Henderson et al v. 1400 Northside Drive, Inc.
Filing
132
ORDER granting in part and denying in part 124 Motion for Partial Summary Judgment. Signed by Judge Thomas W. Thrash, Jr on 6/3/2016. (ss)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
CLINTON HENDERSON, et al.,
Plaintiffs,
v.
CIVIL ACTION FILE
NO. 1:13-CV-3767-TWT
1400 NORTHSIDE DRIVE, INC.
doing business as
Swinging Richards, et al.,
Defendants.
OPINION AND ORDER
This is an action under the Fair Labor Standards Act (“FLSA”) for the recovery
of unpaid minimum wages. It is before the Court on the Plaintiffs’ Motion for Partial
Summary Judgment [Doc. 124]. For the reasons set forth below, the Plaintiffs’
Motion for Partial Summary Judgment [Doc. 124] is GRANTED in part and DENIED
in part.
I. Background
The Plaintiffs are current and former exotic dancers for Swinging Richards, a
male strip club, (“the Club”) which is owned and operated by the Defendant 1400
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Northside Drive, Inc.1 The Defendant C.B. Jones owns the Defendant 1400 and has
been its chief executive officer and chief financial officer for at least the last eight
years.2 The Club classifies the dancers as independent contractors, and they are
compensated exclusively through customer tips.3 The Plaintiffs brought suit, alleging
that the Defendants violated the FLSA by improperly classifying them as independent
contractors and not paying them a minimum wage.
On June 19, 2015, the Court granted the Plaintiffs’ Motion for Partial Summary
Judgment with regard to the Defendants’ creative professional exemption and offset
defenses.4 The Plaintiffs now move for partial summary judgment on a number of
issues. First, they contend that the Defendant 1400 is engaged in commerce and,
therefore, subject to the FLSA. Second, they contend that the Defendant Jones is an
“employer” under the FLSA. Third, they contend that the Defendants willfully
violated the FLSA and, as a result, are not entitled to a “good faith” defense. Fourth,
they contend that the “back-pay calculation here must also include reimbursements
1
Pls.’ Statement of Facts in Supp. of Mot. for Partial Summ. J. ¶¶ 1, 4.
2
Id. ¶¶ 10, 16.
3
Id. ¶¶ 48, 106.
4
[Doc. 105].
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for unlawful kickbacks.”5 Finally, they contend that the Defendants’ counterclaims for
breach of contract and unjust enrichment must be denied.
II. Legal Standard
Summary judgment is appropriate only when the pleadings, depositions, and
affidavits submitted by the parties show that no genuine issue of material fact exists
and that the movant is entitled to judgment as a matter of law.6 The court should view
the evidence and any inferences that may be drawn in the light most favorable to the
nonmovant.7 The party seeking summary judgment must first identify grounds that
show the absence of a genuine issue of material fact.8 The burden then shifts to the
nonmovant, who must go beyond the pleadings and present affirmative evidence to
show that a genuine issue of material fact does exist.9 A “mere ‘scintilla’ of evidence
supporting the opposing party’s position will not suffice; there must be a sufficient
showing that the jury could reasonably find for that party.”10
5
Pls.’ Mot. for Partial Summ. J., at 19.
6
FED. R. CIV. P. 56(c).
7
Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970).
8
Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).
9
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).
10
Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir.1990).
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A party may move for summary judgment on a part of a claim or defense.11 An
“order granting partial summary judgment from which no immediate appeal lies is
merged into the final judgment and reviewable on appeal from that final judgment. .
. .An order granting [summary] judgment on certain issues is a judgment on those
issues. It forecloses further dispute on those issues at the trial stage. An order denying
a motion for partial summary judgment, on the other hand, is merely a judge’s
determination that genuine issues of material fact exist. It is not a judgment, and does
not foreclose trial on the issues on which summary judgment was sought.”12
III. Discussion
A. 1400 Northside Drive, Inc.’s Liability
The Plaintiffs argue that the Defendant 1400 is liable for violations of 29 U.S.C.
§ 206 of the FLSA. To hold an enterprise liable under § 206 – the minimum wage
section – the enterprise must be “engaged in commerce.”13 An enterprise is “engaged
in commerce” if its “employees [are] handling, selling, or otherwise working on goods
or materials that have been moved in or produced for commerce by any person.”14 The
11
FED. R. CIV. P. 56(a).
12
Lind v. United Parcel Serv., Inc., 254 F.3d 1281, 1284 n.4 (11th Cir.
2001) (quoting Glaros v. H.H. Robertson Co., 797 F.2d 1564, 1573 (Fed. Cir. 1986)).
13
29 U.S.C. § 206(a).
14
29 U.S.C. § 203(s)(1)(A)(i).
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term “commerce” is defined as “trade, commerce, transportation, transmission, or
communication among the several States or between any State and any place outside
thereof.”15 In addition to engaging in commerce, the enterprise must have an “annual
gross volume of sales made or business done [that] is not less than $500,000” to be
liable under the Act.16
Here, the Defendant 1400 concedes that its gross annual sales are in excess of
$500,000,17 but the parties dispute whether it is engaged in commerce. The Plaintiffs
contend that the Defendant 1400 is engaged in commerce because it “sells customers
both domesticated and imported alcohol that the club obtains from outside of
Georgia.”18 The Defendants admit this allegation.19 The Defendants, however, argue
that the Club is the ultimate consumer of the packages of alcohol, not the customers.
Moreover, the Defendants contend that it would be illegal under both Georgia law and
Atlanta ordinances to resell packages of liquor to consumers. Thus, according to the
15
Id. § 203(b).
16
Id. § 203(s)(1)(A)(ii).
17
See Defs.’ Resp. to Pls.’ Statement of Facts ¶ 9 (admitting that the
company’s gross annual sales exceed $500,000).
18
Pls.’ Mot. for Partial Summ. J., at 5.
19
Defs.’ Resp. to Pls.’ Statement of Facts ¶ 8; Def. 1400 Answer to Second
Am. Compl. ¶ 16.
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Defendants, “[t]he only fair inference to be drawn is that the club complies with both
Georgia law and Atlanta ordinances and purchases sealed bottles of liquor from
licensed distributors in Georgia for use by the club as the ultimate consumer.”20
The Court finds that the Defendant 1400 is subject to the FLSA minimum wage
requirement. To begin, the Court rejected the Defendants’ argument regarding the
alcohol sales at the Motion to Dismiss stage.21 The Court noted that because “the
FLSA defines ‘goods’ as ‘goods or articles or subjects of commerce of any character,
or any part or ingredient thereof,’. . . the individual bottles of alcohol, as well as the
alcohol itself, are ‘goods’ under the FLSA.”22 Thus, when the Defendant 1400 sells
alcoholic beverages to its customers, the customers are the ultimate consumers of
goods that moved through commerce. In sum, because the Defendants have failed to
create an issue of fact regarding the Defendant 1400’s liability under § 206, the
Plaintiffs’ Motion for Partial Summary Judgment should be granted in this respect.
20
Defs.’ Br. in Opp’n to Pls.’ Mot. for Partial Summ. J., at 5 (citation
omitted).
21
[Doc. 72], at 5-6.
22
Id. at 6 n.18 (emphasis in original) (quoting 29 U.S.C. § 203(i)).
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B. C.B. Jones’s Liability
The Plaintiffs contend that the Defendant C.B. Jones – the owner of the Club
– is individually liable for the FLSA violations. Jones cannot be held individually
liable under the FLSA unless he qualifies as an “employer” under the Act.23 In order
to hold an officer liable as an employer, “an officer must either be involved in the dayto-day operation or have some direct responsibility for the supervision of the
employee.”24
Here, the Plaintiffs argue that Jones wielded enough control over the Club for
him to qualify as an employer. In support of this contention, the Plaintiffs point to
several undisputed facts, including: (1) the Club managers, DJs, bartenders, waiters,
doormen, and entertainers consider Jones to be “the boss”;25 (2) Jones hires the Club’s
management, and he has hired, disciplined, and fired entertainers;26 (3) Jones decided
to keep track of the entertainers’ hours and tip earnings after the instant suit was
filed;27 (4) Jones supervised entertainers through meetings and was involved in
23
29 U.S.C. §§ 203(d), 206(a).
24
Patel v. Wargo, 803 F.2d 632, 638 (11th Cir. 1986).
25
Statement of Material Facts in Supp. of Pls.’ Mot. for Partial Summ. J.
26
Id. ¶¶ 21, 39, 42-43.
27
Id. ¶ 103.
¶ 20.
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resolving disputes between entertainers;28 and (5) Jones decided to classify the
entertainers as independent contractors.29 Based on these undisputed facts and several
others listed by the Plaintiffs in their Motion, it is clear that Jones directly supervises
the Club’s employees and is involved in its day-to-day operations.30
In response, the Defendants contend that there is a question of fact as to
whether Jones or James Colunga – the Club’s general manager – is responsible for
running the day-to-day operations of the Club and supervising the entertainers. The
Defendants point to two parts of Colunga’s testimony as proof that a reasonable
inference can be raised that Colunga manages the Club. Specifically, the Defendants
note that Colunga testified that he is the “general manager” and reports directly to
Jones, and that Colunga changed the “house fee” by himself.31 While this evidence
may indicate that Colunga exercises some authority over the Club, it fails to create an
issue of fact with regard to whether Jones also exercises authority over the day-to-day
28
Id. ¶¶ 37, 42.
29
Id. ¶¶ 46-48.
30
See Coppage v. Bradshaw, 665 F. Supp. 2d 1361, 1364 (N.D. Ga. 2009)
(holding that a president of a company was an employer under the FLSA based on his
participation in the day-to-day operations of the company and his direct supervision
of the company’s managing directors).
31
Colunga Dep. at 8, 60.
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operations of the Club and supervises the entertainers.32 Consequently, the
Defendants’ admissions of fact demonstrate that Jones qualifies as an employer as
defined by the FLSA. The Plaintiffs’ Motion for Partial Summary Judgment is granted
in this respect.
C. Statute of Limitations
The statute of limitations for an ordinary minimum wage claim is two years.33
If a plaintiff demonstrates a willful violation of the FLSA, however, the statute of
limitations extends to three years.34 A violation is “willful” if “the employer either
knew or showed reckless disregard for the matter of whether its conduct was
prohibited by the [FLSA].”35 The burden rests with the plaintiff to prove the employer
willfully violated the FLSA.36 “If an employer acts unreasonably but not recklessly
in determining its legal obligation under the FLSA, then its actions should not be
32
See De Leon-Granados v. Eller & Sons Trees, Inc., 581 F. Supp. 2d 1295,
1303 (N.D. Ga. 2008) (“Supreme Court precedent holds that there may be several
simultaneous employers of any individual worker.” (citing Falk v. Brennan, 414 U.S.
190, 195 (1973))).
33
29 U.S.C. § 255(a).
34
Id.
35
McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988).
36
Ojeda-Sanchez v. Bland Farms, LLC, 499 Fed. Appx. 897, 902 (11th Cir.
2012).
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considered willful and the two-year statute of limitations should be applied.”37
“Whether a violation is willful is a jury question.”38
Here, the Plaintiffs contend that the Defendants willfully violated the minimum
wage requirement. They allege that the Defendants failed to keep track of the
entertainers’ hours and tips and did not ensure that the “club fees” satisfied the
minimum wage requirement, despite their knowledge that the Club’s entertainers
qualified as employees under the FLSA.39 In response, the Defendants argue that
Jones relied on a statement from the Department of Labor that “table dance fees
retained by the dancer may be used to meet the employer’s minimum wage obligation
to that dancer.”40 Moreover, Jones testified that, in 2012, he checked to ensure the
entertainers’ wages satisfied the minimum wage requirement, and, based on the club
fees, it appeared the requirement was satisfied.41
37
Allen v. Board of Pub. Educ. for Bibb Cnty., 495 F.3d 1306, 1324 (11th
Cir. 2007).
38
Coppage v. Bradshaw, 665 F. Supp. 2d 1361, 1364 (N.D. Ga. 2009)
(citing Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1282-83 (11th Cir.
2008)).
39
Reply Br. in Supp. of Pls.’ Mot. for Partial Summ. J., at 11.
40
Defs.’ Br. in Opp’n to Pls.’ Mot. for Partial Summ. J., Ex. 3.
41
Jones Dep. at 32-36.
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Based on these representations, the Court concludes there is a material question
of fact as to whether the Defendants knowingly or recklessly violated the FLSA.42 The
Plaintiffs contend that the Defendants knew that their system of club fees and failure
to record the entertainers’ wages and hours violated the FLSA. The Defendants assert
that their conduct was in compliance with the FLSA and in accordance with
Department of Labor policy. This is sufficient for a reasonable jury to conclude that
the Defendants “‘act[ed] unreasonably, but not recklessly, in determining [their] legal
obligation’ under the Act.”43 Consequently, the Plaintiffs’ Motion for Partial Summary
Judgment concerning the three-year statute of limitations is denied.
D. Liquidated Damages
Parties “who prevail under the FLSA are entitled to recover liquidated damages
unless the employer makes an affirmative showing that it acted in good faith.”44 To
“establish its good faith, [an employer] must prove both that it acted with a good faith
belief that its procedures did not violate the law and that it had reasonable grounds for
42
See Coppage, 665 F. Supp. 2d at 1364-65 (holding a question of fact
existed as to whether the defendant willfully violated the FLSA).
43
Davila v. Menendez, 717 F.3d 1179, 1185 (11th Cir. 2013) (quoting
McLaughlin v. Richland Shoe Co., 486 U.S. 128, 135 n.13 (1988)).
44
Ojeda-Sanchez v. Bland Farms, LLC, 499 Fed. Appx. 897, 902 (11th Cir.
2012); see also 29 U.S.C. § 260.
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believing this.”45 However, if the jury determines that the employer committed a
“willful” violation of the FLSA, it is precluded from asserting a “good faith”
defense.46 Thus, “[w]here there is sufficient evidence from which a jury could find a
‘willful’ violation, the district court is ‘require[d] to await the finding of the jury about
willfulness’ before making a determination as to ‘good faith’ in the context of
liquidated damages.”47 Here, because the Court has concluded a jury question exists
as to the issue of willfulness, the Court must wait to rule on the Defendants’ good
faith defense. Accordingly, the Plaintiffs’ Motion for Partial Summary Judgment as
to the issue of the Defendants’ good faith is denied.
E. Compensatory Damages Calculation
The Plaintiffs move for summary judgment with regard to their compensatory
damages calculation. Specifically, the Plaintiffs assert that the “Defendants owe
Plaintiffs $7.25 per hour for each hour worked, 29 U.S.C. § 206(a), plus
reimbursement of all fines, fees, and ‘tip outs’ Plaintiffs paid to the club as a condition
of employment.”48 Because the Defendants do not dispute the Plaintiffs’ compensatory
45
Ojeda-Sanchez, 499 Fed. Appx. at 903; see also 29 U.S.C. § 260.
46
Davila, 717 F.3d at 1186.
47
Swan v. Nick Grp., Inc., No. 1:11-cv-1713-WSD, 2013 WL 5200508, at
*8 (N.D. Ga. Sept. 13, 2013) (quoting Davila, 717 F.3d at 1186).
48
Pls.’ Mot. for Partial Summ. J., at 19.
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damages calculation,49 the Plaintiffs’ Motion for Partial Summary Judgment is granted
in this respect.
F. 1400 Northside Drive, Inc.'s Counterclaims50
The Defendant 1400 filed counterclaims for breach of contract and unjust
enrichment. The Plaintiffs now move for summary judgment on both counterclaims.
Although the Defendants make a procedural objection to consideration of the motion
at this time, they fail to address the merits at all. The Plaintiffs may not contractually
waive their rights under the FLSA. Accordingly, the Plaintiffs’ Motion for Partial
Summary Judgment regarding the counterclaims is granted.
49
Defs.’ Br. in Opp’n to Pls.’ Mot. for Partial Summ. J., at 9.
50
Though neither party challenges the Court’s jurisdiction regarding the
counterclaims, the Court finds that it has supplemental jurisdiction over the claims.
See 28 U.S.C. § 1367(a). “The constitutional ‘case or controversy’ standard confers
supplemental jurisdiction over all state claims which arise out of a common nucleus
of operative fact with a substantial federal claim.” Lucero v. Trosch, 121 F.3d 591,
597 (11th Cir. 1997). “The FLSA claim and the counterclaims stem from the
employer/employee relationship and the duties and obligations of both [the Defendant
1400] and [the Plaintiffs].” Rivero v. Lefeld & Son, LLC, No. 13-81154-CIV, 2014
WL 2095219, at *4 (S.D. Fla. May 20, 2014). Accordingly, the Court holds it is
appropriate to exercise supplemental jurisdiction.
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IV. Conclusion
For these reasons, the Court GRANTS in part and DENIES in part the
Plaintiffs’ Motion for Partial Summary Judgment [Doc. 124].
SO ORDERED, this 3 day of June, 2016.
/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge
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