NYC co-op restaurant gives rise to a court fight

NEW YORK The Restaurant Opportunities Center of New York, a restaurant-employee advocacy group likened by some to a union, said it will seek dismissal of a lawsuit filed against the organization by eight ex-members who contend they were cheated out of ownership in Colors, a restaurant formed under ROC's auspices as a workplace for former staffers of Windows on the World.

Windows was located atop the north tower of the city's World Trade Center and was destroyed on 9/11. Colors was formed specifically to provide a place where employees displaced by the terrorist attacks could work. It was envisioned as a co-op, with the staffers owning as well as operating the place, which is in a prime location in the eastern part of Greenwich Village.

The project was the brainchild of ROC and an investor group called Good Italian Food, which currently co-own Colors. The business plan called for spinning off a 20-percent stake in the restaurant to employees once the place was profitable, with 10 percent contributed by ROC and a same percentage coming from Good Italian, according to a ROC official.

The place has yet to break even, and may not generate a profit for years, according to ROC co-director Saru Jayaraman.

“We’re only a year and a half old,” she said.

The plaintiffs' attorney contends that his clients deserve to be given the equity they expected as a reward for their hard work.

“These people put in sweat equity, hundreds of hours of work — office work, investigatory work and fund raising — and never got their equity," said Arthur Z. Schwartz, an attorney with the New York law firm Kennedy Schwartz & Cure. "They contributed their tips and pay to ROC. You know, ROC will go to a restaurant and picket saying it is not paying its employees properly, taking tips away, etc., but they did the same thing only, in the name of a cooperative."

Four of the eight plaintiffs worked in Windows, and the remaining four worked in other restaurants in the Wall Street area, where a steep fall-off in business after 9/11 prompted many places to cut their staffs or close for good. All of the eight were members of ROC, and all contend they worked at Colors, though Jayaraman disputes that assertion.

The eight filed suit against ROC on July 24, seeking unspecified damages, reinstatement of jobs at Colors, back pay and a stake in the restaurant.

"The suit is meritless," said Jayaraman. "They're not from Colors and never were a part of Colors."

She acknowledged that the plaintiffs were part of ROC, but asserts that they left the organization in spring of 2005 "of their own accord." Colors opened in January 2006.

"They didn't believe in our mission, but others who did moved [forward] and opened the restaurant," Jayaraman said.

Schwartz maintains that his clients were dismissed from ROC and Colors—as is anyone who disagrees with the employee organization. "[ROC] kicked them out; they didn’t leave on their own," he said. "Each one in one form or another was kicked out.”

He also contends that ROC misled Colors workers into thinking they'd eventually hold equity in the restaurant, when in fact, he says, they will merely be given an interest in a corporation controlled by ROC, which would remain the true owner.

“They told the workers the restaurant would turn a profit, which it is far from doing, and that the best estimate [of when that would happen] was five years down the road,” Schwartz said. “They have cheated these people and basically got free labor out of them.

Jayaraman said the plan to give ownership to Colors employees remains intact.

“Over the next year to year-and-a-half, there will be a profit and once there is profit they can start buying out the investor group. But nobody is going to get profits until there are some,” she said.

"Most people believe Colors is owned by the people who work there and it’s not," said Schwartz. "It basically is an employee stock ownership plan where ownership control is in the hands of ROC.”

Jayaraman said the restaurant, which employs approximately 40 people, cost $2.25 million to open, with $500,000 raised by ROC-NY, the other $500,000 invested by Good Italian and the remaining $1.25 million financed through a loan.