Yarpah v. Bowden Hospitality Newton LLC, et al. (Lawyers Weekly No. 12-061-17)

ROLAND YARPAH, and all others similarly situated
Roland Yarpah worked for several years at the Crowne Plaza Hotel in Newton, Massachusetts. He claims that the Hotel violated the Massachusetts Tips Act (G.L. c. 149, § 152A) by levying an eight percent “administrative charge” for functions where food or alcohol are served, not telling customers that this charge is not a tip paid to servers, and nonetheless keeping monies collected for this charge instead of paying them to wait staff and service bartenders. Yarpah sued Bowden Hospitality Newton LLC, which owns and operates the Hotel. He has also sued Intercontinental Hotels Group Resources, Inc. (IHGR).
IHGR has moved to dismiss the claims against it with prejudice on the ground that the facts alleged do not plausibly suggest that IHGR charged, received, or had any control over the disputed charge. IHGR also showed that it has no contractual relationship with Bowden, and that Holiday Hospitality Franchising, LLC (“HHFL”) is the entity that gave Bowden license to do business as a Crowne Plaza Hotel.
Yarpah then moved to amend the complaint to delete IHGR as a defendant and instead sue HHFL and its parent Six Continent Hotels, Inc. (“SCH”); both of these entities assert that Yarpah has no standing to sue them. Yarpah also seeks to add as a defendant Ward Childs, who manages the hotel for Bowden.
The Court will allow the motion to dismiss the claims against IHGR with prejudice because Yarpah made clear at oral argument that he does not oppose that request. It will also permit Yarpah to add Childs as a defendant, without opposition.
The Court will deny the request to add HHFL and SCH as defendants, however. Neither of them had any control over or received any revenue from the
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administrative charges. As a result they owe no duty under the Tips Act, and Yarpah lacks standing to sue them. It would therefore be futile to amend the complaint to add them as defendants. See generally Johnston v. Box, 453 Mass. 569, 583 (2009) (“Courts are not required to grant motions to amend prior [pleadings] where ‘the proposed amendment … is futile.’ ” (quoting All Seasons Servs., Inc. v. Commissioner of Health & Hosps. of Boston, 416 Mass. 269, 272 (1993)); Thermo Electron Corp. v. Waste Mgmt. Holdings, Inc., 63 Mass. App. Ct. 194, 203 (2005) (affirming denial of motion for leave to assert counterclaim that would have been futile).
1. Legal Background. HHFL and SCH assert that Yarpah lacks standing to sue them. Whether a plaintiff has standing raises an “issue of subject matter jurisdiction.” Indeck Maine Energy, LLC v. Commissioner of Energy Resources, 454 Mass. 511, 516 (2009). A plaintiff has standing to sue a particular defendant if that defendant owed a legal duty to the plaintiff, breached that duty, and plaintiff suffered some injury as a result. See Sullivan v. Chief Justice for Admin. & Mgmt. of the Trial Court, 448 Mass. 15, 22-23 (2007). “It is not enough that the plaintiffs be injured by some act or omission of the defendant; the defendant must additionally have violated some duty owed to the plaintiffs.” School Comm. of Hudson v. Board of Educ., 448 Mass. 565, 579 (2007), quoting Penal Inst. Comm’r for Suffolk County v. Commissioner of Corr., 382 Mass. 527, 532 (1981).
1.1. The Tips Act imposes a legal duty on any entity or person that requires customers to pay a tip for service performed by wait staff, service employees, or service bartenders,1 or that requires customers to pay a service charge in lieu of such a tip. Specifically, the entity that collects such a tip or service charge must pay it over to the wait staff and service employees or bartenders in proportion to the service they provided, and may not retain the tip or service charge or distribute it in any other manner. See G.L. c. 149, § 152A. An entity charging for service performed
1 “Wait staff” are defined as wait persons, bus persons, and counter staff who serve food or beverages or clear tables and have no managerial responsibilities. “Service employees” are employees who work in fields other than food or beverage service in which employees customarily receive tips or gratuities, and who have no managerial responsibilities. “Service bartenders” prepare drinks to be served by someone else, such as wait staff employees. See G.L. c. 149, § 152A(a).
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by such personnel may only impose an administrative fee in addition to or instead of a service charge if it informs the customer in writing that the fee does not represent a tip or service charge. Otherwise, the fee must be treated as a service charge and distributed to the wait staff, service employees, and service bartenders. Id. § 152A(d); see also Bednark v. Catania Hospitality Group, Inc., 78 Mass. App. Ct. 806 (2011).
Entities that neither collect nor retain any part of a tip or service charge have no duty to employees under the Tips Act. For example, if one company employs wait staff to provide food and beverage service at certain events, and a different entity assesses a service charge on the customers paying for those events, the employer has no duty under the Tips Act because it did not submit any invoice to the customers, collect any payment from the customers, retain the service charge, or fail to pay the service charge revenues to the wait staff and service employees. See Cooney v. Compass Grp. Foodservice, 69 Mass. App. Ct. 632, 640-641 (2007).
1.2. Challenging Standing. A motion by an existing defendant to dismiss an action under Mass. R. Civ. P. 12(b)(1) for lack of standing (or other purported lack of subject matter jurisdiction) may do so based solely on the facts alleged in the complaint or on additional evidence submitted by the defendant.
If such a motion is not supported by any evidence, it “presents a ‘facial attack’ based solely on the allegations of the complaint” and thus the court must assume that those allegations are true for the purpose of deciding whether it has subject matter jurisdiction to resolve the claim. Callahan v. First Congregational Church of Haverhill, 441 Mass. 699, 709 (2004), quoting Hiles v. Episcopal Diocese of Mass., 437 Mass. 505, 516 n.13 (2002).
But a defendant may instead submit “documents and other materials outside the pleadings,” including materials “that are not affidavits,” in an attempt to “contest the accuracy (rather than the sufficiency) of the jurisdictional facts pleaded by the plaintiff.” Callahan, supra, at 710-711. Where, as here, the defendant makes such a “factual challenge” to subject matter jurisdiction, the court must “address the merits of the jurisdictional claim by resolving the factual disputes between the plaintiff and the defendants.” Id. at 711. Under these circumstances the factual allegations in the complaint are not presumed to be true, id., and the evidence submitted regarding
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subject matter jurisdiction is “not viewed in the light must favorable to the non-moving party,” Wooten v. Crayton, 66 Mass. App. Ct. 187, 190 n.6 (2006).
In deciding whether it would be futile to let Yarpah assert new claims against HHFL and SCH, the Court must follow the standards that would apply—and therefore may consider the same materials that would be relevant—if HHFL and SCH were already named as defendants and had moved to dismiss the claims against them under Mass. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction. Cf. Mancuso v. Kinchla, 60 Mass. App. Ct. 558, 572 (2004) (pleading amendment is futile if it could not survive motion to dismiss).
2. Findings and Analysis. Based on the evidence summarized below, the Court finds that neither HHFL nor SCH assessed or collected the administrative charges imposed by the Hotel, received or is retaining any revenues generated by those charges, or controlled the imposition of those charges or the distribution of the revenues collected by the Hotel from those charges.
HHFL and SCH submitted sworn declarations of Randall S. Hammer, Ward Childs, and Laura Cranfield. HHFL and SCH also submitted: (i) certain pages from the License Agreement between Bowden and HHFL’s predecessor (Holiday Hospitality Franchising, Inc.), which allows Bowden to use trademarks, service marks, logos, and sign designs associated with the Crowne Plaza hotel brand, and (ii) excerpts from the Business Rewards manual issued by InterContinental Hotels Group (“IHG), which includes Crowne Plaza and a number of other hotel chains.
Yarpah’s only evidence is an excerpt from the Franchise Disclosure Document issued by InterContinental Hotels and Resorts, which Yarpah attached to his unverified, proposed amended complaint. The Court finds, based on Mr. Hammer’s undisputed declarations, that the document submitted and relied upon by Yarpah is irrelevant because it was issued several years after Bowden executed a Crowne Plaza license agreement and, more importantly, is for the InterContinental brand of hotels and has nothing to do with the Crowne Plaza brand. Although Crowne Plaza and the various Holiday Inn chains are all part of the InterContinental Hotels Group, they are separate and distinct from the InterContinental Hotels & Resorts chain.
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The Court credits all of the testimony in the declarations submitted by HHFL and SCH. Based on that evidence it finds as follows. HHFL and SCH do not own, operate, or control the Hotel where Yarpah worked. They did not assess or collect any of the administrative charges at issue in this case. They have never told Bowden what or how to bill for its banquet and event services, and they have no right to do so. They have no control over whether and how Bowden assesses an administrative charge for its banquets and functions. Neither HHFL nor SCH has received, and thus has not retained, any part of the revenue generated Bowden’s administrative charge. Nor can they exercise any control over what Bowden does with those revenues.
Based on these findings, and the legal standards discussed above, the Court concludes that neither HHFL nor SCH has ever owed Yarpah any duty under the Massachusetts Tips Act. Yarpah therefore lacks standing to assert his proposed claims against these two corporate entities.
Yarpah’s assertion that HHFL can be held vicariously liable for any breach of the Tips Act because it is Bowden’s franchisor is without merit. “[A] franchisor is vicariously liable for the conduct of its franchisee only where the franchisor controls or has a right to control the specific policy or practice resulting in harm to the plaintiff.” Depianti v. Jan-Pro Franchising Int’l, Inc., 465 Mass. 607. 617 (2013). The Court finds, based on the undisputed evidence before it, that neither HHFL nor SCH controls or has any right to control Bowden’s assessment, collection, and disposition of the disputed administrative charge.
The mere fact that HHFL receives payments under its license agreement with Bowden does not make HHFL liable for Bowden’s alleged violation of the Tips Act. Liability under the Tips Act only attaches to entities that collect tips or service charges. Nothing in that statute imposes liability on franchisors or licensors that receive royalties paid from the general net revenue of a hotel or other business that collects a service charge. See G.L. c. 149, § 152A.2 Yarpah’s argument to the contrary is incorrect. Under Yarpah’s reasoning, shareholders who receive dividends payable from the gross revenues of a business that collects and keeps a service charge, rather
2 The Court respectfully disagrees with Carpaneda v. Domino’s Pizza, Inc., 991 F.Supp.2d 270, 275 (D.Mass. 2014) (Young, J.), on this point.
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than distributing the revenue to its service employees, would be personally liable for the Tips Act violation. This makes no sense and cannot be squared with the plain language of the statute. In any case, the Court finds that neither HHFL nor SCH is entitled to or has received a percentage of Bowden’s overall net revenue. The Court credits the evidence detailing the payments HHFL is entitled to receive from Bowden, and demonstrating that none of those payments includes any share of Bowden’s administrative charge or other revenue from banquet, event, or function services.
Finally, Yarpah had no right to conduct discovery before the Court decided whether he has standing to assert the proposed claims against HHFL and SCH. See Kramer v. Zoning Bd. of Appeals of Somerville, 65 Mass. App. Ct. 186, 196 n.10 (2005) (court has discretion to bar discovery pending resolution of a motion to dismiss). “[D]iscovery cannot be used as a vehicle for discovering a right of action.” E.A. Miller, Inc. v. South Shore Bank, 405 Mass. 95, 100 (1989), quoting MacKnight v. Leonard Morse Hosp., 828 F.2d 48, 51 (1st Cir. 1987), and 4 Moore’s Federal Practice ¶ 26.56[1], at 26-95 n.3 (1987). “Having failed to make a minimal, threshold showing that there is a factual basis” for his claims, Yarpah is “not entitled to discovery” before the Court determines whether Yarpah has standing to sue these parties. See Id. “Parties may not ‘fish’ for evidence on which to base their complaint “in hopes of somehow finding something helpful to [their] case in the course of the discovery procedure.” Id. at 102, quoting Charbonnier v. Amico, 367 Mass. 146, 153 (1975).
The motion by Intercontinental Hotels Group Resources, Inc., to dismiss all claims against it with prejudice is ALLOWED without opposition. Plaintiff’s responsive motion to amend his complaint is ALLOWED IN PART to the extent that Plaintiff seeks to add Ward Childs as a defendant and DENIED IN PART to the extent that Plaintiff seeks to add Holiday Hospitality Franchising, LLC, and Six Continental Hotels, Inc., as Defendants. Plaintiff shall file a revised First Amended Complaint that is consistent with this ruling within the next 21 days.
18 May 2017
Kenneth W. Salinger
Justice of the Superior Court
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