Wadsworth et al v. KSL Grand Wailea Resort, Inc.

Filing 118

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS re 95 , re [Doc #92]. Signed by JUDGE ALAN C KAY on 12/10/10. (eps )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 the date of this docket entry

Wadsworth et al v. KSL Grand Wailea Resort, Inc.

Doc. 118

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII NAN WADSWORTH, MARK APANA, ELIZABETH VALDEZ KYNE, BERT VILLON and STEPHEN WEST, on behalf of themselves and all others similarly situated, ) ) ) ) ) ) Plaintiffs, ) ) vs. ) ) KSL GRANT WAILEA RESORT, INC.; ) CNL RESORT LODGING TENANT CORP.;) CNL GRAND WAILEA RESORT, L.P.; ) MSR RESORT LODGING TENANT, LLC; ) HILTON HOTELS CORPORATION; ) WALDORF-ASTORIA MANAGEMENT, LLC;) and BRE/WAILEA LLC dba GRAND ) WAILEA RESORT HOTEL & SPA, ) ) Defendants. ) ) Civ. No. 08-00527 ACK-LEK

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS FACTUAL BACKGROUND1/ Plaintiffs Nan Wadsworth, Elizabeth Valdez Kyne, Bert Villion, and Stephen West ("Plaintiffs") have all worked as food and beverage servers at the Grand Wailea Resort Hotel & Spa in Maui. Second Am. Compl. ¶ 3. Plaintiffs bring this action on

behalf of themselves and a class of individuals similarly

The facts as recited in this Order are for the purpose of disposing of the current motion and are not to be construed as findings of fact that the parties may rely on in future proceedings in this case.

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Dockets.Justia.com

situated.

Id. ¶ 4.

Plaintiffs assert the class of individuals

similarly situated consists of "all individuals who are, or who have, worked as food and beverage servers [for] the defendants during the period of time in which the defendants have imposed a service charge on food and beverage, but have not remitted the entire services charge as tip income to these employees." Id.

Plaintiffs' Second Amended Complaint alleges that the Grand Wailea Resort Hotel & Spa ("Grand Wailea Resort" or "Hotel") provides food and beverage service throughout the hotel, including in its banquet department, its restaurants, and through room service. Id. ¶ 5.

Plaintiffs allege that the Grand Wailea Resort has been owned and operated by a number of different entities during the applicable statute of limitations period, including its current owner, Defendant MSR Reort Lodging Tenant, LLC, and operator, Defendant BRE/Wailea, LLC, as well as prior owners and operators, Defendants KSL Grant Wailea Resort, Inc., Waldorf=Astoria Management LLC, CNL Grand Wailea Resort, LP, and CNL Lodging Tenant Corp. (together, "Defendants"). Id. ¶¶ 6-8.

Plaintiffs allege that Defendants have added a preset service charge to customers' bills for food and beverage served at the Hotel, but that Defendants have not remitted the total proceeds of the service charge as tip income to the employees who serve the food and beverages. Id. ¶¶ 9-10. 2 Instead, Plaintiffs

allege that the Defendants have had a policy and practice of retaining for themselves a portion of these service charges (or using it to pay managers or other non-tipped employees who do not serve food and beverages), without disclosing to the Hotel's customers that the services charges are not remitted in full to the employees who serve the food and beverages. Plaintiffs assert five counts. Id. ¶¶ 11-12.

In Count I, Plaintiffs

allege that Defendants' actions violate Hawai`i Revised Statutes ("H.R.S.") § 481B-14. Plaintiffs allege that pursuant to H.R.S.

§ 481B-4, such violation constitutes an unfair method of competition or unfair and deceptive act or practice within the meaning of H.R.S. § 480-2. In Count II, Plaintiffs allege that

Defendants' conduct constitutes unlawful intentional interference with contractual and/or advantageous relations. In Count III,

Plaintiffs allege that Defendants' conduct constitutes a breach of implied contract. In Count IV, Plaintiffs allege that

Defendants have been unjustly enriched at Plaintiffs' expense under state common law. Finally, in Count V, Plaintiffs allege

that as a result of Defendants' conduct, they have been deprived of income that constitutes wages, which is actionable under H.R.S. §§ 388-6, 388-10, and 388-11. PROCEDURAL BACKGROUND On November 24, 2008, a class action complaint was filed in this case. Doc. No. 1. 3 On January 29, 2009, an Amended

Class Action Complaint was filed ("Amended Complaint"). 19.

Doc. No.

There are a number of similar cases pending in this Court

and on January 23, 2009, Plaintiffs moved to consolidate or alternatively for assignment of all the related cases to one judge pursuant to Local Rule 40.2. Doc. No. 16. The motion to

consolidate was denied on March 19, 2009 (Doc. No. 37) and Magistrate Judge Kobayashi's Findings and Recommendation Regarding Assignment Pursuant to Local Rule 40.2. were adopted on April 8, 2009 (Doc. No. 56).2/ On July 9, 2009, this case was stayed in light of Judge Gillmor's certification to the Hawai`i Supreme Court of a question of law that was also important to the instant case.3/ See Doc. No. 71. The Hawai`i Supreme Court answered the

In that Findings and Recommendation, Judge Kobayashi found that reassignment to the same district judge was not warranted, but that the cases should be reassigned to one Magistrate Judge for more efficient case management. See Order Denying Plaintiffs' Motions to Consolidate Actions; and Findings and Recommendations to Deny Alternative Requests for Assignment Pursuant to L.R. 40.2. Judge Gillmor certified the following question: "Where plaintiff banquet server employees allege that their employer violated the notice provision of H.R.S. § 481B-14 by not clearly disclosing to purchasers that a portion of a service charge was used to pay expenses other than wages and tips of employees, and where the plaintiff banquet server employees do not plead the existence of competition or an effect thereon, do the plaintiff banquet server employees have standing under H.R.S. § 480-2(e) to bring a claim for damages against their employer?" See Certified Question to The Hawaii Supreme Court From the United States District Court for the District of Hawaii in Civil No. 08-00525 HG-LEK, Doc. No. 75 in Civ. No. 08-00525, filed June 2, 2009. 4
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certified question on March 29, 2010, in Davis v. Four Seasons Hotel Ltd., 122 Hawai`i 423, 228 P.3d 303 (2010). Accordingly,

on April 16, 2010, Plaintiffs filed a motion to lift the stay and a motion to file a second amended complaint. Doc. Nos. 73 & 74. Doc.

The Magistrate Judge granted both motions on June 22, 2010. No. 89.

Plaintiffs then filed their Second Amended Complaint Doc. No. 93.

("Second Amended Complaint") on June 28, 2010.4/

On July 20, 2010, Defendants filed a Motion to Dismiss Second Amended Complaint. Defendants also filed a Memorandum in

Support of their Motion to Dismiss (the "Motion" or "Motion to Dismiss") as well as a Declaration of Matthew Bailey and Exhibits A and B. Doc. No. 95. On September 3, 2010, Plaintiffs moved to

continue the hearing on Defendants' Motion to Dismiss, which had been scheduled for October 12, 2010. Doc. No. 102. On September

8, 2010, the Court granted Plaintiffs' motion and continued the hearing to November 16, 2010, at 10 a.m. On October 28, 2010, Plaintiffs filed a Memorandum in Opposition to Defendants' Motion to Dismiss ("Opposition"). No. 107.
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Doc.

Although Plaintiffs' Opposition was untimely pursuant

Plaintiffs also filed a Second Amended Complaint in the Davis case before Judge Gillmor. Judge Gillmor ruled on a renewed motion to dismiss filed by the defendants in that case on September 30, 2010. Davis v. Four Seasons, Civ. No. 08-00525 HGLEK, Order Granting In Part and Denying in Part Defendants' Renewed Motion to Dismiss Plaintiffs' Complaint (Doc. No. 94) filed 9/30/10 (hereinafter Davis 9/30/10 Order). The Court notes that there was no union and thus no collective bargaining agreement at issue in Davis. 5

to the Local Rules which require any opposition to be filed not later than twenty-one days prior to a hearing on a motion (D. Haw. Local Rule 7.4), the Court accepted Plaintiffs' tardy filing. Doc. No. 111. The Court also granted Defendants

additional time to respond to Plaintiffs' Opposition in light of its tardiness. Doc. No. 112. A hearing on Defendants' Motion to Dismiss was held on November 17, 2010.5/ LEGAL STANDARDS I. Motion to Dismiss for Lack of Subject Matter Jurisdiction A court's subject matter jurisdiction may be challenged under Federal Rule of Civil Procedure 12(b)(1) ("Rule 12(b)(1)"). "A party invoking the federal court's jurisdiction has the burden of proving the actual existence of subject matter jurisdiction." See Thompson v. McCombe, 99 F.3d 352, 353 (9th Cir. 1996). On a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, the court is not "restricted to the face of the pleadings, but may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction." F.2d 558, 560 (9th Cir. 1988).
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Defendant's Reply was filed on November 8, 2010.

McCarthy v. United States, 850 "Once the moving party [converts]

On November 9, 2010, the hearing that was scheduled for November 16, 2010, was continued one additional day to November 17, 2010. 6

the motion to dismiss into a factual motion by presenting affidavits or other evidence properly brought before the court, the party opposing the motion must furnish affidavits or other evidence necessary to satisfy its burden of establishing subject matter jurisdiction." Savage v. Glendale Union High Sch., 343

F.3d 1036, 1040 n.2 (9th Cir. 2003). "The requirement that the nonmoving party present evidence outside his pleadings in opposition to a motion to dismiss for lack of subject matter jurisdiction is the same as that required under Rule 56(e) that the nonmoving party to a motion for summary judgment must set forth specific facts, beyond his pleadings, to show that a genuine issue of material fact exists." Trentacosta v. Frontier Pac. Aircraft Indus., Inc., 813 When ruling on a jurisdictional

F.2d 1553, 1559 (9th Cir. 1987).

motion involving factual issues which also go to the merits, the moving party "should prevail only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Casumpang v. Int'l Longshoremen's &

Warehousemen's Union, 269 F.3d 1042, 1060-61 (9th Cir. 2001). II. Motion to Dismiss for Failure to State a Claim Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)") permits dismissal of a complaint that fails "to state a claim upon which relief can be granted." Under Rule 12(b)(6),

review is generally limited to the contents of the complaint. 7

Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th Cir. 1996). Courts may also "consider certain materials--documents

attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice--without converting the motion to dismiss into a motion for summary judgment." United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). Documents whose contents are alleged in a complaint and whose authenticity are not questioned by any party may also be considered in ruling on a Rule 12(b)(6) motion to dismiss. Branch v. Tunnell, 14 F.3d 449, 453-54 (9th Cir. 1994). On a Rule 12(b)(6) motion to dismiss, all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Fed'n of African Am. See

Contractors v. City of Oakland, 96 F.3d 1204, 1207 (9th Cir. 1996). However, conclusory allegations of law, unwarranted

deductions of fact, and unreasonable inferences are insufficient to defeat a motion to dismiss. See Sprewell, 266 F.3d at 988;

Nat'l Assoc. for the Advancement of Psychoanalysis v. Cal. Bd. of Psychology, 228 F.3d 1043, 1049 (9th Cir. 2000); In re Syntex Corp. Sec. Litig., 95 F.3d 922, 926 (9th Cir. 1996). Moreover,

the court need not accept as true allegations that contradict matters properly subject to judicial notice or allegations contradicting the exhibits attached to the complaint. 8 Sprewell,

266 F.3d at 988. As the Ninth Circuit has stated, "[t]he issue is not whether a plaintiff's success on the merits is likely but rather whether the claimant is entitled to proceed beyond the threshold in attempting to establish his claims." De La Cruz v. Tormey,

582 F.2d 45, 48 (9th Cir.), cert. denied, 441 U.S. 965 (1979). The court must determine whether or not it appears to a certainty under existing law that no relief can be granted under any set of facts that might be proved in support of a plaintiff's claims. Id. In summary, to survive a Rule 12(b)(6) motion to dismiss, "[f]actual allegations must be enough to raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell Atl. Corp. v. Twombly, 550 U.S. 544, "While a

555 (2007) (internal citations and quotations omitted).

complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations . . . a plaintiff's obligation to provide the `grounds' of his `entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." citations and quotations omitted). Id. (internal

Dismissal is appropriate

under Rule 12(b)(6) if the facts alleged do not state a claim that is "plausible on its face." 9 Id. at 570. "Determining

whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) (citation omitted). "[W]here the well-pleaded facts do not permit the

court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not `show[n]'- `that the pleader is entitled to relief.'" 8(a)(2)). DISCUSSION Defendants move to dismiss Plaintiffs' Second Amended Complaint on multiple grounds. Principally, Defendants assert Id. (quoting Fed. R. Civ. P.

that, under Rule 12(b)(6), Plaintiffs' Unfair Method of Competition ("UMOC") claim (Count I) fails to state a claim upon which relief may be granted and that all of Plaintiffs' claims are preempted under two different federal labor law doctrines. Defendants also assert that, under Rule 12(b)(6), Plaintiffs fail to state a claim against certain defendants because Plaintiffs have failed to adequately allege an employment relationship. it is a jurisdictional question, the Court will address Defendants' preemption arguments first, then their argument regarding Plaintiffs' alleged failure to state a UMOC claim, and finally, their argument that Plaintiffs fail to state a claim against certain defendants. 10 As

I.

Whether Plaintiffs' Claims Are Preempted By Federal Labor Law A. Section 301 Preemption Defendants argue that all of Plaintiffs' claims are

preempted by Section 301 of the Labor Relations Management Act, 29 U.S.C. § 185(a) ("Section 301"), and therefore should be dismissed for lack of subject matter jurisdiction. 26. Section 301 provides: Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties. 29 U.S.C. § 185(a). The Supreme Court has explained that in Motion at 25-

enacting this statute, Congress charged federal courts with a "mandate . . . to fashion a body of federal common law to be used to address disputes arising out of labor contracts." Chalmers Corp. v. Lueck, 471 U.S. 202, 209 (1985). AllisThus, "a suit

in state court alleging a violation of a provision of a labor contract must be brought under § 301 and resolved by reference to federal law. A state rule that purports to define the meaning or

scope of a term in a contract suit is therefore pre-empted by federal labor law." Lueck, 471 U.S. at 210. However, the

Supreme Court has explained that in order to give the policies behind Section 301 their proper range, the pre-emptive effect of 11

§ 301 must extend beyond suits alleging contract violations. Therefore, questions relating to what the parties to a labor agreement agreed, and what legal consequences were intended to flow from breaches of that agreement, must be resolved by reference to uniform federal law, whether such questions arise in the context of a suit for breach of contract or in a suit alleging liability in tort. Any other result would elevate form over substance and allow parties to evade the requirements of § 301 by relabeling their contract claims as claims for tortious breach of contract. Id. at 211. The Supreme Court in Leuck was careful though to

Id.

clarify that "not every dispute concerning employment, or tangentially involving a provision of a collective-bargaining agreement, is pre-empted by § 301 or other provisions of the federal labor law. . . . In extending the pre-emptive effect of § 301 beyond suits for breach of contract, it would be inconsistent with congressional intent under that section to preempt state rules that proscribe conduct, or establish rights and obligations, independent of a labor contract." Id. at 212.

The Supreme Court revisited this issue just a few years after Leuck in Lingle v. Norge Division of Magis Chef, Inc., 486 U.S. 399 (1988).6/ Lingle has become a touchstone in the There, the Supreme Court held that

analysis of § 301 preemption.

although an employee was covered by a collective bargaining The Court observes that Plaintiffs refer to Section 301 preemption as the Lingle Doctrine. See Opposition at 2, 32 ("Plaintiffs' Statutory Claims Are Not Preempted by the Lingle Doctrine"). 12
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agreement that provided a contractual remedy for discharge without just cause, the employee could still maintain her statelaw remedy for retaliatory discharge. See id. at 401. The

Supreme Court explained that in order to resolve the plaintiff's state law retaliatory discharge claim there was no need to interpret any term of the collective bargaining agreement. at 407. Id.

Therefore, the Supreme Court concluded that "the state-

law remedy [was] `independent' of the collective-bargaining agreement in the sense of `independent' that matters for § 301 pre-emption purposes: resolution of the state-law claim does not require construing the collective-bargaining agreement." 407. In practice, however, the "demarcation between preempted claims and those that survive § 301's reach is not . . . a line that lends itself to analytical precision." Cramer v. Id. at

Consolidated Freightways, Inc., 255 F.3d 683, 691 (9th Cir. 2001). Nevertheless, the Ninth Circuit has established

guidelines to aid in this process based upon the Supreme Court's preemption decisions. See Burnside v. Kiewit Pacific Corp., 491

F.3d 1053, 1060 (9th Cir. 2007). First, a court must determine whether the asserted cause of action involves a right conferred upon an employee by virtue of state law, not by a CBA. Id. at 1059-60. As a part of

this analysis, the Court must consider the "legal character of a 13

claim, as `independent of rights under the collective-bargaining agreement [and] not whether a grievance arising from `precisely the same set of facts' could be pursued." Id. at 1060 (citing Moreover, a

Lividas v. Bradhaw, 512 U.S. 107, 123 (1994)).

defendant's reliance upon a CBA as an aspect of a defense is not enough to "inject[] a federal question into an action that asserts what is plainly a state-law claim." Id.

Second, even if a right exists independently of the CBA, a court must consider whether the claim is nevertheless "substantially dependent on analysis of a collective-bargaining agreement." Id. at 1059-60. To determine whether a state law

right is "substantially dependent" on the terms of a CBA, the court must examine whether a claim can be resolved by "looking to" a CBA rather than "interpreting" the CBA. Id. In Lividas,

the Supreme Court made it clear that "when the meaning of contract terms is not the subject of dispute, the bare fact that a [CBA] will be consulted in the course of state-law litigation plainly does not require the claim to be extinguished." 512 U.S. at 124. Lividas,

The Ninth Circuit has also explained, as part

of this analysis, if a waiver of the state law right at issue is asserted (and a waiver of that right is permissible), a court may look to a CBA to determine whether it contains a clear and unmistakable waiver of that right without triggering Section 301 preemption. See Cramer, 255 F.3d at 692. 14 Finally, a court may

look to a CBA to determine damages without triggering the need for preemption. See Lingle, 486 U.S. at 413 n. 12 ("A

collective-bargaining agreement may, of course, contain information such as rate of pay . . . that might be helpful in

determining the damages to which a worker prevailing in a statelaw suit is entitled."); Lividas, 512 U.S. at 125 ("[T]he mere need to `look to' the collective-bargaining agreement for damages computation is no reason to hold the state-law claim defeated by § 301."); Burnside, 491 F. 3d at 1073 (citing Lividas). Defendants argue that all of Plaintiffs' causes of action require interpretation of the CBA and thus are preempted by Section 301. Motion at 27. Each of Plaintiffs' counts is

addressed in turn. 1. Count I - Unfair Methods of Competition

Plaintiffs' first count asserts that Defendants have violated 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 for costs or expenses other than wages and tips of employees. H.R.S. § 481B-14. Pursuant to H.R.S. § 481B-4, "[a]ny person who

violates this chapter shall be deemed to have engaged in an unfair method of competition and unfair or deceptive acts or practice in the conduct of any trade or commerce within the 15

meaning of section 480-2."

Accordingly, Plaintiffs are bringing

this action under H.R.S. § 480-2(e), which permits "any person" to bring an action "based on unfair methods of competition declared unlawful by this section." Defendants argue that this Count is preempted because the CBA specifically defines what a service charge is and addresses the allocation of a service charge between the Hotel and its employees, whereas there is "no statutory definition of `service charge' nor is there any description of the manner in which a Hotel and its employees divide a service charge." Motion at 27-28. Defendants further assert "[s]ince the division

of service charge proceeds is governed by the CBA, the Court cannot determine whether `service charges' have been wrongfully retained by the Hotel without reviewing the CBA. Thus, Section

301 preempts Plaintiffs' Haw. Rev. Stat. § 481B-14 claims." Motion at 28. The Court rejects Defendants' arguments and finds that Count I is not preempted by Section 301. First, Defendants do

not argue that this claim is based on a right conferred only by the CBA rather than an independent right conferred by state law, and Defendants barely even attempt to make any argument that the CBA needs to be interpreted in assessing this claim. 27-28; see also Burnside, 491 F.3d at 1060. Motion at

Rather, Defendants Motion at

argue that the Court would need to "review" the CBA. 16

28.

However, Section 301 does not preempt a claim if a court See e.g., Lividas, 512 U.S. at

need merely to "look to" a CBA.

122-24 ("[W]e were clear that when the meaning of contract terms is not the subject of dispute, the bare fact that a collectivebargaining agreement will be consulted in the court of state-law litigation plainly does not require the claim to be extinguished."). The Ninth Circuit has also "stressed that, in

the context of § 301 complete preemption, the term `interpret' is defined narrowly - it means something more than `consider,' `refer to,' or `apply.'" Balcorta v. Twentieth Century-Fox Film

Corp., 208 F.3d 1102, 1108-09 (9th Cir. 2000). The Court is not persuaded by Defendants' assertion that "resolution of Plaintiffs' claim requires that not only the provisions of the CBA relating to services charges be examined they must be interpreted and applied." Reply at 16. Defendants

further argue that the allocation between employees and the Hotel is governed by the CBA and that "[u]nder Heatherly, the parties' agreement under the CBA is paramount, and there is nothing in § 481B-14 that trumps the terms of the CBA." Reply at 16 (citing

Heatherly v. Hilton Hawaiian Village Joint Venture, 78 Haw. 351, 893 P.2d 779 (1995)). The Court finds that Heatherly cannot be The Hawai`i Supreme

read as broadly as Defendants would like.

Court in Heatherly recognized that "parties may not do by contract what is prohibited by statute." 17 Heatherly, 78 Haw. at

355-56, 893 P.2d at 783-84.

However, the court found that

"nothing in HRS chapter 387 [precluded] the Hotels from agreeing - for the sole purpose of the minimum wage law - not to treat porterage as revenue." Id. Thus, the Hawai`i Supreme Court

concluded that while Hawai`i law may have permitted the porterage fee to be considered in determining whether the state's minimum wage law was being met, the parties were permitted to agree to exclude that fee in determining minimum wage. In essence, the

parties had bargained for greater protections for the employee than those provided under the law and they had not contradicted any state statute. Thus, Heatherly does not stand for the broad

proposition that "the parties' agreement under the CBA is paramount and nothing in § 481B-14 trumps the terms of the CBA." Reply at 16. Indeed, the parties' agreement cannot always be paramount. As the Ninth Circuit has explained, Section 301 "does

not permit parties to waive, in a collective-bargaining agreement, `nonnegotiable state rights' conferred on individual employees." Cir. 2005). Valles v. Ivy Hill Corp., 410 F.3d 1071, 1076 (9th Moreover, if under state law a waiver of rights is

permissible, "the CBA must include clear and unmistakable language waiving the covered employee's state right for a court to even consider whether it could be given effect." Id. A court

may look to the CBA to determine if there has been such a waiver 18

without triggering preemption.

See Cramer, 255 F.3d at 692.

Here, Plaintiffs argue that application of H.R.S. § 481B-14 to the facts of this case presents a "two-part inquiry: (1) was a service charge assessed and (2) was the service charge properly disclosed to customers. This inquiry does not require

any interpretation of, or even reference to the CBA." Opposition at 34. If the service charge was assessed and was not

disclosed to the customers, then the statute dictates that the employees are entitled to 100% of the service charge. The

Defendants have not pointed to any clear and unmistakable waiver of this right in the CBA, nor has the Court found any. Despite

the existence of H.R.S. § 481B-14, there is no reference to it in the relevant section of the CBA. This case is similar to Alderman v. 21 Club Inc., __ F. Supp. 2d __, Civ. No. 09-2418 TPG, 2010 WL 3304268 (S.D.N.Y. Aug. 20, 2010). In that case, the plaintiffs made a claim under a New

York tips statute, and the defendants argued that such a claim was preempted because of the existence of a CBA between the parties that guaranteed employees an 18% service charge. *5. Id. at

The Alderman court explained that "the CBA guarantees

gratuities in the amount of 18% of the total bill for the function. Section 196-d guarantees to the employees whatever has

been charged to provide gratuities, without reference to a specific percentage." Id. Thus, the Southern District of New 19

York found that because the CBA only guaranteed an 18% percent service charge, "a claim for more than 18% is not properly one under the CBA. It is properly made under § 196-d. The result

is, and the court so holds, that the gratuities claim is not preempted by federal law." Id. at *6.

The Court finds that similar reasoning is applicable here. Like in Alderman, a claim for any more than 93% of the

service charge is one properly made under the statute and not the CBA. At most, the CBA might need to be referenced in computing

damages owed to the Plaintiffs, which does not require preemption. See Lingle, 486 U.S. at 431 n.12 ("A collective-

bargaining agreement may, of course, contain information such as rate of pay . . . that might be helpful in determining the

damages to which a worker prevailing in a state-law suit is entitled."); Lividas, 512 U.S. at 125 ("[T]he mere need to `look to' the collective-bargaining agreement for damages computation is no reason to hold the state-law claim defeated by § 301."); Burnside, 491 F. 3d at 1073 (citing Lividas). Thus, the Court finds Plaintiffs' H.R.S. § 481B-14 claim is a statutory claim that is independent from any obligations created under the CBA. The Court further finds that

resolution of that claim does not require interpretation of the CBA and there has not been a clear and explicit waiver of the Plaintiffs' rights under H.R.S. § 481B-14 in the CBA. 20 Therefore,

the Court finds that Count I is not preempted by Section 301. However, as discussed infra, Section II, the Court does find that Plaintiffs fail to state a claim under H.R.S. § 480 for the alleged violation of H.R.S. § 481B-14. 2. Count II - Intentional Interference with Contractual and/or Advantageous Relations

Plaintiffs' second count asserts that the "defendants' conduct as set forth above in failing to remit the total proceeds of service charges to food and beverage services constitutes unlawful intentional interference with contractual and/or advantageous relationships that exist between these employees and the defendants' customers under state common law." Compl. Count II. Second Am.

Hawai`i recognizes two separate torts: (1)

tortious interference with contractual relations and (2) the tort of intentional or tortious interference with prospective business advantage. Meridian Mortgage Inc. v. First Hawaiian

Bank, 109 Hawai`i 35, 122 P.3d 1133, 1145-46 (Haw. App. 2005); Robert's Hawaii Sch. Bus, Inc. v. Laupahoehoe Transp. Co. Inc., 91 Hawai`i 224, 258-59, 982 P.2d 853, 887-88 (1999), superceded by statute on other grounds. Among other elements, tortious

interference with contractual relations requires a contract between the plaintiff and a third party and a defendant's knowledge of the contract. at 1143. Meridian, 91 Hawai`i at 45, 122 P.3d

Because the Plaintiffs have not alleged the existence

of a contract between themselves and customers of the Hotel, the 21

Court will focus on a tortious interference with prospective business advantage claim. To state a claim for tortious interference with prospective business advantage, a plaintiff must allege: (1) the existence of a valid business relationship or a prospective advantage or expectancy that is reasonably probable of maturing into a future economic benefit to the plaintiff; (2) knowledge of the relationship, advantage, or expectancy by the defendant; (3) purposeful intent to interfere with the relationship, advantage or expectancy; (4) legal causation between the act of interference and the impairment of the relationship, advantage, or expectancy; and (5) actual damages. See Meridian Mortgage,

109 Hawai`i at 47-48, 122 P.3d at 1145-46. Defendants argue "the Hotel has distributed service charges in accordance with the CBA's express terms. at ¶ 22. Exhibit B.

Thus, any determination of whether the Hotel's

distribution of service charges was `unlawful' will require the Court to interpret this provision of the CBA to determine whether the Hotel had a legal right to the service charge it retained. Such consideration of the CBA is foreclosed by Section 301." Motion at 29 (citing Hernandez v. Pac. Mar. Ass'n, No. 08-55490, 2010 U.S. App. Lexis 10216, *4-*8 (9th Cir. May 19, 2010)). The Court rejects Defendants' argument. Again,

Defendants do not appear to make any attempt to argue that this 22

claim is based on a right conferred only by the CBA rather than an independent right conferred by state law. Instead, Defendants

focus on the second part of the Burnside inquiry - that is, even if a right exists independently of the CBA, resolution of the claim is substantially dependent on an analysis of the collective bargaining agreement such that the claim should be preempted. Burnside, 491 F.3d at 1059-60. Although Defendants clearly plan to use the CBA as a defense to this state law claim, such usage does not render the state law claim dependent on the CBA. See Burnside, 491 F.3d at

1060 (explaining that a defendant's reliance upon a CBA as an aspect of a defense is not enough to "inject[] a federal question into an action that asserts what is plainly a state-law claim"); Beals v. Kiewit Pacific Co., 114 F. 3d 892, 895 (9th Cir. 1997) (negligent misrepresentation claim not preempted by § 301 because no construction of the CBA was necessary and none of the terms relevant to the misrepresentation claim were subject to conflicting meanings). Furthermore, even if the CBA needs to be

consulted, there has been no persuasive argument that interpretation as opposed to mere consultation would be necessary, thus preemption is not necessary. See Cramer, 255 F.

3d at 691 (citing Lividas, 512 U.S. at 122-24 ("[T]he bare fact that a collective-bargaining agreement will be consulted in the course of state-law litigation plainly does not require the claim 23

to be extinguished").

In this case, there does not appear to be

any dispute that the terms of the CBA indicate that the Hotel may keep 7% of any service charge imposed. Accordingly, the Court finds that Count II is not preempted by Section 301. 3. Count III - Implied Breach of Contract Claim

Plaintiffs' third count asserts that the Defendants' conduct as set forth above constitutes breach of implied contract under state common law. The defendants have breached an implied contract with the plaintiffs that they would comply with the law and distribute the total proceeds of service charges to food and beverage servers. Also the defendants have breached an implied contract with its customers that the employees would receive this money, for which the employees are third party beneficiaries. Second Am. Compl. Count III. To state a claim for breach of an implied contract, a plaintiff must allege the breach of "an agreement in fact," which is not expressed, but "is implied or presumed" based upon the actions of the parties. Durette v. Aloha Plastic Recycling,

Inc., 105 Hawai`i 490, 504, 100 P.3d 60, 74 (2004); Kemp v. State of Hawaii Child Support Enforcement Agency, 111 Hawai`i 367, 391, 141 P.3d 1014, 1038 (2006). Plaintiffs' implied breach of contract claim is a two part claim. First, they allege that Defendants breached an This claim is preempted

implied contract with Plaintiffs.

because an explicit contract exists between Plaintiffs and 24

Defendants regarding Plaintiffs' employment with Defendants - the CBA. See Young v. Anthony's Fish Grotto, Inc., 830 F.2d 993, 997

(9th Cir. 1987) (rejecting the plaintiff's argument that her individual labor contract was independent of the CBA and that thus her contract claim was not a claim for a breach of the CBA, noting that any "independent agreement of employment [concerning that job position] could be effective only as part of the collective bargaining agreement' [and thus] the CBA controls and the contract claim is preempted"). Any consideration of whether

there is an implied contract between the parties would require interpretation of the CBA to determine what terms could be implied under the CBA. Therefore, the Plaintiffs' claim

regarding an implied contract between themselves and Defendants is preempted by Section 301. See Lueck, 471 U.S. at 215 ("[I]t

is a question of federal contract interpretation whether there was an obligation under this labor contract to provide the payments in a timely manner, and, if so, whether Allis-Chalmers' conduct breached that implied contract provision."); Aramark, Civ. No. 08-cv-10700-RWZ, slip op. at *8-10 (noting in its discussion of the plaintiffs' count for breach of implied contract under state common law that "[e]ven if additional implied terms are read into the Agreement, plaintiffs' common law breach of contract claim is preempted by Section 301"). Second, Plaintiffs allege that "the defendants have 25

breached an implied contract with its customers that the employees would receive this money, for which the employees are third party beneficiaries." Second Am. Compl. Count III. The

Court finds that such a claim is not preempted by Section 301.7/ Any purported implied contract between the Defendants and their customers would be independent of the CBA and would not require any interpretation of terms of the CBA. Such an alleged implied

contract and a third party beneficiary right would arise under the statute, H.R.S. § 481B-14. Accordingly, Plaintiffs' breach of implied contract claim is preempted by Section 301 to the extent that Plaintiffs allege an implied contract between Plaintiffs and Defendants. Plaintiffs' breach of implied contract claim is not, however, preempted to the extent that they allege there is an implied contract between Defendants and another party, to which Plaintiffs assert that they are third-party beneficiaries. 4. Count IV - Unjust Enrichment

Plaintiffs' fourth count asserts "the defendants' conduct as set forth above constitutes unjust enrichment under state common law." Second Am. Compl. Count IV. As this Court

The Court observes that Defendants have only moved to dismiss the Second Amended Complaint for failure to state a claim as to certain defendants and as to Count I. See Motion at 1-2; Reply at 1-2 (explicitly acknowledging that "Defendants have not sought dismissal of Count V for failure to state a claim under Rule 12(b)(6)"). 26

7/

has previously explained: The Hawaii Supreme Court [has] explored the general parameters of an unjust enrichment claim, recognizing that limited jurisprudence involving such a claim existed in Hawaii. See Durette v. Aloha Plastic Recycling, Inc., 105 Hawai`i 490, 502, 100 P.3d 60 (2004). "One who receives a benefit is of course enriched, and he would be unjustly enriched if its retention would be unjust." Id. at 502, 100 P.3d 60 (citing Restatement (First) of Restitution § 1 comment a (1937)). As Professor George E. Palmer stated, "[u]njust enrichment is an indefinable idea in the same way justice is indefinable. But many of the meanings of justice are derived from a sense of injustice, and this is true of restitution since attention is centered on the prevention of injustice. Not all injustice but rather one special variety: the unjust enrichment of one person at the expense of another." Durette, 105 Hawai`i at 503 n. 9, 100 P.3d 60 (citing 1 G. Palmer, The Law of Restitution § 1.1 (1978) (internal citation omitted)). It follows that the person who is unjustly enriched is required to make restitution to the other. Durette, 105 Hawai`i at 502, 100 P.3d 60. While unjust enrichment may be a "broad and imprecise term," the court emphasized that in deciding when to apply restitution, the prevention of injustice guides. Id. at 502-03, 100 P.3d 60 (citing A. Denning, The Changing Law 65 (1953)). Television Events & Marketing, Inc. v. Amcon Distrib. Co., 488 F. Supp. 2d 1071, 1078 (D. Haw. 2006). Thus, the Court explained

there are two required elements of an unjust enrichment claim. First, a plaintiff must show that he or she has conferred a benefit upon the defendant and second, that the retention of that benefit was unjust. Id.

The Court finds that, as with other counts, this claim is based upon H.R.S. § 481B-14 and, although the CBA may be referenced in Defendants' defense, no interpretation of the CBA is required, and thus this claim is not preempted by Section 301. See Burnside, 491 F.3d at 1060 (explaining that a defendant's 27

reliance upon a CBA as an aspect of a defense is not enough to "inject[] a federal question into an action that asserts what is plainly a state-law claim"). As noted earlier, there does not

appear to be any dispute that the CBA provides that the Hotel may keep 7% of the service charge. Thus, this provision may be

raised as a defense without the need for any interpretation of the CBA. 5. Count V - Unpaid Wages, Haw. Rev. Stat. §§ 388-6, 388-10, and 388-11

In their fifth count, Plaintiffs allege As a result of the defendants unlawful failure to remit the entire proceeds of food and beverage service charges to food and beverage servers, the plaintiffs have been deprived of income which constitutes wages, which is actionable under Hawaii Revised Statutes Section 388-6, 10, 11. Pursuant to those statutes, the plaintiffs hereby bring a claim for unpaid wages, including liquidated damages, interest, and attorneys' fees. Second Am. Compl. Count V. H.R.S. § 388-6 provides, inter alia, that, subject to certain exceptions "[n]o employer may deduct, retain, or otherwise require to be paid, any part or portion of any compensation earned by any employee. . . ." H.R.S. § 388-6. One

of those exceptions applies if an employer obtains a written authorization from that employee. Pursuant to H.R.S. § 388-11,

an employee may maintain an action to recover unpaid wages. H.R.S. § 388-1 defines wages and explains that "for the purposes of section 388-6, `wages' shall include tips or gratuities of any 28

kind."

H.R.S. § 388-1. Plaintiffs assert that "as recognized by Judge Gillmor

in her recent Order in the Davis case, Plaintiffs may enforce the substantive protections created by HRS 481B-14 by utilizing HRS §§ 388-6, 10 and 11." Opposition at 6, 8. The Court agrees with

this to the extent that Plaintiffs may have a claim under H.R.S. § 388 for unpaid compensation, but not to any extent that Plaintiffs are seeking to avoid the requirements of H.R.S. § 4802(e) and yet obtain damages under that statute. explained: Plaintiffs argue that: (1) H.R.S. § 481B-14 requires an employer to distribute service charges to employees as `tip income' unless the employer discloses its retention of [a part or all] of the service charge to customers; (2) this `tip income' falls under the definition of `wages' according to H.R.S. § 388-1; and (3) since the Defendants have failed to make the required disclosures, they have retained `tip income' in violation of H.R.S. § 388-6. Davis 9/30/10 Order at *37-38. Put another way, because for As Judge Gillmor

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 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 withheld. The Court finds that Plaintiffs' H.R.S. Chapter 388 claim is not preempted. This case is most similar to the Lividas 29

and Burnside cases.

In Lividas, the Supreme Court found that a

California law, which required employers to pay all wages due immediately upon an employee's discharge, imposed a penalty for refusal to pay, and precluded any private contractual waiver of those "minimum labor standards," was not preempted by Section 301. See Lividas 512 U.S. at 110, 123-125. In Burnside,

employees brought a claim that they were entitled to compensation for travel to and from worksites, and the Ninth Circuit held that "because the right to be compensated for employer-mandated travel exists as a matter of state law, independent of the CBAs, on this initial basis at least the employees' claims are not preempted." 491 F.3d at 1061. The Ninth Circuit also concluded that after

examining the relevant CBA provisions in Burnside, the employees claims could be resolved by "at-most-merely `looking to' the CBAs" and therefore the claims were not preempted. Id. at 1071.

This case is also distinguishable from Madison v. St. Francis Med. Ctr., Civ. Nos. 92-00553 DAE & 92-00554 DAE, 1992 U.S. Dist. Lexis 21733, *11 (D. Haw. Dec. 23, 1992), which is cited by the Defendants. As noted earlier, an employer may be in

violation of H.R.S. § 388-6 if it withholds compensation without the employee's written permission. In Madison, the court

determined that an H.R.S. § 388 claim was preempted because it required analysis of a CBA. There, the plaintiff had signed an

agreement that allowed recovery through payroll deduction of a 30

prorated portion of a relocation allowance, except where the employment was "terminated for reasons other than misconduct or violation of the House Rules." Id. at 10. Thus, the issue of

whether the plaintiff had consented to the deduction turned on whether or not he was terminated for misconduct or a violation of the employer's rules, which the court had previously determined required an interpretation of the CBA.8/ By contrast, whether or

not the Defendants have improperly withheld compensation from the Plaintiffs turns on a statutory definition of tip income and whether or not the Defendants failed to give notice as provided in H.R.S. § 481B-14. Accordingly, there is no need to even look

to, much less interpret the CBA. This case is similarly distinguishable from Aramark in which the court found that certain of the plaintiffs' claims were preempted. In Aramark, the court found that the plaintiffs'

claim under Mass. Gen. Laws ch. 151 § 1A, which requires employees to be paid at least one and one-half times their regular rate of compensation for any hours worked in excess of 40 hours per week, was preempted. Aramark, Civ. No. 08-10700-RWZ,

Moreover, Madison was decided prior to the Ninth Circuit's clarification of the Section 301 preemption doctrine in Cramer v. Consolidated Freightways, Inc., 255 F.3d 683 (9th Cir. 2001), which explained that some prior Ninth Circuit cases had gone too far in suggesting that "the preemptive force of § 301 was so strong that preemption must occur simply because the state right in question `is a properly negotiable subject for collective bargaining.'" Id. at 692-93. 31

8/

slip op. at *5.

The court there found that there were a variety

of pay rate provisions which required the CBA be consulted and interpreted. Here there are no such complications. As the

Plaintiffs argue, H.R.S. § 481B-14 requires an employer to distribute service charges to employees as `tip income' unless the employer discloses its retention of all or a part of that service charge to its customers. Thus, the Plaintiffs argue this

tip income falls under the definition of wages in H.R.S. § 388-1, and, therefore, if Defendants have failed to make the required disclosures and have failed to distribute 100% of the service charge, they have retained tip income. consult or interpret the CBA. Furthermore, the Court observes that H.R.S. § 388-8 specifies that "[e]xcept as provided in section 388-11, no provision of this chapter may in any way be contravened or set aside by private agreement." H.R.S. § 388-8. However, There is no need to

Plaintiffs seek to recover for a violation of H.R.S. § 388-6 which provides "[n]o employer may deduct, retain, or otherwise require to be paid, any part or any 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 . . . ." 6. H.R.S. § 388-

As the Ninth Circuit has explained, Section 301 "does not

permit parties to waive, in a collective-bargaining agreement, 32

`nonnegotiable state rights' conferred on individual employees." Valles v. Ivy Hill Corp., 410 F.3d 1071, 1076 (9th Cir. 2005). Moreover, if under state law a waiver of rights is permissible, "the CBA must include clear and unmistakable language waiving the covered employee's state right for a court to even consider whether it could be given effect." Id. A court may look to the

CBA to determine if there has been such a waiver without triggering preemption. See Cramer, 255 F.3d at 692.

Despite the language in H.R.S. § 388-8, H.R.S. § 388-6 (which is the specific section that Plaintiffs are relying upon) appears to contain a partial waiver provision. Therefore, the

Court must look to whether there has been a waiver here. Defendants have not come forth with any evidence that there has been any clear and unmistakable waiver in the CBA as they are required to if they seek to assert a party has waived a state-law right. The Court notes that this case differs from Heatherly

because Heatherly involved a potential waiver of a state law right by the Hotel, and not the employees. Moreover, Heatherly See

was being reviewed after a grant of summary judgment. Heatherly, 78 Haw. at 355-56, 893 P.2d at 783-84.

Accordingly, Plaintiffs' Count V is not preempted. 6. Summary Regarding Section 301 Preemption

As discussed in greater detail above, the Court finds that only one portion of Count III (Plaintiffs' claim alleging a 33

breach of an implied contract between Plaintiffs and Defendants) is preempted by Section 301. The remainder of Plaintiffs' claims

are not preempted because they exist independently of the CBA and do not require interpretation of the CBA. Because Plaintiffs'

claims are not brought under the CBA, but rather under state law, they are not subject to the six-month statute of limitations for breach of contract under Section 301. See 29 U.S.C. § 160(b).

Furthermore, even were the Court to construe the portion of Count III which is preempted as alleging a breach of a collective bargaining agreement under Section 301, the Court would find that Plaintiffs have failed to exhaust the grievance procedures under the CBA and their claims are untimely. See

United Paperworkers Int'l Union AFL-CIO v. Misco, Inc., 484 U.S. 29, 37 (1987) ("The courts have jurisdiction to enforce collective bargaining contracts; but where the contract provides grievance and arbitration procedures, those procedures must first be exhausted and courts must order resort to the private settlement mechanisms without dealing with the merits of the dispute."); 29 U.S.C. § 160(b) (providing a six-month statute of limitations); DelCostello v. Int'l Brotherhood of Teamsters, 462 U.S. 151, 169 (1983). procedure. The CBA here provides for a grievance

See Decl. of Matthew Bailey, Ex. A, section 27 ("When

any employee or the Union believes that Hotel has violated the express terms of this Agreement and that by reason of such 34

violation rights have been adversely affected, the employee or the Union must follow the steps set forth below in presenting the grievance for a determination of the merits thereof."); see also Decl. of Matthew Bailey, Ex. B. at ¶ 18. If the parties are

unable to resolve the grievance, then it is submitted to arbitration. Id. Because Plaintiffs failed to exhaust these

contractually mandated procedures, judicial relief for breach of the CBA is precluded. See Soremekun v. Thrifty Payless, Inc.,

509 F.3d 978, 985 (9th Cir. 2007). B. Machinists Preemption The Defendants also argue that H.R.S. § 481B-14 is preempted by the NLRA pursuant to the Supreme Court's Machinists decision. Motion at 34. The Defendants assert that in Lodge 76,

Int'l Ass'n of Machinists v. Wis. Employment Relation Comm'n, 427 U.S. 132, 140-41 (1976) ("Machinists"), the U.S. Supreme Court described the circumstances in which the NLRA will preempt an otherwise valid state law. Under Machinists, state activity may

be restricted "on the theory that pre-emption is necessary to further Congress[`s] intent that `the conduct involved be unregulated because [it should be] left to be controlled by the free play of economic forces.'" Fort Halifax Packing Co. v.

Coyne, 482 U.S. 1, 19-20 (1987) (second alteration in original) (internal quotations omitted) (quoting Machinists, 427 U.S. at 140). 35

Plaintiffs assert that "Machinists preemption prohibits states from imposing restrictions on labor and management's weapons of self-help that were left unregulated in the NLRA because Congress intended for `tactical bargaining decisions and conduct to be controlled by the free play of economic forces.'" Opposition at 23 (citing Associated Builders and Contractors of Southern California, Inc., 256 F.3d 979, 987 (9th Cir. 2004)). Plaintiffs assert that where the statutes at issue (H.R.S. §§ 388-6 and 481B-14) are laws of general applicability which create a minimum standard related to service charges for the entire hotel and restaurant industry, this doctrine is inapplicable.9/ The Court agrees with Plaintiffs that Machinists preemption is inapplicable here. As the Supreme Court in

Metropolitan Life Insurance Company v. Commonwealth of Massachusetts, 471 U.S. 724 (1985) stated in discussing Machinists preemption: [T]here is no suggestion in the legislative history of the Act that Congress intended to disturb the myriad state laws then in existence that set minimum labor standards, but were unrelated in any way to the processes of bargaining or self-organization. To the contrary, we believe that Congress developed the framework for self-organization and collective bargaining of the NLRA within the larger body of state law promoting public health and safety. The States traditionally have had great latitude under their police powers to legislate as "`to the protection of the lives, limbs, health, comfort, and quiet of all The Court observes that Defendants' Motion only asserts that Machinists preemption applies to H.R.S. § 481B-14. 36
9/

persons.'" Slaughter-House Cases, 16 Wall. 36, 62, 21 L.Ed. 394 (1873), quoting Thorpe v. Rutland & Burlington R. Co., 27 Vt. 140, 149 (1855). "States possess broad authority under their police powers to regulate the employment relationship to protect workers within the State. Child labor laws, minimum and other wage laws, laws affecting occupational health and safety ... are only a few examples." DeCanas v. Bica, 424 U.S. 351, 356, 96 S.Ct. 933, 937, 47 L.Ed.2d 43 (1976). State laws requiring that employers contribute to unemployment and workmen's compensation funds, laws prescribing mandatory state holidays, and those dictating payment to employees for time spent at the polls or on jury duty all have withstood scrutiny. See, e.g., Day-Brite Lighting, Inc. v. Missouri, 342 U.S. 421, 72 S.Ct. 405, 96 L.Ed 469 (1952). Met. Life, 471 U.S. at 756. The Supreme Court further recognized

"that it `cannot declare pre-empted all local regulation that touches or concerns in any way the complex interrelationships between employees, employers, and unions; obviously, much of this is left to the States.'" omitted). H.R.S. § 481B-14 is not the type of statute that the Machinists doctrine is intended to preempt as it does not present the types of concerns enunciated in Machinists. In Machinists, Id. at 756-57 (internal citation

the issue was whether a state labor relations board could grant an employer covered by the NLRA an order enjoining a union and its members from continuing to refuse to work overtime pursuant to a union policy to put economic pressure on the employer in negotiations for renewal of an expired collective bargaining agreement. See Machinists, 427 U.S. at 134. Thus, in

Machinists, the Court found that the "Act's processes would be 37

frustrated . . . were the State's ruling permitted to stand." Id. at 148. The Supreme Court found that the State's ruling

would alter the substantive aspects of the bargaining process that Congress had sought to regulate. However, in considering

Machinists preemption, the Supreme Court has explained that minimum state labor standards do not present the same types of concerns that warrant preemption, because they do not "encourage or discourage employees in the promotion of their interests collectively," which are the subject of federal regulation under the NLRA. Metro. Life, 471 U.S. at 755.10/

The Supreme Court in Metro. Life explained: Minimum state labor standards affect union and nonunion employees equally, and neither encourage nor discourage the collective-bargaining processes that are the subject of the NLRA. Nor do they have any but the most indirect effect on the right of self-organization established in the Act. Unlike the NLRA, mandatedbenefit laws are not laws designed to encourage or discourage employees in the promotion of their interests collectively; rather, they are in part "designed to give specific minimum protections to individual workers and to ensure that each employee covered by the Act would receive" the mandated health insurance coverage. Barrentine, 450 U.S. at 739, 101 S.Ct. at 1444 (emphasis in original). Nor do these laws even inadvertently affect these interests implicated in the NLRA. Rather, they are minimum standards "independent of the collective-bargaining process [that] devolve on [employees] as individual workers, not as members of a collective organization." Id. at 745, 101 S.Ct. at 1447. It would further few of the purposes of the Act to allow unions and employers to bargain for terms of employment that state law forbids employers to establish unilaterally. Metro. Life, 471 U.S. at 755. 38

10/

Hawaii's statute at issue here has no comparable effect on the bargaining process. Defendants assert that the statute

"is a consumer protection statute with a penalty on employers" and that it is the "penalty" provision "which runs afoul of Machinists preemption." agree. Reply at 11-12. The Court does not

The Court finds that H.R.S. § 481B-14 provides a minimum The

protection for employees as well as consumer protection. reality is that it informs consumers in order to protect employees' tips. The Hawai`i Supreme Court in Davis examined and

explained the legislative history of H.R.S. § 481B-14 in great detail. In its first formation, the bill proposed would have,

inter alia, added a definition for "tips" in H.R.S. § 387-1 that would include any service charges imposed by the employer, and amended H.R.S. § 388-6 to prohibit employers from withholding tips from employees. 313. See Davis, 122 Hawai`i at 433, 228 P.3d at

The House Committee on Labor and Public Employment

indicated the bill's original purpose was to "strengthen Hawai`i's wage and hour law to protect employees who receive or may receive tips or gratuities from having these amounts withheld or credited to their employers." Id. (citing H. Stand. Comm. Because of

Rep. No. 479-00, in 2000 House Journal, at 1155).

concerns that the bill as it had been drafted would cause confusion, the bill was amended such that the original section 39

was deleted and a new section that would eventually become H.R.S. § 481B-14 was drafted. Id. As the Davis Court highlighted, the

Senate Committee on Commerce and Consumer Protection recommended adoption of the modified bill, noting Your Committee finds that it is generally understood that service charges applied to the sale of food and beverages by hotels and restaurants are levied in lieu of a voluntary gratuity, and are distributed to the employees providing the service. Therefore, most consumers do not tip for services over and above the amounts they pay as a service charge. Your Committee further finds that, contrary to the above understanding, moneys collected as service charges are not always distributed to the employees as gratuities and are sometimes used to pay the employer's administrative costs. Therefore, the employee does not receive the money intended as a gratuity by the customer, and the customer is misled into believing that the employee has been rewarded for providing good service. Davis, 122 Hawai`i at 313, 228 P.3d at 433-34 (quoting S. Stand. Comm. Rep. No. 3077, in 2000 Senate Journal, at 1286-87 (emphasis added by the Davis Court)). Thus, the Davis Court concluded that

the legislature was concerned that when a hotel or restaurant withholds a service charge without disclosing that to consumers, both "employees and consumers can be negatively impacted." Id.

Defendants also argue that because this statute applies only to the hotel and restaurant industry, it is not a statute of general applicability and therefore should be found to be preempted. As discussed above, the statute provides a minimum

protection for employees as well as consumer protection. Moreover, a minimum protection statute may be targeted toward 40

certain workers.

In Dillingham Const. N.A., Inc. v. County of

Sonoma, Division of Labor Standards, 190 F.3d 1034 (9th Cir. 1999) the Ninth Circuit indicated that just because a statute may only be applicable to a particular industry, does not mean that it is not one of general applicability and thus should be preempted. See id. at 1038-40; see also Associated Builders, 356 . . . explained on several occasions that

F. 3d at 990 ("we have

the NLRA does not authorize us to pre-empt minimum labor standards simply because they are applicable only to particular workers in a particular industry); Emeryville, 2006 WL 2739309 at *12-*13 (rejecting the argument that a statute was preempted by Machinists because it targeted four hotels and interfered with their ability to bargain with employees and instead finding that the statute imposed a minimum wage regulation that was not preempted). In light of the foregoing Ninth Circuit precedent,

Defendants reliance on 520 South Michigan Avenue Associates, Ltd. v. Shannon, 549 F.3d 1119 (7th Cir. 2009) is unavailing for a number of reasons. There, the Seventh Circuit relied heavily

upon the Ninth Circuit's decision in Chamber of Commerce v. Bragdon, 64 F.3d 497 (9th Cir. 1995), which found an ordinance that targeted particular workers in a particular industry was preempted. As the Ninth Circuit has subsequently explained:

Bragdon must be interpreted in the context of Supreme Court authority and our other, more recent, rulings on NLRA preemption. While Bragdon emphasized that the Contra Costa County ordinance "targets particular 41

workers in a particular industry," id. at 504, we have since explained on several occasions that the NLRA does not authorize us to pre-empt minimum labor standards simply because they are applicable only to particular workers in a particular industry. Dillingham II, 190 F.3d at 1034 (upholding minimum standards that applied only to apprentices in the skilled trades); National Broadcasting, 70 F.3d at 71-73 (holding that a California regulation that applied only to broadcast employees was not preempted); Viceroy Gold Corp. v. Aubry, 75 F.3d 482 (9th Cir. 1996) (holding that a regulation that applied only to miners was not preempted). It is now clear in this Circuit that state substantive labor standards, including minimum wages, are not invalid simply because they apply to particular trades, professions, or job classifications rather than to the entire labor market. Associated Builders, 356 F. 3d at 990. Moreover, the

circumstances under which the law at issue in Shannon was passed and the specific details of the law indicate that the law had a much greater effect on the collective bargaining process than the statute at issue here. In Shannon, during a labor dispute

between an employer and a union, the Illinois legislature passed a law that applied only to one occupation in one industry in one county. Shannon, 549 F.3d at 1121, 1131. In considering other

cases that had found minimum labor standards that apply only to particular occupations, industries, or categories of employers were not preempted, the Seventh Circuit emphasized that the Illinois statute was limited not just by trade but also by location. Id. at 1131 ("Unlike these cases . . . the [statute]

is not just limited by trade -it is also limited by location; the [statute] is a state statute that applies only in one county in 42

Illinois - Cook county.

That fact distinguishes this case from

the series of cases cited by Appellees, including Nunn; the [statute] is not just limited to a particular trade, profession, or job classification; it is also a state statute limited to only one of Illinois' 102 counties."). The statute at issue here is

not so narrow; it applies to any hotel or restaurant in the entire state and it was not passed during a labor dispute. Accordingly, for the foregoing reasons, the Court finds that H.R.S. § 481B-14 is not preempted by the Machinists doctrine. II. Whether Plaintiffs Fail to Adequately Allege a UMOC Claim As discussed supra, Plaintiffs assert that Defendants have violated 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 for costs or expenses other than wages and tips of employees. H.R.S. § 481B-14. Pursuant to H.R.S. § 481B-4, "[a]ny person