author: Smith, J.

text:
    [994 NE2d 838, 971 NYS2d 747]
    The People of the State of New York, by Andrew M. Cuomo, Attorney General of the State of New York, Respondent, v Maurice R. Greenberg et al., Appellants.
    Argued May 28, 2013;
    decided June 25, 2013

      POINTS OF COUNSEL

      Boies, Schiller & Flexner LLP, Armonk (David Boies of counsel), and Boies, Schiller & Flexner LLP, New York City (Nicholas A. Gravante, Jr. and Robert J. Dwyer of counsel), Skadden, Arps, Slate, Meagher & Flom LLP (John L. Gardiner of counsel), Charles Fried, of the Massachusetts bar, admitted pro hac vice, of counsel, Kaye Scholer LLP (Vincent A. Sama and Catherine B. Schumacher of counsel) and Andrew M. Lawler, P.C. (Andrew M. Lawler of counsel), for appellants.
    I. The Attorney General of the State of New York lacks standing and authority to pursue this action under the Martin Act and the Executive Law seeking to recover monetary damages on behalf of a class of private shareholders and its efforts to do so here also conflict with, and are preempted by, the federal laws governing nationally traded securities. (United States v Ferguson, 676 F3d 260; Matter of Graziano v County of Albany, 3 NY3d 475; Central States Southeast & Southwest Areas Health & Welfare Fund v Merck-Medco Managed Care, L.L.C., 433 F3d 181; People v Grasso, 54 AD3d 180; People v Lowe, 117 NY 175; Community Bd. 7 of Borough of Manhattan v Schaffer, 84 NY2d 148; People of State of New York by Abrams v Seneci, 817 F2d 1015; Matter of State of New York v New York City Conciliation & Appeals Bd., 123 Misc 2d 47; Alfred L. Snapp & Son, Inc. v Puerto Rico ex rel. Barez, 458 US 592.) II. The courts below improperly denied appellants’ motions for summary judgment with respect to the General Reinsurance Corporation transaction by relying on irremediable hearsay evidence. (Alvarez v Prospect Hosp., 68 NY2d 320; IDX Capital, LLC v Phoenix Partners Group LLC, 19 NY3d 850; Verizon N.Y., Inc. v Garvin, 13 NY3d 851; Zuckerman v City of New York, 49 NY2d 557; Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065; DiGiantomasso v City of New York, 55 AD3d 502; Matter of New York City Asbestos Litig., 7 AD3d 285; Presbyterian Church Of Sudan v Talisman Energy, Inc., 582 F3d 244; Raskin v Wyatt Co., 125 F3d 55; LaSalle Bank N.A. v Nomura Asset Capital Corp., 424 F3d 195.)

      Eric T. Schneiderman, Attorney General, New York City (Barbara D. Underwood, Richard Dearing, Won S. Shin and David Ellenhorn of counsel), for respondent.
    I. The Martin Act and Executive Law § 63 (12) expressly grant the Attorney General authority to maintain civil enforcement actions to prevent, remedy, and deter fraud. (Alfred L. Snapp & Son, Inc. v Puerto Rico ex rel. Barez, 458 US 592; State of New York v Cortelle Corp., 38 NY2d 83; People v Grasso, 54 AD3d 180, 11 NY3d 64; Commonwealth of Pennsylvania v Mid-Atlantic Toyota Distribs., Inc., 704 F2d 125; People v Coventry First LLC, 52 AD3d 345, 13 NY3d 108; State of New York v McLeod, 12 Misc 3d 1157[A], 2006 NY Slip Op 50942[U]; State of Alaska v United States Dept. of Transp., 868 F2d 441; Kerusa Co. LLC v W10Z/515 Real Estate Ltd. Partnership, 12 NY3d 236; Assured Guar. [UK] Ltd. v J.P. Morgan Inv. Mgt. Inc., 18 NY3d 341; People v Bunge Corp., 25 NY2d 91.) II. Federal securities law does not preempt this action under the Martin Act and Executive Law § 63 (12). (Wyeth v Levine, 555 US 555; Medtronic, Inc. v Lohr, 518 US 470; Matter of People v Applied Card Sys., Inc., 11 NY3d 105; Lee v Astoria Generating Co., L.P., 13 NY3d 382; Planned Consumer Mktg. v Coats & Clark, 71 NY2d 442; Matter of Disney Enters., Inc. v Tax Appeals Trib. of State of N.Y., 10 NY3d 392; Cipollone v Liggett Group, Inc., 505 US 504; Hall v Geiger-Jones Co., 242 US 539; Leroy v Great Western United Corp., 443 US 173; Bluebird Partners v First Fid. Bank, 297 AD2d 223.) III. Overwhelming evidence precludes the grant of summary judgment to defendants on the General Reinsurance Corporation fraud. (Jacqueline S. v City of New York, 81 NY2d 288; Mastroianni v County of Suffolk, 91 NY2d 198; People v Apple Health & Sports Clubs, 80 NY2d 803; Marine Midland Bank v Russo Produce Co., 50 NY2d 31; People v Sala, 258 AD2d 182, 95 NY2d 254; Ernst & Ernst v Hochfelder, 425 US 185; Gaidon v Guardian Life Ins. Co. of Am., 94 NY2d 330; People v Federated Radio Corp., 244 NY 33; In re Scholastic Corp. Sec. Litig., 252 F3d 63; Novak v Kasaks, 216 F3d 300.)

      James J. Park, Brooklyn, amicus curiae.
    I. The Attorney General is not a private class action attorney. (Kardon v National Gypsum Co., 69 F Supp 512; Superintendent of Ins. of N.Y. v Bankers Life & Casualty Co., 404 US 6; Central Bank of Denver, N. A. v First Interstate Bank of Denver, N. A., 511 US 164; Stoneridge Investment Partners, LLC v Scientific-Atlanta, Inc., 552 US 148.) II. The Attorney General plays an important role in deterring securities fraud.

      Kate Stith, of the Connecticut bar, admitted pro hac vice, amicus curiae.
    I. This Court’s decisions allow the use of inadmissible evidence to oppose summary judgment only when the party has “demonstrat[ed an] acceptable excuse.” (Hyman v Queens County Bancorp, Inc., 3 NY3d 743; IDX Capital, LLC v Phoenix Partners Group LLC, 19 NY3d 850; Alvarez v Prospect Hosp., 68 NY2d 320; Brill v City of New York, 2 NY3d 648; Zuckerman v

      City of New York, 49 NY2d 557; Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065; W.W.W. Assoc. v Giancontieri, 77 NY2d 157; Chemical Bank v PIC Motors Corp., 58 NY2d 1023; Indig v Finkelstein, 23 NY2d 728; Egleston v Kalamarides, 58 NY2d 682.) II. The rule followed by the court below conflicts with this Court’s decisions and the decisions of every other jurisdiction in the country. (Matter of New York City Asbestos Litig., 7 AD3d 285; Zuckerman v City of New York, 49 NY2d 557; Brill v City of New York, 2 NY3d 648.) III. Other lower court decisions repeating the rule applied by the court below result from a misunderstanding of this Court’s holdings. (Phillips v Kantor & Co., 31 NY2d 307; Horowitz v Kevah Konner, Inc., 67 AD2d 38; Freedman v Chemical Constr. Corp., 43 NY2d 260; Kwong On Bank, Ltd. v Monrose Knitwear Corp., 74 AD2d 768; Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065; Wertheimer v New York Prop. Ins. Underwriting Assn., 85 AD2d 540; Zuilkowski v Sentry Ins., 114 AD2d 453; Guzman v Strab Constr. Corp., 228 AD2d 645; Callari v Pellitieri, 130 AD2d 935; Sunfirst Fed. Credit Union v Empire Ins. Co. /All City Ins. Co., 239 AD2d 894.)

      Susan Ann Silverstein, Washington, D.C. (Michael Schuster of counsel), for AARP, amicus curiae.
    I. Complex securities create considerable challenges for investors. II. The prevalence of securities fraud requires that investors have a full range of strong, flexible enforcement tools. III. Upholding state anti-fraud enforcement actions in the face of arguments asserting federal securities law preemption would place New York in line with other state and federal courts that have addressed the issue. (Missouri ex rel. Carnahan v Stifel, Nicolaus & Co., Inc., 648 F Supp 2d 1095; Zuri-Invest AG v Natwest Fin. Inc., 177 F Supp 2d 189.)

      Mayer Brown LLP, Washington, D.C. (Andrew J. Pincus, Paul W. Hughes and Michael B. Kimberly of counsel), Robin S. Conrad, Kathryn Comerford Todd, Maria Ghazal and Kevin Carroll, for Chamber of Commerce of the United States of America and others, amici curiae.
    I. This suit endangers national uniformity with respect to securities litigation and jeopardizes investment in New York. (Pinter v Dahl, 486 US 622; CTS Corp. v Dynamics Corp. of America, 481 US 69; Dirks v SEC, 463 US 646; TSC Industries, Inc. v Northway, Inc., 426 US 438.) II. Federal law precludes this action. (New York SMSA Ltd. Partnership v Town of Clarkstown, 612 F3d 97; Altria Group, Inc. v Good, 555 US 70; Wachovia Bank, N.A. v Burke, 414 F3d 305; Romano v Kazacos, 609 F3d 512; Kircher v Putnam Funds Trust, 547 US 633; Wisconsin Cent., Ltd. v Shannon, 539 F3d 751; Sturge v Northwest Airlines, Inc., 658 F3d 832; United States v Locke, 529 US 89; Merrill Lynch, Pierce, Fenner & Smith Inc. v Dabit, 547 US 71; Island Park, LLC v CSX Transp., 559 F3d 96.)

      Joseph Brady, General Counsel, North American Securities Administrators Association, Inc., Washington, D.C. (Rick A. Fleming, A. Valerie Mirko and Joseph J. Opron, III, of counsel), for North American Securities Administrators Association, Inc., amicus curiae.
    I. The authority of state securities regulators to bring enforcement actions to protect investors and maintain the integrity of the capital markets was not diminished by the National Securities Markets Improvement Act of 1996. (CPC Intl. v McKesson Corp., 120 AD2d 221; Connecticut Nat. Bank v Germain, 503 US 249.) II. The Securities Litigation Uniform Standards Act of 1998 did not alter the role of state securities regulators or limit their ability to pursue enforcement actions. III. The New York Attorney General’s action is not preempted by the National Securities Markets Improvement Act of 1996 or the Securities Litigation Uniform Standards Act of 1998. (Zuri-Invest AG v Natwest Fin. Inc., 177 F Supp 2d 189; CSX Transp., Inc. v Easterwood, 507 US 658; Rice v Santa Fe Elevator Corp., 331 US 218; Merrill Lynch, Pierce, Fenner & Smith Inc. v Dabit, 547 US 71; EEOC v Waffle House, Inc., 534 US 279; Cipollone v Liggett Group, Inc., 505 US 504; Rousseff v Dean Witter & Co., Inc., 453 F Supp 774; Stoneridge Investment Partners, LLC v Scientific-Atlanta, Inc., 552 US 148.)

      O'Melveny & Myers LLP, Washington, D.C. (Walter Dellinger and Deanna Rice of counsel), and O'Melveny & Myers LLP, New York City (Andrew J. Frackman and Anton Metlitsky of counsel), for former state and federal governmental officials, amicus curiae.
    I. There is an overwhelming national interest in regulating securities markets, and Congress has vindicated that interest by mandating one uniform federal standard for most securities regulation. (Merrill Lynch, Pierce, Fenner & Smith Inc. v Dabit, 547 US 71; Central Bank of Denver, N. A. v First Interstate Bank of Denver, N. A., 511 US 164; Blue Chip Stamps v Manor Drug Stores, 421 US 723; Dura Pharmaceuticals, Inc. v Broudo, 544 US 336; Lander v Hartford Life & Annuity Ins. Co., 251 F3d 101.) II. The Attorney General’s use of the Martin Act in this case flies in the face of the federal securities laws established by Congress. (Kerusa Co. LLC v W10Z/515 Real

      Estate Ltd. Partnership, 12 NY3d 236; CPC Intl. v McKesson Corp., 70 NY2d 268; People v Federated Radio Corp., 244 NY 33; Matter of People v Applied Card Sys., Inc., 11 NY3d 105; Alfred L. Snapp & Son, Inc. v Puerto Rico ex rel. Barez, 458 US 592; Merrill Lynch, Pierce, Fenner & Smith Inc. v Dabit, 547 US 71; Dura Pharmaceuticals, Inc. v Broudo, 544 US 336; People v Federated Radio Corp., 244 NY 33.) III. The Attorney General’s Martin Act action for damages on behalf of a nationwide group of former American International Group, Inc. shareholders is preempted. (Alfred L. Snapp & Son, Inc. v Puerto Rico ex rel. Barez, 458 US 592; Dura Pharmaceuticals, Inc. v Broudo, 544 US 336; People v Grasso, 11 NY3d 64; People of State of New York by Vacco v Operation Rescue Natl., 80 F3d 64; People of State of New York by Abrams v Seneci, 817 F2d 1015; Stoneridge Investment Partners, LLC v Scientific-Atlanta, Inc., 552 US 148; Aaron v SEC, 446 US 680; Lander v Hartford Life & Annuity Ins. Co., 251 F3d 101.) IV. Federalism supports one, uniform federal standard in the circumstances of this case. (U.S. Term Limits, Inc. v Thornton, 514 US 779; Alden v Maine, 527 US 706; Baltimore & Ohio R. Co. v Baugh, 149 US 368; McCulloch v Maryland, 17 US 316; North American Co. v SEC, 327 US 686; Northern Securities Co. v United States, 193 US 197; Merrill Lynch, Pierce, Fenner & Smith Inc. v Dabit, 547 US 71; Lander v Hartford Life & Annuity Ins. Co., 251 F3d 101; Bluebird Partners, L.P. v First Fid. Bank, 896 F Supp 152; People v Coventry First LLC, 52 AD3d 345.)

      George Jepsen, Attorney General, Hartford, Connecticut (Dinah J. Bee of counsel), and William H. Sorrell, Attorney General, Montpelier, Vermont, for the State of Connecticut and another, amici curiae.
    I. The National Securities Markets Improvement Act of 1996 does not preempt state Blue Sky laws. (Lander v Hartford Life & Annuity Ins. Co., 251 F3d 101; Medtronic, Inc. v Lohr, 518 US 470; Retail Clerks v Schermerhorn, 375 US 96; Aaron v SEC, 446 US 680.) II. New York Attorney General’s action is an enforcement action for fraud. (Alfred L. Snapp & Son, Inc. v Puerto Rico ex rel. Barez, 458 US 592; Castillo v Cameron County, Tex., 238 F3d 339; People of State of California v Federal Communications Commn., 75 F3d 1350; Texas Off. of Pub. Util. Counsel v Federal Communications Commn., 183 F3d 393; Connecticut v Moody’s Corp., 664 F Supp 2d 196; All Seasons Resorts v Abrams, 68 NY2d 81; Levin v Barry Kaye & Assoc., Inc., 858 F Supp 2d 914; Hood ex rel. Miss. v Microsoft Corp., 428 F Supp 2d 537; Wisconsin v Abbott Labs., 341 F Supp 2d 1057; State of Maine v Data Gen. Corp., 697 F Supp 23.)
   OPINION OF THE COURT

Smith, J.

We hold that the Attorney General’s claims against two former officers of American International Group, Inc. (AIG) have sufficient support in the record to withstand summary judgment.

The Attorney General began this civil suit against AIG, Maurice Greenberg and Howard Smith in 2005. Until shortly before the suit was brought, Greenberg was the chief executive officer, and Smith the chief financial officer, of AIG. AIG has settled the case; Greenberg and Smith remain as defendants.

The Attorney General alleges that Greenberg and Smith violated section 63 (12) of the Executive Law and article 23-A of the General Business Law (the Martin Act), and committed common-law fraud. The statutes on which the Attorney General relies are broadly worded anti-fraud provisions, prohibiting among other things “repeated fraudulent or illegal acts” (Executive Law § 63 [12]), “persistent fraud or illegality” (id.), and “fraud, deception, concealment, suppression [or] false pretense” (General Business Law § 352-c [1] [a]). It is not disputed that the Attorney General is empowered to sue for violation of these statutes.

The gist of the Attorney General’s claim, to the extent that it is now before us, is that Greenberg and Smith participated in causing AIG to enter into a sham transaction with General Reinsurance Corporation (GenRe) in which AIG purported to reinsure GenRe on certain insurance contracts. The Attorney General asserts that the transaction transferred no real risk from GenRe to AIG, and therefore should not have been treated as an insurance transaction on AIG’s books; and that the transaction’s sole purpose was to increase the insurance reserves shown on AIG’s financial statements, thereby creating the impression of a healthy insurance business and bolstering AIG’s stock price. The transaction has been the subject of a federal criminal case in which Greenberg and Smith were identified as alleged coconspirators, but were not defendants (see United States v Ferguson, 676 F3d 260 [2d Cir 2011]).

The course of the litigation has been long, and some issues once important have fallen by the wayside. Most recently, as a result of the settlement of a federal class action (see In re American Intl. Group, Inc. Sec. Litig., 2013 WL 1499412, 2013 US Dist LEXIS 52624 [SD NY, Apr. 11, 2013, No. 04-Civ-8141 (DAB)]), the Attorney General has withdrawn his claims for damages and now seeks only equitable relief. The parties agree that, because of this development, the issue of federal preemption, discussed in the majority and dissenting opinions at the Appellate Division (People v Greenberg, 95 AD3d 474, 479-482, 489-492 [1st Dept 2012]), is out of the case. The Attorney General has not appealed from the Appellate Division order denying him summary judgment. And Greenberg and Smith do not challenge here the denial to them of summary judgment on a transaction not involving GenRe.

We are left with two questions to address: whether the evidence of Greenberg’s and Smith’s knowledge of the fraudulent nature of the AIG-GenRe transaction is sufficient to raise an issue of fact for trial; and whether, on the present record, the Attorney General is barred as a matter of law from obtaining any equitable relief. We answer yes to the first question and no to the second, and therefore affirm the Appellate Division’s order denying Greenberg and Smith summary judgment.

We will answer the first question without a detailed discussion of the facts. Much of the relevant evidence is summarized in other decisions, including the opinion of the Court of Appeals for the Second Circuit in United States v Ferguson, which held, among other things, that there was sufficient evidence to support a jury finding—in a criminal case, beyond a reasonable doubt—that a fraudulent conspiracy had its inception in a telephone call from Greenberg to GenRe’s chief executive officer (see 676 F3d 260, 289 [2011]). We have no difficulty in concluding that, in this civil case, there is evidence sufficient for trial that both Greenberg and Smith participated in a fraud. The credibility of their denials is for a fact finder to decide.

Greenberg’s and Smith’s remaining argument is that no basis exists for granting equitable relief. They argue, in substance, that all such relief that could possibly be awarded has already been obtained in litigation brought by the Securities and Exchange Commission (SEC), which Greenberg and Smith settled in 2009. In the settlement, without admitting or denying the allegations against them, Greenberg and Smith agreed among other things to permanent injunctions against violations of the anti-fraud provisions of the federal securities laws. The Attorney General responds that more relief could be granted in this case “including but not limited to a ban on [Greenberg’s and Smith’s] participation in the securities industry and a ban on serving as an officer or director of a public company.”

We reject the contention of Greenberg and Smith that the Attorney General failed to preserve this argument for our review. While the sufficiency of the claim for equitable relief was not a major focus of any party’s attention below, the Attorney General did specifically dispute, in Supreme Court, Greenberg’s and Smith’s assertion that that claim was barred by the SEC settlement. It is irrelevant to the preservation issue whether the argument was made in the Appellate Division (Matter of Couch v Perales, 78 NY2d 595, 605 n 5 [1991]; Matter of Seitelman v Lavine, 36 NY2d 165, 170 n 2 [1975]).

On the merits, we cannot say as a matter of law that no equitable relief may be awarded. There is no doubt room for argument about whether the lifetime bans that the Attorney General proposes would be a justifiable exercise of a court’s discretion; but that question, as well as the availability of any other equitable relief that the Attorney General may seek, must be decided by the lower courts in the first instance.

Accordingly, the order of the Appellate Division, insofar as appealed from, should be affirmed, with costs, and the certified question answered in the affirmative.

Judges Graffeo, Read, Pigott, Rivera, Abdus-Salaam and Mastro concur; Chief Judge Lippman taking no part.

Order, insofar as appealed from, affirmed, with costs, and certified question answered in the affirmative.

       Designated pursuant to NY Constitution, article VI, § 2.


source: Caselaw Access Project

author: Pigott, J. Chief Judge Lippman (dissenting).

license: Public Domain

text:
    [994 NE2d 831, 971 NYS2d 740]
    The People of the State of New York, Respondent, v Lester Q. Jones, Appellant.
    Argued May 28, 2013;
    decided June 25, 2013

      POINTS OF COUNSEL

      Dechert LLP, New York City (Matthew L. Mazur and Jonathan R. Streeter of counsel), and Richard M. Greenberg, Office of the

      Appellate Defender, for appellant.
    I. The lineup identification should have been suppressed as the fruit of a pretextual and flagrantly unconstitutional arrest. (United States v Crews, 445 US 463; People v Dodt, 61 NY2d 408; Wong Sun v United States, 371 US 471; People v Bradford, 15 NY3d 329; People v Conyers, 68 NY2d 982; Brown v Illinois, 422 US 590; People v Johnson, 66 NY2d 398; People v Watson, 200 AD2d 643; People v De Bour, 40 NY2d 210; Johnson v Louisiana, 406 US 356.) II. Evidence of witness intimidation by third parties should have been excluded in the absence of evidence that Lester Q. Jones authorized or directed the alleged threats. (People v Buzzi, 238 NY 390; People v Bennett, 79 NY2d 464; People v Plummer, 36 NY2d 161; People v Shilitano, 218 NY 161; People v Davis, 43 NY2d 17; People v Sanchez, 61 NY2d 1022; People v Pignataro, 263 NY 229; People v Myrick, 31 AD3d 668; People v Spruill, 299 AD2d 374; People v Moses, 35 AD3d 766.) III. The prosecutor’s improper arguments during summation denied Mr. Jones a fair trial. (People v Fisher, 18 NY3d 964; People v Calabria, 94 NY2d 519; Berger v United States, 295 US 78; People v Ashwal, 39 NY2d 105; People v Smith, 288 AD2d 496; People v Bailey, 58 NY2d 272; People v Collins, 12 AD3d 33; People v World, 157 AD2d 567; People v Mirenda, 23 NY2d 439; United States v Wade, 388 US 218.) IV The summary denial of Mr. Jones’s motion to set aside the verdict violated the criminal procedure law and due process. (People v Salemi, 309 NY 208; People v Savinon, 100 NY2d 192.)

      Cyrus R. Vance, Jr., District Attorney, New York City (Grace Vee and Susan Gliner of counsel), for respondent.
    I. As defendant concedes, the decision reached by the lower courts, which employed the doctrine of attenuation to deny defendant’s motion to suppress the victim’s lineup identification on Fourth Amendment grounds, presents this Court with a mixed question of law and fact. Since there is support in the record for the Appellate Division’s ruling that the identification testimony was properly admitted at trial, defendant’s appeal to this Court should be rejected out of hand. (People v Harrison, 57 NY2d 470; People v McRay, 51 NY2d 594; People v Francois, 14 NY3d 732; People v Williams, 17 NY3d 834; People v McIntosh, 96 NY2d 521; People v Greenidge, 91 NY2d 967; People v Campbell, 87 NY2d 855; People v Bianchi, 85 NY2d 1022; People v Bradford, 15 NY3d 329; People v Divine, 6 NY3d 790.) II. Justice Farber properly exercised his discretion when he admitted evidence of implied threats made to a witness for the People by third parties, after finding that there was sufficient circumstantial evidence to connect the threats to defendant and to warrant an inference as to his consciousness of guilt. (People v Moses, 35 AD3d 766; People v Myrick, 31 AD3d 668; People v Spruill, 299 AD2d 374; People v Bennett, 79 NY2d 464; People v Plummer, 36 NY2d 161; People v Holland, 174 AD2d 508; People v Cintron, 95 NY2d 329; People v Singleton, 121 AD2d 752; People v Gonzalez, 253 AD2d 674; People v Shilitano, 218 NY 161.) III. Defendant’s challenges to the prosecutor’s summation are unpreserved and without merit. (People v Romero, 7 NY3d 911; People v Tardbania, 72 NY2d 852; People v Tonge, 93 NY2d 838; People v Dien, 77 NY2d 885; People v Balls, 69 NY2d 641; People v Medina, 53 NY2d 951; People v Galloway, 54 NY2d 396; People v Nai Hing Liang, 208 AD2d 401; People v D’Alessandro, 184 AD2d 114; People v Halm, 81 NY2d 819.) IV The trial court properly denied defendant’s motion to set aside the verdict on the ground of newly discovered evidence. This court has no power to review the discretionary denial of that motion. (People v Crimmins, 38 NY2d 407; People v Schulz, 4 NY3d 521, 528 F Supp 2d 77; People v Salemi, 309 NY 208; People v Wainwright, 285 AD2d 358; People v Davis, 43 NY2d 17; People v Johnson, 208 AD2d 562; People v Copeland, 185 AD2d 280.)
   OPINION OF THE COURT

Pigott, J.

The principal issue on this appeal is whether the connection between defendant’s illegal arrest and his subsequent lineup identification was sufficiently attenuated as to dissipate the taint, of the wrongful arrest. The Appellate Division determined that it was and, because there is record support for that conclusion, we affirm.

In the early hours of May 16, 2006, a New York City detective responded to a distress call at an apartment building in Manhattan and spoke with the victim and her neighbor about an incident that occurred that morning. According to the victim, a man, whom she later identified as defendant, followed her onto the elevator and demanded money. A struggle ensued. When they reached the fifth floor, the elevator opened and they fell into the hallway. The man rifled through the victim’s wallet and took her cash and credit cards. The victim described the man as six feet tall, in his early to mid-thirties with dark skin and a large build. The neighbor who had witnessed the incident gave the detective a similar description, adding that the perpetrator had a large nose and went by the street name “Izz.”

The detective contacted a colleague from the Manhattan Gang Unit, who ran the nickname through a database. The detective learned that “Izz” was also known as “Michael Wright.” With that information, the detective obtained a rap sheet and photograph of Michael Wright, both of which he placed in his case folder. The rap sheet indicated that Michael Wright also went by defendant’s given name, Lester Jones. The physical attributes listed on the rap sheet matched those relayed to the detective by the victim and her neighbor.

Several days later, a sergeant was reviewing the robbery report when he recognized the name of a worker at the store that the victim had visited before she was attacked. The employee had told the detective that he saw the man leaving the apartment building 5 to 10 minutes after the incident. The sergeant contacted the store employee, who told him that he knew the man who had committed the crime. The sergeant gave the employee his cell phone number and asked the employee to call him the next time he saw the man.

On May 31, 2006, at approximately 2:00 a.m., while the sergeant was on duty, the store employee called and told him that the man was at the store. When the sergeant arrived with two other officers, the employee told him that the man, who was wearing white pants, had just left. The sergeant located the man—defendant—around a nearby corner, and when asked, the defendant identified himself as “Michael Wright” but was unable to produce identification.

Here, the story takes an unfortunate turn. The sergeant concluded that the defendant was blocking the sidewalk and, because he had no identification, handcuffed the defendant and escorted him to an unmarked police car, with the intention of charging him with disorderly conduct. In later testimony, it was the sergeant’s view that the defendant was not free to go because he had been identified as a person involved in the robbery. As the sergeant and defendant were walking to the police car, the sergeant contacted the store employee, who told the sergeant that he had arrested the right man.

Defendant was transported to the precinct six blocks away. Within 15 minutes of his arrival, the sergeant contacted the detective at his home (at approximately 2:30 a.m.) and learned that the detective had placed a photograph of the suspect in his case folder. The sergeant retrieved the folder from the detective’s desk and found a picture of the defendant. Five hours later, when the detective arrived at the precinct, he made arrangements for defendant to be placed in a lineup. The victim identified defendant as the perpetrator. Defendant was arrested for and charged with burglary in the first degree (Penal Law § 140.30 [2]) and robbery in the second degree (Penal Law § 160.10 [2] [a]).

Following his conviction, defendant appealed. The Appellate Division held the judgment in abeyance and remitted the matter for a Dunaway hearing (Dunaway v New York, 442 US 200 [1979]), finding that defendant had made sufficient allegations concerning the propriety of his arrest to warrant such a hearing (73 AD3d 662, 663 [1st Dept 2010]). At the hearing, the detective and sergeant, the only two witnesses called, testified essentially to the facts set forth above. The hearing court credited their testimony and concluded that the sergeant lacked probable cause to stop and arrest defendant on May 31, 2006 for the earlier robbery. The court did, however, find that because the detective had independently gathered sufficient evidence tying defendant to the robbery, the sergeant’s discoveiy of the “fruits” of the detective’s investigation within 30 minutes of defendant’s detention broke the causal connection between the illegal arrest and the lineup identification. The hearing court concluded that the call between the sergeant and the detective constituted an “intervening event” that attenuated the causal connection between the arrest and the lineup identification.

The Appellate Division affirmed, holding, among other things, that although the police lacked probable cause for the arrest, the lineup identification “was based on intervening probable cause,” which sufficiently attenuated the taint of the illegal arrest (85 AD3d 612, 612 [1st Dept 2011]). A Judge of this Court granted defendant leave to appeal (19 NY3d 962 [2012]).

The sergeant’s initial arrest of defendant was without probable cause and therefore illegal. But evidence discovered subsequent to an illegal arrest is not indiscriminately subject to the exclusionary rule (see People v Jones, 2 NY3d 235, 241-242 [2004]). Instead, the People “must have ‘somehow exploited or benefited from [the] illegal conduct’ such that ‘there is a connection between the violation of a constitutional right and the derivative evidence’ obtained by the police” (id. at 242, quoting People v Burr, 70 NY2d 354, 362 [1987], cert denied 485 US 989 [1988]).

Defendant claims that the lineup identification must be suppressed because it was the product of an illegal arrest. In order to counter that challenge, the People were required to demonstrate that the identification was “acquired by means sufficiently distinguishable from the arrest to be purged of the illegality” (People v Conyers, 68 NY2d 982, 983 [1986]), i.e., that the taint of the illegal arrest was “attenuated” (see Wong Sun v United States, 371 US 471, 491 [1963]). In order to determine whether attenuation exists, the court must “consider ‘the temporal proximity of the arrest and [the evidence at issue], the presence of intervening circumstances and, particularly, the purpose and flagrancy of the official misconduct’ ” (People v Bradford, 15 NY3d 329, 333 [2010], quoting Conyers, 68 NY2d at 983).

Defendant acknowledges that “attenuation of evidence from police misconduct” is generally a mixed question of law and fact that is beyond our review unless there is no record support for the Appellate Division’s determination (People v Williams, 17 NY3d 834, 835 [2011]; but cf. Matter of Leroy M., 16 NY3d 243, 247 [2011]). Here, we conclude that there was record support at the hearing to support the Appellate Division’s attenuation finding.

The hearing testimony established that prior to the arrest, the detective had gathered detailed descriptions of the perpetrator from two witnesses, and learned from one witness—who was acquainted with the perpetrator—that he was known by the street name “Izz.” The detective’s investigation further uncovered that “Izz” was the same man known to police as “Michael Wright” and that the physical description on his rap sheet matched the physical descriptions the witnesses gave the detective. The rap sheet also indicated that “Michael Wright” was also known as “Lester Jones.” Finally, even before the illegal arrest, the detective had obtained a photograph of a person he believed to be the perpetrator and placed it in his case folder.

By the time the sergeant effected the illegal arrest, the detective already had in his possession sufficient evidence to establish probable cause for defendant’s arrest. Within 30 minutes of arriving at the precinct, the sergeant was in contact with the detective, and that conversation led the sergeant to the detective’s case folder and the photograph of defendant. At that point, the sergeant possessed probable cause to detain defendant until the lineup identification eight hours later. Thus, there is clear record support for the Appellate Division’s finding that, at the time of the lineup identification, any taint of the illegal arrest had been attenuated.

Defendant, nonetheless, argues that the disorderly conduct charge was a “mere pretext” and that “there is no record support for any conclusion but that the police obtained the lineup identification ‘by exploitation’ of [defendant’s] illegal arrest.” The sergeant plainly admitted at the hearing that, in addition to the disorderly conduct charge—for which he could not issue a summons because defendant lacked identification—he took defendant into custody because he also believed defendant to be the perpetrator of the earlier robbery. The Appellate Division concluded that the sergeant possessed some information connecting defendant to the robbery and acted in good faith on that information, but that it fell short of probable cause (see e.g. Bradford, 15 NY3d at 334 [noting that there was “no demonstrable proof in the record that the initial detention of defendant was motivated by bad faith or a nefarious police purpose,” and observing that although the Appellate Division concluded that the trooper lacked probable cause upon the initial arrest, it found that he possessed a “fair basis” to approach and detain the defendant]). Here, there is record support for the Appellate Division’s finding that the police did not exploit the illegal arrest.

We also conclude that the Appellate Division correctly held that the trial court properly exercised its discretion by allowing the store employee to testify concerning threats made to him by third parties both before and during trial relative to his testimony. There was sufficient circumstantial evidence to connect those threats to defendant, and the court charged the jury that it needed to determine first whether the threats had, in fact, occurred, and, if so, then whether the threats demonstrated consciousness of guilt on defendant’s part.

Defendant’s remaining contentions are either unpreserved or without merit. Accordingly, the order of the Appellate Division should be affirmed.

Chief Judge Lippman (dissenting).

I find no record support for the Appellate Division’s finding of attenuation. Rather, the record demonstrates that the lineup identification was directly caused by, and the result of the exploitation of the illegal, indeed pretextual, arrest. Because I would find no attenuation as a matter of law, I respectfully dissent and would suppress the lineup identification.

As the majority correctly notes, in applying the attenuation doctrine, courts must consider the “temporal proximity” between the arrest and the discovery of the challenged evidence, “the presence of intervening circumstances, and, particularly, the purpose and flagrancy of the official misconduct” (Brown v Illinois, 422 US 590, 603-604 [1975] [citation omitted]; People v Bradford, 15 NY3d 329, 333 [2010]). But the majority glosses over the actual application of this doctrine: “intervening circumstances” typically include either release from custody or some action taken by a court (see Johnson v Louisiana, 406 US 356, 365 [1972] [intervening circumstances found where, “(p)rior to the lineup, at which (defendant) was represented by counsel, he was brought before a . . . magistrate to advise him of his rights and set bail”]; People v Wilson, 57 NY2d 786, 787-788 [1982] [intervening circumstances found because release followed by voluntary participation in lineup]; People v Pleasant, 54 NY2d 972, 974 [1981], cert denied 455 US 924 [1982] [intervening circumstances found because issuance of warrant followed illegal seizure, but preceded lineup]; People v Poventud, 300 AD2d 223, 223 [1st Dept 2002] [intervening circumstances where lineup was held two weeks after illegal arrest]). Here, there was no warrant issued, no judge involved, and defendant remained in custody from the time of his arrest until he was required to participate in the lineup, which occurred mere hours after he was placed in a holding cell. Moreover, the official misconduct was particularly flagrant: defendant was arrested on pretextual charges of disorderly conduct for blocking a sidewalk, in the wee hours of the morning, when there were no pedestrians around to be blocked.

There is no support for the determination that the telephone call between Sergeant Miller and Detective Sucic broke the causal chain between the illegal arrest and the lineup, and provided the intervening circumstances necessary for a finding of attenuation. The illegal arrest was the very event that facilitated the arresting officer’s acquisition of information tying Mr. Jones to the robbery. It was the illegal arrest that directly prompted Miller to call Sucic. The illegal arrest also allowed Miller to make the comparison between the photograph and. Mr. Jones. In other words, the pretextual arrest was not “sufficiently distinguishable” from Miller’s observation that Mr. Jones was the same person depicted in the photograph from Sucic’s file, and thus there was a direct “ ‘connection between the violation of a constitutional right and the derivative evidence’ ” obtained by the police (People v Jones, 2 NY3d 235, 242 [2004], quoting People v Burr, 70 NY2d 354, 362 [1987], cert denied 485 US 989 [1988]).

Furthermore, Detective Sucic did not possess sufficient evidence to establish probable cause to arrest defendant at the time Miller took defendant into custody, or at the time Miller called Sucic. Sucic only had a vague description of the perpetrator, as being a large, six-foot tall black male, in his thirties, with a big nose. And although Sucic knew the possible street name of the perpetrator, “Izz,” Sucic had no reliable way of knowing that the Gang Unit gave him the correct person matching the nickname “Izz.” In fact, Detective Sucic was told that Michael Wright, or Lester Jones, was only “a possible name” corresponding to “Izz.” Because Sucic never followed up his investigation by showing the photograph to either of the eyewitnesses, he could not know whether there were other people named “Izz” or whether the person with the nickname “Izz” was the person that the neighbor saw committing the robbery. Sucic’s next step, in the normal course of his police investigation, would be to show the photograph to the eyewitness who told him the robber’s street name was “Izz,” question Mr. Jones, or show his photo to the complainant, not to arrest Mr. Jones.

Moreover, there was no evidence that Sucic communicated any information to Miller that would have established probable cause. Miller initially took defendant into custody based on the identification of an employee of a store close to the robbery scene. But that store employee merely saw defendant enter and exit the building around the time of the robbery; he did not see the actual robbery taking place. Then, the only information Sucic communicated to Miller was that he had a photograph of a suspect in his file. Two people with less than probable cause talking on the phone about their respective suspicions does not create probable cause. Indeed, that conversation was itself a part of Miller’s investigation and by definition the opposite of attenuation.

Perhaps most troubling, the majority rests its affirmance on the Appellate Division’s conclusion that Sergeant Miller acted in “good faith” in making the pretextual arrest (see majority op at 456). “Good faith” or “fair basis” for an illegal arrest should not be confused with the well-meaning goal of trying to catch a criminal (see United States v Voustianiouk, 685 F3d 206, 216-217 [2d Cir 2012]). It is society’s most basic understanding of law enforcement that police officers may not violate constitutional rights to effectuate the capture of lawbreakers. In People v Bradford (15 NY3d 329), the case cited by the majority, we held that a state trooper had a good faith basis to arrest a defendant known to the troopers as a 37-year-old registered sex offender in the company of two young teenage girls who had been reported missing by their mother. The girls were at defendant’s apartment late at night and defendant tried to evade police contact by changing direction when he spotted a police car in the parking lot of his building, while he was exiting his apartment with the two young girls (see id. at 334-335). Our finding of “fair basis” to approach and detain in that case meant that, although lacking probable cause, the police officers had a reason to intervene in a suspected crime in progress to prevent potential imminent harm to two young children. Here, however, the robbery occurred over two weeks prior, so there were no safety concerns, no illegal activity was in progress and no reason compelled the officers to make the arrest (see e.g. People v Martinez, 37 NY2d 662, 668-669 [1975] [improper stop of vehicle was followed by necessary arrest after a gun was discovered on the rear floor of the automobile]). There was no fair basis or good faith to detain and transport Mr. Jones for disorderly conduct, a crime completely unrelated to robbery. Unlike Bradford, this was a sham arrest. Thus, the majority chips away at one of the most basic tenets of the Fourth Amendment: a police officer may not place a defendant under arrest in order to obtain sufficient evidence to arrest him (see Brown v Illinois, 422 US at 605; Dunaway v New York, 442 US 200, 218 [1979]; People v Robinson, 13 NY2d 296, 301 [1963]).

Judges Graffeo, Read and Smith concur with Judge Pigott; Chief Judge Lippman dissents in an opinion in which Judge Rivera concurs; Judge Abdus-Salaam taking no part.

Order affirmed.

      . The dissent believes that the detective was obligated to verify that the nickname “Izz,” which he obtained from his colleague at the Manhattan Gang Unit, was reliable (dissenting op at 458). However, a police officer is entitled to rely on a name given him by a fellow officer as part of his investigation (see People v Ketcham, 93 NY2d 416, 420 [1999]).

      . Given our holding in this regard, we need not reach defendant’s argument concerning the “fellow officer” rule.

       “The right of the people to be secure in their persons . . . against unreasonable . . . seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing . . . the persons . . . to be seized” (US Const Amend IV).


author:
Graffeo, J. Smith, J. (dissenting in part).
      Rivera, J. (concurring in part, dissenting in part).

text:
    [995 NE2d 153, 972 NYS2d 191]
    Jeana Barenboim et al., Appellants, v Starbucks Corporation, Respondent. Eugene Winans et al., Appellants, et al., Plaintiff, v Starbucks Corporation, Respondent.
    Argued May 28, 2013;
    decided June 26, 2013

      POINTS OF COUNSEL

      Lichten & Liss-Riordan, EC., Boston, Massachusetts (Shannon Liss-Riordan of counsel), and Joseph, Herzfeld, Hester & Kirschenbaum LLP, New York City (.Daniel Maimón Kirschenbaum of counsel), for appellants in the first above-entitled action.
    I. An employee who is a supervisor is an “agent” under Labor Law § 196-d. (People v Dugan, 91 Mise 2d 239; O’Neil v Roman Catholic Diocese of Brooklyn, 31 Mise 3d 1219, 98 AD3d 485; Southern Ind. Gas & Elec. Co. v National Labor Relations Bd., 657 F2d 878; Herman v RSR Sec. Servs. Ltd., 172 F3d 132; Lauria v Heffernan, 607 F Supp 2d 403.) II. The Department of Labor’s Wage Order concerning Labor Law § 196-d is not entitled to judicial deference. (Chevron U.S.A. Inc. v Natural Resources Defense Council, Inc., 467 US 837; Matter ofAlbano v Board of Trustees of NY. City Fire Dept., Art. II Pension Fund, 98 NY2d 548; Matter of Gruber [New York City Dept, of Personnel—Sweeney], 89 NY2d 225; Matter of Action Elec. Contrs. Co. v Goldin, 64 NY2d 213; Boreali v Axelrod, 71 NY2d 1; Matter of John Paterno, Inc. v Curíale, 88 NY2d 328; Matter of New York Pub. Interest Research Group v New York State Dept, of Ins., 66 NY2d 444; Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 NY2d 588; Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451; Doo Nam Yang v ACBL Corp., 427 F Supp 2d 327.)

      Outten & Golden LLP, New York City (Adam T. Klein, Lewis M. Steel and Molly A. Brooks of counsel), and Outten & Golden LLP, Chicago, Illinois {Paul W. Mollica of counsel), for appellants in the second above-entitled action.
    I. An “agent” under Labor Law § 196-d is an employee who has full authority on management decisions. {Matter of Board ofEduc. of City School Dist. of City of N.Y. v Mills, 250 AD2d 122; Matter of American Tel. & Tel. Co. v State Tax Commn., 61 NY2d 393; Matter ofLezette v Board ofEduc., Hudson City School Dist., 35 NY2d 272; Matter of Lesher v Hynes, 19 NY3d 57; Matter of Fink v Lefkowitz, 47 NY2d 567; Matter of Aurecchione v New York State Div. of Human Rights, 98 NY2d 21; Ayres v 127 Rest. Corp., 12 F Supp 2d 305; Chu Chung v New Silver Palace Rests., Inc., 272 F Supp 2d 314; Herman v RSR Sec. Servs. Ltd., 172 F3d 132; Carter v Dutchess Community Coll., 735 F2d 8.) II. Labor Law § 196-d prohibits employers from excluding otherwise tip-eligible employees from participating in a tip pool. III. The Labor Law should be liberally construed in favor of employees.
      (In re Novartis Wage & Hour Litig., 611 F3d 141; Martin v Malcolm Pirnie, Inc., 949 F2d 611.)

      Akin Gump Strauss Hauer & Feld LLP, Los Angeles, California (Rex S. Heinke, Gregory W. Knopp, Katharine J. Galston and L. Rachel Lerman, of the California bar, admitted pro hac vice, of counsel), Akin Gump Strauss Hauer & Feld LLP, New York City (Samidh Guha of counsel), and Akin Gump Strauss Hauer & Feld LLP, Washington, D.C. (Daniel L. Nash and Nathan J. Oleson, of the District of Columbia bar, admitted pro hac vice, of counsel), for respondent in the first and second above-entitled actions.
    I. New York’s tipping statute permits tip sharing and pooling arrangements among employees “similar” to waiters and busboys, who are “primarily engaged” in customer service, while prohibiting those with true, managerial authority and control from sharing tips with subordinates. (Sarniento v World Yacht Inc., 10 NY3d 70; Matter of Daimler Chrysler Corp. v Spitzer, 7 NY3d 653; Riley v County of Broome, 95 NY2d 455; Matter of Chesterfield Assoc, v New York State Dept, of Labor, 4 NY3d 597; Ayres v 127 Rest. Corp., 12 F Supp 2d 305; Ferraiolo v O’Dwyer, 302 NY 371; Matter of Golf v New York State Dept, of Social Servs., 91 NY2d 656; Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 NY2d 588; Doo Nam Yang v ACBL Corp., 427 F Supp 2d 327; Matter of American Tel. & Tel. Co. v State Tax Commn., 61 NY2d 393.) II. Starbucks Corporation’s policy of including shift supervisors in its tip pools is fully consistent with New York law. (Rosner v Metropolitan Prop. & Liab. Ins. Co., 96 NY2d 475; Sarniento v World Yacht Inc., 10 NY3d 70; People v Illardo, 48 NY2d 408; In re Novartis Wage & Hour Litig., 611 F3d 141; Matamoros v Starbucks Corp., 699 F3d 129; LaForte v Homer, 833 F2d 977; American Fedn. of State, County & Mun. Empls., AFL-CIO [AFSCME] v Nassau County, 609 F Supp 695.) III. Starbucks Corporation’s policy of not including assistant store managers in its tip pools, but instead agreeing to compensate those managerial employees in other ways, is fully consistent with New York law. (Abdu-Brisson v Delta Air Lines, Inc., 239 F3d 456; Ayres v 127 Rest. Corp., 12 F Supp 2d 305; Matter of Charter Dev. Co., L.L.C. v City of Buffalo, 6 NY3d 578; Matter of World Trade Ctr. Bombing Litig., 17 NY3d 428; Henry Modell & Co. v Minister, Elders & Deacons of Ref. Prot. Dutch Church of City of N.Y., 68 NY2d 456; Sarniento v World Yacht Inc., 10 NY3d 70; Scotto v Almenas, 143 F3d 105; Argus Inc. v Eastman Kodak Co., 801 F2d 38.) IV Starbucks Corporation’s tip policy is consistent with this Court’s directive that labor laws be liberally construed in favor of employees. (Sarniento v World Yacht Inc., 10 NY3d 70.)

      Eric T. Schneiderman, Attorney General, New York City (Steven C. Wu, Barbara D. Underwood and Julie M. Sheridan of counsel), for New York State Department of Labor, amicus curiae in the first and second above-entitled actions.
    I. Eligibility to participate in a tip-splitting arrangement depends on the extent to which an employee performs direct customer service. (Commissioner v Solimán, 506 US 168; Weingarten v Board of Trustees of N.Y. City Teachers’ Retirement Sys., 98 NY2d 575; Sarniento v World Yacht Inc., 10 NY3d 70; Matter of County of Albany v Hudson Riv.-Black Riv. Regulating Dist., 97 AD3d 61, 19 NY3d 816; Matter of Judd v Constantine, 153 AD2d 270; Ayres v 127 Rest. Corp., 12 F Supp 2d 305; Matter of OnBank & Trust Co., 90 NY2d 725; Columbus 95th St., LLC v New York State Div. of Hous. & Community Renewal, 81 AD3d 269.) II. It is premature to rule on the propriety of Starbucks Corporation’s specific exclusionary policy here. (New York Pub. Interest Research Group v Carey, 42 NY2d 527; Sarniento v World Yacht Inc., 10 NY3d 70.)

      Jackson Lewis LLP, New York City (Jeffrey W. Brecher, Felice B. Ekelman, Noel P. Tripp and Tara Touloumis of counsel), for New York State Restaurant Association, Inc., amicus curiae in the first and second above-entitled actions.
    I. Labor Law § 196-d prohibits an “employer” or anyone acting on its behalf from misappropriating tips received by employees who participate in providing personal service to patrons; it does not prohibit “agents” or “supervisors” or any other person from participating in a tip pool so long as he or she provides personal service to patrons. (Sarniento v World Yacht Inc., 10 NY3d 70; Wildenstein & Co. v Wallis, 79 NY2d 641; Matter of Southeast Banking Corp., 93 NY2d 178; Herman v RSR Sec. Servs. Ltd., 172 F3d 132; Stoganovic v Dinolfo, 92 AD2d 729, 61 NY2d 812; Andux v Woodbury Auto Park, Inc., 30 AD3d 362; Renzler v D.F. White, Inc., 267 AD2d 443.) II. New York Labor Law permits employees who provide personal service to patrons to retain tips they receive directly from patrons and participate in a tip splitting arrangement with coworkers who also provide personal service to patrons. (Sarniento v World Yacht Inc., 10 NY3d 70; Matter of DaimlerChrysler Corp. v Spitzer, 7 NY3d 653; CFCU Community Credit Union v Hayward, 552 F3d 253; Jacobus v Colgate, 217 NY 235; Matter of City of New York [Long Is. Sound Realty Co.], 160 AD2d 696; Shahriar v Smith & Wollensky Rest. Group, Inc., 659 F3d 234.) III. Nothing in Labor Law § 196-d requires an employer to include all employees who perform personal service in a tip pool. (Kronick v L.P. Thebault Co., Inc., 70 AD3d 648;
      Cole v Mandell Food Stores, 93 NY2d 34; Hines v State Room, Inc., 665 F3d 235.)

      Gladstein, Reif & Meginniss LLP, New York City {James Reif of counsel), and Harrison, Harrison & Associates, Ltd. {David Harrison of counsel) for UNITE HERE! Local 100 and others, amici curiae in the first and second above-entitled actions.
    I. The Court should apply Labor Law § 196-d as written to exclude supervisors and managers from employee tip pools. {Matter of Malta Town Ctr. I, Ltd. v Town of Malta Bd. of Assessment Review, 3 NY3d 563; Matamoros v Starbucks Corp., 699 F3d 129; Chung v New Silver Palace Rest., Inc., 246 F Supp 2d 220; Ayres v 127Rest. Corp., 12 F Supp 2d 305.) II. The Court should interpret Labor Law § 196-d to ensure maximum protection of tips to non-agent employees. {Matter of Angello v Labor Ready, Inc., 7 NY3d 579.) III. The Court need not give deference to the tip pooling portion of the Department of Labor’s hospitality order because it does not derive from the language of the statute. {Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 NY2d 588; Chung v New Silver Palace Rest., Inc., 246 F Supp 2d 220; Barrentine v Arkansas-Best Freight System, Inc., 450 US 728.)

      Fox Rothschild LLP, New York City {Carolyn D. Richmond, Eli Z. Freedberg and Rosemary P. Joyce of counsel), for New York City Hospitality Alliance, amicus curiae in the first and second above-entitled actions.
    I. The Labor Law’s definition of “agent” is not relevant to the analysis of who is entitled to participate in a tip pool. {Matter of Charter Dev. Co., L.L.C. v City of Buffalo, 6 NY3d 578; Sarniento v World Yacht Inc., 10 NY3d 70; Chu Chung v New Silver Palace Rests., Inc., 272 F Supp 2d 314; Saunders v Big Brothers, 115 Mise 2d 845; P & L Group v Garfinkel, 150 AD2d 663; Matter of Hartnett v Wade-Mark Eleven, 156 AD2d 559; Lanzetta v Florio’s Enters., Inc., 763 F Supp 2d 615; Hai Ming Lu v Jing Fong Rest., Inc., 503 F Supp 2d 706; Ayres v 127 Rest. Corp., 12 F Supp 2d 305.) II. Employees who possess some supervisory authority are not prohibited from participating in a tip pool. {Fowler v Scores Holding Co., Inc., 677 F Supp 2d 673; Shahriar v Smith & Wollensky Rest. Group, Inc., 659 F3d 234; Hai Ming Lu v Jing Fong Rest., Inc., 503 F Supp 2d 706; Kilgore v Outback Steakhouse of Fla., Inc., 160 F3d 294; Myers v Copper Cellar Corp., 192 F3d 546; Sarniento v World Yacht Inc., 10 NY3d 70.) III. To the extent the definition of the term “agent” is material, food service employees with some supervisory responsibilities do not qualify as “agents.” {Ayres v 127 Rest. Corp., 12 F Supp 2d 305; Shahriar

      v Smith & Wollensky Rest. Group, Inc., 659 F3d 234.) IV Labor Law § 196-d does not compel an employer to include all service employees in a tip pool. (People ex rel. Harris v Sullivan, 74 NY2d 305; Sarniento v World Yacht Inc., 10 NY3d 70.)
   OPINION OF THE COURT

Graffeo, J.

The United States Court of Appeals for the Second Circuit has posed two questions regarding the legality of Starbucks Corporation’s tip-splitting policy under Labor Law § 196-d.

I.

Defendant Starbucks Corporation is a Washington-based coffeehouse company that operates hundreds of outlets in New York State. In each store, Starbucks employs four categories of employees: baristas, shift supervisors, assistant store managers and store managers. Baristas are the front-line, entry-level employees responsible for tasks such as taking orders, making and serving the company’s coffee, tea and food offerings, operating the cash register, cleaning tables and stocking product. They work on a part-time, hourly basis.

After six months’ employment, baristas may become eligible for promotion to shift supervisors. Like baristas, shift supervisors are primarily responsible for serving food and beverages to customers. In fact, they spend nearly all their time performing the same customer-related duties undertaken by baristas. They also work on a part-time basis and are paid an hourly wage. As their title suggests, however, shift supervisors have some supervisory responsibilities, such as assigning baristas to particular positions during their shifts, directing the flow of customers and providing baristas with feedback about their performance. Shift supervisors may also open and close stores, change the cash register tills and, if neither an assistant store manager nor store manager is present, make bank deposits.

Assistant store managers represent the third rung in the Starbucks hierarchy. Although assistant store managers devote the majority of their time performing customer-oriented services, they also possess greater managerial and supervisory authority than shift supervisors. For example, they assist store managers in interviewing applicants, assigning work shifts to baristas and shift supervisors, and evaluating employee performance. They also participate in decisions to hire or fire employees, recommend corrective action for employee infractions and process payroll. In essence, an assistant store manager functions as the store manager’s deputy. In contrast to baristas and shift supervisors, assistant store managers are full-time employees who receive a salary if they work at least 37 hours per week. And unlike baristas and shift supervisors, they are eligible for quarterly bonuses and certain benefits, including holiday and sick pay.

Finally, store managers constitute the highest rank in the workforce structure. With the support of assistant store managers, store managers are responsible for the overall operation of the store. They have the power to hire, promote, transfer, schedule, discipline and terminate baristas and shift supervisors. Store managers, like assistant store managers, are full-time, salaried employees who are eligible for various benefits.

Starbucks maintains a written policy governing the collection, storage and distribution of customer tips. Pursuant to this policy, each Starbucks store places a plexiglass container at the counter where patrons may deposit tips. Once these tip canisters become full, Starbucks requires that they be emptied into a bag and the money is stored in a safe. At the end of each week, the tips are tallied and distributed in cash to two categories of employees—baristas and shift supervisors—in proportion to the number of hours each employee worked. Starbucks does not permit its assistant store managers or store managers to share in the weekly distribution of tips. The company’s decision to include shift supervisors in these tip pools was the impetus for the first lawsuit before us, while its exclusion of assistant store managers underlies the claims in the second action.

In 2008, plaintiffs Jeana Barenboim and Jose Ortiz (collectively, Barenboim), two former Starbucks baristas, brought a putative class action in the United States District Court for the Southern District of New York alleging that Starbucks’ policy of including shift supervisors in the tip pools was unlawful under Labor Law § 196-d. In particular, Barenboim claimed that shift supervisors should not be able to receive distributions from a store’s tip pool because they are Starbucks “agents” who may not “demand or accept, directly or indirectly, any part of the gratuities, received by an employee” (Labor Law § 196-d). In other words, Barenboim contended that the tip jar proceeds belong exclusively to Starbucks baristas. On cross motions for summary judgment, the District Court granted Starbucks’ motion, concluding that Labor Law § 196-d does not bar shift supervisors from participating in tip pools because their limited supervisory responsibilities “do not carry the broad managerial authority or power to control employees that courts have held to be sufficient to render an employee an ‘employer or [employer’s] agent’ within the meaning of Section 196-d” (In re Starbucks Empl. Gratuity Litig., 264 FRD 67, 72 [SD NY 2009]). Barenboim appealed.

Meanwhile, plaintiff Eugene Winans and four other former Starbucks assistant store managers (collectively, Winans) filed a separate complaint in the same court asserting that assistant store managers are not ineligible “agents” and, therefore, they should be entitled to participate in the tip pools under Labor Law § 196-d. Put differently, they claimed that the tips should be distributed among baristas, shift supervisors and assistant store managers. On cross motions for summary judgment, the District Court concluded that there was a triable issue of fact as to whether assistant store managers are tip-pool eligible but awarded Starbucks summary judgment on the ground that, although Labor Law § 196-d excludes an employer or its agent from retaining tips, it does not compel an employer to include any particular eligible employee in a tip pool Winans v Starbucks Corp., 796 F Supp 2d 515 [SD NY 2011]). Winans appealed.

Recognizing that the two appeals presented unresolved questions of New York law, the Second Circuit certified the following questions to us:

“1. What factors determine whether an employee is an ‘agent’ of his employer for purposes of N.Y. Lab. Law § 196-d and, thus, ineligible to receive distributions from an employer-mandated tip pool? In resolving this question for purposes of this case, the Court of Appeals may also consider the following subsidiary questions:
“a. Is the degree of supervisory or managerial authority exercised by an employee relevant to determining whether the employee is a ‘manager [or] supervisor’ under N.Y. Lab. Law § 2(8-a) and, thus, an employer’s ‘agent’ under § 196-d?
“b. If an employee with supervisory or managerial authority renders services that generate gratuities contributed to a common tip pool, does § 196-d preclude that employee from sharing in the tip pool?
“c. To the extent that the meaning of ‘employer or his agent’ in § 196-d is ambiguous, does the Department of Labor’s New York State Hospitality Wage Order constitute a reasonable interpretation of the statute that should govern disposition of these cases?
“d. If so, does the Hospitality Wage Order apply retroactively?
“2. Does New York Labor law permit an employer to exclude an otherwise eligible tip-earning employee under § 196-d from receiving distributions from an employer-mandated tip pool?” (698 F3d 104, 118 [2d Cir 2012]).

The Second Circuit clarified that it did not intend to “bind” us “to the particular questions stated” and invited this Court to “expand these certified inquiries to address any further pertinent question of New York law as it might pertain to the particular circumstances presented in these appeals” (id.).

II.

Labor Law § 196-d, admittedly not a model of clarity, provides in relevant part as follows:

“No employer or his agent or an officer or agent of any corporation, or any other person shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee. . . . Nothing in this subdivision shall be construed as affecting the . . . sharing of tips by a waiter with a busboy or similar employee.”

The first sentence of the statute, adopted in 1968, was intended to “end the unfair and deceptive practice of an employer retaining money paid by a patron under the impression that he is giving it to the employee, not to the employer” (Samiento v World Yacht Inc., 10 NY3d 70, 79 n 4 [2008] [internal quotation marks and citation omitted]). The last sentence, which preserves tip sharing among waiters, busboys and “similar employee[s],” was added at the request of the restaurant and hotel industries to preserve the legality of commonplace tip-splitting practices in those businesses (see Mem of Indus Commr, June 6, 1968, Bill Jacket, L 1968, ch 1007 at 4).

On this appeal, Barenboim and Winans focus on the first sentence of Labor Law § 196-d and, in particular, on the term “agent.” Barenboim asserts that any supervisory responsibility, however slight, renders an employee (such as a shift supervisor) an agent and, therefore, ineligible to participate in a tip pool. Winans argues the opposite position, contending that only employees with “full” managerial authority—i.e., the ability to hire and fire subordinates—should be viewed as agents and, as a result, assistant store managers remain eligible for tip distribution. Taking a different tack, Starbucks relies on the final sentence of the statute in claiming that shift supervisors are sufficiently similar to waiters, busboys and the like, and should be viewed as eligible to share in tips, while assistant store managers, by virtue of their significant managerial responsibility, stand on substantially different footing from baristas and shift supervisors, making them tip-pool ineligible.

Aside from the arguments of the parties themselves, the New York State Department of Labor (DOL) appears as amicus curiae, lending us its view of the case. Like Starbucks, the DOL draws our attention to the last sentence of Labor Law § 196-d and submits that it contains the operative language relevant to tip-splitting practices. According to the DOL, employees who are “similar” to waiters and busboys may share in tips while employees who are dissimilar to those positions may not. Because the first certified question, as framed by the Second Circuit, centers on the term “agent” rather than the phrase “similar employee,” the DOL suggests that we slightly reformulate it to ask:

“What factors determine whether an employee is eligible or ineligible to receive distributions from an employer-mandated tip-splitting arrangement?”

We accept the DOL’s reframed first question and now turn to the task of answering it.

We have recognized that the DOL’s “interpretation of a statute it is charged with enforcing is entitled to deference” (Samiento, 10 NY3d at 79; see also Matter of Chesterfield Assoc. v New York State Dept. of Labor, 4 NY3d 597, 604 [2005] [explaining that the “construction given statutes and regulations by the agency responsible for their administration, if not irrational or unreasonable, should be upheld” (internal quotation marks and citation omitted)]). Indeed, we previously deferred to the DOL’s reading of Labor Law § 196-d, the very statute at the heart of this case (see Samiento, 10 NY3d at 79 [agreeing with the DOL that a charge that is not voluntary may nevertheless be a “charge purported to be a gratuity” within the meaning of the first sentence of section 196-d such that the employer may not pocket it]). Hence, our analysis begins with the DOL’s interpretation of the tip-sharing language of section 196-d and, in particular, the meaning of the phrase “similar employee.”

In January 2011, the DOL promulgated the Hospitality Industry Wage Order (the Wage Order), codified at 12 NYCRR part 146. As relevant to this case, the Wage Order clarified and unified the DOL’s tip-splitting policies previously found in a patchwork of opinion letters and a set of written guidelines dating back to 1972. The Wage Order makes clear that an employee’s ability to participate in a tip pool under the last sentence of Labor Law § 196-d “shall be based upon duties and not titles” (12 NYCRR 146-2.14 [e]). The Wage Order also codified the DOL’s long-standing construction of section 196-d as limiting tip-pool eligibility to workers who “perform, or assist in performing, personal service to patrons at a level that is a principal and regular part of their duties and is not merely occasional or incidental” (id.). It is therefore evident that employer-mandated tip splitting should be limited to employees who, like waiters and busboys, are ordinarily engaged in personal customer service, a rule that comports with the “expectation[s] of the reasonable customer” (Samiento, 10 NY3d at 79).

Moreover, contrary to Barenboim’s (i.e., the baristas’) position, the DOL has consistently and, in our view, reasonably, maintained that employees who regularly provide direct service to patrons remain tip-pool eligible even if they exercise a limited degree of supervisory responsibility. Both the 1972 guidelines and the Wage Order identify “captains” as employees who are able to participate in tip sharing under Labor Law § 196-d (see 12 NYCRR 146-2.14 [e] [8] [“captains who provide direct food service to customers”]). Manifestly, captains enjoy some supervisory authority over other waitstaff, yet such responsibility does not, by itself, render them sufficiently dissimilar to waiters and busboys so as to preclude their participation in tip pools. Consequently, we cannot agree with Barenboim’s contention that even the slightest degree of supervisory responsibility automatically disqualifies an employee from sharing in tips under Labor Law § 196-d.

Barenboim relies heavily on Matamoros v Starbucks Corp. (699 F3d 129 [1st Cir 2012]) in support of her section 196-d claim, but that case is readily distinguishable. In Matamoros, a class of baristas in Massachusetts similarly challenged Starbucks’ policy of including shift supervisors in the communal tip pool, arguing that it violated the Massachusetts Tips Act. That statute, unlike section 196-d, contained an express limitation— wait staff employees could only share tips with fellow wait staff who had “no managerial responsibility” (id. at 133). The First Circuit held that the Tips Act created a bright-line rule excluding employees with any level of managerial responsibility, however minimal, from tip sharing and concurred with the baristas that Starbucks shift supervisors could not receive distributions. In reaching this conclusion, the First Circuit relied on the unequivocal language of the Massachusetts statute (see id. at 134 [“ ‘no’ means ‘no’ ”]) as well as interpretive guidance from the Massachusetts Attorney General, who had likewise construed the provision in a manner consistent with the baristas’ claim. In stark contrast, New York’s Labor Law § 196-d does not set forth a categorical prohibition against tip splitting by employees with any inkling of supervisory responsibility. Further, the DOL—the agency charged with the enforcement of section 196-d —directly opposes Barenboim’s proposed construction. As such, we decline to apply the analysis in Matamoros.

On the other hand, Winans, on behalf of the assistant store managers, suggests that employees should be deemed “similar” to waiters and busboys—and eligible to share in tips—so long as they do not have full or final authority to terminate subordinates. But we believe that there comes a point at which the degree of managerial responsibility becomes so substantial that the individual can no longer fairly be characterized as an employee similar to general wait staff within the meaning of Labor Law § 196-d. We conclude that the line should be drawn at meaningful or significant authority or control over subordinates. Meaningful authority might include the ability to discipline subordinates, assist in performance evaluations or participate in the process of hiring or terminating employees, as well as having input in the creation of employee work schedules, thereby directly influencing the number and timing of hours worked by staff as well as their compensation. In other words, contrary to Winans’ view, the power to hire and fire is not the exclusive test. The Second Circuit recognized that the parties’ dispute in the Winans case “is more legal than factual, with resolution depending on whether New York views final decisionmaking authority as necessary” (698 F3d at 114). Meaningful authority, not final authority, should be the standard.

In sum, an employee whose personal service to patrons is a principal or regular part of his or her duties may participate in an employer-mandated tip-allocation arrangement under Labor Law § 196-d, even if that employee possesses limited supervisory responsibilities. But an employee granted meaningful authority or control over subordinates can no longer be considered similar to waiters and busboys within the meaning of section 196-d and, consequently, is not eligible to participate in a tip pool. We leave it to the federal courts to apply these principles to the Barenboim and Winans cases.

III.

Turning to the second certified question, the Second Circuit asks whether an employer may deny tip-pool distributions to an employee who is nevertheless eligible to split tips under Labor Law § 196-d. The second question relates to the Winans case because, should the federal courts determine that assistant store managers are eligible to participate in tip pools (on the basis that they do not possess meaningful authority), the legality of Starbucks’ policy of excluding them from the tip jars would be implicated.

The District Court in Winans reached this issue and upheld Starbucks’ practice, reasoning that Labor Law § 196-d merely defines who is eligible or ineligible to join in a tip pool and does not grant an otherwise eligible employee an affirmative right to participate in tip pools or receive tip distributions. Put differently, the District Court effectively answered the second question in the affirmative, holding that Labor Law § 196-d excludes certain people from an employer-mandated tip pool but does not require the inclusion of all employees not statutorily barred from participation. We generally agree with the District Court’s reading of the statute but leave open the possibility that there may be an outer limit to an employer’s ability to excise certain classifications of employees from a tip pool. For example, the DOL suggests that an employer should not be permitted to “give all of the distributions from a tip-splitting arrangement to only the highest-ranking eligible employee.” We need not resolve this hypothetical scenario, however, because it is clear that Starbucks’ decision to exclude assistant store managers from the tip pool is not contrary to Labor Law § 196-d.

Accordingly, the first certified question, as reformulated, and the second certified question should be answered in accordance with this opinion.

Smith, J. (dissenting in part).

I agree with the majority to the extent that I too would answer the Second Circuit’s questions in a way favorable to Starbucks and adverse to plaintiffs in both cases. I would proceed by a simpler route, however: I think Labor Law § 196-d is inapplicable to this case.

The conduct forbidden by the statute is to “demand or accept . . . any part of the gratuities . . . received by an employee” or to “retain any part of a gratuity or of any charge purported to be a gratuity for an employee.” In plainer language, neither the boss nor (with some exceptions) a fellow worker may take or demand part of a worker’s tips. No one is doing that in this case. This case involves tips not given to any particular employee, but put into a common pool. The only issue is how the pool is to be shared among the people who earn the tips—a subject on which the statute has nothing to say. No doubt, if Starbucks itself were taking a piece of the pool, or if higher-level employees were coercing baristas to give up part of the share that Starbucks allotted them, the statute would be triggered, but that is not what is going on.

The purpose of the statute is no less plain than its language. As we said in Samiento v World Yacht Inc. (10 NY3d 70, 79 n 4 [2008]), quoting from the legislative history:

“The drafters of Labor Law § 196-d sought to end the ‘unfair and deceptive practice’ of an employer retaining money paid by a patron ‘under the impression that he is giving it to the employee, not to the employer’ (see Mem of Indus Commr, June 6, 1968, Bill Jacket, L 1968, ch 1007, at 4).”

This case does not involve that “unfair and deceptive practice” or anything resembling it, and that should end the case.

Some federal decisions have made the New York law of tipping more complicated than it needs to be by drawing an analogy between Labor Law § 196-d, a simple prohibition of a rather clear abuse, and 29 USC § 203 (m), which deals with a less simple question of federal law: the extent to which an employer may credit tips against the minimum wage (see Shahriar v Smith & Wollensky Rest. Group, Inc., 659 F3d 234, 241 [2d Cir 2011] [“Thus, 29 U.S.C. § 203(m) and § 196-d bar the same types of tipping practices, and actions that violate the tip pooling provision of 29 U.S.C. § 203(m) may also violate § 196-d”]). But we are not bound by the federal courts’ interpretation of New York law, and I would not follow it here. I think more useful guidance can be found in Jou Chau v Starbucks Corp. (174 Cal App 4th 688, 94 Cal Rptr 3d 593 [2009]), in which the court interpreted California Labor Code § 351, a statute quite similar to our section 196-d. Under the California statute: “No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron.”

Jou Chau was a class action by Starbucks baristas essentially identical to the Barenboim case we have here. The court dismissed the case, drawing a distinction between an employer’s authority to compel the sharing of a tip “given to an individual service employee” and the authority “to require equitable allocation of tips placed in a collective tip box” (174 Cal App 4th at 691, 94 Cal Rptr 3d at 594-595 [emphasis omitted]). The Jou Chau court decided the case without interpreting the term “agent” in Labor Code § 351, concluding that “[e]ven if shift supervisors can be considered ‘agents’ . . . Starbucks did not violate section 351 by permitting shift supervisors to share in the tip proceeds that were left in a collective tip box for baristas and shift supervisors” (174 Cal App 4th at 696, 94 Cal Rptr 3d at 598). The policy behind section 351, the court explained, was “to protect employees from employers who used their positions to unfairly command a share of the employee’s tip” (id.). Because the distribution of a common tip pool does not implicate that policy, the court held section 351 not to be violated. I would adopt a similar line of reasoning here.

Because I think the statute is inapplicable, I would answer no to question 1 (b) (asking whether Labor Law § 196-d precludes an employee with supervisory or managerial authority from sharing in a common tip pool) and yes to question 2 (asking whether an employer may exclude an otherwise eligible tip-earning employee from such a pool), and would treat the other questions as academic. The majority’s contrary approach extends the statute to a situation that does not involve the abuse the legislature sought to prohibit—or, as far as I can see, any abuse at all. This has the unfortunate effect of leaving open a large category of tips to regulation by the Department of Labor and to litigation over when the tips have and have not been properly distributed. What good this does, other than the full employment of regulators and of lawyers, is not clear to me.

Rivera, J. (concurring in part, dissenting in part).

I agree with the majority’s conclusion, with respect to the first question certified from the United States Court of Appeals for the Second Circuit, that an employee who exercises meaningful authority or control over subordinates is an employer’s “agent” ineligible to receive and retain gratuities under Labor Law § 196-d. However, based on our answer to the first certified question, the complex factual issues that may impact the application of section 196-d as suggested by the majority’s discussion of the second certified question, and the current posture of the Winans case in the federal courts, I would decline to answer the second certified question.

Our answer to the first certified question sets forth the “meaningful authority standard” as the proper standard to determine whether an employee is an agent of the employer under section 196-d. The application of that standard in Winans is left to the federal courts, and the Second Circuit may decide the appeal based solely on our answer to the first certified question, obviating the need to consider the majority’s answer to the second certified question.

The majority’s answer to the second certified question, “whether an employer may deny tip-pool distributions to an employee who is nevertheless eligible to split tips under Labor Law § 196-d” (majority op at 474), is qualified. The majority asserts its general agreement with the District Court that section 196-d does not mandate inclusion of all employees not statutorily barred from participation, but “leave[s] open the possibility that there may be an outer limit to an employer’s ability to excise certain classifications of employees from a tip pool” (id.). That is, the majority recognizes that there are statutory reins on the employer’s attempts to exclude tip-eligible employees from the tip pool. However, the majority refrains from considering the statutory boundaries because it concludes that Starbucks’ policy to exclude assistant store managers from the tip pool “is not contrary to Labor Law § 196-d” (id.). This determination must rest on the majority’s conclusion that assistant store managers have the type of meaningful authority or control over subordinates making this class of employees ineligible to participate in the tip pool. If that is the majority’s conclusion, then it does not matter what, if any, discretionary authority the employer may have under section 196-d to exclude an otherwise eligible employee. Put otherwise, the majority’s suggestion that assistant store managers are employer’s agents ineligible to participate in a tip pool renders unnecessary its further consideration of the second certified question.

If that is not the logical import of the majority’s assessment of the Starbucks policy in Winans, then at a minimum, the majority leaves too much unsaid about the boundaries potentially applicable here. As the Department of Labor notes, there remain crucial factual issues that weigh in favor of declining this question. As it currently stands, the record indicates that all four classes of Starbucks employees are garbed in similar uniforms and engaged in customer service duties. Thus, whether the customer service responsibilities of an assistant store manager constitute a principal or regular part of his or her duties remains unresolved, and the propriety of Starbucks’ tipping policy turns on factual issues pertaining to the appropriate classification of assistant store managers as either employer’s agents, or tip-eligible employees.

I believe the more prudent course is for us to allow the Second Circuit to consider the possible applicability of our answer to the first certified question to the Winans case, and to decline to answer the second certified question. Given that the federal courts may resolve the case without reference to our answer, and because the majority’s resolution of the second question raises, without addressing, certain undefined parameters of the statute, I join in the majority’s answer to the first certified question and dissent from its answer to the second (see Yesil v Reno, 92 NY2d 455, 456-457 [1998]; Retail Software Servs. v Lashlee, 71 NY2d 788 [1988]).

Chief Judge Lippman and Judges Read, Pigott and AbdusSalaam concur with Judge Graffeo; Judge Smith dissents in part in an opinion; Judge Rivera dissents in part in a separate opinion.

Following certification of questions by the United States Court of Appeals for the Second Circuit and acceptance of the questions by this Court pursuant to section 500.27 of the Rules of Practice of the New York State Court of Appeals, and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified questions answered in accordance with the opinion herein.

      . The Labor Law elsewhere defines an “ ‘[a]gent’ of a corporation” to include, but not be limited to, “a manager, superintendent, foreman, supervisor or any other person employed acting in such capacity” (Labor Law § 2 [8-a]).

        . Notably, although the Second Circuit singled out the word “agent” in its first question, it recognized the import of Labor Law § 196-d’s last sentence—and the “similar employee” language—to this case throughout its opinion (see 698 F3d at 106, 109, 111, 113, 115). We believe that in certifying the first question, the Second Circuit was interested in knowing both whether an employee’s supervisory responsibilities are relevant to ascertaining tip-pool eligibility and, if so, the point at which an employee’s authority becomes too great to remain eligible to participate in a tip pool. The reformulated question addresses these inquiries.

        (n. cont’d)

      . The Wage Order defines tip sharing as “the practice by which a directly tipped employee gives a portion of his or her tips to another service employee or food service worker who participated in providing service to customers and keeps the balance” (12 NYCRR 146-2.14 [a]). It describes tip pooling as “the practice by which the tip earnings of directly tipped employees are intermingled in a common pool and then redistributed among directly and indirectly tipped employees” (12 NYCRR 146-2.14 [b]). In its brief, the DOL notes that Starbucks’ tip distribution plan “shares features of both practices” and interchangeably refers to it as a policy of tip sharing, tip pooling or tip splitting, as do we.

      . The Second Circuit queried whether the relevant tip-splitting provisions of the Wage Order, promulgated in 2011, could be applied to these 2008 lawsuits. We discern no retroactivity problem. Although retroactive operation of an enactment is generally disfavored, retroactive effect occurs only when the enactment’s application “would impair rights a party possessed when he acted, increase a party’s liability for past conduct, or impose new duties with respect to transactions already completed” (Landgraf v USI Film Products, 511 US 244, 280 [1994]). Here, the pertinent portions of the Wage Order do not create new rights or duties and merely elaborate upon the DOL’s preexisting understanding of Labor Law § 196-d.

      . Judge Smith’s dissent, giving no deference to the DOL, relies on a California case to support his view that Labor Law § 196-d has no application to the distribution of a communal tip pool (see Jou Chau v Starbucks Corp., 174 Cal App 4th 688, 94 Cal Rptr 3d 593 [Ct App, 4th Dist 2009]). But the statute at issue in Jou Chau contains no tip-sharing language analogous to the last sentence of New York’s Labor Law § 196-d. Moreover, the court in Jou Chau stated that its analysis related solely to Starbucks shift supervisors (id. at 704-705 [“Our ruling is based only on the particular and narrow facts before us”]) and acknowledged that its “legal reasoning and conclusions would not be controlling” were assistant store managers at issue (id. at 705)—as they are here.

       If we were to be presented with this question in the future, we would also benefit from more extensive briefing by the Department of Labor based upon a fully developed factual record (see Samiento v World Yacht Inc., 10 NY3d 70, 79 [2008]; Matter of Chesterfield Assoc. v New York State Dept. of Labor, 4 NY3d 597, 604 [2005]).