Degidio v. Crazy Horse Saloon & Rest., Inc.

• Decision Date: 30 September 2015
• Docket Number: Civil Action No.: 4:13-cv-02136-BHH
• Parties: Alexis Degidio, individually and on behalf of all others similarly situated Plaintiff, v. Crazy Horse Saloon and Restaurant, Inc, d/b/a Thee New DollHouse Defendant.
• Court: U.S. District Court — District of South Carolina

Alexis Degidio, individually and on behalf of all others similarly situated Plaintiff, v. Crazy Horse Saloon and Restaurant, Inc, d/b/a Thee New DollHouse Defendant.

Civil Action No.: 4:13-cv-02136-BHH

UNITED STATES DISTRICT COURT DISTRICT OF SOUTH CAROLINA FLORENCE DIVISION

September 30, 2015

Opinion and Order

This matter is before the Court on the plaintiff's motion for conditional class certification and judicial notice pursuant to 216(b) of the FLSA (ECF No. 70), a motion for class certification under Rule 23 (ECF No. 71), and the defendant's motion for summary judgment (ECF No. 102). The Court held a hearing on August 18, 2015, to consider the parties' arguments on these motions.¹ For the reasons set forth in this Order, the motion for conditional class certification and judicial notice is granted, the motion for class certification under Rule 23 is denied with leave to refile as provided herein, and the motion for summary judgment is denied in substantial part.

BACKGROUND

The defendant, the Crazy Horse Saloon and Restaurant, Inc. d/b/a Thee New DollHouse, is a strip club in North Myrtle Beach, South Carolina (the "Club"). The Club describes itself as "an upscale gentlemen's club" offering "a first class experience,"complete with valet parking, "top champagnes, wines and liquors," and "4 elevated lighted stages" where "entertainers" perform exotic adult dancing. (Davenport Decl. ¶ 3.)² The Club also offers couches, Jacuzzis, and semi-private "VIP" areas, where entertainers can provide individualized services, such as "friction dances," for the Club's patrons, which it refers to as "guests." (Id.) The Club also serves food and alcohol and has 25 HDTVs featuring sports programing. (Id.)

The defendant has made substantial investments to create and maintain a "high class" atmosphere in the Club and to promote its business. The defendant pays for advertising through radio, magazines, and the internet, has hired an outside graphic artist to design its advertisements, and contracts with an outside company to manage the Club's official Facebook page. (Clark Dep. 36:3-16, 40:4-8, 72:10-24.) Since 2012, the defendant has invested over $1 million in remodeling and maintenance projects inside the club, and it planned to spend approximately $1.2 million to remodel the club's exterior in the winter of 2014-2015 (Watson Dep. 37:18-39:14; 135:19-137:1.) The defendant's total expenses related to the Club in 2013 were approximately $3.3-$3.4 million. (Id. 48:21-49:15.)

The Club classifies its entertainers as "lessees" or "independent contractors," who are permitted the non-exclusive use of the Club's stages, dressing room, lockers, and semi-private areas for performing. (Watson Decl. ¶ 2.) Consequently, the entertainers are not paid any wages by the Club, but receive tips from customers for their performances. In fact, entertainers are often required to pay a nightly "house fee" to the club in order to be able to dance there. House fees are an important source ofrevenue for the Club and are structured to encourage entertainers to arrive early in the evening to ensure that there are plenty of women dancing in the Club. If entertainers arrive before 7:00 p.m. there is no House Fee. After 8:00 p.m. it is $20.00, after 9:00 p.m. it is $40.00, after 10:00 p.m. it is $60.00, after 11:00 p.m. it is $80.00, and after midnight it is $100.00. (Davenport Decl. ¶ 8.) The amounts charged may vary seasonally at the discretion of the Club's managers and consultant. (Clark Dep. 58:16-59:9.)

In addition to drawing customers³ and generating house fees, there are a number of other ways that the Club makes money from the entertainers. First, the defendant offers guests who are light on cash artificial currency referred to as "Golden Dollars," which can only be used for tipping or buying private dances. Guests pay a 10% fee to purchase Golden Dollars from the defendant. In addition, entertainers are required to pay the defendant a 10% fee in order to have the Golden Dollars they receive as payment from guests redeemed for U.S. currency. (See Clark Dep. 64:23-66:22.) The plaintiff emphasizes that while entertainers must submit whatever portion of their earnings they receive in Golden Dollars to the defendant for conversion, only the ten percent conversion fee is ever recorded in the defendant's gross receipts, and the record supports this contention. (See, e.g., Exs. C, D & E to Watson Decl, ECF No. 102-4, pp. 48-98.)

Second, the Club sets what it describes as minimum payment amounts for the various types of individualized services offered by its entertainers. In the Club's "couch" areas, the Club charges $10.00 per song for use of the couch space and the entertainercharges a fee for the dance. The minimum listed by the Club is $30.00, which includes the $10.00 for use of the space. There are VIP rooms where dancers can perform in increments of time starting with 15 minutes. The Club charges a fee for use of the VIP room as follows, $25.00 for 15 minutes, $50.00 for 30 minutes, and $100.00 for 60 minutes. The Club minimums for dances in the VIP area are $150 for 15 minutes, $300 for 30 minutes, and $600 for 60 minutes. These minimums include the room fees charged by the Club at $25 for 15 minutes, $50 for 30 minutes, and $100 for 60 minutes. (See Ex. A to Davenport Decl.) For example, if a patron wanted to purchase a 15 minute "couch" or "friction" dance at the minimum price, he would pay $30 with $20 dollars going directly to the dancer and $10 going to the Club. Of course, if the patron paid with Golden Dollars, the club would collect an extra $3 (10%) from the patron in conversion fees and another $2 from the dancer (10%) when she traded in the Golden Dollars she was given for U.S. currency.

The defendant alleges that entertainers are free to charge more or less for their services, but the Club's use fees remain the same. The plaintiff alleges that entertainers were not actually allowed to charge less than the Club's stated minimum for semi-private performances, and the general manager of the club testified that he has no knowledge of a dancer selling dances for less than the minimum prices. (See Davenport Dep. 50:6-8.) An entertainer's ability to use the VIP rooms is practically limited by the space available, so if all the rooms are occupied, the entertainer and her patron might have to wait. (Miller Dep. 89:15-90:2.)

Third, the Club uses the dancers in certain promotions during which it sells hats and T-shirts and offers reduced prices on private dances. For thesepromotions, entertainers line up and walk on stage with one of Thee New DollHouse's promotional items, and the DJ announces that customers may buy a two-song dance and the promotional item for $50. (Davenport Dep. 46:23-47:20; Callicutt Dep.171:15-172:18.) The club takes a $30 cut of the promotional sales, representing 60% of the total price. (Callicutt Dep. 172:19-23.) Jack Davenport, the general manager of the Club, offered the following testimony about two for one promotions:

Q. So you decide when there's going to be a two for one and you tell the D.J.?

A. No. We have them approximately every hour on the week, but particularly when we're busy. The only time that I would say something along those lines is when we're past that hour into 15 minutes past the hour. Then I may say, hey, don't forget, you know, two for one time, that type of thing.

Q. And then do all the dancers come up on stage during the two for one?

A. They are supposed to.

Q. They are supposed to?

A. Yeah.

Q. And -

A. We encourage them to.

Q. Right. What would happen if a dancer was just sitting around not doing anything during the two for one? Would you ever tell the dancer to go on stage?

A. I would - if I saw someone not participating, I would say, you need to go upstairs now.

Q. Okay. So it is an expectation that unless they are doing something with a customer, that they will participate in the two for one.

A. We - we encourage them - everyone to - to participate in - in the two for ones

(Davenport Dep. 46:23-47:25.)

The Club does not have written rules for entertainers and claims that the only unwritten rules are those required by health, safety, and the law. The defendant makes this claim despite the fact that it sometimes has 60-80 entertainers working for it on a single night, (see Davenport Dep. 56:16-19; Clark Dep. 34:8-19, 39:6-17), and the fact that it claims to maintain a "high class" atmosphere that is "more like a show club than a strip club." A review of the facts and testimony quickly dispels any suggestion that the defendant is operating a laid back free-for-all without policies and procedures. While the defendant may characterize its rules and practices as "suggestions," "standards," "custom," "guidance," or "encouragement," the bottom line is that the defendant employs practices that are very similar to the "rules" imposed at other clubs and, to an extent that exceeds a lot of other clubs, tightly controls the atmosphere of its business. Finally, it is undisputed that the management of the Club has complete discretion to determine who can and cannot perform at the Club. (See Clark Dep. 43:6-12; Trowbridge Dep. 25:4-7.)

The Club claims that in addition to no rules for entertainers, there is no schedule either. The plaintiff disputes this claim, and argues that while scheduling is extremely flexible, the defendant does exert a measure of control in this area. The defendant has ultimate authority to control the shifts that entertainers are permitted to work, and has required certain entertainers to work the typically less lucrative daytime or happy hour shifts. (Hargadon Dep. 35:20-36:12 (if an entertainer is failing to live up to standards, the defendant "might put them on a day shift"); DeGidio Dep. 99:11-20 ("If they didn't think you were up to par, they would make you work on a happy hour."); Gardner Dep.866:17-69:9 ("The manager would tell you, 'You have to work a happy hour [shift] or you don't have a...