Case 2:16-cv-04074-ADS-SIL Document 18 Filed 06/03/17 Page 1 of 9 PageID #: 212
`
`Decision & Order
`16-cv-4074(ADS)(SIL)
`
`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF NEW YORK
`-----------------------------------------------------------------------------x
`JUAN S. GALICIA, individually and in behalf of all other
`
`persons similarly situated,
`
`
`
`
`
`Plaintiff,
`
`-against-
`
`
`
`
`
`
`TOBIKO RESTAURANT, INC.; and JIMMY H. LIN,
`jointly and severally,
`
`
`
`Defendant.
`
`
`-----------------------------------------------------------------------------x
`APPEARANCES:
`
`Law Office of Justin A. Zeller, Esq.
`Attorneys for the Plaintiff
`277 Broadway, Suite 408
`New York, NY 10007
`
`By:
`Justin A. Zeller, Esq.
`
`
`Brandon D. Sherr, Esq.
`
`
`John Gurrieri, Esq., Of Counsel
`
`Law Office of Z. Tan, PLLC
`Attorneys for the Defendants
`110 59th Street, Suite 3200
`New York, NY 10022
`
`By: Bingchen Li, Esq., Of Counsel
`
`
`
`SPATT, District Judge:
`
`Presently before the Court in this putative wage-and-hour class action are two motions.
`
`First, the Plaintiff Juan S. Galicia moves under Federal Rule of Civil Procedure
`
`
`
`
`
`(“FED. R. CIV. P.”) 12(b)(6) to dismiss the counterclaims asserted by the Defendant Tobiko
`
`Restaurant, Inc. (“Tobiko”) and its principal Jimmy H. Lin (“Lin,” together with Tobiko, the
`
`“Defendants”) on the ground that they fail to state plausible claims for relief.
`
`
`
`Second, the Defendants move under FED. R. CIV. P. 11(c) for an award of sanctions against the
`
`Plaintiff on the ground that the complaint is frivolous and intended solely to harass the Defendants.
`
`1
`
`

`

`Case 2:16-cv-04074-ADS-SIL Document 18 Filed 06/03/17 Page 2 of 9 PageID #: 213
`
`
`
`For the reasons that follow, the Plaintiff’s motion to dismiss the Defendants’ counterclaims is
`
`granted, and the Defendants’ motion for sanctions is denied.
`
`I.
`
`BACKGROUND
`
`
`
`On July 22, 2016, the Plaintiff filed a complaint alleging that, from January 2016 to March
`
`2016, he worked approximately 73 hours a week as a dishwasher in the Defendants’ restaurant, but
`
`was not paid the minimum wage, overtime wages, so-called “spread of hours” pay, and was not
`
`provided with certain required documentation, including wage statements, in violation of the Fair
`
`Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., and the New York Labor Law (“NYLL”).
`
`
`
`On October 18, 2016, the Defendants filed an answer, substantially denying the Plaintiff’s
`
`allegations and asserting counterclaims against the Plaintiff sounding in malicious prosecution and
`
`injurious falsehood. In particular, the Defendants alleged that the Plaintiff never worked for the
`
`Defendants; that the statements in his complaint are materially false; and that the Defendants have
`
`suffered a loss of business and other harm as a result of the Plaintiff’s claims.
`
`
`
`These motions followed.
`
`A.
`
`The Plaintiff’s Motion to Dismiss the Counterclaims
`
`II.
`
`DISCUSSION
`
`
`
`On November 7, 2016, the Plaintiff filed a motion to dismiss the counterclaims. Pursuant to
`
`Local Civil Rule 6.1(b), the time for the Defendants to respond to this motion expired on November
`
`21, 2016. However, to date, more than six months have elapsed and the Defendants have yet to
`
`respond in any way.
`
`1.
`
`The Standard of Review
`
`
`
`“A motion to dismiss a counterclaim is evaluated under the same standard as a motion to
`
`dismiss a complaint.” Capitelli v. Riverhouse Grill, Inc., No. 15-cv-2638, 2015 U.S. Dist. LEXIS 170156, at
`
`*2 (E.D.N.Y. Dec. 21, 2015) (Spatt, J.) (citation omitted). Namely, to survive a motion to dismiss
`
`under Rule 12(b)(6), a counterclaim must be supported by “ ‘enough facts to state a claim to relief
`
`
`
`2
`
`

`

`Case 2:16-cv-04074-ADS-SIL Document 18 Filed 06/03/17 Page 3 of 9 PageID #: 214
`
`that is plausible on its face,’ Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d
`
`929 (2007), and ‘allow[ ] the court to draw the reasonable inference that the [plaintiff] is liable for
`
`the misconduct alleged,’ Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009).”
`
`Otis-Wisher v. Medtronic, Inc., No. 14-cv-3491, 2015 U.S. App. LEXIS 9565, at *2 (2d Cir. June 9, 2015).
`
`
`
`Of importance, even where a motion to dismiss stands unopposed, as it does here, the
`
`movant is required to establish his entitlement to relief. See McCall v. Pataki, 232 F.3d 321, 323 (2d Cir.
`
`2000) (“If a complaint is sufficient to state a claim on which relief can be granted, the plaintiff’s
`
`failure to respond to a Rule 12(b)(6) motion does not warrant dismissal”); Lichtenstein v. Reassure Am.
`
`Life Ins. Co., No. 07-cv-1653, 2009 U.S. Dist. LEXIS 23656, at *18 (E.D.N.Y. May 23, 2009) (“The court
`
`typically applies the same Rule 12(b)(6) standard to unopposed motions to dismiss”).
`
`2.
`
`As to the Sufficiency of the Counterclaims
`
`
`
`As noted above, the Defendants assert counterclaims against the Plaintiff sounding in
`
`malicious prosecution and injurious falsehood, both of which stem from the allegedly groundless
`
`nature of the complaint in this case. However, the Defendants’ answer fails to set forth enough non-
`
`conclusory facts to state a plausible claim for relief under either theory.
`
`a.
`
`Malicious Civil Prosecution
`
`
`
`To state a claim for malicious prosecution of a civil action, the Defendants are required to
`
`plausibly allege that the Plaintiff initiated an action against them, without probable cause to believe
`
`it could succeed, and that the case terminated in the Defendants’ favor. See Engel v. CBS, 145 F.3d 499,
`
`502 (2d Cir. 1998). Thus, to the extent that an essential element of this cause of action is a
`
`resolution favoring the Defendants, they must necessarily await completion of the action before
`
`bringing their claim. See Secard v. Wells Fargo Bank, N.A., No. 15-cv-499, 2015 U.S. Dist. LEXIS 144412,
`
`at*12-*13 (E.D.N.Y. Sept. 9, 2015) (Report and Recommendation) (dismissing claim for malicious
`
`prosecution where the underlying lawsuit was still pending), adopted, 2015 U.S. Dist. LEXIS 144378
`
`
`
`3
`
`

`

`Case 2:16-cv-04074-ADS-SIL Document 18 Filed 06/03/17 Page 4 of 9 PageID #: 215
`
`(E.D.N.Y. Oct. 23, 2015); Zeltser v. Joint Stock Inkombank, No. 95-cv-796, 1998 U.S. Dist. LEXIS 8200, at
`
`*9-*10 (S.D.N.Y. 1998) (finding that the merits of a malicious prosecution claim can only be assessed
`
`after the completion of the challenged action); cf. Bentley v. McNamara, 2017 U.S. Dist. LEXIS 62532, at
`
`*8-*9 (N.D.N.Y. Apr. 24, 2017) (dismissing a malicious prosecution claim as premature where the
`
`underlying criminal action was ongoing).
`
`
`
`Therefore, to the extent that the Defendants attempt to predicate a malicious prosecution
`
`claim on the present litigation, they do not state a plausible claim for relief. Accordingly, the
`
`Plaintiff’s motion to dismiss this counterclaim is granted, without prejudice to refiling at an
`
`appropriate time.
`
`b.
`
`Injurious Falsehood
`
`
`
`“The tort of injurious falsehood ‘consists of the knowing publication of false matter
`
`derogatory to the plaintiff’s business of a kind calculated to prevent others from dealing with the
`
`business or otherwise interfering with its relations with others, to its detriment.’ ” Korova Milk Bar of
`
`White Plains, Inc. v. PRE Props., LLC, No. 11-cv-3327, 2013 U.S. Dist. LEXIS 14937, at *53 (S.D.N.Y. Feb. 4,
`
`2013) (quoting Kasada, Inc. v. Access Capital, Inc., No. 01-cv-8893, 2004 U.S. Dist. LEXIS 25257, at *50
`
`(S.D.N.Y. Dec. 14, 2007)).
`
`
`
`Unlike the tort of defamation, which may be actionable where the challenged statements
`
`impugn the basic integrity or creditworthiness of a business, “ ‘an injurious falsehood is confined to
`
`denigrating the quality of the plaintiff’s business’s good or services.’ ” Id. at *54 (quoting Berwick v.
`
`New World Network Int’l, Ltd., No. 06-cv-2641, 2007 U.S. Dist. LEXIS 22995, at *48 (S.D.N.Y. Mar. 28,
`
`2007), aff’d, 639 F. App’x 43 (2d Cir. 2016)). For this reason, the tort of injurious falsehood is also
`
`commonly referred to as “trade libel” and “product disparagement.” See Henneberry v. Sumitomo Corp. of
`
`Am., 415 F. Supp. 2d 423, 470, 472 (S.D.N.Y. 2006) (noting that the relevant caselaw “elucidates the
`
`difference between, on the one hand, statements concerning a party’s integrity or business methods,
`
`
`
`4
`
`

`

`Case 2:16-cv-04074-ADS-SIL Document 18 Filed 06/03/17 Page 5 of 9 PageID #: 216
`
`and, on the other hand, statements denigrating the quality of a party’s goods or services, with the
`
`former providing a basis for a claim of defamation and the latter providing a basis for an injurious
`
`falsehood claim”) (internal quotation marks and citations omitted).
`
`
`
`Applying these standards, the Court finds that the Defendants’ counterclaim is unsupported
`
`by any plausible allegations that the complaint in this action denigrates the goods or services they
`
`offer. On the contrary, accepting the Defendants’ factual premise, the Plaintiff’s complaint falsely
`
`attributes to Tobiko and its individual owner a willful failure to comply with the applicable state
`
`and federal labor laws. While certainly derogatory, there simply is no plausible nexus between these
`
`charges and the quality of the Defendants’ goods and services so as to support an injurious falsehood
`
`claim.
`
`
`
`Further, even if there was such a connection, the Plaintiff is correct in asserting that the
`
`harm allegedly suffered by the Defendants as a result of the commencement of this action is not pled
`
`with the specificity required to state a claim based on injurious falsehood. See Murphy-Higgs v. Yum
`
`Yum Tree, Inc., 112 F. App’x 796, 797 (2d Cir. 2004) (noting that “[u]nder New York tort law, special
`
`damages are an essential element of the tort of injurious falsehood” and “claimants must provide
`
`proof of itemized damages”); Kasada, Inc., 2004 U.S. Dist. LEXIS 25257, at *51 (noting that “[t]he
`
`requirement of pleading and proving special damages is applied strictly,” and therefore, “a motion to
`
`dismiss a claim of injurious falsehood may be granted for failure to allege special damages with the
`
`requisite specificity”) (citations omitted).
`
`
`
`In particular, the Defendants allege that the Plaintiff’s false accusations have led to a “loss of
`
`business by 15-20%”; difficulty selling the restaurant; and “attorneys’ fees and costs in defending the
`
`action and tremble [sic] damages” to be established at trial. In the Court’s view, these allegations fall
`
`well short of properly pleading special damages. See Murphy-Higgs, 112 F. App’x at 797 (overturning a
`
`jury verdict in favor of counterclaiming defendants where “vague testimony as to lost sales” was
`
`
`
`5
`
`

`

`Case 2:16-cv-04074-ADS-SIL Document 18 Filed 06/03/17 Page 6 of 9 PageID #: 217
`
`“plainly insufficient” to establish special damages); In Touch Concepts v. Cellco P’ship, 949 F. Supp. 2d
`
`447, 484 n.30 (S.D.N.Y. 2013) (dismissing claim based on injurious falsehood where the pleading
`
`lacked specific allegations connecting the damages sought to any alleged injury to the plaintiff’s
`
`credibility and reputation in the business community); Korova, 2013 U.S. Dist. LEXIS 14937, at *56
`
`(finding that the plaintiff’s alleged damages, consisting of a “substantial decrease in the number of
`
`patrons” and a “decrease in profits,” were “simply insufficient to state a claim for injurious falsehood
`
`under New York law”); Conte v. Newsday, 703 F. Supp. 2d 126, 149 (E.D.N.Y. 2010) (dismissing claim
`
`based on injurious falsehood where a bare allegation of $500,000 in damages, without any
`
`itemization, was insufficient to state a claim); Kasada, Inc, 2004 U.S. Dist. LEXIS 25257, at *52
`
`(dismissing claim based on injurious falsehood where the plaintiff alleged special damages based on
`
`a loss of business “in an amount to be determined at trial”).
`
`
`
`Therefore, the Court finds that the Defendants have failed to plausibly allege two essential
`
`elements of an injurious falsehood claim, namely, a false statement directed at the quality of their
`
`business’s goods or services, and special damages. Accordingly, the Plaintiff’s motion to dismiss this
`
`counterclaim is granted.
`
`B.
`
`The Defendants’ Motion for Rule 11 Sanctions
`
`
`
`On December 12, 2016, the Defendants filed a separate motion under Rule 11, seeking an
`
`award of sanctions against the Plaintiff and his counsel. In particular, the Defendants contend that
`
`the complaint is premised on materially false factual allegations; that the Plaintiff’s counsel failed to
`
`undertake a reasonable inquiry regarding the accuracy of the Plaintiff’s allegations; and that this
`
`action was commenced solely to harass the Defendants and extract a nuisance settlement.
`
`1.
`
`The Standard of Review
`
`
`
`“Rule 11 sanctions are a coercive mechanism, available to trial court judges, to enforce ethical
`
`standards upon attorneys appearing before them, while being careful not to rein in zealous
`
`
`
`6
`
`

`

`Case 2:16-cv-04074-ADS-SIL Document 18 Filed 06/03/17 Page 7 of 9 PageID #: 218
`
`advocacy.” Kiobel v. Millson, 592 F.3d 78, 83 (2d Cir. 2010) (quoting Pannonia Farms, Inc. v. USA Cable,
`
`426 F.3d 650, 652 (2d Cir. 2005)).
`
`
`
`Relevant here, Rule 11 “provides for the imposition of appropriate sanctions when an
`
`attorney or a party signs a pleading . . . that contains a claim that is objectively unreasonable.” See
`
`Spinner v. City of New York, No. 01-cv-2715, 2003 U.S. Dist. LEXIS 9411, at *41 (E.D.N.Y. Jan. 28, 2003)
`
`(citing MacDraw, Inc. v. CIT Group Equip. Fin., Inc., 73 F.3d 1253, 1257-58 (2d Cir. 1996)), aff’d, 2003 U.S.
`
`Dist. LEXIS 14854 (E.D.N.Y. Aug. 27, 2003).
`
`2.
`
`As to Whether Sanctions are Warranted in this Case
`
`
`
`The Defendants contend that the material facts alleged in the complaint are false, and no
`
`competent attorney, having conducted a reasonable inquiry, could have concluded otherwise. The
`
`Court disagrees.
`
`
`
`To establish the falsity of the Plaintiff’s claim that he worked at Tobiko, the Defendants
`
`submitted an affidavit by the individual Defendant Jimmy Lin. In this affidavit, Lin asserts that he
`
`has been the sole owner and manager of Tobiko since it opened for business in November 2013,
`
`during which time he has been present at the restaurant on a near-daily basis and has personally
`
`interviewed and hired every employee. However, Lin denied that the Plaintiff ever worked at
`
`Tobiko.
`
`
`
`Rather, Lin asserted that, during the same period of time the Plaintiff claims to have worked
`
`as a dishwasher, the restaurant had a full-time dishwasher named Vicente Mendoza. Mendoza
`
`assertedly worked from 11:00 A.M. to 10:30 P.M. every Monday through Wednesday; 11:00 A.M. to
`
`11:00 P.M. every Friday; 12:00 P.M. to 11:00 P.M. every Saturday; and 12:00 P.M. to 10:00 P.M. every
`
`Sunday. He took one hour-long break each workday, and on Thursdays, when Mendoza was off, one
`
`of two unidentified employees responsible for operating the deep fryer would washes dishes in his
`
`place.
`
`
`
`7
`
`

`

`Case 2:16-cv-04074-ADS-SIL Document 18 Filed 06/03/17 Page 8 of 9 PageID #: 219
`
`
`
`The Defendants also submitted an affidavit from Mendoza himself, who confirmed that he
`
`worked as a dishwasher at Tobiko during the relevant time period, and on the same work schedule
`
`described by Lin. He asserted that he was the only dishwasher at Tobiko during this period, and
`
`does not know of any employee by the Plaintiff’s name.
`
`
`
`Relying on this evidence, the Defendants contend that the Plaintiff’s counsel failed to make a
`
`reasonable inquiry into the Plaintiff’s alleged employment, and that his claims based on wage-and-
`
`hour violations are objectively unreasonable.
`
`
`
`In opposition, Brandon D. Sherr, Esq. submitted an affidavit of his own, denying that his law
`
`firm failed to make a reasonable inquiry before filing the complaint. In relevant part, Mr. Sherr
`
`described the process by which counsel interviewed the Plaintiff about his employment, and then
`
`independently corroborated several facts relating to the Defendants’ business. Mr. Sherr also noted
`
`that it was reasonable to rely on the Plaintiff’s version of events because Sherr’s law firm has
`
`represented the Plaintiff in several prior wage-and-hour litigations, and he has never knowingly
`
`provided counsel with false factual information.
`
`
`
`In the Court’s view, this conflicting evidence clearly shows that the parties disagree on a
`
`basic element of the Plaintiff’s claim, and in that regard, creates an issue of material fact for trial.
`
`However, resolving all doubts in favor of the attorney who signed the complaint, see Oliveri v.
`
`Thompson, 803 F.2d 1265, 1275 (2d Cir. 1986), the Court is unable to conclude that the Defendants’
`
`affidavits, without more, make it “patently clear that” the Plaintiff’s claim “has absolutely no chance
`
`of success under the existing precedents,” Fisher v. Tice, No. 15-cv-955, 2016 U.S. Dist. LEXIS 87792, at
`
`*71 (S.D.N.Y. July 5, 2016) (Report and Recommendation), adopted, 2016 U.S. Dist. LEXIS 120001
`
`(S.D.N.Y. Sept. 4, 2016).
`
`
`
`The Court’s reasoning is not altered by the Defendants’ reliance on complaints filed by the
`
`Plaintiff in prior wage-and-hour cases against his former employers. In arguing that the Plaintiff’s
`
`
`
`8
`
`

`

`Case 2:16-cv-04074-ADS-SIL Document 18 Filed 06/03/17 Page 9 of 9 PageID #: 220
`
`counsel has facilitated a pattern of pursuing false and groundless lawsuits, the Defendants point out
`
`discrepancies and apparently conflicting allegations in several of these prior complaints. However,
`
`the Defendants fail to identify anything in these prior complaints that supposedly contradicts or
`
`disproves the specific allegations made in this case.
`
`
`
`Therefore, the Court finds that the Defendants have failed to satisfy their burden of
`
`demonstrating that Plaintiff’s claims are objectively unreasonable, or that the conduct of the Plaintiff
`
`and his counsel is otherwise sanctionable. Accordingly, the Defendants’ motion for an award of
`
`
`
`/s/ Arthur D. Spatt_______________________________
`ARTHUR D. SPATT
`United States District Judge
`
`
`9
`
`sanctions under Rule 11 is denied.
`
`It is SO ORDERED:
`
`
`
`Dated: Central Islip, New York
`
`June 3, 2017
`
`
`
`
`
`
`
`
`
`