest pursuant to a statute or regulatory scheme, the moving party must demonstrate (1) irreparable harm absent injunctive relief, (2) a likelihood of success on the merits, and (3) public interest weighing in favor of granting the injunction.” Kane v. De Blasio, 19 F.4th 152, 163 (2d Cir. 2021) (quoting Agudath Isr. of Am. v. Cuomo, 983 F.3d 620, 631 (2d Cir. 2020)).
The Court considers the merits of each of Plaintiff's federal claims, ultimately concluding that it has not shown a likelihood of success on any federal claim.
ERISA mandates that employers use “certain oversight systems and other standard procedures” to make “benefits promised by an employer more secure.” Rutledge v Pharm. Care Mgmt. Ass'n, 141 S.Ct. 474, 480 (2020). To that end, ERISA aims to have employers “establish a uniform administrative scheme [to] provide[] a set of standard procedures to guide processing of claims and disbursement of benefits.” Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987). Accordingly, ERISA “ensure[s] that plans and plan sponsors [are] subject to a uniform body of benefits law.” Rutledge, 141 S.Ct. at 480. The Act “supersede[s] any and all State laws insofar as they . . . relate to any employee benefit plan, ” 29 U.S.C. § 1144(a), including state statutes “that obligate[] an employer to establish an employee benefit...
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