Degidio v. Crazy Horse Saloon and Restaurant Inc
ORDER AND OPINION: It is hereby ORDERED that Defendant's motion to dismiss (ECF No. 117 ) is DENIED. In light of this Order, Plaintiff may re-file her motion for class certification under Rule 23. Plaintiff should submit a proposed order with her motion to certify class. Signed by Honorable Bruce Howe Hendricks on 6/3/2016.(prou, )
IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE DISTRICT OF SOUTH CAROLINA
) Civil Action No.: 4:13-cv-02136-BHH
ORDER AND OPINION
Crazy Horse Saloon and Restaurant,
Inc., d/b/a Thee New DollHouse,
Alexis Degidio, individually and on
behalf of all others similarly situated,
This matter is before the Court on Defendant’s motion to dismiss or, in the
alternative, for summary judgment. (ECF No. 117). For the reasons set forth below, the
motion is DENIED.
BACKGROUND AND PROCEDURAL HISTORY
Plaintiff Alexis Degidio is a former dancer at Defendant, the Crazy Horse Saloon
and Restaurant, Inc. d/b/a Thee New DollHouse, a strip club in North Myrtle Beach,
South Carolina (the “Club”). On August 8, 2013, Plaintiff filed this civil action on behalf of
herself and “all similarly situated employees” at the Club for overtime compensation and
other relief against Defendant. Plaintiff alleges that Defendant violated the Fair Labor
Standards Act (“FLSA”), 29 U.S.C. §§ 201, et seq. and the South Carolina Payment of
Wages Act (“SCPWA”), S.C. Code Ann. §§ 41-10-10, et seq.
On December 17, 2014, Plaintiff moved for conditional class certification and
judicial notice pursuant to 216(b) of the FLSA and class certification under Fed. R. Civ.
P. 23. Simultaneously, Defendant moved for summary judgment. On September 30,
2015, this Court issued an Order denying in substantial part Defendant’s motion for
summary judgment, granting Plaintiff’s motion for class certification and judicial notice,
and denying Plaintiff’s motion for class certification under Rule 23 with leave to refile.
Relevant to this motion, the Court found that Plaintiff’s SCPWA claims were largely
preempted by federal law, but that Plaintiff’s SCPWA claim for deductions from tips was
On October 26, 2015, Defendant moved for dismissal and/or summary judgment
on Plaintiff’s remaining SCPWA claim for improper deductions. (ECF No. 117.)
Defendant argues the claim should be dismissed for failure to state a claim upon which
relief can be granted and that summary judgment is proper because there is no genuine
issue of material fact that Defendant did not pay Plaintiff any wages. Because the Court
finds that the issue presented is purely a question of law, consideration of summary
judgment is inappropriate here. Accordingly, the Court will only consider Defendant’s
motion under Rule 12(b)(6).
STANDARD OF REVIEW
A plaintiff’s complaint should set forth “a short and plain statement . . . showing
that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Rule 8 “does not require
‘detailed factual allegations,’ but it demands more than an unadorned, the-defendantunlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). To show that the plaintiff is
“entitled to relief,” the complaint must provide “more than labels and conclusions,” and “a
formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S.
at 555. In considering a motion to dismiss under Rule 12(b)(6), the Court “accepts all
well-pled facts as true and construes these facts in the light most favorable to the plaintiff
. . . .” Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir.
To survive a Rule 12(b)(6) motion to dismiss, a complaint must state “a plausible
claim for relief.” Iqbal, 556 U.S. at 679. “The plausibility standard is not akin to a
‘probability requirement,’ but it asks for more than a sheer possibility that a defendant
has acted unlawfully. Where a complaint pleads facts that are ‘merely consistent with’ a
defendant’s liability, it ‘stops short of the line between possibility and plausibility of
entitlement to relief.’” Id. (quoting Twombly, 550 U.S. at 557). Stated differently, “where
the well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is
entitled to relief.’” Id. (quoting Fed. R. Civ. P. 8(a)). Still, Rule 12(b)(6) “does not
countenance . . . dismissals based on a judge’s disbelief of a complaint’s factual
allegations.” Colon Health Centers of Am., LLC v. Hazel, 733 F.3d 535, 545 (4th Cir.
2013) (quoting Neitzke v. Williams, 490 U.S. 319, 327 (1989)). “A plausible but
inconclusive inference from pleaded facts will survive a motion to dismiss . . . .”
Sepulveda-Villarini v. Dep’t of Educ. of Puerto Rico, 628 F.3d 25, 30 (1st Cir. 2010)
Plaintiff brings a claim for improper deduction of wages under the SCPWA,
Due to Defendant’s policy of deducting amounts from the tips of Plaintiff
and the SC Class to offset business expenses, Plaintiff and the SC Class
were subject to improper deductions from their compensation. Specifically,
Defendant unlawfully withheld and diverted monies from the compensation
earned by Plaintiff and the SC Class for business expenses of Defendant,
including, but not limited to, the cost of employing other workers, in direct
violation of the [SC]PWA.
Defendant has set, reduced, withheld and/or diverted the wages of Plaintiff
and the SC Class Members without providing advance notice of such
amounts, and absent any lawfully sufficient reason for such conduct.
(Am. Compl. at ¶¶ 83–84, ECF No. 42.) The SCPWA provides in part:
An employer shall not withhold or divert any portion of an employee's
wages unless the employer is required or permitted to do so by state or
federal law or the employer has given written notification to the employee
of the amount and terms of the deductions as required by subsection (A) of
S.C. Code Ann. § 41-10-40.
Defendant asserts that the SCPWA does not apply here. The Club classifies its
entertainers as “lessees” or “independent contractors,” who are permitted the nonexclusive use of the Club’s stages, dressing room, lockers, and semi-private areas for
performing. (ECF No. 69-4 ¶ 2.) According to Defendant, the entertainers are paid for
performances only by customers, who either pay with cash or Golden Dollars, which
Defendant cashes out for the entertainers. (ECF No. 117-2 at 2.) Consequently,
Defendant asserts, the entertainers are not paid any wages by the Club—only tips which
they receive from customers. Defendant contends that S.C. Code Ann. § 41-10-40 does
not define tips as constituting wages, nor does it specifically prohibit any deductions from
tips as opposed to wages. Therefore, Defendant argues, Plaintiff cannot establish that
Defendant violated the SCPWA through improper deductions from wages.
S.C. Code Ann. § 41-10-10 defines “wages” as
all amounts at which labor rendered is recompensed, whether the amount
is fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the amount and includes vacation, holiday, and sick
leave payments which are due to an employee under any employer policy
or employment contract. Funds placed in pension plans or profit sharing
plans are not wages subject to this chapter.
Although South Carolina courts have not expressly addressed whether tips may
constitute wages under the SCPWA, another court in this district has considered
allegations similar to those made by Plaintiff and found that they were “sufficient to
plausibly state a claim under S.C. Code Ann. § 41-10-30.” Foster v. M5 Hosp. Grp., LLC,
No. 4:14-CV-4517, 2015 WL 5024404, at *5 (D.S.C. Aug. 24, 2015); Spallone v. SOHO
Univ., Inc., No. 4:15-CV-1622, 2015 WL 5098154, at *5 (D.S.C. Aug. 31, 2015). In the
related cases Foster and Spallone, the plaintiffs alleged that tips constitute wages and
that their employers improperly made deductions from their wages through a tip pool.
Foster, 2015 WL 5024404, at *5; Spallone, 2015 WL 5098154, at *5. The court denied
the defendants’ motions to dismiss this SCPWA claim in both cases, noting that “[t]he
defendants have not asserted that the plaintiff has not sufficiently pled the claim, only
that the claim is preempted.” Id. While these cases do not resolve the issue directly
before this Court, they indicate that allegations similar to those made in Plaintiff’s
SCPWA claim can survive 12(b)(6) motions to dismiss.
Recognizing the uncertainty of this issue under South Carolina law, Defendant
argues that a case from the Southern District of New York is applicable here and
mandates finding that tips are not covered under the statute. Hart v. Rick’s NY Cabaret
Intern., Inc., 967 F. Supp. 2d 901 (S.D.N.Y. 2013), involves facts similar to the instant
matter—the Hart plaintiffs were dancers at the defendant strip club and brought claims
under the FLSA and the New York Labor Law (“NYLL”). The Hart court considered the
plaintiffs’ allegation that defendant “required the dancers to make mandatory daily tip-out
payments to management each night” in violation of NYLL § 193. Hart, 967 F. Supp. 2d
at 936. The court first addressed whether the defendant could be liable under § 193(1),
which prohibits improper deductions from wages. Id. at 952. In a prior order, the court
held, without discussion, “that the performance fees received from customers did not
constitute wages,” and the parties conceded this point. Id. at 936, 951. Accordingly, the
court found the plaintiffs could not state a claim under § 193(1). Id. at 952.
The Hart court then analyzed plaintiff’s allegation under § 193(3)(a), which
provides that no employer “shall make any charge against wages, or require an
employee to make any payment by separate transaction unless such charge or payment
is permitted as a deduction from wages” under § 193(1). Id. 952–953. The court noted
that this separate transaction language was added “to assure that employers who could
not make certain deductions directly from an employee’s paycheck not subvert that
prohibition by forcing the employee to pay those same amounts in a separate
transaction.” Id. at 953. Stating, “[i]t would contravene the purpose served by § 193(3)(a)
to permit [defendant] to achieve indirectly (by forcing dancers to pay by separate
transaction from customer-paid performance fees) what it could not have achieved
directly[,]” the court found that defendants could be liable under § 193(3)(a) and granted
the plaintiffs’ motion for summary judgment on this claim. Id. at 954.
As Plaintiff asserts, the circumstances of Hart differ from the instant matter, such
that Defendant’s reliance on Hart is misguided. Most importantly, the Hart court did not
separately analyze whether tips could constitute wages under the New York Labor Law,
and the plaintiffs did not argue that point. Rather, the court began its analysis of the
plaintiffs’ claim under § 193 apparently assuming that tips could not constitute wages as
contemplated by the statute. Of course, the likely reason for this method of analysis is
that the tip deductions were easily categorized within an alternate provision of the statute
(“or . . . payment by separate transaction”), so the question of whether tips constituted
wages under the New York Labor Law was ultimately unimportant. There is no alternate
provision in § 41-10-10, so the method of statutory construction must proceed differently
in this case. In addition, the plaintiffs in Hart were ultimately successful in their claim that
defendant’s mandatory tip-out payments violated the New York Labor Law. While the
court found the plaintiffs’ claim valid under a portion of NYLL § 193 that does not have an
analogous counterpart in the SCPWA, the court emphasized that the legislative intent of
the statute would be thwarted if the defendant was not found liable. For these reasons,
the Court concludes that Hart does not mandate finding that tips do meet the definition of
wages under the SCPWA.
While Hart appears to be the case most factually similar to the instant matter,
courts in other jurisdictions have also considered whether tips can constitute wages
under state wage deduction and wage payment and collection statutes. Plaintiff offers
these cases to support her position that South Carolina would also consider tips as
wages under the SCPWA. For example, in Ventura v. Bebo Foods, Inc., 738 F. Supp. 2d
8, 20 (D.D.C. 2010) the U.S. District Court for the District of Columbia found that tips
constituted wages under the District of Columbia Wage Payment and Collection Act
(“WPCA”). The WPCA defines wages as “monetary compensation after lawful
deductions, owed by an employer for labor or services rendered, whether the amount is
determined on a time, task, piece, commission, or other basis of calculation.” D.C. Code
§ 32–1301(3). The Ventura court recognized that “this definition does not expressly
mention tips,” but found that because “the District of Columbia Court of Appeals has
considered tips to be an element of compensation in other D.C. labor provisions,” the
court would likewise consider tips a form of wages. Ventura, 738 F. Supp. 2d at 20.
In Cork v. Applebee’s of Michigan, Inc., 608 N.W.2d 62, 63 (Mich. App. 2000), the
Michigan Court of Appeals considered the plaintiffs’ allegations that the defendant’s tipsharing policy violated the Michigan Wage and Fringe Benefits Act (“WFBA”). The WFBA
defines wages as “all earnings of an employee whether determined on the basis of time,
task, piece, commission, or other method of calculation for labor or services except those
defined as fringe benefits under subdivision (e) above.” MCL 408.471(f); MSA
17.277(1)(f). The court found that the “clear language of this section indicates to this
[c]ourt that tips are included in the definition of wages[,]” noting that the WFBA expressly
“precludes an employer from ‘demand[ing] . . . from an employee, a fee, gift, tip, gratuity,
or other remuneration . . . as a condition of employment.’” Cork, 608 N.W.2d at 65.
In Servenen v. EmpireCLS Worldwide Chauffeured Servs., 2010 WL 5392873, at
*3 (D.N.J. Dec. 22, 2010), the United States District Court for the District of New Jersey
found that the plaintiffs sufficiently pled “specific facts regarding deductions and
witholdings from their wages[,] including . . . their withholding of tips[,]” under the New
Jersey Wage Payment Law (“NJWPL”). The NJPWL defines wages as “the direct
monetary compensation for labor or services rendered by an employee, where the
amount is determined on a time, task, piece, or commission basis excluding any form of
supplementary incentives and bonuses which are calculated independently of regular
wages and paid in addition thereto.” N.J. Stat. Ann. § 34:11-4.1.
Finally, in Karl v. Uptown Drink, LLC, 835 N.W.2d 14, 19 (Minn. 2013), the
Supreme Court of Minnesota offered a compelling policy rationale for finding that
gratuities met the definition of wages under the plaintiffs’ wage deduction claim.
Specifically, the court noted that “if gratuities were not ‘wages’ . . . it would allow
employers whose employees receive gratuities to use self help to enforce a claimed
indebtedness, creating different levels of protection for tipped and non-tipped
employees.” Karl, 835 N.W.2d at 19. According to the court, allowing such inequality
would undermine the purpose of the state wage deduction statute. Id.
Similar to the wage statutes mentioned in Hart and Karl, the SCPWA was also
drafted to protect the interests of employees. South Carolina courts have noted that the
SCPWA “is remedial legislation designed to protect working people and assist them in
collecting compensation wrongfully withheld.” Long v. Boston Scientific Corp., 665 F.
Supp. 2d 541, 553 (D.S.C. 2008) (quoting Dumas v. InfoSafe Corp., 463 S.E.2d 641, 645
(S.C. Ct. App. 1995) (internal quotation marks omitted)); see also Weaver v. John Lucas
Tree Expert Co., No. 2:13-cv-01698, 2013 WL 5587854, at *9 (D.S.C. Oct. 10, 2013)
(“The South Carolina Supreme Court has noted on multiple occasions that ‘the purpose
of the [SCPWA] is ‘to protect employees from the unjustified and willful retention of
wages by the employer.’”) (quoting Mathis v. Brown & Brown of S.C., Inc., 698 S.E.2d
773, 783 (S.C. 2010)).
For example, in Weaver v. John Lucas Tree Expert Co., the court considered the
SCPWA’s purpose when considering the defendant’s motion to dismiss an SCPWA
claim. 2013 WL 5587854, at *9. The plaintiff alleged that the defendants “refused to pay
him the accrued profit sharing promised under the contract” and that defendants’ “failure
to pay him all ‘wages’ earned and accrued was unreasonable, willful, and intentional.” Id.
In its order, the court first summarized the purpose of the SCPWA and then found that
although profit sharing plans were expressly excluded from the definition of wages, it did
not appear that the agreement at issue was “of the type envisioned by the South
Carolina General Assembly.” Id. at *9–*10. The court denied the defendants’ 12(b)(6)
motion to dismiss the SCPWA claim on this basis. Id.
In light of the established purpose of the SCPWA and the analogous case law
from other jurisdictions, the Court finds that tips meet the definition of wages under the
SCPWA. To dismiss Plaintiff’s SCPWA claim on the basis proffered by Defendant would
undermine the statute’s intended purpose of “protect[ing] working people and assist[ing]
them in collecting compensation wrongfully withheld.” Long, 665 F. Supp. 2d at 553.
Further, the Court notes that tips could plausibly fall under the “amounts at which labor
rendered is recompensed” language of the SCPWA. S.C. Code Ann. § 41-10-10.
Accordingly, upon review of the complaint and the pleadings, the Court finds that
Plaintiff’s allegations as to improper wage deductions advance a plausible basis for
relief. At this stage, the allegations set forth in the complaint are sufficient to survive a
motion to dismiss. See Iqbal, 556 U.S. at 679.
For the foregoing reasons, it is hereby ORDERED that Defendant’s motion to
dismiss (ECF No. 117) is DENIED. In light of this Order, Plaintiff may re-file her motion
for class certification under Rule 23. Plaintiff should submit a proposed order with her
motion to certify class.
IT IS SO ORDERED.
/s/Bruce Howe Hendricks
United States District Judge
Greenville, South Carolina
June 3, 2016
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