Gardner v. Country Club, Inc.

• Decision Date: 03 December 2015
• Docket Number: Civil Action No.: 4:13-cv-03399-BHH
• Court: U.S. District Court — District of South Carolina
• Parties: Jacinda Gardner, on behalf of herself and all others similarly situated, Plaintiff, v. Country Club, Inc. d/b/a Masters Gentlemen's Club, Defendant.

Jacinda Gardner, on behalf of herself and all others similarly situated, Plaintiff, v. Country Club, Inc. d/b/a Masters Gentlemen's Club, Defendant.

Civil Action No.: 4:13-cv-03399-BHH

UNITED STATES DISTRICT COURT DISTRICT OF SOUTH CAROLINA FLORENCE DIVISION

December 3, 2015

Opinion and Order

This matter and a related case, Degidio v. Crazy Horse Saloon ("Degidio"), 4:13-2136-BHH, were presented to the Court on August 18, 2015, for hearing on motions for summary judgment, motions for conditional class certification and judicial notice pursuant to 216(b) of the FLSA, and motions for class certification under Rule 23. On September 30, 2015, the Court issued an exhaustive order in Degidio granting the motion for conditional class certification and judicial notice, denying the motion for class certification under Rule 23, and denying in substantial part the defendant's motion for summary judgment. See Degidio v. Crazy Horse Saloon and Rest., Inc, 4:13-cv-02136-BHH, 2015 WL 5834280 (D.S.C. Sept. 30, 2015). As the Court explained in its order, the material facts in the Degidio case were similar to those in this case, and the Court's analysis was essentially the same in both cases. The Court issued a detailed text order (ECF No. 84) in this case, with the following findings and instructions:

1. The Court finds that the plaintiff and other exotic dancers who have performed at the defendants club during the proposed class period are properly classified as employees under the FLSA.

2. The Court finds that the plaintiff has submitted sufficient evidence to carry her burden to establish that she was not paid minimum wage and overtime in violation of the FLSA. The defendant is certainly entitled to contest the number of hours the plaintiff and other class members worked, and damages remain an issue of fact.

3. The defendant has not produced sufficient evidence to show that the payments the plaintiff received for tableside dances, couch dances, and VIP-area dances qualify as service charges that may be used to offset the defendants minimum wage obligations pursuant to 29 C.F.R. § 531.52. The defendant has not provided evidence, beyond conclusory allegations, that the payments alleged to be service charges are taken into the defendants gross receipts in their full amount.

4. The Court grants the defendants summary judgment motion with regard to its claims that the state law claims under the South Carolina Payment of Wages Act (SCPWA) for minimum wage and overtime are preempted and invites the defendant to file a motion seeking dismissal of the remaining SCPWA claims as explained in Degidio. The Court declines to certify a class under Rule 23 at this time.

5. The Court declines to grant the defendant summary judgment on its claim that the plaintiff is not entitled to liquidated damages because the defendant has demonstrated both good faith and reasonable grounds for believing that it was not acting in violation of the FLSA. The Court finds that genuine issues of material fact preclude summary judgment on this issue at this time.

6. The Court grants conditional class certification under Section 216(b) of the FLSA. The proposed class notice (ECF No. 43-8) submitted by the plaintiff is approved. The deadlines and procedures for class notification set forth in the Degidio case should be followed in this case as well.

Accordingly, as set forth above, the plaintiffs motion for conditional class certification and judicial notice pursuant to 216(b) of the FLSA (ECF No. 43) is GRANTED, the motion for class certification under Rule 23 (ECF No. 42) is DENIED, the plaintiffs motion for summary judgment (ECF No. 41) on the issue of whether the defendants dancers are employees or independent contractors is GRANTED, and the defendants motion forsummary judgment (ECF No. 74) is DENIED except as to the minimum wage and overtime claims under the SCPWA as set forth above.

The Court explained in its text order that it would be issuing a statement of reasons explaining more fully why the reasoning set forth in Degidio applied to this case as well. The Court indicated that it wished for the cases to proceed in parallel and instructed the defendant to immediately comply with its text order. On October 8, 2015, before the Court could issue the promised statement of reasons, the defendant filed a motion seeking relief from the text order and permission to appeal (ECF No. 85). The plaintiff filed a response in opposition on October 29, 2015 (ECF No. 86). The Court provides a complete factual discussion and statement of reasons as a part of this Order denying the motion to reconsider.

BACKGROUND

The defendant, Country Club, Inc. d/b/a Masters Gentlemen's Club (the "Club) describes itself as a "topless adult night club in Myrtle Beach South Carolina." (Def's Statement of Undisputed Material Facts ¶ 1, ECF No. 74-2.) The Club refers to its "topless dancers" as "entertainers," as their job is "to entertain [the Club's] customers on stage and on the floor of the Club." (Decl. of Mike Kap ¶ 4, ECF No. 74-3.) In addition to the stage performances, customers can also pay for certain private, individualized services, including "table-side or VIP-area dances." (ECF No. 74-2 at ¶ 33-34.)

As the entity that operates the Club, the defendant and its managers and agents have the authority and responsibility to hire and fire those who work at the Club, including the entertainers, house moms, disc jockeys, and bartenders. (Dep. of Michael Slay 17:7-18:23, ECF No. 44-1.) The defendant controls the layout of the Club, selects the food and alcohol the Club offers, maintains the building and makes any necessaryrepairs to the facility. (See id. at 25:25-26:4, 62:21-63:13; Kap Dep. 32:2-12, 54:2-10, ECF No. 44-3.) Entertainers are not given keys to the building and have no authority to hire or fire entertainers or other employees, to change the rules that govern entertainers or patrons, to alter the physical characteristics of the building, or to make decisions about the club's food and beverage offerings. (See id.) The defendant advertises on its website, cable television, local radio, and in the newspaper, and its management typically determines the content of the advertising.¹ (See Kap Dep. 22:14-24, ECF No. 79-6.)

Profitability of Entertainers

The defendant admits that it does not pay entertainers any wages or include them in payroll, (see Def's Disc. Resp. 9, ECF No. 44; Slay Dep. 50:21-51:7, ECF No. 44-1; Taylor Dep. 51:6-11, ECF No. 79-5), and that to earn money for working at Masters, entertainers rely on money received from the Club's customers, including tips and payments for private performances, which the Club characterizes as "service charges." (See Def's Disc. Resp. 9, ECF No. 44.) Entertainers are an important part of the defendant's business, and there are numerous ways in which the defendant profits from its entertainers, including house fees, performance fees, and G-Buck transactions.

House Fees

Entertainers are typically required to pay a nightly "house fee" to the Club in order to be able to dance. (Kap Dep. 38:23-25, ECF No. 79-6.) When asked why the Club charges its entertainers these fees, the Club's general manager, Michael Kap,responded, "[w]e always have charged house fees. We called them locker rentals for years. And they come in and they pay to work there." (Id. at 39:21-24.) The Club retains the house fees (they are not paid out to club employees as tips etc.). (Kap. Dep. 40:1-22, ECF No. 74-5.) The fees are structured to encourage the entertainers to arrive earlier in the evening to ensure that there are a sufficient number of entertainers in the Club during non-peak hours. The Club's written rules ("Club Rules") set forth the following house fees:

  • Dayshift2  no house fee listed  • Happy Hour Shift3  $25  • Night Shifts   o 7:30 P.M. - Close  $25  o After 7:50 P.M.  $35  o After 8:50 P.M.  $45  o After 9:50 P.M.  $100 

(Club Rules 3, ECF No. 79-3; Slay Dep. 39:4-24, ECF No. 79-4; Gardner Dep. 50:2-9, ECF No. 79-2; Kap Dep. 38:23-39:2, ECF No. 79-6.)⁴ The plaintiff alleges that there were occasions when she did not make enough money to pay Masters' mandatory house fees, but was told that she was still required to pay the house fee that same night or she "would not be welcome to come back to work the next day." (Gardner Depo. 36:5-16, ECF No. 79-2.)

Performance Fees

The Club also takes a portion of the fees charged for individualized services such as table-side dances, couch dances, and VIP-area dances. Masters requires itsentertainers to charge customers ten dollars ($10) for a table dance, twenty-five dollars ($25) for a couch dance, and four hundred dollars ($400) per hour for dances in the club's VIP area. If they have paid their house fees, entertainers are permitted to keep the entire $10 charged for a table dance, $20 of the $25 charged for a couch dance, and $300 of the $400 per hour charged for VIP dances, with the remaining amount being paid to the Club. (See Def's Disc. Resp. 9, ECF No. 79-7.) Entertainers are not supposed to charge less than the Club's recommended amounts, (see Slay Dep. 67:22-25, ECF No. 79-4), but are also warned not to overcharge customers, (ECF No. 79-3 at 4 ("Do not over-charge - it will cost you in the end!").)

The defendant characterizes the payments customers make for individualized services as "service charges," and it alleges that these fees are taken into the Club's gross receipts. (Kap. Dep. 46:2-6, ECF No. 74-5 (testifying that the Club's portion of the fees for individualized services "go[es] to the same place that the house fee cash goes").) In his sworn declaration submitted to the Court, the Club's general manager, Michael Kap, describes the way in which "service charges" are collected, recorded by the Club, and shared with the entertainers:

10. [E]ntertainers receive not only tips directly from the Club's customers, but also are compensated with service charges which the Club charges its customers for

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