Hart v. Rick's Cabaret Int'l, Inc.

967 F.Supp.2d 901

Sabrina HART and Reka Furedi, on behalf of themselves and all others similarly situated, and the New York Rule 23 Class, Plaintiffs,

v.RICK'S CABARET INTERNATIONAL, INC., RCI Entertainment (New York), Inc., and Peregrine Enterprises, Inc., Defendants.

No. 09 Civ. 3043(PAE).

United States District Court, S.D. New York.

Sept. 10, 2013.

Order Denying Reconsideration in Part Nov. 18, 2013.

Eleanor Michelle Drake, Anna Purna Prakash, Michele Renee Fisher, Paul J. Lukas, Rebekah Lynn Bailey, Steven Andrew Smith, Nichols Kaster, PLLP, Minneapolis, MN, for Plaintiffs.

Howard Scott Davis, Jeffrey A. Kimmel, Racquel Crespi Weintraub, Meister Seelig & Fein LLP, New York, NY, for Defendants.

OPINION & ORDER

PAUL A. ENGELMAYER, District Judge:

Rick's Cabaret (“Rick's NY” or “the Club”) is a New York strip club located in midtown Manhattan featuring exotic dancers. Plaintiffs were dancers, also known as entertainers, at the Club. In this lawsuit, plaintiffs allege violations of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., and the New York Labor Law (“NYLL”), § 190 et seq. & § 650 et seq., and regulations promulgated thereunder by the New York State Department of Labor, seeN.Y. Comp.Codes R. & Regs. tit. 12, § 137–1.1 et seq. The Court has conditionally certified this as a collective action under the FLSA and has certified a class under Federal Rule of Civil Procedure 23.

It is undisputed that, while working at Rick's NY, plaintiffs were not paid any salary. Instead, they received money from customers, including in the form of “performance fees” for personal dances, as described further below. Plaintiffs claim that they were employees as defined under the FLSA and NYLL, and as such, were entitled to be paid a minimum wage by their employer. Plaintiffs bring five causes of action: (1) failure to pay the minimum wage under the FLSA; (2) failure to pay the minimum wage under the NYLL; (3) unlawful requesting and receiving of portions of plaintiffs' wages in violation of NYLL § 198–b; (4) unlawful retention of plaintiffs' gratuities in violation of NYLL § 196–d; and (5) unlawful deduction of wages by imposing fines and penalties in violation of NYLL § 193.

Defendants consist of the corporation Peregrine Enterprises, Inc. (“Peregrine”), which owned and operated Rick's NY, and two corporate parents, RCI Entertainment New York (“RCI New York”) and Rick's Cabaret International, Inc. (“RCII”), all three of which plaintiffs claim was their employer. (For purposes of identifying litigation positions taken by the defendants, the Court refers to the defendants collectively as “Rick's NY” or as “defendants.”) Defendants contend that plaintiffs were not employees, but were instead independent contractors, and therefore not covered by the FLSA or NYLL. Alternatively, defendants claim that the performance fees that plaintiffs took home should be counted against any statutory wage obligation of defendants, and therefore seek a monetary offset against any award of minimum wages. Defendants also bring a counterclaim for unjust enrichment, to the effect that plaintiffs will be unjustly enriched if they are awarded a judgment reflecting unpaid minimum wages while being allowed to retain the performance fees they received. Defendants further contend that, even if plaintiffs are held to have been employees of Peregrine, they were not employees of the two parent-company defendants.

The parties now cross-move for summary judgment. Plaintiffs seek summary judgment on Claims One, Two, and Five (following the numbering above). See Dkt. 384; Pl. Br. 2. Defendants cross-move for summary judgment on all five claims, on the grounds that plaintiffs were independent contractors, not employees. Each party seeks judgment in its favor on defendants' counterclaim. For the reasons that follow, plaintiffs' motion for summary judgment is granted in part and denied in part; and defendants' motion for summary judgment is denied in its entirety. Plaintiffs have also moved to supplement the record with additional evidence. That motion is granted.

I. Background¹A. Overview of the Parties

In September 2005, Rick's NY opened for business. Stipulated Facts (“SF”) ¶ 7. It is located at 50 West 33rd Street, New York, NY. Id. ¶ 6. At all relevant times, Rick's NY was owned and operated by Peregrine, id. ¶ 8, which is a wholly owned subsidiary of RCI New York, id. ¶ 31. RCI New York, in turn, was wholly owned at all relevant times by RCII, a Texas corporation. Id. ¶¶ 32, 34.

Rick's NY has always classified the dancers who perform at the Club as independent contractors. Id. ¶ 19. Rick's NY had three stages on which dancers perform, id. ¶ 13, and a number of semi-private rooms, id. ¶ 17. Dancers' duties at the Club included public performances on stage. Dancers also gave personal dances (lap dances or table dances) to the Club's customers, and entertained customers in the Club's semi-private rooms. Id. ¶¶ 15–17.

Dancers were not paid a wage at all by Rick's NY; rather, they received various fees paid by customers. Id. ¶¶ 20, 181. Important here, a personal dance cost $20, although customers were permitted to pay dancers more. Id. ¶¶ 180, 182. If the customer paid the dancer in cash, the customer did so by paying the dancer directly, and the dancer retained the entire performance fee. If a customer wished to pay by credit card, he or she could purchase, for $24 each, vouchers worth $20 known as “Dance Dollars” from Rick's NY. The customer could then give the dancer the Dance Dollar as payment for a personal dance. Id. ¶¶ 181, 183. The dancer later redeemed, from Rick's NY, the Dance Dollar that she had received. Rick's NY paid dancers $18 for each Dance Dollar that they redeemed; Rick's NY retained the remaining $6. Id. ¶¶ 185, 190.

In addition to the above, the Club also had an on-site restaurant that sold liquor, food, and beverages. SF ¶ 10; Def. 56.1 ¶ 11; Pl. Resp. 56.1 ¶ 11. The Club had multiple televisions on site, which displayed sporting events, news programming, and advertisements. Id. Further details about the operations of the Club and the activities and compensation of the dancers are set out below, in the course of addressing the motions for summary judgment.

The class period, as defined at an earlier point in this litigation, runs from September 2005 to the entry of judgment. The FLSA collective action consists of 41 opt-in plaintiffs; the NYLL plaintiff class consists of more than 1,900 members. SF ¶ 30.

B. Procedural History

On March 30, 2009, plaintiffs filed their initial Complaint. Dkt. 1. On June 15, 2009, the plaintiffs moved for conditional certification of an FLSA collective class composed of dancers who had performed at Rick's Cabaret in New York. Dkt. 15. On August 11, 2009, plaintiffs filed an Amended Complaint. Dkt. 42.

On August 27, 2009, defendants moved to dismiss the Amended Complaint as against RCII for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). While the motion was pending, plaintiffs filed a Second Amended Complaint. Dkt. 71.

On December 16, 2009, the Honorable John G. Koeltl, to whom this case was previously assigned, granted plaintiffs' motion to conditionally certify an FLSA collectiveclass. In the same order, he also dismissed plaintiffs' claims as to RCII without prejudice. Dkt. 79.

On May 28, 2010, plaintiffs filed a Third Amended Complaint, the operative pleading here. Dkt. 153 (“TAC”). The TAC included, among other modifications, amended allegations as to RCII.

On December 20, 2010, 2010 WL 5297221, Judge Koeltl denied defendants' motion to dismiss and granted plaintiffs' motion for Rule 23 class certification. Dkt. 253 (“Cert. Op.”). He certified a Rule 23 class consisting of:

All persons who worked at Rick's New York or were employed by Defendant Rick's Cabaret International Inc., RCI Entertainment (New York) Inc. and/or Peregrine Enterprises, Inc. in the state of New York as “entertainers” at any time six years prior to the filing of the Complaint to the entry of judgment in this case.

Cert. Op. 3, 20.²

On February 3, 2011, defendants filed their Answer, including a counterclaim for unjust enrichment. Dkt. 254 (“Ans.”). On June 21, 2011, defendants filed an Amended Answer. Dkt. 279 (“Am. Ans.”).

After numerous extensions, fact discovery closed October 31, 2012, and the parties sought leave to cross-move for summary judgment.

On February 1, 2013, the parties submitted joint stipulated facts, as directed by the Court. Dkt. 454 (“SF”). On February 20, 2013, the parties cross-moved for summary judgment. On March 15, 2013, the parties each submitted opposition papers. On April 3, 2013, the parties submitted reply memoranda.

In their summary judgment motion, plaintiffs contend that they were employees, and thus entitled to payment of unpaid wages for the hours during which they worked at Rick's NY. They further argue that the failure to pay them minimum wage was a willful violation of the FLSA and NYLL, entitling them to a three-year statute of limitations under the FLSA and to liquidated damages under NYLL. Finally, plaintiffs assert that all three defendant companies were their employers as a matter of law, entitling them to recover against all three, jointly and severally. Plaintiffs also seek summary judgment as to defendants' counterclaim for unjust enrichment.

In their summary judgment motion, defendants argue that plaintiffs were at all times independent contractors, and therefore fell outside the coverage of the FLSA and NYLL. Alternatively, defendants contend that, as a matter of law, the performance fees paid directly to plaintiffs by customers should be held to offset any unpaid wages that are held due. Relatedly, defendants seek summary judgment on their counterclaim for unjust enrichment. Finally, defendants argue that as a matter of law, any violations were not willful and that only Peregrine, and not RCI New York or RCII, was plaintif...