Dunphy v. Martins et al, No. 4:2017cv01225 - Document 125 (S.D. Tex. 2019)
Court Description: MEMORANDUM OPINION AND ORDER denying 118 Opposed MOTION for Leave to File Answer to Plaintiffs Second Amended Collective Action Complaint; denying 122 MOTION to Strike 119 Response in Opposition to Motion; denying 120 Response in Opposition to Motion ; granting in part, denying in part 114 MOTION for Summary Judgment , ORDER REFERRING CASE to Magistrate Judge Nancy K Johnson for settlement. (Signed by Judge Sim Lake) Parties notified.(gclair, 4)
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Dunphy v. Martins et al Doc. 125 United States District Court Southern District of Texas ENTERED November 15, 2019 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION David J. Bradley, Clerk SERAH DUNPHY , Indiv idually and on Behalf of A1l Others Similarly Situated , Plaintiffs, V . PROJECT ARISTOCRAT LIFE FOUNDATION ; WERUNTEXA S, LLC C IV IL A CT ION NO . H -1 7-12 25 d/b/a MERCY; WE RUN HOU, LLC d/b/a ENGINE ROOM; JONATHAN REITZELL ; STEVEN A . ROGERS ; JOHN CARAVELLO ; TANNER COX ; and MOJEED MARTINS , JR ., Defendants . MEMOPANDUM OPINION AND ORDER Plaintiff Serah Dunphy , on behalf of herself and similarly situated individuals (collectively uPlaintiffs''), filed this action against defendants Project Aristocrat Life Foundation, WeRunTexas, LCC d/b/a Mercy, We Run Hou, LLC d/b/a Engine Room, Jonathan Reitzell, Steven A. Rogers, John Caravello, Tanner Cox, and Mojeed Martins, alleging that the defendants violated the Fair Labor Standards Act (UFLSA'') by failing to pay employees wages for hours worked and w ithholding tips x Pending before the court are lsee Plaintiff's Second Amended Collective Action Complaint (usecond Amended Complaint''), Docket Entry No . 85, pp . 7-8. All page numbers for docket entries in the record refer to the pagination inserted at the top of the page by the court's electronic filing system, CM/ECF. Dockets.Justia.com Defendants ' Rule 56 Motion for Partial Summary Judgment ('ADefendants' MSJ'') (Docket Entry No. 112); Plaintiffs' Motion for Summary Judgment C'plaintiffs' MSJ' ') (Docket Entry No . 114); Defendants' Motion for Leave to File Amended Pleading (uDefendants' Motion to Amend'') (Docket Entry No . 118); Defendants' Supplemental Motion for Continuance and Response Plaintiff's Motion Summary Judgment (uDefendants' Supplemental Motion for Continuance and Response'') (Docket Entry No. 120); and Plaintiff's Motion to Strike Defendants' Supplemental Response to Plaintiffs ' Motion for Summary Judgment and Defendants' Exhibits and 4 to Defendants' Response to Plaintiff's Motion for Summary Judgment CAplaintiff's Motion Strike'') WeRunTexas, (Docket Entry No. 122) Only Defendants d/b/a Mercy (uMercy''), Mojeed Martins, Jonathan Reitzell, and Steven Rogers (collectively nDefendants'') have filed motions . For the reasons exp lained below , Defendants ' motions will be denied , Plaintiff's Motion to Strike will be denied , and Plaintiff's Motion for Summary Judgment will be granted in part and denied in part . 1. Factual and Procedural Backcround Mercy Nightclub (''Mercy'') is located in Houston, Texas, and in February of 2017 was owned and operated by WeRunTexas , LLC .2 WeRunTexas co -owned by individual defendants Steven Rogers, Jonathan Reitzell, and Mojeed Martins, Jr. (collectively uthe zDeclaration of John Caravello (ucaravello Declaration'o , Exhibit 6 to Plaintiff's MSJ, Docket Entry No. 114-6, p. 2 ! 2. Co-owners'').3 manager to The Co-owners hired John Caravello as general run Mercy x The Co-owners were not passive shareholders ; they had areas of responsibility and played some role managing the club .5 Steven Rogers, for example, was responsible for building maintenance .6 managers and marketing , met regularly operations, uncontradicted The Co-owners oversaw testimony and with John Caravello performance .? also states that John the to club 's discuss Caravello 's three Co-owners were responsible for paying the waitstaff and exercised control over operations of the c1ub .8 Mercy hosted several special events on February 2 , 2017 that year's Super Bowl .9 4 , and Mercy 's Co-owners hired 3Ora1 Deposition of Steven A . Rogers (uRogers Deposition/o , Exhibit 4 to Plaintiff 's MSJ , Docket Entry No . 114 -4 , p . 3 . Glohn Caravello Offer Letter, Exhibit 2 to Defendants ' Motion for Continuance and Response to Plaintiff's Motion for Summary Judgment (nDefendants' Response and Motion for Continuancev), Docket Entry No . 119-2, p . 2 ; Rogers Deposition , Exhibit 4 to Plaintiff 's MSJ , Docket Entry No . 114-4 , p . 1O . sRogers Deposition , Exhibit No . 114 -4 , p . 5. to Plaintiff's MSJ , Docket Entry 6Id . at Vld. at 1O; Oral Deposition of John Caravello (ncaravello Deposition'/), Exhibit 5 to Plaintiff's MSJ, Docket Entry No. 114-5, pp. 11-12; Oral Deposition of Mojeed Martins (''Martins Deposition'o , Exhibit 11 to Plaintiff's MSJ , Docket Entry No . 114-13, pp . 5-6 . 8caravello Deposition , Exhibit Entry No . pp . 5-6, l6 . Plaintiff's MSJ , Docket 92017 Super Bowl Event Advertisements, Exhibit 6-B to Plaintiff's Response to Defendants ' Rule 56 Motion for Partial Summary Judgment Clplaintiff's Response'o , Docket Entry No. 117-8, pP . 3-6 . music artists and celebrities to appear at the club in order to attract more customers over the weekend x o The events were advertised online , and table reservations and liquor packages could be purchased online x l weekend, Mercy hired To handle the expected patronage that cocktail waitresses and runners C'the waitstaff'o , including Plaintiffs, although a dispute exists as to whether John Caravello or the Co-owners controlled that hiring x z The waitstaff sold and delivered alcoho l customers x 3 alcohol served at the events included foreign-made brands such as Hennessy , D 'ussé , and Cîroc .l4 The waitstaff were also told to post about the Super Bowl Events on social media xs l0Id .; Rogers Deposition , Exh ibit 4 to Plaintiff 's MSJ , Docket Entry No . 114-4 , p .14 . llsuper Bowl Event Advertisements, Exhibit 6-B to Plaintiff's Response , Docket Entry No . 117-8, pp . 3-67 Caravello Declaration , Exhibit 6 to Plaintiff's MSJ, Docket Entry No. 114-6, p. 3 ff 7-8. HDeclaration of Jonathan Reitzell PAReitzell Declarationro , Exhibit 1 to Defendant's Response and Motion for Continuance , Docket Entry No. 119-1, p. 2 ! 2 (ulohn hired al1 of the young ladies.'o ; Caravello Deposition, Exhibit 4 to Plaintiff's MSJ, Docket Entry No. 114-5, p . 8 C'The owners of the business (had final say on hiringl.v). HDefendants' Amended Answers to Plaintiff's First Set of Interrogatories to Defendants (uDefendants' Interrogatory Answers'o , Exhibit 2 to Plaintiff's Response, Docket Entry No . 117-2 , p . 16 Interrogatory 15; Caravello Declaration , Exhibit 6 to Plaintiff's MSJ, Docket Entry No. 144-6, p. 3 ff 6, 8. Msuper Bowl Liquor Menu , Exhibit 6-A to Plaintiff 's MSJ , Docket Entry No . 114-7 , pp . 2-3 ; Super Bowl Event Advertisements , Exhibit 6-B to Plaintiff's Response , Docket Entry No . 117-8 , pp . 3-6 . HDunphy Declaration , Exhibit 8 to Plaintiffs ' Response, Docket Entry No. 117-10, p. 3 $ 67 Declaration of Erin Carantza (ncarantza (continued - .) The waitstaff's pay was : '$2.13 per hour worked plus tips.''l6 The tips included all credit card and cash tips earned , plus a flat rate for gratuities on party packages x 7 According to Plaintiffs, they collected uthousands of dollars in cash tip s alone'' during the events .l8 But the waitstaff were required to turn in tip s earned each night that they could be pooled x g Handbook and deposition Mercy 's Employee testimony state that five percent of waitstaff tips should have been tipped out to the service bartender and sweeper staff , and the remainder shou ld have been divided between the waitstaff who worked that shift and paid back to them as part of their paychecksxo The hired waitstaff worked seven to eight hours each night of the Super Bowl Events, and some worked additional hours on February 4 , 2017 .21 lst- .continued) Declaration''), Exhibit 10 to Plaintiffs' Response, Docket Entry No. 117-12, p. 3 ! 6. l6Defendants ' Interrogatory Answers , Exhibit 2 to Plaintiff 's Response, Docket Entry No . 117-2, p . 16 Interrogatory 16. l7oral Deposition of Mojeed Martins (uMartins Deposition'o , Exhibit 11 to Plaintiff 's Response , Docket Entry No . 117-13 , p . 8 . l8Declaration of Serah Dunphy in Support of Response to Motion for Summary Judgment (MDunphy Declaration/'), Exhibit 8 to Plaintiffs' Response, Docket Entry No. 117-10, p. 3 f 8. HDunphy Declaration , Exhibit 8 to Plaintiffs ' Response , Docket Entry No. 117-10, p. 3 $f 5, 8. zoMercy Nightclub Employee Handbook, Exhibit 7 to Plaintiffs' MSJ , Docket Entry No . 114-9 , p . 14; Dunphy Declaration , Exhib it 8 to Plaintiffs ' Response , Docket Entry No. 117-10, p. 3 f 5. nDunphy Declaration , Exh ibit 8 to Plaintiffs ' Response , Docket Entry No. 117-10, p. 3 $ 7. On February 2017, Steven Rogers, a Co -owner of Mercy , paid the Super Bowl event waitstaff with personal checks his own name .22 According to uncontradicted statements from Plaintiffs and John Caravello , the amount paid did not account for the fu ll amount of tips and wages the waitstaff earned during the Super Bowl weekend events .23 Plaintiffs filed this action on April 2017, seeking the alleged unpaid minimum wages and tip s for herself and others similarly situated under the FLSA .24 Defendants filed their answer on March 23 , 2018 .25 Plaintiffs' most recent amended comp laint was filed on June 2019.26 Discovery has concluded and on August 2019 , the court set the case for trial on September 23, 2019 , and later rescheduled the trial for December 2019 .27 With the leave 22Id. at 3 $ 10; Carantza Declaration, Exhibit 10 to Plaintiffs' Response, Docket Entry No. 117-12, p. 3 f 10; Steven Rogers Checks, Exhibit 12 to No . 117-14 , pp . 2-3 . Plaintiffs ' Response , Docket Entry 23Carave1lo Deposition , Exhibit 5 to Plaintiffs ' Response, Docket Entry No . 117-5, p . 4 ; Serah Dunphy Declaration , Exhibit 8 to Plaintiffs' Response, Docket Entry No. 117-10, p. 3 f 87 Carantza Declaration , Exhib it 10 to Plaintiffs' Response , Docket Entry No. 117-12, p. 3 $ 9. M plaintiff's Original Collective Action Complain , Docket Entry No. 1, pp. 1, 9 ! 8.3. MDefendants' A ffirmative and Other Defenses and Answer to Plaintiffs' First Amended Collective Action Comp laint, Docket Entry No . 32. 26second Amended Complaint, Docket Entry No . 8 5 . MMinute Entry Order, Docket Entry No. 1O7 (setting the trial for September 23, 2019); Order Granting Plaintiffs' Unopposed Motion for Continuance of Trial, Docket Entry No. 11O (resetting the trial for December 2, 2019). of the court, Defendants filed their motion for summary judgment on September 11 , 2019 , contending that there is no evidence that would establish that the FLSA applies .28 for summary judgment on September Plaintiffs filed their motion 2019, seeking judgment on a1l elements of their FLSA claim except damages x g their response on October 2019 .30 Plaintiffs filed October 2019, Defendants filed a motion for leave to amend their answer .3l On October 18, 2019 , Defendants filed a response and a motion asking the court to continue its consideration of the motions for summary judgment until decides the motion to amend.32 Defendants filed a supplemental motion to their response on October 21, 2019 .33 On October 25 , 2019, Plaintiffs filed their rep ly and also a motion to strike one of Defendant 's response briefs and two of Defendant's exhibits .34 On November 4, 2019, Plaintiffs filed a response brief opposing Defendants' motion for leave to amend .35 z8Defendant's MSJ , Docket Entry No . 112 . zgplaintiffs ' MSJ , Docket Entry No . M plaintiffs' Response , Docket Entry No . HDefendants' Motion to Amend , Docket Entry No . 118 . HDefendants' Response and Motion for Continuance , Docket Entry No . HDefendants' Supplemental Motion for Continuance and Response , Docket Entry No . 120. Mplaintiffs ' Reply in Support of Plaintiffs' MSJ, Docket Entry No . 123; Plaintiffs' Motion to Strike , Docket Entry No . 122 . 3splaintiffs' Response to Defendants' Motion for Leave to File an Answer to Plaintiffs ' Second Amended Comp laint, Docket Entry N o . 124 . II . Motion to Strike and Adm issibilitv of Exhibits The court must first resolve Plaintiffs' Motion to Strike Defendants' Supplemental Response and two of Defendants' exhibits . Defendants filed their response to Plaintiffs' MSJ on its due date, twenty-one days after Plaintiff filed her motion .36 Three days later, Defendants filed their supplemental response x? Plaintiffs argue that the supplemental response should be stricken because it was filed late without leave of the court .38 However , the court has a strong policy of resolv ing issues on the merits rather than on procedural technicalities . Oramulu v . Washington Mutual Bank , C .A . No. H-08-00277, 2009 WL 7838118, at *2 (S .D . Tex. June 2009). Accordingly , the Motion to Strike Defendants' Supplemental Response will be denied . Plaintiffs also move to strike Exhibits 3 and 4 to Defendant's Response x g Exhibit 3 appears to be an unsigned contract drafted by John Caravello that would have granted him greater scope of authority as manager of Mercy Nightclub x D Exhibit 4 appears to be a text message conversation dated January 3, 2017, between several women and the Mercy managers, where John Caravello , called uboss'' 36Defendants' Supplemental Motion for Continuance and Response, Docket Entry No . 120. 37y(' j. 38plaintiffs' Motion to Strike , Docket Entry No . 122 , p . 39Id . at 3-5 . O caravello Contract, Exhib it 3 to Defendants ' Response and Motion for Continuance, Docket Entry No . 119-3 , pp . 2-6 . in the conversation , informs the women that they can come pick up their tips .4l To authenticate these documents , Defendants prov ide a declaration by Jonathan Reitzel that he has personal knowledge of the exh ibit .42 Testimony by a knowledgeable witness may suffice to support a finding that an item is what purports to be and thus sufficiently authenticated for admission into evidence . Fed . P. 9O1(b)(1)7 Thompson v . Bank of America National Association, 783 1022, 1027 (5th 2015). the summary judgment stage , Reitzel's statement that the exhibits are what they purport be satisfies the 1ow burden for authentication . Plaintiffs also argue that the exhibits should be stricken because the contract bears no signatures and the tex t message does not show John Caravello was fact Plaintiffs' boss .43 These arguments relate to whether the exh ibits show a genu ine issue of material fact rather than whether they are admissible . Accordingly , the court will deny Plaintiffs' Motion to Strike the exhibits . The court will consider b0th Defendants' Supp lemental Response and Defendants' exhibits in deciding the pend ing motions . In their Supplemental Response , Defendants argue that the court should disregard the Caravello Declaration (Docket Entry H Text Message , Exhibit 4 to Defendants ' Response and Motion for Continuance , Docket Entry No . 119-4 . HDeclaration of Jonathan Reitzel , Exhib it l to Defendants ' Response and Motion for Continuance , Docket Entry No . 119-1 , p . 1 . O plaintiffs' Motion to Strike , Docket Entry No . 114-6) as a sham declaration x4 A sham declaration is one that contradicts the declarant's prior deposïtion testimony to raise a fact issue . Doe ex rel . Doe v . Dallas Independent School District, F.3d 380, 386 (5th Cir. 2000). Defendants do not point to any prior deposition testimony that the declaration contradicts, and the court concludes the sham affidavit rule does not app ly . 111 . Summary Judqment Standlr; of Review Summary judgment is appropriate if the movant establishes that there is no genuine dispute about any material fact and the movant is entitled to judgment as a matter of law. Fed. Disputes about material facts are genuine Civ . 56 (a). the evidence is such that a reasonable jury could return a verdict for the nonmoving party .'' Anderson v . Liberty Lobbv , Inc . , - 2505 , 2510 (1986). The moving party is entitled to judgment as a matter of law if uthe nonmov ing party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof .'' Celotex Corp . v . Catrett , S. 2548, 2552 (1986) party moving for summary judgment nmust 'demonstrate the absence of a genuine issue of material fact ,' but need not negate the elements of the nonmovant 's case .'' Little v . Liquid A ir Corp w 37 F .3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam) (quoting Celotex, lO6 S. Ct. at 2553). nIf the moving party fails to meet GDefendants' Supplemental Motion for Continuance and Response , Docket Entry No . 120. this initial burden, the motion must be denied , regardless of the nonmovant's response .'' Id . If the mov ing party meets th is burden , Rule 56 (c) requires the nonmovant to go beyond the pleadings and show affidavits, depositions, answers to interrogatories, admissions on file, or other admissib le ev idence that specific facts exist over which there is a genuine issue for trial . Id . The nonmovant ''must do more than simply show that there is some metaphysical doubt as to the material facts .'' Matsushita Electric Industrial Co ., Ltd . v . Zenith Radio Corp . 106 S . Ct . 1348 , 1356 (1986). In reviewing the evidence nthe court must draw all reasonable inferences favor the nonmov ing party , and may not make Reev es credibility determinations or weigh the evidence .'' Sanderson Plumbinq Products , Inc ., 2097, v. (2OOO). The court resolves factual controversies in favor of the nonmovant , ubut only when there is an actual controversy , that is, when b0th parties have submitted evidence of contradictory facts .'' Little, at 1075. IV . FLSA Comm erce Recuirement Plaintiffs assert a claim against defendants for unpaid minimum wages and tips under the FLSA .45 see 29 U.S .C. 216 (b). The FLSA 'S wage and tip provisions apply only to employees ''engaged in commerce or the production of goods for commerce'' 45second Amended Complaint, Docket Entry No . 85, p . 8 . - 1 1- uemp loyed in an enterprise engaged in commerce or in the production of goods for commerce.'' Id . 5 206 (a). Defendants' MSJ contends that no evidence supports that Plaintiffs were engaged in commerce or emp loyed by an enterprise engaged commerce and so the FLSA does not cover Plaintiffs .46 Plaintiffs argue that Defendants are bound by their p leadings , which admit being an enterprise engaged in interstate commerce, and that the evidence presents a genuine issue of material fact on the issue .47 Defendants request leave to amend their answer to remove the admission that they are an enterprise engaged in commerce x 8 A. Judicial Adm ission and Motion for Leave to Amend Facts admitted in the pleadings uare considered to be judicial admissions conclu sively binding on the party who made them .' ' White v. ARco/polymers, Inc w 720 F.2d 1391, 1396 (5th Cir. 1983). Once admitted , the facts are considered uno longer at issue .'' Davis v . A .G. Edwards and Sons, Inc., 823 F.2d 105, l08 (5th Cir. 1987). When Defendants pled an admission that they ''were an enterprise engages Esic) in commerce or in the production of goods for 46Defendants' MSJ, Docket Entry No. 112, pp. 4-5 $$ 14-16. U plaintiffs ' Response , Docket Entry No . 117, pp . 11-12. 48Defendants ' Motion to Amend , Docket Entry No . 11 8 ; comp are Defendants ' Answer to Plaintiff 's Second Amended Collective Action Complaint, Exhibit A to Defendants ' Motion to Amend, Docket Entry No. 118-1, p. 5 ! 5.2 with Defendants Affirmative and Other Defenses and Answer to Plaintiffs ' First Amended Collective Action Complaint (sicq (uDefendants' Answer'o , Docket Entry No. 32, p . 4 ! 5.2. commerce within the meaning of the FLSA ,''49 they bound themselves that statement and agreed that the FLSA 'S commerce requirement was not a contested issue in this case . Defendants may not rely on an argument summary judgment that controverts their prior judicial admission. Bowman v. CitiMortqaqe, Inc., 768 F. App'x (5th Cir . 2019) Defendants do not contest that their p leading adm its that the FLSA 'S commerce requirement met . Instead, they move for leave to amend their pleading to remove that admission x o Leave to amend pleadings nshall be freely given when justice so requires.'' Fed. Civ . P. l5a (a) But leave to amend decision to grant or deny leave not automatic and nthe amend lies within the sound discretion of the district court .'' Little v . Ligu id Air Corp w 952 F.2d 841, 845-46 (5th Cir. 1992). Factors the court may consider in exercising that discretion include undue delay , bad faith or dilatory motives, repeated failures cure deficiencies when previously allowed, and undue prejudice to the opposing party. Id. Motions discovery amend and disfavored . on the p leadings made after the conclusion of the eve trial , as here, are Id .; Daves v . Payless Cashwavs , Inc ., especially F .2d 1022, 1025 (5th Cir. 1981). O Defendants ' Answer , Docket Entry No. 32, p. 4 f 5.2 (admitting to the allegation in Plaintiffs' Original Collective Action Complaint Cïoriginal Complaint''), Docket Entry No. 1, p . 5 $ 5.2). ODefendants' Motion to Amend , Docket Entry No . 118 , p . Defendants ' motion was subm itted thirty months after Plaintiff filed her Original Complaint and nineteen months after Defendants' Answer .sl Defendants argue that their amended answer is responsive to Plaintiffs ' Second Amended Complaint , filed on June 4 , 2019 , but that amendment did not change or add to the allegation of FLSA commerce paragraph 5 .2 .52 allegation has been part Plaintiffs' claim s since the outset of this action . Defendants have had ample opportunity Because amend their answer and retract their judicial admission, denial of their late motion to amend is appropriate. See id. (holding that a delay of over a year in requesting leave to amend justified denial of leave to amend). Accordingly , Defendants' Motion Amend will be denied, and Defendants are bound by their admission that the FLSA commerce requirement satisfied . Defendants' Supplemental Motion for Continuance requesting that the court delay ruling on Plaintiffs ' MSJ until after allowing Defendants' Motion to Amend w ill be denied a s m oo t . B. FLSA Coverage Merits Even Defendants were not bound by their adm ission , to prevail on their own summary judgment motion Defendants must 5lId . (filed October 14, 2019); Original Comp laint, Docket Entry No. 1 (filed April 19, 2017); Defendants' Answer , Docket Entry No. 32 (filed March 23, 2018). Ooriginal Complaint, Docket Entry No. 1, p. 5 $ 5.2; Plaintiffs' First Amended Collective Action Complaint ('AFirst Amended Complaintv), Docket Entry No. 16, p. 5 f 5.2; Plaintiffs' Second Amended Complaint, Docket Entry No. 85, p. 5 f 5.2. - 14 - establish that there is no ev idence that wou ld create a genuine issue of material fact as to FLSA coverage . 1075. Little, 37 F .3d at Plaintiffs meet their summary judgment burden by showing there is evidence that supports FLSA coverage as a matter of law , Defendants must cite evidence that would show a material disputed fact . Id . An unpaid-wages claimant may satisfy the FLSA 'S commerce requirement by showing that the employee-plaintiffs engaged ''in commerce or in the production of goods for commerce'' (uindividual coverage'o , or that the employer-defendant is engaged commerce or the production of goods for commerce'' (nenterprise coverage'') 29 U .S.C. 5 206 (a); Martin v . Bedell, 955 (5th Cir. 1992). The statute defines ncommerce'' to 1029, mean nan enterprise utrade, commerce , transportation , transm ission , communication among the several States.'' 29 U .S.C. or 2O3(b). The statute also defines uenterprise engaged in commerce or the production of goods for commerce'' as one that : (i) has employees engaged in commerce or in the production of goods for commerce , or that has emp loyees handling , selling , or otherwise working on goods or materials that have been moved in or produced for commerce by any person ; and (ii) is an enterprise whose gross volume of sales made or business done is not less than $500,000. Id. 5 203(s) (1) (A) (i) (ii) Individual coverage is narrow , and only applies to emp loyees whose work directly and substantially involves interstate commerce . Mendoza - v . Detail Solutions, LLC , 9ll 15 - F. Supp . 2d 433, 440 (N .D . Tex . 2012). however, is broadly defined ; has employees directly Enterprise coverage, app lies not only when an enterprise engaged in commerce , also where employees handle , sell, or otherwise work on goods that have been moved in or produced for interstate commerce. 29 U .S .C. 5 2O3 (b); see Landeros v . Fu Kinq, Inc w Supp . 1020, 1023-24 (S .D . Tex . 2014) (discussing the expansive nature of FLSA enterprise coverage). Enterprise Coverage FLSA enterprise coverage has tWo elements: (l) that the employer 's employees engaged in qualify ing activity , and the employer's gross sales exceed $500,000 annually . 5 2O3 (s)(1)(A). that U .S.C. The first element can be satisfied if goods handled or sold by the enterprise's emp loyees moved across state lines at some time in the flow of commerce. Id. 5 203 (s) (l) (A ) (i); Brennan v . Greene 's Propane Gas Service , Inc ., 479 F .2d 1027, 1030-31 (5th Cir. 1973); Landeros, Supp. 3d at 1023-24. It is not disputed that the record establishes that John Caravello and the waitstaff, employees of Mercy , ordered , handled , or sold well- known brands liquor such as Hennessy , D 'u ssé , and Cîroc on behalf of the nightclub x3 Plaintiffs have not, however, pointed 53Super Bowl Liquor Menu , Exhibit 6-A to Plaintiffs ' MSJ , Docket Entry No . 114-7, pp . 2-3 ; Super Bowl Event Advertisements , Exhibit 6-B to Plaintiffs ' Response , Docket Entry No . 117-8, pp . 3-6 . to any evidence that this liquor traveled across state lines . Instead , Plaintiffs argue that the court may infer the liquor must have traveled in interstate commerce because they are not manufactured in Texas .54 Plaintiffs therefore appear to argue that the court take judicial notice that these liquors are not produced Texas , which would require that this fact .'(1) generally known within the trial court's territorial jurisdiction; or Can be accurately and readily determ ined from sources whose accuracy cannot reasonably be questioned .'' Fed . concludes Evid . 2O1 (b). The court may take judicial notice of the origin famous foreign -made liquors such as Hennessy , D 'ussé , and Cîroc, and thus any stocked and sold by Mercy must have traveled commerce. Accordingly, interstate first element of 5 2O3 (s)(1)(A) is satisfied as a matter of 1aw because there is no genuine issue material fact as to whether Mercy 's emp loyees handled and sold foreign -made liquors that had traveled in interstate commerce . The second element of enterprise 's ''gross volume less than $500,000.'' 5 2O3(s) (1) (A) requires that the sales made or bu siness done is not 29 U .S.C. 5 2O3 (s)(1)(A) Plaintiffs argue that this element is satisfied by John Caravello 's statements that Mercy grossed approximately $400,000 over the course of the 2017 Super Bowl weekend events alone , and that the nightly closeout reports for Super Bowl weekend indicated s4plaintiffs ' MSJ , Docket Entry No . 114 , sales 12 . of at least $125,161.55 Defendants' briefing does not address the gross sales issue at a11 or raise motion . It is as a basis for their summary judgment Plaintiffs' burden , however , to demonstrate entitlement to summary judgment on the issue. Little, 37 F.3d at 1 075 . Plaintiffs argue that the $400,000 figure conclusively shows the statutory threshold is met because under the urolling quarter'' method of computation, a quarterly income over $125,000 establishes annual income of $500,000.56 This, however, is not a fair statement rolling quarter computation method promulgated by the Secretary of Labor and approved by the Fifth Circuit . See Donovan v . 1-20 Motels, Incw 664 F.2d 957, 958 (5th Cir. 1981). Under that guidance, most businesses should determine FLSA coverage ''at the beginning of each quarter by calculating Ethe) annual dollar volume based on the sum of the four preceding quarters .'' Donovan , 664 F .2d at 958 . Multiply ing a single quarter of sales to estimate an annual figure is only appropriate for a new business that has only been in operation for a single quarter . Landeros , Supp. 3d at 1026 (citing 29 C.F .R. 5 779.259). Neither the parties nor the record suggests Mercy was a new business in the first quarter of 2017, and there is no evidence in the record of Oplaintiffs' MSJ , Docket Entry No . 114, pp . 14-15; see Caravello Deposition , Exhibit 5 to Plaintiffs ' MSJ , Docket Entry No . 114-5, p . l4 ; Caravello Declaration , Exhibit 6 to Plaintiffs ' MSJ, Docket Entry No. 114-6, p. 3 $ 9; Closeout Records, Exhibit 3 to Plaintiffs ' MSJ , Docket Entry No . 114-3, pp . 1-13 . sGplaintiffs' MSJ , Docket Entry No . Mercy 's sales in any quarters before or after the 2017 Super Bowl ev en t s . In the absence of other ev idence, the close-out records and Caravello 's statement might support an inference that Mercy did $500,000 in gross sales annually that year, but the court cannot draw such an inference against Defendants considering Plaintiffs' MSJ . See Reeves, 120 S. Ct. 2097, 2110 (2000) (''ETlhe court must draw al1 reasonable inferences in favor of the nonmov ing Accordingly, Plaintiffs have not met their burden to party ./'). show there is no genuine issue of material fact as to the second element of 203 (s) (l) (A ) But neither have Defendants met their burden to show Plaintiffs have no evidence supporting the two elements of enterprise coverage . But for Defendants' admission , whether Mercy grossed at least $500,000 annually would be an issue for trial . Individual Coveraqe The parties also 50th argue that there is no genuine issue of material fact as whether Plaintiffs qualify for FLSA indiv idual coverage . Plaintiffs contend that Mercy 's waitstaff was uengaged in commerce'' because their duties included serving liquor to outof-state customers who were v isiting Houston Mercy 's events on the internet .s? and advertising Defendants argue that these activities do not satisfy the statutory requirement because they bgplaintiffs ' Response , Docket Entry No . - 1 9- 20 . either do not qualify as engagement w ith interstate commerce or because they were not a significant part of Plaintiffs ' duties .58 An employee is considered personally engaged in interstate commerce when nthe work is so directly and v itally related to the functioning of an instrumentality facility of interstate commerce as to be, in practical effect , a part of it , rather than isolated local activ ity .'' Lodge, Incw Sobrinio v . Medical Center Visitor 's 474 F.3d 828, 829 (5th Cir. 2007). contact with commerce, no matter how ''(A)ny regular small, will result in coverage.'' Id . (quoting Marshall v . Victoria Transportation Co ., F.2d 1122, 1124 (5th In c w 1979)) An employee who regularly uses an instrumentality of interstate commerce is engaged in commerce . Thorne v . A11 Restoration Services, Inc w 448 F .3d 1264, 1266 (11th Cir. 2006). It is well-settled that the internet is an instrumentality of interstate commerce . United States v . Barlow , 568 F.3d 215, 22O (5th Cir. 2009); see also Miller v . Centerfold Entertainment Club , Inc w No . 6:14-CV -6O74 , WL 3425887, at *3 (W.D . Ark. Aug. 9, 2017) (holding that employees who regularly use the internet as part their job have FLSA individual coverage); Foster v . Gold & Silver Private Club , Incw Civil Action No. 7:14CV00698, 2015 WL 8489998, at *6 (W .D . Va. Dec. 2015) (same). SSDefendants' Response and Motion for Continuance , Docket Entry No . 119, pp . 6-7 . - 20- The only evidence that Plaintiffs regularly used the internet while working for Mercy is a statement in Plaintiffs ' declarations that the waitstaff were utold to put the our social media Super Bowl events on to promote the events .' 'sg This does not suffice to establish Plaintiffs' job duties included a regular use of the internet . There is no evidence the waitstaff actually used the internet , much less with any regu larity . Plaintiffs cite no authority that wou ld support that merely serv ing customers who are visiting from out-of-state qualifies as FLSA commerce . The Fifth Circuit has held otherwise . In Sobrinio a driver who provided local transportation to a motel's customers sued his employer under the FLSA . argued that he was engaged 474 F .3d at 829 . commerce because transportation to out-of-state guests, though he The driver he prov ided not provide transportation to or from any interstate transportation points such as an airport . Id . The Fifth Circuit held that because the driver 's activities occurred after the customers had completed their interstate travel and before they began their departure , they were local in character and not part of interstate commerce . 830 . Id . Like the driver in Sobrinio , Plaintiffs served out-of- state customers after they had completed their interstate journey to Texas and before they began their departure journeys. That some ODunphy Declaration , Exhibit 8 to Plaintiffs' Response , Docket Entry No. 117-10, p. 3 ! 6; Carantza Declaration, Exhibit 10 to Plaintiffs' Response, Docket Entry No. 117-12, p. 3 f 6. - 21 - customers were from out of state does not suffice to satisfy commerce or the FLSA 'S indiv idual coverage . It is the Plaintiffs' burden to prove FLSA coverage . Id . at 829 . Plaintiffs have pointed to no evidence or facts that would establish individual Coverage . C. Summary Judgment Conclusions on FLSA Coverage As explained above , the court concludes that the ev idence shows that there would have been at least a genuine issue of material fact as to the second element of enterprise coverage, the $500,000 revenue threshold. Defendants, however, are bound their admission that Mercy is an enterprise engaged in commerce under the definition of the FLSA and therefore are not permitted to argue otherwise at summary judgment or at trial. App 'x at 224 ; Dav is, 823 F .2d at 108 . considers enterprise established . coverage to have Bowman, 768 The court therefore been conclusively There is , however , no basis in the record to support that Plaintiffs are eligible for individual coverage under the FLSA . Defendants ' MSJ will be denied because FLSA coverage is the only issue raised . Plaintiffs ' MSJ will be granted as to the establishment of enterprise coverage . V. A. Emplover-Emp lovee Relation ship The Co-owners' Employer Status uAny employer'' who violates the FLSA 'S min imum -wage provisions are liable to their employees. 29 U .S .C. 5 216 (b). The statute includes Many person acting directly or indirectly in the interest of an employer in relation to an employee'' as an uemployer .'' Id . 203 (d). This generally means 50th a corporate entity and officers who exert operational control over the entity may considered uemployers'' and are jointly and severally liable for unpaid wages. Donovan v . Grim Hotel Co ., 747 F.2d 966, 972 (5th Cir. 1984). Plaintiffs argue that uncontested evidence demonstrates that under the FLSA defendants Rogers, Martins , and Reitzell, the Co-owners of Mercy , are uemployers'' who may be liable to the waitstaff for unpaid wages .6o Plaintiffs point to statements by John Caravello and Steven Rogers that Rogers, Martins, and Reitzell were involved managing Mercy . Defendants argue that the Co-owners were not FLSA emp loyers of the waitstaff because they did not directly hire or supervise them .6l In particular , defendants argue that because John Caravello hired the waitstaff , superv ised them , wrote the Employee Handbook , and was called nboss'' by some of them , only he and not the Co -owners can be considered the FLSA employer of the waitstaff x z Under the Fifth Circuit's econom ic reality test , factors to consider when determining uwhether the alleged employer : a person an employer include possessed the power to h ire 6oplaintiffs ' MSJ , Docket Entry No . pp . 16-17 . HDefendants ' Response and Motion for Continuance , Docket Entry No . 119, pp . 3-4 . 62Id . at 4-5 . and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, method of payment, and determ ined the rate and maintained employment records .''' Grav v. Powers, 673 F.3d 352, 355 (5th Cir. 2012). The Plaintiffs need not establish each element to prove employer status . The FLSA 'S remedial purpose uemployer'' than Id . at requires a broader definition of the traditional common law . McLaughlin v . Seafood , Inc., 867 F.2d 875, 877 (5th Cir. 1989). The definition includes an individual who udominates corporationrs) adm inistration or otherwise acts, or has the power to act, on behalf of the corporation vis-a -vis its emp loyees .'' Reich v . Circle C . Investments, Inc ., 998 F.2d 324, 329 (5th Cir. 1993) An owner of a business who does not manage employees on a day-to-day basis but nonetheless oversees the business 's activities and has the power to hire and fire employees, including managers, may be an nemp loyer'' under the FLSA . Reich v . Priba Corp w 890 F . Supp . 59l (N .D . Tex . 1995). Uncontradicted deposition testimony establishes that the Co -owners had and exercised the power to h ire managers, would coach them to improve performance , and consult with them on promotions and events .63 John Caravello states w ithout contradiction that all three of the Co-owners were responsible for pay ing the waitstaff 63Rogers Deposition , Exhibit 4 to Plaintiffs' MSJ, Docket Entry No . 114-4 , pp . 9-12; Caravello Deposition , Exhibit 5 to Plaintiffs ' MSJ , Docket Entry No . 114-5, pp . 11-12 ; Martins Deposition, Exhibit 11 to Plaintiffs' MSJ , Docket Entry No . 114-13, pp . 5-6 . - 24 - and exercised control over operations of the c1ub .64 The record also contains checks signed by Steven Rogers made out to members of waitstaff, including Plaintiff .6s These facts suffice establish that the Co -owners were FLSA employers because they acted or had the power to act directly or indirectly in the interest of Mercy in relation to an employee. See 29 U .S.C. 5 302 (d). Because Plaintiffs have accordingly met their burden under Rule 56 (c) to show there is an absence of a genu ine issue of material fact as to whether the Co-owners are FLSA emp loyers, the burden shifts Defendants to point to evidence in the record that would show a genuine issue of material fact . See Little , F .3d at 1071 . Defendants argue that the Co-owners were not employers of the waitstaff because John Caravello exerted exclusive and comp lete control over the waitstaff . Defendants cite no authority support that an individual can prove he was not an employer by demonstrating that another indiv idual Defendants also cite no authority was also an employer . support that their employer- like actions in closely supervising John Caravello are irrelevant to whether they were employers of other Mercy employees . The text of the statute assigns emp loyer status to any person who acts on behalf of the legal employer (here, Mercy) in relation to ''an 64caravello Deposition , Exhibit Entry No . 114-5, pp . 5-6, 16 . to Plaintiffs ' MSJ , Docket 65Rogers Checks, Exhib it 12 to Plaintiffs' MSJ , Docket Entry No . 114-14 , pp . 2-3. - 25 - employee.'' 29 U .S.C. 5 216(b). The statute does not require the person to act in relation to specifically the employee who brings su it under the FLSA . Defendants cite Grav , 673 F .3d at 352 , to argue there insu fficient evidence here to consider the Co -owners emp loyers . In that case, a bartender sued the owner of a club as a purported employer, but no ev idence showed the owner had exerted operational control over the club beyond participating decisions as a shareholder . Id . at 355-356 . corporate-level The Fifth Circuit distinguished cases where shareholders exercised real authority in the business's operations and concluded there was no ev idence that the owner was even an employer with regard to the club 's manager . Id . at 356 . where there Grav is therefore distingu ishable from this case , not only evidence that the Co -owners superv ised Mercy 's managers on a regular basis but also that the Co-owners directly controlled the wa itstaff's pay . This evidence competent to show that the Co-owners were employers, and is the Defendants' burden to point to evidence that shows a genu ine conflict with Defendants cite four points of ev idence that they argue create a fact issue . First , the Defendants cite an unsigned contract apparently written by John Caravello in which he requests , among other things : Comp lete control over operations and for the Co-owners to stop interacting with and instructing Mercy 's staff, comp lete control over staffing , and - 26- that the Co-owners reliably pay the staff.66 The contract is not signed and there is no evidence it was ever agreed to by the Co -owners x ? Because the contract is not signed , at most between Caravello and shows that there were disputes Co-owners about how to run Mercy . Because the contract alludes to disputes regarding the Co -owners being too involved with the staff and failing to reliably pay the staff on time and does not show those disputes were ever resolved , the contract does not contradict the facts discussed above that support the Co-owners' employer status . Second , Defendants submit a Declaration from Jonathan Reitzell that states John Caravello had comp lete control over the waitstaff and that the Co-owners udid not hire , fire , control or superv ise'' them .68 Third , Defendants point the evidence that Caravello wrote the Employee Handbook and prepared the nightly close-out reports .6g Fourth , Defendants provide a text message conversation where Caravello appears to be referred to as waitstaff's ''boss .''7o A s exp lained above , this evidence does not contravene the critical facts exp lained above that the Co -owners supervised 66unsigned Contract , Exhibit to Defendants ' Response and Motion for Continuance , Docket Entry No . 119-3, pp . 2-4 . 67Id . at 6 . 68Reitzel Declaration , Exhibit l to Defendants ' Response and Motion for Continuance , Docket Entry No . 119-1, 2 $ 2. 69Id. IJ 2. VoText Message, Exhibit 4 to Defendants' Response and Motion for Continuance , Docket Entry No . 119-4 , p .2 . Caravello and controlled the waitstaff 's pay . Proof that Caravello was the waitstaff 's primary manager or uboss' ' does not create a fact issue as to whether the Co-owners exercised operational control over the club and waitstaff . The Co -owners did not have to control every aspect of the employee-employer relationship for established . Gray , 673 F .3d at 357 . employer status to Because the evidence cited by Defendants only shows that the Co -owners did not control every aspect of the employment relationship and does not contravene the key evidence Plaintiffs cite that they exerted at least some significant control , Defendants have not shown there is a genuine issue for trial as to whether the Co-owners were employers under the FLSA . See Little , F .3d at 1075 . Accordingly , Plaintiffs' MSJ will be granted as to this issue . Employee Status Plaintiffs' MSJ also argues that there is no genuine issue of material fact as to whether they were employees under the FLSA X I The FLSA defines uemployee'' as simply nan individual emp loyed by an employer.'' U.s .C. 5 2O3 (e) (1) Uncontroverted deposition and declaration ev idence establishes that Plaintiffs received training , uniform and scheduling instructions , and payment for serving as waitstaff for Mercy Nightclub x z Plaintiffs also filled out an Hplaintiffs ' MSJ , Docket En try No . 114, l8 . H Dunphy Declaration , Exhibit to Plaintiffs ' MSJ , Docket Entry No . 114-10, pp . 1-2 ; Carantza Declaration , Exhib it to Plaintiffs' MSJ , Docket En try No . 114 -12 , pp . 1-2 . - 28 - employment application and W-4 tax form for Mercy .'3 Defendants have not contested these facts, and the court concludes there is no genuine issue of material fact as to Plaintiffs' emp loyee status . VI . M inimum Waqe and Tip Violations After the commerce requirement and the establishment of the employer-employee minimum wage relationship , the claim that the final element employer failed an FLSA paY the Plaintiffs the minimum wage required by statute . 29 U .S .C . 55 216(b). The FLSA allows employees to recover any tips received that the employer kept. Id . 55 203 (m)(2)(B), 2l6 (b). Plaintiffs argue that there is no genuine issue of material fact as to whether Defendants failed to pay the required minimum wage and unlawfully kept tips, and requests summary judgment on liability and referral of the action to the Magistrate Judge for a trial or mediation on damages only .74 But in an unpaid wages case , liability and damages turn on the same set of facts : the hours worked by the employee and the wages the emp loyer paid , if any . Likewise , Plaintiffs ' claim for unlawfully kept tips turns on whether their ultimate pay did not reflect the hours worked and tips received . While a plaintiff need not prove the precise extent of uncompensated work when the employer failed to keep adequate employment records , the O caravello Deposition , Exhibit Entry No . 114 -5, p . 9 to Plaintiffs' MSJ , Doeket M plaintiffs' MSJ , Docket Entry No . pp . 24-25 employee must still ''produce lq sufficient evidence to show the amount and extent work as a matter of just and reasonable inference .'' Anderson v . Mt . Clemens Potterv Co ., 66 S . Ct . 1187 , 1192 (1946), superseded by statute on other grounds, Portal-toPortal Act 1947 , Pub . No . 80-49 , 61 Stat . as recoqnized Ct . 513 , 51 9 in Integritv Staffing Solutions, Inc. v . Busk , (2014). Because Plaintiffs point to no evidence in the record that approximates the wages and tips owed and admits these facts need further development, they are not entitled to summary judgment on liability . Plaintiffs also argue that there is no factual dispute that the FLSA 'S tip credit allowance for tipped employees does not apply this case . The FLSA tip credit allows employers reduced minimum wage to tipped emp loyees received meet or exceed the reduction . To qualify for the tip credit, however, employees the provisions of pay a long as the tips U .S .C. 203 (m)(2)(A). employers must inform 203 (m), and employees must retain a11 tips received , with the exception that tip pooling is permitted among emp loyees who customarily and regularly receive tips . Id . The tip credit is best characterized as an affirmative defense to a minimum wage claim , and it is the emp loyer's burden to prove the tip credit applies. Barcellona v . Tiffany English Pub , Incw 597 F.2d 464, 467 (5th Cir. 1979); see also Pedigo v . Austin Rumbo, Incw Supp . 2d 723-24 (W .D . Tex . 2010) (collecting and analyzing cases). Defendants' briefing does not respond to Plaintiffs ' argument and points no evidence that would show Plaintiffs were informed of 5 2O3 (m) or were permitted to retain their tips. Accordingly, summary judgment that the tip credit defense does not apply and that the waitstaff was entitled to a full m inimum wage is warranted . Plaintiffs still bear the burden to prove at trial that their ultimate pay did not reflect hours worked and tips received . V II . Conclusion and Order reasons explained above, Plaintiffs ' Motion Summary Judgment (Docket Entry No. 114) is therefore GRANTED IN PART and DENIED IN PART . Plaintiffs' motion is granted as to FLSA coverage, her employee status , the employer statu s of the Co -owner defendants , and Plaintiffs ' motion the applicab ility of the denied as to liability . FLSA tip -credit . Plaintiffs' Motion to Strike Defendants' Supplemental Response to Plaintiffs ' Motion for Summary Judgment EDkt. and Defendants' Exhibits and (Dkts. 119-3, 119-41 to Defendants' Response to Plaintiffs' Motion for Summary Judgment (Docket Entry No . 122) is DENIED . Defendants' Rule 56 Motion for Partial Summary Judgment (Docket Entry No . 112) DENIED . Defendants' Motion for Leave to File Amended Pleading (Docket Entry No . DENIED . Defendants ' Supp lemental Motion for Continuance and Response to Plaintiffs' Motion for Summary Judgment (Docket Entry No. 120) is DENIED AS MOOT . This action is REFERRED to United States Magistrate Judge Nancy K . Johnson for a settlement conference . SIGNED at Houston , Texas , on this 15th day of November , 2019 . < A S IM LA KE SENIOR UNITED STATES DISTRICT JUDGE - 32-
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