Chen v. Kyoto Sushi, Inc.

• Court: District Court, E.D. New York
• Decided: April 1, 2021
• Docket: 2:15-cv-07398
• Status: Unknown

Opinion

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK _____________________

No 15-CV-7398 (DLI) (RER) _____________________

SHANG ZHONG CHEN, ON BEHALF OF HIMSELF AND OTHERS SIMILARLY SITUATED,

Plaintiff,

VERSUS

KYOTO SUSHI, INC. D/B/A KYOTO SUSHI, ASQUARED GROUP, INC. D/B/A KYOTO SUSHI, AND ANDY LEE,

Defendants. ___________________

Memorandum & Order April 1, 2021 ___________________ RAMON E. REYES, JR., U.S.M.J.:

Before the Court is Plaintiff Shang Zhong BACKGROUND Chen’s (“Chen” or “Plaintiff”) motion under The Court assumes familiarity with the Section 11 of the Federal Arbitration Act underlying facts of this matter. A description (“FAA”), 9 U.S.C. § 11, to modify an of the relevant procedural history follows: arbitration award to include reasonable attorney’s fees, costs, and expenses.1 (Dkt. On December 30, 2015, Chen filed this Nos. 54–56, 59). For the reasons discussed suit against Kyoto Sushi, Inc., Asquared herein, the motion is denied. Group, Inc. and Andy Lee (collectively, “Defendants”) claiming multiple violations

of the Fair Labor Standards Act (“FLSA”),

29 U.S.C. § 201 et seq., the New York Labor

Law (“NYLL”) § 190 et seq; the Internal

1 Pursuant to 28 U.S.C. § 636, a United States District dismiss or to permit maintenance of a class action, to “judge may designate a Magistrate Judge to hear and dismiss for failure to state a claim upon which relief determine any pretrial matter pending before the court, can be granted, and to involuntarily dismiss an action.” except a motion for injunctive relief, for judgment on 28 U.S.C. § 636(b)(1)(A). On November 18, 2020 the the pleadings, for summary judgment, to dismiss or Honorable Dora L. Irizarry referred to me Chen’s quash an indictment or information made by the motion, which is not one of the matters excepted in defendant, to suppress evidence in a criminal case, to 28 U.S.C. § 636(b)(1)(A). (Order dated 11/18/2020). Revenue Code, 26 U.S.C. § 7434; and the (“Arbitration Award”)). Although the New York General Business Law, N.Y. Gen. Agreements required individual arbitration, Bus. Law § 349. (Dkt. No. 1 (“Compl.”) ¶¶ Defendants consented to consolidation of the 57–107). On April 3, 2016, Shi Hang Wu and employees’ claims. (Arbitration Award at 1; Shu Jun Ma (collectively, “Opt-In see also Ex. A ¶ 6). After a two-day Plaintiffs”) each filed consents to become arbitration hearing, the parties filed post- parties in a collective action ostensibly hearing briefs. (Arbitration Award at 3; Dkt. pursuant to § 216(b) of the FLSA. (Dkt. Nos. No. 57 (“Yim Aff.”) ¶ 11). The arbitrator 8, 10). subsequently issued an award in favor of Claimants on April 23, 2020. (Arbitration Prior to brining or joining suit, Chen and Award at 33). The arbitrator did not find any the Opt-in Plaintiffs (collectively, of the Claimants credible; however, “Claimants”) each had signed an arbitration Defendants admitted liability as to some agreement with their employer (“the wage and hour violations under the FLSA Agreements”). (Dkt. No. 57-1 (“Ex. A”)). and NYLL. (Id. at 3–4). According to the terms of the Agreements, the parties The arbitrator’s award provided that the administrative fees and compensation of the agree[d] that all “covered claims” that arbitrator “shall be borne as incurred” but did Employee may have against not address attorney’s fees or other costs. Employer (or its owners, directors, (Arbitration Award at 32). Chen emailed officers, managers, employees, or AAA to request a briefing schedule regarding agents) or that Employer may have attorney’s fees. (Dkt. No. 57-5 (“First Post- against Employee shall be submitted Award Order”)). In response, the arbitrator exclusively to and determined requested briefing as to her continuing exclusively by binding arbitration in jurisdiction over the matter given that she had New York, New York under the already issued a final award. (Id.). After Federal Arbitration Act, 9 U.S.C. § 1 reviewing the parties’ submissions, the et seq., regardless the substantive law arbitrator issued an order on July 14, 2020, applied in the arbitration. finding that she did not have continuing jurisdiction to determine a motion for (Ex. A ¶ 2). Therefore, Defendants moved to attorney’s fees and costs. (Dkt. No. 52; Dkt. compel arbitration. (Dkt. No. 27). On No. 57-6 (“Second Post-Award Order”)). September 22, 2017, the Court granted Defendants’ motion to compel arbitration as Chen subsequently filed the instant to the FLSA and NYLL claims,2 and the case motion. (Dkt. Nos. 54–56, 59). was administratively closed. (Dkt. No. 47; Dkt. Entry dated 9/22/2017). DISCUSSION Consistent with the Agreements, Chen timely moves to modify the Claimants then submitted arbitration arbitration award in include attorney’s fees demands to the American Arbitration under § 11 of the FAA.3 (Dkt. No. 47 (“Any Association (“AAA”). (Dkt. No. 57-4 party wishing to challenge the arbitration

2 The Court dismissed the remaining claims without 3 Chen’s motion and memorandum in support did not prejudice, except for Chen’s claim pursuant to 26 provide the basis on which he sought attorney’s fees U.S.C. § 7434, which was dismissed with prejudice. from this Court, and hardly reference the arbitration; (Dkt. No. 47). he argued only that under the FLSA and NYLL, decision must do so within thirty (30) days 81 (2d Cir. 2008) (quoting Wall Street Assoc., thereof.”)); see also Zambrano v. Strategic L.P. v. Becker Paribas, Inc., 27 F.3d 845, 849 Delivery Sols., LLC, No. 15 CIV. 8410 (ER), (2d Cir. 1994)); Companhia de Navegacao 2018 WL 4462360, at *4 (S.D.N.Y. Sept. 17, Maritima Netumar v. Armada Parcel Serv., 2018) (“motions filed under sections 10 or 11 Ltd., No. 96 Civ. 6441 (PKL), 2000 WL ‘must be served upon the adverse party or his 60200, at *5 (S.D.N.Y. Jan. 25, 2000) attorney within three months after the award (“arbitration awards are subject to very is filed or delivered.’” (quoting 9 U.S.C. § limited review in order to avoid undermining 12)). Specifically, he requests that the Court the twin goals of arbitration, namely, settling modify the arbitration award under § 11(a) on disputes efficiently and avoiding long and the basis that the arbitrator made “an evident expensive litigation.”). material mistake” in failing to include attorney’s fees and costs in the award.4 (Dkt. A party seeking judicial review of an No. 59 (“Reply”) at 1). As discussed herein, arbitration award can request vacatur, however, it was not the arbitrator who made modification, or remand to the arbitrator.5 a mistake, but Chen, who failed to submit See 9 U.S.C. §§ 10–11; LLT Int’l, Inc. v. MCI arguments and evidence in support of Telecomms. Corp., 69 F. Supp. 2d 510, 515 reasonable attorney’s fees and costs prior to (S.D.N.Y. 1999) (citing Ottley, 819 F.2d at or concurrently with his post-arbitration 376). “The grounds for modifying or vacating brief. an arbitration award are grudgingly narrow.” Armada Parcel, 2000 WL 60200, at *5. Chen I. The Federal Arbitration Act moves only for modification of the arbitration award to include attorney’s fees Arbitration allows parties to avoid the and costs. costs of litigation without abandoning substantive rights provided in statute. Circuit Section 11 of the FAA provides the City Stores, Inc. v. Adams, 532 U.S. 105, 123 exclusive grounds for modification of an (2001). The FAA compels judicial arbitrator’s decision.6 T.Co Metals, LLC v. enforcement of arbitration agreements, id. at Dempsey Pipe & Supply, Inc., 592 F.3d 329, 111, and limits judicial review of arbitration 338 (2d Cir. 2010) (citing Hall Street Assocs. awards, see, e.g., Rich v. Spartis, 516 F.3d 75, L.L.C. v. Mattel, Inc., 522 U.S. 576, 584

prevailing employees are entitled to costs and (citing United Steel Workers v. Adbill Management attorney’s fees. (See Dkt. Nos. 52, 54–56). In his reply, Corp., 754 F.2d 138, 141 (3d Cir.1985)). Chen does however, Chen argues that the arbitrator made “an not seek a remand. evident material mistake” as defined by FAA § 11(a). (Reply at 1). 6 In extraordinary circumstances, the Court may also modify or vacate an arbitration award when an 4 Chen mischaracterizes § 11(a). (See Reply at 1). In arbitrator committed manifest disregard of the law. full, the statute reads that the Court can modify or T.Co Metals, LLC v. Dempsey Pipe & Supply, Inc., correct an award where the arbitrator has made “an 592 F.3d 329, 338 (2d Cir. 2010); DiRussa v. Dean evident material mistake in the description of any Witter Reynolds Inc., 121 F.3d 818, 821 (2d Cir. 1997) person, thing, or property referred to in the award.” 9 (affirming court’s ruling that failure to award U.S.C. § 11(a) (emphasis added). attorney’s fees was not manifest disregard of law). Chen does not assert manifest disregard of the law. 5 “A remand for further arbitration is appropriate in only certain limited circumstances such as when an award is incomplete or ambiguous.” Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d Cir. 1987) (2008)). Under Section 11, a federal court can heard in court including awards of attorney’s modify or correct an arbitration award: fees and costs, in accordance with applicable law.” R. 39(d). Here, the applicable laws are (a) Where there was an evident the FLSA and NYLL. (Final Award at 2). material miscalculation of figures or Those statutes allow prevailing employees to an evident material mistake in the collect reasonable attorney’s fees and costs. description of any person, thing, or 29 U.S.C. § 216(b); N.Y. Lab. Law § 198(4). property referred to in the award. (b) Where the arbitrators have The FLSA mandates that prevailing awarded upon a matter not submitted plaintiffs be awarded reasonable attorney’s to them, unless it is a matter not fees and costs, see Zambrano v. Strategic affecting the merits of the decision Delivery Sols., LLC, No. 15 CIV. 8410 (ER), upon the matter submitted. 2016 WL 5339552, at *5 (S.D.N.Y. Sept. 22, (c) Where the award is imperfect in 2016); however, it remains a plaintiff’s matter of form not affecting the burden to submit documentation that merits of the controversy. supports the reasonableness and necessity of the hours spent, rates charged, and costs 9 U.S.C. § 11. incurred. Fermin v. Las Delicias Peruanas Rest., Inc., 93 F. Supp. 3d 19, 51 (E.D.N.Y. II. The Parties’ Arbitration 2015); Fisher v. SD Prot. Inc., 948 F.3d 593, Agreements & Applicable 600 (2d Cir. 2020) (citing N.Y. State Ass’n for Laws Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1154 (2d Cir. 1983)). For example, for Claimants each signed arbitration an award of attorney’s fees, courts in this agreements with their employer. (Ex. A). The Circuit require the submission of Agreements require that the parties “bring all contemporaneous time records for each covered claims in one arbitration proceeding” attorney who worked on the case. E.g., and that “[a]ny covered claims not brought as Fermin, 93 F. Supp. 3d at 51. one arbitration proceeding shall be waived and precluded.” (Id. ¶ 5). They also specify III. The Arbitrator Did Not Make that after finding a violation of applicable an Evident Material Mistake law, “the arbitrator shall have the same power and authority as would a court” to award In reviewing arbitration awards, the attorney’s fees and costs. (Id. ¶ 14). As such, Court owes strong deference to arbitrators. the relief awarded must conform “with Fellus v. Sterne, Agee & Leach, Inc., 783 F. applicable principles of common, decisional Supp. 2d 612, 618, 622 (S.D.N.Y. 2011); and statutory law, in the relevant Fried, Krupp, GmbH, Krupp Reederei Und jurisdiction.” (Id.). Brennstoff-Handel-Seeschiffarht v. Solidarity Carriers, Inc., 674 F. Supp. 1022, Under the Agreements, arbitration must 1030 (S.D.N.Y.) (collecting cases) (“An be administered by the AAA and governed by arbitration award having any conceivable the AAA Rules for Employee Dispute rational basis must be upheld even if the Resolution (“AAA Employment Rules”). arbitrator misinterpreted law or facts.”), aff’d (Id. ¶ 7). The AAA Employment Rules sub nom. Fried Krupp GmbH v. Solidarity, reinforce that “[t]he arbitrator may grant any 838 F.2d 1202 (2d Cir. 1987). The party remedy or relief that would have been challenging an arbitration award under available to the parties had the matter been § 11(a) “bears a heavy burden of proof.” Armada Parcel, 2000 WL 60200, at *5 R. 4(b)(i)(1). The allocation of attorney’s (citing Folkways Music Publishers, Inc. v. fees and costs was also discussed at an Weiss, 989 F.2d 108, 111 (2d Cir. 1993)). An arbitration management conference as “evident material mistake” is one that required under AAA Employment Rule 8. “appears on the face of the record and would (Reply at 2); see also R. 8(xii). Without have been corrected had the arbitrator known explanation, however, Claimants’ post- of it at the time.” Foster Wheeler Env’t Corp. hearing brief did not provide any arguments v. EnergX TN, LLC, No. 13 Civ. 1178 (RA), or supporting documentation on which the 2014 WL 982857, at *5 (S.D.N.Y. Mar. 13, arbitrator could base an award of fees and 2014) (“[Section] 11(a) does not authorize a costs.7 (First Post-Award Order). Therefore, court to modify an arbitration award simply the arbitrator, who was well-versed in the because it believes the arbitrator incorrectly FLSA and NYLL, (Reply at 3), could not interpreted a contract.”). award attorney’s fees or costs under either statute at the time the final award was issued.8 Evident material mistakes include See Fermin, 93 F. Supp. 3d at 51. clerical and typographical errors, or other mistakes that do not implicate a substantive Chen argues that “liability must be found dispute. Webb v. Citigroup Glob. Markets, prior to the moving for attorneys’ fees under Inc., No. 19 Civ. 535 (PAE), 2019 WL the prevailing Plaintiffs standard.” (Reply at 4081893, at *10 (S.D.N.Y. Aug. 29, 2019) 2–3 (emphasis omitted)). This suggestion (ordering modification of an arbitration runs counter to practice in this District and award so that the case caption conformed to the requirements of the Agreements. the award). The Court may not correct a Plaintiffs seeking attorney’s fees under the mistake in an arbitration award if the FLSA and NYLL routinely include correction would alter the substantive arguments and evidence in support of disposition. Foster, 2014 WL 982857, at *5. attorney’s fees along with their submissions as to the defendants’ liability. See, e.g., Claimants’ arbitration demands indicated Fermin, 93 F. Supp. 3d at 22–23 (default their intention to seek attorney’s fees in judgment); Barfield v. N.Y.C. Health & accordance with AAA Employment Rule 4. Hosps. Corp., 537 F.3d 132, 135 (2d Cir. (First Post-Award Order); see also 2008) (summary judgment); but cf. Kalloo v.

7 Even with this motion, Chen failed to provide any held that such provisions excluding fees are invoices or receipts to support his request for costs. He unenforceable and noted that under the parties’ submitted only an itemized list of costs related to the agreements, an arbitrator must award attorney’s fees litigation. (Dkt. No. 55-1 at 10). “to the extent permitted by applicable law.” Carter, 362 F.3d at 299. As discussed supra Section II, the law 8 Chen emphasizes that an arbitrator is required to in this Circuit requires that a prevailing plaintiff award attorney’s fees and costs to prevailing plaintiffs provide invoices, receipts, and other supporting under the FLSA and NYLL. (Reply at 1 (citing Carter evidence to support their request for attorney’s fees v. Countrywide Credit Indus., 362 F.3d 294, 299 (5th and costs under the FLSA and NYLL. Cir. 2004); Raniere v. Citigroup Inc., 827 F. Supp. 2d 294, 316 (S.D.N.Y. 2011) (citing Carter), rev’d and The petitioner in D&W sought to recover attorney’s remanded on other grounds, 533 Fed. Appx. 11 (2d fees incurred in post-arbitration litigation. 28 Misc. 3d Cir. 2013)); D&W Cent. Station Fire Alarm Co., Inc. at 635. Pursuant to the parties’ contract, the court v. Ziari, 957 N.Y.S. 2d 635 (App. Div. 2010))). Carter referred the fee award to the court below. Id. Here, does not involve review of an arbitration award; Chen seeks attorney’s fees incurred during the instead, the court analyzed the enforceability of arbitration and the preceding litigation before this arbitration agreements that did not provide for Court. attorney’s fees. See Carter, 362 F.3d at 299. The court Unlimited Mech. Co., 977 F. Supp. 2d 209, attorney’s fees or costs. He identifies no 210–11 (E.D.N.Y. 2013) (awarding fees on a person, thing, or property that has been motion submitted post-trial). Courts also mistakenly described or how such a mistake deny unsupported motions for attorney’s fees would relate to his claim for attorney’s fees with leave to renew. See, e.g., Restivo and costs. See Solidarity, 674 F. Supp. at Guardado v. Precision Fin., Inc., No. 04-CV- 1029 (denying petition to modify arbitration 3309 (JS) (AKT), 2007 WL 1041663, at *8 award because the reduction of an (E.D.N.Y. Mar. 31, 2007) (denying a indemnification award including attorney’s prevailing plaintiff’s motion for attorney’s fees “simply cannot be characterized fees, because although she was entitled to as . . . an evident material mistake.”). Chen fees under the NYLL, she did not submit merely argues that the arbitrator “refus[ed]” information on which the Court could to adjudicate a “concurrent” request for determine the reasonableness of the fees). attorney’s fees. (Reply at 3). It is unclear to what “concurrent” request Chen refers.9 In furtherance of “the twin goals of Nevertheless, the absence of an award of arbitration, namely, settling disputes attorney’s fees was not a mistake; it was a efficiently and avoiding long and expensive reasoned determination that § 11 cannot litigation;” however, procedural rules in the reach. See Companhia, 2000 WL 60200, at arbitration context differ. Armada Parcel, *7–8. 2000 WL 60200, at *5 (quoting Willemijn Houdstermaatschappij, BV v. Standard Chen’s counsel had the opportunity to Microsys. Corp., 103 F.3d 9, 12 (2d Cir. submit post-hearing briefing to the arbitrator. 1997)). In that vein, the Agreements required (Arbitration Award at 3; Yim Aff. ¶ 11). That that Claimants “bring all covered claims in would have been an appropriate juncture at one arbitration proceeding.” (Ex. A. ¶ 5). which to submit an explicit request for, and Moreover, an arbitrator’s award is final and to provide proof of, his fees and costs prior to binding. AAA Emp. R. 39(g); see also Ottley, the arbitrator’s final decision. He failed to do 819 F.2d at 376 (“As a general rule, once an either. (First Post-Award Order). The FAA arbitration panel decides the submitted limits the Court’s review of the arbitrator’s issues, it becomes functus officio and lacks final award, and it forecloses Chen’s post hoc any further power to act.”) (quoting Proodos request that the Court modify the award to Marine Carriers Co. v. Overseas Shipping & include attorney’s fees and costs. Logistics, 578 F. Supp. 207, 211 (S.D.N.Y.1984)). Therefore, the arbitrator did not have continuing jurisdiction after issuing a final arbitration award. (Second Post-Award Order). Chen has not met his burden to demonstrate that the arbitrator made an evident material mistake by failing to award

9 Chen argues that the Claimants “repeatedly notified reference is to the motion submitted on May 22, 2020 the Arbitrator that they were seeking attorneys’ fees after the arbitrator issued her final award. Regardless, and costs before the motion itemizing the specific notice alone is insufficient to meet Chen’s burden for attorney fee and cost amount they were seeking.” an award of reasonable costs and attorney’s fees under (Reply at 2). It is unclear to what motions or other the FLSA and NYLL. submissions Chen refers, but the Court assumes his CONCLUSION

Based on the foregoing, Plaintiffs’ motion for modification of the arbitration award to include an award of attorney’s fees, costs, and expenses is denied.

SO ORDERED.

/s/ Ramon E. Reyes, Jr. RAMON E. REYES, JR. United States Magistrate Judge

Dated: April 1, 2021 Brooklyn, NY