Chen v. WAI ? Cafe Inc.
1:10-cv-07254
S.D.N.Y.Aug 2, 2017Background
- Six named plaintiffs sued Wai ? Café and owner Wai Yin Chan (Mr. Chan) alleging NY labor law and FLSA violations for unpaid minimum, overtime, and spread-of-hours pay; they sought liquidated and punitive damages.
- At trial (Feb 2012) the court dismissed FLSA claims for lack of showing of enterprise coverage; retained supplemental jurisdiction over NYLL claims; jury found defendants liable on NYLL wage claims but not willful conduct (no liquidated damages). Judgment entered for plaintiffs.
- Defendants sought to introduce a contract and payment records at trial that plaintiffs’ counsel represented had not been produced in discovery; the court excluded those documents. On appeal the Second Circuit found possible wrongful exclusion and remanded for consideration of those documents and other issues.
- Post-appeal discovery developments revealed plaintiffs’ counsel had in fact received the documents; the court ordered a new trial and entertained defenses including a motion to dismiss for lack of supplemental jurisdiction by Mr. Chan.
- The central legal questions on remand: whether the district court should exercise supplemental jurisdiction over NYLL claims (federal claims no longer live) and whether NY law required pre-2011 notice for employers to claim tip credits (an unsettled state-law question).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court should retain supplemental jurisdiction over NYLL claims after FLSA dismissal | Plaintiffs preferred federal adjudication; argued judicial economy and prior trial justify retention | Chan argued original federal claims are gone and the NYLL issue is novel; court should decline jurisdiction | Court should decline to exercise supplemental jurisdiction; factors favor comity and avoiding novel state-law determination in federal court |
| Whether pre-2011 NY law required employer notices to claim tip credits under NYLL | Plaintiffs contended notice requirement not applicable or settled against defendants | Chan argued NY law allowed tip/meal allowances without federal-style notice for the relevant period | Court treated the notice-for-tip-credit question as an unsettled state-law issue that weighs in favor of dismissal of supplemental jurisdiction |
| Whether exclusion of discovery documents at first trial and counsel’s misrepresentations require sanctions or dismissal | Plaintiffs initially denied production; later counsel conceded production occurred | Chan sought sanctions/dismissal for alleged fraud on the court | Court denied dismissal/sanctions but ordered a new trial because documents had been produced and were wrongly excluded |
| Whether prior trial and sunk costs justify retaining jurisdiction | Plaintiffs pointed to prior trial and judicial resources spent | Chan argued sunk costs are not dispositive; future trial can proceed in state court | Court focused on forward-looking factors; sunk costs insufficient to override comity and other concerns, favoring remand to state court |
Key Cases Cited
- Shahriar v. Smith & Wollensky Restaurant Group, Inc., 659 F.3d 234 (2d Cir.) (federal and state wage claims derive from common nucleus of operative fact)
- Briarpatch Ltd. v. Phoenix Pictures, Inc., 373 F.3d 296 (2d Cir.) (standard for supplemental jurisdiction when claims arise from same controversy)
- Motorola Credit Corp. v. Uzan, 388 F.3d 39 (2d Cir.) (considerations for retaining jurisdiction post-trial)
- Kolari v. New York Presbyterian Hospital, 455 F.3d 118 (2d Cir.) (district court discretion on supplemental jurisdiction and abuse when retaining novel state-law claims)
- Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343 (U.S. 1988) (values of judicial economy, convenience, fairness, and comity in supplemental jurisdiction analysis)
- Valencia ex rel. Franco v. Lee, 316 F.3d 299 (2d Cir.) (district court discretion not boundless; declining jurisdiction when federal claims eliminated before trial)
- Seabrook v. Jacobson, 153 F.3d 70 (2d Cir.) (abuse of discretion where district court retained novel state-law claim after federal claims dismissed)
- United Mine Workers v. Gibbs, 383 U.S. 715 (U.S.) (avoid needless decisions of state law; comity in federal adjudication)