In this action premised on alleged violations of Labor Law § 196-d, plaintiffs move pursuant to CPLR article 9 for certification of this matter as a class action, for appointment of the named plaintiffs as class representatives, for appointment of their counsel as class counsel and for an order consolidating this action with a related action pending in this Court, Picard v [*2]Bigsbee Enters., Inc. (Albany County Index No. 1984-13) ("Picard Action"). Defendants oppose the motion and cross-move for dismissal of the complaint pursuant to CPLR 3211 (a) (7).

According to the Class Action Complaint ("Complaint") filed in this action, plaintiffs were employed as servers at defendants' restaurants and catering venues from 2009 through 2012. Specifically, plaintiff Megan Adams worked as a server from May 2009 through November 2011, and plaintiff Kyra Thornton worked as a server from September 2010 until August 2011.^[FN1] As amplified by the affidavits submitted in support of their motion, plaintiffs' work included banquet service at catering halls operated by defendants.

Throughout plaintiffs' employment, defendants allegedly charged banquet customers a mandatory "20% service personnel charge". Plaintiffs allege that, while banquet customers reasonably would have believed this charge to be a gratuity, defendants retained these funds and did not distribute them to servers, who were paid a flat hourly rate. When asked by customers if they receive gratuities, plaintiffs allegedly were instructed by defendants to respond that they did.

Plaintiffs contend that defendants' retention of the "service personnel charges" violates Labor Law § 196-d, which provides in relevant part: "No employer or his agent or an officer or agent of any corporation . . . 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." A mandatory service charge falls within the ambit of Labor Law § 196-d "when it is shown that employers represented or allowed their customers to believe that the charges were in fact gratuities for their employees" (Samiento v World Yacht Inc., 10 NY3d 70, 81 [2008]).

In March 2010, the New York State Department of Labor ("DOL") issued an opinion letter ("2010 Opinion Letter") setting forth an "illustrative" list of factors that banquet operators should consider in assessing whether a reasonable customer would believe a particular service charge to be a gratuity. DOL later promulgated regulations, effective on January 1, 2011 ("the 2011 Regulations"), establishing "a rebuttable presumption that any charge in addition to charges for food, beverage, lodging, and other specified materials or services, including but not limited to any charge for service' or food service', is a charge purported to be a gratuity" (12 NYCRR 146-2.18 [b]).

Plaintiffs seek to maintain this action on behalf of themselves and a class of similarly situated present and former employees of defendants. In light of the promulgation of the 2011 Regulations, plaintiffs propose the creation of two subclasses: (1) all servers employed by defendants from April 4, 2007 until December 31, 2010 ("pre-2011" subclass); and (2) all servers employed by defendants from January 1, 2011 until December 31, 2012 ("post-2011" subclass). Plaintiffs and the putative class members seek an injunction restraining defendants from continuing their allegedly unlawful practices, recovery of the gratuities allegedly retained by defendants and an award of attorney's fees.

Plaintiffs also seek to consolidate this action with the Picard Action, which alleges the [*3]same violations of Labor Law § 196-d against essentially the same defendants.^[FN2] In a Decision & Order dated June 24, 2014, this Court denied the motion of the named plaintiff, Ryan Picard, for class certification on two grounds: (1) the failure to demonstrate numerosity; and (2) a finding that Picard's claims, which concerned post-2011 allegations, were not typical of the pre-2011 claims he sought to litigate on behalf of the class. Picard sought to remedy the latter deficiency by proposing Kyra Thornton as a second class representative, but the Court found his request to designate a non-party as class representative, made for the first time in reply, to be procedurally and substantively improper.

Plaintiffs then commenced this action on July 10, 2014. Following limited disclosure, plaintiffs now move for class certification, alleging that the deficiencies that prevented certification of a class in the Picard Action have been corrected. Plaintiffs also seek to consolidate the two actions, claiming that the cases present common issues of law and fact. Defendants oppose the motions and move for dismissal of the Complaint. Oral argument on the motions was held on August 21, 2015, and this Decision & Order follows.

Defendants first contend that plaintiffs' Complaint is time-barred insofar as it is premised upon violations of Labor Law § 196-d that occurred prior to July 10, 2008. Defendants rely upon Labor Law § 198 (3), which provides that "an action to recover upon a liability imposed by [Labor Law article 6] must be commenced within six years." In response, plaintiffs argue that they are entitled to pursue recovery for statutory violations on and after April 4, 2007 under two independent theories: (1) the motion for consolidation should be granted, and plaintiffs then would be entitled to the benefit of the "relation-back" doctrine (see CPLR 203 [b], [f]; Buran v Coupal, 87 NY2d 173, 177 [1995]); and/or (2) the statute of limitations for plaintiffs and putative class members was tolled from the filing of the complaint in the Picard Action until the denial of the class certification motion under the common-law principles articulated in American Pipe & Constr. Co. v Utah (414 US 538, 551-554 [1974]).

While the Court does not see merit in plaintiffs' invocation of the relation-back doctrine,^[FN3] the timely commencement of a putative class action has been held to toll the statute of limitations for members of the proposed class (Yollin v Holland Am. Cruises, 97 AD2d 720, 720 [1st Dept 1983]; Clifton Knolls Sewerage Disposal Co. v Aulenbach, 88 AD2d 1024, 1024-1025 [3d Dept 1982]; see Paru v Mutual of Am. Life Ins. Co., 52 AD3d 346, 348 [1st Dept 2008]). Members of the proposed class in Picard would have had no reason to commence their own action until class [*4]certification was denied, and a rule requiring them to commence duplicative litigation simply to preserve the statute of limitations would frustrate the objectives of efficiency and economy underlying CPLR article 9 (see American Pipe, 414 US at 551-554).

Accordingly, the Court concludes that plaintiffs and the proposed class are entitled to the benefit of a tolling from the commencement of the Picard Action until the June 24, 2014 denial of class certification. Accordingly, plaintiffs may pursue claimed violations Labor Law § 196-d that occurred on or after April 4, 2007.

Defendants argue that the Complaint fails to state a claim for violations of Labor Law § 196-d prior to January 1, 2011, the date on which the 2011 Regulations became effective. Defendants contend that the pre-2011 claims fail due to the absence of allegations that they represented to customers that the service charge was a gratuity that would be distributed to staff. In so arguing, defendants seek to draw on "20 years of case law and guidance" from the DOL holding that the "existence of a service charge, without any allegation that the defendant told customers that the service charge was a gratuity", fails to state a claim for relief under Labor Law § 196-d.^[FN4]

On a motion to dismiss brought pursuant to CPLR 3211 (a) (7), the Court must afford the pleadings a liberal construction, take the allegations of the complaint as true and provide the plaintiff the benefit of every possible inference (EBC 1, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]). Further, a court may "consider affidavits submitted by the plaintiff to remedy any defects in the complaint" (Leon v Martinez, 84 NY2d 83, 88 [1994]).

In World Yacht, the Court of Appeals held that a mandatory service charge may fall within Labor Law § 196-d "when it is shown that employers represented or allowed their customers to believe that the charges were in fact gratuities for their employees" (10 NY3d at 81 [emphasis added]). The test is an objective one that looks to whether, given the totality of all relevant facts and circumstances, a reasonable "banquet patron would understand a service charge was being collected in lieu of a gratuity" (id. at 79). Thus, a mandatory service charge may purport to be a gratuity even in the absence of allegations that the service charge expressly was represented to patrons to be a gratuity (see e.g. Martin v Restaurant Assoc. Events Corp., 106 AD3d 785, 786 [2d Dept 2013], affg 35 Misc 3d 215 [Sup Ct, Westchester County 2012]; see also Maldonado v BTB Events & Celebrations, Inc., 990 F Supp 2d 382, 390 [SDNY 2013]).

The Court is satisfied that the allegations of the Complaint, as amplified by plaintiffs' affidavits, suffice to state a cause of action for pre-2011 violations of Labor Law § 196-d. Plaintiffs allege that a reasonable patron would have understood the "20% Service Personnel Charge" to be a gratuity (see Martin, 106 AD3d at 786; see also Martin, 35 Misc 3d at 226). Further, nothing in the banquet contracts "provide[s] any explanation for the service charge" (Martin, 106 AD3d at 786). And in addition to establishing policies that allegedly had the effect [*5]of misleading customers, plaintiffs allege that defendants directed them to represent to the patrons that they did receive gratuities. Plaintiffs echo these allegations in their affidavits and further aver that most customers understood the 20% service charge to be a gratuity, and the patrons who did leave gratuities left only a modest additional percentage, rather than the traditional 15 to 20 percent. Accordingly, the branch of the motion seeking dismissal of the pre-2011 claims is denied.

Defendants also move for dismissal of the class allegations of the complaint based upon CPLR 901 (b), which prohibits the use of a class action lawsuit "to recover a penalty, or minimum measure of recovery created or imposed by statute." This Court rejected an identical argument in the Picard Action, holding that, while liquidated damages under Labor Law § 198 (1-a) represent a "penalty" within the meaning of CPLR 901 (b), the named plaintiff may waive the liquidated damages on behalf of himself and putative class members to maintain a class action, provided that class members are properly notified of the waiver and given the opportunity to opt out. Defendants cite no intervening authorities that call into question this prior ruling; in fact, the Court of Appeals' subsequent decision in Borden v 400 E. 55th St. Assoc., L.P. (24 NY3d 382 [2014]) only lends support to the conclusion that plaintiffs may waive liquidated damages to bring their claim as a class action. Accordingly, this branch of the motion to dismiss is denied.

Plaintiffs move to consolidate this action with the Picard Action. CPLR 602 (a) provides that, "[w]hen actions involving a common question of law or fact are pending before a court, the court, upon motion . . . may order the actions consolidated, and may make such other orders concerning proceedings therein as may tend to avoid unnecessary costs or delay." "[C]onsolidation is favored by the courts as serving the interests of justice and judicial economy" (Guasconi v Pohl, 2 AD3d 1202, 1203 [3d Dept 2003] [internal quotation marks omitted]), and a party opposing such a motion has the burden of showing that consolidation would prejudice a substantial right (Fashion Tanning Co. v Lumbermens Mut. Cas. Co., 105 AD2d 1034, 1035 [3d Dept 1984], supra).

In opposing the consolidation motion, the only prejudice claimed by defendants is the potential application of the relation-back doctrine. For the reasons stated above, the Court does not believe that application of the relation-back doctrine would be proper in this action. As defendants identify no other prejudice to a substantial right resulting from consolidation, the motion is granted.

The CPLR lists five prerequisites to class certification (CPLR 901 [a] [1-5]). The ultimate determination is discretionary, and the burden of proof lies with plaintiffs to show that each of the statutory prerequisites has been met (Beller v William Penn Life Ins. Co. of NY, 37 AD3d 747, 748 [2d Dept 2007]; cf. Casey v Prudential Sec., 268 AD2d 833, 834 [3d Dept 2000]). If the prerequisites of CPLR 901 are satisfied, consideration of the factors enumerated in CPLR 902 is required before a class can be certified (Fleming v Barnwell Nursing Home & Health Facilities, 309 AD2d 1132, 1134 [3d Dept 2003]).

The first prerequisite to certification is that the class be "so numerous that joinder of all members . . . is impracticable" (CPLR 901 [a] [1]). In seeking to establish this element, plaintiffs rely upon defendants' interrogatory responses showing that each of the proposed subclasses consists of approximately 100 members. In the face of this showing, defendants do not dispute that the proposed class and subclasses are sufficiently numerous that the joinder of all members is impracticable (see Hoerger v Board of Educ. of Great Neck Union Free School Dist., 98 AD2d 274, 282 [2d Dept 1983]; see also Consolidated Rail Corp. v Town of Hyde Park, 47 F3d 473, 483 [2d Cir 1995]; Lee v ABC Carpet & Home, 236 FRD 193, 203 [SDNY 2006]).

The second prerequisite to class certification is that "there are questions of law or fact common to the class which predominate over any questions affecting only individual members" (CPLR 901 [a] [2]). Thus, plaintiffs must satisfy two distinct, but related, elements: the commonality of issues; and the predominance of those common issues over issues that require individualized consideration (see e.g. Freeman v Great Lakes Energy Partners, L.L.C., 12 AD3d 1170, 1171 [4th Dept 2004]).

Plaintiffs argue that each class member's claim is premised upon the same legal theory: the service charges imposed by defendants represent a "gratuity" that was withheld from servers in violation of Labor Law § 196-d. Plaintiffs further contend that the claims arise out of the same operative facts: defendants' common policy and practice of describing the service charges in promotional materials and contract documents and retaining the collected charges. In this connection, plaintiffs aver that one sales team handled banquet events for all of the catering venues operated by defendants. Plaintiffs contend that the foregoing common issues of law and fact predominate over any issues affecting only individual class members, including damages.

In opposition, defendants first argue that there is no predominance of legal issues, relying upon changes to the governing legal standard during the proposed class period. In particular, the 2011 Regulations and the rebuttable presumption established therein alter the manner in which post-2011 claims under Labor Law § 196-d must be analyzed. However, plaintiffs have adequately addressed this legitimate concern by proposing the establishment of two subclasses: one for claims predating the 2011 Regulations and another for events governed by the 2011 Regulations. As so divided, members of each subclass would be making identical legal arguments to establish defendants' liability.

Defendants further contend that there is no predominance of common factual issues. Specifically, they rely upon alleged differences in each banquet customer's reasonable expectations concerning the service charge. In this connection, defendants cite the multitude of different iterations of the "service charge" language in a variety of brochures, contracts and invoices, as well as the need for individualized inquiries into how particular banquet customers reasonably would interpret particular promotional and contract language.

The Court does not find this line of argument to be persuasive. While adjudication of the claims of class members may require application of Labor Law § 196-d to a large number of banquet events, the liability aspect of the claims of class members who served at any particular banquet stand or fall together without the need for individualized inquiry. Further, the record shows that defendants used only a limited number of contract forms and promotional brochures through 2012, and it does not appear from the present record that the service charge was the [*6]subject of individualized communications on a regular or routine basis (cf. Morrissey v Nextel Partners, Inc., 72 AD3d 209, 214 [3d Dept 2010]). Moreover, the relevant legal standard is an objective one that looks to the expectations of reasonable consumers (see World Yacht, 10 NY3d at 79; Krebs v Canyon Club, Inc., 22 Misc 3d 1125[A][Sup Ct, Westchester County 2009]; see also Maldonado, 990 F Supp 2d at 389-394). Finally, individualized issues of damages do not defeat class certification where, as here, damages are easily measured, computed and allocated. Accordingly, commonality and predominance have been established.

The third prerequisite to class certification is that "the claims or defenses of the representative parties are typical of the claims or defenses of the class" (CPLR 901 [a] [3]). In order to satisfy this requirement, the named plaintiffs need not share every claim asserted on behalf of every member of every subclass (see Pruitt v Rockefeller Ctr. Props., 167 AD2d 14, 22 [1st Dept 1991]). Further, " it is not necessary that the claims of the named plaintiff[s] be identical to those of the class'" (id., quoting Super Glue Corp. v Avis Rent A Car Sys., 132 AD2d 604, 607 [2d Dept 1987]).

Plaintiffs maintain that their claims are virtually identical to those of the proposed class members. They and the class members worked together as banquet servers for defendants during the class period and allegedly were denied gratuities to which they were entitled. In opposition, defendants argue only that typicality has not been shown as to the pre-2011 claims, based on plaintiffs' failure to allege "that Defendants told customers the service charge was a gratuity". This contention is rejected for the reasons stated above, and the Court therefore finds that plaintiffs have made a sufficient showing of typicality.

The fourth prerequisite to class certification is that "the representative parties will fairly and adequately protect the interest of the class" (CPLR 901 [a] [4]). To meet this requirement plaintiffs must show both that class counsel is qualified and capable of seeing this litigation through to its ultimate conclusion and that no conflict of interest exists that would pit the nominative plaintiffs against other members of the classes or subclasses (see In re Drexel Burnham Lambert Group, Inc., 960 F2d 285, 291 [2d Cir 1992]).

Plaintiffs argue that they can and will adequately represent the interests of the class, have no known conflict with any of the putative members and will be able to oppose the adverse interests asserted by others. Further, plaintiffs maintain that they have adequate knowledge of the facts underlying this action based on Adams's employment with defendants as a server from May 2009 through November 2011, Thornton's work from September 2010 until August 2011 and Picard's employment from March 2011 through December 2012. Additionally, plaintiffs' counsels affirm that they have extensive experience in prosecuting wage and hour class actions against restaurants in New York State and have obtained substantial recoveries in certain cases. Thus, plaintiffs' attorneys argue that they have the requisite experience, vigor and financial resources to sufficiently and adequately represent the class.

In opposing this branch of the motion, defendants claim that Adams is an inadequate representative based upon her prior criminal convictions for driving while intoxicated in 2005 and 2009. The Court does not agree. "Courts that have disallowed prospective plaintiffs on the basis of prior convictions have done so only where a clear nexus existed between the conviction [*7]and the class claims" (Jones v Ford Motor Credit Co., 2005 US Dist LEXIS 5381, *58-59 [SDNY 2005]), or where the criminal conduct bears directly on the proposed representative's honesty, credibility and integrity (Harris v Vector Mktg. Corp., 753 F Supp 2d 996, 1015 [ND Cal 2010]; cf. Pena v Taylor Farms Pac., Inc., 305 FRD 197, 215-216 [ED Cal 2015] [conviction of crime requiring proof of "intent to deceive or to defraud"]).

Given the absence of such a nexus and the nature of the criminal convictions, defendants have failed to rebut plaintiffs' showing that Adams, Thornton and Picard adequately will protect the interests of the class.^[FN5]

The final prerequisite to class certification is that plaintiffs must prove that "a class action is superior to other available methods for the fair and efficient adjudication of the controversy" (CPLR 901 [a] [5]). Plaintiffs argue that adjudicating this case on a class-wide basis will avoid the possibility of inconsistent outcomes and eliminate impediments to litigating their relatively modest claims.

In opposition, defendants argue that at least two superior fora exist in which aggrieved banquet servers can adjudicate their claims and potentially recover liquidated damages. First, they could pursue the simplified, administrative process before DOL. Alternatively, an individual could commence his or her own action under Labor Law § 196-d and be eligible for both liquidated damages and an award of attorney's fees.

While defendants' arguments regarding the availability of an administrative remedy are not without some force, the Court finds that plaintiffs have made an adequate showing of superiority under the particular facts and circumstances of this action. Unlike in Alix v Wal-Mart Stores, Inc. (57 AD3d 1044 [3d Dept 2008], affg 16 Misc 3d 844 [Sup Ct, Albany County 2007]), adjudication of class members' claims in this case would not call for the type of intensive, individualized inquiries that are highly problematic in the context of a class-wide adjudication. Further, as stated above, the claims of all servers who worked during a particular banquet will stand or fall together. Accordingly, the Court finds that the element of superiority has been sufficiently established.

Having determined that the prerequisites of CPLR 901 have been satisfied, the Court must also consider the factors set forth in CPLR 902, which are: (1) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (2) the impracticability or inefficiency of prosecuting or defending separate actions; (3) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class;(4) the desirability or undesirability of concentrating the litigation of the claim in the particular forum; and (5) the difficulties likely to be encountered in the management of a class action.

The Court is satisfied that the foregoing factors weigh in favor of class certification. Members of the class have only a limited interest in individually controlling the prosecution of their cases, since each member has sustained damages that are modest in amount compared to the [*8]cost of individual litigation. And while it would not be completely impractical for individuals to prosecute their own separate actions against defendants, it would be inefficient. And other than the Picard Action, which is pending in this Court, there is no other litigation that has been commenced by members of the proposed class. Further, concentration of this litigation in Albany County is appropriate given that defendants' catering venues are located in Albany County, many of the class members reside in or around Albany County and the relevant events occurred in Albany County.

Accordingly, it is

ORDERED that plaintiffs' motion for consolidation is granted; and it is further

ORDERED that plaintiffs' motion for class certification is granted; and it is further

ORDERED that defendants' motion to dismiss is denied; and finally it is

ORDERED that plaintiffs shall settle an order incorporating their requested relief after conferring in good faith with opposing counsel in an attempt to reach agreement as to form.

This constitutes the Decision and Order of the Court. The original Decision and Order is being transmitted to counsel for plaintiffs (Pechman Law Group LLP); all other papers are being transmitted to the Albany County Clerk. The signing of this Decision and Order shall not constitute entry or filing under CPLR Rule 2220, and counsel is not relieved from the applicable provisions of that Rule.