Berger et al vs. Leasing Enterprises, Ltd., et al.

Filing 239

MEMORANDUM Opinion and Order: For the foregoing reasons, Plaintiffs' motion to certify the classes and collective actions identified in Plaintiffs' motion, R. 188 , is granted. To the extent not already produced, Defendants must produce t o Plaintiffs' counsel by March 23, 2018, in an agreed upon electronic format, the names, addresses, phone numbers, email addresses, and dates of employment for all persons employed by Defendants as servers from September 1, 2013 through present. Plaintiffs are permitted to provide the notice to and seek consent from all such individuals using the form found at R. 189-26. Defendants are directed to post copies of document R. 189-26 on an employee bulletin board at its restaurant starting on the same day Plaintiffs' counsel mails the form, and to keep it posted until the close of the opt-in/opt-out period.Considering the age of this case and motion, the parties' positions on the appropriate date of the close of the opt-in/opt-o ut period are now obsolete. A status hearing is set for Tuesday, March 20, 2018, at which the parties should be prepared to set that date, and generally update the Court regarding the status of the case. Status hearing set for 3/20/2018 at 09:00 AM. Signed by the Honorable Thomas M. Durkin on 3/12/2018:Mailed notice(srn, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JESSICA BERGER AND TIMOTHY RENDAK,
Plaintiffs,

No. 14 C 8543

v.

Judge Thomas M. Durkin

PERRY’S STEAKHOUSE OF ILLINOIS, LLC;
HOWARD CORTES; AND JEFFERY
PAGNOTTA,
Defendants.
MEMORANDUM OPINION AND ORDER
Jessica Berger and Timothy Rendak worked as table-servers at Perry’s
Steakhouse and Grille in Oak Brook, Illinois. They allege that Perry’s and their
managers, Howard Cortes and Jeffery Pagnotta, failed to pay them all the tips
which they were owed, and required them to perform non-table-service related work
at less than minimum wage, in violation of the federal Fair Labor Standards Act
and the Illinois Minimum Wage Law. Plaintiffs have moved for partial class and
collective action certification. R. 188. For the following reasons, that motion is
granted.
Background
Plaintiffs have three primary claims: (1) the “tip credit” claim, alleging that
Defendants had a policy of pooling tips given to table-servers and impermissibly

keeping some of the tips to pay certain business expenses; 1 (2) the “tip refund”
claim, alleging that in addition to business expenses, Defendants had a policy of
impermissibly deducting more than necessary from the tip pool to cover (or
“refund”) credit card processing fees; and (3) the “sidework” claim, alleging that
Defendants impermissibly required Plaintiffs to perform “sidework,” i.e., non-tableservice related tasks (such as tasks related to opening and closing the restaurant),
at less than minimum wage. Plaintiffs also allege that Defendants failed to give
them notice of the “tip credit” and “tip refund” policies, as required by the FLSA.
See 29 U.S.C. § 203(m) (the provisions permitting lower base wages for tipped
employees “shall not apply with respect to any tipped employee unless such
employee has been informed by the employer of the provisions of this subsection”).
Plaintiffs do not at this time seek certification of a class or collective action
with regard to whether Defendants’ “tip credit” policy was legal. See R. 188 ¶ 1.
However, Plaintiffs do seek certification of a collective action regarding their claim
that Defendants provided insufficient notice of the “tip credit” policy. Plaintiffs also
seek certification of Rule 23 classes and FLSA collective actions on their “tip refund”
and “sidework” claims. Plaintiffs identify the following three classes/collective
actions:

“Federal and state laws provide that tips count toward the minimum wage and
permit employers to pay less in the expectation that tips will make up the
difference.” Schaefer v. Walker Bros. Enters., 829 F.3d 551, 553 (7th Cir. 2016).
“Both statutes require some cash payment from the employer, however, no matter
how much a worker receives in tips.” Id. “This is called the tip-credit rate.” Id.
(emphasis added). Hence, the name of Plaintiffs’ first claim.
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Sub-Class One – Tip Credit Notification (FLSA): All
persons employed by Defendants in the occupation of
“Server,” from September 1, 2013, to present, who were
paid by Defendants at the sub-minimum wage, tip credit
rate.
Sub-Class Two – Tip Refund (FLSA, IMWL, and Unjust
Enrichment): All persons employed by Defendants as
Servers who were paid at the sub-minimum wage, tip
credit rate and were subjected to Defendants’ “Tip
Refund” policy.
Sub-Class Three – Sidework (FLSA, IMWL, and Unjust
Enrichment): All persons employed by Defendants as
Servers, from September 1, 2013, through Present, who
were paid at the sub-minimum wage, tip credit rate and
performed Sidework duties.
R. 188 at ¶ 7. Since only the FLSA has a notification requirement, Plaintiffs seek
certification of only a FLSA collection action for the “tip credit notification” claim.
By contrast, both the FLSA and Illinois law regulate using tips to cover credit card
processing fees and the proper wage for sidework, so Plaintiffs seek certification of
both Rule 23 classes and FLSA collective actions for those claims. The Court
addresses the Rule 23 classes first, followed by the FLSA collective actions.
Analysis
I.

Class Actions: Sub-Classes Two & Three
A.

Legal Standard

A party seeking to certify a class action must show that the putative class
satisfies the four prerequisites of Federal Rule of Civil Procedure 23(a): numerosity,
commonality, typicality, and adequacy of representation. The action must also
satisfy at least one of the three subsections of Rule 23(b). Here, Plaintiffs seek

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certification under subsection (3), which requires a finding that “questions of law or
fact common to class members predominate over any questions affecting only
individual members, and that a class action is superior to other available methods
for the fair and efficient adjudication of the controversy.” District courts have “broad
discretion” in determining whether a proposed class satisfies Rule 23. See Howland
v. First Am. Title Ins. Co., 672 F.3d 525, 528 (7th Cir. 2012). However, “certification
is proper only if the trial court is satisfied, after a rigorous analysis, that the
prerequisites of Rule 23(a) have been satisfied.” Comcast Corp. v. Behrend, 569 U.S.
27, 33 (2013).
“Plaintiffs bear the burden of showing that a proposed class satisfies the Rule
23 requirements.” Messner v. Northshore Univ. Health Sys., 669 F.3d 802, 811 (7th
Cir. 2012). “The Rule does not set forth a mere pleading standard,” rather, the
plaintiff must satisfy Rule 23 “through evidentiary proof.” Comcast, 569 U.S. at 33.
“It is sufficient if each disputed requirement has been proven by a preponderance of
evidence.” Messner, 669 F.3d at 811. This does not mean that “the court should . . .
turn the class certification proceedings into a dress rehearsal for the trial on the
merits.” Id. Yet, “[i]f there are material factual disputes, the court must receive
evidence . . . and resolve the disputes before deciding whether to certify the class.”
Id. “Such an analysis will frequently entail overlap with the merits of the plaintiff’s
underlying claims,” Comcast, 569 U.S. at 33-34, but “merits questions may be
considered . . . only to the extent . . . that they are relevant to determining whether

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the Rule 23 prerequisites for class certification are satisfied.” Amgen Inc. v. Conn.
Ret. Plans and Trust Funds, 568 U.S. 455, 466 (2013).
B.

Sub-Class Two: Tip Refund Claim
1.

Numerosity

Defendants do not dispute that they had a tip refund policy regarding credit
card processing fees. Defendants employed 41 individual table-servers in the month
of December 2013 alone. This is sufficient to satisfy the numerosity requirements.
See Pruitt v. City of Chicago, 472 F.3d 925, 926-27 (7th Cir. 2006) (“Sometimes
‘even’ 40 plaintiffs would be unmanageable . . . .”); Shields v. Local 705, Int’l Bhd. of
Teamsters Pension Plan, 188 F.3d 895, 897 (7th Cir. 1999) (noting that class
consisted of the class representative “and 35 other[s]”); Swanson v. Am. Consumer
Indus., Inc., 415 F.2d 1326, 1333 n. 9 (7th Cir. 1969) (“Even if the class were limited
to 40 . . . that is a sufficiently large group to satisfy Rule 23(a).”); Costello v. BeavEx
Inc., 2014 WL 1289612, at *8 (N.D. Ill. Mar. 31, 2014) (“A class consisting of more
than 40 members generally satisfies the numerosity requirement of certifying a
class action.”).
2.

Commonality

Defendants admit that they had a policy of retaining 3.25% of all credit card
tips paid to table-servers to offset the expense of converting the tip to cash. See R.
189-3 at 10 (interrogatory response). Plaintiffs cite Defendants’ December 2013
credit card processing fee statement to assert that Defendants paid only a 1.8% fee
to process credit card charges. See R. 189 at 5. The Court’s review of this document

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shows total credit card sales of $543,304.46 and total “interchange” fee of
$10,990.91. See R. 189 (Ex. W). This is a 2% fee. In any case, it is less than the
3.25% Defendants withheld from table-servers. Whether retention of 3.25% of tips
violates the FLSA and the IMWL is a question common to all table-servers who
were subject to the retention policy. See Steele v. Leasing Enters., Ltd., 826 F.3d
237, 246 (5th Cir. 2016) (affirming judgment in a class action claim that a
restaurant retained a greater percentage of tips than necessary to offset credit card
processing fees).
“Defendants challenge Plaintiffs’ blanket statement that Defendants
withheld tips ‘belonging to Plaintiffs,’” and “Plaintiffs’ blanket statement
characterizing narrowly the appropriate expenses to be considered in comparing a
credit card tip offset fee to the cost of ‘clearing a tip.’” R. 195 at 18. But these are
arguments that go to the answer to the common question regarding the legality of
Defendants’ tip refund policy (i.e., the merits), and do not undermine the existence
of the common question itself. See Bell v. PNC Bank, Nat. Ass’n, 800 F.3d 360, 376
(7th Cir. 2015) (“A proposed class of plaintiffs must prove the existence of a common
question, and one that predominates over individual questions, but it need not
prove that the answer to that question will be resolved in its favor.”) (emphasis in
original).
In addition to their claims under the FLSA and IMWL, Plaintiffs bring a
claim for unjust enrichment. Defendants argue that the evidence discovered so far
shows that agreements existed which undermine any unjust enrichment claims.

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Again, this is an argument that goes to the merits of the claim not to whether there
is a common question amenable to class treatment.
3.

Typicality

“A claim is typical if it arises from the same event or practice or course of
conduct that gives rise to the claims of other class members and [the] claims are
based on the same legal theory.” Arreola v. Godinez, 546 F.3d 788, 798 (7th Cir.
2008). Plaintiffs’ claims arise from their work for Defendants as servers, and the
putative class is defined as those who worked for Defendants as servers. Defendants
have not identified, and the Court does not perceive, any meaningful fact that would
distinguish Defendants’ conduct towards the named plaintiffs from Defendants’
conduct toward the rest of the class. Thus, the named plaintiffs’ claims are typical of
the class as a whole.
4.

Adequacy

Lead Plaintiffs’ counsel, Colleen M. McLaughlin, is an experienced
employment law attorney, and has been lead trial counsel on three other wage and
hour class actions, two of which resulted in settlements favorable to the plaintiffs.
See R. 189-25. Defendants do not challenge Plaintiffs’ counsel’s adequacy. The Court
finds that Ms. McLaughlin meets the adequacy requirement.
Additionally, the Court does not perceive there to be any conflict between the
named plaintiffs, Ms. Berger and Mr. Rendak, and Defendants have identified none.
Thus, the Court finds they are adequate class representatives.

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5.

Predominance

“There is no mathematical or mechanical test for evaluating predominance.”
Messner, 669 F.3d at 814. “Rule 23(b)(3)’s predominance requirement is satisfied
when common questions represent a significant aspect of [a] case and . . . can be
resolved for all members of [a] class in a single adjudication.” Id. at 815.
Here, whether Defendants’ policy of withholding 3.25% of tips to pay credit
card processing fees complied with the FLSA and IMWL is the primary question
regarding Defendants’ potential liability. Defendants have not identified any
questions regarding any individual plaintiff’s liability that would undermine this
commonality, and the Court does not perceive there to be any at this time. Thus,
this common question predominates over any individual questions.
6.

Superiority

“Rule 23(b)(3)’s superiority requirement . . . is comparative: the court must
assess efficiency [of a class action] with an eye toward other available methods.”
Mullins v. Direct Digital, LLC, 795 F.3d 654, 664 (7th Cir. 2015). Factors used to
evaluate superiority include: “(A) the class members’ interests in individually
controlling the prosecution or defense of separate actions; (B) the extent and nature
of any litigation concerning the controversy already begun by or against class
members; (C) the desireability or undesireability of concentrating the litigation of
the claims in the particular forum; and (D) the likely difficulties in managing a
class action.” Fed. R. Civ. P. 23(b)(3).

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Here, the clear predominance of the question of the legality of Defendants’ tip
retention policy makes class treatment of this question the superior method of
adjudication. Defendants do not suggest a more efficient alternative.
C.

Sub-Class Three: Sidework Claim
1.

Numerosity

Twelve table-servers have stated in declarations that Defendants required all
table-servers to perform sidework at the lower wage for tipped employees.
Defendants employed 41 individual table-servers in the month of December 2013
alone. As discussed above regarding the tip refund class, this is sufficient to satisfy
the numerosity requirements.
2.

Commonality

The declarations from table-servers stating that Defendants required them to
perform sidework are sufficient evidence to show a common question of law. Other
district courts have certified classes on such claims. See Grosscup v. KPW Mgmt.,
Inc., 261 F. Supp. 3d 867, 875 (N.D. Ill. 2017) (citing cases).
Defendants argue that “Plaintiffs cannot rely merely on a conclusory
statement that servers were required to spend a ‘substantial’ amount of time
engaged in untipped work,” because “Plaintiffs must provide evidence that servers
performed related side work in excess of 20% of their workdays.” R. 195 at 23 (citing
Driver v. AppleIllinois, LLC, 739 F.3d 1073, 1076 (7th Cir. 2014) (“A tipped
employee is entitled just to the sub-minimum, tip credit wage rate unless he is
doing either unrelated non-tipped work or related non-tipped work in excess of 20

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percent of his work-day.”)). But at least two of the table-server declarations state
that they spent at least two hours out of every eight or nine hour shift on side work,
which is more than 20%. See R. 189-11 at ¶¶ 6, 79-80; 189-14 at ¶¶ 6, 76-77.
Defendants also argue that “individual damage calculations will inevitably
overwhelm questions common to the class.” R. 195 at 24. Defendants, however, do
not explain why this is so, and the Court does not perceive this to be the case.
Plaintiffs have identified a common question of law, i.e., the legality of Defendants’
sidework policy. It will certainly simplify the litigation to certify a class for the
purpose of answering this question. To the extent the damages portion of the case
becomes unwieldy to address collectively, the Court can hold individual damage
hearings. See Gomez v. PNC Bank, 306 F.R.D. 156, 169-70 (N.D. Ill. 2014), aff’d sub
nom, Bell v. PNC Bank, 800 F.3d 360, 379-80 (7th Cir. 2015).
3.

Typicality

As with the tip refund class, the sidework claim arises from Plaintiffs’ work
as table-servers employed by Defendants. Since the class is defined as those who
worked as table-servers for Defendants, Plaintiffs’ claims are typical of the class.
4.

Adequacy

The Court’s analysis of Plaintiffs’ counsel’s and the named plaintiffs’
adequacy with respect to the tip refund class applies equally to the putative
sidework class.

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5.

Predominance

Defendants argue that the question of the legality of Defendants’ sidework
policy does not predominate because individual servers’ responsibilities for sidework
varied from shift to shift. While common sense says this is likely to be the case, it
does not change the fact that the legality of Defendants’ policy to improperly
compensate sidework is the threshold question in this case. For this reason, it
predominates over questions of whether any individual server actually performed a
sufficient amount of sidework on a given shift to trigger liability.
6.

Superiority

As with the tip refund class, the clear predominance of the question of the
legality of Defendants’ tip retention policy makes class treatment of this question
the superior method of adjudication. Again, Defendants do not suggest a more
efficient alternative.
II.

Collective Actions
A.

Legal Standard

“The Seventh Circuit has not yet established criteria for determining whether
employees are ‘similarly situated’ for purposes of the FLSA, but the majority of
courts . . . have adopted a two-step process for determining whether an FLSA
lawsuit should proceed as a collective action.” Gallardo v. Scott Byron & Co., 2014
WL 126085, at *17 (N.D. Ill. Jan. 14, 2014) (citing cases). “The first step focuses on
‘determin[ing] whether ‘similarly situated’ plaintiffs do in fact exist,’” such that a
notice can be sent to them. Id. (quoting Myers v. Hertz Corp., 624 F.3d 537, 555 (2d

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Cir. 2010), and citing Zavala v. Wal Mart Stores, Inc., 691 F.3d 527, 536 n.4 (3d Cir.
2012)); see also Brown v. Club Assist Road Serv. U.S., Inc., 2013 WL 5304100, at
*12 (The first step requires “the court [to] make[] an initial determination to send
notice to potential opt-in plaintiffs who may be ‘similarly situated’ to the named
plaintiffs with respect to whether a FLSA violation has occurred.” (citing Myers, 624
F.3d at 555)). The named plaintiffs “can show that the potential claimants are
similarly situated by making a modest factual showing sufficient to demonstrate
that they and potential plaintiffs together were victims of a common policy or plan
that violated the law.” Strait v. Belcan Engineering Group, Inc., 911 F. Supp. 2d
709, 718 (N.D. Ill. 2012) (citations omitted). Other courts in this District have
described this “modest factual showing” as a “low standard of proof,” Bergman v.
Kindred Healthcare, Inc., 2013 WL 2632596, at *3 (N.D. Ill. June 11, 2013), and
requiring only a “minimal showing.” Jirak v. Abbott Labs., Inc., 566 F. Supp. 2d
845, 847 (N.D. Ill. 2008).
After notice has been sent and additional plaintiffs have opted in to the
lawsuit, “the second step focuses on ‘whether the plaintiffs who have opted in are in
fact ‘similarly situated’ to the named plaintiffs.’” Gallardo, 2014 WL 126085, at *17
(quoting Myers, 624 F.3d at 555, and citing Zavala, 691 F.3d at 536 n.4). In order to
make this determination, courts consider “‘(1) whether the plaintiffs share similar
or disparate factual and employment settings; (2) whether the various affirmative
defenses available to the defendant would have to be individually applied to each
plaintiff; and (3) fairness and procedural concerns.’” Gallardo, 2014 WL 126085, at

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*17 (quoting Strait, 911 F. Supp. 2d at 718). “‘This stage is where the certification
becomes more akin to the familiar Rule 23 class certification standard . . . .’”
Gallardo, 2014 WL 126085, at *17 (quoting Brown, 2013 WL 5304100, at *12).
B.

Sub-Classes Two & Three: Tip Refund & Sidework Claims

Defendants argue that the Court should apply an “intermediate level of
scrutiny” because “the parties have conducted significant discovery.” R. 195 at 1415. Regardless of whether this is the appropriate level of scrutiny at this point in
the litigation, the Court has already applied what amounts to an intermediate level
of scrutiny in certifying Sub-Classes Two and Three pursuant to Rule 23. See
Espenscheid v. DirectSat USA, LLC, 705 F.3d 770, 772 (7th Cir. 2013) (“[T]here isn’t
a good reason to have different standards for the certification of the two different
types of action, and the case law has largely merged the standards . . . .”). On that
basis, the Court finds that the proposed class members are similarly situated to the
named plaintiffs such that it is appropriate to conditionally certify the collective
action and to send notice to the members of Sub-Classes Two and Three.
C.

Sub-Class One: Tip Credit Notification Claim

In order to pay a lower wage to tipped employees that complies with the
FLSA, employers are required to inform their employees of the relevant FLSA
provisions in 29 U.S.C. § 203(m) (the provisions permitting lower wages for tipped
employees “shall not apply with respect to any tipped employee unless such
employee has been informed by the employer of the provisions of this subsection”).
Defendant Cortes testified that he is solely responsible for informing new servers

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about Defendants tipping practices, but he never advised the servers of the FLSA
provisions. See R. 189-5 at 31-32 (119:24–121:25). Cortes also testified that he does
not know what a “tip credit” is under the FLSA and has never received training
regarding application of the statute. See id. at 27 (103:25–104:5). Since there is
evidence that Defendants’ method of informing servers of their rights under the
FLSA was inherently deficient, this deficiency applied to all servers as though
Defendants had a policy of insufficient notice. This is sufficient evidence to establish
that those who opt in will be similarly situated to the named plaintiffs.
D.

Statute of Limitations

Defendants also contend that any potential members of the “tip refund”
collective action who have not yet opted in are barred by the two year statute of
limitations. A three-year statute of limitations applies to a willful violation. But
Defendants argue that a “bare allegation” of willfulness is not sufficient to meet the
“heightened” burden of the second step of collective action certification, and
Plaintiffs must “provide some evidence.” R. 195 at 19 n.15. Plaintiffs have presented
such evidence—namely, evidence that Defendants withheld 3.25% of tips to cover
what appears to be a 2% processing charge. Defendant Cortes testified that the “tip
refund” policy was intended to cover credit card processing charges, see R. 189-5 at
56 (217:11-12), but clearly it went well beyond that. This is sufficient evidence to
justify sending a notice to potential class members.

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Conclusion
For the foregoing reasons, Plaintiffs’ motion to certify the classes and
collective actions identified in Plaintiffs’ motion, R. 188, is granted. To the extent
not already produced, Defendants must produce to Plaintiffs’ counsel by March 23,
2018, in an agreed upon electronic format, the names, addresses, phone numbers,
email addresses, and dates of employment for all persons employed by Defendants
as servers from September 1, 2013 through present. Plaintiffs are permitted to
provide the notice to and seek consent from all such individuals using the form
found at R. 189-26. Defendants are directed to post copies of document R. 189-26 on
an employee bulletin board at its restaurant starting on the same day Plaintiffs’
counsel mails the form, and to keep it posted until the close of the opt-in/opt-out
period.
Considering the age of this case and motion, the parties’ positions on the
appropriate date of the close of the opt-in/opt-out period are now obsolete. A status
hearing is set for Tuesday, March 20, 2018, at which the parties should be prepared
to set that date, and generally update the Court regarding the status of the case.
ENTERED:
______________________________
Honorable Thomas M. Durkin
United States District Judge

Dated: March 12, 2018

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