Grodensky v. Artichoke Joe's Casino

• Decision Date: 11 March 2009
• Docket Number: No. A119035.,No. A119036.,A119035.,A119036.
• Citation: 171 Cal.App.4th 1399
• Court: California Court of Appeals Court of Appeals
• Parties: HARVEY GRODENSKY, Plaintiff and Respondent, v. ARTICHOKE JOE'S CASINO et al., Defendants and Appellants. HARVEY GRODENSKY, Plaintiff and Appellant, v. ARTICHOKE JOE'S CASINO et al., Defendants and Respondents.

171 Cal.App.4th 1399

HARVEY GRODENSKY, Plaintiff and Respondent, v. ARTICHOKE JOE'S CASINO et al., Defendants and Appellants.

HARVEY GRODENSKY, Plaintiff and Appellant, v. ARTICHOKE JOE'S CASINO et al., Defendants and Respondents.

No. A119035.

No. A119036.

Court of Appeals of California, First District, Division Two.

March 11, 2009.

Spiro Moss Barness, Dennis F. Moss; Law Offices of Andrew Kopel and Andrew R. Kopel for Plaintiff and Appellant and for Plaintiff and Respondent.

Kauff McClain & McGuire, Maureen E. McClain and Robert D. Links for Defendants and Appellants and for Defendants and Respondents.

OPINION

LAMBDEN, J.—

Artichoke Joe's Casino (Artichoke Joe's or the casino) implemented a mandatory tip pooling policy for the dealers. A dealer, Harvey Grodensky, filed a class action and alleged claims for conversion and violating Labor Code sections 351 and 1194. He also claimed in his representative capacity that the casino had violated the unfair competition law (UCL). After a bench trial, the trial court found that a mandatory tip pool was legal. However, it determined the shift managers were agents of the casino and therefore the casino violated Labor Code section 351 by distributing a portion of the tip money to the shift managers. The court also found that this violation of the Labor Code supported Grodensky's UCL claim. The court ordered restitution for the amount of tip money given to the shift managers and issued an injunction. It also ruled that Grodensky was entitled to an award of attorney fees under Code of Civil Procedure section 1021.5. Both parties appealed and we, on our own motion, consolidated the appeals.

On appeal, Artichoke Joe's asserts that a protective order issued by the trial court was unlawful, that Labor Code section 351 did not provide Grodensky with a private right of action, and that restitution was not a proper remedy. It also challenges the court's award of attorney fees to Grodensky and the class. We agree that the lower court did not apply the proper test under Code of Civil Procedure section 1021.5 when determining that Grodensky was entitled to attorney fees and remand for the court to consider whether to award attorney fees using the proper test. We otherwise reject the casino's arguments.

In the appeal by Grodensky and the class, they argue that the trial court erred in finding that the mandatory tipping pool did not violate Labor Code section 351 and that the casino did not violate Labor Code section 1194. They also object to the lower court's rulings that the floor managers were not agents under Labor Code section 350, subdivision (d), that Grodensky could not bring a claim of conversion, and that Grodensky and the class did not have a UCL claim based on alleged violations of Labor Code sections 221 and 450. We are not persuaded by any of Grodensky and the class's arguments.

BACKGROUND

Pretrial

The Complaint, Protective Order, and Class Certification

On July 12, 2002, Grodensky, a dealer at the casino, filed a class action lawsuit against the casino and Dennis J. Sammut challenging the implementation of a tip pool, which required the dealers to contribute to a tip pool.¹ Sammut's father started Artichoke Joe's as a family business in 1957. The casino became a corporate operation in approximately 1986; Sammut is one of the three major shareholders and an officer of the corporation.

In his complaint, Grodensky set forth claims of conversion and violations of the gratuity statute (Lab. Code, § 351), the minimum hourly wage laws (Lab. Code, § 1194), and the UCL (Bus. & Prof. Code, § 17200 et seq.). With regard to violating Labor Code section 351, Grodensky alleged that the dealers' tips were taken, collected, or received by the casino and illegally distributed to its agents.

On May 13, 2003, Grodensky filed a motion for class certification. The following day, the casino sent a memorandum to all cardroom dealers, which stated in relevant part: "On Tuesday, May 20, 2003, we have scheduled three meetings for all of the card room dealers. These meetings will be held to talk about a lawsuit that has been filed against Artichoke Joe's concerning wages and the tip pool. [¶] The lawsuit has been filed as a potential class action involving all past and present card room dealers at Artichoke Joe's. That means the lawsuit could impact you as well as other employees at Artichoke Joe's. For that reason, we have asked our attorneys to meet with you as a group to talk about the matter. Our attorneys also will be available to meet with you individually .... [¶] ... Your attendance at any one of these sessions will be on the clock."

The dealers were required to sign an acknowledgement that they had read the foregoing memorandum. The acknowledgement stated: "I have read the memo about the meetings for dealers scheduled for Tuesday, May 20, 2003. I understand Artichoke Joe's recommends that I attend, since the issues in question could affect me, but I am not required to attend."

Grodensky filed an application for a protective order, which the court heard on May 19, 2003. The court granted the protective order under the following terms and conditions: "1. The meetings unilaterally scheduled by defendants and defense counsel for May 20th with members of the putative class who are employee dealers shall not go forward and shall be immediately cancelled. [¶] 2. There shall not be any communications regarding this lawsuit or the claims asserted therein between defendants and members of the putative class who are presently employed by any defendant, while determination of the class certification motion is pending, unless otherwise specifically ordered by this court subsequent to the entry of this order. [¶] 3. There shall not be any communications regarding this lawsuit or the claims asserted therein between defendants' counsel and any members of the putative class, while determination of the class certification motion is pending, unless otherwise specifically ordered by this court subsequent to the entry of this order. [¶] 4. If defendants or defense counsel believe they have a need to have communication with any class member regarding this lawsuit or the claims asserted therein for purposes of investigation, defendants shall make written application to the court for such communication and receive court approval prior to any such communication. . . ."

On August 4, 2003, the trial court granted in part Grodensky's motion to certify a class. Of the 137 known class members, 59 opted out of the class, including one former employee and 58 current employees. The class consisted of 43 former employees and 35 current employees for a total of 78 current and former dealers. Grodensky did not seek class certification for his UCL claim. Subsequently, the trial court dismissed with prejudice Grodensky's claim for conversion.

The Ruling on the Private Right of Action Issue

The parties stipulated that the trial court would adjudicate certain issues after considering the parties' briefing and argument. One such issue was whether Grodensky and the class had a private right of action for violating Labor Code section 351 regarding the taking of their tips by the employer for distribution to other employees. In its order filed on December 9, 2003, the court ruled that Grodensky and the class did have a private right of action under Labor Code section 351 against their employer. The casino again raised this issue in its summary judgment motion; the court again found that there was a private right of action.

The Bench Trial

The matter proceeded to a three-stage bench trial. In the first phase, the trial court addressed the claims for violating Labor Code sections 351 and 1194. The second phase concerned Grodensky's UCL claim. The final phase concentrated on remedies.

Evidence Presented

The casino is located in San Bruno and has been in business for decades. It operates 24 hours a day, seven days a week. Games played at the casino include poker games such as "Texas Hold `Em." Players do not play against the house, but play against each other. They are charged a fee by the casino to play the available games.

The players give tips directly to the dealer. The players stay at the table with the dealer and, if they keep winning, they repeatedly tip the dealer. Players separately tip board persons, floor managers, shift managers, and chip sellers.

In late 1993, the Internal Revenue Service (IRS) began an investigation into whether the cardroom employees at the casino were complying with various federal income tax reporting requirements.

According to Joe Willson, the general manager of the casino, the casino began considering the adoption of a tip pool after being contacted by the IRS. On August 22, 1997, the casino received a letter from the regional commissioner of the IRS stating that employees in the casino industry had not been properly reporting their tip income. It proposed a "Tip Rate Determination Agreement" (TRDA) with the casino, which would result in no further tip audits. The letter explained: "To participate in this program, you, the employer, must first establish a set of rates for the various categories of employees at your establishment. Rates must be based upon empirical data and must be verifiable. . . . All rates must be approved by the IRS before we enter into a TRDA agreement." The letter announced that the IRS had set January 1, 1998, as the date for implementing these agreements.

Prior to October 1998, the casino permitted the dealers to do whatever they wanted with their tips; tip sharing with other employees was voluntary and random. The dealers determined whether they wanted to give tips to others and how much those tips would be. In March 1998, the following writing reflected the policy of the casino: "It is Artichoke Joe's policy that every employee shall have sole discretion over all tips received by him or her. No employee is required to split tips, pool tips, or...