Trawick v. Tri-Star Restaurant Group, LLC

Filing 29

ORDER DENYING PLAINTIFFS' MOTION TO REMAND re 11 , 28 - Signed by JUDGE LESLIE E. KOBAYASHI on 5/23/2018. (emt, )

Case 1:17-cv-00456-LEK-RLP Document 29 Filed 05/23/18 Page 1 of 16

PageID #: 354

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
)
ELLESAR M. TRAWICK,
individually and on behalf of )
)
all others similarly
)
situated,
)
)
Plaintiffs,
)
)
vs.
)
)
TRI-STAR RESTAURANT GROUP,
)
LLC; TRI-STAR RESTAURANT
)
GROUP III, LLC d/b/a/
)
SARENTO’S TOP OF THE ‘I’;
)
TRI-STAR RESTAURANT GROUP
)
III, LIMITED LIABILITY
COMPANY; TRI-STAR RESTAURANT )
)
GROUP IV, LLC d/b/a NICK’S
)
FISHMARKET MAUI; and JOHN
)
DOES 1-10; JANE DOES 1-10,
)
DOE LIMITED LIABILITY
)
CORPORATIONS 1-10, AND DOE
)
OTHER ENTITIES 1-10,
)
)
Defendants.
_____________________________ )

CIVIL 17-00456 LEK-RLP

ORDER DENYING PLAINTIFFS’ MOTION TO REMAND
Before the Court is Plaintiffs Elessar M. Trawick and
Nathan Stroetz’s (“Plaintiffs”) Motion to Remand (“Motion”),
filed on October 12, 2017.

[Dkt. no. 11.]

Defendants Tri-Star

Restaurant Group, LLC (“TSG”); Tristar Restaurant Group III, LLC
d/b/a Sarento’s Top of the “I”; Tri-Star Restaurant Group III,
Limited Liability Company (“TSG3”); Tri-Star Restaurant Group IV,
LLC d/b/a Nick’s Fishmarket, Maui (“TSG4,” collectively

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“Defendants” or “Tri-Star”)1 filed their memorandum in opposition
on March 12, 2018, and Plaintiffs filed their reply on March 19,
2018.

[Dkt. nos. 18, 19.]

April 2, 2018.

This matter came on for hearing on

On April 30, 2018, this Court issued an entering

order ruling on the Motion.

[Dkt. no. 28.]

supersedes that entering order.

The instant Order

Plaintiffs’ Motion is hereby

denied for the reasons set forth below.
BACKGROUND
Trawick filed the original Complaint on July 25, 2017
in state court.

[Notice of Removal of State Court Action to

Federal Court (“Notice of Removal”), filed 9/12/17 (dkt. no. 1),
Exh. A.]

On August 21, 2017, the First Amended Complaint was

filed, adding Stroetz as a plaintiff.

[Id., Exh. B.]

On

August 25, 2017, Defendants filed an answer to the original
Complaint.

[Id., Exh. C.]
Trawick was employed by Defendants as a waiter from

approximately February 2015 to December 2016.

Stroetz was

employed by Defendants as a server from December 2010 until he
became a captain in 2014.

As of the filing of the First Amended

Complaint, he was still employed as a captain.

1

[First Amended

Defendants state “[t]here is no active Hawaii entity
called ‘Tri-Star Restaurant Group III, LLC,’ the second named
defendant,” and it was TSG3 that operated the Sarento’s Top of
the “I” restaurant (“Sarento’s”) – not the second named
defendant. Sarento’s closed on September 30, 2017. [Mem. in
Opp. at 1 nn.2-3.]
2

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Complaint at ¶¶ 1-2.]

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Defendants are a restaurant group that

operates five restaurants on O`ahu and Maui.

[Id. at ¶ 3.]

However, only Sarento’s and the Nick’s Fishmarket Maui restaurant
(“Nick’s”) are referred to in the substantive allegations of the
First Amended Complaint.2

Plaintiffs bring this action as class

action, [id. at ¶¶ 10-11,] but the issue of class certification
is not before the Court at this time.
Plaintiffs allege Defendants “employ[] individuals
engaged in commerce or in the production of goods for commerce
and/or handling, selling, or otherwise working on goods or
materials that have been moved in or produced in commerce by any
person, as required by 29 U.S.C. § 206.”

[Id. at ¶ 6.]

Further,

their “annual gross volume of business exceeds $500,000,” and
they are “not an independently owned and controlled local
enterprise within the meaning of 29 U.S.C. § 207(b)(3).”

[Id. at

¶¶ 7-8.]
Plaintiffs are among Defendants’ tipped employees,
which includes waiters, bussers, and bartenders.

Defendants’

tipped employees are paid hourly and participate in a tip pooling
system.

[Id. at ¶ 14.]

Plaintiffs participated in the tip pool,

which also includes management employees who do not usually

2

Defendants state none of the entities named as defendants
own or operate the other three restaurants – Manoli’s Pizza
Company, Sarento’s on the Beach, and Son’z Steakhouse.
Defendants therefore assert only Sarento’s and Nick’s are at
issue in this case. [Mem. in Opp. at 1 n.1.]
3

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receive tips, such as roving captains.

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[Id. at ¶¶ 17, 21.]

According to Plaintiffs, “roving captains are actually assistant
and general managers whose interactions with customers are de
minimus” and who “are responsible for overseeing all of the
restaurant’s operations, the hiring and firing staff, purchasing
food, supplies and equipment, and dealing with suppliers and
vendors.”

[Id. at ¶ 23.]

Plaintiffs describe the tip pool

protocol as follows:
18. During the relevant time period,
Tri-Star takes a tip credit from every tipped
employee for every hour a tipped employee works,
including Plaintiffs.
19. For example, Tri-Star took a tip credit
of $0.75 per hour from Plaintiff Trawick for the
pay periods between August 16, 2016 and August 31,
2016, and between September 1, 2016 and
September 15, 2016. During those pay periods,
Plaintiff Trawick was paid below the minimum wage
per hour less the tip credit.
[Id. at pg. 5.]

Plaintiffs allege Defendants do not maintain

accurate records of the hours Plaintiffs worked on a daily and
weekly basis, and Defendants’ operations at all of their
restaurants are similar.

[Id. at ¶¶ 25-26.]

Plaintiffs contend

Defendants’ tip pool practices are illegal because it deprives
the tipped employees of the “the full amounts of tips owed to
them.”

[Id. at ¶ 20.]
According to Plaintiffs, Defendants: knowingly allowed

roving captains to participate in the tip pool; [id. at ¶ 24;]
willfully and/or recklessly failed to properly compensate
4

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Plaintiffs, in violation of Hawai`i law; [id. at ¶ 28;] and knew
Plaintiffs were being under-compensated because they were
splitting their tips with non-tipped employees and their hourly
rates fell below minimum wage, [id. at ¶ 29].

Further,

Defendants add a pre-set service charge to food and beverage
bills “[f]or banquets, events, meetings, room service, and in
other instances,” without “clearly disclosing to
Plaintiffs, . . . and Tri-Star’s customers that a portion of the
service charge was not distributed to the employees” who provided
the food and beverage services to the customers.
58.]

[Id. at ¶¶ 56-

The establishments also retained a portion of the service

charges.

[Id. at ¶ 59.]
Plaintiffs allege the following claims: violation of

the Hawai`i Wage and Hour Law, Haw. Rev. Stat. Chapter 387
(“Count I”); [id. at ¶¶ 39-46;] violation of the Hawai`i Payment
of Wages and Other Compensation Law, Haw. Rev. Stat. Chapter 388
(“Count II”); [id. at ¶¶ 47-55;] and violation of Haw. Rev. Stat.
§ 481B-14, which also constitutes an unfair method of competition
(“UMOC”), in violation of Haw. Rev. Stat. § 480-2 (“Count III”),
[id. at ¶¶ 56-69].

Plaintiffs pray for the following relief:

damages, including unpaid wages; liquidated damages; double or
treble damages; prejudgment interest; attorney’s fees and
litigation costs/expenses; and any other appropriate relief.
[Id. at pg. 13.]

5

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On September 12, 2017, Defendants removed this action
based on federal question jurisdiction because either:
1) Plaintiffs’ claims under Chapters 387 and 388 “are wholly
dependent on and require an interpretation of the Fair Labor
Standards Act (‘FLSA’) and the federal tip pooling law (29
[U.S.C.] § 203(m)) and regulations”; or 2) Plaintiffs’ claims
under Chapters 387 and 388 “are baseless because there is only a
federal remedy for the alleged tip pooling infractions.”
of Removal at ¶ 4.]

[Notice

Defendants also assert there is supplemental

jurisdiction over Count III.

[Id. at ¶ 8.]

The instant Motion followed.

Plaintiffs argue the

removal was improper because they assert claims under Hawai`i
law, not federal law.

Even if their claims require the

interpretation of the FLSA, the federal issues are not so
substantial as to create federal question jurisdiction.
STANDARD
28 U.S.C. § 1441(a) states, in pertinent part:
Except as otherwise expressly provided by Act of
Congress, any civil action brought in a State
court of which the district courts of the United
States have original jurisdiction, may be removed
by the defendant or the defendants, to the
district court of the United States for the
district and division embracing the place where
such action is pending.
This district court has stated:
“Removal and subject matter jurisdiction statutes
are ‘strictly construed,’ and a ‘defendant seeking
removal has the burden to establish that removal
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is proper and any doubt is resolved against
removability.’” Hawaii ex rel. Louie v. HSBC Bank
Nev., N.A., 761 F.3d 1027, 1034 (9th Cir. 2014)
(quoting Luther v. Countrywide Home Loans
Servicing LP, 533 F.3d 1031, 1034 (9th Cir.
2008)). Thus, “‘[i]t is to be presumed that a
cause lies outside [the] limited jurisdiction [of
the federal courts] and the burden of establishing
the contrary rests upon the party asserting
jurisdiction.’” Hunter v. Philip Morris USA, 582
F.3d 1039, 1042 (9th Cir. 2009) (quoting Abrego
Abrego v. Dow Chem. Co., 443 F.3d 676, 684 (9th
Cir. 2006)) (alterations in original). This
“‘strong presumption against removal jurisdiction
means that the defendant always has the burden of
establishing that removal is proper,’ and that the
court resolves all ambiguity in favor of remand to
state court.” Id. (quoting Gaus v. Miles, Inc.,
980 F.2d 564, 566 (9th Cir. 1992) (per curiam)).
U.S. Bank, N.A. v. Mizukami, CIVIL NO. 15-00523 JMS-BMK, 2016 WL
632195, at *2 (D. Hawai`i Feb. 17, 2016) (alterations in U.S.
Bank).
DISCUSSION
I.

Federal Question Jurisdiction
Federal district courts “have original
jurisdiction of all civil actions arising under
the Constitution, laws, or treaties of the United
States.” 28 U.S.C. § 1331. Generally, an action
is deemed to “arise under” federal law where it is
a “federal law [that] creates the cause of action”
that the plaintiff has asserted. Gunn v. Minton,
133 S. Ct. 1059, 1064 (2013); see also Ultramar
Am. Ltd. v. Dwelle, 900 F.2d 1412, 1414 (9th Cir.
1990) (“The plaintiff is the ‘master’ of his
complaint; where he may pursue state and federal
law claims, he is free to pursue either or both,
so long as fraud is not involved.”) (quoting

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Savelson v. W. States Bankcard Ass’n, 731 F.2d
1423, 1426-27 (9th Cir. 1984)).[3]
Robinson v. First Hawaiian Bank, CIV. NO. 17-00105 DKW-RLP, 2017
WL 3641564, at *3 (D. Hawai`i Aug. 24, 2017) (some alterations in
Robinson).

In other words:
The presence or absence of federal-question
jurisdiction is governed by the “well-pleaded
complaint rule,” which provides that federal
jurisdiction exists only when a federal question
is presented on the face of the plaintiff’s
properly pleaded complaint. See Gully v. First
National Bank, 299 U.S. 109, 112-113, 57 S. Ct.
96, 97-98, 81 L. Ed. 70 (1936). The rule makes
the plaintiff the master of the claim; he or she
may avoid federal jurisdiction by exclusive
reliance on state law.

Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987).
In the instant case, Plaintiffs have expressly pled
state law claims.

However, that does not end the federal

question inquiry because:
Actions asserting state-law claims may also be
deemed to “arise under” federal law for purposes
of federal question jurisdiction if the asserted
state law: (1) “necessarily raise[s] a stated
federal issue,” (2) that is “actually disputed”
and (3) “substantial,” and (4) “which a federal
forum may entertain without disturbing any
congressionally approved balance of federal and
state judicial responsibilities.” Grable & Sons
Metal Prods. v. Daru Eng’g & Mfg., 545 U.S. 308,
314 (2005).

3

Salveson was superseded by statute on other grounds, as
stated in Ethridge v. Harbor House Restaurant, 861 F.2d 1389,
1392 n.3 (9th Cir. 1988).
8

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Naehu v. Read, CIVIL NO. 16-00673 DKW-KSC, 2017 WL 1162180, at *4
(D. Hawai`i Mar. 28, 2017) (alteration in Naehu).
In the instant case, Plaintiffs’ claims brought
pursuant to Hawai`i law – Chapters 387, 388, and 480 – challenge:
1) Defendants’ tip pooling practices and procedures; and
2) Defendants’ practice of failing to disclose to customers that
a portion of the mandatory service charges is retained by the
establishments instead of being distributed to the employees who
provide the food and beverage services to the customers.
Plaintiffs’ second challenge does not necessarily raise a federal
issue.

The Hawai`i Supreme Court has held that,
when a hotel or restaurant applying a service
charge for the sale of food or beverage services
allegedly violates HRS § 481B–14 (2008) (1) by not
distributing the full service charge directly to
its employees as “tip income” (in other words, as
“wages and tips of employees”), and (2) by failing
to disclose this practice to the purchaser of the
services, the employees may bring an action under
HRS §§ 388–6 (1993), –10 (1993 & Supp. 1999), and
–11 (1993 & Supp. 1999) to enforce the employees’
rights and seek remedies.

Villon v. Marriott Hotel Servs., Inc., 130 Hawai`i 130, 132–33,
306 P.3d 175, 177–78 (2013).

Further, “[e]mployees are ‘any

persons’ within the meaning of HRS §§ 480-1 and 480-2(e), . . .
and are within the category of plaintiffs who have standing to
bring a claim under HRS § 480-2(e) for a violation of HRS
§ 481B-14.”

Davis v. Four Seasons Hotel Ltd., 122 Hawai`i 423,

425, 228 P.3d 303, 305 (2010).

Plaintiffs’ claims challenging

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Defendants’ service charge practices necessarily raise only state
law issues, and therefore those claims cannot be deemed to arise
under federal law for purposes of federal question jurisdiction.
In contrast, neither Chapter 387, Chapter 388, nor any
other provision of the Hawai`i Revised Statutes governs the
practice of tip pooling.

Federal law sets forth the principles

governing which employees an establishment may include in a tip
pool and how the establishment distributes the tips among the
employees in the pool.

The FLSA definition of the “wage” paid to

an employee states, inter alia:
In determining the wage an employer is required to
pay a tipped employee, the amount paid such
employee by the employee’s employer shall be an
amount equal to–
(1) the cash wage paid such employee which
for purposes of such determination shall be
not less than the cash wage required to be
paid such an employee on August 20, 1996; and
(2) an additional amount on account of the
tips received by such employee which amount
is equal to the difference between the wage
specified in paragraph (1) and the wage in
effect under section 206(a)(1) of this title.
The additional amount on account of tips may not
exceed the value of the tips actually received by
an employee. The preceding 2 sentences shall not
apply with respect to any tipped employee unless
such employee has been informed by the employer of
the provisions of this subsection, and all tips
received by such employee have been retained by
the employee, except that this subsection shall
not be construed to prohibit the pooling of tips
among employees who customarily and regularly
receive tips.
10

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29 U.S.C. § 203(m) (emphasis added).

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The FLSA regulations

include a regulation titled “Tip pooling,” which provides that: a
“valid mandatory tip pool[] . . . can only include those
employees who customarily and regularly receive tips”; and “an
employer must notify its employees of any required tip pool
contribution amount, may only take a tip credit for the amount of
tips each employee ultimately receives, and may not retain any of
the employees’ tips for any other purpose.”

29 C.F.R. § 531.54;

see also 29 C.F.R. § 531.59(b) (discussing a tip pooling
arrangement as an exception to certain tip wage credit
requirements).
The leading case on the issue of which employees may be
included within a tip pool is a Sixth Circuit case that has been
summarized as follows:
This circuit recently affirmed a magistrate
judge’s summary judgment ruling that hosts and
hostesses at Outback steak houses qualified as
“tipped employees,” and thus were legitimately
subsumed into a section 203(m) tip pool, because
they worked in a customarily “tipped” service
occupation. Kilgore v. Outback Steakhouse of
Florida, Inc., 160 F.3d 294, 300-02 (6th Cir.
1998). On appellate review, this court concluded
that, as a factual matter, the actual employment
functions of the Outback hosts/hostesses entailed
sufficient customer interaction and table
attendance duties to qualify their job
classification as among the types which have
traditionally generated service gratuities. The
Kilgore court explained:
Hosts at Outback are “engaged in an
occupation in which they customarily and
regularly receive tips” because they
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sufficiently interact with customers in an
industry (restaurant) where undesignated tips
are common. Although the parties dispute
exactly how hosts spend their time working at
Outback, hosts do perform important customer
service functions: they greet customers,
supply them with menus, seat them at tables,
and occasionally “enhance the wait.” Like
bus persons, who are explicitly mentioned in
29 C.F.R. § 531.54 as an example of
restaurant employees who may receive tips
from tip outs by servers, hosts are not the
primary customer contact but they do have
more than de minimis interaction with the
customers. One can distinguish hosts from
restaurant employees like dishwashers, cooks,
or off-hour employees like an overnight
janitor who do not directly relate with
customers at all. Additionally, the fact
that Outback prohibits hosts from receiving
tips directly from customers provides some
evidence that Outback hosts work in an
occupation that customarily and regularly
receives tips.
Id. at 301-02 (brackets and ellipses omitted;
quotations in original).
Myers v. Copper Cellar Corp., 192 F.3d 546, 550 (6th Cir. 1999)
(footnote omitted) (emphasis added).

The Ninth Circuit has cited

Kilgore regarding an aspect of tip pools, other than who may be
included in the pool.

See Cumbie v. Woody Woo, Inc., 596 F.3d

577, 581 n.12 (9th Cir. 2010) (declining to recognize a
requirement limiting the amount of tip pool contributions to what
was “customary and reasonable” (citing Kilgore v. Outback
Steakhouse, 160 F.3d 294, 302-03 (6th Cir. 1998)).

Further, at

least one district court within the Ninth Circuit has applied the
Kilgore analysis in determining who may participate in a tip

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pool.

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See Thornton v. Crazy Horse, Inc., Case

No. 3:06-cv-00251-TMB, 2011 WL 13234967, at *4 (D. Alaska
Sept. 26, 2011).

This Court agrees with the Kilgore analysis of

who may participate in a top pool.

In light of the absence of

Hawai`i statutes or case law addressing tip pooling, this Court
concludes the FLSA and federal case law – including Kilgore –
governs the issue of which employees may participate in a tip
pool.

Plaintiffs’ First Amended Complaint appears to acknowledge

that the FLSA and the Kilgore analysis apply to their claims.
See First Amended Complaint at ¶ 6 (citing 29 U.S.C. § 206)4; id.

4

Section 206(a)(1) specifies the minimum wage “[e]very
employer shall pay to each of his employees who in any workweek
is engaged in commerce or in the production of goods for
commerce.”
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at ¶ 8 (citing 29 U.S.C. § 207(b)(3));5 id. at ¶ 23 (alleging

5

Section 207(b)(3) states:
No employer shall be deemed to have violated
subsection (a) by employing any employee for a
workweek in excess of that specified in such
subsection without paying the compensation for
overtime employment prescribed therein if such
employee is so employed–
. . . .
(3) by an independently owned and controlled
local enterprise (including an enterprise
with more than one bulk storage
establishment) engaged in the wholesale or
bulk distribution of petroleum products if–
(A) the annual gross volume of sales of
such enterprise is less than $1,000,000
exclusive of excise taxes,
(B) more than 75 per centum of such
enterprise’s annual dollar volume of
sales is made within the State in which
such enterprise is located, and
(C) not more than 25 per centum of the
annual dollar volume of sales of such
enterprise is to customers who are
engaged in the bulk distribution of such
products for resale,
and such employee receives compensation for
employment in excess of forty hours in any
workweek at a rate not less than one and
one-half times the minimum wage rate
applicable to him under section 206 of this
title,
and if such employee receives compensation for
employment in excess of twelve hours in any
workday, or for employment in excess of fifty-six
hours in any workweek, as the case may be, at a
rate not less than one and one-half times the
(continued...)
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roving captains have “de minimus” interactions with customers).
To the extent Plaintiffs’ state law claims are based
upon allegedly improper tip pooling practices, their claims
“necessarily raise [] stated federal issue[s]” that will be
“actually disputed” in this case, and that are “substantial.”
See Grable & Sons, 545 U.S. at 314.

Further, because Hawai`i

does not have any statute or case law governing tip pooling, this
Court may consider the federal issues in Plaintiffs’ claims
“without disturbing any congressionally approved balance of
federal and state judicial responsibilities.”

See id.

Plaintiffs’ claims regarding Defendants’ tip pooling practice are
therefore “deemed to ‘arise under’ federal law for purposes of
federal question jurisdiction.”

See Naehu, 2017 WL 1162180, at

*4.
Federal question jurisdiction, pursuant to § 1331,
exists over Plaintiffs’ claims regarding Defendants’ tip pooling
practice.

Supplemental jurisdiction pursuant to 28 U.S.C.

§ 1367(a), exists over Plaintiffs’ state law claims that do not
implicate federal issues.

Defendants’ removal of this case was

therefore proper.

5

(...continued)
regular rate at which he is employed.
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CONCLUSION
On the basis of the foregoing, Plaintiffs’ Motion to
Remand, filed October 12, 2017, is HEREBY DENIED.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, May 23, 2018.

/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge

ELESSAR TRAWICK, ET AL. VS. TRI-STAR RESTAURANT GROUP III, LLC,
ETC., ET AL; CV 17-00456 LEK-RLP; ORDER DENYING PLAINTIFFS’
MOTION TO REMAND

16