McFeeley et al v. Jackson Street Entertainment, LLC et al, No. 8:2012cv01019 - Document 12 (D. Md. 2012)
Court Description: MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 11/26/12. (sat, Chambers)
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : LAURA MCFEELEY, et al., : v. : Civil Action No. DKC 12-1019 : JACKSON STREET ENTERTAINMENT, LLC, et al. : MEMORANDUM OPINION Presently pending and ready for review in this Fair Labor Standards Act ( FLSA ) case is the motion to dismiss Defendants counterclaims filed by Plaintiffs Laura McFeeley and Danielle Everett (ECF No. 5). The issues have been fully briefed, and the court now rules, no hearing being deemed necessary. Rule 105.6. Local For the following reasons, the motion to dismiss will be granted in part and denied in part. I. Background1 Plaintiffs Laura McFeeley and Danielle Everett are exotic dancers who have sued the exotic dance clubs, Fuego s Exotic Dance Club individuals Street 1 and and Club Extasy entities Entertainment, that LLC, Exotic operate Risque LLC, Dance both Club, of Quantum them: and the Jackson Entertainment Unless otherwise noted, the facts outlined here construed in the light most favorable to Defendants, nonmoving parties. are the Group, LLC, Nico Enterprises, Inc., XTC Entertainment, and Uwa Offiah, for violations of the FLSA and the Maryland Wage and Hour Law ( MWHL ). (ECF No. 3). McFeeley danced at Fuego from March 1, 2009 to March 15, 2012. Everett danced at Fuego and Club Extasy from May 1, 2010 through October 31, 2011. allege that Plaintiffs In their counterclaims, Defendants danced as independent contractors, pursuant to contracts they signed with Defendants. terms of these contracts, Plaintiffs directly by the clubs patrons. were paid Under the for dances Plaintiffs paid a nightly fee ranging from $20-60 to the clubs in exchange for access to the clubs facilities and services. At the clubs, dancers performed on the main stage and had the opportunity to provide table side dances and dances in VIP rooms. Dancers paid the clubs a fee for each private or semi-private dance they performed, and the clubs set a standard, minimum price that required to charge patrons for these dances. the dancers were During Plaintiffs employment, dancers were required to charge $10 for tableside dances, $15 for dances in the VIP II area, and $30 for a dance in the VIP I area. They were free to set any price they desire for a private or semi-private dance, so long as it met the club s set minimum fee. Dancers kept all of the proceeds of tableside and VIP II area dances, and were required to pay the clubs $10 per dance in the VIP I area. 2 Dancers also regularly received gratuities above the dance fees. Defendants aver that based on dance fees and tips, all dancers, including Plaintiffs, were compensated well beyond the federal minimum wage for their work. A. On Procedural Background April 3, 2012, Plaintiffs filed Defendants, alleging three counts: a complaint against violation of the FLSA for failure to pay minimum wage; violation of the FLSA for failure to pay overtime; and violation of the MWHL for failure to pay minimum wage and overtime. Defendants filed an (ECF No. 1). answer, On April 18, before Plaintiffs allegations in an amended complaint. augmented (ECF No. 3). subsequently filed an answer and counterclaims. Defendants counterclaims include: their Defendants (ECF No. 4). breach of contract, unjust enrichment, quantum meruit, accounting, conversion, and fraud. Plaintiffs moved to dismiss the counterclaims, arguing that they are in waiver essence of permitted. replied. claims Plaintiffs (ECF No. for FLSA 5) indemnification rights, Defendants both and of opposed, constitute which and are a not Plaintiffs (ECF Nos. 6-7).2 2 Both the counterclaims and the arguments for dismissal mirror those in Ruffin v. Entm t of the E. Panhandle, 845 F.Supp.2d 762 (N.D.W.Va. 2011). 3 II. Standard of Review Fed.R.Civ.P. complaint. 12(b)(6) the sufficiency of the Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006). standard tests of Rule A counter-complaint need only satisfy the 8(a), which requires a short and plain statement of the claim showing that the pleader is entitled to relief. Fed.R.Civ.P. 8(a)(2). Rule 8(a)(2) still requires a showing, rather than a blanket assertion, of entitlement to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 n. 3, (2007). That showing must consist of more than a formulaic recitation of the elements of a cause of action or assertion[s] devoid of further factual enhancement. v. Iqbal, 556 U.S. 662, 678, (2009) (internal naked Ashcroft citations omitted). At this stage, the court must consider all well-pleaded allegations in a counter-complaint as true, Albright v. Oliver, 510 U.S. 266, 268 (1994), and must construe all factual allegations in the light most favorable to the counter-claimant, see Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir. 1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). The court need not, however, accept unsupported legal allegations. Revene v. Charles Cnty. Comm'rs, 882 F.2d 870, 873 (4th Cir. 1979). Nor must it agree with legal conclusions couched as factual allegations, Iqbal, 556 U.S. at 4 678, or conclusory factual allegations devoid of any reference to actual events, United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979); see also Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009). [W]here 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 show[n] . . . that the pleader is entitled to relief. 556 U.S. at 679 (quoting Fed.R.Civ.P. 8(a)(2)). not Iqbal, Thus, [d]etermining whether a [counter-complaint] states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. Id. III. Analysis A. Breach of Contract/Unjust Enrichment In their counterclaims for breach of contract and unjust enrichment, contracts Defendants and allege conducted that Plaintiffs themselves as entered though related Defendants as independent contractors, not employees. into to By filing this lawsuit and retroactively claiming that they were employees (and, by extension, not properly allegedly breached their contracts. compensated), Plaintiffs As damages for this breach, Defendants seek the return of fees related to all private and semi-private dances performed by Plaintiffs. 5 Alternatively, Plaintiffs acting failed to collect would have done Defendants like independent revenues had allege as a result contractors, generated Plaintiffs that by been of Defendants Plaintiffs, employees. as they Should Plaintiffs prevail on their FLSA claims, Defendants assert that Plaintiffs will be unjustly enriched at Defendants expense. Therefore, they seek restitution and an accounting of all fees collected by Plaintiffs. Plaintiffs present three grounds counterclaims: first, that they indemnification; second, that they are are for dismissal improper based on of the claims for an unlawful waiver of Plaintiffs FLSA rights; and third, that Defendants have not alleged that the fees charged for dances are service charges rather than tips. 1. Improper Claims for Indemnification Plaintiffs first argue that Defendants counterclaims are basically claims for indemnification, against Defendants potential FLSA liability, which are not allowed under the FLSA. See Lyle v. Food Lion, Inc., 954 F.2d 984, 987 (4th Cir. 1992) ( In effect, Food Lion sought to indemnify itself against [the manager] for its own violation of the FLSA, which . . . is something the FLSA simply will not allow. ). In Lyle, Food Lion counterclaimed that its employee breached his contract with and fiduciary duty to Food Lion by 6 violating and allowing an employee to violate its prohibition of off-the-clock work. Id. Unlike in Lyle, Defendants here do not attribute any fault in any potential FLSA violation to Plaintiffs. Rather, they seek either the return of the alleged dance service charges, or an offset against potential FLSA liability based upon Plaintiffs retention of those fees. Defendants counterclaims do not improperly seek indemnification. 2. Unlawful Waiver of FLSA Rights Plaintiffs also argue that Defendants counterclaims rely on an unlawful waiver of their FLSA rights: that is, that Plaintiffs could not have lawfully entered into a contract with Defendants to waive the FLSA s minimum wage protections. The right to a minimum wage under the [FLSA] cannot be waived by agreement between the employer and his employee. Mayhue s Super Liquor Stores, Inc. v. Hodgson, 464 F.2d 1196, 1197 (5th Cir. 1972) (1945)). (citing Brooklyn Bank v. O Neil, 324 U.S. 697 Here, Defendants allege that, pursuant to the terms of their contracts with the clubs, Plaintiffs and other dancers received greater compensation than they would have earned at a rate of minimum wage. Therefore, as alleged, the parties contract does not constitute an unlawful waiver of Plaintiffs FLSA rights. 7 3. Tips Mischaracterized as Service Fees Finally, Plaintiffs argue that Defendants have insufficiently pled that the dance fees were service charges, which may be offset against Defendants minimum wage liability, rather than tips. An employer may offset the full amount of a service charge against its minimum wage liability, but may offset up to fifty per cent of all tips received if: (i) the employer has informed the employees of this tip credit provision; and (ii) tipped employees retain all tips received except for those tips included in a tipping pool among employees who customarily receive tips. Reich v. ABC/York Estes Corp., No. 91-C-6265, 1997 WL 264379, at *4, (N.D.Ill. May 9, 1997) (citing 29 U.S.C. § 203(m)). Tip is defined by the implementing regulations for § 203(m) thus: A tip is a sum presented by a customer as a gift or gratuity in recognition of some service performed for him. It is to be distinguished from payment of a charge, if any, made for the service. Whether a tip is to be given, and its amounts, are matters determined solely by the customer, and generally he has the right to determine who shall be the recipient of his gratuity. In the absence of an agreement to the contrary between the recipient and a third party, a tip becomes the property of the person in recognition of whose service it is presented by the customer. Id. at *5 (quoting 29 C.F.R. § 531.52). provide examples of compensation which The regulations also is and which is not considered to be a tip and, in doing so, distinguishes between 8 a service charge 531.55(a) and (b)). and a tip. Id. (citing 29 C.F.R. The regulations further explain that: (a) A compulsory charge for service, such as 10 percent of the amount of the bill, imposed on a customer by an employer's establishment, is not a tip and, even if distributed by the employer to his employees, cannot be counted as a tip received in applying the provision of [29 U.S.C. §§ 203(m) and (t)] . . . . (b) As stated above, service charges and other similar sums which become part of the employer's gross receipts are not tips for the purposes of the Act. However, where such sums are distributed by the employer to his employees, they may be used in their entirety to satisfy the monetary requirements of the Act. Id. (quoting original). 29 C.F.R. § 531.55(a) and (b)) (emphasis in Interpreting the regulations, the court in Reich held that an employer must include payments in its records as gross receipts as a prerequisite classification under the FLSA. to service charge Id. at *5. Because Defendants allege that they set the minimum prices that dancers could charge for dances, and that they received a portion of those fees, they have adequately pled that the fees constituted service charges, Defendants minimum wage which liability, Plaintiffs motion to dismiss. 9 may in be offset order to against survive 4. Accounting Defendants also seek an accounting of the dance fees that Plaintiffs collected and did not turn over to Defendants, as well as all tips collected by Plaintiffs. Plaintiffs argue that an accounting is not warranted. An accounting is unnecessary where discovery is sufficient to determine the amounts at issue. Doe v. Cin Lan, Inc., 2010 WL 726710, at *8 (E.D.Mich. Feb. 24, 2010) (quoting King v. Bank of Am. Corp., 2009)). 2009 WL Defendants 2960425, make no at *2 (E.D.Mich. arguments to show Sept. why 11, ordinary discovery devices will be insufficient to establish the amounts of Plaintiffs necessary. dance fees Therefore, and tips Defendants and have an failed accounting to allege is a plausible claim for an accounting. B. In that by Conversion their counterclaim keeping any for portion of conversion, the dance Defendants allege performance fees, Plaintiffs have converted Defendants property to their own use. Plaintiffs argue that Defendants freely permitted Plaintiffs to retain the fees in question, and never considered them to be Defendants property. In Maryland, [a] conversion may consist of a wrongful, tortious or unlawful taking of property from the possession of another . . . without his consent or approbation, either express or implied. Darcars Motors of Silver Spring, 10 Inc. v. Borzym, 379 Md. 249, 262 (2004) (quoting Wallace v. Lechman & Johnson, Inc., 354 Md. 622, 633 (1999)). Defendants do not respond to Plaintiffs arguments on this issue, and at the that time Plaintiffs collected allowed Plaintiffs they service to fees, retain Defendants them. admit Therefore, Defendants cannot state a plausible claim for conversion. C. Fraud Finally, Defendants allege that Plaintiffs committed fraud by misrepresenting themselves as independent contractors and not employees. They receive benefits the repudiating that employees. further of status Finally, allege that Plaintiffs independent-contractor and claiming Defendants in allege this that intended status lawsuit they to before to be relied on Plaintiffs representations to their detriment. At base, these allegations suggest that Plaintiffs share fault with Defendants for any potential FLSA violations because they misrepresented their status depends to on Defendants. Defendants Ultimately, Plaintiffs status treatment of Plaintiffs. Therefore, Defendants counterclaim for fraud seeks improper indemnification for Defendants potential violation of the FLSA, and will be dismissed. IV. See Lyle, 954 F.2d at 987. Conclusion For the Defendants foregoing counterclaims reasons, filed 11 by the motion Plaintiffs to dismiss McFeeley and Everett will be granted in part and denied in part. A separate order will follow. /s/ DEBORAH K. CHASANOW United States District Judge 12
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