Brueningsen et al v. Resort Express et al

Filing 91

MEMORANDUM DECISION AND ORDER denying 86 Motion for Reconsideration re 64 Memorandum Decision. Signed by Judge David Nuffer on 3/24/16 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
JEFFREY BRUENINGSEN, et al.,

v.

MEMORANDUM DECISION AND ORDER
DENYING [86] PLAINTIFFS’ MOTION
FOR RECONSIDERATION

RESORT EXPRESS INC.,

Case No. 2:12-CV-843-DN

Plaintiffs,

Defendant.

District Judge David Nuffer

Plaintiffs seek reconsideration of the dismissal of their claims for unlawfully retained
tips. 1 Plaintiffs’ basis for seeking reconsideration is the issuance of a recent Ninth Circuit Court
of Appeals’ opinion, Oregon Rest. and Lodging Ass’n v. Perez, 2 which overrules Oregon Rest.
and Lodging v. Solis. 3 The Memorandum Decision and Order relied on Solis in dismissing
Plaintiffs’ unlawfully retained tips claims. 4 Because Perez is nonbinding precedent and its
majority’s analysis is unpersuasive, Plaintiffs’ Motion for Reconsideration is DENIED.
BACKGROUND
Defendant employed Plaintiffs as drivers and had control over and the power to establish,
enforce, and change: (a) Plaintiffs’ working conditions; (b) policies governing the allocation of
gratuities; and (c) compensation policies and practices. 5 At all times during Plaintiffs’
1

See Motion for Reconsideration of January 26, 2015 Memorandum Decision and Order Granting Motion for Partial
Summary Judgment as it Relates to Plaintiffs’ Claims for Unlawfully Retained Tips (“Motion for Reconsideration”),
docket no. 86, filed Feb. 26, 2016.

2

See Oregon Rest. and Lodging Ass’n v. Perez, Nos. 13-35765, 14-15243, 2016 WL 706678 (9th Cir. Feb. 23,
2016).
3

See Oregon Rest. and Lodging v. Solis, 948 F.Supp.2d 1217 (D.Or. 2013).

4

See Memorandum Decision and Order Granting Motion for Partial Summary Judgment (“Memorandum Decision
and Order”) at 6-10, 15-16, docket no. 64, filed Jan. 26, 2015.

5

See id. at 2, Undisputed Facts ¶ 2.

employment, Defendant did not take a “tip credit,” i.e., Defendant did not assert a credit based
on tips, partial or otherwise, to meet its minimum wage requirements. 6 Defendant did, however,
retain some or all of Plaintiffs’ non-cash tips. 7 Plaintiffs allege that Defendant’s practice of
retaining non-cash tips violated the Fair Labor Standards Act (“FLSA”) and opened Defendant to
liability under state common law theories of conversion, unjust enrichment, and quantum
meruit. 8
Defendant moved for summary judgment on Plaintiffs’ unlawfully retained tips claims. 9
The claims were dismissed by the Memorandum Decision and Order. 10 Support for the dismissal
came from the Ninth Circuit Court of Appeals’ opinion in Crumbie v. Woody Woo, Inc., 11 which
construed section 203(m) of the FLSA as permitting an employer’s retention of a portion or all of
an employee’s tips if the employer does not take a tip credit. 12 The Crumbie opinion preceded
the promulgation of a Department of Labor (“DOL”) regulation that stated “[t]ips are the
property of the employee whether or not the employer has taken a tip credit under section
[20]3(m) of the FLSA.” 13 Plaintiffs’ claims in this case for unlawfully retained tips relied on that
regulation. The Memorandum Decision concluded the regulation was not entitled to deference
because it departed from Congress’ clear intent in the plain language of section 203(m), as
construed by Crumbie. 14 Plaintiffs’ unlawfully retained tips claims therefore failed as a matter of

6

See id. at 2, Undisputed Facts ¶ 1.

7

See id. at 2, Undisputed Facts ¶ 3.

8

See First Amended Complaint at 12-16, docket no. 12, filed Nov. 1, 2012.

9

See Motion for Partial Summary Judgment at 1-6, 10-12, docket no. 33, filed Oct. 22, 2013.

10

See Memorandum Decision and Order at 6-10, 15-16.

11

See Crumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010).

12

See id. at 581.

13

29 C.F.R. § 531.52 (2011).

14

See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778 (1984).

2

law. The Memorandum Decision and Order also cited three district court opinions, Stephenson v.
All Resort Coach, Inc., 15 Solis, 16 and Trinidad v. Pret A Manger (USA) Ltd., 17 which used this
same analysis and reached this same conclusion. 18
Now that the Ninth Circuit Court of Appeals’ opinion in Perez overruled Solis, Plaintiffs
seek reconsideration of the dismissal of their unlawfully retained tips claims. 19 Plaintiffs
maintain that Perez’s reading and application of Crumbie undercuts the legal authority relied on
for the dismissal of their unlawfully retained tips claims. Plaintiffs argue that this intervening
change in controlling law justifies reconsideration of the claims’ dismissal. 20
STANDARD OF REVIEW
The authority to reconsider interlocutory orders stems from Rule 54(b) of the Federal
Rules of Civil Procedure. 21 Under Rule 54(b),
any order or other decision, however designated, that adjudicates fewer than all
the claims or the rights and liabilities of fewer than all the parties does not end the
action as to any of the claims or parties and may be revised at any time before the
entry of a judgment adjudicating all the claims and all the parties’ rights and
liabilities.22
“Grounds warranting a motion to reconsider include (1) an intervening change in the controlling
law, (2) new evidence previously unavailable, and (3) the need to correct clear error or prevent

15

See Stephenson v. All Resort Coach, Inc., No. 2:12-CV-1097 TS, 2013 WL 4519781 (D.Utah Aug. 26, 2013).

16

See Solis, 948 F.Supp.2d 1217.

17

See Trinidad v. Pret A Manger (USA) Ltd., 962 F.Supp.2d 545 (S.D.N.Y. 2013)

18

See Memorandum Decision and Order at 9-10.

19

See Motion for Reconsideration.

20

See id.

21

See Raytheon Constructors, Inc. v. Asarco Inc., 368 F.3d 1214, 1217 (10th Cir. 2003).

22

FED R. CIV. P. 54(b).

3

manifest injustice.” 23 “Thus, a motion for reconsideration is appropriate where the court has
misapprehended the facts, a party’s position, or the controlling law.” 24
DISCUSSION
Plaintiffs’ only argument for seeking reconsideration of the dismissal of their unlawfully
retained tips claims is that Perez constitutes an intervening change in the controlling law. 25 This
argument is misplaced.
The dismissal of Plaintiffs’ unlawfully retained tips claims stemmed from a reading and
application of Crumbie. The Memorandum Decision and Order, consistent with Crumbie,
declined to give deference to the DOL regulation which departed from Congress’ clear intent in
the plain language of section 203(m) of the FLSA. 26 Three district court opinions supported this
reading and application of Crumbie. 27 The majority opinion in Perez has overruled one of these
district court opinions, Solis, by implementing a limited reading and application of Crumbie. 28
The Perez majority read Crumbie as merely holding that section 203(m)’s silence as to
employers that do not take a tip credit must be construed in favor of the employer to permit a
practice of retaining tips. 29 Consequently, the Perez majority held that because of section
203(m)’s silence, the DOL retained authority to promulgate regulations interpreting section
203(m). 30 The Perez majority therefore determined that the district court in Solis incorrectly

23

Servants of Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000).

24

Id.

25

See Motion for Reconsideration.

26

See Memorandum Decision and Order at 7-10.

27

See id. at 9-10 (citing Stephenson, 2013 WL 4519781, at *8; Solis, 948 F.Supp.2d at 1223-24; Trinidad, 962
F.Supp.2d at 562).
28

See Perez, 2016 WL 706678.

29

See id. at *5.

30

See id. at *5-6.

4

applied Crumbie as foreclosing the DOL’s ability to promulgate regulations that interpret section
203(m), and held that the DOL’s regulation was reasonable and entitled to deference. 31
The Perez majority, however, did not overrule Crumbie. 32 Indeed, the majority opinion
expressly stated: “To be clear, we have no quarrel with Crumbie[.]” 33 The Perez majority simply
overruled Solis’s application of Crumbie. 34 While Perez is the controlling law of the Ninth
Circuit as to Crumbie’s reading and application, “[t]he decisions of the Ninth Circuit are not
binding on this circuit.” 35 Therefore, the Perez does not constitute an intervening change in
controlling law.
The majority opinion in Perez is, at most, persuasive authority that Crumbie should be
read as holding that section 203(m) is silent as to employers who do not take a tip credit, and that
this silence permits deference to the DOL’s construction that extends the restrictions of section
203(m) to all employers, not just those who take a tip credit. 36 However, this reading and
application of Crumbie is not persuasive, as it ignores the plain language of section 203(m) and
of Crumbie.
Section 203(m) provides:
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 is for purposes of such
determination shall be not less than the case wage required to be paid such
an employee on August 20, 1996; and

31

See id. at *5-8.

32

See id. at *8.

33

Id.

34

Id.

35

FDIC v. Daily, 973 F.2d 1525, 1532 (10th Cir. 1992) (“

36

See Perez, 2016 WL 706678, at *1, 3, 5-6, 8.

5

(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. 37
Crumbie analyzes this statutory language sentence by sentence and rejects the argument that “an
employee must be allowed to retain all of [his or] her tips—except in the case of a ‘valid’ tip
pool involving only customarily tipped employees—regardless of whether [the] employer claims
a tip credit.” 38 Crumbie specifically holds:
[W]e cannot reconcile [the petitioner’s] interpretation with the plain text of the
third sentence [of section203(m)], which imposes conditions on taking a tip credit
and does not state freestanding requirements pertaining to all tipped employees. A
statute that provides that a person must do X in order to achieve Y does not
mandate that a person must do X, period. 39
“If Congress wanted to articulate a general principle that tips are the property of the employee
absent a ‘valid’ tip pool, it could have done so without reference to the tip credit.” 40 Therefore,
the Crumbie court “decline[d] to read the third sentence [of section 203(m)] in such a way as to
render its reference to the tip credit, as well as its conditional language and structure,
superfluous.” 41
Crumbie next addresses the argument that section 203(m) should be construed as
permitting employees to retain all tips that they are given by virtue of the DOL’s “free and clear”
37

20 U.S.C. § 203(m) (2012).

38

Crumbie, 596 F.3d at 580.

39

Id. at 581 (emphasis in original).

40

Id.

41

Id.

6

regulation. 42 Turning again to the plain language of section 203(m), Crumbie rejects this
argument:
[T]he applicability of the ‘free and clear’ regulation hinges on whether or not the
tips belong to the [employees] to whom they are given. This question brings us
back to section 203(m), which we have already determined does not alter the
default rule … that tips belong to the servers to whom they are given only in the
absence of an explicit contrary understanding that is not otherwise prohibited.
Hence, whether [an employee] owns [his or] her tips depends on whether there
existed an agreement to redistribute [the] tips that was not barred by the FLSA. 43
The Crumbie court held that because “[t]he FLSA does not restrict tip pooling when no tip credit
is taken… only the tips redistributed to [an employee] from the [tip] pool ever belong to [the
employee], and [the employee’s] contributions to the [tip] pool did not, and could not, reduce
[the employee’s] wages below the statutory minimum.” 44 Any contrary interpretation using the
DOL’s “free and clear” regulation is “plainly erroneous and unworthy of any deference.” 45
The Crumbie plaintiff’s final argument was that the FLSA is nullified by allowing
employers to confiscate an employee’s tips by functionally taking a tip credit through the use of
a tip-pooling arrangement to subsidize the wages of its non-tipped employees. 46 The Crumbie
court held the “[e]ven if [this argument] were correct, we do not find this possibility so absurd or
glaringly unjust as to warrant a departure from the plain language of the statute.” 47 “Naturally,
[an employee] would prefer to receive all of [his or] her tips, but the FLSA does not create such
an entitlement where no tip credit is taken.” 48 “Absent an ambiguity or an irreconcilable conflict

42

See id. at 581-582.

43

Id. at 582.

44

Id.

45

Id.

46

See id. at 582-83.

47

Id. at 582 (internal quotations and punctuation omitted).

48

Id. at 583 (emphasis in original).

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with another statutory provision, we will not alter the text in order to satisfy the policy
preferences of [the plaintiff] and [the DOL].” 49
The majority opinion in Perez ignores Crumbie’s repeated references to the plain and
unambiguous language of section 203(m) and reads Crumbie as rooted in statutory silence. 50 The
words “silent” and “silence” do not appear in Crumbie. 51 As recognized by the dissenting
opinion in Perez, which notably is authored by the only common panel member with the
Crumbie court, “[Perez] is nothing more than Crumbie II.” 52 “Any rational reading of Crumbie
unequivocally demonstrates that [the court] determined the meaning of section 203(m) is clear
and unambiguous, leaving no room for agency interpretation.” 53 “[T]he DOL’s promulgation of
[a] new rule changes nothing.” 54 “The DOL is not free to manufacture an ambiguity, which
circuit precedent mandates is not there.” 55 The dissent’s reading and application of Crumbie is
persuasive and is precisely the analysis behind the Memorandum Decision and Order’s dismissal
of Plaintiffs’ unlawfully retained tips claims. 56
The Perez majority’s analysis for affording deference to the DOL’s regulation is also
premised on a strained interpretation of the United States Supreme Court’s opinion in

49

Id.

50

See Perez, 2016 WL 706678, at *1-8.

51

See Crumbie, 596 F.3d 577.

52

Perez, 2016 WL 706678, at *9 (N.R. Smith, dissenting).

53

Id. at *11.

54

Id. at *10.

55

Id. at *12.

56

See Memorandum Decision and Order at 6-10.

8

Christensen v. Harris Cty. 57 In Cristensen, the Supreme Court examined whether a DOL opinion
letter regarding the FLSA was entitled to deference. 58 The Supreme Court held that it was not:
Interpretations such as those in opinion letters—like interpretations contained in
policy statements, agency manuals, and enforcement guidelines, all of which lack
the force of law—do not warrant … deference. Instead, interpretations contained
in formats such as opinion letters are entitled to respect … but only to the extent
that those interpretations have the power to persuade[.] 59
Christensen did recognize that agency regulations are entitled to deference, but determined that
no DOL regulation addressed the matter at issue in the case. 60
The Perez majority used this analysis, in conjunction with a one line concurring opinion
authored by Justice Souter, 61 in which no other Justice joined, to state that “Christensen strongly
suggests, there is a distinction between court decisions that interpret statutory commands and
court decisions that interpret statutory silence.” 62 Following this reasoning, the Perez majority
held that “Crumbie should not be read to foreclose the DOL’s ability to subsequently issue a
regulation prohibiting the challenged tip pooling practice [of employers retaining employee tips
when the employer does not take a tip credit].” 63
The flaw in the Perez majority’s use of Christensen to justify the result it reached begins
with its reading of Crumbie’s holdings as being rooted in statutory silence rather than in an
unequivocally construction of the clear and unambiguous meaning of section 203(m). 64 This

57

See Christensen v. Harris Cty., 529 U.S. 576, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000).

58

See id. at 587-88.

59

Id. at 587 (internal quotations and citations omitted).

60

See id. at 587-88.

61

See id. at 589 (J. Souter, concurring) (“I join the opinion of the Court on the assumption that it does not foreclose
a reading of the Fair Labor Standards Act of 1938 that allows the Secretary of Labor to issue regulations liming
forced use.”).

62

Perez, 2016 WL 706678, at *6.

63

Id.

64

See id. at *5; see also Crumbie, 596 F.3d at 581-583.

9

flaw is then compounded by the use of Justice Souter’s concurrence to infer that Christensen
stands for the proposition that an agency may regulate wherever a statute does not forbid it to
regulate. 65 No such suggestion appears in Christensen’s main opinion. 66 Ultimately, the Perez
majority analysis affords deference to a DOL regulation that contradicts the plain language of
section 203(m) and the “default rule” recognized by Crumbie that “an arrangement to turn over
or to redistribute tips is presumptively valid.” 67
The United States Supreme Court has held that “[a] court’s a prior judicial construction
of a statute trumps an agency construction otherwise entitled to … deference only if the prior
court decision holds that its construction follows from the unambiguous terms of the statute and
thus leaves no room for agency discretion.’” 68 This describes Crumbie’s construction of section
203(m) and the rationale behind the Memorandum Decision and Order’s dismissal of Plaintiffs’
unlawfully retained tips claims. The Perez majority’s contrary analysis is unpersuasive and
therefore does not justify reconsideration of the dismissal of Plaintiffs’ unlawfully retained tips
claims.

65

See Perez, 2016 WL 706678, at *5-6

66

See Christensen, 529 U.S. at 587-89.

67

Crumbie, 596 F.3d at 579 (citing Williams v. Jacksonville Terminal Co., 315 U.S. 386, 397, 62 S.Ct. 659, 86
L.Ed. 914 (1942)).
68

Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 982, 125 S.Ct. 2688, 162 L.Ed.2d 820
(2005).

10

ORDER
IT IS HEREBY ORDERED that Plaintiffs’ Motion for Reconsideration 69 is DENIED.
Signed March 24, 2016.
BY THE COURT

________________________________________
District Judge David Nuffer

69

Motion for Reconsideration.

11