Edwards v. Prime, Inc.

• Decision Date: 09 April 2010
• Docket Number: No. 09-11699.,09-11699.
• Parties: Kyle EDWARDS, Diane George, Ryan Cade, Kameron Battles, Kelly Key, individually, collectively and on behalf of a class of similarly-situated employees, Terrence Forman, Jimmy D. Lincoln, Plaintiffs-Appellants, v. PRIME, INC., d.b.a. Ruth's Chris Steak House, Markham Oswald, Jesus Molina, an individual which may or may not be his real name, Ruth's Hospitality Group Inc., Defendants-Appellees, Ruth's Chris Steak House, Inc., themselves and on behalf of a class of defendants that operate restaurants named "Ruth's Chris Steak House," Defendant.
• Court: U.S. Court of Appeals — Eleventh Circuit

602 F.3d 1276

Kyle EDWARDS, Diane George, Ryan Cade, Kameron Battles, Kelly Key, individually, collectively and on behalf of a class of similarly-situated employees, Terrence Forman, Jimmy D. Lincoln, Plaintiffs-Appellants, v. PRIME, INC., d.b.a. Ruth's Chris Steak House, Markham Oswald, Jesus Molina, an individual which may or may not be his real name, Ruth's Hospitality Group Inc., Defendants-Appellees Ruth's Chris Steak House, Inc., themselves and on behalf of a class of defendants that operate restaurants named "Ruth's Chris Steak House," Defendant.

No. 09-11699.

United States Court of Appeals, Eleventh Circuit.

April 9, 2010.

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Barry V. Frederick, Brandi Branton Frederick, The Frederick Firm, Birmingham, AL, for Plaintiffs-Appellants.

Jennifer L. Anderson, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, Baton Rouge, LA, for Defendants-Appellees.

Laurie M. Chess, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, LLP, Miami, FL, Victoria Jeanne Franklin-Sisson, Jones Walker, Birmingham, AL, for Defendant.

Before CARNES, HULL and ANDERSON, Circuit Judges.

CARNES, Circuit Judge:

Ruth's Hospitality Group, the parent company of Ruth's Chris Steak House, is proud of its origins. The company boasts that forty-five years after its founder, Ruth Fertel, mortgaged her home to purchase her first restaurant, it has grown into a chain of more than 120 steakhouse restaurants in seven countries. Though it has become an international operation, the company insists that "our success continues to be driven by our adherence to Ruth's core values."¹ Ruth Fertel "understood the value of each and every employee's contribution to her success," and that is why the business continues to be a place "where respect, integrity and pride are a way of life."² Not only that but the company "continues to value the unique differences of each and every team member."³ Or so it says.

The seven former employees of one Ruth's Chris Steak House franchise who are the plaintiffs in this lawsuit not only beg to differ but also have pleaded to the contrary, at least insofar as the franchise where they worked is concerned. According to their allegations, that particular franchise had the core values of a criminal enterprise and provided anything but an atmosphere of respect, integrity, and pride for its employees. More specifically, they allege that the Ruth's Chris Steak House in Birmingham, Alabama, knowingly provided illegal aliens with names and social security numbers of American citizens to use for illegal employment, unlawfully took employees' tips, discriminated on the basis of race, and retaliated against employees who challenged those and other practices.

Those allegations are contained in an amended complaint that asserts claims based on the Racketeer Influenced and Corrupt Organizations Act, the Fair Labor Standards Act, 42 U.S.C. § 1981, and Alabama common law. The district court dismissed four of the fifteen counts in the amended complaint under Federal Rule of Civil Procedure 12(b)(6) and certified those rulings as partial final judgments under Rule 54(b). The plaintiffs have appealed those four rulings, and they have attempted to appeal a number of others that were not certified for interlocutory appeal. Our decision, like the complaint and the district court's judgment, is a mixed bag. We end up reversing the district court's judgment with respect to the RICO claim, affirming the judgment insofar as it includes the other claims that were certified to us under Rule 54(b), and dismissing for lack of jurisdiction the attempted appeal of the rulings that were not certified to us.

I.

This case, as we indicated, involves allegations brought by former employees of Ruth's Chris Steak House in Birmingham, Alabama, against the restaurant and its owner, operator, and franchisor. More particularly the defendants are Prime, Inc., a Ruth's Chris franchisee that owns and operates the restaurant where the plaintiffs worked; Mark Oswald, who owns and manages Prime; and Ruth's Chris Steak House, Inc.,⁴ which franchises Ruth's Chris restaurants.

At this stage we must and do assume that any well-pleaded allegations in the amended complaint are true. What we state as facts in this part of the opinion have not been established as facts in anything other than the pleading sense. They may or may not turn out to be actual facts. Count 1 claims that the defendants engaged in a pattern of racketeering activity in violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968.⁵ The federal crime that is said to trigger RICO liability is a criminal enterprise to violate federal immigration laws. Prime knowingly hired and employed illegal aliens, allowed them to work under the names of former Ruth's Chris employees who were United States citizens, and provided them with the former employees' social security numbers. In addition, the defendants gave the illegal aliens more time than federal law permits to produce paperwork establishing their eligibility to work in this country and sometimes did not require the illegal aliens ever to produce the paperwork. To fill open positions, Prime's management asked the illegal aliens employed in the restaurant whether they knew of any other illegal aliens who were interested in working there. Prime paid illegal aliens in cash and preferred them over United States citizens. As part of the illegal enterprise the company also provided illegal aliens with name tags showing names other than their own.

Counts 2-6 claim that the defendants violated the Fair Labor Standards Act, 29 U.S.C. §§ 201-219, primarily by unlawfully taking and keeping plaintiffs' tips for their own profit.⁶ Because Prime paid the plaintiffs as "tipped employees," it claimed a "tip credit" and paid them an hourly wage below the minimum wage that otherwise would have applied. As a standard practice Prime withheld a percentage of servers' tips, and a portion of that money was paid to "the house." The rest was placed into a "tip pool," which Prime used to pay other employees, including some who were not eligible to participate in the tip pool. When a manager or supervisor believed that a customer had tipped an employee too much, the manager or supervisor persuaded the customer to reduce the amount of the tip to the employee or not to tip at all. Those practices, it is claimed, rendered defendants' use of the tip credit unlawful under the FLSA, requiring them to pay direct wages for the full minimum wage and to return the tips.

Prime also required the plaintiffs to perform excessive non-serving tasks and duties. Managers and supervisors occasionally "clocked out" the plaintiffs even though they were still working. In some instances, managers and supervisors docked plaintiffs' hours. Prime also did not keep accurate records of the amount of time employees worked. For the violations claimed in Counts 2-6, the plaintiffs request injunctive and declaratory relief, all unlawfully taken tips, lost minimum and overtime wages, liquidated damages matching the amount of lost tips and wages, and reasonable attorney's fees.

The next two claims in the amended complaint assert violations of Alabama state law.⁷ Count 7 claims that Prime and Oswald intentionally interfered with two business relationships. One of those relationships was between Prime's employees and the patrons who dine at the restaurant. Prime and Oswald knew about the business relationship in which "employees give patrons excellent service with the expectation they will be rewarded for such service by getting tips and greater tips from patrons, and patrons so reward and pay servers, some of which gets dispersed to other employees via a `tip pool.'" The other relationship was among Prime's employees who contribute to or receive money from the tip pool. Prime and Oswald intentionally interfered with those business and contractual relations "by taking amounts of money" from the plaintiffs "based on such gratuities paid to servers regardless of whether Defendants otherwise complied with the FLSA in compensating employees." Count 8 alleges that the same conduct constituted conversion under state law. Count 7 and Count 8 both seek relief in the form of compensatory and punitive damages.

The final seven counts of the amended complaint involve individual claims of unlawful discrimination or retaliation. Only a few of them are relevant to this appeal.⁸ One of the claims that is relevant is Count 12, in which Kyle Edwards, a Caucasian, alleges that Prime subjected him to a hostile work environment on the basis of his race, in violation of § 1981. While working at Ruth's Chris, Edwards was targeted by Hispanic and Latino employees who repeatedly threatened him at the restaurant. One employee cursed Edwards and threatened to cut his throat. He complained to Prime's management about the hostile work environment, but they failed to take any action "because Prime disfavored Caucasian Edwards in favor of its Hispanic and Latino employees and did not want to upset them out of fear of disrupting its supply of cheap illegal labor." In addition to being threatened, Edwards was also shunned. One Hispanic employee threatened Edwards, telling him that it was "going to be bad" for the person who was complaining about Prime's employment of illegal aliens.

Count 13 involves Edwards' claim of retaliation by the defendants, a claim that he brought on behalf of himself and other similarly-situated employees. In February 2008, Edwards' attorney gave the general manager of the Birmingham restaurant a copy of the complaint he intended to file in this lawsuit. After that, Edwards was subjected to added scrutiny at work, and the defendants took "no effective action to prevent ... Edwards' hostile work environment...