Chen v. Street Beat Sportswear, Inc.

226 F.Supp.2d 355 (2002)

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Nature of the Case

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Facts

Fen X. Chen, Qui Chen, Yu Zheng, Chai Chen, Dang Zheng, Hua Chen, Yong Chen, Kun Huang, and Qi Liu (Ps) brought this action against two garment factories, 1A Fashions Inc. and Red Arrow Inc. and a manufacturer of women’s sportswear, Street Beat Sportswear, Inc. Ps worked for Ds from 1996 until 2000 as garment inspectors, hangers, button sewers, iron pressers, or general helpers. Ps worked seven days a week with only one or two days off a year and often worked from early in the morning until past midnight and into the next morning. Ps were paid either by the piece or by the hour and were never paid overtime wages for the hours worked past forty hours a week. Ds maintained false employment records, including false time records, in an effort to conceal their employment practices. This action arises out of alleged federal and state violations of the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA). On February 26, 1997, the manufacturer defendants signed a Memorandum of Agreement (MOA) with the Department of Labor (DOL) for an ongoing Augmented Compliance Program Agreement (ACPA) to ensure factory compliance with the FLSA. The ACPA imposed several duties on Ds, including: (1) the pre-contract evaluation of the economic feasibility, based on the price terms involved, of a contractor's compliance with the FLSA; (2) the ongoing monitoring of contractor compliance with the FLSA; and (3) in the event that FLSA violations by a contractor were detected by the manufacturer defendants, a suspension of shipment of all goods affected by said violations and payment of all unpaid back wages. Ps brought negligence causes of action against Ds, and also assert a third-party beneficiary claim for breach of contract alleging that they are the 'third-party beneficiaries' to DOL's contract with Street Beat (D) and that Street Beat (D) 'materially beached' the terms of that agreement. Ps seek unpaid wages, including minimum wage, overtime pay, spread hours pay, and liquidated damages and/ or interest. Ds moved to dismiss these claims. Ds claim in part that Ps were not the intended beneficiaries of the contract between Street Beat (D) and the DOL.