Louis v. McCormick & Schmick Restaurant Corp.

• Decision Date: 18 October 2006
• Docket Number: No. CV 06 3752 MMM(SSX).,CV 06 3752 MMM(SSX).
• Citation: 460 F.Supp.2d 1153
• Court: U.S. District Court — Central District of California
• Parties: Nancy LOUIE, on behalf of herself and others similarly situated, Plaintiffs, v. MCCORMICK & SCHMICK RESTAURANT CORP., and Does 1 through 50, inclusive, Defendants.

460 F.Supp.2d 1153

Nancy LOUIE, on behalf of herself and others similarly situated, Plaintiffs, v. MCCORMICK & SCHMICK RESTAURANT CORP., and Does 1 through 50, inclusive, Defendants.

No. CV 06 3752 MMM(SSX).

United States District Court, C.D. California.

October 18, 2006.

Darren M. Cohen, Eric B. Kingsley, George R. Kingsley, Kingsley and Kingsley, Encino, CA, for Plaintiff.

Candice Terry Zee, Michael L. Gallion, Thomas R. Kaufman, Seyfarth Shaw, Los Angeles, CA, for Defendant.

ORDER GRANTING DEFENDANT'S MOTIONS TO DISMISS FIRST AMENDED COMPLAINT

MORROW, District Judge.

On March 15, 2006, plaintiff Nancy Louie filed a complaint in Los Angeles Superior Court against her former employer, McCormick & Schmick. Louie sued on her own behalf and on behalf of all individuals similarly situated. McCormick & Schmick removed the action to this court on June 15, 2006, invoking jurisdiction under the Class Action Fairness Act of 2005, Pub.L. No. 109-2, § 4(a), 119 Stat. 9 (codified in relevant part at 28 U.S.C. 1332(d)(2)).

On July 3, 2006, plaintiff filed a first amended complaint asserting three causes of action. The first claim alleges that defendant's tip-sharing arrangement, in which Louie was required to participate as a former employee, violates California Labor Code § 351 because it mandates that servers share tips with bartenders who do not provide direct table service to patrons. The second and third claims assert violations of California's Unfair Competition Law ("UCL"), California Business & Professions Code §§ 17200 et seq., and the Labor Code Private Attorney General Act, California Labor Code §§ 2698 et seq. Both claims are based on McCormick & Schmick's purported violation of Labor Code § 351. McCormick & Schmick filed a motion to dismiss Louie's complaint on June 16, 2006. Although the amended complaint was filed after the motion to dismiss, the parties by stipulation asked that the motion be deemed directed to the amended complaint. The court agreed to this procedure on July 14, 2006.

I. FACTUAL BACKGROUND

Louie previously worked for McCormick & Schmick, a restaurant chain with multiple locations in California, as a server.¹ In this capacity, she was allegedly required to pay "bartenders a percentage of [her] tips" even when they "did not offer direct table service to her customers."² Louie asserts that under Labor Code § 351, only employees "who provide direct table service to customers" may participate in a tip-sharing arrangement, and that bartenders, who provide "nominal or no direct table service" to a server's customers, are not eligible to receive a percentage of the tips.³

II. DISCUSSION

A. Legal Standard Governing Motions To Dismiss Under Rule 12(b)(6)

A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaint. A court may not dismiss a complaint for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see also, e.g., Johnson v. Knowles, 113 F.3d 1114, 1117 (9th Cir.1997). Thus, a Rule 12(b)(6) dismissal is proper only where plaintiff "lack[s] ... a cognizable legal theory" or fails to allege "sufficient facts [to support] ... a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1988).

Generally, a court considers only the allegations of the complaint and attached exhibits in deciding a Rule 12(b)(6) motion. Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n. 19 (9th Cir.1989). Documents that are proper subjects of judicial notice can be considered, however, without converting the motion into one for summary judgment. MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir.1986).⁴ The court must accept all factual allegations pleaded in the complaint as true, and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996); Mier v. Owens, 57 F.3d 747, 750 (9th Cir.1995). It need not, however, accept as true unreasonable inferences or conclusory legal allegations cast in the form of factual allegations. W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir.1981).

B. Whether Defendant's Mandatory Tip-Pooling Arrangement Violates California Labor Code § 351⁵

Louie alleges that, during the period she worked at McCormick & Schmick, the restaurant mandated that she share a portion of the tips left by the patrons she served with non-managerial employees who did not directly service those patrons at their tables. She contends this violates Labor Code § 351, which provides, in relevant part:

"No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer. Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for." CAL. LABOR CODE § 351

Two California appellate courts⁶ have held that the statute does not prohibit mandatory tip-pooling arrangements. See Leighton v. Old Heidelberg, Ltd., 219 Cal.App.3d 1062, 268 Cal.Rptr. 647 (1990); see also Jameson v. Five Feet Restaurant, Inc., 107 Cal.App.4th 138, 131 Cal.Rptr.2d 771 (2003). The court in Leighton analyzed the statutory language, and concluded:

"While the language of the statute expressly prohibits various employer practices, there is no mention therein of employer-mandated tip pooling, or of any kind of tip pooling among employees. Tip pooling has been around for a long time, as has section 351, and had the Legislature intended to prohibit or regulate such practice, it could have easily done so, just as it prohibited the various enumerated employer practices. Further, we find nothing in the legislative history of section 351 or related sections, which precludes such an arrangement." Leighton, 219 Cal.App.3d at 1067, 268 Cal.Rptr. 647.

Similarly, the court in Jameson stated that "[t]ip pooling is permissible under California law if an employer or agent does not take any part of a gratuity given to an employee by a patron or otherwise violate section 351." Jameson, 107 Cal.App.4th at 141, 131 Cal.Rptr.2d 771; see also id. at 143, 131 Cal.Rptr.2d 771 ("Tip pooling is permissible as long as it does not run afoul of the prohibitions contained in section 351"); id. at 145, 131 Cal.Rptr.2d 771 ("Under section 351, tip pooling is only permitted among employees who are neither employers nor agents under section 350").

These cases are consistent with the court's own interpretation of the statute. Section 351 prohibits an employer or its agent from taking any portion of a tip left by a patron for an employee, from deducting the amount of the tip from wages paid to the employee, and from requiring that the employee credit all or part of the tip to wages due from the employer.⁷ It does not prohibit tip sharing among employees who are neither employers nor agents. See id. at 145, 131 Cal.Rptr.2d 771. Thus, the fact that an employer requires a server to pool tips with other service employees who do not hire, fire, supervise or control their co-workers does not constitute a "taking" as that term is used in § See Leighton, 219 Cal.App.3d at 1068, 268 Cal.Rptr. 647 (stating that an employer that mandated tip pooling did "not `take, collect, or receive' as its own any part of a gratuity left by a patron," and "reject[ing] plaintiffs contention that employer-mandated tip pooling constitute[d] a prohibited `taking' by the employer within the meaning of section 351" because "[s]uch a construction [was] a strained one, outside of the ambit of the definition of the word `take' contemplated by the Legislature in drafting the statute").⁸

Citing Leighton, Louie urges that the court adopt a narrower construction of § 351 — i.e., that to be legal, tip-pooling arrangements must be limited to employees who directly serve patrons at their tables.⁹ So construed, Louie asserts § 351 outlaws mandatory tip sharing between servers and bartenders, irrespective of whether tipping customers order alcoholic beverages from the bar.¹⁰ Leighton does contain some language that might be read to support the stringent table service/non-table service distinction that Louie advocates. See, e.g., id. at 1067, 268 Cal.Rptr. 647 (describing tip sharing as a standard industry practice in which the "restaurant employer ... pools and distributes [a tip] among those employees who directly provide table service to a [tipping] patron," emphasis added); id. at 1069, 268 Cal.Rptr. 647 ("[The average diner] rewards for good service no matter which one of the employees directly servicing the table renders it," emphasis added). The court, however, cannot afford these passages the significance that Louie suggests they should have.

The California Supreme Court has consistently instructed that "`the language of an opinion must be construed with reference to the facts presented by the case, and [that] the positive authority of a decision is coextensive only with such facts.'" Brown v. Kelly Broadcasting Co., 48 Cal.3d 711, 734-735, 257 Cal.Rptr. 708, 771 P.2d 406 (1989) (quoting River Farms Co. v. Superior Court, 131 Cal.App. 365, 369, 21 P.2d 643 (1933)); see also Colmenares v. Braemar Country Club, Inc., 29 Cal.4th 1019, 1029, 130 Cal.Rptr.2d 662, 63 P.3d 220 (2003) ("`Language used in any opinion is of course to be understood in the light of the facts and the issue then before the court ...,'" quoting People v. Scheid, 16 Cal.4th 1, 17, 65 Cal.Rptr.2d 348, 939 P.2d 748 (1997)); Vons Companies, Inc. v. United States Fire Ins. Co., 78 Cal....