JOSEPH H. McKINLEY, Jr., District Judge.
This matter is before the Court on a motion by the Plaintiffs, William Whitlock, David Skyrm, Michael Brown, Holly Goodman, Kristin Moore, and Gary Muncy, for class certification pursuant to the Federal Rules of Civil Procedure 23(a) and 23(b)(1) and (3) [DN 71]. Fully briefed, this matter is ripe for decision.
Plaintiffs, William Whitlock, David Skyrm, Michael Brown, Holly Goodman, Kristin Moore, and Gary Muncy, brought an action against Defendants, FSL Management, LLC, FSH Management, LLC, Entertainment Concepts Investors, LLC, and Cordish Operating Ventures, LLC ("Cordish") alleging wage and hour violations and defamation. The named Plaintiffs are former employees of three nightclubs that operate in Louisville, Kentucky: Tengo sed Cantina, Angel's Rock Bar, and Hotel. The clubs are located in "Fourth Street Live," a one block entertainment district located in downtown Louisville. Tengo sed Cantina and Angel's Rock Bar are organized under the name FSL Management, LLC ("FSL"). Hotel is organized under the name FSH Management, LLC ("FSH"). Plaintiffs allege that all three nightclubs are managed by Entertainment Concept Investors, LLC ("ECI"). The nightclubs employ a variety of individuals including servers (shot girls and beer tub girls), bartenders, security personnel, and barbacks.
Plaintiffs assert claims for unpaid wages under KRS Chapter 337. Plaintiffs allege that Defendants acted in violation of KRS § 337.275 by requiring them to work off-the-clock without payment of an hourly wage which included time engaged in promotional activities, set up, clean up, and employee meetings. Plaintiffs contend they are entitled to damages equivalent to the statutory minimum wage of $7.25 per hour for all hours worked off the clock. Plaintiffs further allege that Defendants violated KRS § 337.065 by requiring employees to participate in a tip pool and to share tips with barbacks at a rate set by the Defendants. In addition to these class wage and hour claims, Plaintiffs Whitlock and Moore allege they were defamed by Defendants in the manner in which they were terminated.
Plaintiffs now seek class certification of all non-salaried employees of FSL and FSH who worked without receiving hourly wages from January 30, 2007, through January 30, 2012. Plaintiffs also seek certification of the following subclass of "[a]ll tipped employees of [FSL and FSH] who were required to pay a portion of their tips to other employees and were required to participate in a mandatory tip pool from January 30, 2007 through January 30, 2012." (Plaintiffs' Memorandum in Support of Motion for Class Certification at 1.)
The United States Supreme Court requires a district court to conduct a "rigorous analysis" into whether the prerequisites of Rule 23 are met before certifying a class.
Fed. R. Civ. P. 23(a). Once these conditions are satisfied, the party seeking certification must then demonstrate that the class falls within one of the subcategories of Rule 23(b).
"`[S]ometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question,'
Furthermore, "`the determination as to a Rule 23 requirement is made only for purposes of class certification and is not binding on the trier of facts, even if that trier is the class certification judge.'"
Rule 23(a)(1) requires a showing that the number of members in the proposed class is so large as to make joinder "impracticable." "While this requirement is commonly referred to as a `numerosity' requirement, the real issue is whether the plaintiff seeking class certification has demonstrated impracticability of joinder."
In the present case, the proposed class and subclass consists of hundreds of past and present employees of Defendants. Plaintiffs represent that there are at least 424 members of the proposed class and subclass. This is sufficient to satisfy the numerosity requirement.
To satisfy Rule 23(a)(2), the proponents of certification of the class must demonstrate that "there are questions of law or fact common to the class."
Essentially, commonality requires demonstrating that class members "have suffered the same injury," which does not mean merely that they have all suffered a violation of the same provision of law.
In challenging the Plaintiffs' satisfaction of the commonality requirement, Defendants argue that the discretion of individual general managers at each nightclub to set daily practices within the confines of the ECI Employee Handbook defeats a showing of commonality. Defendants also argue that the conflicting employee declarations preclude a finding of any common policy or practice of requiring off-the-clock work, tip pooling, and tip sharing which could unify Plaintiffs' claims.
First, Defendants maintain that class certification is improper because each business is operated by independent general managers and management teams. Defendants argue that ECI's role is merely a consultant to the nightclubs providing coaching and leadership to the managers of FSH and FSL. Further, Defendants claim that the general managers implement their own practices and procedures, including procedures for opening and closing, cash checkout, scheduling of employees, topics and length of meetings, and other operational issues.
After a review of the record, Defendants characterization of ECI's relationship with FSL and FSH as one of consulting, as opposed to management, is not supported in the record. Jake Miller
The record further reflects that Jimmy Smith, current Director of Operations at ECI, reports directly to Miller and is responsible for oversight of the three venues in Louisville. Smith testified that in addition to providing oversight of general managers, he is also responsible for leadership, coaching, and support of the clubs. Prior to becoming the Director of Operations for ECI, Smith served as a district manager employed by FSL Management between January of 2008 and 2010. As district manager, Smith testified that he was responsible for Tengo sed Cantina, Angel's Rock Bar, and Hotel. (Smith Dep. at 6-10.) Smith testified that while he was district manager he would have weekly meetings with his general or operations managers, sales managers, and VIP managers. (
Accordingly, the record reflects that each of the three nightclubs in question has an onsite manager who reports to Jimmy Smith, Director of Operations at ECI. Smith reports to Jake Miller, Senior Vice President of ECI, who reports to Reed Cordish, President of ECI. While Hotel, Angel's Rock Bar, and Tengo sed Cantina have individual general managers, ECI through its agents, Miller and Smith, exert control over polices, practices and operations at the nightclubs in question. Furthermore, although there might be slight variations in some of the procedures for opening and closing, cash checkout, scheduling of employees, and topics and length of staff meetings from nightclub to nightclub, the common question in this case is whether Defendants enforced an unlawful, unofficial company policy or practice requiring employees to work off- the-clock without payment of an hourly wage in violation of KRS § 337.275 and/or requiring employees to participate in a tip pool and to share tips with barbacks in violation of KRS §337.065. Thus, given the facts presented, the organizational structure of the Defendants does not destroy commonality.
In challenging the commonality requirement, Defendants primarily argue that the conflicting employee declarations submitted by Defendants preclude a finding of any common policy or practice of requiring off-the-clock work, tip pooling, and tip sharing which could unify Plaintiffs' claims.
Plaintiffs allege that employees were required to participate in promotional teams for different themed events the clubs were planning. The promotional teams consisted of groups of employees who went to other nightclubs, bars, sporting events, concerts, and hotels to promote activities at Tengo sed Cantina, Angel's Rock Bar, and Hotel. These teams would pass out flyers or other advertising material. Plaintiffs maintain that Defendants also required employees (1) to make phone calls to potential customers to sell them a "happy hour party" using lists of potential customer names and phone numbers provided by club management; (2) to promote club events using social media such as Facebook and MySpace; (3) to have a certain number of people on the club's "guest list," a list of people who were admitted to the clubs without paying the cover charge; and (4) to interact with taxicab drivers to encourage them to promote the clubs to their patrons. (
Plaintiffs also allege that employees were also not paid their hourly rate for engaging in setup and closing work, including cleaning the bar area and restocking. (Whitlock Dep. at 86; Moore Dep. at 102-103; Muncy Aff. at ¶¶ 4, 7; Dye Aff. ¶¶6-7; Hides Aff. ¶5; Donnie Chasteen Aff. ¶¶ 5-7; Kayrouz Aff. ¶ 4; Stephen Cross Aff. ¶ 4; Heine Aff. ¶ 5; Jones Aff. ¶ 4.)
Defendants maintain that according to ECI policy "[a]ll hourly employees are required to use the Company's time clock in order to document their work time accurately. Employees must clock in promptly at the start of each shift and may not clock in before their scheduled start time." (Employee Handbook at 24, Defendants' Response, Exhibit 17.) Defendants represent that this has always been Defendants' policy that non-salaried employees are to be clocked-in and earning an hourly wage while performing work on Defendants' behalf. Additionally, Defendants state that employees are always paid in full for all required promotional activity. Defendants tender the affidavits of current employees and two former employees in which they represent that at no point during their non-salaried employment with the Defendants' businesses were they forced by management to work without being paid an hourly wage. (Belew Aff. ¶ 8; Darville Aff. ¶ 9; Proctor Aff. ¶ 8; Paul Aff. ¶ 5; Rudd Aff. ¶ 5; Matter Aff. ¶¶ 7-8; B. Smith Aff. ¶ 7.) Additionally, District Manager Smith testified in his deposition that "we would bring in college kids that would go out and flier." (Smith Dep. at 30.) When asked if any employees such as bartenders or servers ever go out and hand out flyers, Smith testified that they did not. (
After a review of the evidence presented by the parties, the Court finds that the weight of the evidence falls in favor of finding a common policy or practice of requiring off-the-clock promotional activities in violation of Kentucky wage and hour laws. In addition to the anecdotal evidence of individual employees submitted by the Plaintiffs, Plaintiffs tendered manager meeting notes of staff meetings led by District Manager Smith reflecting a policy or practice of requiring employees to engage in uncompensated promotional activities. While Smith in his February 28, 2012, affidavit tries to distance himself from the manager meetings, his deposition clearly reflects that he organized and ran the weekly manager meetings, composed the agenda, and had someone take notes. (J. Smith Dep. at 22-26.) Furthermore, while Smith's affidavit appears to imply that Defendants' employees were naturally outgoing and engaged in promotional activities solely for their own benefit, the manager meeting notes between 2008 and 2009 belie any suggestion that promoting was not a mandatory part of Defendants' business practice. For example,
Under these circumstances, the cases cited by Defendants,
Throughout work shifts, customer tips were placed in communal tip jars. At the end of the night, the tips were split by the bartenders. Plaintiffs contend that the tip pooling arrangement was mandated by management and was not within the discretion of the tipped employees. (Whitlock Dep. at 68; Muncy Dep. at 40.) Additionally, the named Plaintiffs testified that the bartenders were required to pay 20 percent of their tips to the barbacks. This amount was set by management and was not determined by the bartender. (Goodman Dep. at 63; Muncy Dep. at 43; Whitlock Dep. at 68; Moore Dep. 92; Skyrm Dep. at 115; Kimberlee Dye Aff. ¶¶ 8,9; Amber Hides Aff. ¶¶ 6, 7; Whitney Kayrouz Aff. ¶5; Alta Howard Aff. ¶¶4, 5; Richard Jones Aff. ¶ 5.)
Defendants argue that tip pooling is a customary practice in the bar and nightclub industry. According to Defendants, Kentucky wage and hour law permits employers to inform employees of the existence of a voluntary pool and the customary tipping arrangement of the employees at the establishment. Defendants maintain that they have never mandated any tip pooling within their businesses and have never required employees to share the tips they receive. In support of this argument, Defendants submit affidavits from current employees and three former employees. (Belew Aff. ¶¶ 4-6; Proctor Aff. ¶¶ 4-6; Paul Aff. ¶¶ 2-4; B. Smith Aff. ¶¶ 2,4; Matter Aff. ¶¶ 2-6; Rudd Aff. ¶¶2-4; Payne Aff. ¶¶ 2-7.) Defendant represents that tip pooling is strictly voluntarily. In 2010, ECI instituted a written policy providing in part as follows: "Any tip pooling is strictly voluntary. If you feel like you are being forced to pool your tips, please speak to the General Manager or contact Human Resources Manager Ashley Shaw." (Exhibit 15, Defendant's Response.) Relying exclusively on the caselaw from the district courts of California, Defendants argue that the conflicting employee declarations preclude a finding of any common policy or practice of mandatory tip pooling and sharing.
The Court finds that Defendants' arguments do not demonstrate that there are no common questions of law or fact. The common question of fact with regard to this subclass is whether there was a common policy or practice of Defendants to require tipped employees of FSL and FSH to participate in mandatory tip pooling and sharing. "This unofficial policy is the common answer that potentially drives the resolution of this litigation."
While the Court has reviewed the affidavits submitted by Defendants, the Court finds it significant that all but three affidavits relied upon by Defendants are from current employees and managers. Thus, the Court views the affidavits from current employees and managers as less credible due to bias. Additionally, unlike the case law from the district courts of California relied upon by Defendants, the Sixth Circuit instructs that class certification is appropriate "`if class members complain of a pattern or practice that is generally applicable to the class as a whole. Even if some class members have not been injured by the challenged practice, a class may nevertheless be appropriate.'"
Furthermore, contrary to Defendants' argument, the fact that some employees worked for companies with similar policies and practices does not destroy commonality in the present case. Because another company may or may not have violated similar Kentucky wage and hour laws does not negate Defendants liability.
Therefore, for the reasons set forth above, the Court finds that the commonality requirement of Rule 23(a)(2) has been met.
To satisfy the typicality requirement of Rule 23(a)(3), the proponents of class certification must demonstrate that "the claims or defenses of the representative parties are typical of the claims or defenses of the class."
The Court finds that the named Plaintiffs' claims are typical of the class and subclass as they are based on the same legal theory — failure to pay wages as required for work that was performed off-the-clock in violation of KRS § 337.275 and/or requiring tipped employees to pool and share tips in violation of KRS § 337.275. While each nightclub may have different opening and closing hours, different procedures with respect to cash checkout, scheduling of employees, and topics and length of staff meetings, these factual distinctions are not enough to destroy typicality.
Finally, to satisfy the requirement of Rule 23(a)(4), the proponents of certification must demonstrate that `the representative parties will fairly and adequately protect the interests of the class." The Sixth Circuit has articulated two criteria for determining adequacy of representation: "`1) the representative must have common interests with unnamed members of the class, and 2) it must appear that the representatives will vigorously prosecute the interests of the class through qualified counsel.'"
Defendants assert that a number of direct conflicts exist between class representatives and other members of the class. Specifically, Defendants contend that conflicts exist (1) between hourly employees in the putative class and named Plaintiffs David Skyrm and Gary Muncy who served in the role of salaried managers and (2) between the several class representative bartenders and the barbacks with whom they were allegedly made to share tips.
First, Skyrm and Muncy do not have a conflict of interest that affects the proposed class members. While they acted as managers in the nightclubs and admit to having enforced the policies or practices in question, they were also hourly employees who allege that Defendants required them to work off-the-clock and pool and share tips. Second, with respect to the tip pooling subclass, it would appear to the Court that the barbacks would not fall within the class definition. The barbacks have been characterized as non-tipped employees, were not required to pay a portion of their tips to others, and were the beneficiaries of the alleged policy or practice. Therefore, there is no inherent conflict between the bartenders or servers and the barback. Accordingly, no evidence exists that the representative Plaintiffs differ from the class members in any significant circumstance with respect to this issue which would obstruct their ability to vigorously represent the proposed class.
Furthermore, the Defendants in this case do not challenge the qualification or ability of Plaintiffs' counsel to effectively represent the class. The court has reviewed and considered the qualifications of Plaintiffs' counsel and find that counsel have sufficient experience and ability to fairly and adequately represent the interest of the class.
For these reasons, the Court finds that the named Plaintiffs adequately represent the interests of the class as a whole and the requirements of Rule 23(a)(4) have been satisfied.
After satisfying Rule 23(a)'s four prerequisites, the party seeking certification must demonstrate that the action satisfies one of the requirements of Rule 23(b). Plaintiffs argue that they meet the criteria of both Rule 23(b)(1) and Rule 23(b)(3).
Rule 23(b)(1)(A) allows for class certification when "prosecuting separate actions by or against individual class members would create a risk of . . . inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class. . . ." A class action is appropriate under this subsection when "`the party is obliged by law to treat the members of the class alike.'"
Rule 23(b)(1)(B) allows for certification where "individual adjudications `as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests,' Rule 23(b)(1)(B), such as in `limited fund cases, . . . in which numerous persons make claims against a fund insufficient to satisfy all claims.'"
Plaintiffs also contend that certification of the class is proper under Rule 23(b)(3). A class action may be maintained under Rule 23(b)(3) if the Court finds "that the 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 fairly and efficiently adjudicating of the controversy." Fed. R. Civ. P. 23(b)(3). Subdivision (b)(3) of Rule 23 parallels subdivision (a)(2) of Rule 23 in that both require that common questions exist, but subdivision (b)(3) contains a more stringent requirement that common issues "predominate" over individual issues.
Defendants argue that Plaintiffs fail to satisfy the predominance and superiority requirements of Rule 23(b)(3) because individual issues regarding liability and personal damages will predominate over the common issues identified by Plaintiffs. Defendants contend that any collective class adjudication would require proof from a multitude of managers and employees to determine initially the existence of any alleged unwritten de facto policy, therefore defeating Plaintiffs' argument of predominance. Defendants maintain that if this case were to proceed to trial, the Court would be required to hold mini-trials on issues related to managers' and assistant managers' practices with regard to clocking-out and closing procedures. Defendants further argue that the Court would be required to make individualized calculations and damage assessments for each potential class member.
Courts have found that class certification is appropriate in cases in which the plaintiff class challenged a common practice or policy of failing to compensate employees appropriately for time worked, despite the presence of some factual variation in the claims.
Further, individualized damage claims do not defeat the Rule 23(b)(3) class. "Varying damage levels rarely prohibit a class action if the class members' claims possess factual and legal commonality."
Defendants' reliance on
The Court also finds that the class action is the "superior" method of adjudicating the controversy here. For Rule 23(b)(3) certification to be proper, a class action must also be the most fair and efficient method of resolving this case. See Fed. R. Civ. P. 23(b)(3). In analyzing that question, courts must consider four nonexclusive factors: (1) the interest of the class members in maintaining separate actions; (2) "the extent and nature of any litigation concerning the controversy already begun by or against class members"; (3) "the desirability or undesirability of concentrating the litigation of the claims in the particular forum"; and (4) "the likely difficulties managing a class action." See Fed. R. Civ. P. 23(b)(3).
Considering the evidence in the record, the Court finds that litigating the existence of a common policy or practice for the class as a whole would "both reduce the range of issues and promote judicial economy."
Thus, the Court concludes that Plaintiffs have satisfied the requirements of Rule 23(a) and (b)(3).
In their motion, Plaintiffs move this Court to certify a class of all non-salaried employees of FSH and FSL who worked without receiving hourly wages from January 30, 2007, through January 30, 2012. Plaintiffs also ask this Court to certify a subclass for the same time period for tipped employees who participated in mandatory tip pooling and sharing. Defendants argue that because none of the named Plaintiffs worked for any of the Defendants after January 1, 2010, the claims of the potential class members employed or hired after that date are not fairly encompassed by the named Plaintiffs' claims. Thus, Defendant contends that the named Plaintiffs cannot fairly or adequately represent the interests of these potential class members. Additionally, Defendants argue that the named Plaintiffs have made no effort to show that their claims are common or typical of the claims of the potential class members employed after January 1, 2010. Defendants contend that Plaintiffs have not argued, much less proven, that Defendants used the same alleged uniform policies from January 2010 through January 30, 2012. Plaintiffs do not address this argument in their reply.
In the employment context, "courts have held that former employees have standing to represent a class consisting of both current and past employees."
However, this determination does not address the issue of whether the proposed class and subclass may be defined too broadly in terms of its duration by extending the class to employees who worked through January 30, 2012. In reviewing Plaintiffs' motion for class certification, it appears that Plaintiffs selected the date the motion for class certification was filed as the end date for the class definition. Plaintiffs do not offer an explanation of their selection of January 30, 2012, as the end date. Therefore, the Court interprets the Plaintiffs' failure to address the Defendants' argument as a concession that January 1, 2010, is the appropriate end date for the class definition.
The Court finds that Plaintiffs have satisfied the prerequisites for certification of the class under Rule 23. For the reasons set forth above, and the Court being otherwise sufficiently advised,