Court Opinion

ID: 9959936
Source: CourtListenerOpinion
Date Created: 2024-04-12 20:13:02.851486+00
Date Added: 2024-06-11T08:19:00.068689
License: Public Domain

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.
                                                                                                     INDEX NO. 652871/2023
  NYSCEF DOC. NO. 23                                                                        RECEIVED NYSCEF: 04/04/2024

                             SUPREME COURT OF THE STATE OF NEW YORK
                                       NEW YORK COUNTY
           PRESENT:         Hon. James E. d' Auguste                        PART 55
                                                                 Justice
           ----------------------------------------------------X
                                                                             INDEX NO.              652871/2023
            MEVRAM SERVICES, LLC,
                                                                             MOTION DATE             08/21/2023
                                             Plaintiff,
                                                                             MOTION SEQ. NO. ------=--00-=---1.:___ _
                                       -v-
            QUADRUM HOSPITALITY GROUP, LLC, ARLO SOHO,
                                                                                DECISION + ORDER ON
            LLC, ARLO NOMAD, LLC, ARLO MIDTOWN, LLC,
                                                                                      MOTION
                                             Defendants.
           ----------------------                         ------X

           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 of claims in plaintiffMevRam Services, LLC's ("MevRam")

           complaint. Defendants oppose the motion. For the 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; MevRam provides

           services based on agreements with commercial companies, such as hotels. Quadrum is the

           parent company of the 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 breached the terms of three service agreements between the parties. Each agreement

           contains essentially the same terms and conditions, except for the particular employees and

            652871/2023 MEVRAM SERVICES, LLC, vs. QUADRUM HOSPITALITY GROUP, LLC ET AL               Page 1 of 5
            Motion No. 001

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                                                                                                INDEX NO. 652871/2023
  NYSCEF DOC. NO. 23                                                                     RECEIVED NYSCEF: 04/04/2024

           services MevRam would provide. Each agreement also contains a no-poaching provision-

           which prohibited either party engaging any staff employee of the other party for a period of 90

           days after termination of the agreements. The contracts additionally provide that if the no-

           poaching agreements were violated, the poaching party was required to continue the employee's

           assignment for 520 consecutive work hours or pay MevRam a fee equivalent to 520 work hours

           of such employee (NYSCEF Doc. Nos. 10, 17).

                  Defendants move for dismissal of MevRam'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 Displaced Hotel Service Workers Act (DHSWA").

           Defendants assert that MevRam's claims that the "employees at issue were not displaced and

           remained employed by MevRam" is unsupported by any exception written into either law, and

           MevRam is simply "attempting an end-run around both of these laws" via enforcement of the no-

           poaching provision in the parties' contracts (NYSCEF Doc. No. 21 ).

                  MevRam asserts that defendants breached the agreements by terminating them early

           without providing the requisite notice, and by poaching MevRam's employees immediately

           following termination of the contracts. MevRam contends that immediately after breaching the

           parties' agreements, defendants hired Proper Hospitality Services ("PHS") to replace MevRam,

           and PHS promptly hired 32 of MevRam'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 of the parties' agreements (NYSCEF Doc. Nos. 10, 17).

            652871/2023 MEVRAM SERVICES, LLC, vs. QUADRUM HOSPITALITY GROUP, LLC ET AL          Page 2 of 5
            Motion No. 001

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                                                                                                 INDEX NO. 652871/2023
  NYSCEF DOC. NO. 23                                                                     RECEIVED NYSCEF: 04/04/2024

                  Further, MevRam maintains that there is no support for defendants' arguments under the

           DBSWPA and the DHSW A claiming neither applies to the instant matter. Mevram notes that

           the employees at issue were not displaced and remained employed by MevRam with numerous

           other available assignments following defendants' breach of the parties' contracts. Additionally,

           MevRam notes that it is willing to provide alternative employment to 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 calculated based on a formula

           that was intended, at the time the parties entered into the agreements, to estimate the actual

           damages, and the amount of the liquidated damages is not grossly disproportionate to the actual

           damages suffered (NYSCEF Doc. No. 17) (see Truck Rent-A-Center, Inc. v. Puritan Farms 2nd,

           Inc., 41 NY2d 420 [1977]).

                  Defendants' claims that the no-poaching provision violates the DBSWPA and DHSW A

           are meritless given that the employees were never displaced, and the two laws are not implicated

           herein. It is clear DHSW A does not apply as it deals with a change in control of a hotel. As

           there was no such change in control or identity of the hotels or hotels' employer herein as

           defendants still own and control the hotels, the DHSW A is inapplicable, and the no-poaching

           provision did not require 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 relevant to the instant matter, the

           cases analyzing claims under the DBS WP A concern circumstances where employees were

           actually displaced-when a new employer took over the management of a building, unlike here.

            652871/2023 MEVRAM SERVICES, LLC, vs. QUADRUM HOSPITALITY GROUP, LLC ET AL           Page 3 of 5
            Motion No. 001

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                                                                                                  INDEX NO. 652871/2023
  NYSCEF DOC. NO. 23                                                                      RECEIVED NYSCEF: 04/04/2024

           Guerrero v. Club Quarters Mgmt. Co., LLC, 74 Misc. 3d 224 [Sup Ct, NY County. 2021]

           (applying the DBSWPA where purchaser of hotel terminated plaintiff employees). Unlike in

           Guerrero, there was no change in defendants' hotels' management, instead defendants breached

           their contracts with MevRam to circumvent their obligations and poached MevRam's employees.

           Thus, even had PHS failed to retain the subject employees as the successor contractor for

           defendants, the employees would have remained employed by MevRam and continued to receive

           their normal pay and benefits (NYSCEF Doc. No. 17). In any event, even if defendants were

           required to hire these employees under the law due to defendants early termination of the parties'

           agreements, same does not change defendants' obligation to compensate plaintiffs for breach of

           the no-poaching provision of those 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 of precedent governing no-poaching provisions, thus, apply the same three-pronged

           reasonableness test utilized in ascertaining the validity of non-compete clauses. Reed Elsevier

           Inc. v. Transunion Holding Co., Inc., 2014 WL 97317, at *7 [Jan. 9, 2014, No. 13-Civ.-8739

           (PKC)] (citing OTG Mgmt, LLC v. Konstantinidis, 967 NY2d 823 [Sup. Ct. 2013]). The

           enforceability of a restrictive covenant requires an analysis of the particular facts and

           circumstances giving context to the agreement. Reed Elsevier Inc., 2014 WL 97317, at *7.

           Further, the no-poaching provision is designed to protect MevRam's legitimate business interest

           in preventing its "disintermediation" - cutting out the 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)].

            652871/2023 MEVRAM SERVICES, LLC, vs. QUADRUM HOSPITALITY GROUP, LLC ET AL            Page 4 of 5
            Motion No. 001

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                                                                                                  INDEX NO. 652871/2023
  NYSCEF DOC. NO. 23                                                                       RECEIVED NYSCEF: 04/04/2024

                     In Design Partners, the Court noted that where an alleged wrongdoing was committed

           by "one sophisticated business entity against another," "the powerful consideration of public

           policy which militate against sanctioning the loss of a man's livelihood are not implicated to the

           same extent as where an employer seeks to enforce a restrictive covenant against an employee."

           Id. Here, as both parties herein are sophisticated business entities, without the protection of the

           no-poaching provision in the parties' agreements, defendants would be allowed to hire

           MevRam's employees directly and disintermediate MevRam, thus making MevRam's whole

           function as a staffing agency obsolete. Hence, the no-poaching provision is valid, as is the

           enforceable liquidated damages clause against defendants within the parties' agreements.

                   Accordingly, it is

                   ORDERED that defendants' motion to dismiss is denied.

                   This constitutes the decision and order of the Court.

                    4/4/2024
                     DATE                                                       James d'Auguste, J.S.C.

                                    ~
            CHECK ONE:                  CASE DISPOSED                   NON-FINAL DISPOSITION

                                        GRANTED         0    DENIED     GRANTED IN PART          □ OTHER
            APPLICATION:                SETTLE ORDER                    SUBMIT ORDER

            CHECK IF APPROPRIATE:       INCLUDES TRANSFER/REASSIGN      FIDUCIARY APPOINTMENT    □ REFERENCE

            65287112023 MEVRAM SERVICES, LLC, vs. QUADRUM HOSPITALITY GROUP, LLC ET AL            Page 5 of 5
            Motion No. 001

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