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Between the late '80s and the late '90s, Peter Glazman recruited a variety of people to be "franchisees" for his courier business, in which his company delivered packages around New York City. Glazman's franchisees basically paid for everything themselves: a white van, "training" fees, "beeper" fees, insurance, taxes, gas, uniforms, and on and on.
The plaintiffs in this case are several franchisees -- many of whom recently emigrated from Eastern Europe and spoke limited English -- who claimed that they would be promised a 60 percent commission from each package delivery. There was never really any accounting of that, and Glazman claimed there was never any agreement to pay them that.
6 Years in Court
This case has been in federal court for six years. In 2007, the court granted summary judgment to Glazman on all the federal claims, leaving only state law claims. But "because the district court had presided over the case for six years, developing an intimate knowledge of the parties and the governing case law," the federal court kept jurisdiction over the trial on state law claims. No one objected.
Some plaintiffs went to trial, others got summary judgmented out, and eight plaintiffs received a verdict in their favor for state law violations. Glazman appealed because of the court's exercise of supplemental jurisdiction, and also because the state law claims were time-barred and that their remedies are limited to rescission and reliance damages.
Overall, a Win for Some Plaintiffs
Federal courts can decline to exercise supplemental jurisdiction over state law claims, but they don't have to. In this case, the Second Circuit found no abuse of discretion because the federal court, after six years of litigation, was already familiar with the case and remanding the state-law claims to state court would create a hardship to both parties.
As to being time-barred, the defendants claimed that the three-year statute of limitations started running when six of the plaintiffs signed their franchise agreement.
The Second Circuit ultimately agreed with defendants that the claims were time-barred. Though plaintiffs claimed that the transfer of the business to a new company restarted the clock, the transfer didn't alter the business or create a new franchise agreement. They also claimed that, by paying franchise fees in installments, each time Glazman accepted their payment, that was a new violation. That didn't work either, said the court.
Guzman claimed that, even if the jury found a violation of the law, the plaintiffs shouldn't receive any money because they ended up making a net profit in the end. But that conclusion was at issue: Because there were no records kept, it's not certain how much money each plaintiff made.
Finally, the court reversed a grant of summary judgment to Glazman on other state law claims -- specifically, whether Glazman agreed to pay plaintiffs a 60 percent commission. That wasn't subject to the statute of frauds because the delivery work could be performed within a year, as it as an at-will employment agreement.