Jte Enters., Inc. v. Cuomo

2 F.Supp.3d 333

JTE ENTERPRISES, INC., Plaintiff,

v.Andrew M. CUOMO, in his official capacity as Governor of the State of New York, Thomas Di Napoli, in his capacity as Comptroller of the State of New York, Peter M. Rivera, as Commissioner of the State of New York Labor Department, and Leonard D. Polletta, Chairman of the Underemployment Insurance Appeal Board, Defendants.

No. 13–CV–1425 (ADS)(WDW).

United States District Court, E.D. New York.

Signed Feb. 15, 2014.

Cobert, Haber & Haber, by: Eugene F. Haber, Esq., of Counsel, Mineola, NY, for the Plaintiff.

New York State Attorney General's Office, by: Toni E. Logue, Assistant Attorney General, Richard Yorke, Volunteer Attorney, Mineola, NY, for the Defendants.

MEMORANDUM OF DECISION AND ORDER

SPATT, District Judge.

On March 19, 2013, the Plaintiff JTE Enterprises, Inc. (the “Plaintiff”), commenced this action against Andrew M. Cuomo, in his official capacity as Governor of the State of New York; Thomas Di Napoli, in his capacity as Comptroller of the State of New York; Peter M. Rivera, as Commissioner of the State of New York Labor Department (the “Department of Labor”); and Leonard D. Polletta, Chairman of the Unemployment Insurance Appeal Board (the “UIAB” and collectively, the “Defendants”). The Plaintiff seeks an order from the Court (1) classifying the drivers of its taxi cab vehicles as either independent contractors or as employees of the Plaintiff; (2) in the event the Court determines the drivers are independent contractors, declaring that a UIAB determination classifying the drivers as employees is null and void; (3) pursuant to 42 U.S.C. § 1983, finding that the Department of Labor denied the Plaintiff its basic due process rights by allegedly preventing the Plaintiff from appealing the UIAB's determination; and (4) in the event the Court determines the drivers are employees, directing a refund of all monies the Plaintiff paid for sales taxes on the leases of the taxi cab vehicles to the drivers.

Presently before the Court is a motion by the Defendants to dismiss the Plaintiff's Complaint in its entirety, which the Defendants have brought under Federal Rules of Civil Procedure (“Fed. R. Civ.P.”) 12(b)(1) and (6). For the reasons that follow, the Court grants the Defendants' motion.

I. BACKGROUND

The Plaintiff operates a taxi cab and livery service in Suffolk County, New York. The Plaintiff's employees include a clerical staff and dispatchers who work in its Islandia office. For these employees, the Plaintiff pays unemployment insurance premiums.

However, with respect to the drivers of its taxi cab vehicles, the Plaintiff uses “for hire” vehicles, for which it hires drivers allegedly as independent contractors. The drivers do not work on a regular basis and do not have a regular schedule. They are also free to work for other “for hire” taxi cab companies that are in competition with the Plaintiff. In addition, the drivers receive no benefits and no taxes or social security payments are withheld because they are not paid a salary.

Rather, the drivers sign lease agreements to use one of the Plaintiff's “for hire” taxi cabs, by which they agree to pay the Plaintiff a percentage of the income he earns that day from operating the taxi cab. During the day, the Plaintiff dispatches the driver to its customers, who call in requesting transportation services. However, the drivers are permitted to decline any of these calls for cab service request.

According to the Plaintiff, the drivers of its “for hire” vehicles should be classified as independent contractors because they are not subject to the Plaintiff's dominion or control so as to be classified as employees entitled to unemployment insurance benefits. Also, the New York State Department of Taxation and Finance collects a sales tax from the Plaintiff on the leases it enters into with the drivers.

Nevertheless, the Department of Labor audited the Plaintiff's books and records for the period of December 1, 1999 through August 31, 2003. As a result of the audit, the Department of Labor concluded that the Plaintiff owed $35,801.57 for unemployment insurance premiums for the drivers of the “for hire” vehicles. It also assessed a fifty percent fraud penalty of $17,900.78.

The Plaintiff opposed the Department of Labor's decision that the drivers were employees rather than independent contractors and further contested the fraud penalty assessment. Accordingly, the Plaintiff challenged the decision and the Department of Labor by initiating an Article 78 proceeding under the New York Civil Practice Law and Rules. Thereafter, the Plaintiff and the Department of Labor entered into a Stipulation of Settlement and Discontinuance whereby the Department of Labor consented to process the Plaintiff's request for a hearing before an Administrative Law Judge (“ALJ”) in accordance with the exclusive review procedures provided in Article 18 of the New York Labor Law.

The proceeding occurred over a period of seven months and was overseen by ALJ Craig Fishman (“Fishman”), who conducted hearings and considered both documentary evidence and oral testimony. At the proceeding's conclusion, on December 28, 2009, ALJ Fishman issued a decision wherein he held that the drivers were employees as opposed to independent contractors, and as such, owed the $35,801.57 in unemployment insurance premiums. However, ALJ Fishman reversed the assessment of the fraud penalty against the Plaintiff.

Both the Plaintiff and the Department of Labor appealed ALJ Fishman's decision to the UIAB. In this regard, the Plaintiff disputed the finding that the drivers were employees instead of independent contracts, while the Department of Labor challenged the reversal of the fraud penalty assessment. In a decision dated November 23, 2010, the UIAB (1) affirmed ALJ Fishman's determination that the drivers were employees, thus requiring the Plaintiff to pay the $35,801.57, but (2) reinstated the fifty percent fraud penalty that had been assessed by the Department of Labor. In addition, the UIAB decision advised that appeals should be made to the New York State Appellate Division, Third Department (the “Third Department”) within thirty days from the mailing date of the decision.

On December 13, 2010, the Plaintiff served a Notice of Appeal on the UIAB, which the UIAB confirmed receiving. Apparently, the UIAB informed the Plaintiff's counsel that the appeal would be processed and that it would mail them correspondence concerning the appeal. However, according to the Plaintiff, during the course of the six-year dispute between the Plaintiff and the Department of Labor, “it was common for notices and/or correspondence to take in excess of six months to be mailed by the Department of Labor and/or [UIAB].” (Compl., ¶ 21.) Further, with respect to the correspondence concerning the appeal, the Plaintiff claims that it never received this correspondence because the UIAB incorrectly mailed it to its lawyers' previous address. In this regard, in August of 2009, the Plaintiff's lawyers had moved out of their former office and relocated to another office within the same building. The Post Office forwarded their mail until March of 2010.

On March 13, 2011, the Plaintiff faxed a second Notice of Appeal to the UIAB. Three days later, on or about March 16, 2011, the UIAB sent a “Notice of Receipt of Appeal to Court” to both the Plaintiff's business address and to its attorneys. This notice (1) informs appellants of the special rules and instructions for unemployment insurance appeals which have been established by the Third Department; (2) instructs appellants to write to the Attorney General's Office in order to obtain a copy of the court's instructions; and (3) warns that failure to serve and file court papers within nine months after the date of appeal will result in the Third Department deeming the appeal abandoned. However, the Plaintiff alleges that the UIAB again mailed this notice to the address associated with its attorneys' previous office.

Of note, the November 23, 2010 UIAB decision and the March 16, 2011 notice were both sent to the previous address of the Plaintiff's attorneys. However, the Complaint offers no explanation as to why the Plaintiff's lawyers received the UIAB decision but not the notice, even though both were sent after the Post Office stopped forwarding the Plaintiff's mail.

Of further note, Section 800.17 of the Third Department's Court Rules provide that instructions on appealing a decision of the UIAB are available from the clerk of the court. These instructions unambiguously advise that based on section 800.12 of the Third Department's Rules of Practice, there is a nine-month time limit for filing court papers in connection with a UIAB appeal.

In any event, purportedly neither the Plaintiff nor its counsel received any correspondence or communication from either the New York State Appellate Division, Third Department (the “Third Department”) or the UIAB. As such, the Plaintiff alleges that because the UIAB and the Department of Labor failed to send its attorneys the appropriate correspondence, it never perfected its appeal.

On February 10, 2012, the Plaintiff was notified by the Department of Labor that its appeal was deemed abandoned by the Third Department, which dismissed the appeal for failure to timely perfect. Consequently, the Third Department never reviewed the decision of the Department of Labor or the decision of the UIAB. The Complaint contains no allegations that the Plaintiff or its attorneys every contacted or attempted to contact the UIAB or the Third Department about the appeal in the fourteen-month period between when it filed its Notice of Appeal on December 13, 2010 and when the Third Department dismissed the appeal on February 10, 2012.

II. DISCUSSION

A. Legal Standards

1 Motion to Dismiss Standard Under Fed.R.Civ.P. 12(b)(1)

“A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(...