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February 7, 2013

Otesaga pays $550,000 to settle lawsuit

Resort sued by workers, admits no wrongdoing

By Richard Whitby
Cooperstown Crier

---- — Leatherstocking Corp., owner of the Otesaga Resort Hotel in Cooperstown, has agreed to pay a $550,000 settlement in a federal class-action lawsuit brought by service workers, largely over the distribution of service-charge proceeds.

The workers alleged in the suit filed in Albany in 2010 that the hotel’s actions violated New York labor law the federal Fair Labor Standards Act.

In settling in the lawsuit, the hotel maintained that it did nothing wrong.

“After years of litigation, the hotel determined that the settlement was in the best interests of the hotel and its loyal employees,” the Otesaga said in a statement emailed to The Daily Star at the newspaper’s request last week. “The hotel remains committed to complying with its legal obligations.”

The lawsuit also alleged violations of overtime and minimum-wage standards, but the bulk of the case focused on a “service/gratuity” charge that the hotel charged guests and restaurant patrons, according to court papers. It also alleged that guests were not told that service charge was part of their bills. The amount of charge varied, depending on the service, the lead attorney for the plaintiffs said this week.

“My recollection (is) that in the dining room, standard meals were charged at a certain amount per diner whether it was $5 or $8 or whatever, per meal, and also that the lodging charges were per night,” said Leon Greenberg, a Las Vegas-based specialist in wage cases.

According to court documents, the hotel insisted that it properly distributed all of the service-charge money to employees. The dispute centered on which employees were paid, according to the documents.

The plaintiffs contended that management employees who were not legally entitled to a share of the payments nonetheless received them, while the hotel countered that that all of the people it paid were entitled to a share of the money.

“The financial dispute concerned people that … we believed were not properly eligible to participate in the service-charge assessment,” Greenberg said. “That included people with managerial responsibilities of varying degrees. … Some of these people were captains in the dining facility. Some of them had other management positions.”

“It was our view that these persons’ function as management personnel, as opposed to hospitality or service personnel, disqualified them from participating in the service-charge assessment,” he added.

The lawsuit had five named plaintiffs: Virginia M. Elliott; Deborah Knoblauch; Jon Francis; Laura Rodgers, and John Rivas. An additional 27 workers and ex-workers filed claims under the Fair Labor Standards Act and joined the lawsuit.

Laura Rodgers said in an affidavit that she was paid $4.60 an hour when she worked in the dining room, and that her share of the service charge was $1.90 per person for breakfast, $1.85 for lunch; and $4.50 for dinner. But she said in the affidavit that she never received an accounting from the hotel about where the rest of the money went.

She said dining captains, who received a portion of the money, exercised considerable managerial authority over servers and could reward or punish the servers as they saw fit. But they had almost no service function themselves, she said.

She also alleged that the captains actively discouraged diners from leaving additional tips.

“On at least one occasion, I have had a customer retract an additional tip given to me after a dining captain approached the customer to explain that the additional tip was not necessary,” she said in the affidavit.

Distribution of the settlement is complex.

Altogether, 660 people were identified as members of the “class,” and thus entitled to a share. The plaintiffs’ attorneys received $112,475, or 20.45 percent of the settlement, plus expenses totaling less than $15,000. An additional $24,000 was allocated to Rust Consulting Inc., which is administering the settlement.

The five named plaintiffs were awarded “enhancement payments” of $5,000 apiece, plus a share of the $263,128.79 set aside for class members — eligible workers or ex-workers -- who filed claims.

The 27 plaintiffs who filed Fair Labor Standards Act complaints split $10,000.

Another $100,000 was set aside for class members who neither filed claims nor requested that they be excluded from the litigation. Only two eligible workers had asked to be excluded, as of December. They reserve the right to file suit on their own behalf.

The settlement stipulates that none of the money revert to Leatherstocking, and that any leftover funds resulting from uncashed checks be donated to the American Red Cross.

Leatherstocking was represented by Lisa E. Cleary and Krista Adler of the New York City law firm Patterson Belknap Webb & Tyler.