Wadsworth et al v. KSL Grand Wailea Resort, Inc.
Filing
239
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' RENEWED MOTION FOR SUMMARY JUDGMENT 199 , DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT 201 , AND DEFENDANTS' COUNTER-MOTION FOR SUMMARY JUDGMENT 223 . Signed by JUDGE ALA N C KAY on 11/12/2014. [Written Order follows motions hearing on motions held on 11/03/2014. Minutes of hearing: docket entry no. 236 ] (afc) CERTIFICATE OF SERVICEParticipants registe red 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
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,
) Civ. No. 08-00527 ACK-RLP
)
)
)
)
)
Plaintiffs,
)
)
v.
)
)
KSL GRAND WAILEA RESORT, INC.;
)
CNL RESORT LODGING TENANT CORP.; )
CNL GRAND WAILEA RESORT, LP; MSR )
RESORT LODGING TENANT, LLC;
)
HILTON HOTELS CORPORATION;
)
WALDORF-ASTORIA MANAGEMENT LLC; )
and BRE/WAILEA LLC; dba GRAND
)
WAILEA RESORT HOTEL & SPA,
)
)
Defendants.
)
)
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ RENEWED
MOTION FOR SUMMARY JUDGMENT, DEFENDANTS’ MOTION FOR PARTIAL
SUMMARY JUDGMENT, AND DEFENDANTS’ COUNTER-MOTION FOR SUMMARY
JUDGMENT
For the following reasons, the Court hereby GRANTS IN
PART AND DENIES IN PART the motions as follows:
The Court GRANTS Defendants’ Motion for Partial Summary
Judgment as to Counts II, III, and IV of the Second Amended
Complaint.
The Court GRANTS Plaintiffs’ Renewed Motion for Summary
Judgment and DENIES Defendants’ Motion for Partial Summary
Judgment and Counter-Motion for Summary Judgment and concludes
that Plaintiffs have established Defendants’ liability as to
Count V for (1) long-form conventions from January 31, 2006 to
May of 2007; (2) short-form conventions from January 31, 2006
until December 31, 2008; (3) weddings from January 31, 2006 to
January 2009; and (4) in-room dining from January 31, 2006 to
January 2012. The Court GRANTS Defendants’ Motion for Partial
Summary Judgment and Counter-Motion for Summary Judgment and
DENIES Plaintiffs’ Motion for Summary Judgment as to the portion
of Count V premised upon banquets.
Finally, the Court DENIES Defendants’ Counter-Motion as
to equitable justification.
FACTUAL BACKGROUND
Plaintiffs Nan Wadsworth, Elizabeth Valdez Kyne, Bert
Villon, and Stephen West (“Plaintiffs”) brought suit on behalf
of a similarly situated class against a number of different
entities that have owned and operated the Grand Wailea Resort
Hotel & Spa (“Grand Wailea Resort” or “Hotel”) in Maui during the
applicable statute of limitations period. (Second Am. Compl.
¶¶ 4-6.) Defendants include MSR Resort Lodging Tenant, LLC, KSL
Grand Wailea Resort, Inc., Hilton Hotels Corp. (“Hilton”),
Waldorf-Astoria Management LLC (“Waldorf-Astoria”), CNL Grand
Wailea Resort, LP, and CNL Lodging Tenant Corp.1/ (Id. ¶¶ 6–8.)
1/
Plaintiffs also brought suit against Grand Wailea
Resort’s operator at the time the Second Amended Complaint was
(continued...)
2
Plaintiffs have all worked as food and beverage servers for
Defendants. (Id. ¶ 3.)
Plaintiffs’ Second Amended Complaint alleges that the
Grand Wailea Resort provides food and beverage services
throughout the Hotel, including in its banquet department, its
restaurants, and through room service. (Id. ¶ 5.) 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.) 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
service charges are not remitted in full to the employees who
serve the food and beverages. (Id. ¶¶ 11-12.)
Plaintiffs’ Second Amended Complaint asserts five
counts. As a result of the Court’s ruling on a previous motion to
dismiss, the following counts remain: Count II, in which
Plaintiffs allege that Defendants’ conduct constitutes unlawful
1/
(...continued)
filed, BRE/Wailea, LLC (“BRE/Wailea”). (Second Am. Compl. ¶ 6.)
The parties subsequently stipulated to the dismissal of all
claims against BRE/Wailea, which this Court approved and ordered
on April 28, 2009. (Doc. No. 67.)
3
intentional interference with contractual and/or advantageous
relations; Count III, in which Plaintiffs allege that Defendants’
conduct constitutes a breach of an implied contract between
Defendants and Defendants’ customers, of which Plaintiffs are
third party beneficiaries2/; Count IV, in which Plaintiffs allege
that Defendants have been unjustly enriched at Plaintiffs’
expense under state common law; and Count V, in which Plaintiffs
allege that as a result of Defendants’ conduct, they have been
deprived of income that constitutes wages, which is actionable
under Haw. Rev. Stat. §§ 388–6, 388–10, and 388–11.
PROCEDURAL BACKGROUND
On November 24, 2008, Plaintiffs filed a Class Action
Complaint. (Doc. No. 1.) On January 29, 2009, Plaintiffs filed an
Amended Class Action Complaint.3/ (Doc. No. 19.) On July 9, 2009,
the Court stayed this case in light of Judge Gillmor’s
certification to the Hawaii Supreme Court of a question of law
2/
In Count III, Plaintiffs also asserted that Defendants
breached an implied contract between Plaintiffs and Defendants.
In a prior ruling, the Court dismissed this portion of Count III
as preempted under federal labor law. See 2010 WL 5146521 (Doc.
No. 118).
3/
There were a number of similar cases filed in this
district 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.) On
April 8, 2009, this Court adopted the Magistrate Judge’s Findings
and Recommendation that the similar cases not be consolidated.
2009 WL 975769 (Doc. No. 56).
4
that was also important to the instant case.4/ (See Doc. No. 71.)
The Hawaii Supreme Court answered the certified question on March
29, 2010. See Davis v. Four Seasons Hotel Ltd., 228 P.3d 303
(Haw. 2010). Accordingly, on April 19, 2010, Plaintiffs filed a
motion to lift the stay and a motion to file a second amended
complaint. (Doc. Nos. 73 & 74.) The Magistrate Judge granted both
motions on June 22, 2010. (Doc. No. 89.) Plaintiffs filed their
Second Amended Complaint on June 28, 2010. (Doc. No. 93.)
On July 20, 2010, Defendants filed a Motion to Dismiss
Second Amended Complaint. (Doc. No. 95.) On December 10, 2010,
the Court granted the motion with respect to Count I, Plaintiffs’
unfair methods of competition claim, without prejudice, and Count
III, in so far as it alleged a breach of an implied contract
between Plaintiffs and Defendants. 2010 WL 5146521 (Doc. No.
118).
On March 25, 2011, Plaintiffs filed a Motion to Certify
4/
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?
5
Class.5/ (Doc. No. 126.) On June 27, 2011, Magistrate Judge
Puglisi issued his Findings and Recommendations to Grant in Part
and Deny in Part Plaintiff’s Motion for Class Certification.
(Doc. No. 149.) Neither party objected to the Magistrate Judge’s
Findings and Recommendation, and on July 18, 2011, the Court
adopted it, certifying the class as “all non-managerial food and
beverage employees who, from January 31, 2006 to the present,
have worked at banquets, functions, other events, and small
parties, where a service charge was imposed and where a part of
that service charge was kept by the Defendants or management
without adequate disclosure to customers” as to the non-debtor
Defendants Hilton and Waldorf-Astoria (together “Defendants”).6/
(Doc. Nos. 149 & 150.)
On June 1, 2011, Plaintiffs filed a Motion for Partial
5/
On April 1, 2011, Defendants filed a Suggestion of
Bankruptcy for MSR Golf Course LLC, et al., which acted to stay
proceedings against all Defendants except Hilton and WaldorfAstoria. (Doc. No. 128.) Defendants CNL Grand Wailea Resort, LP,
CNL Resort Lodging Tenant Corp., and KSL Grand Wailea Resort,
Inc. are each a subsidiary or affiliate of MSR Resort Golf Course
LLC. (See Doc. No. 128.) On October 23, 2014, the parties
stipulated to the dismissal of the debtor parties. (Doc. No.
234.)
6/
Plaintiffs requested that the class be defined as “all
non-managerial food and beverage service employees who, since
November 24, 2002 have worked at banquets, functions, other
events, and small parties, where a service charge was imposed and
where a part of that service charge was kept by the Defendants or
management without adequate disclosure to customers.” (Doc. No.
126.) Hilton and Waldorf-Astoria, however, did not manage the
Hotel prior to January 31, 2006. (See Doc. No. 149.)
6
Summary Judgment (“Plaintiffs’ Motion for Summary Judgment”)
(Doc. No. 143,) and Defendants filed a Motion to Dismiss Count V
of the Second Amended Class Action Complaint or to Certify the
Question to the Hawaii Supreme Court (Doc. No. 146.) On December
2, 2011, the Court issued its Order Granting in Part and Denying
in Part Plaintiffs’ Motion for Partial Summary Judgment, in which
the Court granted summary judgment as to Defendants’ liability
with respect to service charges imposed on food and beverages
purchased via room service. See 2011 WL 6030074 (“12/2/11
Order”). Defendants did not seek reconsideration or file an
appeal of the 12/2/11 Order.
Also on December 2, 2011, the Court issued its Order
Denying Defendants’ Motion to Dismiss Count V, Granting
Defendants’ Request to Stay Proceedings as Modified, and
Administratively Closing this Case, in which the Court, inter
alia, stayed all proceedings in the instant case pending a
decision by the Hawaii Supreme Court on a question of law
certified to it by Judge Kobayashi.7/
On August 1, 2013, Plaintiffs notified the Court of the
7/
As was relevant in this case, Judge Kobayashi certified
the following question: “May food or beverage service employees
of a hotel or restaurant bring a claim against their employer
based on alleged violation of Haw. Rev. Stat. § 481B–14 by
invoking Haw. Rev. Stat. §§ 388–6, 388–10, and 388–11 and without
invoking Haw. Rev. Stat. §§ 480–2 or 480–13?” Villon v. Marriot
Hotel Services, Inc., CV–08–00529 LEK–RLP, Doc. No. 130 (Oct. 12,
2011) (Doc. No. 130).
7
Hawaii Supreme Court’s decision and, pursuant to Plaintiffs’
request, the Court lifted the stay and reopened the case. (Doc.
Nos. 168, 169.) On July 2, 2014, Defendants filed a Motion to
Vacate Order on Motion for Partial Summary Judgment. (Doc. No.
193.) On the same day, Defendants filed a Motion to Decertify the
Class. (Doc. No. 192.) On September 26, 2014, the Court denied
both of Defendants’ motions.8/ (Doc. Nos. 218 & 219).
On July 28, 2014, Plaintiffs filed their Renewed Motion
for Summary Judgment, along with a concise statement of facts and
a number of exhibits. (Doc. Nos. 199 & 200.) On the same day,
Defendants filed their Motion for Partial Summary Judgment, also
supported by a concise statement of facts and numerous exhibits.
(Doc. Nos. 201 & 202.) On October 10, 2014, Defendants filed
their Counter-Motion for Summary Judgment, along with their
8/
In its Order Denying Defendants’ Motion to Vacate,
pursuant to Federal Rule of Civil Procedure 60(a), the Court
elected to remedy any confusion over the class definition by
amending it to clarify that, pursuant to the Court’s original
intention and the parties’ understanding at the time, the
definition includes in-room dining. The class definitely
therefore reads: “all non-managerial food and beverage employees
who, from January 31, 2006 to the present, have worked at
banquets, functions, other events, in-room dining, and small
parties, where a service charge was imposed and where a part of
that service charge was kept by the Defendants or management
without adequate disclosure to customers.” (Doc. No. 218 at 19.)
Thus, to the extent Defendants argue in their Motion that in-room
dining servers are not members of the class, their arguments are
without merit.
8
responses to Plaintiffs’ concise statement of facts.9/ (Doc. Nos
223 & 225.) On the same day, Plaintiffs filed their memorandum in
opposition to Defendants’ Motion for Partial Summary Judgment, as
well as their responses of Defendants’ concise statement of
facts. (Doc. Nos. 228 & 229.) The parties filed their respective
replies on October 20, 2014. (Doc. Nos. 231 & 232.) The hearing
on the motions was held on November 3, 2014.10/
STANDARD OF REVIEW
Summary judgment is appropriate when a “movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a). The central issue is “whether the evidence presents a
sufficient disagreement to require submission to a jury or
whether it is so one-sided that one party must prevail as a
matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
251–52 (1986).
9/
Plaintiffs object to Defendants’ Counter-Motion, arguing
that it is an attempt to “exploit” Local Rule 7.9 and file an
untimely dispositive motion. Plaintiffs correctly point out that
Defendants were fully aware of the arguments in their CounterMotion when they filed their original Motion for Partial Summary
Judgment; indeed, there is some overlap between the two. The
Court will nevertheless consider Defendants’ Counter-Motion, but
cautions Defendants that further circumvention of Court-issued
deadlines will not be tolerated.
10/
On November 6, 2014, pursuant to the Court’s directive at
the hearing, the parties each filed their respective lists
summarizing the contested and uncontested service charge
disclosures in the instant suit. (Doc. Nos. 237 &238.)
9
The moving party bears the initial burden of
demonstrating the absence of a genuine issue of material fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If that
burden has been met, the nonmoving party must then come forward
and establish the specific material facts in dispute to survive
summary judgment. Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 588 (1986). The Court must draw all
reasonable inferences in favor of the nonmoving party. Id. at
587.
In supporting a factual position, a party must “cit[e]
to particular parts of materials in the record . . . or show[]
that the materials cited do not establish the absence or presence
of a genuine dispute, or that an adverse party cannot produce
admissible evidence to support the fact.” Fed. R. Civ. P.
56(c)(1). The nonmoving party “must do more than simply show that
there is some metaphysical doubt as to the material facts.”
Matsushita, 475 U.S. at 585. “[T]he requirement is that there be
no genuine issue of material fact . . . . Only disputes over
facts that might affect the outcome of the suit under the
governing law will properly preclude the entry of summary
judgment.” Anderson, 477 U.S. at 247–48 (emphasis in original).
Also, “[t]he mere existence of a scintilla of evidence in support
of the non-moving party’s position is not sufficient[]” to defeat
summary judgment. Triton Energy Corp. v. Square D Co., 68 F.3d
10
1216, 1221 (9th Cir. 1995). Likewise, the nonmoving party “cannot
defeat summary judgment with allegations in the complaint, or
with unsupported conjecture or conclusory statements.” Hernandez
v. Spacelabs Med. Inc., 343 F.3d 1107, 1112 (9th Cir. 2003).
DISCUSSION
In their Motion, Plaintiffs seek summary judgment as to
Defendants’ liability as to Count V of the Second Amended
Complaint. Defendants, in their Motion and Counter-Motion, seek
summary judgment as to all claims. The Court addresses each in
turn.
I.
Count V
In Count V, Plaintiffs assert that, as a result of
Defendants’ failure to remit the entire proceeds of food and
beverage service charges to the food and beverage servers without
adequate disclosure in violation of Haw. Rev. Stat. § 481B-14,
Defendants are liable to Plaintiffs under Chapter 388 of the
Hawaii Revised Statutes. (Second Am. Compl. Count V.) Section
481B-14 requires that:
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.
Haw. Rev. Stat. § 388–6 states that: “No employer may
deduct, retain, or otherwise require to be paid, any part or
11
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.”11/ Section 388–11 provides an employee or class of
employees with a cause of action to recover unpaid wages.
Pursuant to § 388–10(a), an employer who fails to pay wages in
violation of any provision of Chapter 388 without equitable
justification is liable to the employee for double damages.
Plaintiffs assert that Defendants withheld compensation they
earned in violation of § 388–6 by failing to distribute the full
amount of service charges that Defendants imposed without making
the disclosure required by § 481B–14.12/
For Plaintiffs to succeed on their claim, they must
present sufficient evidence to establish that Defendants: “(1)
11/
Plaintiffs’ union agreed in a collective bargaining
agreement (“CBA”) that the Hotel could keep seven percent of the
banquet service charges; however, this Court has already
determined that “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.’” 2010 WL
5146521, at *14 (Doc. No. 118) (quoting Valles v. Ivy Hill Corp.,
410 F.3d 1071, 1076 (9th Cir. 2005)). The Court concluded that
the language from the CBA is not a clear and unmistakable waiver
of Plaintiffs’ state law right to receive all earned compensation
(unless properly disclosed) as set forth in § 388-6. Id.; see
also 12/2/11 Order at 12 n.13.
12/
The Hawaii Supreme Court has ruled that employees may
recover for violations of Haw. Rev. Stat. § 481B-14 through Haw.
Rev. Stat. § 388-6. See Villon v. Marriott Hotel Svcs., Inc., 306
P.3d 175, 188 (Haw. 2013).
12
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.”
Davis v. Four Seasons Hotel Ltd., 810 F. Supp. 2d 1145, 1157 (D.
Haw. 2011). The employer bears the burden of establishing an
equitable justification for retaining a portion of food and
beverage service charges. See Arimizu v. Fin. Sec. Ins. Co., 5
Haw. App. 106, 679 P.2d 627, 631–32 (Haw. App. 1984).
In its December 2, 2011 Order Granting in Part and
Denying in Part Plaintiffs’ Motion for Partial Summary Judgment
(“12/2/11 Order”), the Court found that Plaintiffs have
established the first two elements of their claim. (12/2/11 Order
at 14-15.) Thus, in the instant motions, the dispute turns on
whether Defendants clearly disclosed to customers the portion of
service charges (if any) that would be remitted to Plaintiffs.
“Clarity and conspicuousness is a question of law.” See
Rubio v. Capital One Bank, 613 F.3d 1195, 1200 (9th Cir. 2010)
(considering as a matter of law whether, under the Truth in
Lending Act, a disclosure of annual percentage rates in a credit
card solicitation was clear and conspicuous); Barrer v. Chase
Bank USA, N.A., 566 F.3d 883, 892 (9th Cir. 2009) (“‘[w]e decide
conspicuousness as a matter of law’”) (quoting In re Basset, 285
F.3d 882, 885 (9th Cir. 2002)); Wallis v. Princess Cruises, Inc.,
13
306 F.3d 827, 835 (9th Cir. 2002) (determining that whether a
passenger ticket provided reasonable notice of contractual terms
contained in fine print on the ticket is a question of law). If
an employer retains a portion of a service charge, § 481B–14
requires the employer to “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.” The
provision itself does not provide any further guidance on what
constitutes a “clear disclosure.”
At the hearing on the instant motions, both parties
agreed that the purpose of the statute is to ensure that food and
beverage customers have clear notice regarding whether servers
will receive the full service charge so that they may make an
informed decision regarding whether and how much to tip. In
general, the Court finds that customers were given sufficient
information to make an informed decision (and Defendants
therefore satisfied the requirements of § 481B–14) when service
charge disclosures stated that (1) the service charge was not a
gratuity, (2) the service charge was to be applied entirely to
administrative expenses, or (3) a certain amount or percentage of
the service charge would be paid to the food and beverage
servers.
Because the different events involving food or beverage
services contain different documents, the Court will discuss
14
banquet events, conventions, room service, and weddings
separately.
A.
Banquets
From the beginning of the class period (January 31,
2006) until March 2010, banquet contracts contained the following
service charge disclosure:
A 21% service charge will be assessed to all of
your bills from the Resort to offset
administrative expenses for supervisory, sales,
and other banquet personnel. On any event where
the guaranteed number is less than 25 persons,
additional surcharges will be added to the event.
(Def.’s CSF, Dowse Decl., Ex. C; Pl.’s CSF ¶ 31.) Beginning in
March of 2010, Defendants switched from using banquet contracts
to using catering sales event agreements, which included the
following disclosure:
This service charge is not a gratuity and is the
property of the Hotel to cover discretionary costs
of the Event. A portion of the service charge is
being used to pay for costs or expenses other than
wages and tips of employees.13/
13/
In May 2013, disclosure was revised to read in relevant
part: “A portion of the service charge (currently 18.25% for
limited & cocktail meal service or 17.00% for full meal service)
will be fully distributed to waiters, waitresses, bus help and/or
bartenders engaged in the Event. The remaining portion of the
service charge (currently 5.75% for limited & cocktail meal
service or 5.00% for full meal service) is being used to pay for
costs and expenses other than wages and tips of employees and
will be applied to Hotel administration costs.” (Def.’s CSF,
Dowse Decl., Ex. F.) There appears to be no dispute that this
disclosure is sufficient for purposes of § 481B–14, and the Court
agrees that it gives the customer sufficient information to make
an informed determination as to whether and how much to tip.
15
(Def.’s CSF, Do; Pl.’s CSF ¶ 32.) Plaintiffs apparently concede
that the 2010 language is sufficient, and the Court concurs.
(Pl.’s Mot. at 20.) Therefore, the only dispute as to the banquet
contracts goes to the sufficiency of the disclosure between
January 2006 and March 2010.
In its 12/2/11 Order, this Court ruled that the
challenged disclosure in the banquet contracts was sufficient to
comply with § 481B-14, and that Defendants were not required to
include disclosures in other banquet event documents other than
the contracts.14/ (12/2/11 Order at 17-18.) Plaintiffs correctly
note, however, that the Court did not rule on the adequacy of the
language of the disclosure, only on the adequacy of its location.
(Pl.’s Mot. at 4; see also 12/2/11 Order at 17.)
The Court finds that the disclosure contained in the
banquet contracts between January 2006 and March 2010 was
sufficient to satisfy the requirements of § 481B-14. The
14/
In their Motion here, Plaintiffs apparently seek
reconsideration of this Court’s ruling that it is unnecessary for
service charge disclosures to appear in every document given to
the purchaser. (Pl.’s Mot. at 6 n.5; 22-24.) The Court DENIES
Plaintiffs’ request for reconsideration. Plaintiffs do not meet
the requirements of Federal Rule of Civil Procedure 59(e) and
Local Rule 60.1 governing motions for reconsideration.
Specifically, Plaintiffs have not shown (and do not even argue)
that there are new material facts, an intervening change in law,
or a need to correct clear error. Rather, Plaintiffs merely
repeat the arguments this Court already rejected in its 12/2/11
Order. As Plaintiffs well know, mere disagreement with a previous
order is an insufficient basis for reconsideration. See White v.
Sabatino, 424 F. Supp. 2d 1271, 1274 (D. Haw. 2006).
16
disclosure states that the service charge will be used “to offset
administrative expenses for supervisory, sales, and other banquet
personnel.” (Def.’s CSF, Dowse Decl., Ex. C.) “Administrative
expenses” are generally understood to be the ordinary operating
costs of a business, distinct from payments made to employees in
the form of wages or tips. Thus, a disclosure stating that
service charges will be used “to offset administrative expenses”
clearly indicates that the service charge will be used for
purposes other than payment to banquet servers. The Court
concludes that a reasonable customer reading this language would
be on notice that the service charge was being used to pay for
costs and expenses other than the wages and tips of the food and
beverage servers. The disclosure is therefore sufficient for
purposes of § 481B-14.
Plaintiffs argue that, even if the disclosure in the
banquet contracts is found to be sufficient, they are
nevertheless entitled to summary judgment as to banquets between
January 2006 and the end of 2008 because “Defendants provided
their banquet customers with inconsistent, conflicting
disclosures during that time.” (Pl.’s Mot. at 20.) Specifically,
Plaintiffs note that, at the same time Defendants made the
disclosures in their banquet contracts that service charges would
be assessed “to offset administrative expenses for supervisory,
sales, and other banquet personnel,” the banquet menus stated
17
that “all cash prices are inclusive of gratuity and tax.” (Id. at
20-21; Pl.’s CSF, Ex. 8 at 78.)
The banquet menus contain the statement “all cash
prices are inclusive of gratuity and tax” in the context of their
price lists for drinks served via “hosted” and “cash” bar15/
services. (Pl.’s CSF, Ex. 8 at 78.) These prices refer only to
drink prices, and do not appear to relate to or include any
applicable service charges. Indeed, at various times the banquet
menu states “[t]he above prices are subject to a 21% service
charge and a 4.166% sales tax,” indicating that the service
charge is not included in the listed drink prices. (See, e.g.,
id. at 79.) Thus, the statement that the listed drink prices which do not include the service charge - are “inclusive of
gratuity and tax” does not implicate the requirements of
§ 481B-14, which relates only to service charges. Because the
statement in the banquet menus does not relate to service
charges, it cannot be accurately characterized as inconsistent or
conflicting with Defendants’ service charge disclosures in the
banquet contracts.
While it is true that the banquet menus at issue do not
contain any clear disclosures regarding the distribution of the
service charges, this Court has already ruled that Defendants
15/
At the hearing on the instant motions, the parties agreed
that no service charge is imposed upon drinks served at cash bars
at banquets and other events.
18
were not required to include disclosures “in other banquet event
documents in addition to contracts, such as the menu, event order
form, and check.” (12/2/11 Order at 18.)16/ Moreover, as discussed
above, the Court finds that the disclosure contained in the
banquet contracts was sufficient to satisfy § 481B-14. Defendants
are therefore entitled to summary judgment in their favor on
Plaintiffs’ claims in Count V based on service charges imposed at
banquet functions. The Court GRANTS Defendants’ Motion and
Counter-Motion and DENIES Plaintiffs’ Motion as to these claims.
B.
Conventions
Depending upon the number of hotel rooms associated
with the event, the Hotel used either short-form (100 rooms or
fewer) or long-form (100 rooms or more) contracts when booking
conventions. (Def.’s CSF ¶ 22.)
First, as to long-form contracts, there appears to be
no dispute that no disclosure was made on long-form contracts
between January 2006 and May of 2007. (Def.’s CSF ¶ 23; Pl.’s CSF
¶ 8.) As to short-form contracts, it is undisputed that no
disclosure regarding the distribution of service charges was made
between January 2006 and December 31, 2008. (Def.’s CSF ¶ 25;
16/
The parties also make arguments regarding the banquet
event order (“BEO”) forms that were used for banquets; however,
as the Court stated in its 12/2/11 Order, it is unnecessary to
consider the sufficiency of the disclosures in BEOs, because the
banquet contracts themselves contained an adequate disclosure.
(12/2/11 Order at 17 n.14.)
19
Pl.’s CSF ¶ 14.) In May of 2007 for long-form contracts, and as
of December 31, 2008 for short-form contracts, Defendants began
including the following disclosure regarding service charges:
“This service charge is not a gratuity and is the property of the
hotel to cover discretionary costs of the Event.” (Def.’s CSF,
Dowse Decl., Exs. M, O.)17/ The parties do not appear to dispute
that this disclosure is sufficient to satisfy the requirements of
§ 481B-14, and the Court concurs. (Def.’s Counter-Mot. at 19-20;
Pl.’s Mot. at 14.) Thus, it appears that Plaintiffs have
demonstrated that no adequate disclosure was made for long-form
contract conventions from January 2006 until May of 2007, and for
short-form contract conventions from January 2006 to December 31,
2008.
Defendants argue, however, that even for the periods
during which the long- and short-form contracts contained no
service charge disclosures, they still satisfied the requirements
17/
In 2013, both long- and short-form contracts were revised
to include a disclosure that read, in relevant part: “A portion
of the service charge (currently 18.25% for limited & cocktail
meal service or 17.00% for full meal service) will be fully
distributed to waiters, waitresses, bus help and/or bartenders
engaged in the Event. The remaining portion of the service charge
(currently 5.75% for limited & cocktail meal service or 5.00% for
full meal service) is being used to pay for costs and expenses
other than wages and tips of employees and will be applied to
Hotel administration costs.” (Def.’s CSF, Dowse Decl., Exs. N &
P.) There appears to be no dispute that this disclosure is
sufficient for purposes of § 481B–14, and the Court agrees that
it gives the customer sufficient information to make an informed
determination as to whether and how much to tip.
20
of § 481B-14 because the banquet event order (“BEO”) forms used
for all food and beverage events (including conventions) did
contain adequate disclosures. (Def.’s Counter-Mot. at 20.) From
the beginning of the class period until May of 2009, the BEOs
contained the following disclosure:
All food and beverage is subject to a 21% service
charge and a 4.166% Hawaii State and Local Tax.
Service charges include gratuities, taxes, and
other hotel service charges.
(Def.’s CSF, Dowse Decl., Ex. G.) In January 2009, Defendants
began providing a Terms and Conditions sheet with the BEO that
contained the following disclosure:
22% of the food and beverage total plus applicable
state or local tax will be added to your account
as a service charge. This service charge is not a
gratuity and is the property of the hotel to cover
discretionary costs of the Event.18/
(Def.’s CSF, Dowse Decl., Ex. J.) This Court, in its 12/2/11
Order, found that the latter disclosure was sufficient for
purposes of § 481B-14. (12/2/11 Order at 17 n.14.) Defendants
18/
The BEO contract and terms and conditions disclosures
were revised again in 2013 to read, in relevant part, “A portion
of the service charge (currently 16.25% for limited & cocktail
meal service or 17.00% for full meal service) will be fully
distributed to waiters, waitresses, bus help and/or bartenders
engaged in the Event. The remaining portion of the service charge
(currently 5.75% for limited & cocktail meal service or 5.00% for
full meal service) is being used to pay for costs and expenses
other than wages and tips of employees and will be applied to
Hotel administration costs.” (Def.’s CSF, Dowse Decl., Exs. I &
L.) There appears to be no dispute that this disclosure is
sufficient for purposes of § 481B–14, and the Court agrees that
it gives the customer sufficient information to make an informed
determination as to whether and how much to tip.
21
argue that the earlier disclosure is sufficient as well. The
Court disagrees.
The service charge disclosure contained in the BEOs
prior to January 2009 does not “clearly disclose” that the
service charge was being used entirely to pay for costs and
expenses other than the wages and tips of food and beverage
servers, nor does it “clearly disclose” exactly how much of the
service charge will go to servers as a gratuity; thus, it fails
to provide customers sufficient information upon which to base
their gratuity decision. The Hawaii Supreme Court has
acknowledged that the purpose of § 481B-14 was to ensure that
employees would not receive a smaller gratuity than the customer
intended. Specifically, the Hawaii Supreme Court noted that it is
generally understood that service charges applied to the sale of
food and beverages by hotels are levied in lieu of a voluntary
gratuity; absent sufficient disclosure, customers are misled into
believing that the employee will receive the service charge as a
gratuity when, in reality, some or all of it is retained by the
hotel. See Villon, 306 P.3d at 184-85. The statement that
“[s]ervice charges include gratuities” reinforces, rather than
dispels, a customer’s belief that the service charge is levied in
lieu of a gratuity. Rather than informing customers how much of
the service charge will be paid out to servers as a gratuity, the
statement that the service charge “include[s] gratuities” wrongly
22
indicates that the entire service charge will be remitted to the
servers.
That the disclosure states that the service charge
includes “taxes and other service charges” does not negate the
misleading nature of the disclosure or otherwise make it
sufficiently clear. Defendants argue that the use of the word
“other” indicates to the customer that not all of the service
charge is a gratuity. As discussed above, however, the purpose of
§ 481B-14 is to ensure that employees do not receive smaller
gratuities because customers believe the gratuity is built into
the service charge. See Villon, 306 P.3d 184. The statement that
the service charge includes “taxes, and other hotel service
charges,” when read in conjunction with the statement that
“[s]ervice charges include gratuities,” simply fails to
adequately apprise customers that the service charge is not being
imposed in lieu of a gratuity. Thus, the Court concludes that the
disclosure contained in the BEO contracts prior to January 2009
was insufficient for purposes of § 481B-14.
Because, as discussed above, no disclosure was made on
long-form contracts from January 2006 to May of 2007, and on
short-form contracts from January 2006 to December 31, 2008, and
because the disclosure in the BEO contract was insufficient
during those periods, the Court GRANTS Plaintiffs’ Motion and
DENIES Defendants’ Motion and Counter-Motion as to service
23
charges imposed on conventions using long-form contracts from the
beginning of the class period until May of 2007, and on
conventions using short-form contracts from the beginning of the
class period until December 31, 2008.
C.
Weddings
There is no dispute that, from the beginning of the
class period until March of 2010, no disclosures were made on
wedding contracts regarding the distribution of service charges
imposed for food and beverage service at weddings. (Def.’s CSF ¶
21; Pl.’s CSF ¶ 21.) In March 2010, the wedding contracts were
revised to state that “[t]his service charge is not a gratuity
and is the property of the Hotel to cover discretionary costs of
the Event.” (Def.’s CSF ¶ 22; Pl.’s CSF ¶ 22.) Thus, it appears
that wedding contracts lacked the necessary disclosures from the
beginning of the class period until March 2010.19/
Defendants assert, however, that all wedding customers
also received either a BEO contract or wedding event order
(“WEO”) contract (the two being materially identical), and that
those contracts contained sufficient service charge disclosures.
(Def.’s CSF ¶¶ 20, 24.) As discussed above, between January 2006
and January 2009, the BEO contracts (and therefore the identical
19/
This distinguishes wedding contracts from banquet
contracts: banquet contracts contained an adequate disclosure
from the beginning of the class period (as discussed above),
while wedding contracts contained no disclosure whatsoever until
March 2010.
24
WEO contracts) contained disclosures that are insufficient for
purposes of § 481B-14. Beginning in January of 2009, the BEO
contracts (and therefore WEO contracts) included a Terms and
Conditions sheet with the disclosure that “[t]his service charge
is not a gratuity and is the property of the hotel to cover the
discretionary costs of the event.” (Def.’s CSF, Dowse Decl., Ex.
J.) The Court found in its 12/2/11 Order that this provision is
sufficient for purposes of the disclosure requirement in
§ 481B-14. (12/2/11 Order at 17 n. 14.) Plaintiffs appear to
agree. (See Pl.’s Mot. at 17.) Thus, beginning in January of
2009, wedding customers were provided with adequate disclosure
regarding service charge disbursement. Because the Court
concludes that the disclosures made in BEOs and WEOs prior to
January of 2009 were insufficient, the Court GRANTS Plaintiffs’
Motion and DENIES Defendants’ Counter-Motion with respect to
service charges collected by Defendants at weddings for the
period between January 2006 and January 2009.
D.
In-Room Dining
In its 12/2/11 Order, the Court granted summary
judgment in Plaintiffs’ favor for service charges collected from
Defendants’ in-room dining service for the period of January 2006
to March 2011. (12/2/11 Order at 20.) In their instant motion,
Plaintiffs seek judgment for the additional period from March of
2011 to January of 2012. (Pl.’s Mot. at 18.)
25
Defendants counter that, beginning in August of 2009,
in-room dining menus contained a service charge disclosure that
read, in relevant part, “[s]ervice charges include gratuities,
taxes and other hotel service charges.”20/ (Def.’s CSF ¶¶ 26, 29.)
Defendants assert that this disclosure is sufficient for purposes
of § 481B-14. The Court disagrees.
Leaving aside the fact that this Court has already
ruled that Plaintiffs have established Defendants’ liability as
to in-room service for the period of January 2006 to March
2011,21/ the disclosure Defendants rely upon is materially
identical to the disclosure used in their BEOs and WEOs prior to
January 2009 and must fail for the same reasons. As discussed
above, the disclosure that service charges “include gratuities”
is insufficient for purposes of § 481B-14. It utterly fails to
20/
The parties agree that, in January of 2012, the menus
were revised to include a sufficient disclosure stating, in
relevant part, that “[t]his service charge is not a gratuity and
is the property of the hotel to cover discretionary costs” and
that “[a] portion of the service charge is being used to pay for
costs and expenses other than wages and tips of employees.”
(Pl.’s CSF ¶ 30; Def.’s CSF ¶ 30.)
21/
Defendants argue in their Counter-Motion that the Court’s
grant of partial summary judgment as to Defendants’ liability
with respect to in-room dining was based upon Defendants’
mistaken statement in their concise statement of facts that they
did not dispute that they failed to provide adequate disclosures
in room service menus for the time period at issue. (Counter Mot.
at 10.) As discussed below, however, even considering the
disclosure beginning in August 2009 that Defendants mistakenly
omitted from their previous filings, Plaintiffs are still
entitled to summary judgment with respect to in-room dining from
the beginning of the class period until January 2012.
26
adequately apprise customers what portion, if any, of the service
charge is being paid to service employees in lieu of a gratuity.
Indeed, in concluding in its 12/2/11 Order that Defendants failed
to provide adequate disclosures for in-room dining until March
2011, this Court made a point of noting that the room service
checks contained the statement “Gratuity Included!” (12/2/11
Order at 20.) The Court believed then, as it does now, that a
statement indicating that the service charge includes the
gratuity wholly fails to satisfy the requirements of § 481B-14.
The Court therefore GRANTS Plaintiffs’ Motion and DENIES
Defendants’ Motion and Counter-Motion as to in-room dining.
In sum, as to Count V, the Court GRANTS Plaintiffs’
Motion and DENIES Defendants’ Motion and Counter-Motion and
concludes that Plaintiffs have established Defendants’ liability
under § 481B-14 as to (1) long-form conventions from January 31,
2006 to May of 2007; (2) short-form conventions from January 31,
2006 until December 31, 2008; (3) weddings from January 31, 2006
to January 2009; and (4) in-room dining from January 31, 2006 to
January 2012.22/ The Court GRANTS Defendants’ Motion and Counter-
22/
The Court notes that Defendants make a cursory argument
in their Counter Motion as to the existence of “oral and other
individual disclosures.” (Counter Mot. at 11-12.) The Court is
unconvinced, however, as to the sufficiency of any such
disclosures, and Defendants have failed to demonstrate that these
supposed oral disclosures were given on a regular basis for any
particular type of event. Indeed, the evidence Defendants have
produced regarding these disclosures indicates that they were
(continued...)
27
Motion and DENIES Plaintiffs’ Motion as to banquets.
E.
Equitable Justification
Finally, Defendants argue that even if the Court grants
summary judgment to Plaintiff on some or all of the claims,
Defendants are not subject to double damages under Haw. Rev.
Stat. § 388-10(a) because their “good-faith effort” to provide
the necessary disclosures constitutes an “equitable
justification” under that provision. (Def.’s Counter Mot. at 26.)
As noted above, pursuant to Haw. Rev. Stat.
§ 388–10(a), an employer who fails to pay wages in violation of
any provision of Chapter 388 without equitable justification is
22/
(...continued)
only given if a customer expressly asked about the distribution
of the service charge. For example, Defendants have produced the
declaration of Gale Fujiwara, Director of Catering and Conference
Services at the Hotel, in which she states that “[i]f
[conference, wedding, or banquet] clients ask about the service
charge, staff members are instructed to explain that a portion of
the service charge is paid out as a gratuity for the servers, and
a portion is retained by the Hotel for administrative costs.”
(Def.’s CSF, Dowse Decl., Ex. S at ¶ 3.) Similarly, Jana Lynn
Arai, Manager of In-Room Dining at the Hotel, makes an identical
statement about oral disclosures given to in-room dining
customers. (Def.’s CSF, Dowse Decl., Ex. T at ¶ 3.) Thus, it
appears oral disclosures were only made if the customer expressly
asked about the distribution of the service charge. Section 481B14 requires disclosure whenever less than all of the service
charge is distributed to food and beverage servers; this
requirement is imposed regardless of whether a customer actually
asks for the information. Moreover, even were Defendants able to
show that these disclosures were given to every customer, they
are nevertheless insufficient for purposes of § 481B-14. Thus, to
the extent Defendants attempt to suggest that they have satisfied
the requirements of § 481B-14 via oral and other individual
disclosures, the Court disagrees.
28
liable to the employee for double damages. The Hawaii Supreme
Court has held that violations of § 481B-14 may be enforced
through § 388-10. Villon, 306 P.3d at 188. The burden of
establishing an equitable justification falls on the employer.
Arimizu v. Financial Sec. Ins. Co., Inc., 679 P.2d 627, 631-32
(Haw. App. 1984).
The legislative history of § 388-10 sheds little light
on the meaning of the term “equitable justification.” The
legislature amended § 388-10 in 1977 to add the civil penalty,
including the language regarding an “equitable justification.”
See Hse. Stand. Comm. Rep. No. 205, in 1977 House Journal, at
1374-75; Sen. Stand. Comm. Rep. No. 727, in 1977 Sen. Journal, at
1160. During subsequent revisions of the law, the civil penalty
was discussed as applicable to employers who withhold wages
“without valid reason.” Hse. Stand. Comm. Rep. No. 1433-94, in
1994 House Journal, at 1451. Similarly, in 1999, the civil
penalty was characterized as applicable for “unjustified wage
withholdment [sic].” Sen. Comm. Rep. No. 643, in 1999 Sen.
Journal, at 354.
While there is scant Hawaii law defining the term
“equitable justification,” the Intermediate Court of Appeals of
Hawaii has cited with apparent approval Louisiana cases defining
the term as “a good faith non-arbitrary defense.” Arimizu, 679
P.2d at 631 n. 4 (citing Carriere v. Pee Wee’s Equipment Co., 364
29
So.2d 555, 557 (La. 1978)). The Arimizu Court emphasized that
“[t]he public policy that employees be paid promptly . . .
permeates Part I of HRS Chapter 388 and the legislative intent in
[the] enactment of HRS § 388-10(a).” Id. at 631. As such, it
appears the penalty must be assessed unless the employer can put
forth evidence of a valid, or good faith, non-arbitrary reason or
justification for withholding wages in contravention of Hawaii
law. See Id. at 632 (rejecting a claim of equitable justification
where the employer argued that it had a “good faith” belief that
wages could be withheld because of an alleged setoff claim
against the employee); Gurrobat v. HTH Corp., 323 P.3d 792, 80809 (Haw. 2014) (finding no equitable justification where
defendants argued that their withholding of service charges
conformed to an industry-wide trend among Hawaii hotels).
Here, Defendants argue that their “good faith” effort
to make service charge disclosures constitutes an equitable
justification under § 388-10(a). Defendants assert that, for the
periods during which they made an attempt to provide service
charge disclosures - albeit insufficiently - they are entitled to
an equitable justification defense.
Specifically, for conventions and weddings from January
2006 to January 2009, and for in-room dining beginning in August
2009, Defendants began using a service charge disclosure stating
that “[s]ervice charges include gratuities, taxes and other hotel
30
service charges.” Defendants argue that this was a “good faith”
attempt to comply with the disclosure requirements of § 481B-14.
The Court disagrees. As discussed above, a disclosure stating
that service charges include gratuities is exactly the opposite
of what § 481B-14 requires, and entirely fails to effectuate the
statute’s purpose. Defendants cannot, therefore, credibly argue
that including this disclosure was a good faith effort to comply
with the law. Importantly, as was the case in Arimizu, Defendants
have introduced no evidence suggesting they made any attempts to
verify whether any of their disclosures were actually legally
proper. See Arimizu, 679 P.2d at 111.
Moreover, the staggered, piecemeal process through
which Defendants revised their various disclosures to come into
compliance with the law also belies their claim that their
insufficient disclosures were made in good faith. For example,
since the beginning of the class period in January 2006, banquet
contracts contained a disclosure stating that service charges
will be used “to offset administrative expenses for supervisory,
sales, and other banquet personnel.” (Def.’s CSF, Dowse Decl.,
Ex. C.) As discussed above, this disclosure is sufficient because
it informs the customer that the service charge was being used to
pay for administrative expenses, rather than the wages and tips
of food and beverage servers. Notwithstanding their apparent
ability to provide an adequate disclosure in banquet contracts as
31
early as January 2006, Defendants failed to provide similarly
adequate disclosures to long-form convention customers until May
of 2007, to short-form convention customers until December of
2008, to wedding customers until January 2009, or to in-room
dining customers until January 2012. (Def.’s CSF, Dowse Decl.,
Exs. O, J, R.) Defendants were therefore capable of making
adequate disclosures as early as January 2006, yet they failed to
do so uniformly for all types of events. This hardly constitutes
a “good faith” effort to comply with the law. The Court is
therefore unpersuaded that Defendants’ insufficient disclosures
were made in good faith. Defendants’ Counter-Motion is DENIED as
to Defendants’ arguments regarding equitable justification.
II.
Count II: Intentional Interference with Advantageous
Relations
Plaintiffs’ second count asserts that the Defendants’
failure to remit the total proceeds of service charges to food
and beverage servers “constitutes unlawful intentional
interference with contractual and/or advantageous relationships
that exist between these employees and the defendants’ customers
under state common law.” (Second Am. Compl. Count II.) Hawaii
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, 122 P.3d 1133, 1145-46
(Haw. App. 2005); Robert’s Haw. Sch. Bus, Inc. v. Laupahoehoe
32
Transp. Co. Inc., 982 P.2d 853, 887-88 (1999), superceded by
statute on other grounds. As this Court stated in its December
10, 2010 Order Granting in Part and Denying in Part Defendants’
Motion to Dismiss, because there is no claim that any contract
existed between Plaintiffs and the customers of the Hotel,
Plaintiffs appear to be bringing a claim for tortious
interference with prospective business advantage. (Doc. No. 118
(“12/10/10 Order”) at 21-22.)
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 Minton v. Quintal, 317
P.3d 1, 25 (Haw. 2013).
The first element requires “a colorable economic
relationship between the plaintiff and a third party with the
potential to develop into a full contractual relationship. The
prospective economic relationship need not take the form of an
offer but there must be specific facts proving the possibility of
33
future association.” Haw. Med. Ass’n v. Haw. Med. Serv. Ass’n,
Inc., 148 P.3d 1179, 1218 (Haw. 2006) (quoting Locricchio v.
Legal Servs. Corp., 833 F.2d 1352, 1357 (9th Cir. 1987))
(quotation marks and emphasis omitted).
Defendants argue that Plaintiffs fail to establish this
first element because there is no evidence that the relationship
between Plaintiffs and Hotel customers had the potential to
develop into a “full contractual relationship.” (Def.’s Mot. at
24.) The Hawaii Supreme Court has made clear, however, that “[i]t
is not necessary that the prospective relation be expected to be
reduced to a formal, binding contract.” Haw. Med. Ass’n, 148 P.3d
at 1219 (quoting Restatement (Second) of Torts § 766B cmt. c.
(1979)). Indeed, the prospective relation may include
“prospective quasi-contractual or other restitutionary rights or
even the voluntary conferring of commercial benefits in
recognition of a moral obligation.” Id. The provision of a
gratuity in exchange for food and beverage service is arguably
just such a “voluntary conferring of commercial benefits in
recognition of a moral obligation.” The Court therefore concludes
that there is at least a question of fact as to whether a
colorable economic relationship existed between Plaintiffs and
the Hotel customers.
The second element of the tortious interference with
business advantage claim mandates that the defendant have either
34
“actual knowledge” of the potential economic relationship, or
“knowledge of facts which would lead a reasonable person to
believe that such interest exists.” Kutcher v. Zimmerman, 957
P.2d 1076, 1088 n.16 (Haw. App. 1998) (citation and internal
quotation marks omitted). Here, Defendants were aware that
Plaintiffs were in their employ for the purpose of providing food
and beverage services to Hotel customers. (See Def.’s CSF ¶¶ 12.) Defendants therefore knew that an economic relationship was
likely to come into existence between Plaintiffs and Hotel
customers: a reasonable person would be aware of the general
practice of providing gratuities to food and beverage servers.
The second element of the claim is therefore satisfied.
As to the third element, intent, it “denotes
purposefully improper interference,” and “requires a state of
mind or motive more culpable than mere intent.” Haw. Med. Ass’n,
148 P.3d at 1218 (internal citations omitted). Specifically,
Plaintiffs must prove that Defendants “either pursued an improper
objective of harming [them] or used wrongful means that caused
injury in fact.” Id. (quoting Omega Envtl., Inc. v. Gilbarco,
Inc., 127 F.3d 1157, 1166 (9th Cir. 1997)). Here, Plaintiffs
argue that Defendants’ retention of the service charges in
violation of Haw. Rev. Stat. § 481B-14 amounts to a use of
“wrongful means.” The Court agrees. An improper means may be
demonstrated where the interference involved “violations of
35
statutes, regulations, or recognized common-law rules.” Kutcher,
957 P.2d at 1089 (citing Leigh Furniture & Carpet Co. v. Isom,
657 P.2d 293, 308 (Ut. 1982)). As discussed above, Defendants’
withholding of service charges without providing adequate
disclosures was clearly in violation of state law. Thus, the
third element of Plaintiffs’ claim for tortious interference with
advantageous relations is satisfied.
Finally, however, as to the elements of legal causation
and damages, Defendants correctly point out that Plaintiffs have
failed to put forth any evidence to establish these elements of
the claim. As to legal causation, Plaintiffs assert that
“Defendants’ act of withholding a portion of the service charges
caused Plaintiffs to lose tip revenue.” (Pl.’s Opp’n at 15.)
Similarly, Plaintiffs allege in their Second Amended Complaint
that “customers who would otherwise be inclined to leave an
additional gratuity . . . frequently do not do so because they
erroneously believe that the servers are receiving the entire
service charge imposed by the hotel.” (Second Am. Compl. ¶ 13.)
Plaintiffs do not, however, support this allegation with any
evidence. Specifically, Plaintiffs have not come forth with any
evidence that Hotel customers in fact failed to leave gratuities
or left smaller gratuities because of Defendants’ actions.
Plaintiffs cite to the affidavit of Stephen West, a food and
beverage server at the Hotel, in support of their claim; however,
36
Mr. West’s statements merely establish that the Hotel had a
practice of pooling all service charges collected in a week. (See
Pl.’s Opp’n at 15 (citing to Doc. No. 205, Ex. 1 (Aff. of Stephen
West) at ¶ 7.) Mr. West does not provide any evidence to support
Plaintiffs’ claims that customers left smaller tips because of
Defendants’ acts. (See id.) Moreover, there is no evidence in the
record of the damages Plaintiffs assert are associated with this
claim. The Court therefore GRANTS Defendants’ Motion as to Count
II.
III. Count III: Breach of Implied Contract
Plaintiffs’ third count asserts that Defendants
breached an implied contract with Hotel customers “that the
employees would receive [the service charges], for which the
employees are third party beneficiaries.”23/ (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.,
100 P.3d 60, 74 (Haw. 2004); Kemp v. State of Haw. Child Support
Enforcement Agency, 141 P.3d 1014, 1038 (Haw. 2006).
The “essential element of an implied contract” is a
“mutual intent to form a contract ” that is implied from the
23/
In its 12/10/10 Order, the Court dismissed the portion of
Count III premised upon an implied contract between Plaintiffs
and Defendants.
37
“actions of the parties.” Kemp, 141 P.3d at 1038. Thus, in order
to bring their claim, Plaintiffs must present evidence of actions
taken by Defendants and the Hotel customers that would imply a
mutual intent to form a contract to distribute service charges to
service employees. Plaintiffs have failed to do so. Plaintiffs
have provided evidence that Defendants added a service charge to
food and beverage bills, failed to distribute it in full to food
and beverage employees, and failed to provide adequate notice
regarding its distribution. Plaintiffs have not, however,
provided evidence of any actions by Defendants or Hotel customers
from which an inference could be drawn that they mutually
intended to form a contract requiring Defendants to remit the
service charge in full to Plaintiffs. Plaintiffs’ claim for
breach of implied contract must therefore fail. See Kemp, 141
P.3d at 1038. The Court GRANTS Defendants’ Motion as to Count
III.
IV.
Count IV: Unjust Enrichment
Finally, Plaintiffs’ fourth count asserts that
Defendants’ retention of the service charges without proper
disclosure constitutes unjust enrichment under Hawaii common law.
To recover on an unjust enrichment claim, a plaintiff must prove:
(1) the defendant received a benefit without adequate legal
basis; and (2) unjustly retained the benefit at the expense of
the plaintiff. Chapman v. Journal Concepts, Inc., 2008 WL
38
5381353, at *21 (D.Haw. 2008) (citing Small v. Badenhop, 701 P.2d
647, 654 (Haw. 1985); Durrette v. Aloha Plastic Recycling, Inc.,
100 P.3d 60, 61 (Haw. 2004). Unjust enrichment is a “broad and
imprecise term.” Durrette, 100 P.3d at 72 (internal citation and
quotation marks omitted). In reviewing unjust enrichment claims,
courts must be guided by the “underlying conception of
restitution, the prevention of injustice.” Id.
Importantly, the absence of an adequate remedy at law
is a necessary prerequisite to maintaining an unjust enrichment
claim. Porter v. Hu, 169 P.3d 994, 1007 (Haw. App. 2007). Here,
Plaintiffs have an adequate remedy at law in the form of their
claim for unpaid wages pursuant to Haw. Rev. Stat. § 481B-14 and
Chapter 388. Plaintiffs concede as much, but nevertheless argue
that their claim for unjust enrichment should go forward because
“Defendants buried clear disclosures in small print within
lengthy boilerplate agreements, thereby misleading the
Defendants’ customers into believing that the full amount of the
service charge is being remitted to the Plaintiff class[,]” and
that this “misleading and unjust” action entitles Plaintiffs to
equitable relief because they performed work for which Defendants
were unjustly enriched. (Pl.’s Opp. at 16.)
As discussed above, however, the Court has already
rejected Plaintiffs’ arguments regarding the placement and
prominence of the service charge disclosures in its 12/2/11
39
Order. Moreover, even assuming some disclosures were misleading
or buried, this has no bearing on the fact that, as Plaintiffs
concede, they already have an adequate remedy at law for
Defendants’ unlawful withholding of the service charges without
adequate disclosure. Plaintiffs’ claim for unjust enrichment must
therefore fail. See Porter, 169 P.3d at 1007; see also Davis v.
Four Seasons Hotel Ltd., 2011 WL 5025521 at *6 (D. Haw. 2011)
(dismissing similar service charge plaintiffs’ unjust enrichment
claims because the plaintiffs’ already had an adequate remedy at
law under Haw. Rev. Stat. Chapter 388). Defendants’ Motion is
GRANTED as to Count IV of the Second Amended Complaint.
CONCLUSION
For the foregoing reasons, the Court GRANTS IN PART AND
DENIES IN PART the motions as follows:
The Court GRANTS Defendants’ Motion for Partial Summary
Judgment as to Counts II, III, and IV of the Second Amended
Complaint.
The Court GRANTS Plaintiffs’ Renewed Motion for Summary
Judgment and DENIES Defendants’ Motion for Partial Summary
Judgment and Counter-Motion for Summary Judgment and concludes
that Plaintiffs have established Defendants’ liability as to
Count V for (1) long-form conventions from January 31, 2006 to
May of 2007; (2) short-form conventions from January 31, 2006
until December 31, 2008; (3) weddings from January 31, 2006 to
40
January 2009; and (4) in-room dining from January 31, 2006 to
January 2012. The Court GRANTS Defendants’ Motion for Partial
Summary Judgment and Counter-Motion for Summary Judgment and
DENIES Plaintiffs’ Motion for Summary Judgment as to the portion
of Count V premised upon banquets.
Finally, the Court DENIES Defendants’ Counter-Motion as
to equitable justification.
IT IS SO ORDERED.
DATED:
Honolulu, Hawaii, November 12, 2014
________________________________
Alan C. Kay
Senior United States District Judge
Wadsworth v. KSL Grand Wailea Resort, Inc., et al., Civ. No. 08-00527 ACK-RLP,
Order Granting in Part and Denying in Part Plaintiffs’ Renewed Motion for
Summary Judgment, Defendants’ Motion for Partial Summary Judgment, and
Defendants’ Counter-Motion for Summary Judgment.
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