Davis et al v. Four Seasons Hotel Limited
ORDER GRANTING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT,FILED ON APRIL 4, 2011 132 . Signed by JUDGE HELEN GILLMOR on 8/26/2011. ~ Plaintiffs' Motion for Partial Summary Judgment (Doc. 132) on their claim that Defend ant Four Seasons Hotel, Limited is liable for unpaid wages under H.R.S. § 388-6 (Count 5) is GRANTED. An issue of fact remains for trial as to the amount of Plaintiffs' resulting damages. (ecs, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on 8/29/2011.
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
DARYL DEAN DAVIS; MARK APANA;
ELIZABETH VALDEZ KYNE; EARL
TANAKA; THOMAS PERRYMAN;
DEBORAH SCARFONE; on behalf of
themselves and all others
FOUR SEASONS HOTEL LIMITED,
dba FOUR SEASONS RESORT, MAUI
and FOUR SEASONS RESORT,
HUALALAI; MSD CAPITAL, INC.,
Civ. No. 08-00525 HG-BMK
ORDER GRANTING PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT,
FILED ON APRIL 4, 2011 (DOC. 132)
Plaintiffs filed a five-count Second Amended Class Action
Complaint alleging: unfair methods of competition in violation of
Hawaii Revised Statutes (“H.R.S.”) §§ 480-2(e), 481B-14 (Count 1);
intentional interference with contractual or advantageous relations
(Count 2); breach of implied contract (Count 3); unjust enrichment
(Count 4); and unpaid wages in violation of H.R.S. §§ 388-6, 10, 11
Plaintiffs filed a Motion for Partial Summary Judgment
(“Defendant” or “Four Seasons”) liability for unpaid wages, but not
as to the amount of resulting damages.
Plaintiffs’ Motion for Partial Summary Judgment, filed on
April 4, 2011, for liability on Count 5 for unpaid wages in
violation of H.R.S. §§ 388-6, 10, 11, is GRANTED.
Complaint. (Doc. 1).
On January 12, 2009, Plaintiffs filed an Amended Class Action
Complaint. (Doc. 13).
On January 30, 2009, Defendant Four Seasons Hotel, Limited
filed a Motion to Dismiss. (Doc. 32).
On March 24, 2009, a hearing was held on Defendant’s Motion to
Dismiss. (See Doc. 53).
The Court denied the Motion and ordered
the parties to meet and confer in order to frame an appropriate
standing. (See Doc. 53).
On June 2, 2009, the Court certified the question to the
Hawaii Supreme Court regarding Plaintiffs’ standing to pursue their
unfair competition claim under H.R.S. § 480-2(e) for a violation of
H.R.S. § 481B-14. (Doc. 75).
On July 28, 2009, the Court directed the Clerk’s Office to
close the case administratively, while the matter was before the
Hawaii Supreme Court. (Doc. 88).
On March 29, 2010, the Hawaii Supreme Court issued a ruling on
the certified question.
Davis, et al., v. Four Seasons Hotel Ltd,
et al., 228 P.3d 303 (Haw. 2010).
On April 9, 2010, the Defendant filed a Motion to Reopen the
Case. (Doc. 93).
On the same day, the Defendant filed a Renewed
Motion to Dismiss Plaintiffs’ Complaint. (Doc. 94).
On April 19, 2010, Plaintiffs filed a Motion for Leave to File
Second Amended Complaint. (Doc. 98).
On the same day, Plaintiffs
filed a Statement of No Opposition to Defendant’s Motion to Reopen
Case. (Doc. 100).
On May 6, 2010, the Court granted Defendant’s Motion to Reopen
Case. (Doc. 102).
On August 31, 2010, the Court granted Plaintiffs’ Motion for
Leave to File Second Amended Complaint. (Doc. 121).
On September 3, 2010, Plaintiffs filed a Second Amended Class
Action Complaint. (Doc. 122).
On September 30, 2010, the Court issued an Order Granting In
Part And Denying In Part Defendant’s Renewed Motion to Dismiss.
The Court ruling applied to the Second Amended
Complaint. (See Doc. 125 at 5).
On November 3, 2010, Defendant filed an Answer to the Second
Amended Complaint. (Doc. 126).
On April 4, 2011, Plaintiffs filed a Motion for Partial
Summary Judgment as to Count 5 (Doc. 132) and a Memorandum in
Support (Doc. 134).
On May 10, 2011, Defendant filed an Opposition. (Doc. 141).
On May 24, 2011, Plaintiffs filed a Reply. (Doc. 144).
On June 21, 2011, a hearing was held on Plaintiffs’ Motion for
Partial Summary Judgment. (Doc. 151).
Plaintiffs are food and beverage servers who have worked at
the Four Seasons Resort, Maui (the “Maui resort”), and the Four
Seasons Resort, Hualalai (the “Hualalai resort”). (Second Amended
Complaint at ¶ 1 (Doc. 122); Defendant’s Answer at 3, ¶ 1 (Doc.
Defendant Four Seasons Hotel, Limited is responsible for
managing both resorts. (Defendant’s Answer at ¶ 3 (Doc. 126);
Plaintiffs’ Reply in Support of Motion for Partial Summary Judgment
at 16 (Doc. 144)).
Defendant MSD Capital, Inc. has an ownership
interest in the two resorts. (Second Amended Complaint at ¶ 4 (Doc.
122); Defendant’s Answer at ¶ 4 (Doc. 126)).
Capital, Inc. has not appeared, and there is no evidence that it
was ever served.
Plaintiffs claim that Four Seasons adds a “service charge” to
resort customers’ food and beverage bills, which ranges from 18 to
22 percent of the food and beverage bill total. (Plaintiffs’
Statement of Facts at ¶¶ 2-3 (Doc. 133)).
According to the
Complaint, a portion of the service charge is distributed to
Seasons. (Id. at ¶ 4).
Four Seasons does not dispute that resort
customers are billed an 18 to 22 percent service charge, and that
it retains a portion that is not distributed to service employees.
(Defendant’s Statement of Facts at ¶¶ 1-4 (Doc. 140)).
Seasons disputes that it is responsible for this practice. (Id.).
Four Seasons maintains that it does not “operate” the resorts on a
“day-to-day basis.” (Defendant’s Statement of Facts at ¶ 1 (Doc.
According to Four Seasons, the “day-to-day” operation of
the Maui resort is performed by 3900 WA Associates, LLC, and the
“day-to-day” operation of the Hualalai resort is performed by
Hualalai Investors, LLC. (Defendant’s Answer at ¶ 3 (Doc. 126)).
Plaintiffs’ claims for relief are all based on an allegation
that Four Seasons failed to disclose to customers, prior to the
filing of this lawsuit, that the service charges were not remitted
in full to the employees who serve the food and beverages. (Second
Amended Complaint at ¶¶ 8-9 (Doc. 122); Plaintiffs’ Statement of
Facts at ¶ 5 (Doc. 133)).
Plaintiffs maintain that customers are
misled into believing that the entire service charge is distributed
to the service employees, and that customers who would otherwise be
inclined to leave an additional gratuity do not do so. (Second
Amended Complaint at ¶ 9 (Doc. 122)).
Summary judgment is appropriate when there is no genuine issue
as to any material fact and the moving party is entitled to
judgment as a matter of law.
Fed. R. Civ. P. 56(c). To defeat
reasonable jury could return a verdict for the nonmoving party.
Nidds v. Schindler Elevator Corp., 113 F.3d 912, 916 (9th Cir.
The moving party has the initial burden of "identifying for
the court the portions of the materials on file that it believes
demonstrate the absence of any genuine issue of material fact."
T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d
626, 630 (9th Cir. 1987) (citing Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986)).
The moving party has no burden to negate or
disprove matters on which the opponent will have the burden of
proof at trial.
The moving party need not produce any evidence at
all on matters for which it does not have the burden of proof.
Celotex, 477 U.S. at 325.
The moving party must, however, show
that there is no genuine issue of material fact and that he or she
is entitled to judgment as a matter of law.
That burden is met by
pointing out to the district court that there is an absence of
evidence to support the non-moving party’s case. Id.
If the moving party meets its burden, then the opposing party
may not defeat a motion for summary judgment in the absence of
probative evidence tending to support its legal theory. Commodity
Futures Trading Comm'n v. Savage, 611 F.2d 270, 282 (9th Cir.
1979). The opposing party must present admissible evidence showing
that there is a genuine issue for trial. Fed. R. Civ. P. 56(e);
Brinson v. Linda Rose Joint Venture, 53 F.3d 1044, 1049 (9th Cir.
significantly probative, summary judgment may be granted.” Nidds,
113 F.3d at 916 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 249-50 (1986)).
The court views the facts in the light most favorable to the
non-moving party. State Farm Fire & Casualty Co. v. Martin, 872
F.2d 319, 320 (9th Cir. 1989).
Opposition evidence may consist of
declarations, admissions, evidence obtained through discovery, and
matters judicially noticed. Fed. R. Civ. P. 56(c); Celotex, 477
U.S. at 324.
The opposing party cannot, however, stand on its
pleadings or simply assert that it will be able to discredit the
movant's evidence at trial. Fed.R.Civ.P. 56(e); T.W. Elec. Serv.,
809 F.2d at 630. The opposing party cannot rest on mere allegations
or denials. Fed. R. Civ. P. 56(e); Gasaway v. Northwestern Mut.
Life Ins. Co., 26 F.3d 957, 959-60 (9th Cir. 1994). Nor can the
opposing party rest on conclusory statements. National Steel Corp.
v. Golden Eagle Ins. Co., 121 F.3d 496, 502 (9th Cir. 1997).
In Count 1, Plaintiffs claim that Four Seasons’ failure to
disclose that service charges were not remitted in full to service
employees constitutes an unfair method of competition in violation
of Hawaii Revised Statutes (hereinafter “H.R.S.”) §§ 480-2(e),
In Counts 2-4, Plaintiffs claim that the practice
advantageous relationship (Count 2); breach of an implied contract
(Count 3); unjust enrichment (Count 4); and unpaid wages in
violation of H.R.S. §§ 388-6, 10, 11 (Count 5).
Plaintiffs Move for Partial Summary Judgment on Count 5 as to
Four Seasons’ liability for unpaid wages, but not as to the amount
of resulting damages. Plaintiffs argue that decisions from several
violates H.R.S. § 388-6, which prohibits “Withholding of Wages.”
According to Plaintiffs, H.R.S. § 388-6, when interpreted in
conjunction with H.R.S. § 481B-14, requires hotels and restaurants
to distribute service charges on food or beverages to employees as
tip income or clearly disclose to purchasers that the service
charge is being used for other purposes.
Plaintiffs maintain that
the facts relevant to this claim are not in dispute.
The Court expressly ruled that Plaintiffs’ allegations state
a claim for unpaid wages under H.R.S. § 388-6 when denying Four
Seasons’ Renewed Motion to Dismiss as to Count 5.
the bulk of Four Seasons’ Opposition consists of a lengthy argument
that Plaintiffs have failed to state a claim under H.R.S. § 388-6.
Four Seasons effectively asks the Court to reconsider its previous
Alternatively, Four Seasons requests that the Court
certify the question to the Hawaii Supreme Court.
also argues that it cannot be liable for violating H.R.S. § 388-6
because the statute prohibits an “employer” from withholding wages,
and it was not the Plaintiffs’ “employer.” Finally, in a footnote,
Four Seasons argues that the Plaintiffs are barred from seeking
redress due to mandatory arbitration clauses in their employment
Liability for Unpaid Wages Pursuant to H.R.S. §§ 388-6, 10, 11
H.R.S. § 388-6, concerning “Withholding of wages,” provides in
No employer may deduct, retain, or otherwise require to
be paid, any part or portion of any compensation earned
by any employee except where required by federal or state
statute or by court process or when such deductions or
retentions are authorized in writing by the employee . .
An employer who “fails to pay wages in accordance with this chapter
without equitable justification” is liable to the affected employee
for a sum equal to the amount of unpaid wages, in addition to the
wages due. H.R.S. § 388-10.
The Hawaii legislature enacted
sections 388-6 and 388-10 to “encourage employers to pay wages
promptly, reduce an employee’s economic losses, and strengthen the
law.” Schefke v. Reliable Collection Agency, Ltd., 32 P.3d 52, 67
(Haw. 2001) (internal citations and quotation marks omitted).
Chapter 388 defines “wages” as “compensation for labor or
services rendered by an employee, whether the amount is determined
on a time, task, piece, commission, or other basis of calculation.”
H.R.S. § 388-1.
H.R.S. § 388-1 makes clear that for the purposes
of the prohibition on the withholding of wages in section 388-6,
“wages” include “tips or gratuities of any kind.” Id. Section 38811 provides employees with a cause of action to recover unpaid
wages, including a class action. H.R.S. § 388-11(a).
Plaintiffs argue that the “service charge” that Four Seasons
billed to resort customers should have been distributed in full to
the service employees as tip income. Plaintiffs maintain that Four
Seasons violated H.R.S. § 388-6 by withholding a portion of the
Plaintiffs cite H.R.S. § 481B-14, which provides:
Any hotel or restaurant that applies a service charge for
the sale of food or beverage services shall distribute
the service charge directly to its employees as tip
income or clearly disclose to the purchaser of the
services that the service charge is being used to pay
costs or expenses other than wages and tips of employees.
Plaintiffs argue that Four Seasons retained a portion of their “tip
income” in violation of section 481B-14, and is therefore liable
for withholding wages under section 388-6.
Although Chapter 388 defines “wages” as “compensation for
labor or services” and provides that wages include “tips” for
purposes of section 388-6, Chapter 388 does not make reference to
“service charges” or reference how they must be distributed.
H.R.S. § 1-16, however, provides:
Laws in pari materia, or upon the same subject matter,
shall be construed with reference to each other. What is
clear in one statute may be called in aid to explain what
is doubtful in another.
See also State v. Rauch, 13 P.3d 324, 331 (Haw. 2000).
481B-14 of the Hawaii Revised Statutes was originally drafted as an
amendment to section 388-6, and it plainly addresses a similar
subject matter. See Davis v. Four Seasons, 228 P.3d 303, 313 (Haw.
The title of the bill that was eventually signed into law
as H.R.S. § 481B-14, entitled “Relating to Wages and Tips of
Employees,” makes the similarity in subject matter very clear.1 See
As section 481B-14 is a law “in pari materia” with section
388-6, it is proper that it be called in as a reference to aid in
interpreting section 388-6. H.R.S. § 1-16; Rauch, 13 P.3d at 331.
Section 481B-14 requires “service charges” for the sale of
food or beverage services to be included as “tip income” unless the
employer clearly discloses to customers that they will not be.
When statutory language is “plain and unambiguous,” as with section
481B-14, a court’s “sole duty is to give effect to its plain and
obvious meaning.” State v. Ribbel, 142 P.3d 290, 295 (Haw. 2006)
(quoting Peterson v. Hawaii Elec. Light Co., Inc., 944 P.2d 1265,
1270-71 (Haw. 1997)). Under the plain language of section 481B-14,
withholding service charges from employees without disclosing it to
customers constitutes the withholding of “tip income.”
Article III, Section 14, of the Hawaii Constitution
provides: “No law shall be passed except by bill. Each law shall
embrace but one subject, which shall be expressed in its title.”
388-6 prohibits employers from withholding income.2
if Four Seasons withheld income in violation of section 481B-14,
then Four Seasons also withheld wages in violation of section 3886.
One Hawaii state court and
two District Judges of this Court
have considered the same issue raised here.
May employees assert
a claim for unpaid wages under H.R.S. § 388-6 based on a violation
of H.R.S. § 481B-14?
In Gurrobat v. HTH Corporation, et al., Civ.
No. 08-1-2528-12 (KKS) (Haw. Ct. 1st Cir. 2010), a Hawaii state
trial court granted summary judgment to an employee plaintiff who
asserted a claim that was identical in all material respects to the
claim before this Court.
The state court Judge concluded that
sections 388-6 and 481B-14 should be read in conjunction because
they are laws “in pari materia, or upon the same subject matter.”
(Transcript of November 17, 2010 hearing in Gurrobat, Exhibit 3 to
Plaintiffs’ Memorandum in Support of Motion for Partial Summary
Judgment at 7 (Doc. 134-3)).
The Gurrobat court examined the legislative history of section
481B-14 and noted that it was originally drafted as an amendment to
section 388-6. (Id. at 9).
Although it was eventually codified in
a different statute, the state trial Judge concluded that the
H.R.S. 388-6 provides two exceptions: an employer may
withhold income where authorized by federal or state statute or
court process, or when authorized in writing by the employee.
Neither exception has been claimed in the matter before the
legislative history reflected that it was intended to protect
service workers. (Id. at 8). He referenced a report from the House
Committee on Labor & Public Employment, stating that section 481B14 was originally drafted with the intent to “protect employees who
receive or may receive tips or gratuities.” H. Stand. Comm. Rep.
No. 479-00, in 2000 House Journal, at 1155.
Rodriguez v. Starwood Hotels & Resorts, Civ. No. 09-0016-LEKRLP (D. Haw. 2010), is a case raising similar issues as the one
before the Court.
The District Judge ruled that an employee may
assert a claim for unpaid wages under H.R.S. § 388-6 based on an
allegation that the employer withheld service charges in violation
of H.R.S. § 481B-14. (Order Granting In Part and Denying in Part
Plaintiffs’ Memorandum in Support of Motion for Partial Summary
Judgment at 55 (Doc. 134-1)).3
“Based on the plain language of the
statutes,” the court concluded, “Plaintiffs’ allegations suffice to
state a cause of action under § 388-6.” Id. at 55.
In Wadsworth v. KSL Grant Wailea Resort, Inc., 2010 WL
5146521, at *12 (D. Haw. 2010), another similar case, the District
[B]ecause for purposes of H.R.S. § 388, the statutory
definition of wages includes tips, and because pursuant
to H.R.S. § 481B-14 a service charge received by the
employers without notice to the customers is deemed a
The order can be found in Rodriguez v. Starwood Hotels &
Resorts, Civ. No. 09-0016-LEK-RLP, (D. Haw. 2010) (Doc. 93).
tip, the employer holds that tip in trust for the
employees as a conduit. Therefore, the employees have a
claim against the employer for compensation that has been
This Court previously ruled, when denying Defendant Four
Seasons’ Renewed Motion to Dismiss as to Count 5, “[b]ased on the
language of the relevant statutes, Plaintiffs’ allegations are
sufficient to state a claim for unpaid wages under H.R.S. § 388-6.”
Davis v. Four Seasons Hotel Ltd., 2010 WL 3946428, at *15 (D. Haw.
Four Seasons attempts to rely on the Hawaii
Supreme Court’s decision in Davis v. Four Seasons Hotel Ltd., 228
P.3d 303 (Haw. 2010), and the legislative history of Chapter 480.
Four Seasons argues that these sources reflect that section 481B-14
was not intended to protect service employees or to give them a
right to sue.
Neither the Hawaii Supreme Court’s ruling in Davis nor the
legislative history of Chapter 480 provide grounds to disregard the
plain language of sections 388-6 and 481B-14. In Davis, the Hawaii
Supreme Court considered whether employees have standing to bring
a claim under H.R.S. § 480-2(e) for a violation of H.R.S. § 481B14. 228 P.3d at 303.
That issue is entirely distinct and separate
from the question of whether H.R.S. § 388-6, concerning the
withholding of wages, should be interpreted with reference to
H.R.S. § 481B-14.
The Hawaii Supreme Court provided no indication
in Davis that service charges do not constitute tip income under
section 388-6, or that section 388-6 should not be interpreted in
a manner that is consistent with the plain meaning of section 481B14; that issue was simply not before the court. Id. at 308 n. 12
(“Employees also contend that Employees can enforce HRS § 481B-14
through HRS §§§ 388-6, 10, and 11. However, this argument will not
be addressed because it is beyond the scope of the certified
The legislative history of Chapter 480 also does not provide
a reason to ignore the plain language of the statutes.
legislative history of Chapter 480 is only relevant to the extent
that the meaning of sections 388-6 and 481B-14 is ambiguous. See TMobile USA, Inc. v. County of Hawaii Planning Comm’n, 104 P.3d 930,
939 (Haw. 2005) (“It is well-settled in this jurisdiction that
courts turn to legislative history as an interpretive tool only
where a statute is unclear or ambiguous.”) (internal citation
unambiguous, our inquiry regarding its interpretation should be at
an end.”); see also Davis, 228 P.3d at 312 (“As a threshold matter,
inconsistent with Four Seasons’ argument that Employees cannot . .
. sue for a violation of H.R.S. 481B-14.”).
Sections 388-6 and 481B-14 are not ambiguous.
The meaning of
these statutes, when read in conjunction in accordance with H.R.S.
§ 1-16, is quite clear. As the District Judge stated in Rodriguez,
Civ. No. 09-0016-LEK-RLP (Doc. 93 at 55) (D. Haw. 2010), “Based on
the plain language of the statutes, Plaintiffs’ allegations suffice
to state a cause of action under § 388-6.” Id. at 55.
“from the plain and unambiguous language of [a] statute cannot be
justified without a clear showing that the legislature intended
some other meaning . . . .” Singleton v. Liquor Com’n, County of
Hawai’i, 140 P.3d 1014, 1024 (Haw. 2006) (internal citation and
quotation marks omitted).
Unless the literal interpretation of a
statute would “produce absurd or unjust results that are clearly
inconsistent with the purposes and policies of the statute,” it
must be given effect. Kang v. State Farm Mut. Auto Ins. Co., 815
P.2d 1020, 1021-22 (Haw. 1991).
The meaning of sections 388-6 and
481B-14 is straightforward and apparent, and does not produce
absurd or unjust results.
There is no clear indication that the
legislature intended any other meaning for these statutes than
their literal meaning.
Although it is unnecessary to consider the legislative history
of section 481B-14 insofar as its meaning, in relation to the wage
protections provided by section 388-6, is unambiguous, the Hawaii
legislative history supports the right of employees to sue for
violations of section 481B-14.
In Davis, the Hawaii Supreme Court
reviewed the legislative history of section 481B-14 at length and
concluded: “[T]he legislative history of HRS § 481B-14 does not
reflect an intent to preclude enforcement by employees.” 228 P.3d
Summarizing its review of the legislative history, the
In sum, the legislative history . . . indicates that the
legislature was concerned that when a hotel or restaurant
withholds a service charge without disclosing to
consumers that it is doing so, both employees and
consumers can be negatively impacted. The legislature
chose to address that concern by requiring disclosure and
by authorizing enforcement of that requirement under HRS
There is no clear indication in the
legislative history that the legislature intended to
competitors and to preclude enforcement by employees.
Id. at 314 (emphasis added).
The legislative history of section
481B-14 reflects a desire to prevent service workers from being
deprived of tip income. Id.
To the extent that the legislative
history of section 481B-14 is relevant to the question of whether
employees may sue for unpaid wages under section 388-6 based on
interpreted by the Hawaii Supreme Court in Davis, provides support
for the idea that employees may do so.
As has been emphasized, however, the starting point for
statutory interpretation is the language of the statute itself.
Mathewson v Aloha Airlines, Inc., 919 P.2d 969, 983 (Haw. 1996).
Where a statute’s meaning is plain and unambiguous, as here, there
is no need to attempt to divine legislative intent based on the
various events that led to the statute’s passage, the import of
which may be unclear and open to wide-ranging interpretation. Four
Seasons argues, for example, that the fact that the Legislature
placed section 481B-14 within Chapter 480 rather than Chapter 388
compels an inference that the Legislature did not intend for
employees to be able to assert a cause of action for unpaid wages
under section 388-6 based on a violation of section 481B-14.
interpretation that does violence to the language of the statutes
Four Seasons asks the Court to ignore the plain meaning of
sections 388-6 and 481B-14 and to interpret these statutes in a
contradictory manner that would lead to an absurd result.
Four Seasons’ construction, a “service charge” that is withheld
from service employees without a clear disclosure to customers
would not constitute tip income under Chapter 388 of the Hawaii
Revised Statutes, even though such charges are expressly required
to be tip income under H.R.S. § 481B-14.
When the words of a law
are unambiguous, any construction that “leads to an absurdity” must
be rejected. H.R.S. § 1-15(3).
Four Seasons’ construction would
require: (1) ignoring the plain language of the statues, (2)
ignoring the fact that the statutes clearly address a similar
subject matter and are therefore to be read “in pari materia” or
with reference to each other, (3) ignoring evidence that the
legislature sought to protect service employees from losing tip
income, and (4) disregarding the fact that at least three other
courts, including one Hawaii state court, have concluded that
employees may state a claim for unpaid wages under section 388-6
based on a violation of section 481B-14, while no court has ruled
to the contrary.
In short, Chapter 380 of the Hawaii Revised Statutes provides
employees with a cause of action for the withholding of wages,
including tip income.
H.R.S. § 481B-14 requires hotels and
restaurants to pay service charges to employees as tip income if
they do not disclose their contrary practice to customers.
H.R.S. § 481B-14 Is Not Preempted By Fair Labor Standards Act
Four Seasons argues, in a footnote, that H.R.S. § 481B-14 is
differentiate between a service charge and a tip.
cites 29 C.F.R. § 531.55, which states that a “compulsory charge
for service . . . is not a tip.”
To determine whether a federal law preempts a state law, a
court’s “sole task is to ascertain the intent of Congress.” Pacific
Merchant Shipping Ass’n v. Aubry, 918 F.3d 1409, 1415 (9th Cir.
“purpose behind the FLSA is to establish a national floor under
which wage protections cannot drop, not to establish absolute
uniformity . . . .” Id. at 1425.
The fact that H.R.S. § 388-6,
read in conjunction with H.R.S. § 481B-14, may provide greater wage
protection to Hawaii workers than the FLSA presents no conflict
with the FLSA’s purpose.
Nor does an FLSA regulation providing that a compulsory
service charge is not a tip conflict with H.R.S. § 481B-14. H.R.S.
§ 481B-14 does not define “service charges” as tip income; it
merely requires employers to distribute service charges as tip
unless the employer makes a clear disclosure to consumers
that it will not do so.
This requirement does not conflict with
FLSA regulations differentiating compulsory service charges from a
The FLSA does not prohibit service charges from being
distributed to employees as tip income.
Four Seasons points to no
conflict between section 481B-14 and FLSA regulations such that
H.R.S. § 481B-14 would be preempted.
H.R.S. § 481B-14 Is Not Unconstitutionally Vague
unconstitutionally vague if interpreted as requiring employers to
pay service charges to employees as tip income.
points out that section 481B-14 does not expressly state which
employees are entitled to receive the service charges as tip
constitute a violation of due process, a statute must be “so vague
and indefinite as really to be no rule or standard at all.” Paul v.
Dept’s of Transp., State of Haw., 168 P.3d 546, 651 (Haw. 2001)
(quoting A.B. Small v. Am. Sugar Refining, 267 U.S. 233, 239
Section 481B-14 states that the service charge shall be
distributed as “tip income.”
“Tip income” is not defined by the
dictionary definition of a “tip” is a “gift or a usu[ally] small
sum of money tendered in payment . . . for a service performed or
anticipated.” 228 P.3d at 331, (Acoba, J., dissenting).4
As H.R.S. § 481B-14 requires service charges to be distributed
as tip income to employees, it is clear that service charges must
be distributed to the employees who provided the relevant service
(in keeping with the common, dictionary definition of a “tip”).
Section 481B-14 “cannot reasonably be construed as allowing the
employer to pick any employee to receive the monies in any amount.”
Id. (internal citation and quotation marks omitted); see also
Rodriguez v. Starwood Hotels & Resorts, Civ. No. 09-0016-LEK-RLP
The majority in Davis expressly declined to consider
whether section 481B-14 is unconstitutionally vague, stating that
it was an issue that “did not relate” to the certified question
of whether the plaintiffs had standing under section 480-2(e) to
bring a claim for damages for a violation of section 481B-14, and
instead related to the “merits of such a claim.” 228 P.3d at 308
n. 13. Justice Acoba, however, addressed the issue in his
dissent, stating that “the constitutionality of the statute as
disputed is obviously germane to the viability of the proceeding
in federal court.” Id. at 331 (Acoba, J., dissenting).
(Doc. 93) (D. Haw. 2010) (“The legislature’s focus on protecting
employees who would otherwise be tipped clearly demonstrates that
§ 481B-14 was intended to provide protection for those specific
employees.”); Tauese v. State, Dept. of Labor & Indus. Relations,
147 P.3d 785, 812 n. 27 (Haw. 2006) (“Because this term is easily
definable and allows a person of ordinary intelligence to obtain an
adequate description of the prohibited conduct, the statute is not
H.R.S. § 481B-14 Does Not Deny Four Seasons Due Process
Four Seasons argues that H.R.S. § 481B-14 denies it due
process to the extent it requires it to pay service charges to
employees, because the service charges “would be transformed as a
Opposition at 29 (Doc. 141-3)).
for this argument.
Four Seasons cites no authority
Requiring employers to pay service charges to
employees or to disclose otherwise to customers does not constitute
a due process violation.
Section 481B-14 does not automatically
transform service charges into property of employees; it permits
employers the option of disclosing to customers that service
charges will not be paid to employees.
Four Seasons’ Alternative Request To Certify a Question to the
Hawaii Supreme Court is Untimely and Unnecessary
Four Seasons’ alternative request to certify a question to the
Hawaii Supreme Court is untimely and unnecessary.
The meaning of
the relevant statutes is not ambiguous, and the courts that have
addressed the issue concluded that employees may assert a claim for
unpaid wages under H.R.S. § 388-6 based on violations of section
The Court finds persuasive the Hawaii state trial court
Corporation, et al., Civ. No. 08-1-2528-12 (KKS) (Haw. Ct. 1st Cir.
Four Seasons Has Waived Any Right To Compel Arbitration
Finally, Four Seasons argues in a footnote that Plaintiffs’
claim is barred by mandatory arbitration clauses in some employee
Four Seasons has waived any right to compel the
Plaintiffs to engage in arbitration. See Van Ness Townhouses v. Mar
Industries Corp., 862 F.2d 754, 758-59 (9th Cir. 1988) (“[A] much
delayed demand for arbitration indicates a conscious decision to
continue to seek judicial judgment on the merits of the arbitrable
This action was filed on November 21, 2008, approximately two
and a half years ago.
On January 30, 2009, Four Seasons filed a
Motion to Stay Proceedings and Compel Arbitration for Plaintiffs
Mark Apana, Elizabeth Valdez Kyne, and Thomas Perryman. (Doc. 33).
On February 25, 2009, Four Seasons voluntarily withdrew the Motion
without prejudice, stating that it would not seek to compel
arbitration until after the Hawaii Supreme Court determined whether
Plaintiffs Apana, Valdez Kyne, and Perryman have standing to pursue
their claims. (Doc. 54 at 4).
On March 29, 2010, the Hawaii
Supreme Court issued its ruling. (See Doc. 92).
On April 9, 2010,
Four Seasons filed a Renewed Motion to Dismiss. (Doc. 94).
Seasons did not argue in its Renewed Motion to Dismiss that any of
the Plaintiffs are subject to mandatory arbitration clauses in
their employment contracts.
Four Seasons did not reassert the
arbitration clause issue until after Plaintiffs filed a Motion for
Partial Summary Judgment on April 4, 2011.
In Four Seasons’ May
10, 2011 Opposition to the Motion for Partial Summary Judgment,
Four Seasons raised the argument in footnote. (Doc. 141).
The delay in raising the demand for mandatory arbitration
results in Four Seasons having waived its right to enforce any
mandatory arbitration clauses in Plaintiffs’ employment contracts.
See Hoxworth v. Blinder, Robinson & Co., Inc., 980 F.2d 912, 925
(3d Cir. 1992) (“[W]e conclude that the defendants have waived
whatever right they may have had to arbitration by actively
litigating this case for almost a year prior to filing their motion
to compel arbitration.”).
Elements of Claim for Liability on Count 5
An employer who withholds wages in violation of H.R.S. § 388-6
without equitable justification is liable to the affected employee.
H.R.S. § 388-10. The burden of proving that there is equitable
justification is on the employer. Arimizu v. Fin. Sec. Ins. Co.,
Inc., 679 P.2d 627, 631 (Haw. Ct. App. 1984).
In order to merit summary judgment on Plaintiffs’ claim that
Four Seasons is liable for unpaid wages under sections 388-6 and
388-10 based on a violation of section 481B-14, the Plaintiffs must
present sufficient evidence to prove that Defendant Four Seasons:
(1) employed Plaintiffs as food and beverage servers; (2) retained
portions of food and beverage service charges while employing
Plaintiffs; and (3) failed to clearly disclose to customers that
the service charges would not be remitted in full to Plaintiffs.
See H.R.S. § 386-1, 6, 10, 11; 481B-14.
Four Seasons Employed Plaintiffs as Food and Beverage
H.R.S. § 388-6 prohibits an “employer” from withholding wages.
H.R.S. § 388-1 defines “employer” as follows:
association, joint-stock company, trust, corporation, the
personal representative of the estate of a deceased
individual or the receiver, trustee, or successor of any
of the same, employing any person, but shall not include
the State or any political subdivision thereof or the
To “employ” means “to permit or suffer to work.” H.R.S. § 388-1.
Four Seasons disputes that it is or was Plaintiffs’ employer.
According to Four Seasons, 3900 WA Associates is the employer of
the employees at the Four Seasons Resort, Maui, and Hualalai
Investors, LLC is the employer of the employees at the Four Seasons
Resort, Hualalai. (Defendant’s Statement of Facts at ¶ 15 (Doc.
Four Seasons states that these entities each separately
controls its own payroll, has its own revenues, issues its own
financial statements, makes its own human resources decisions, and
has its own human resources department. (Id. at ¶ 16).
Seasons cites a Declaration of Larry Nishikawa, the director of
human resources at the Maui resort, and a Declaration of Mitch
Sipiala, senior director of human resources at the Hualalai resort.
(Docs. 140-1; 140-5).
Although both Nishikawa and Sipiala declare that Defendant
Four Seasons is not the employer of the resorts’ employees, whether
Four Seasons is their employer is a legal determination to be
decided by the Court, based on the facts to the extent they are not
genuinely in dispute.
As evidence that Four Seasons is and was
Plaintiffs’ employer, Plaintiffs cite employment agreements for the
two resorts that indicate they were drafted by “Four Seasons Hotels
and Resorts,” include a history of “Four Seasons Hotels and
Resorts,” and state in capitalized letters, “I AM A FOUR SEASONS
EMPLOYEE.” (Docs. 140-2; 140-6).
Four Seasons concedes that it is contractually responsible for
managing both the Maui and Hualalai resorts, and has the authority
to do so. (Defendant’s Answer at ¶ 3 (Doc. 126)).
also admits that Plaintiffs have worked at the Maui and Hualalai
resorts as food and beverage servers. (Id. at ¶ 1).
further admits that it has applied a service charge to food and
beverage bills at the resorts and has retained a portion of it.
(Id. at ¶ 5, 7).
Because Four Seasons concedes that it is
authority to do so, there is no genuine issue of fact that Four
Seasons “permit[ed] or suffer[ed]” Plaintiffs to work, and was
therefore their “employer” under H.R.S. § 388-1.
The Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201 et
seq., defines “employ” in a similar manner to H.R.S. § 388-1.
FLSA states: “‘Employ’ includes to suffer or permit to work.” 29
U.S.C. § 203(g).
This definition was “intended to make the scope
of employee coverage under the FLSA very broad.” Johns v. Stewart,
interpreted the “suffer or permit to work” language to mean than an
entity employs an individuals if, “as a matter of ‘economic
reality,’ the entity functions as the individual’s employer.” Zheng
v. Liberty Apparel Co., Inc., 355 F.3d 61, 66 (2nd Cir. 2003)
(internal citation omitted).
The “overarching concern is whether
the alleged employer possessed the power to control the worker in
question.” Id. (internal citation and quotation marks omitted).
Here, Four Seasons does not dispute that it has or had the
capacity as banquet servers. Nor does Four Seasons dispute that it
was the entity who retained portions of the service charges. It is
clear, as a matter of economic reality, Four Seasons is or was the
Plaintiffs’ employer. Although additional entities may be involved
in the operation of the Maui and Hualalai resorts and may also have
or have had power to control the Plaintiffs as banquet servers, “a
worker may be employed by more than one entity at the same time.”
Zheng, 355 F.3d at 66; see also Torres-Lopez v. May, 111 F.3d 633,
639-45 (9th Cir. 1997) (permitting claims under the FLSA against
Four Seasons Retained Portions of Food and Beverage
Service Charges While Employing Plaintiffs as Servers
Four Seasons admits that a preset service charge was applied
to food and beverage bills at banquets at the resorts, and that it
retained a portion of it. (Defendant’s Answer at ¶¶ 5, 7 (Doc.
There is no genuine dispute that Four Seasons applied a
service charge to food and beverage bills at banquets while
employing Plaintiffs as food and beverage servers, and retained a
portion of it.
Four Seasons Failed to Clearly Disclose to Customers That
the Service Charges Would Not be Remitted in Full to
Plaintiffs claim that prior to the filing of this lawsuit,
Four Seasons failed to include any disclosures to customers in its
banquet contracts that a portion of the service charge was not
distributed to service employees.
Plaintiffs cite a sample 2008
banquet contract (Exhibit 4 to Plaintiffs’ Statement of Facts (Doc.
Plaintiffs’ Statement of Facts (Doc. 133-6)). Plaintiffs also cite
sample banquet event orders (documents listing the menu items and
pricing for banquet event orders). (Exhibit 3 Plaintiffs’ Statement
of Facts (Doc. 133-4)).
The sample order forms state that service
charges will be applied, but do not indicate that a portion will be
retained by Four Seasons and not distributed to the service
Plaintiffs also cite sample 2004-2008 menus,
which similarly state that food and beverage prices are subject to
a service charge, but do not state that a portion of the service
charge will be retained by Four Seasons and not distributed to the
service employees. (Exhibits 6 and 7 to Plaintiffs’ Statement of
Facts (Docs. 133-7; 133-8)).
According to Plaintiffs, the “only disclosure made by Four
Seasons prior to the filing of the lawsuit, that the entire service
charge was not being distributed to service employees was that some
banquet checks for the Maui Four Seasons, starting in late 2006,
had writing in extremely fine print that stated: ‘(House is
allocated 5.4% of Service Charge.)’” (Plaintiffs’ Statement of
Facts at ¶ 12 (Doc. 133)).
Four Seasons disputes this contention
on the ground that the phrase “extremely fine print” is “vague and
disparaging.” (Defendant’s Statement of Facts at ¶ 12 (Doc. 140)).
But Four Seasons does not dispute that the statement as quoted
appeared in fine print, was only on some banquet checks rather than
all, only appeared on checks for the Maui resort and not the
Hualalei resort, and that it made no other disclosures to customers
that it retained a portion of the service charge applied to food
and beverage bills prior to the filing this lawsuit.
hearing on Plaintiffs’ Motion for Partial Summary Judgment, Four
Seasons conceded that “prior to October 2008 for Hualalai and prior
to . . . August of 2006 at Maui, any notice to customers by Four
Seasons would have been done verbally or based on knowledge of
industry practice.” (Transcript of June 21, 2011 Hearing at 11
There is therefore no genuine issue of fact that Four Seasons
failed to clearly disclose to at least some customers that service
charges would not be remitted in full to Plaintiffs.
Seasons has admitted that it retained portions of service charges
without disclosing it to customers while employing Plaintiffs as
food and beverage servers, Plaintiffs are entitled to SUMMARY
JUDGMENT on their claim that Defendant Four Seasons Hotel, Limited
is liable for unpaid wages under H.R.S. § 388-6 (Count 5).
issue of fact remains for trial as to the amount of Plaintiffs’
Plaintiffs’ Motion for Partial Summary Judgment (Doc. 132) on
their claim that Defendant Four Seasons Hotel, Limited is liable
for unpaid wages under H.R.S. § 388-6 (Count 5) is GRANTED.
An issue of fact remains for trial as to the amount of
Plaintiffs’ resulting damages.
IT IS SO ORDERED.
DATED: August 26, 2011, Honolulu, Hawaii.
/S/ Helen Gillmor
United States District Judge
DAVIS, et al. v. FOUR SEASONS HOTEL LIMITED, et al.; Civil No. 0800525 HG-BMK; ORDER GRANTING PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?