Gortat et al v. Capala Brothers, Inc. et al, No. 1:2007cv03629 - Document 262 (E.D.N.Y. 2011)
Court Description: ORDER denying 239 , 261 Motion for Summary Judgment; granting 211 Motion to Amend/Correct/Supplement; granting 227 Motion to Amend/Correct/Supplement. For the foregoing reasons, it is hereby ordered that (1) the counter-defendants' motion for summary judgment is DENIED; (2) plaintiffs' motion for leave to amend the complaint is GRANTED; and (3) defendants' motion to amend the notice of exclusion is GRANTED. Ordered by Senior Judge I. Leo Glasser on 12/30/2011.
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Gortat et al v. Capala Brothers, Inc. et al Doc. 262 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ------------------------------------------------x MIROSLAW GORTAT, et al. MEMORANDUM AND ORDER Plaintiffs, 0 7 Civ. 3629 (ILG) (SMG) -v.CAPALA BROTHERS, INC., et al. Defendants. ------------------------------------------------x GLASSER, Senior United States District J udge: On February 13, 20 0 9, plaintiffs Miroslaw Gortat, Grzegorz Drelich, Henryk Bienkowski, Miroslaw Filipkowski, Artur Lapinski, J an Swaltek, Edm und Kisielewicz, Artur Kosiorek, and Henryk Stoklosa (“plaintiffs”), on behalf of them selves and others sim ilarly situated in this collective and class action, filed an am ended com plaint against their form er em ployer defendant Capala Brothers, Inc. (“Capala Brothers”), a construction services com pany, and its shareholder officers, Robert and Pawel Capala (together “defendants”). Am ended Com plaint dated February 13, 20 0 9 (Dkt. No. 10 4). Plaintiffs allege breach of contract and violations of (1) New York’s m inim um wage act, N.Y. Lab. Law § 650 et seq.; (2) the Fair Labor Standards Act, 29 U.S.C. § 20 1 et seq. (“FLSA”); and (3) the Portal-to-Portal Act, 29 U.S.C. § 254(a)(1)-(2). Am . Com pl. ¶¶ 4457. Plaintiffs filed their original complaint on August 29, 20 0 7, and defendants on October 18, 20 0 7 filed their answer, along with counterclaim s against plaintiffs Gortat, Lapinski, Filipowski, Swaltek, and Bienkowski (the “counter-defendants”) alleging claim s for conversion, negligence, tortious interference with contract, and breach of fiduciary duty. Answer & Counterclaim s dated Oct. 17, 20 0 7 (“Answer & Countercl.”) 1 Dockets.Justia.com (Dkt. No. 6). The Court on Novem ber 12, 20 0 8 granted the m otion to dism iss defendants’ claim s for negligence, breach of fiduciary duty, and tortious interference with contract but granted defendants leave to replead their tortious interference claim . See Gortat v. Capala Bros., Inc., 585 F. Supp. 2d 372, 376-77 (E.D.N.Y. 20 0 8) (“Gortat I”). Defendants did so on Decem ber 8, 20 0 8. Am . Third Counterclaim filed Dec. 8, 20 0 8 (“Third Countercl.”) (Dkt. No. 69). On May 5, 20 0 9, the Court granted the counter-defendants’ m otion for sum m ary judgm ent on a portion of the first counterclaim pertaining to conversion of a logbook but left intact defendants’ counterclaim for conversion of tools belonging to Capala Brothers. Gortat v. Capala Bros., Inc., 257 F.R.D. 353, 369 (E.D.N.Y. 20 0 9) (“Gortat II”). Accordingly, defendants’ counterclaim s for conversion and for tortious interference rem ain outstanding. Currently before the Court are (1) the counter-defendants’ m otion for sum m ary judgm ent on these claim s; (2) plaintiffs’ m otion for leave to am end its com plaint to specify that the class will seek to recover liquidated damages on the New York Labor Law claim s; and (3) defendants’ m otion to am end the class action notice of exclusion to include three additional people. For the following reasons, the counter-defendants’ m otion for sum m ary judgm ent is denied; plaintiffs’ m otion for leave to am end is granted; and defendants’ m otion to am end the notice of exclusion is granted. I. BACKGROU N D The factual background and procedural history to this action is set out m ore fully in the Court’s previous decisions, see, e.g., Gortat II, 257 F.R.D. at 356-57; Gortat I, 585 F. Supp. 2d at 374-75, and fam iliarity with the facts underlying this action is assum ed. 2 The Court will recite only those facts that are necessary for purposes of deciding this m otion. Capala Brothers em ployed plaintiffs as construction workers or forem an until early 20 0 7 when each of them decided to leave the com pany. Plaintiffs’ Local Rule 56.1 Statem ent (“Pls.’ 56.1 Statem ent”) ¶¶ 1-2 (Dkt. No. 240 ). Defendants allege that counter-defendants Bienkowski, Gortat, and Lapinski failed to return tools belonging to Capala Brothers upon their departure from the com pany, Answer & Countercl. ¶ 40 , and have subm itted evidence from Robert Capala and his brother, Piotr, substantiating this allegation. Defendants’ Opposition to Plaintiffs’ Motion for Sum m ary J udgm ent dated J une 13, 20 11 (“Defs.’ Opp’n”) Ex. E (Robert Capala Dep.), at 48-51; id. Ex. C (Piotr Capala Decl.) ¶ 4. Plaintiffs dispute this allegation and have subm itted evidence that Bienkowski, Gortat, and Lapinski did indeed return the tools at the end of their em ploym ent. Pls.’ 56.1 Statem ent ¶ 32. Defendants also allege that after leaving Capala Brothers the counter-defendants threatened defendants’ em ployees with physical harm if they continued their em ploym ent at Capala Brothers or aided defendants in any respect with this ligation. Third Countercl. ¶¶ 50 -52. This interference, defendants aver, caused their employees to suffer low m orale and im paired their productivity, ultim ately causing dam age to Capala Brothers through the loss of contracts that it would have obtained had the em ployees been m ore productive. Id. ¶ 59. Defendants have provided the Court with evidence that they contend supports their claim s. For exam ple, Oldrich Hum polik (“Hum polik”), a Capala Brothers forem an, testified that counter-defendant Swaltek on Thanksgiving Day in 20 0 7 physically threatened him and told him not to aid defendants 3 in this litigation. Plaintiffs’ Motion for Sum m ary J udgm ent dated Mar. 11, 20 11 (“Pls.’ Mot.”) Ex. 20 (Deposition of Oldrich Hum polik on J une 8, 20 0 9), at 33-38. Hum polik also states that plaintiffs m ade harassing calls to him and physically threatened him . Id. Ex. 9 (Hum polik Aff.) ¶ 35. While the counter-defendants acknowledge that Swaltek threatened Hum polik on Thanksgiving Day in 20 0 7, they em phasize that Hum polik also stated that he did not take the threat seriously and that both he and Swaltek had been drinking alcohol at the tim e of the threat. Pls.’ 56.1 Statem ent ¶ 5; Plaintiffs’ Mem orandum of Law in Support of Sum m ary J udgm ent dated Mar. 11, 20 11 (Dkt. No. 243) (“Pls.’ Mem .”) at 9. J anusz Drozdal, another Capala Brothers forem an, also com plained of threats of physical violence by counter-defendants Swaltek and Lapinski. Pls.’ Mot. Ex. 11 (Drozdal Aff.) ¶ 36 (“When I refused to join the case against the Capala [sic], I was inform ed that if I ever testify in their case, they told m e that they have connections with afro-Am ericans who would break m y arm s and legs and I would be found in the car trunk.”); Pls.’ Mot. Ex. 19 (Drozdal Dep.), at 10 3. With respect to the injury caused by the counter-defendants’ alleged threats to Capala Brothers’ em ployees, defendants have provided the Court with evidence that their em ployees suffered low m orale and decreased productivity such that jobs that typically would take them 30 days to com plete instead took them 45 days. Defs.’ Opp’n Ex. E (Robert Capala Dep.) at 29-30 , 249; Defs. Opp’n Ex. C (Piotr Capala Decl.) ¶ 5. Plaintiffs respond that this evidence is incredible and that the Court should disregard it because (1) no affiant or deponent rem em bered having worked m ore slowly as a result of any alleged threats; and (2) defendants have failed to offer to the Court any objective evidence measuring m orale or work pace. Pls.’ Mem . at 19. 4 II. D ISCU SSION A. Mo tio n fo r Su m m ary Ju d gm e n t 1. Le gal Stan d ard Sum m ary judgm ent is appropriate “if the m ovant shows that there is no genuine dispute as to any m aterial fact and the m ovant is entitled to judgm ent as a m atter of law.” Fed. R. Civ. P. 56(a). “‘An issue of fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonm oving party. A fact is m aterial if it m ight affect the outcom e of the suit under the governing law.’” Fincher v. Depository Trust & Clearing Corp., 60 4 F.3d 712, 720 (2d Cir. 20 10 ) (quoting Roe v. City of Waterbury, 542 F.3d 31, 35 (2d Cir. 20 0 8)). The m oving party bears the burden of establishing the absence of any genuine issue of m aterial fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 10 6 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). When the burden of proof at trial would fall on the nonm oving party, it ordinarily is sufficient for the m ovant to point to a lack of evidence to go to the trier of fact on an essential elem ent of the nonm ovant’s claim . Id. at 322-23. To defeat a m otion for sum m ary judgm ent, the non-m oving party “‘m ust do m ore than sim ply show that there is som e m etaphysical doubt as to the m aterial facts,’” Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir. 20 11) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 10 6 S. Ct. 1348, 89 L. Ed. 2d 538 (1986)), and cannot “‘rely on conclusory allegations or unsubstantiated speculation.’” Id. (quoting Fed. Deposit Ins. Corp. v. Great Am . Ins. Co., 60 7 F.3d 288, 292 (2d Cir. 20 10 )). A court deciding a m otion for sum m ary judgm ent m ust “‘construe the facts in the light m ost favorable to the non-m oving party and m ust resolve all am biguities and draw 5 all reasonable inferences against the m ovant.’” Brod v. Om ya, Inc., 653 F.3d 156, 164 (2d Cir. 20 11) (quoting William s v. R.H. Donnelley Corp., 368 F.3d 123, 126 (2d Cir. 20 0 4)). Moreover, “‘[c]redibility determ inations, the weighing of the evidence, and the drawing of legitim ate inferences from the facts are jury functions, not those of a judge.’” Kaytor v. Electric Boat Corp., 60 9 F.3d 537, 545 (2d Cir. 20 10 ) (quoting Reeves v. Sanderson Plum bing Prods., Inc., 530 U.S. 133, 150 , 120 S. Ct. 20 97, 147 L. Ed. 2d 10 5 (20 0 0 )). Counter-defendants m ove for sum m ary judgm ent on defendants’ counterclaim s (1) against them for tortious interference with business relations between defendants and their em ployees; and (2) against counter-defendants Gortat, Lapinski, and Bienkowski for conversion of tools belonging to Capala Brothers. The Court will apply the principles above to each of these claim s in turn. 2 . To rtio u s In te rfe re n ce W ith Bu s in e s s Re latio n s The crux of defendants’ am ended third counterclaim is that the counterdefendants interfered with the em ploym ent of defendants’ at will em ployees by threatening them with physical harm if they continued their em ploym ent for defendants or aided defendants in any respect with this ligation. Third Countercl. ¶¶ 50 -52. This interference, defendants allege, caused their em ployees to suffer from low m orale im pairing their em ployees’ productivity and ultim ately causing dam age to defendants’ business through the loss of contracts that they would have obtained had their em ployees been m ore productive. Id. ¶ 59. “Under New York law, the elem ents of a tortious interference with contract claim are: (a) that a valid contract exists; (b) that a ‘third party’ had knowledge of the contract; 6 (c) that the third party intentionally and im properly procured the breach of the contract; and (d) that the breach resulted in dam age to the plaintiff.” Albert v. Loksen , 239 F.3d 256, 274 (2d Cir. 20 0 1) (quoting Finley v. Giacobbe, 79 F.3d 1285, 1294 (2d Cir. 1996)).1 Where, as here, the relevant em ployees are at will, the nature of the contractual relationship between the em ployees and their em ployer is prospective. See, e.g., Gortat I, 585 F. Supp. 2d at 376 (quoting Sm ith v. Meridian Tech., Inc., 52 A.D.3d 685, 861 N.Y.S.2d 687 (20 0 8)). “As com pared to the tort of tortious interference with contract, ‘[w]here there has been no breach of an existing contract, but only interference with prospective contract rights . . . plaintiff m ust show m ore culpable conduct on the part of the defendant.’”2 Discover, 333 F. Supp. 2d at 86 (quoting NBT Bancorp Inc. v. Fleet/ Norstar Fin. Grp., Inc., 87 N.Y.2d 614, 621, 641 N.Y.S.2d 581 (1996)). Accordingly, in order to sustain a claim of tortious interference with business relations, defendants m ust show that (1) they had a business relationship with a third party (i.e., their em ployees), (2) the counter-defendants interfered with the relationship, (3) the counter-defendants acted for a wrongful purpose or used dishonest, unfair, or im proper m eans; and (4) the interference caused injury to the relationship. See Catskill, 547 F.3d at 132. 1 The parties’ briefs assum e that New York law controls. “Such im plied consent . . . is sufficient to establish choice of law.” See, e.g., Motorola Credit Corp. v. Uzan, 388 F.3d 39, 61 (2d Cir. 20 0 4) (internal quotation m arks om itted). 2 The tort of interference with business relations is also som etim es known as interference with prospective contractual relations or interference with prospective econom ic advantage. Catskill Dev., L.L.C. v. Park Place Entm ’t Corp., 547 F.3d 115, 132 (2d Cir. 20 0 8) (citations om itted); see also Discover Grp., Inc. v. Lexm ark Int’l, Inc., 333 F. Supp. 2d 78, 86 n.3 (E.D.N.Y. 20 0 4) (citation om itted). 7 The counter-defendants m aintain that defendants have failed to establish the third elem ent of this claim and have com e forward with no evidence establishing that they used any im proper m eans or acted with any wrongful purpose to interfere with defendants’ relationships with their em ployees. Pls.’ Mem . at 15-19. The counterdefendants also m aintain that defendants have suffered no dam ages as a result of their alleged interference. Pls.’ Mem . at 19-21. Defendants respond, am ong other things, that the evidence in the record of threats by the counter-defendants against defendants’ em ployees establish disputed issues of m aterial fact as to whether the counterdefendants em ployed wrongful m eans or acted with a wrongful purpose to harm defendants and that therefore sum m ary judgm ent is inappropriate. Defs.’ Mem . at 1117. The Court agrees, and the counter-defendants’ m otion for sum m ary judgm ent on the third am ended counterclaim is therefore denied. Using wrongful or im proper m eans generally am ounts to conduct “that am ount[s] to a crim e or an independent tort,” Carvel Corp. v. Noonan, 3 N.Y.3d 182, 190 , 785 N.Y.S.2d 359 (20 0 4), including “‘physical violence, fraud or m isrepresentation, civil suits and crim inal prosecutions, and som e degrees of econom ic pressure,’” id. at 191 (citing Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 191, 428 N.Y.S.2d 628 (1980 ). Threats also constitute wrongful or im proper m eans. Guard-Life, 50 N.Y.2d at 196. Moreover, as the parties recognize, Carvel intim ates that “extrem e and unfair” econom ic pressure m ay constitute “wrongful m eans” satisfying the third elem ent of tortious interference, 3 N.Y.3d at 192-93, but such pressure would only suffice here if its “sole purpose” was to injure defendants, see Catskill, 547 F.3d at 137; Pls.’ Mem . at 17; Defs.’ Mem . at 15. 8 Sim ilarly, acting with a “wrongful purpose” m eans engaging in conduct for the “sole purpose of inflicting intentional harm on the [defendants].” Catskill, 547 F.3d at 137 (citations om itted). Actions m otivated by econom ic self-interest are not actions taken with a wrongful purpose. Carvel, 3 N.Y.3d at 191 (noting that “[w]here the parties are not [business] com petitors, there m ay be a stronger case that the defendant’s interference with the plaintiff's relationships was m otivated by spite”); see also Sem ple v. Eyeblaster, Inc., No. 0 8 Civ. 90 0 4 (HB), 20 0 9 WL 270 9281, at *4 (S.D.N.Y. Aug. 27, 20 0 9) (“[I]t is well-settled that where a party acts, at least in part, in accordance with its norm al econom ic self-interest, it cannot be found to have acted solely out of m alice for the purpose of a tortious interference claim .”). With respect to wrongful m eans, defendants have subm itted, am ong other pieces of evidence, an affidavit from Drozdal, a Capala Brothers forem an, establishing that counter-defendants Swaltek and Lapinski threatened to have his arm s and legs broken if he testified in this action. Pls.’ Mot. Ex. 11 (Drozdal Aff.) ¶ 36; Pls.’ Mot. Ex. 19 (Drozdal Dep.), at 10 3.3 Defendants have also subm itted deposition testim ony from Hum polik that establishes that Swaltek on Thanksgiving Day 20 0 7 threatened him with physical violence if he in any way aided defendants in this litigation. Hum polik testified as follows: Q. Can you tell us what, if anything, happened . . . for Thanksgiving 20 0 7? 3 Although Drozdal states in his affidavit that Swaltek, Lapinski, and Filipkowski threatened him , Pls.’ Mot. Ex. 11 (Drozdal Aff.) ¶ 36, he testified during his deposition that he “m ay have m ade an error with the nam e contained [in the affidavit]. It wasn’t Filipkowski, but, rather, Swaltek and Lapinski,” Pls.’ Mot. Ex. 19 (Drozdal Dep.), at 10 3. 9 A. Swaltek, J an began to m ake threats that if we say anything against them . Q. Well, so what specific words did Swaltek use? A. That we will regret it, that they will find us. . . . Q. So Mr. Swaltek, just out of the blue, says you will regret it if you testify and so on and so forth, or was there a discussion, if any, about the lawsuit and his working for Capala Brothers? A. Yes, there was a discussion about Capala Brothers, how m uch we are earning and what we do. . . . Q. What did you understand them to be, who specifically? A. Meaning he wasn’t talking in one person, he was talking in plural. I’ll give you an exam ple. He would say we will show you. Q. Did you take it as a physical threat? A. Yes. Q. Were you afraid? A. When he said it, I was not afraid. I didn’t take it to heart. . . . Pls.’ Mot. Ex. 20 (Deposition of Oldrich Hum polik on J une 8, 20 0 9), at 33-38. Physical threats of violence such as those against Hum polik and Drozdal constitute wrongful or im proper m eans. Guard-Life, 50 N.Y.2d at 196. Additionally, a reasonable jury could draw the inference that Swaltek’s use of the plural in his statem ent to Hum polik referred to the other counter-defendants in this action. Hum polik’s statem ent that “[plaintiffs] m ade harassing calls and threatened . . . that they would hurt [him ]” also could support such an inference. Pls.’ Mot. Ex. 9 10 (Hum polik Aff.) ¶ 35. Though it is true, as the counter-defendants argue, that both Hum polik and Swaltek had been drinking alcohol when Swaltek threatened Hum polik and that Hum polik acknowledged during his deposition that “people say all kinds of things when drunk,” id. Ex. 20 at 39, the weight to accord the evidence of Swaltek’s threats in light of his intoxication is a question for the jury, not for the Court. The counter-defendants also argue that the proffered evidence does not create an issue for the jury because “Defendants m ust establish that [the counter-defendants’] alleged threats were designed to force their em ployees to quit their jobs with Defendants not m erely to refrain from testifying against Plaintiffs.” Pls.’ Reply at 5. However, this is not the test for tortious interference with business relations; defendants need only establish that the counter-defendants’ interference caused injury to the relevant relationship (here, the relationship between defendants and their em ployees), not necessarily that the injury caused their em ployees to quit.4 See Catskill, 547 F.3d at 132; PPX Enters., Inc. v. Audiofidelity Enters., Inc., 818 F.2d 266, 270 (2d Cir. 1987) (“[A] claim of tortious interference with prospective econom ic advantage usually involves interference with a business relationship not am ounting to a contract, resulting in a breach, or severance of the relationship itself, or at least som e injury to that 4 The cases the counter-defendants rely on in support of their contention are inapposite. Unlike here, each involves an at will em ployee’s suit against a third-party for procuring the em ployee’s discharge through allegedly im proper m eans. The cases m erely reflect application of a narrow exception to the rule that “New York has adam antly refused to allow em ployees to evade the em ploym ent at-will rule and relationship by recasting [a] cause of action in the garb of tortious interference with . . . em ploym ent.” Locksen, 239 F.3d at 274 (citation and internal quotation m arks om itted). Moreover, the fact that it is “extrem ely rare” for em ployers to bring such a claim , Pls.’ Mem . at 9, does not necessarily m ean that it is unavailable to em ployers, and the New York Court of Appeals has not addressed the question. 11 relationship.” (internal citation and quotation m arks om itted) (em phasis added)), abrogated on other grounds by Hannex Corp. v. GMI, Inc., 140 F.3d 194, 20 6 (2d Cir. 1998). Defendants allege that the counter-defendants’ threats caused injury to their relationship with their em ployees that m anifested itself in the form of low em ployee m orale and productivity, ultim ately resulting in dam age to the business through the loss of potential contracting jobs. Am . Countercl. ¶ 59. Defendants have provided the Court with evidence of this loss of m orale sufficient to preclude sum m ary judgm ent on this claim . For exam ple, defendant Robert Capala testified as follows: A. Between 10 of 20 0 7 . . . and between the 12 ’0 8, I find [sic] out som e stuff about the behavior of the plaintiffs, about the connection of the workers which I didn’t know, how it could affect the ability to perform work. I find out that this also included the way that I lost a lot of jobs because they were threatened, so it is also affect [sic] that a lot of jobs which I — which I m ention in this project, like, in the end of the year of 20 0 7 and I believe that the position of the — how the connection between the plaintiffs and other workers who decided to stay with m e and don’t — wanted to go with them , how it affect that they were working slower so I was not able to get the jobs which I was able to take. . . . Defs.’ Opp’n Ex. E (Deposition of Robert Capala on April 22, 20 0 9), at 29-30 (em phasis added). Moreover, during the sam e deposition, Capala also had the following exchange with plaintiffs’ counsel: 12 Q. You are alleging that you lost m oney because of the lower m orale? . . . . A. Every aspect which happened at that tim e [sic] that som e kind of result of m y losses of the way how m y business was going after the plaintiffs left. . . . You can m ake threats, physical things. You can m ake econom ic threats and everything reflected on the way how the workers worked. Id. Ex. E at 249. The im plication of this testim ony is that the counter-defendants’ threats im pacted the perform ance of defendan ts’ em ployees and thus their relationship with defendants. The counter-defendants contend that the Court should disregard this testim ony because it is self-serving and conclusory, but they have provided the Court with no basis to do so. Indeed, Capala’s testim ony is to som e extent buttressed by the sworn statem ents of his brother Piotr, a Capala Brothers forem an, who states as follows: I have personal knowledge that [the counter-defendants] had spread dam aging inform ation . . . that Capala would be destroyed by the plaintiffs through their legal action com m enced in this Court. . . . [S]ince 20 0 7, I have had to supervise incom petent fellow workers who had to be trained on the job, while the remaining form er em ployees did not work to their full potential because of their concerns for the jobs to be [sic] for them available the next day they would show up at Capala. J obs that took 30 days to com plete, instead therefore took 45 days to their successful satisfactory com pletion. Defs.’ Opp’n Ex. C (Piotr Capala Decl.) ¶ 5.5 5 The close fam ily relationship between Piotr and Robert Capala of course raises issues regarding Piotr Capala’s credibility; however, “[c]redibility determ inations . . . are 13 Construing the facts in the light m ost favorable to defendants and drawing all inferences against the counter-defendants, the Court concludes that there is a triable issue of fact concerning whether the counter-defendants used wrongful m eans to injure defendants’ relationship with their em ployees and that therefore sum m ary judgm ent on defendants’ third am ended counterclaim is inappropriate.6 Since the Court concludes that this claim should go to the jury, defendants’ argum ents concerning the counterdefendants’ dam ages—or apparent lack thereof—are prem ature. 3 . Co n ve rs io n o f Co m p an y To o ls Plaintiffs also m ove for sum m ary judgm ent on the rem aining portion of the counterclaim alleging that plaintiffs Gortat, Lapinski, and Bienkowski failed to return tools belonging to Capala Brothers at the end of their em ploym ent there. Answer & Countercl. ¶ 40 . Plaintiffs’ m otion is denied. “‘The tort of conversion is established when one who owns and has the right to possession of personal property proves that the property is in the unauthorized possession of another who has acted to exclude the rights of the owner.’” Gortat II, 257 F.R.D. at 369 (quoting Republic of Haiti v. Duvalier, 211 A.D.2d 379, 384, 626 N.Y.S.2d 472 (1st Dep’t 1995)). jury functions, not those of a judge.” Kaytor, 60 9 F.3d at 545 (citation and internal quotation m arks om itted). 6 In light of this conclusion, the Court need not consider whether there are triable issues of fact concerning whether the counter-defendants acted with the “sole purpose” of injuring defendants in light of the evidence establishing that they wished to “destroy Capala” because Robert and Pawel Capala were “m aking excessive profits.” See, e.g., Defs.’ Opp’n Ex. J J (Hum polik Aff.) ¶ 30 . 14 Here, factual issues exist as to whether Gortat, Lapinski, and Bienkowski are in unauthorized possession of Capala Brothers’ property—the com pany issued tools. Gortat, Lapinski, and Bienkowski apparently claim to have returned their tools to Capala Brothers at the end of their em ploym ent, in accordance with Capala Brothers’ policies. Pls.’ Mot. Ex. 38 (Response to Interrogatory 18) at 2; 7 Pls.’ 56.1 Statem ent ¶ 32 (“All Plaintiffs returned their tools at the end of their em ploym ent.”). Meanwhile, Robert Capala testified during his deposition on Septem ber 22, 20 0 8, that Gortat, Lapinski, and Bienkowski failed to do so. Defs.’ Opp’n Ex. E, at 48-51. Piotr Capala, who was responsible for adm inistering the property room where Capala Brothers kept all of their tools, corroborated his brother’s testim ony, stating that “plaintiffs did not return their borrowed tools belonging to Capala” and that he would have noticed had they done so as the num ber of tools in the room would have “increased by about 150 to 20 0 ” tools. Defs.’ Opp’n Ex. D (Piotr Capala Decl.) ¶ 4.8 Accordingly, whether Gortat, Lapinski, and Bienkowski returned the tools at issue to Capala Brothers is a disputed m aterial fact that precludes sum m ary judgm ent on the rem aining portion of defendants’ first counterclaim . 7 Interrogatory 18 asks plaintiffs, am ong other things, whether they “received any . . . tools under the em ploym ent and whether [they] returned all such tools belonging to the em ployer defendant” after their term ination. Id. Plaintiffs do not respond to this interrogatory (or have sim ply failed to subm it their response to the Court); nevertheless, the Court will accept counsel’s representation that plaintiffs returned their tools after ending their em ploym ent with Capala Brothers. 8 The Court finds unpersuasive plaintiffs’ contention that Piotr Capala’s statem ent is speculative. Pls.’ Reply at 12. As the person who adm inistered the property room at Capala Brothers during the relevant period, Piotr had an am ple basis on which to m ake his statem ent. 15 In sum , for the foregoing reasons, the counter-defendants’ m otion for sum m ary judgm ent on defendants’ first counterclaim and third am ended counterclaim is denied. B. Mo tio n to Am e n d Co m p lain t Plaintiffs next m ove to be relieved from their previous waiver of claim s for liquidated dam ages under New York Labor Law §§ 198(1-a), 663(1).9 Letter to the Court dated Dec. 29, 20 10 (“Pls.’ Dec. 29 Letter”) at 1 (Dkt. No. 227). Although plaintiffs’ am ended com plaint states that plaintiffs seek “liquidated dam ages pursuant to . . . Labor Law § 198,” Am . Com pl. ¶ 57, plaintiffs subsequently waived these dam ages in a hearing before Magistrate J udge Gold on Septem ber 10 , 20 0 9, Pls.’ Dec. 29 Letter Ex. 3, at 19, and the notice of class action that plaintiffs sent to class m em bers pursuant to Fed. R. Civ. P. 23(c)(2) explicitly provided that “[u]nless you exclude yourself from the class, you will have waived . . . liquidated dam ages under New York law.” Notice Pursuant to Fed. R. Civ. P. 23(c)(2) (“Class Notice”) at 4 (Dkt. No. 227-6). The Court construes plaintiffs’ m otion to reinstate their claim for liquidated dam ages as a m otion to am end their com plaint governed by Fed. R. Civ. P. 15. Plaintiffs argue that liquidated dam ages becam e available to them after the Suprem e Court in Shady Grove Orthopedics Associates, P.A. v. Allstate Insurance Co., 130 S. Ct. 1431, 176 L. Ed. 2d 311 (20 10 ), concluded that section 90 1(b) of New York’s Civil and Practice Rules (“C.P.L.R.”)—which bars class action plaintiffs from seeking The relevant provision of Sections 198(1-a) and 663(1) are identical; both provisions allow an em ployee who prevails on a wage claim to recover the full am ount of any underpaym ent, attorney’s fees, prejudgm ent interest, and “unless the em ployer proves a good faith basis to believe that its underpaym ent of wages was in com pliance with the law, an additional am ount as liquidated dam ages equal to one hundred percent of the total am ount” of the wages found to be due. Id. (em phasis added). 9 16 “penalties” such as liquidated dam ages—does not apply to state law class actions filed in federal court. Pls.’ Dec. 29 Letter at 2. Plaintiffs state that they previously waived their claim to these dam ages because Second Circuit authority prior to Shady Grove required them to do so, and that after learning of the decision, they prom ptly inform ed Magistrate J udge Gold and defendants of their desire to revoke their waiver. Id. at 4-5. Defendants oppose plaintiffs’ m otion on several grounds: that (1) Fed. R. Civ. P. 23 is inapplicable to the factual circum stances here; (2) plaintiffs unnecessarily delayed in m aking the m otion to am end, waiting until eight m onths after the Suprem e Court decided Shady Grove and until after the Court had certified the class and authorized the class notice to be sent to class m em bers; and (3) defendants will be prejudiced if the Court grants the m otion as class m em bers who previously opted out of the class m ay subsequently seek to rejoin it. Opposition to Plaintiffs’ Motion to Am end dated J an. 17, 20 11 (“Defs.’ Mot.”) (Dkt. No. 231). 1. Le gal Stan d ard Rule 15 of the Federal Rules of Civil Procedure states that after one am endm ent to which it is entitled as a m atter of course, “a party m ay am end its pleading only with the opposing party’s written consent or the court’s leave. The court should freely give leave when justice so requires.” Fed. R. Civ. P. 15(a)(2). The Suprem e Court and this Circuit have repeatedly stressed that whether to perm it a party to am end its pleading is com m itted to the district court’s discretion. See, e.g., Zenith Radio Corp. v. Hazeltine Res., Inc., 40 1 U.S. 321, 330 , 91 S. Ct. 795, 28 L. Ed. 2d 77 (1971) (citing Fom an v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227 (1962)); Gurary v. Winehouse, 235 F.3d 792, 80 1 (2d Cir. 17 20 0 0 ); Local 80 2, Assoc. Musicians of Greater N.Y. v. Parker Meridien Hotel, 145 F.3d 85, 89 (2d Cir. 1998); Guzm an v. Bevona, 90 F.3d 641, 649 (2d Cir. 1996). Generally, the court m ay deny a m otion to am end for good reason, including futility, bad faith, undue delay, or undue prejudice to the opposing party. Holm es v. Grubm an, 568 F.3d 329, 334 (2d Cir. 20 0 9). In determ ining whether leave to am end should be granted, am ong the “m ost im portant” issues to consider is prejudice to the opposing party. AEP Energy Services Gas Holding Co. v. Bank of Am ., N.A., 626 F.3d 699, 725 (2d Cir. 20 10 ) (internal quotations om itted). “Am endm ent m ay be prejudicial when, am ong other things, it would ‘require the opponent to expend significant additional resources to conduct discovery and prepare for trial’ or ‘significantly delay the resolution of the dispute.’” Id. at 725-26 (quoting State Teachers Ret. Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir. 1981)). 2 . Ap p licatio n o f Stan d ard Plaintiffs’ m otion to am end the com plaint to reinstate their claim for liquidated dam ages pursuant to N.Y. Lab. L. §§ 198(1-a), 663(1) is granted. As a threshold m atter, plaintiffs’ interpretation of Shady Grove is correct. In Shady Grove, the Suprem e Court considered whether C.P.L.R. Section 90 1(b)—which bars class action plaintiffs from seeking “penalties” such as liquidated dam ages—conflicted with Fed. R. Civ. P. 23, a valid rule under the Rules Enabling Act. Shady Grove, 130 S. Ct. 1437.10 The district court had concluded that there was no such conflict as Section 90 1(b) was substantive and therefore applied to class actions brought under New York state law that were filed 10 Section 90 1(b) provides, in relevant part, that “an action to recover a penalty, or m inim um m easure of recovery created or im posed by statute m ay not be m aintained as a class action.” 18 in federal court and certified pursuant to Fed. R. Civ. P. 23. Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 466 F. Supp. 2d 467, 473 (E.D.N.Y. 20 0 6). The Second Circuit affirm ed on appeal. 549 F.3d 137, 143 (2d Cir. 20 0 8) (“Rule 23, fairly construed, is not sufficiently broad to cause a direct collision with CPLR 90 1(b).”). But the Suprem e Court reversed, concluding that Section 90 1(b) does not apply to state law class actions filed in federal court and that in stead Fed. R. Civ. P. 23 governs. Shady Grove, 130 S. Ct. 1436-42; id. at 1442-44 (plurality opinion); id. at 1455-60 (Stevens, J ., concurring in part and concurring in judgm ent).11 Since Rule 23, unlike Section 90 1(b), contains no lim itation regarding “penalties” such as liquidated dam ages, post-Shady Grove, plaintiffs alleging claim s under sections 198 and 663 of New York Labor Law m ay now seek liquidated dam ages in federal court.12 Courts applying this principle consistently allow plaintiffs to am end their 11 Defendants’ contention that Fed. R. Civ. P. 23 is inapplicable to the factual circum stances here is m eritless and not worthy of lengthy discussion. Indeed, J ustice Scalia, the author of the plurality opinion, and J ustice Stevens, the author of a concurring opinion, each explicitly conclude that Fed. R. Civ. 23 applies to state law class actions filed in federal court such as the one in this case. Shady Grove, 130 S. Ct. 1437-38 (plurality opinion) (holding that Rule 23 controls unless Congress has “carved out federal claim s . . . from Rule 23’s reach”); id. at 1448 (Stevens, J ., concurring in part and concurring in judgm ent) (“The New York law at issue, § 90 1(b), is a procedural rule that is not part of New York’s substantive law. Accordingly, I agree with J ustice SCALIA that Federal Rule of Civil Procedure 23 m ust apply in this case.” (internal citation om itted)); see also Holster v. Gatco, Inc., 130 S. Ct. 1575, 1575, 176 L. Ed. 2d 716 (20 10 ) (Scalia, J ., concurring) (“Shady Grove . . . held that, irrespective of Erie, § 90 1(b) does not apply to state-law claim s in federal court because it is validly pre-em pted by Rule 23.”). 12 Contrary to defendants’ argum ent, the liquidated damages provisions of N.Y. Lab. L. §§ 198(1-a), 663(1) clearly constitute “penalties” within the m eaning of Section 90 1(b). See, e.g., Cohen v. Gerson Lehrm an Grp., Inc., 686 F. Supp. 2d 317, 322-23 (S.D.N.Y. 20 10 ) (liquidated damages provision of Section 198(1-a) constitutes penalty 19 pleadings to include claim s for dam ages that were previously barred under section 90 1(b). See Gardner v. W. Beef Props., Inc., No. 0 7 Civ. 2345 (RJ D)(J MA), 20 11 WL 6140 518, at *7 (E.D.N.Y Sept. 26, 20 11), adopted by 20 11 WL 6140 512, at *7 (E.D.N.Y. Dec. 9, 20 11) (m otion to am end com plaint waiving right to punitive dam ages under New York Labor Law granted in light of Shady Grove); Coultrip v. Pfizer, Inc., No. 0 6 Civ. 9952 (J CF), 20 11 WL 1219365, at *4 (S.D.N.Y. Mar. 24, 20 11) (m otion to am end com plaint to add claim for liquidated dam ages granted in light of Shady Grove); Spicer v. Pier Sixty LLC, No. 0 8 Civ. 10 240 (LBS), 20 11 WL 446144, at *3 (S.D.N.Y. Feb. 7, 20 11) (sam e); Pefanis v. Westway Diner, Inc., No. 0 8 Civ. 0 0 2 (DLC), 20 10 WL 3564426, at *6-7 (S.D.N.Y. Sept. 7, 20 10 ) (sam e); McBeth v. Gabrielli Truck Sales, Ltd., 731 F. Supp. 2d 316, 320 -21 (20 10 ) (sam e). The Court will reach the sam e conclusion here. Plaintiffs waived their right to liquidated dam ages under New York Labor Law because they were previously required to do so under the then-prevailing law. See, e.g., Spicer v. Pier Sixty LLC, 269 F.R.D. 321, 338 n.15 (S.D.N.Y. 20 10 ) (noting that a “waiver of liquidated dam ages . . . is a prerequisite to the bringing of a class action under the applicable provisions of New York Labor Law” (citation and internal quotation m arks om itted)). On Novem ber 24, 20 10 , roughly two m onths after learning of Shady Grove’s change of the law—and nearly eight m onths after the Suprem e Court issued the decision—plaintiffs alerted both Magistrate J udge Gold and defendants of their desire to seek liquidated damages under under Section 90 1(b)); Niem iec v. Ann Bendick Realty, No. 0 4 Civ. 0 0 897 (ENV) (KAM), 20 0 7 WL 51570 27, at *3 n.2 (E.D.N.Y. Apr. 23, 20 0 7) (“[Section] 663, which provides for a penalty in the form of liquidated dam ages, but does not provide for recovery through a class action, is lim ited by [Section] 90 1(b) . . . .”). 20 the New York Labor Law. See Pls.’ Dec. 29 Letter at 4-5; Letter dated Novem ber 24, 20 10 at 6-7 (Dkt. No. 216). Under such circum stances, plaintiffs did not unduly delay in seeking leave to am end their com plaint. See Coultrip, 20 11 WL 1219365, at *4 (six m onth delay in filing m otion to am end in light of Shady Grove not undue); Pefanis, 20 10 WL 3564426, at *7 (two m onth delay in filing m otion to am end after learning of Shady Grove not undue). In any event, delay alone, without evidence of bad faith or prejudice, does not warrant denial of a m otion to am end. See, e.g., Ruotolo v. City of New York, 514 F.3d 184, 191 (2d Cir. 20 0 8) (“Mere delay, however, absent a showing of bad faith or undue prejudice, does not provide a basis for the district court to deny the right to am end.” (citation and internal quotation m arks om itted)). And defendants have failed to identify any actual prejudice to them as a result of plaintiffs’ delay. 13 Indeed, they do not contend that the am endm ent would require them to expend significant additional resources to conduct additional discovery or to prepare for trial or that it would delay the resolution of their dispute—two of the key factors in determ ining whether prejudice exists. See, e.g., Bank of Am ., 626 F.3d 725-26. Accordingly, plaintiffs’ m otion to am end their com plaint to reinstate their claim for liquidated damages under New York Labor Law is granted. 13 Defendants argue instead that they could potentially be prejudiced if any of the class m em bers who exercised their right to opt out of the class attem pted to revoke their waiver after learning that the class m ay now seek liquidated dam ages. Defs.’ Mot. at 7. The Court finds this contention unpersuasive. As Magistrate J udge Gold noted during the Novem ber 29, 20 10 hearing, since no class m em ber opted-in to the FLSA claim (which allows for liquidated dam ages) and opted out of the New York Labor Law claim (that waived liquidated dam ages), “it’s very difficult to draw the inference that anyone was encouraged to opt-out by the liquidated dam ages waiver from the Rule 23 action because if they were really thinking at that level, they would have joined the [FLSA] collective action.” Transcript of Hearing Held Novem ber 29, 20 10 (Dkt. No. 217). 21 C. Mo tio n to Am e n d N o tice o f Exclu s io n One additional m atter requires resolution: plaintiffs’ m otion to am end the notice of exclusion to include additional class m em bers who wish to opt out of the class. By Mem orandum and Order dated April 9, 20 10 , the Court granted plaintiffs’ m otion for class certification under New York state law and overruled defendants’ objections to Magistrate J udge Gold’s Order certifying this case as a collective action under the FLSA. See Gortat v. Capala Bros., Inc., No. 0 7 Civ. 3629 (ILG), 20 10 WL 14230 18 (E.D.N.Y. Apr. 9, 20 10 ). All class m em bers wishing to opt out of the class were to provide written notice to plaintiffs’ counsel by August 2, 20 10 . Class Notice at 4; Transcript of Hearing Held May 5, 20 10 at 20 (Dkt. No. 199). Plaintiffs received such opt out requests from 23 class m em bers and on August 3, 20 10 filed a notice of exclusion listing the m em bers’ nam es. Notice of Exclusion filed Aug. 3, 20 10 (Dkt. No. 20 7). Defendants now m ove to am end the notice to include three additional people: Andrzej Mazur, Przem yslaw Szulc, and J uan Carlos Ram irez. Letter to the Magistrate J udge Gold dated Novem ber 2, 20 10 (“Nov. 2 Letter”) (Dkt. No. 211). Having received signed copies of opt out requests from Mazur and Szulc after their original requests were apparently lost in the m ail, plaintiffs have consented to the am endm ent of the notice of exclusion as to Mazur and Szulc. Id. at 1 & Ex. 8. Plaintiffs do not appear to have taken a position on the am endm ent as to Ram irez whose original opt out request plaintiffs’ counsel apparently never received. Defendants represent that Ram irez m ailed the original sworn opt out statem ent on or about May 26, 20 10 and have provided the Court with a copy of the statem ent that is also dated May 26, 20 10 . Nov. 2 Letter Ex. 1. 22 Defendants’ m otion to am end the notice of exclusion to include Mazur, Szulc, and Ram irez is granted. Fed. R. Civ. P. 23(c)(2) provides that a judgm ent shall bind class m em bers who have not requested exclusion from the action. It further provides that a court m ust direct to the class “the best notice practicable under the circum stances, including individual notice to all m em bers who can be identified through reasonable effort.” Id. The class action notice m ust include, am ong other inform ation, the fact “that the court will exclude from the class any m em ber who requests exclusion, stating when and how m em bers m ay elect to be excluded.” Fed. R. Civ. P. 23(c)(2)(B). The notice here did so, providing that all m em bers wishing to opt out of the class were to notify plaintiffs’ counsel in writing by August 2, 20 10 . A class action notice’s opt out deadline, however, is not absolute, and “Rule 23 gives a court the power to prescribe the procedures a class m em ber m ust follow to opt out of a class action.” In re WorldCom , Inc. Sec. Litig., No. 0 2 Civ. 3288 (DLC), 20 0 5 WL 10 480 73, at *4 (S.D.N.Y. May 5, 20 0 5). Accordingly, if there is a dispute about whether a class m em ber has followed the appropriate opt out procedures, the class m em ber bears the burden of establishing that “he or she m ade a sufficient effort to com m unicate an intent to opt out through the appropriate channels. . . . Because flexibility in m aking this determ ination is appropriate, ‘any written evidence’ containing a ‘reasonable indication of a desire to opt out ought to be sufficient.’” Id. (quoting In re Four Seasons Sec. Laws Litig., 493 F.2d 1288, 1291 (10 th Cir. 1974)) (denying class m em bers’ request to be excluded from class where m em bers had no copy of exclusion form they purportedly sent to claim s adm inistrator and m em bers failed to send form by overnight or certified m ail as required by the notice of class action); see also Plum m er v. 23 Chem ical Bank, 668 F.2d 654, 657 n.2 (2d Cir. 1982) (noting in the context of an opt out for a 23(b)(2) class action that “[a]ny reasonable indication of a desire to opt out should suffice”); 7A C. Wright, et al., Federal Practice and Procedure § 1787 (3d ed. 20 0 5) (“[C]onsiderable flexibility is desirable in determ ining what constitutes an effective expression of a class m em ber’s desire to be excluded and any written evidence of that desire should suffice.”). This flexible standard is necessary to give effect to the Due Process right to opt out identified by the Suprem e Court in Phillips Petroleum v. Shutts, 472 U.S. 797, 812, 10 5 S. Ct. 2965, 86 L. Ed. 2d 628 (1985) see also McLaughlin on Class Actions § 5:78 (6th ed. 20 0 8) (“The right to opt out is an individual one that m ust knowingly be exercised on a class-m em ber-by-class-m em ber basis.”). The Tenth Circuit’s ruling in Four Seasons is instructive. There, the court concluded that a class m em ber who filed an opt out notice after the deadline, but had m ade various previous inquiries and statem ents during the exclusion period in an attem pt to com ply with the deadline, had indicated a desire to opt out and should be perm itted to do so. Four Seasons, 493 F.2d at 1291. The court explicitly rejected “a rule that in order to opt out, the request m ust be explicit,” and stressed instead that “flexibility is desirable in determ ining what constitutes an expression of a class m em ber’s desire to exclude him self.” Id. The Court noted, m oreover, that the purpose of Rule 23(c)(2), which provides for binding effect of a judgm ent on m em bers of a class who had not opted out of it, “was to elim inate the practice of waiting to see if the adjudication was favorable to the class before deciding whether to enter it.” Id. Such a situation was not presented in Four Seasons; nor is it presented here. 24 Plaintiffs are satisfied that Mazur and Szulc through their letters to plaintiffs’ counsel and previous attem pts to opt out of the class have m anifested a reasonable indication of their desire to opt out as plaintiffs have consented to the am endm ent of the Notice of Exclusion to include Mazur and Szulc. See Nov. 2 Letter Ex. 8 (“Now that we have received signed letters from both of them , which both indicate that they m ade serious attem pts to opt-out from their class before the August 2, 20 10 deadline, we join your request to perm it their late exclusion from the class.”). Applying the standard of flexibility set forth above, the Court is also satisfied that Mazur’s and Szulc’s letters sufficiently establish their desire to be excluded from the class. See id. Ex. 5, at 2 (“I was not [previously] rem oved from the case so I ask [sic] to rem ove m e from the case against Capala Brothers.”); id. Ex. 6, at 2 (“I once again ask, request to withdraw [sic] m e from the case regarding Capala Brothers.”). The sam e is true of the notarized letter dated May 26, 20 10 from Ram irez in which he states that “I don’t want to be part of the group that are suing [Pawel and Robert Capala].” This letter—signed well before the August 2, 20 10 deadline for class m em bers to opt out—provides a reasonable indication of Ram irez’s desire to be excluded from the class, and plaintiffs have articulated no reason why the Court should upset this desire. Accordingly, defendants’ m otion to am end the notice of exclusion to include Mazur, Szulc, and Ram irez is hereby granted. Plaintiffs shall file an am ended notice of exclusion forthwith. III. CON CLU SION For the foregoing reasons, it is hereby ordered that (1) the counter-defendants’ m otion for sum m ary judgm ent is DENIED; (2) plaintiffs’ m otion for leave to am end the 25 com plaint is GRANTED; and (3) defendants’ m otion to am end the notice of exclusion is GRANTED. SO ORDERED. Dated: Brooklyn, New York Decem ber 30 , 20 11 / s/ I. Leo Glasser Senior United States District J udge 26
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