Johnson v. VCG Holding Corp.

• Decision Date: 09 March 2012
• Docket Number: No. 1:10–cv–00442–JAW.,1:10–cv–00442–JAW.
• Citation: 845 F.Supp.2d 353,18 Wage & Hour Cas.2d (BNA) 1705
• Parties: Ernest E. JOHNSON, III and Brian S. Prindle, Plaintiffs, v. VCG HOLDING CORPORATION, Defendant.
• Court: U.S. District Court — District of Maine

845 F.Supp.2d 353

18 Wage & Hour Cas.2d (BNA) 1705

Ernest E. JOHNSON, III and Brian S. Prindle, Plaintiffs,

v.VCG HOLDING CORPORATION, Defendant.

No. 1:10–cv–00442–JAW.

United States District Court, D. Maine.

March 9, 2012.

Donald F. Fontaine, Law Office of Donald F. Fontaine, Portland, ME, for Plaintiffs.

Allan S. Rubin, Jackson Lewis LLP, Southfield, MI, Matthew D. Freeman, Jackson Lewis LLP, Boston, MA, Paul DeCamp, Jackson Lewis LLP, Reston, VA, for Defendant.

ORDER ON MOTIONS FOR SUMMARY JUDGMENT

JOHN A. WOODCOCK, JR., Chief Judge.

The corporate and employment structure of adult entertainment nightclubs is occasionally exotic. The Plaintiffs, emcees who worked at a Defendant-owned nightclub, contend that their tips from dancers, who are independent contractors, should not count for purposes of the Federal Labor Standards Act. Despite determining that the record raises genuine issues of material fact as to whether the corporate parent is a proper defendant, the Court concludes that the money an entertainer gives an emcee constitutes a tip within the meaning of the FLSA and grants summary judgment in favor of the nightclub owner. Finally, with the disposition of the federal statutory claim, the Court declines to maintain supplemental jurisdiction over the state law claims and dismisses them without prejudice.

I. STATEMENT OF FACTSA. Procedural Background

On October 27, 2010, Ernest E. Johnson, III and Brian S. Prindle initiated “an individual and collective action” on behalf of “all persons who are or have been employed by defendant VCG Holding Corporation ... as dis[c] jockeys at any time within [the previous] three years ... through the date of the final disposition of this action.” Compl. at 1–2 (Docket # 1). Individually and on behalf of proposed members of the collective action, the Plaintiffs allege that VCG Holding Corporation (VCG) violated the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq. (Count I) and individually, they allege violations of Maine's Minimum Wage Act, 26 M.R.S. § 661 et seq. (Count II).

On August 12, 2011, VCG moved for summary judgment and filed a statement of material facts. Def. VCG Holding Corp.'s Mot. for Summ. J. (Docket # 46) ( Def.'s Mot.); Def. VCG Holding Corp.'s Statement of Material Facts in Support of its Mot. for Summ. J. (Docket # 47) (DSMF). On September 15, 2011, the Plaintiffs filed their opposition to VCG's motion for summary judgment, responded to VCG's statement of material facts, and proposed a set of additional facts. Pls.' Opp'n to Def. VCG Holding Corp.'s Mot. for Summ. J. (Docket # 50) ( Pls.' Opp'n ); Pls.' Statement of Material Facts in Opp'n to Def. VCG Holding Corp's Statement of Material Facts in Support of its Mot. for Summ. J. (Docket # 51) (PRDSMF); Pls.' Additional Statement of Material Fact in Opp'n to the Def.'s Mot. for Summ. J. (Docket # 51) (PSAMF). On September 30, 2011, VCG filed its reply to the Plaintiffs' response to its motion for summary judgment and its response to the Plaintiffs' statement of additional material facts. Def. VCG Corp.'s Reply in Support of its Mot. for Summ. J. (Docket # 56) ( Def.'s Reply ); Def. VCG Corp.'s Reply to Pls.' Additional Statement of Material Facts in Opp'n to Def.'s Mot. for Summ. J. (Docket # 57) (DRPSAMF).

On August 12, 2011, the Plaintiffs also moved for partial summary judgment and filed a statement of material facts. Pls.' Mot. for Partial Summ. J. (Docket # 44) ( Pls.' Mot.); Pls.' Statement of Material Facts (Docket # 45) (PSMF). On September 16, 2011, VCG filed its opposition to the Plaintiffs' motion for summary judgment, a response to the Plaintiffs' statement of material facts, and a set of additional facts. Def. VCG Holding Corp.'s Opp'n to Pls.' Mot. for Partial Summ. J. (Docket # 52) ( Def.'s Opp'n ); Def. VCG Holding Corp.'s Opp'n to Pls.' Statement of Material Facts and Statement of Additional Facts (Docket # 53) (DRPSMF; DSAMF). On September 22, 2011, the Plaintiffs moved for leave to consolidate their filings so that their response to VCG's motion for summary judgment would be considered their reply to VCG's response to their motion for summary judgment and their statement of material facts in opposition to VCG's statement of material facts would be considered their reply to VCG's response to their statement of material facts. Expedited Mot. for Leave to File Abbreviated Reply to Def.'s Resp. to Pls.' Mot. for Partial Summ. J. (Docket # 54) ( Expedited Mot.). The Court granted the motion on September 23, 2011. Order (Docket # 55).

B. VCG's Motion: The Facts

1. The Plaintiffs

Ernest E. Johnson, III and Brian S. Prindle were formerly employed as disc jockeys (Emcees) by KenKev II, Inc., d/b/a PT's Showclub Portland (P.T.'s or the Portland Club), an adult entertainment nightclub owned by VCG Holding Corp. in Portland, Maine.¹ DSMF ¶ 1; PRDSMF ¶ 1.

2. VCG's Corporate Structure

VCG is a Colorado corporation that owns, via stock, membership, or partnership interest, 18 businesses that operate nightclubs providing adult entertainment. DSMF ¶ 3; PRDSMF ¶ 3. VCG was formerly a publicly-traded corporation; however, as of April 18, 2011, it is no longer publicly-traded and is owned by a private entity, Family Dog, LLC, a Colorado limited liability company. Id. Each entity is separately incorporated and maintains proper corporate formalities.²Id. VCG acquired the stock of KenKev from its prior owner on September 14, 2007. DSMF ¶ 5; PRDSMF ¶ 5.

3. KenKev

KenKev is a Maine corporation that owns all licenses and permits to operate P.T.'s Showclub—Portland. Id. Mr. Ocello is a director of KenKev. Id. At the time of acquisition, the Portland Club was called Platinum Plus, and KenKev continued to operate the club under that name until June 2009, when the name changed to P.T.'s Showclub. DSMF ¶ 6; PRDSMF ¶ 6. KenKev employs its own staff (i.e. managers, bartenders, bar backs, waitresses, housemothers, emcees, etc.) and enters into lease agreements with the entertainers to perform at the Portland Club. DSMF ¶ 6; PRDSMF ¶ 6. Each club maintains its own employment files, books, records and payroll; however, the corporate office in Denver, Colorado does as well.³ DSMF ¶ 7; PRDSMF ¶ 7. The Plaintiffs admit that KenKev was listed as their employer on their W–2 tax forms. DSMF ¶ 8; PRDSMF ¶ 8. KenKev is currently managed by Gary Schellen and he holds the title Area Director. DSMF ¶ 9; PRDSMF ¶ 9. Before Mr. Schellen, Paul Clement was the Area Director for KenKev. Id. Mr. Clement testified that he was employed by KenKev. Id.

4. VCG, Employees, and the Clubs

Several Maine licenses issued to the Portland Club list Colorado as the address of the club.⁴ PSAMF ¶ 43; DRPSAMF ¶ 1. The Manager of the Portland Club has little idea as to when and how the licenses were obtained, suggesting that they were obtained by the Colorado corporate office.⁵ PSAMF ¶ 44; DRPSAMF ¶ 2. VCG's Department of Human Resources in Colorado maintains the payroll records and other human resource concerns for the Portland Club.⁶ PSAMF ¶ 45; DRPSAMF ¶ 3. VCG stated in its 2009 Annual Report that it has “approximately 925 employees, of which 135 were full-time management employees, including corporate and administrative functions, and approximately 790 who were engaged in entertainment, food and beverage service, including bar tenders and waitresses.” ⁷ PSAMF ¶ 46; DRPSAMF ¶ 4. VCG was the subject of two audits by the United States Department of Labor (DOL) relating to whether its employees were paid according to the Fair Labor Standards Act.⁸ PSAMF ¶ 47; DRPSAMF ¶ 5. VCG stated to the DOL that “[w]e continually monitor the actions of entertainers, employees, and customers to ensure the proper behavior standards are met.” ⁹ PSAMF ¶ 48; DRPSAMF ¶ 6. In 2009, the DOL placed VCG under a nationwide audit for all nightclub locations and for its corporate office. ¹⁰ PSAMF ¶ 49; DRPSAMF ¶ 7.

5. Paul Clement

Paul Clement was promoted in 2008 by the President of VCG from Supervisor at another PT club to Area Director of the Portland Club.¹¹ PSAMF ¶ 50; DRPSAMF ¶ 8. Michael Ocello, the President of VCG, chose Mr. Clement to travel to Portland in 2007 to recommend whether VCG should purchase the Portland Club.¹² PSAMF ¶ 51; DRPSAMF ¶ 9. When he testified, Mr. Clement referred to “we” when he described VCG.¹³ PSAMF ¶ 52; DRPSAMF ¶ 10. Area Director Paul Clement has constant legal and administrative conversations with VCG's corporate office.¹⁴ PSAMF ¶ 53; DRPSAMF ¶ 11.

Along with VCG, the Area Director is responsible for all day-to-day managerial activities, such as hiring and firing, establishing policies and procedures and management of all employees, including persons with job duties similar to the named Plaintiffs at the Portland Club.¹⁵ DSMF ¶ 10; PRDSMF ¶ 10. Mr. Clement likened his position of Area Director to Chief of Operations. ¹⁶ DSMF ¶ 11; PRDSMF ¶ 11. Mr. Clement testified that he was responsible for hiring and firing, revising employee policies, and maintaining records for his employees; he also said that he had the authority to pay invoices directly.¹⁷Id. At the suggestion of people at VCG or IEC and to make the Portland Club's tipping policy consistent with other clubs, Mr. Clement changed the tipping policy as it relates to managers, emcees, and doormen and the emcees' compensation from shift pay to tipped minimum wages. ¹⁸Id. The Portland Club had its own forms manual, which was provided by Ms. Danner,¹⁹ and his managers were responsible for running the shifts, overseeing particular departments, and handling the paperwork and tracking monies.²⁰Id.

6. The Portland Club and VCG

The Portland Club uses a Form Book prepared by the corporate office of VCG and provided by Ms. Danner, the Human Resources Director for VCG.²¹ PSAMF ¶ 54; DRPSAMF ¶ 12. Ms. Danner handles the payroll for employees of the Portland Club.²² PSAMF ¶ 55; DRPSAMF ¶ 13. The accountants for the Portland Club work in Denver, Colorado at the corporate...