Alshehabi v. Hymans Seafood Co.

• Decision Date: 30 June 2016
• Docket Number: C.A. No.: 2:14-cv-2724-PMD
• Parties: Alicia Alshehabi, on behalf of herself and all others similarly situated, Plaintiff, v. Hymans Seafood Company, Inc.; Eli Hyman, individually; and Brad Gena, individually, Defendants.
• Court: U.S. District Court — District of South Carolina

Alicia Alshehabi, on behalf of herself and all others similarly situated, Plaintiff, v. Hymans Seafood Company, Inc.; Eli Hyman, individually;and Brad Gena, individually, Defendants.

C.A. No.: 2:14-cv-2724-PMD

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA CHARLESTON DIVISION

June 30, 2016

ORDER

This matter is before the Court on Hymans Seafood Company, Inc., Eli Hyman, and Brad Gena's (collectively "Defendants") motions for partial summary judgment (ECF Nos. 227, 228, 229, & 230). Also before the Court are Plaintiff's motions for partial summary judgment (ECF Nos. 226 & 231). These matters are ripe for consideration.¹

BACKGROUND

On July 3, 2014, Plaintiff commenced this action, on behalf of herself and others similarly situated, seeking, inter alia, unpaid overtime compensation and minimum wages pursuant to the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq. Plaintiffs and those who have subsequently given notice of their consent to join this action (collectively "Plaintiffs") are current or former employees of Defendant Hymans Seafood Company, Inc. ("Hymans Seafood"). Plaintiffs assert two FLSA causes of action against Defendants. First, they primarily allege that Defendants paid them less than the statutory minimum wage by improperly claiming a tip credit while utilizing an invalid "tip pool," in violation of 29 U.S.C. §§ 203(m), 206. Second,Plaintiffs assert that Defendants failed to pay them the proper overtime wage, in violation of 29 U.S.C. § 207, by "knowingly allow[ing] its servers to 'work off the clock.'" (Compl., ECF No. 1, at ¶ 22.)

In the six pending motions, the parties raise a number of issues. The Court will first address the issues of liquidated damages and the three-year statute of limitations, and then it will address the other motions.

LEGAL STANDARD

To grant a motion for summary judgment, a court must find that "there is no genuine dispute as to any material fact." Fed. R. Civ. P. 56(a). The judge is not to weigh the evidence but rather must determine if there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). All evidence should be viewed in the light most favorable to the nonmoving party. Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 124 (4th Cir. 1990). "[I]t is ultimately the nonmovant's burden to persuade [the court] that there is indeed a dispute of material fact. It must provide more than a scintilla of evidence—and not merely conclusory allegations or speculation—upon which a jury could properly find in its favor." CoreTel Va., LLC v. Verizon Va., LLC, 752 F.3d 364, 370 (4th Cir. 2014) (citations omitted). "[W]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, disposition by summary judgment is appropriate." Teamsters Joint Council No. 83 v. Centra, Inc., 947 F.2d 115, 119 (4th Cir. 1991). Summary judgment is not "a disfavored procedural shortcut," but an important mechanism for weeding out "claims and defenses [that] have no factual basis." Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).

Plaintiffs' Motion for Partial Summary Judgment & Defendants' Motion for Partial Summary Judgment (ECF Nos. 226 & 228)

Plaintiffs and Defendants seek summary judgment on the question of whether Defendants' invalid breakage² fees constituted a willful violation of the FLSA. If Plaintiffs can prove that Defendants' violation was willful, the FLSA provides a three-year statute of limitations. On the other hand, if Defendants' violation was not willful, the two-year statute of limitations applies. See 29 U.S.C. § 255(a).

An FLSA violation is "willful if the defendant 'either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the FLSA.'" Linnville v. RW Props., No. 6:13-cv-542-BHH, 2015 WL 196372, at *5 (D.S.C. Jan. 15, 2015) (quoting McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988)). The employee bears the burden of proving that a violation is willful. Id. "[W]illfulness is, conceptually, a question of fact." Regan v. City of Charleston, 142 F. Supp. 3d 442, 463 (D.S.C. 2015); see also Linnville, 2015 WL 196372, at *5. Accordingly, "'a plaintiff must present sufficient evidence of willfulness to survive summary judgment.'" Linnville, 2015 WL 196372, at *5 (quoting Hantz v. Prospect Mortg., LLC, 11 F. Supp. 2d 612, 617 (E.D. Va. 2014)).

This Court has previously ruled it is inappropriate to determine willfulness where liability has not yet been determined. See Reynolds v. Wyndham Resorts Inc., No. 4:14-cv-2261, 2016 WL 362620, at *4 (D.S.C. Jan. 29, 2016) (declining to reach defendant's arguments as towillfulness where liability had not yet been determined); Regan, 131 F. Supp. 3d at 558 (same). Here, Defendants have admitted liability only as to the breakage fee that servers and bartenders were required to remit. Therefore, Defendants' breakage fee is the only violation on which the Court could make a willfulness determination. Because significant jury issues on liability remain, the Court cannot grant Plaintiffs' motion on willfulness. However, the Court agrees that Plaintiff has made a sufficient showing for a jury to conclude that Defendants' breakage fee was a willful violation of the FLSA. Consequently, Defendants' motion for summary judgment on the question of willfulness is also denied. Plaintiff has presented evidence that the individual Defendants, as well as members of Hymans Seafood's management team, were made aware that their tip-out policy was illegal. Additionally, Plaintiff has submitted deposition testimony in which Mr. Hyman admits he did not seek a legal opinion on his restaurant's tip-pooling practices. Courts have found similar actions sufficient to constitute reckless disregard for whether the policy violated the FLSA. See Alvarez Perez v. Sanford-Orlando Kennel Club, Inc., 515 F.3d 1150, 1163 (11th Cir. 2008) (stating that reckless disregard is the "failure to make adequate inquiry into whether conduct is in compliance with the [FLSA]"); Brantley v. Ferrell Elec., Inc., 112 F. Supp. 3d 1348, 1376 (S.D. Ga. 2015) (stating that a reasonable jury could find a willful violation where the jury could infer that the defendant "'buried his head in the sand' to his and the company's FLSA duties").

Plaintiffs and Defendants also seek summary judgment on various issues related to the FLSA's liquidated damages provision. See 29 U.S.C. § 260. First, Defendants request that the Court permit liquidated damages only on the amounts contributed to the tip pool that raise Plaintiffs' wages to the minimum wage. Defendants argue that all other money paid into the tip pool should not be subject to liquidated damages. The Court finds that it is premature todetermine liquidated damages at this time. There are questions of fact as to Defendants' good-faith defense and, without determining liability as to all alleged violations, the Court cannot determine whether Plaintiffs are entitled to liquidated damages. See Regan, 142 F. Supp. 3d at 463; Linnville, 2015 WL 196372, at *5. Accordingly, both Plaintiffs' and Defendants' motions are denied as they pertain to liquidated damages.

Defendants' Motion for Partial Summary Judgment and Plaintiffs' Motion for Partial Summary Judgment (ECF Nos. 227 & 231)

Plaintiffs and Defendants have each filed motions for partial summary judgment pertaining to the consent order the Court entered on January 20, 2015, which stated, "Defendants consent that Plaintiffs have, as an available remedy to them . . . the ability to recover all tips he or she contributed to the tip pool. This remedy is outlined in Fact Sheet #15 from the Wage & Hour Division of the U.S. Department of Labor." (Order, ECF No. 82, at 1-2.) The parties did not define "the tip pool" in their consent order. Accordingly, Defendants now contend that phrase means only the invalid tip pools as discussed in the referenced fact sheet. Plaintiffs, on the other hand, argue that it means every tip pool to which Plaintiffs contributed. Importantly, the fact sheet states "[t]he requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips." (Defs.' Mot. Partial Summ. J., Ex. 4-A, Fact Sheet #15, ECF No. 147-4, at 3.) In support of their interpretation, Defendants also assert that Plaintiffs' counsel drafted the consent order. Thus, the implication is that any ambiguity contained therein must be construed against Plaintiffs. Plaintiffs assert that throughout the litigation, Defendants have used the phrase "the tip pool" to mean each of the various tip pools to which Defendants' employees were required tocontribute their tips. Additionally, Plaintiffs assert that the plain meaning of the phrase "the tip pool" cannot be "the invalid tip pools."

"[R]ules of contract construction appl[y] when determining the scope of a consent decree." Anita's N.M. Style Mexican Food, Inc. v. Anita's Mexican Foods Corp., 201 F.3d 314, 319 (4th Cir. 2000). "The cardinal rule of contract interpretation is to ascertain and give effect to the intention of the parties." Chan v. Thompson, 395 S.E.2d 731, 734 (S.C. Ct. App. 1990) (citing RentCo., a Div. of Fruehauf Corp. v. Tamway Corp., 321 S.E.2d 199 (S.C. Ct. App. 1985)). "'Where the agreement in question is a written contract, the parties' intention must be gathered from the contents of the entire agreement and not from any particular clause therein.'" Parker v. Byrd, 420 S.E.2d 850, 852 (S.C. 1992) (quoting Thomas-McCain, Inc. v. Siter, 232 S.E.2d 728, 729 (S.C. 1977)). Finally, contract interpretation is a question of law, to be decided by the court. Liberty Mut. Ins. Co. v. Westport Ins. Co., 664 F. Supp. 2d 587, 593 (D.S.C. 2009) (citing Hawkins v. Greenwood Dev. Corp., 493 S.E.2d 875, 878 (S.C. Ct. App. 1997)). Thus, the interpretation of the consent order is a question of law.

Applying these contract...