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Co-op City Times / February 5, 2022
Judge’s Decision
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sued in Federal Court in a class action consisting of former employees alleging their employment contracts violated the Fair Labor Standards Act. That was the decision of Judge Koeltl at 35 F.Sup.3d 513, August 1, 2014. It is undisputed that MSI was responsible for these employee contracts and that Riverbay was not. New York State regulations hold that plaintiff, as the then managing agent of Co-op City, was responsible for all “day-to-day operations, management and employment related matters” under NYCR Section 1725-3.3, and that Riverbay should not interfere with their performance of these duties. The contract between the parties provides that plaintiff is “responsible for compliance with all applicable laws”, that would include local, state, federal laws, codes and ordinances. And Article 9 provides that the contract may be terminated “by Riverbay”... “effective immediately”...” if the managing agent shall fail or refuse to comply with or abide by any rule, order, determination, ordinance or law of any federal, state or municipal authority.” So, Judge Koeltl found the contracts to be in breach of the Fair Labors Standard Act and thus in violation of New York State and Federal Law. And all that means is that plaintiff, who is in charge of and had sole responsibility for the illegal employment contracts, violated the law. And because violation of the law grants Riverbay authority to terminate its within its rights to terminate plaintiff maybe. The issue is that a letter from the Division of Housing and Community Renewal advised Riverbay that plaintiff was improperly removed as the managing agent and should be reinstated. Although DHCR had the authority to reinstate plaintiff itself, it did not and subsequent replacement. This inaction and subremoval of plaintiff allegedly pursuant to a contract they are best resolved by a jury determination. tion, two breach of contract as to other contractual requirements and the third is negligence. First plaintiff seeks summary judgment dismissasserts it has no duty to indemnify defendant for graph 16 of the contract provides that plaintiff would “defend, indemnify and hold harmless Riverbay, anything related to the Fair Labor Standards Act it was pressured to pay. The same paragraph of the contract calls for the payment of fees for “personal injuries, illness, wrongful death and property damasserts that violations of the FLSA and the New York Labor Law do not conform to any of this, but as the Court previously noted a few moments ago, the contract called for plaintiff to adhere to all applicable law, and plaintiff was found to have breached New York State and Federal Law. This implicates the breach of contract portion of the clause in the contract, but it remains to be determined whether Riverbay itself breached the contract by terminating plaintiff. If such a determination is made, then a serious question would arise whether Riverbay would be entitled to breach of contract based on this the Court cites the L-U-E case, 94 A.D.3d 386. Department held that – that a contractual indemnimature to determine whether plaintiff is obliged to indemnify Riverbay for expenses and costs related -
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dismissing that counterclaim is denied. counterclaim asserting that plaintiff breached its contract by approving the contracts without Rivercording to the record, it was noted that as of that date millions of dollars in contracts were placed every regulations and the contract between the parties hold that insurance contracts be bid upon whenever possible, and that all insurance contracts in excess of $100,000 be approved by a board resolution signed by the board president, forwarded to the DHCR for contrast plaintiff claims that the contract did not contain any mention of board approval for contracts in excess of $100,000. However, the contract provides that “the managing agent is authorized after approval by a majority of Riverbay board of directors”...”to procure contracts for the proper maintenance, repair Document 191, page 7, Section D dealing with contract procedures. Furthermore, 9NYCRR 17728-4.3 which governs actions by housing company managers like plaintiff, provides that “prior approval by the New York Division of Housing and Community Renewal is required for purchases or contracts of $100,000 or more.” So, besides a clear contract and statutory language, plaintiff has admitted that it approved of tens of millions of dollars worth of don me. And it is unlikely that this would ever be allowed to occur without some form of approval from either Riverbay or relevant New York State aulaw require approval for contracts, and defendant procured contracts without any form of approval. Just a moment. Although defendant is the non movsummary judgment on the counterclaim that plaintiff breached the contract by not obtaining Riverbay board signoff prior to approving the contracts. Finally defendant – plaintiff rather moves for terclaim asserting that plaintiff was negligent with nances, avoid labor disputes and ensure compliance argues that the governing contract exempts it from liability arising out of the payment of wages or compensation, namely that Article 6 provides that it shall not be responsible for wages or compensation. This does not exempt plaintiff from responsibility under New York State regulations as the then managing agent of Co-op City for all “day-to-day operations, management and employment related matters with– 9 NYCRR Section 1725-3.3. In the past the New York State Department of Housing and Community Renewal had removed a Riverbay board president this policy by intruding into employment matters. Article 6 of the contract between the parties also provides that the managing agent shall hire “all
responsible for recruiting, selecting, hiring, supervising, evaluating and terminating all staff and also that it would “negotiate and administer contracts”. The labor relations section provides that plaintiff was responsible for promoting a “positive working relationship environment to execute the best possible labor agreement.” Last, all “applicable personnel...under staff at Riverbay... will report to the executive general manager” who is “employed by” document number 256 under “job descriptions, du-
ties and responsibilities”. In August of 2014 Judge Koeltl, as I mentioned earlier, issued a decision in an action over labor employment issues brought by many Riverbay employees against both plaintiff and defendant. The District Court held that both parties violated the FLSA and similar provisions of the New York Labor Law. Ultimately Riverbay alone settled this action for $6,250,000 because plaintiff declined to pay. Federal Court found that “There is no dispute” that the employees were paid for compensation time instead of cash for overtime hours. That was page that this was “not expressly authorized and courts have generally concluded that this is...not permitthat regarding the two plaintiffs, their compensation time claims are “uncontested... from which no reasonable inference can be drawn other than these two plaintiffs were provided comp. time in lieu of cash overtime for time worked...constituting uncompensated overtime under the law...and plaintiffs are entitled to summary judgment for liability under fedFurthermore, the Court stated that regarding four, F-O-U-R, plaintiffs they had a “proper basis for summary judgment” for their claim of failure to be paid nighttime differential pay which also violated federal and state law.” That was page 530 of Judge So, Judge Koeltl found enough evidence of labor and employment violations to justify granting summary judgment. The contract between the parties here, plaintiff and defendant, provides that plaintiff is “responsible for compliance with all applicable laws.” NYSCEF Document 256, page 14. The labor practices found to be illegal in Federal Court involved employment practices between 2001 and 2013, a period when plaintiff acted as managing agent of Co-op City and had complete control over labor policies and practices. The fact that Judge Koeltl found the contracts in breach of the FLSA and the New York Labor Law, and thus in violation of state and federal law, means that plaintiff, who was in charge of and had sole responsible for the illegal employment contracts violated the law. plaintiff full control over employment related matsummary judgment is denied. Indeed, once again although defendant is the nonmoving party, the remanaging the employment related matters for Riverbay compel this Court to grant Riverbay, the defendant and nonmoving party summary judgment on its negligence counterclaim. So this case is not over. There remains a trial to be held. And the jury will consider damages on the counterclaims that the Court has – on which the Court has granted, reversed summary judgment for defendant. I wish counsel well and all their loved ones. And thank you very much. MR. KHADER: Your Honor, will this order from the bench be uploaded or should we request it from Ms. Sacco? THE COURT: There will be a gray sheet probably handwritten summarizing what the Court did for the reasons stated on the record. It is traditional or typical for counsel to order the minutes and then – and then use them appropriately to enforce the order listed in the gray sheet. MR. KHADER: Thank you. *** the above-captioned stenographic minutes.
––––––––––––––––––––––––––––––––––––– Lori Ann Sacco
