### MevRam Servs., LLC v Quadrum Hospitality Group, LLC 2024 NY Slip Op 31163(U) April 4, 2024 Supreme Court, New York County Docket Number: Index No. 652871/2023 Judge: James d'Auguste Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York State and local government sources, including the New

York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.NYSCEF DOC. NO. 23 INDEX NO. 652871/2023 RECEIVED NYSCEF: 04/04/2024 

### SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: Hon. James E. d'Auguste Justice ----------------------------------------------------X

MEVRAM SERVICES, LLC, Plaintiff,

### -vQUADRUM HOSPITALITY GROUP, LLC, ARLO SOHO, LLC, ARLO NOMAD, LLC, ARLO MIDTOWN, LLC, Defendants.



### ---------------------- ------X PART 55
INDEX NO. MOTION DATE 652871/2023 08/21/2023 MOTION SEQ. NO. ------=--00-=---1.:__
__ DECISION + ORDER ON MOTION

The following e-filed documents, listed by NYSCEF document number (Motion 001) 9, 10, 11, 13, 14, 15, 16, 17, 19, 21 were read on this motion to/for DISMISS In Motion Sequence 001, defendants Quadrum Hospitality Group, LLC ("Quadrum"), Arla Soho, LLC, Arla Nomad, LLC, and Arla Midtown, LLC ("Arla defendants") (collectively "defendants"), move for dismissal ofclaims in plaintiffMevRam Services, LLC's ("MevRam") complaint. Defendants oppose the motion. Forthe reasons set forth below, the motion is denied. MevRam is a full-service hospitality and commercial cleaning company that staffs employees, including housekeepers and front-desk employees for hotels; MevRamprovides services based on agreements with commercial companies, such as hotels. Quadrum is the parentcompany ofthe Arla defendants, who each operate a hotel in New York City. MevRam and Quadrum entered into three service agreements for MevRam to provide engineering and housekeeping services to Quadrum's hotels (NYSCEF Doc. Nos. 10, 13). The action arises from MevRam's complaint asserting that defendants allegedly wrongfully breachedthe terms ofthree service agreements between the parties. Each agreement contains essentially the same terms and conditions, except for the particular employees and

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services MevRam wouldprovide. Each agreement also contains a no-poaching provisionwhich prohibited eitherparty engaging any staffemployee ofthe other party for aperiod of90 days after termination ofthe agreements. The contracts additionally provide that ifthe nopoaching agreements were violated, the poachingparty was required to continue the employee's assignment for 520 consecutive workhours orpay MevRam a fee equivalentto 520 workhours ofsuch employee (NYSCEF Doc. Nos. 10, 17). Defendants move for dismissal ofMevRam's claims related to the no-poaching provision asserting it is void, unenforceable and violates public policy. Defendants argue the no-poaching provision violates the New York City Displaced Building Service Workers Protection Act ("DBSWPA"), and the New York City DisplacedHotel ServiceWorkers Act (DHSW A"). Defendants assertthat MevRam's claims that the "employees at issue were not displaced and remained employedby MevRam" is unsupportedby any exception written into either law, and MevRam is simply "attempting an end-run aroundboth ofthese laws" via enforcement ofthe nopoaching provision in the parties' contracts (NYSCEF Doc. No. 21). MevRam asserts that defendants breached the agreements by terminating them early withoutproviding the requisite notice, and by poaching MevRam's employees immediately following termination ofthe contracts. MevRam contends that immediately afterbreaching the parties' agreements, defendants hired ProperHospitality Services ("PHS") to replace MevRam, and PHS promptly hired 32 ofMevRam's active employees to continue performing the same services they did under the agreements between MevRam and defendants. However, despite the breach, Mevram claims defendants refused to compensate MevRam fees owed, as required under the no-poaching provision ofthe parties' agreements (NYSCEF Doc. Nos. 10, 17).

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Further, MevRam maintains that there is no support for defendants' arguments underthe DBSWPA and the DHSWA claiming neither applies to the instant matter. Mevram notes that the employees at issue were not displaced andremained employedby MevRam with numerous other available assignments following defendants' breach ofthe parties' contracts. Additionally, MevRam notes that it is willing to provide alternative employmentto its employees once a service agreement is terminated (NYSCEF Doc. Nos. 17, 21). Moreover, MevRam contends that contrary to defendants' assertions the liquidated damages clause within the parties' agreements is enforceable. MevRam claims the provision for liquidated damages within the parties' agreements is reasonably calculatedbased on a formula that was intended, at the time the parties entered into the agreements, to estimate the actual damages, and the amount ofthe liquidated damages is not grossly disproportionateto the actual damages suffered (NYSCEF Doc. No. 17) (see TruckRent-A-Center, Inc. v. Puritan Farms 2nd
, Inc., 41 NY2d 420 [1977]). Defendants' claims that the no-poachingprovision violates the DBSWPA and DHSWA
are meritless given that the employees were never displaced, and the two laws are not implicated herein. It is clearDHSWA does not apply as it deals with a change in control ofahotel. As there was no such change in control or identity ofthe hotels orhotels' employerherein as defendants still own and control the hotels, the DHSWA is inapplicable, and the no-poaching provision did notrequire defendants to violate that law. Hence, the no-poaching provision is enforceable against defendants (NYSCEF Doc. Nos. 10, 17). Similarly, while the DBSWPA on its face appears to be relevantto the instant matter, the
cases analyzing claims underthe DBSWPA concern circumstances where employees were actually displaced-when a new employertook overthe management ofabuilding, unlike here.

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Guerrero v. Club Quarters Mgmt. Co., LLC, 74 Misc. 3d 224 [Sup Ct, NY County. 2021] (applying the DBSWPAwhere purchaser ofhotel terminated plaintiffemployees). Unlike in Guerrero, there was no change in defendants' hotels' management, instead defendants breached theircontracts with MevRamto circumventtheir obligations and poached MevRam's employees. Thus, even had PHS failed to retainthe subject employees as the successor contractorfor defendants, the employees would have remained employedby MevRam and continued to receive theirnormal pay andbenefits (NYSCEF Doc. No. 17). In any event, even ifdefendants were required to hire these employees underthe law due to defendants early termination ofthe parties' agreements, same does not change defendants' obligation to compensate plaintiffs for breach of the no-poaching provision ofthose agreements (NYSCEF Doc. No. 17). While the no-poaching provision restricts defendants' ability to poach MevRam's employees, it places no restrictions on the employees themselves. New York courts have noted a lack ofprecedent governing no-poaching provisions, thus, apply the same three-pronged reasonableness test utilized in ascertaining the validity ofnon-compete clauses. ReedElsevier Inc. v. Transunion Holding Co., Inc., 2014 WL 97317, at *7 [Jan. 9, 2014, No. 13-Civ.-8739 (PKC)] (citing OTG Mgmt, LLCv. Konstantinidis, 967 NY2d 823 [Sup. Ct. 2013]). The enforceability ofarestrictive covenantrequires an analysis ofthe particular facts and circumstances giving context to the agreement. ReedElsevierInc., 2014 WL 97317, at *7. Further, the no-poaching provisionis designedto protect MevRam's legitimatebusiness interest in preventing its "disintermediation"

- cutting outthe middleman. Design Partners, Inc. v. Five Star Electric Corp., 2017 WL 818364, at *14, n. 16 [ED NY. Mar. 1, 2017, No. 12-CV-2949 (PKC) (VMS)].

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InDesign Partners, the Courtnoted thatwhere an alleged wrongdoing was committed by "one sophisticated business entity against another," "thepowerful consideration ofpublic policy which militate against sanctioningthe loss ofaman's livelihood are not implicatedtothe
same extent as where an employer seeks to enforce a restrictive covenant against an employee." 

### Id. Here, as bothparties herein are sophisticatedbusiness entities, withoutthe protectionofthe no-poaching provision inthe parties' agreements, defendants would be allowed to hire MevRam's employees directly and disintermediate MevRam, thus making MevRam'swhole function as a staffing agency obsolete. Hence, the no-poaching provision is valid, as is the enforceable liquidated damages clause against defendants withinthe parties' agreements. Accordingly, it is ORDERED that defendants' motionto dismiss is denied. This constitutes the decision and orderofthe Court.

4/4/2024

DATE CHECK ONE: James d'Auguste, J.S.C.

APPLICATION: CHECK IF APPROPRIATE:

# ~ CASE DISPOSED GRANTED 

# 0 DENIED SETTLE ORDER INCLUDES TRANSFER/REASSIGN NON-FINAL DISPOSITION GRANTED IN PART SUBMIT ORDER FIDUCIARYAPPOINTMENT

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