Samiento v. World Yacht Inc.

• Decision Date: 14 February 2008
• Docket Number: No. 17.,17.
• Citation: 883 N.E.2d 990,10 N.Y.3d 70
• Parties: Arnel SAMIENTO et al., Appellants, v. WORLD YACHT INC. et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

883 N.E.2d 990

10 N.Y.3d 70

Arnel SAMIENTO et al., Appellants, v. WORLD YACHT INC. et al., Respondents.

No. 17.

Court of Appeals of New York.

February 14, 2008.

Law Office of Steven M. Sack, New York City (Scott A. Lucas of counsel), for appellants.

Kauff McClain & McGuire LLP, New York City (Dennis A. Lalli and J. Patrick Butler of counsel), for respondents.

Andrew M. Cuomo, Attorney General, New York City (Barbara D. Underwood, Michelle Aronowitz, Jennifer S. Brand, Sasha Samberg-Champion, Seth Kupferberg and Donya Fernandez of counsel), and Maria Colavito for Attorney General of the State of New York and another, amici curiae.

McNamee, Lochner, Titus & Williams, PC, Albany (David J. Wukitsch of counsel), for New York State Restaurant Association, amicus curiae.

Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York City (Marc Falcone of counsel), and David A. Colodny for Urban Justice Center and others, amici curiae.

OPINION OF THE COURT

CIPARICK, J.

In Bynog v. Cipriani Group, 1 N.Y.3d 193, 770 N.Y.S.2d 692, 802 N.E.2d 1090 (2003), we left open the question as to whether Labor Law § 196-d, which forbids an employer from retaining any part of a gratuity or "any charge purported to be a gratuity" for an employee applies only to a voluntary gratuity or tip presented by a customer or whether it may also apply to a service charge that is held out to the customer as a substitute for a tip. We conclude that a charge that is not a voluntary payment may be a "charge purported to be a gratuity" within the meaning of the statute.

As alleged in the complaint, plaintiffs are former and present restaurant servers who claim their employers violated Labor Law § 196-d by failing to properly remit the money collected as either service charges, gratuities included within the ticket price or automatic gratuities added at the time of purchase of a ticket for three types of dining cruises provided by defendants: banquet cruises, general public dining and special events cruises. All of the dining cruises take place in New York harbor on boats either owned and/or operated by defendants. Banquet cruises are private events which involve either individual or corporate patrons that have contracted with defendants to charter an entire vessel for celebratory, ceremonial, charitable or corporate purposes. General public dining cruises are attended by members of the general public who purchase individual tickets either from defendants directly or from designated travel and tour operators; as to these cruises, plaintiffs' complaint is limited to charges paid by customers in the latter category. Special event dining cruises are held on major holidays, such as July 4th and New Year's Eve, and are similar to the general public dining cruises in that tickets are available to the general public; however, tickets for special event cruises are sold at a significantly higher price. Meals and drinks are served at all three types of cruises. Plaintiffs characterize the meals and drinks provided on these cruises as luxury dining in which customers would expect to pay a gratuity of between 15% to 20%. Defendants pay their employee waitstaff an hourly wage which varies according to the type of cruise. Tips are allowed although are seldom collected, allegedly because patrons believe the tip is included in the price of the cruise.

Plaintiffs' complaint asserts seven causes of action. The first cause of action alleges World Yacht¹ violated Labor Law § 196-d by withholding gratuities from its waitstaff with respect to all three types of cruises. In relation to defendants' banquet cruises, plaintiffs assert that defendants told inquiring customers that the 20% service charge is remitted to defendants' waitstaff as the gratuity, but then failed to distribute any amount of the service charge to their waitstaff. Plaintiffs further argue that defendants should be precluded from treating the 20% banquet service charge as anything other than a gratuity because defendants presented banquet patrons with bills which segregated and excluded the banquet service charge from other banquet charges thereby treating the banquet service charge like a gratuity for sales tax purposes, and presumably for income tax purposes as well. As to the general public dining cruises (to the extent customers come through travel and tour operators) and special event cruises, plaintiffs assert that World Yacht manipulated the custom of tipping by representing to the customer that the gratuity was included in the ticket price but then only remitting to its employees a gratuity of between 4% to 7%.

Plaintiffs' second cause of action alleges that World Yacht violated General Business Law § 349 by (1) misrepresenting to its banquet customers that the 20% service charge would be remitted to the waiters, (2) misrepresenting to its general public dining cruise patrons that the ticket price included the gratuity and (3) misrepresenting to its special event patrons that upon purchasing a ticket for a special event cruise, an automatic gratuity is added to the price of the ticket at the time of purchase. Plaintiffs' third cause of action alleges defendants were unjustly enriched by wrongfully retaining gratuities meant for their waitstaff Plaintiffs' remaining causes of action alleging violations of federal and state wage and labor laws are not relevant to this appeal. Defendants moved for an order pursuant to CPLR 3211(a)(7) to dismiss plaintiffs' first three causes of action for failure to state a claim. Supreme Court granted, in part, defendants' motion by dismissing plaintiffs' General Business Law § 349 action in its entirety, and relying on the Appellate Division's decision in Bynog v. Cipriani Group, 298 A.D.2d 164, 748 N.Y.S.2d 9 (1st Dept 2002), affd. as mod. 1 N.Y.3d 193, 770 N.Y.S.2d 692, 802 N.E.2d 1090 (2003), dismissed that portion of plaintiffs' Labor Law § 196-d cause of action which alleged defendants failed to remit the 20% service charge collected at banquet cruises. The Appellate Division unanimously modified, on the law, dismissing plaintiffs' unjust enrichment claim and the remainder of the first cause of action holding that special event and public dining patrons "paid a mandatory service charge that was not in the nature of a voluntary gratuity, and thus the failure to remit any of this charge to the waitstaff did not constitute a violation of section 196-d, notwithstanding defendants' treatment of the charge for sales or income tax purposes, and the fact that certain patrons believed the charge to be in the nature of a gratuity" (38 A.D.3d 328, 328-329, 833 N.Y.S.2d 2 [2007]) and otherwise affirmed. The Appellate Division certified the following question: "Was the order of the Supreme Court, as modified by the decision and order of this Court, properly made?" We answer the certified question in the negative and hold that plaintiffs sufficiently pleaded a cause of action for violation of Labor Law § 196-d.

In relation to gratuities, Labor Law § 196-d requires that:

"No 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."

Labor Law § 196-d further states in its last sentence that:

"Nothing in this subdivision shall be construed as affecting . . . practices in connection with banquets and other special functions where a fixed percentage of the patron's bill is added for gratuities which are distributed to employees, nor to the sharing of tips by a waiter with a busboy or similar employee."

In Bynog v. Cipriani Group, 1 N.Y.3d 193, 196, 770 N.Y.S.2d 692, 802 N.E.2d 1090 (2003) we held "that because plaintiffs were independent contractors and not employees of the defendants, they [we]re not entitled to recover [service charge] payments." However, we "reserve[d] judgment as to whether those waiters would be entitled to a share of [the] service charge under Labor Law § 196-d if [the waitstaff] were employees" (id. at 199 n. 4, 770 N.Y.S.2d 692, 802 N.E.2d 1090). On this appeal plaintiffs, supported by the New York State Attorney General and the New York State Department of Labor (NYSDOL), assert defendants violated Labor Law § 196-d by informing their banquet patrons that the 20% service charge was waitstaff's tip. Plaintiffs further assert that World Yacht violated Labor Law § 196-d by telling its travel and tour patrons as well as its special events patrons that a gratuity was included within the ticket price for the cruise.

Defendants assert that in order to constitute a gratuity, within the purposes of Labor Law § 196-d, a payment must be voluntary and not mandatory and that the payments here were mandatory. In Weinberg v. D-M Rest. Corp., 53 N.Y.2d 499, 507, 442 N.Y.S.2d 965, 426 N.E.2d 459 (1981), we quoted with approval the Arizona Supreme Court's determination in Beaman v. Westward Ho Hotel Co., 89 Ariz. 1, 4-5, 357 P.2d 327, 329 (1960) that "[a] tip is in law, if not always in fact, a voluntary payment." We also cited, with approval, Peoria Hotel Co. v. Illinois Dept. of Revenue, 87 Ill.App.3d 176, 178-179, 42 Ill.Dec. 473, 408 N.E.2d 1182, 1184 (1980) which held that a fixed percent gratuity charge added to banquet customers' bills was really a mandatory charge.

We have stated that "[w]hen presented with a question of statutory interpretation, our primary consideration is to ascertain and give effect to the intention of the Legislature" (Matter of DaimlerChrysler Corp. v. Spitzer, 7 N.Y.3d 653, 660, 827 N.Y.S.2d 88, 860 N.E.2d 705 [2006] [internal quotation marks and citation omitted]). "The language of a statute is generally construed according to its natural and most obvious sense . . . in accordance with its ordinary and accepted meaning, unless the Legislature by definition or from the rest of the context of the...