Davis v. B & S, Inc., 1:98-CV-49.

• Decision Date: 13 November 1998
• Docket Number: No. 1:98-CV-49.,1:98-CV-49.
• Parties: Eric DAVIS and Christine Davis, Plaintiffs, v. B & S, INC., d/b/a Showgirl I, et al., Defendants.
• Court: U.S. District Court — Northern District of Indiana

38 F.Supp.2d 707

Eric DAVIS and Christine Davis, Plaintiffs, v. B & S, INC., d/b/a Showgirl I, et al., Defendants.

No. 1:98-CV-49.

United States District Court, N.D. Indiana, Fort Wayne Division.

November 13, 1998.

Chris K. Starkey, Fort Wayne, IN, for Eric Davis, plaintiff.

Chris K. Starkey, Fort Wayne, IN, Daniel J. Millea, Rolf E. Gilertson, Zelle and Larson, Minneapolis, MN, Brad Shafer, Lansing, MI, for Christine Davis, plaintiff.

James P. Buchholz, Miller Carson Box-berger and Murphy, Fort Wayne, IN, Mark A. Thoma, Jeffrey P. Terrill, Tremper Bechert Leonard and Terrill, Fort

Wayne, IN, Brad Shafer, Lansing, MI, for defendants.

MEMORANDUM OF DECISION AND ORDER

COSBEY, United States Magistrate Judge.

I. INTRODUCTION

This matter is before the Court¹ on the motion for summary judgment filed by the Plaintiffs, Eric Davis ("Mr.Davis") and Christine Davis ("Ms.Davis") (collectively "the Plaintiffs"), on July 27, 1998. The Defendants, B & S, Inc., AJDD Inc., and Showgirl III, Inc. (collectively "the Defendants") responded on September 4, 1998, the Plaintiffs replied on September 17, 1998, and the motion is ripe for review. The entire factual record consists of the affidavit of Mr. Davis ("E. Davis ¶ ___") with attached W-2 tax forms and employee payroll forms; the affidavit of Ms. Davis ("Christine aff. ¶ ___") with attached W-2 tax forms; the affidavit of James Butler ("Butler aff. ¶ ___"); and the affidavit of Thomas J Grant. ("Grant aff. ¶ ___").

This Court has jurisdiction pursuant to 28 U.S.C. § 1331. For the reasons hereinafter provided, the Plaintiffs' motion will be DENIED.

II. FACTUAL BACKGROUND

The Plaintiffs' complaint asserts that the three corporate defendants violated the minimum wage provisions of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., ("FLSA"). The three Defendants are separate corporate entities, each of which operates a separate nightclub. Defendant B & S, Inc. owns and operates the nightclub "Showgirl I," Defendant AJDD, Inc. owns and operates the nightclub "Showgirl II," and Defendant Showgirl III, Inc. owns and operates the nightclub "Showgirl III." Notwithstanding the separate corporate ownership of the three "Showgirl" nightclubs, it appears that the nightclubs are all operationally interconnected in some way, although this point is never fully explained. For example, the titles of the three nightclubs are obviously related, and the nightclubs appear to employ the same people simultaneously, such as Ms. Davis and James Butler ("Butler"), who is employed as the General Manager of all three nightclubs. This conclusion is bolstered by the Defendants' answer, which explains that Butler's father owns a substantial amount of stock in all three corporations. (See Def. Answer Rhet. ¶ 14.)

Moreover, the Plaintiffs consistently refer to the "Defendants" collectively, rather than distinguishing between the individual nightclubs or corporate owners, and we shall also adopt that convention. We now turn to the specific factual circumstances of each Plaintiff.

A. Eric Davis

Mr. Davis began employment with Showgirl III, Inc. as a disc jockey after March 15, 1997, and worked exclusively at the Showgirl III nightclub until his termination in January 1998. (E. Davis aff. ¶¶ 1-2). Mr. Davis' initial salary was $6.00 per hour, but in late March 1997 he agreed to a salary of $2.13 per hour in cash wages plus tips. (Butler aff. ¶¶ 21-24). The W-2 forms presented by Mr. Davis indicate that he received $2,145.00 in tip income in 1997. This figure is disputed by Butler, who asserts that the W-2 forms are in error, and that Mr. Davis earned anywhere between $600.00 and $1,200.00 weekly in tips. (Id. ¶¶ 19, 26.)

Mr. Davis also contends that he was never notified of the applicable FLSA provisions or their affect on his cash wage, (E. Davis aff. ¶ 5), but we must accept at this juncture the Defendants' contention that Butler discussed the cash wage rate in relation to the FLSA. (Butler aff. ¶ 25.) Mr. Davis further contends that he was required to share his tip income with other employees, including Butler. (E. Davis aff. ¶ 4.) Mr. Davis does not explain who these "other" employees were, or what sort of tip sharing arrangement he had with them, but only asserts that he was required to pay a set amount of his tips into these tip sharing arrangements.

However, Butler's uncontradicted affidavit offers some missing details. Butler asserts that Mr. Davis received tips directly from customers, and also received tips from the entertainers who performed at the nightclub through a voluntary tip pooling arrangement. (Butler aff. ¶¶ 30, 32.) According to Butler, each entertainer would give Mr. Davis either $10.00 or ten percent of the tips they received from customers as a gesture of gratitude for his work in assisting their performances by setting up lights, playing music, etc. (Id. ¶ 31.)

Butler further asserts that part of his duties as General Manager of Showgirl III included serving as an assistant to the disc jockey by operating the stage lights, setting up music routines for the entertainers, and the like. (Id. ¶ 6.) Mr. Davis worked approximately three nights a week, and Butler asserts that they had a voluntary tip pooling agreement by which Mr. Davis paid Butler out of his tip income $40.00 each night he worked. (Id. ¶ 32.)²

B. Christine Davis

Ms. Davis commenced employment with the Defendants as a waitress prior to February 9, 1995, and worked for the Defendants through her resignation in January 1998. (C. Davis aff. ¶¶ 1-4.) According to tax records provided by Ms. Davis, she was employed by Defendants B & S, Inc. and AJDD, Inc. in 1995, by Defendant B & S in 1996, and by Defendants B & S, Inc. and Showgirl III, Inc. in 1997.

The parties agree that Ms. Davis was paid $2.50 per hour in cash wages during her employment with the various nightclubs, and also received tips from customers. (Id. at ¶ 5.) The W-2 forms presented by Ms. Davis indicate that she received $875.00 in tip income in 1995, $2,120 in tip income in 1996, and $2,635.00 in tip income in 1997. These figures are disputed by Butler, who asserts that the W-2 forms are in error, and that Ms. Davis earned between $150.00 and $300.00 in tips a night. (Butler aff. ¶¶ 14-15.)

In any event, Ms. Davis contends that she was required to pay ten percent of her tip income to other employees. (Id.) However, we must credit the Defendants' version of the facts as the non-moving party, and they contend that Ms. Davis participated in a voluntary tip sharing arrangement with the bartenders. (Butler aff. ¶ 10.)³ Ms. Davis also asserts that the Defendants never informed her that her cash wages were below the minimum wage requirement as required by the FLSA's tip credit provision, (C. Davis aff. ¶ 6), but again we must accept the Defendants' version of things, which discloses that Ms. Davis was notified by Butler that Defendants intended to use the tip credit provision of the FLSA. (Butler aff. ¶ 12.)

III. STANDARD OF REVIEW

The Court will grant summary judgment only when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). We do not weigh the evidence submitted by the parties, or determine the truth of asserted matters. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Rather, we view all facts and draw all reasonable inferences in the light most favorable to the non-moving party. Vanasco v. National-Louis Univ., 137 F.3d 962, 965 (7th Cir.1998). "If no reasonable jury could find for the party opposing the motion, it must be granted." Hedberg v. Indiana Bell Tel. Co., Inc., 47 F.3d 928, 931 (7th Cir.1995) (citing Anderson, 477 U.S. at 248, 106 S.Ct. 2505).

IV. LEGAL PRINCIPLES

Employers in the United States are required to pay employees a minimum wage. 29 U.S.C. § 206(a)(1) (1998). The hourly minimum wage was set at $4.25 on April 1, 1991, increased to $4.75 on October 1, 1996, and to $5.15 on September 1, 1997. 29 U.S.C. § 206(a)(1) (1994 & West Supp. 1997). However, Congress has provided an exception to this minimum wage requirement in that employers are permitted to pay less than minimum wage to employees who receive tips. 29 U.S.C. § 203(m) (1998). The mechanism that § 203(m) creates is known as the "tip credit." The tip credit allows employers to use a portion of the employee's tip income to supplement its minimum wage obligation to the employee, so long as the employee's combined cash wage and tip income meets or exceeds the minimum wage. During the time period relevant to this case, an employer was required to pay its tipped employees a cash wage of at least $2.13 an hour and the employer was then allowed the tip credit for the difference between the wage paid and the prevailing minimum wage.⁴

However, Congress requires employers to meet certain conditions in order to qualify for the tip credit. First, employers can only take the tip credit toward the wages of employees who qualify as "tipped employees" under 29 U.S.C. § 203(t) (1998).⁵ Second, employers must ensure that a tipped employee's total income meets or exceeds the minimum wage level. § 203(m) also requires an employer to satisfy two other conditions to qualify for the tip credit:

The [tip credit] shall not apply with respect to any tipped employee unless such employee has been informed by the employer of the provisions of this subsection, and all tips received by such employee have been retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.

29 U.S.C. § 203(m) (1998). See generally Kilgore v. Outback Steakhouse of Florida, 160 F.3d 294, 298 (6th Cir.1998); Reich v.. Chez Robert, Inc., 28 F.3d 401,...