KORYN RUSSELL VS. THE GIFT GROUP, INC. (L-6264-19, BERGEN COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: December 6, 2021
• Docket: A-0326-20
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-0326-20

KORYN RUSSELL,

Plaintiff-Appellant,

v.

THE GIFT GROUP, INC.,

Defendant-Respondent,

and

LOREN DROTOS, a/k/a MARK ROBERTS,

Defendant. __________________________

Submitted October 20, 2021 – Decided December 6, 2021

Before Judges Gooden Brown and Gummer.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-6264-19.

Costello & Mains, LLC, attorney for appellant (Deborah L. Mains, on the brief).

Respondent has not filed a brief. PER CURIAM

Plaintiff Koryn Russell appeals from an August 31, 2020 Law Division

order entering default judgment following a proof hearing against her former

employer, The Gift Group, Inc., and its owner, Loren Drotos, collectively,

defendants. Pertinent to this appeal, the trial judge awarded plaintiff damages

for unpaid wages and overtime but denied her liquidated damages and reduced

her requested counsel fee award by twenty-five percent. Additionally, the judge

denied plaintiff's claim under the Conscientious Employee Protection Act

(CEPA), N.J.S.A. 34:19-1 to -14. We reverse and remand.

On September 4, 2019, plaintiff filed a complaint against defendants

alleging violations of CEPA, the New Jersey Wage Payment Law (WPL),

N.J.S.A. 34:11-4.1 to -4.14, and the Fair Labor Standards Act (FLSA), 29 U.S.C.

§ 201 to § 219. Defendants did not respond to the complaint, and, on July 31,

2020, the judge granted plaintiff's motion to enter default judgment and schedule

a proof hearing, see R. 4:43-2(b), for which defendants did not appear.

At the proof hearing conducted on August 10, 2020, plaintiff testified that

on September 17, 2018, she began working for The Gift Group, Inc. as a gift

basket assembler. When plaintiff was hired, she did not sign an employment

contract. However, she was a full-time, hourly employee and earned $12 an

A-0326-20 2 hour. She was paid biweekly, but payment for the first two weeks of work was

"withheld" by defendants.

Around Thanksgiving, plaintiff began working more than forty hours per

week due to an increase in orders. In the first two weeks of December, plaintiff

worked approximately forty-four hours each week. In the third week of

December, she worked approximately forty-eight hours. Plaintiff did not

receive overtime compensation for the additional hours worked.

According to plaintiff, she and other employees raised the overtime issue

with their supervisor, but the supervisor "didn't believe that [the employees]

should be compensated for overtime, because in Canada [employees] only start

making overtime at [forty-eight] hours."1 As a result, the supervisor "made sure

to keep [the employees] all under [forty-eight] hours" to comply with "the

Canadian time and a half" requirement. Plaintiff testified she and other

employees tried to convince the supervisor that, in the United States, hourly

employees were owed "time and a half" after working forty hours in a week, but

to no avail.

In addition, plaintiff had several individual conversations with her

supervisor about "pay discrepancies." Specifically, plaintiff talked to her

1 Defendant Loren Drotos is purportedly a Canadian resident. A-0326-20 3 supervisor during the first week of January 2019, and again around January 10,

2019. Plaintiff testified that following the January 10 conversation, her

supervisor said she would receive the owed overtime as well as $200 of missing

pay at the end of the week, as one paycheck had been short by $200. That Friday,

when plaintiff did not receive the amount she was due, she again spoke to her

supervisor and demanded her overtime and missing pay. Plaintiff's supervisor

responded she would receive the overdue wages the following Monday, January

14, 2019. However, on Sunday, January 13, 2019, plaintiff received a text

message from an unknown sender saying she was terminated, and the police

would be called if she showed up for work. When plaintiff received her last

paycheck, it was missing compensation for three weeks and three days of work

as well as the $200 and the overtime hours she was owed.

Plaintiff explained she "went above and beyond to try to make

[defendants'] business successful." She believed she was not "fired for not doing

[her] job" but "for telling them . . . about [her] job." Plaintiff testified the

circumstances of her termination "led to . . . severe anxiety." She stated her

anxiety adversely affected her "confidence in getting back out there in the

workplace." However, she was ultimately able to find new employment on

October 8, 2019.

A-0326-20 4 Following the proof hearing, the judge entered an order on August 31,

2020, awarding plaintiff damages totaling $2,1912 under the FLSA on her unpaid

wages and overtime claims. The judge found plaintiff had demonstrated she

performed her duties as "an at-will employee of [d]efendant(s), and was not

compensated for her wages and overtime work." However, the judge denied

plaintiff's claim for liquidated damages. According to the judge, because "there

was no demonstration that an employment contract, or any contract, existed

between the [p]arties," there was "no demonstration of a contractual breach" to

allow a liquidated damages award. The judge also denied plaintiff's claim for

"an award of . . . emotional distress damages" resulting from "alleged willful

discriminatory conduct" by defendants. As to counsel fees, the judge reduced

the requested amount of $3,635 "by twenty-five percent" to $2,726 plus costs

"to align . . . with the final judgment award."

In a supplemental opinion filed October 15, 2020, pursuant to Rule 2:5-

1(b), the judge expressly denied plaintiff's CEPA claim because plaintiff "did

not submit sufficient evidence" relating to the requisite elements. Specifically,

the judge found plaintiff failed to demonstrate "she had a reasonable belief that

the employers' conduct was violating either the law, regulation, or public

2 We round all monetary amounts to the nearest dollar. A-0326-20 5 policy." The judge stated plaintiff provided insufficient proofs "demonstrating

. . . a source of law or public policy that relates to the complained of conduct"

and failed to "set forth facts which would support a reasonable belief that a

violation of law or public policy occurred."

The judge also determined plaintiff had not engaged in "whistleblowing

activity" because she did not report the "misconduct with respect to

compensation practices" internally "to other employees within the employers'

organization" or to "external" stakeholders. Instead, "[p]laintiff made a

reasonable inquiry as to why her paycheck contained an error." The judge also

found plaintiff had not established she was fired "in retaliation" for her overtime

pay inquiries.

Additionally, the judge clarified the reduction in the counsel fee award.

He "determined that the damages recovered were a factor bearing on the

reasonableness" of the award "consistent with RPC 1.5" and reasoned "the level

of success achieved was sufficient to warrant the reduction of the fee awarded."

Further, while plaintiff's counsel had "set forth . . . that the total lodestar amount

as the prevailing party was [$3,635] and . . . sought a [fifty percent] lodestar

enhancement bringing the lodestar to [$5,452,]" the judge exercised his

A-0326-20 6 discretion in excluding "excessive hours from the lodestar calculation" as well

as the enhancement. This appeal followed.

On appeal, plaintiff raises the following points for our consideration:

POINT I [3]

THE TRIAL COURT ERRONEOUSLY FAILED TO APPLY THE STANDARD SET FORTH IN HEIMBACH V. MUELLER [4] TO PLAINTIFF'S CEPA CLAIM, THEREBY COMMITTING ERROR IN FINDING THAT PLAINTIFF HAD NOT ESTABLISHED A PRIMA FACIE CASE OF RETALIATORY DISCHARGE IN VIOLATION OF CEPA.

POINT II

THE TRIAL COURT ERRED WHEN IT FAILED TO AWARD LIQUIDATED DAMAGES TO PLAINTIFF ON HER WAGE CLAIMS.

POINT III

THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT REDUCED PLAINTIFF’S LODESTAR FEES BY TWENTY-FIVE PERCENT WITHOUT ENGAGING IN THE CAREFUL AND CRITICAL EVALUATION OF THE HOURS EXPENDED BY COUNSEL REQUIRED BY RENDINE V. [5] PANTZER.

3 We have condensed the point heading to eliminate redundancy. 4 229 N.J. Super. 17 (App. Div. 1988). 5 141 N.J. 292 (1995). A-0326-20 7 Generally, judgment against a defaulting defendant should be granted

unless a court finds after a proof hearing that "some necessary element of

plaintiff's prima facie case was missing or because plaintiff's claim was barred

by some rule of law whose applicability was evident either from the pleadings

or from the proofs presented." Heimbach, 229 N.J. Super. at 23-24 (footnote

omitted). At the proof hearing, "the court should ordinarily apply the prima

facie standard to plaintiff's proofs, thus not weighing evidence or finding facts

but only determining bare sufficiency." Kolczycki v. City of East Orange, 317

N.J. Super. 505, 514 (App. Div. 1999). That exercise is "mechanical" and "[t]he

trial court is not concerned with the worth, nature or extent (beyond a scintilla)

of the evidence, but only with its existence, viewed most favorably" to plaintiff.

Dolson v. Anastasia, 55 N.J. 2, 5-6 (1969) (discussing analogous burden of proof

applicable to motion for involuntary dismissal under Rule 4:37-2).

Turning to the substantive principles, to establish the prima facie elements

of a CEPA claim, a plaintiff must demonstrate:

(1) he or she reasonably believed that his or her employer's conduct was violating either a law, rule, or regulation promulgated pursuant to law, or a clear mandate of public policy; (2) he or she performed a "whistle-blowing" activity described in [N.J.S.A. 34:19-3(a) or (c)]; (3) [a retaliatory] action was taken against him or her; and (4) a causal connection exists

A-0326-20 8 between the whistle-blowing activity and the [retaliatory] employment action.

[Turner v. Associated Humane Soc'ys, Inc., 396 N.J. Super. 582, 592 (App. Div. 2007) (first alteration in original) (quoting Dzwonar v. McDevitt, 177 N.J. 451, 462 (2003)).]

Protected whistle-blowing activities include "disclos[ing] to a supervisor

. . . an activity, policy or practice of the employer . . . the employee reasonably

believes . . . is in violation of a law" and objecting to "any activity, policy or

practice which the employee reasonably believes . . . is in violation of a law ."

N.J.S.A. 34:19-3(a) and (c). "CEPA 'does not require a plaintiff to show that a

law . . . actually would be violated if all the facts he or she alleges are true.

Instead, a plaintiff must set forth facts that would support an objectively

reasonable belief that a violation has occurred.'" Turner, 396 N.J. Super. at 593

(quoting Dzwonar, 177 N.J. at 464).

Furthermore, CEPA defines retaliatory action as "the discharge,

suspension or demotion of an employee, or other adverse employment action

taken against an employee in the terms and conditions of employment." N.J.S.A.

34:19-2(e). "The requirement that an employee who brings a CEPA claim under

N.J.S.A. 34:19-3 must show 'a causal connection exists between the whistle-

blowing activity and the adverse employment action[,]' can be satisfied by

A-0326-20 9 inferences that the trier of fact may reasonably draw based on circumstances

surrounding the employment action." Maimone v. City of Atl. City, 188 N.J.

221, 237 (2006) (alteration in original) (quoting Dzwonar, 177 N.J. at 462)

(citation omitted). "The temporal proximity of employee conduct protected by

CEPA and an adverse employment action is one circumstance that may support

an inference of a causal connection." Ibid.

CEPA's "requirements must be liberally construed to effectuate CEPA's

important social goals." Id. at 230. "[A] prevailing plaintiff in a CEPA action

is entitled to '[a]ll remedies available in common law tort actions.'" Longo v.

Pleasure Prods., Inc., 215 N.J. 48, 57 (2013) (quoting N.J.S.A. 34:19–5).

Indeed, "[t]he statute specifically permits compensatory and punitive damages."

Ibid.

Plaintiff contends she established a prima facie "CEPA claim for purposes

of assessing liability against a defaulted defendant" because it is conceivable a

jury could find defendants fired her in response to her complaints to her

supervisor that she was entitled to overtime pay after working more than forty

hours in a week as required by law in the United States. We agree. Plaintiff

testified defendants refused to pay employees overtime not exceeding the forty-

eight hour per week threshold for overtime in Canada. Plaintiff made a series

A-0326-20 10 of verbal complaints to her supervisor concerning defendants' purported wage

law violation and was terminated shortly thereafter. Viewing plaintiff's proofs

"indulgently" as we are required to do and limiting our inquiry to whether

plaintiff presented a prima facie case satisfying all elements of the cause of

action, Heimbach, 229 N.J. Super. at 20, we are satisfied the judge erred in

dismissing plaintiff's CEPA claim.

Turning to the FLSA claim, the FLSA provides that an employer "who

violates the provisions of section 206 or section 207 of this title shall be liable

to the employee or employees affected in the amount of their unpaid minimum

wages, or their unpaid overtime compensation, as the case may be, and in an

additional equal amount as liquidated damages." 29 U.S.C. § 216(b) (emphasis

added). Section 206 establishes the minimum hourly wage for workers "engaged

in commerce or in the production of goods for commerce," and section 207 sets

the minimum overtime rate at "not less than one and one-half times the regular

rate" for hourly employees who work more than forty hours in a week. The

FLSA also provides employers may avoid paying liquidated damages by

demonstrating to the court that their wage violations were based upon

reasonable, good faith errors. 29 U.S.C. § 260.

A-0326-20 11 Similarly, under the WPL, an employer who "fails to pay the full amount

of wages to an employee" is liable for the unpaid wages "plus an amount of

liquidated damages equal to not more than 200[%] of the wages lost or of the

wages due, together with costs and reasonable attorney's fees." N.J.S.A. 34:11-

4.10(c). The WPL also allows an employer to avoid paying liquidated damages

for first violations if the employer: (1) shows the court the violation was an

"inadvertent error made in good faith"; (2) "had reasonable grounds for

believing that the act or omission was not a violation"; and (3) acknowledges

the violation and pays what is owed within thirty days' notice of the violation.

Here, the judge denied plaintiff's liquidated damages claim because "there

was no demonstration that an employment contract, or any contract, existed

between the [p]arties." That was error. Neither the FLSA nor the WPL requires

an employment contract for an employee to recover liquidated damages for wage

law violations. See 29 U.S.C. § 216(b); N.J.S.A. 34:11-4.10(c). The judge

determined defendants had violated the FLSA by failing to pay minimum and

overtime wages. Accordingly, defendants were liable for liquidated damages,

unless they were able to show they had acted in good faith and had reasonable

grounds to believe their pay practices did not violate the law. See 29 U.S.C. §

A-0326-20 12 260. Likewise, defendants were required to pay liquidated damages for unpaid

wages under the WPL, absent a showing of good faith and other factors

delineated in the statute. See N.J.S.A. 34:11-4.10(c). However, defendants lost

their opportunity and ability to advance such affirmative proofs in defense of

the claim because of their default and failure to appear at the proof hearing.

Chakravarti v. Pegasus Consulting Grp., Inc., 393 N.J. Super. 203, 210-11 (App.

Div. 2007) ("[A] defendant who has defaulted has relinquished the right to

present affirmative proofs in the matter . . . ."). Accordingly, plaintiff was

entitled to liquidated damages under the FLSA and the WPL.

Given our decision that plaintiff's damages award must be recalculated,

we also reverse the judge's award of attorney's fees and remand the matter for

reconsideration, applying the principles governing such awards set forth in

Rendine, 141 N.J. at 343 (concluding "that contingency enhancements in fee-

shifting cases ordinarily should range between five and fifty-percent of the

lodestar fee, with the enhancement in typical contingency cases ranging between

twenty and thirty-five percent of the lodestar").

Reversed and remanded for further proceedings consistent with this

opinion. We do not retain jurisdiction.

A-0326-20 13