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Gristede's Owner Liable In OT Class Action: Judge

Law 360 - Za Winnickch

A New York federal judge ruled Friday that Gristede’s Foods Inc. owner John Catsimatidis is personally liable for any damages the company owes to a class of hundreds of grocery workers who say they are due millions in overtime payments under the Fair Labor Standards Act.

“The conclusion should come as no surprise to Mr. Catsimatidis,” U.S. District Judge Paul A. Crotty said Friday, ruling that the owner of Manhattan’s largest supermarket chain is an employer under the law, and therefore jointly and severally liable for damages owed by the chain. “There is no aspect of Gristede’s operations from top to bottom and side to side which is beyond Mr. Catsimatidis’ reach. There is no area of Gristede’s which is not subject to his control, whether he chooses to exercise it.”

Friday’s decision puts the New York grocery magnate on the hook for what could amount to millions of dollars in damages to hundreds of hourly workers who say the company misclassified them as managers to avoid paying them overtime.

The lawsuit traces back to April 2004, when plaintiff Carlos Torres filed a class action seeking damages on behalf of nearly 500 Gristede's department managers and co-managers for unpaid overtime in violation of the FLSA and New York Labor Law.

The class was certified in September 2006, and the parties agreed on a settlement amount on the eve of trial in June 2009.

Negotiations on key settlement terms continued, and in June 2010, the court granted preliminary approval to a $3.5 million settlement that provided for a lump payment of $425,000, followed by 27 monthly payments. The court granted final approval to the settlement in December.

The settlement has since run into trouble. In July, Gristede’s filed a motion saying it had missed scheduled payments and seeking to modify the settlement terms and block an acceleration provision in the settlement agreement.

“In the seven fiscal quarters since June 1, 2009, Gristede’s has incurred net losses in excess of $10 million,” the defendants noted in their motion. “Because of Gristede’s continued financial difficulty, it finds itself in arrears under the settlement agreement.”

The motion for partial summary judgment granted Friday dates back to May 2009, when the plaintiffs moved for summary judgment as to the individual liability of Catsimatidis. The court removed the motion from its calendar during settlement talks but placed it back on the docket in January 2010.

In Friday's ruling, Judge Crotty pointed to an affidavit signed by Catsimatidis in another federal court lawsuit, Trader Joe’s Co. v. Gristede's Foods Inc., in which the grocery king asserted that he is the sole owner, president and CEO of Gristede’s that he has the authority to open and close stores, and that he has other powers that demonstrate “he has absolute control of Gristede’s and all of its operations.”

The judge rejected Catsimatidis’ argument that he didn’t meet the definition of an employer under the FLSA and New York law and shouldn’t be held personally liable.

“Mr. Catsimatidis routinely reviews financial reports, works at his office in Gristede’s corporate office and generally presides over the day-to-day operations of the company. His employees recognize that he is in charge,” Judge Crotty noted. “It does not matter that Mr. Catsimatidis has delegated powers to others. What is critical is that Mr. Catsimatidis has those powers to delegate.”

The ruling means that any damages that have accrued in the overtime action are owed not only by Gristede's, but by Catsimatidis himself.

Catsimatidis disagreed strongly with the decision on Monday. “The fact is, I have not run that company day to day for 10 years. I have not hired anybody and not fired anybody for 10 years, so for them to say I’m responsible for any wrongdoing of the company and pierce the corporate veil and make me responsible, I think it’s wrong.”

Calling the about $200 million in annual revenue the supermarket chain pulls in “pimples on an elephant’s” rear end compared with the about $3.5 billion to $4 billion his larger company pulls in, Catsimatidis said his lawyers were exploring their options.

“This might be a case for the Supreme Court,” he added.

A representative for the plaintiffs did not immediately respond to a request for comment.

The plaintiffs are represented by Adam T. Klein, Justin M. Swartz, Molly Brooks and Mariko Hirose of Outten & Golden LLP.

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The case is Carlos Torres et al. v. Gristede's Operating Corp. et al., case number 1:04-cv-03316, in the U.S. District Court for the Southern District of New York.