Reich v. Priba Corp., Civ. A. No. 3:91-CV-2786-G.

• Decision Date: 27 March 1995
• Docket Number: Civ. A. No. 3:91-CV-2786-G.
• Citation: 890 F. Supp. 586
• Parties: Robert REICH, Secretary of Labor, United States Department of Labor, Plaintiff, v. PRIBA CORPORATION, et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

890 F. Supp. 586

Robert REICH, Secretary of Labor, United States Department of Labor, Plaintiff, v. PRIBA CORPORATION, et al., Defendants.

Civ. A. No. 3:91-CV-2786-G.

United States District Court, N.D. Texas, Dallas Division.

March 27, 1995.

COPYRIGHT MATERIAL OMITTED

Robert E. Luxen, Crouch & Hallett, Dallas, TX, pro se, special master.

Robert Allen Fitz, James Edward White, Brian Lee Pudenz, Marshall J. Breger, Bobbie Gannaway McCartney, Nancy Bowers Carpentier, U.S. Dept. of Labor, Office of Sol., Dallas, TX, Olivia Tanyel Harrison, Strasburger & Price, Houston, TX, for plaintiff Robert Reich.

Cynthia M. Wheless, Wheless & Walker, Plano, TX, John V. Jansonius, Shannon Brown Schmoyer, Akin Gump Strauss Hauer & Feld, Dallas, TX, Lynn C. Hensley, Hensley & King, Rockdale, TX, for defendants Priba Corp., Prive Corp., Manana Valet Corp., Salah Izzedin.

MEMORANDUM OF DECISION

FISH, District Judge.

I. INTRODUCTION

This case is brought by Robert Reich, Secretary of Labor, United States Department of Labor (the "Secretary" or the "DOL") under the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 et seq. ("FLSA"), against Prive Corporation ("Prive"), Priba Corporation ("Priba"), and Salah Izzedin ("Izzedin") (sometimes collectively "the defendants" or "Cabaret Royale"). Following a bench trial on October 20, 21, and 22, 1993, the court has reached the following findings of fact and conclusions of law.

II. BACKGROUND

1. The DOL is an agency of the United States charged with the administration, interpretation, and enforcement of the FLSA.

2. All parties have been correctly designated and venue is proper in this court.

3. The court has subject matter jurisdiction over this case pursuant to the FLSA, 29 U.S.C. §§ 216-17.

4. Priba was incorporated under the laws of the state of Texas on October 12, 1987. Pretrial Order ¶ C(1). Prive was incorporated under the laws of the state of Texas on January 19, 1988. Id. ¶ C(2). Both Priba and Prive are and have been, during all relevant periods, corporations with a place of business and doing business at the same location in Dallas, Texas and are within the jurisdiction of this court. Izzedin is an individual who at the time of trial resided in Houston, Texas. Pretrial Order ¶ C(3).

5. Prive and Priba jointly operate a night club and restaurant known as Cabaret Royale and are engaged in interstate commerce. Pretrial Order ¶ C(4), (5), (6), (11). See ¶ 7 below. Joe Najjar ("Najjar") serves as a managing director of Cabaret Royale. TR 2:156.¹ In that capacity, Najjar is responsible for the day-to-day operation of the club. Id.

6. Entertainers at Cabaret Royale are topless female dancers. Pretrial Order ¶ C(10); TR 1:22; 3:40.

III. PRIBA AND PRIVE: ENTERPRISE STATUS

7. Priba and Prive have been engaged in related activities for a common business purpose, as shown by following facts:

a. Priba and Prive operate out of the same business location for the common purpose of operating Cabaret Royale. TR 2:114-16, 132, 156, 160-61; 3:40. Prive holds the liquor license and Priba holds the sexually oriented business license for Cabaret Royale. TR 1:24. The topless entertainers work for Priba, TR 1:25, while Prive employs the waitresses and other food service personnel. TR 1:24-25.

b. Priba and Prive are consolidated for income tax purposes. TR 1:32. Both companies operate under the trade name "Cabaret Royale." TR 1:22.

c. Corporate officers who testified at trial never distinguished one corporation from the other. Instead, they simply referred to the combined operation as Cabaret Royale. TR 2:114-16, 132, 156, 160-61.

d. Priba is the parent of Prive and exerts at least some control over the unified operation. TR 1:25.

e. Accounting functions for Priba and Prive are executed through a combined accounting department. TR 1:21-22.

f. Both corporations share common officers. TR 1:21-22; 2:98 (referring to answers to interrogatories on file with the court which were read into the record).

g. Izzedin is the sole stockholder in both Priba and Prive. TR 2:98 (again referring to answers to interrogatories on file with the court which were read into the record).

8. Prive recorded gross sales for the year 1989 in the amount of $2,653,970.00 and reported $6,944,820.00 in gross sales for the year 1991. TR 1:20 (referring to answers to interrogatories read into the record). Priba reported $866,124.00 in gross sales for 1989 and $2,083,494.00 in gross sales for 1990. Id. Cabaret Royale recorded annual gross sales of approximately $3.5 million dollars in 1992. TR 3:21-22. See also stipulations by defendants in Defendants' Response in Opposition to Plaintiff's Motion to Compel Kay Sheppard, Defendants' Corporate Controller, To Bring Certain of Defendants' Documents to Trial ¶ II.

9. The FLSA defines the term "enterprise" as follows:

the related activities performed (either through unified operation or common control) by any person or persons for a common business purpose, and includes all such activities whether performed in one or more establishments or by one or more corporate or other organizational units.

§ 3(r)(1), 29 U.S.C. § 203(r)(1).

10. Priba and Prive constitute an "enterprise" within the meaning of § 3(r)(1), 29 U.S.C. § 203(r)(1), because they perform related activities through common control for a common business purpose. See Donovan v. Janitorial Services, Incorporated, 672 F.2d 528, 530 (5th Cir.1982); Brennan v. Veterans Cleaning Service, Inc., 482 F.2d 1362, 1366 (5th Cir.1973); Shultz v. Mack Farland & Sons Roofing Co., 413 F.2d 1296, 1299 (5th Cir.1969).

11. Priba and Prive hold themselves out to the public under the common operating name Cabaret Royale, share office space, and utilize a combined managerial and clerical staff to further the common purpose and related activity of promoting and operating a gentlemen's club. See Janitorial Services, above, 672 F.2d at 530.

12. Prive and Priba operate jointly to manage an upscale gentlemen's club. In this case, joint operation equates to related business activity because neither entity would exist without the presence of the other. Both entities are held out to the public as a single establishment and "each entity is used to enhance the public image of the other." See Veterans Cleaning Service, Inc., above, 482 F.2d at 1367.

13. The common ownership of Priba and Prive by Izzedin and the overlap of corporate officers demonstrates common control of the two corporations. See Donovan v. Grim Hotel Company, 747 F.2d 966, 970 (5th Cir. 1984), cert. denied, 471 U.S. 1124, 105 S.Ct. 2654, 86 L.Ed.2d 272 (1985). Vesting in Najjar supervision of the day-to-day operations of the combined entity Cabaret Royale also illustrates common control of the entities. Id.

14. Priba and Prive constitute "an enterprise engaged in commerce" within the meaning of § 3(s)(1) of the FLSA, 29 U.S.C. § 203(s)(1), because they have employees handling, selling, or otherwise working on alcoholic beverages that have moved in interstate commerce and because their annual gross volume of sales is not less than $500,000. Grim Hotel, above, 747 F.2d at 969-71.

IV. STATUS OF SALAH IZZEDIN

15. Izzedin is the entrepreneur and the promoter behind Cabaret Royale. TR 2:158. He "sets the image" for the club and coordinates the club's expansion plans in other major cities. Id.

16. Although not directly responsible for the day-to-day operation of the club, Izzedin stays involved in major policy decisions that would affect the profitability of Cabaret Royale. TR 3:24-25.

17. Izzedin has on occasion hired waitresses at Cabaret Royale. TR 1:56, 66-67.

18. Izzedin owns 100% of the stock in Prive and Priba. TR 2:98.

19. The remedial goals of the FLSA require courts to define "employer" more broadly than the traditional common-law application. McLaughlin v. Seafood, Inc., 867 F.2d 875, 877 (5th Cir.1989). Section 3(d) of the FLSA defines "employer" as "any person acting directly or indirectly in the interest of an employer in relation to an employee." 29 U.S.C. § 203(d). The determination of whether a person is an "employer" is essentially a question of fact, and the court must evaluate the totality of the circumstances, focusing on the economic realities of the particular employment relationship. Donovan v. Sabine Irrigation Co., Inc., 695 F.2d 190, 194 (5th Cir.), cert. denied, 463 U.S. 1207, 103 S.Ct. 3537, 77 L.Ed.2d 1387 (1983).

20. Izzedin contends that he is not an "employer" within the meaning of the FLSA because he (a) has delegated day-to-day operation of Cabaret Royale to a managing director, (b) does not hire or fire employees, and (c) is merely responsible for directing the public relations function of the club. The evidence at trial, however, indicates otherwise. Izzedin is the sole shareholder of both Prive and Priba and hired two of the waitresses who testified at trial. Najjar, who admitted that he consults Izzedin on occasion, conceded that important decisions concerning the status of waitresses and dancers probably could not be made without input from Izzedin. E.g., TR 3:30-31. A defense witness testified that Izzedin "oversees the managers as far as I can tell." TR 2:151. More importantly, Izzedin was the "driving force behind Cabaret Royale." See Reich v. Circle C. Investments, Inc., 998 F.2d 324, 329 (5th Cir.1993). Izzedin pioneered the concept of an upscale gentlemen's club in Dallas, and his club sets the standard for similarly situated establishments. TR 1:10; 3:39-40. His involvement in developing Cabaret Royale and his subsequent efforts to develop such establishments in other markets, TR 2:158, clearly demonstrate that Izzedin occupies the status of an employer within the meaning of § 3(d) of the FLSA. See Grim Hotel Company, above, 747 F.2d at 971-72.

21. Because Izzedin has been found to be an employer within the meaning of the FLSA, he is jointly and severally liable for all damages which stem from Cabaret Royale's failure...