Xue Ming Wang v. Abumi Sushi Inc.

• Decision Date: 14 August 2017
• Docket Number: 1:15–cv–9860–GHW
• Parties: XUE MING WANG, individually and on behalf of all other employees similarly situated, Plaintiff, v. ABUMI SUSHI INC. d/b/a Abumi Sushi, Qing Zhong Li, Chen Chao Zhao, John Doe, and Jane Doe # 1–10, Defendants.
• Court: U.S. District Court — Southern District of New York

262 F.Supp.3d 81

XUE MING WANG, individually and on behalf of all other employees similarly situated, Plaintiff,

v.ABUMI SUSHI INC. d/b/a Abumi Sushi, Qing Zhong Li, Chen Chao Zhao, John Doe, and Jane Doe # 1–10, Defendants.

1:15–cv–9860–GHW

United States District Court, S.D. New York.

Signed August 14, 2017

Keli Liu, Marisol Santos, William Michael Brown, Jian Hang, Hang & Associates, PLLC, Flushing, NY, for Plaintiff.

Eugene Kroner, Michael Aaron Brand, Vincent Wong, Vincent Wong, Law Offices, New York, NY, for Defendants.

OPINION AND ORDER

GREGORY H. WOODS, United States District Judge

Plaintiff Xue Ming Wang brings this action for violations of the Fair Labor Standards Act ("FLSA"), the New York Labor Law ("NYLL"), and New York General Business Law § 349 (" § 349") in connection with his employment as a delivery worker at a Japanese restaurant located at 209 East 26th Street in Manhattan between December 10, 2013 and December 15, 2015. In June 2015, former owner 1 Chimi Sushi Inc. sold the assets of the restaurant to Defendant Abumi Sushi Inc. Defendant Qing Zhong Li is the owner of Abumi Sushi Inc. None of the remaining defendants have appeared in this action.

Both Plaintiff and the appearing Defendants have filed motions for partial summary judgment on the issue of successorship liability—that is, whether the appearing Defendants can be held liable for claims pre-dating the June 2015 asset sale, when they were not Plaintiff's "employer" within the meaning of the FLSA or NYLL, as successors to the previous owner's liabilities. For the reasons described below, the Court concludes that they cannot. In this case, the question turns largely on whether the appearing Defendants had "notice" of their predecessors' alleged wage and hour violations prior to the sale. In concluding that they did not, the Court rejects Plaintiff's expansive view of constructive notice, which would impute notice of a predecessor's violations of law on innocent purchasers whenever those violations could have been discovered through the exercise of due diligence. Such a rule would effectively create a duty of due diligence, which in the Court's view should be imposed by Congress, or at least the Second Circuit, in the first instance. Accordingly, Defendants' motion is GRANTED, and Plaintiff's motion is DENIED.

I. BACKGROUND¹

Plaintiff Xue Ming Wang was employed as a delivery worker at a Japanese restaurant located at 209 East 26th Street in Manhattan from December 10, 2013 until December 15, 2015 (the "Restaurant"). Defs.' Local Rule 56.1 Counterstatement (ECF No. 55) ("Defs.' 56.1") ¶ 1.² Prior to June 2015, the restaurant was owned and operated by non-parties 1 Chimi Sushi Inc. ("1 Chimi") and Liang Zhang. Id. ¶ 3. On June 2, 2015, the assets of the restaurant were sold by 1 Chimi to Defendant Abumi Sushi Inc. ("Abumi") and its owner, Defendant Qing Zhong Li ("Li," and together with Abumi, the "Appearing Defendants"). Id. ; Pl.'s Local Rule 56.1 Counterstatement (ECF No. 52) ("Pl.'s 56.1").³ Li had learned that 1 Chimi was selling the Restaurant from the friend of a former employee. Id. ¶ 27. In negotiating the purchase, Li dealt primarily with the Restaurant's then-manager, whose nickname was Bui Di. Id. ¶ 29. Li does not personally know Liang Zhang and never had any contact with Zhang until the day of the closing. Id. ¶ 28.

The sale of the Restaurant was accomplished pursuant to a written agreement entitled "Contract for Sale of Business" (the "Agreement"). Decl. of Vincent Wong ("Wong Decl."), Ex. A. The Agreement describes the subject matter of the sale as follows:

The Transferor agrees to sell to the Transferee and the Transferee agrees to buy the following described business: Japanese Restaurant located at: 207 E. 26th Street, New York, NY 10010 including the stock in trade, fixtures, equipment, accounts receivable, contract rights, lease, good will, licenses, rights under any contract for telephone service or other rental, maintenance or use of equipment, machinery and fixtures at said premises, more particularly described in Schedule A hereto attached, free and clear of any debts, mortgages, security interests or other liens or encumbrances except as herein stated.

Id. ¶ 1. Pursuant to Schedule A, the "[p]roperty to be [t]ransferred" was: "All furniture, fixtures, equipment, chattels and personal properties at the Japanese Restaurant located at: 207 E. 26th Street, New York, NY 10010." Id. at p. 3. The Agreement does not contain an assumption of any liabilities, other than "full performance of the existing lease," which was assigned to Abumi in connection with the sale. Id. ¶ 10. In a rider to the Agreement, 1 Chimi Sushi provided a representation and warranty that "the business sold herein is being operated in accordance with all laws, ordinances and rules affecting said business." Id. at p. 4.

The cross-motions currently before the Court only concern liability for FLSA, NYLL, and § 349⁴ violations alleged to have occurred during the period of time prior to the June 2, 2015 sale of the Restaurant—that is, before the Appearing Defendants owned and operated the Restaurant (the "Pre–Sale Period"). Defendants dispute or otherwise challenge some of Plaintiff's assertions regarding the violations that occurred during the Pre–Sale Period. At the very least, however, it is undisputed for purposes of these motions that Plaintiff worked more than 40 hours per week during the Pre–Sale Period, and that 1 Chimi and Zhang paid him a fixed salary in cash regardless of the number of hours he worked. Defs.' 56.1 ¶¶ 18, 20. It is also undisputed that the Appearing Defendants had no knowledge of 1 Chimi's wage and hour practices, including how much 1 Chimi and Zhang paid Plaintiff and their other employees. Id. ¶ 34.

II. PROCEDURAL HISTORY

Plaintiff filed this action on December 17, 2015 against ABC Corp. d/b/a Abumi Sushi, Abumi Sushi Inc. d/b/a Abumi Sushi, Qing Zhong Li, Cheng Chao Zhao, and John Doe and Jane Doe # 1–10, asserting claims for unpaid minimum wages, unpaid overtime, unpaid spread-of-hours premium, failure to provide paystubs and time-of-hiring wage notices, failure to provide reimbursement for expenses relating to tools of the trade, and willful filing of fraudulent information returns. ECF No. 1. Although the action was filed as a putative collective and class action, it has proceeded solely on an individual basis.

The Appearing Defendants answered the complaint on January 19, 2015. ECF No. 9. On May 24, 2016, Plaintiff filed an amended complaint, removing ABC Corp. d/b/a Abumi Sushi from the list of defendants and adding 1 Chimi and Zhang. ECF No. 15. The Appearing Defendants filed an answer to the amended complaint on June 23, 2016, as well as crossclaims against all other defendants for contribution and indemnification.⁵ ECF No. 19. On September 20, 2016, Plaintiff voluntarily dismissed his claims against 1 Chimi and Zhang without prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i). ECF No. 23.

After several extensions from the Court, discovery in this matter closed on November 1, 2016.⁶ See ECF No. 26. On that date, the Appearing Defendants filed a letter requesting a pre-motion conference to discuss an anticipated motion for partial summary judgment as to all claims predating the June 2, 2015 sale "for the very simple reason that appearing Defendants were not and could not have been Plaintiff's employer before that date." ECF No. 27. On November 8, 2016, Plaintiff filed a response letter arguing that the Appearing Defendants should be held liable for violations during the Pre–Sale Period under a federal common-law doctrine of successorship liability known as the "substantial continuity" doctrine. ECF No. 30. The Court held a pre-motion conference on November 10, 2016, and the instant cross-motions for summary judgment resulted.

III. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see also Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ("[S]ummary judgment is proper ‘if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ " (quoting former Fed. R. Civ. P. 56(c) )).

The party moving for summary judgment must first demonstrate the absence of any genuine dispute of material fact. Holcomb v. Iona Coll. , 521 F.3d 130, 137 (2d Cir. 2008) (citing Celotex , 477 U.S. at 323–24, 106 S.Ct. 2548 ). If the burden of proof at trial would fall on the movant, that party's "own submissions in support of the motion must entitle it to judgment as a matter of law." Albee Tomato, Inc. v. A.B. Shalom Produce Corp. , 155 F.3d 612, 618 (2d Cir. 1998). If, on the other hand, "the burden of proof at trial would fall on the nonmoving party, it ordinarily is sufficient for the movant to point to a lack of evidence to go to the trier of fact on an essential element of the nonmovant's claim." Cordiano v. Metacon Gun Club, Inc. , 575 F.3d 199, 204 (2d Cir. 2009) (citing Celotex Corp. , 477 U.S. at 322–23, 106 S.Ct. 2548 ).

If the moving party meets its burden, the nonmoving party "must come forward with ‘specific facts showing that there is a genuine issue for trial’ " in order to avoid summary judgment. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting former Fed. R. Civ. P. 56(e) ). "The mere existence of a scintilla of evidence in support of the [non-movant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-movant]." Anderson , 477 U.S. at 252, 106 S.Ct. 2505. Moreover, the non-movant "must do more than simply show that...