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SORENSEN v. CHT CORP.

March 9, 2004.

KURT SORENSEN, PAUL LARSON, SARAH BROWN, JOHN WINTERMAN, and BELINDA CHANG on behalf of themselves and all other Plaintiffs similarly situated known and unknown, Plaintiffs
v.
CHT CORP., a/k/a CHARLIE TROTTERS and CHARLIE TROTTER, Defendants. BEVERLY KIM on behalf of herself and all other Plaintiffs similarly situated known and unknown, Plaintiff, CHT CORP., a/k/a CHARLIE TROTTERS and CHARLIE TROTTER, Defendants



The opinion of the court was delivered by: REBECCA PALLMEYER, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs are current and former employees of Defendants CHT Corp., a/k/a Charlie Trotters and Charlie Trotter, the owners of Charlie Trotter's restaurant in Chicago, Illinois. Plaintiffs allege that Defendants violated the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., the Portal-to-Portal Act, 29 U.S.C. § 251 et seq., the Illinois Minimum Wage Law ("1MWL"), 820 ILCS 105/1 et seq., and the Illinois Wage Payment and Collection Act ("IWPCA"), 820 ILCS 115/1 et seq., by failing to pay employees minimum wages and overtime pay as required under these statutes. Plaintiff Paul Larson now seeks to certify a class of similarly situated employees on a Page 2 claim of unjust enrichment, and Plaintiff Beverly Kim seeks class certification of her IMWL and IWPCA claims. Defendants object to class certification and also seek judgment on the pleadings on the unjust enrichment claim. For the reasons set forth here, Defendants' motion for judgment on the pleadings is granted. Larson's motion for class certification is denied, and Kim's motion is entered and continued.

BACKGROUND

  These related cases arise out of a compensation scheme in place at Charlie Trotter's restaurant from at least March 1998 until October 2002. Under that plan, Defendants paid waiters and servers ("waiters") $3,09 per hour, plus tips. The waiters were required to turn over their earned tips to Defendants, who then distributed back to the waiters a certain flat "per diem" rate representing "tips." (TAC ¶¶ 5, 6.)*fn1 Although waiters typically collected from $300 to $1,000 in tips per night, Defendants paid them "only a fractional amount of the tips they actually received . . . as part of Defendants' tip pooling arrangement." (Id. ¶ 8.) Defendants allegedly used the excess tip money to pay the salaries of non-tipped employees, and to fund certain of Defendants' charitable activities. (Id. ¶ 9.) Defendants' compensation plan also provided for "back of the house employees" working as cooks and food prepares to receive $5.15 per hour, plus an additional payment termed "other." (Complot. ¶ 6.)*fn2 Plaintiffs allege that Defendants "excluded the weekly `other' payment made to [back house employees] in calculating [their] applicable regular hourly rate of pay for overtime purposes." (Id., ¶¶ 7, 9.) In addition, Defendants paid overtime wages only for hours worked in excess of 80 in bi-weekly pay periods rather than for hours worked in excess of 40 per week. (Id. ¶¶ 10, 11.) Page 3

  Plaintiffs believe this scheme violates federal and state law. Specifically, the Fair Labor Standards Act requires that employees be paid not less than the federally mandated minimum wage (at the time, $5,15 per hour), plus overtime pay at a rate of one and one-half times their regular rate of pay for all hours worked in excess of 40 hours in a work week. 29 U.S.C. § 206, 207. Under the Act, an employer may pay tipped employees a cash wage that is less than the minimum wage if the employee also receives "an additional amount on account of the tips received by such employee which amount is equal to the difference between the [cash] wage . . . and the [effective minimum] wage." 29 U.S.C. § 203(m). An employer may only utilize this so-called "tip credit" arrangement if it notifies employees of such a plan, and if "all tips received by such employee have been retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips." Id. Sorensen Litigation

  On March 5, 2003, Plaintiff Kurt Sorensen filed a five-count complaint on behalf of himself and other similarly situated waiters, alleging that Defendants willfully violated the FLSA and the Portal-to-Portal Act by unlawfully using a tip credit against their minimum wage obligations, and then failing to pay their waiters minimum wages (Count I) and overtime wages (Count III) as required by the statutes. In Counts II and IV, Sorensen alleged violations of the Awl's minimum wage and overtime pay requirements, and in Count V, he alleged that Defendants were unjustly enriched by their unlawful compensation arrangement with the waiters. On April 10, 2003, the complaint was amended to add Paul Larson, Sarah Brown, John Winter man, and Belinda Chang as plaintiffs (the "Sorensen Plaintiffs"), Plaintiffs made some additional changes in this First Amended Complaint and in a Second Amended Complaint filed on June 18, 2003.

  On August 6, 2003, the Sorensen Plaintiffs filed a Third Amended Complaint ("TAC") which is now the current version before the court. In Count I of the TAC, the Sorensen Plaintiffs allege Page 4 that Defendants' "tip credit" arrangement described above violates the FLSA and resulted in Plaintiffs being compensated at less than the applicable minimum wage of $5,15 per hour. (TAC ¶¶ 10, 11.) They also allege that Defendants' failure to pay them the minimum wage violates the IMWL (Count II.) In Count III, the Sorensen Plaintiffs allege that they and other tipped employees were entitled to be paid at an overtime rate of $7.72 per hour; i.e., one and one-half times the minimum wage of $5,15 per hour. (TAC ¶ 24.) Defendants instead paid the wait staff an overtime rate of only $5.66 per hour. The Sorensen Plaintiffs also allege that Defendants paid waiters overtime wages for hours worked "in excess of 80 hours in bi-weekly work weeks" rather than for all hours worked in excess of 40 hours per week as required by the FLSA and the Portal-to-Portal Act, (id. ¶ 25.) In Count IV, the Sorensen Plaintiffs assert a similar violation under the IMWL,

  In Count V, the Sorensen Plaintiffs allege, in the alternative, that for each week in which they and other waiters worked in excess of 40 hours, Defendants paid them a minimum wage of $3.09 per hour, an overtime rate of $5.66 per hour, and a daily "per diem" or "day rate." According to the Sorensen Plaintiffs, "[t]hose [per diem] payments were fictitious rates of pay which were aggregated each week by Defendants to equate to a fixed bi-weekly salary paid to Plaintiffs and other wait staff." (TAC ¶ 40.) The Sorensen Plaintiffs claim that this plan violates the FLSA and the Portal-to-portal Act.

  Count VI of the TAC alleges that Defendants were unjustly enriched by their practice of requiring the Sorensen Plaintiffs and other waiters to turn over their earned tips, and then paying the employees "substantially less than 50% of the total tips earned by Plaintiffs in each two week pay period" and using the excess tip money to pay non-tipped employees and fund charitable events. (TAC ¶¶ 48, 50.) Larson seeks to represent a class of similarly situated waiters for this claim. Finally, in Count VII of the TAC, the Sorensen Plaintiffs allege a violation of the IWPCA based on Defendants' failure to "compensate Plaintiffs for all hours they worked for Defendants." (Id. ¶ 64.) Page 5

 Kern Litigation

  On or about September 9, 2003, Plaintiff Beverly Kern filed a complaint in the Circuit Court of Cook County seeking overtime pay and other earned wages on behalf of herself and other similarly situated "back house" employees working at Charlie Trotter's restaurant as cooks and food prepares. The complaint alleges that from at least August 11, 2000 to October 2002, Defendants paid Kim and other back house employees an hourly rate, typically $5.15, plus an additional payment termed "other." (Complot. ¶ 6.) Defendants directed these employees to work in excess of 40 hours per week but did not pay them the proper overtime rate of one and one-half times their regular rate of pay. Instead, Defendants "excluded the weekly `other' payment made to Plaintiff in calculating Plaintiffs and the class' applicable regular hourly rate of pay for overtime purposes" in violation of the IMWL and the FLSA. (Id. ¶¶ 7, 9.) In addition, Kim alleges, Defendants failed to pay her and other back house employees all earned overtime wages, and implemented an unlawful practice of paying overtime wages only for hours worked in excess of 80 in bi-weekly pay periods rather than for hours worked in excess of 40 per week. (Id. ¶¶ 10, 11.) Kim claims that these practices violate the minimum wage and maximum hour provisions of the IMWL (Count I), and the requirements of the IWPCA (Count II), and she seeks to certify a class of all similarly situated employees on both Counts. The complaint also alleges a violation of the Flea's overtime pay requirements (Count III),

  On October 17, 2003, Defendants timely removed Kim's case to federal court pursuant to 28 U.S.C. § 1331. On October 31, 2003, the case was reassigned to this court pursuant to Local Rule 40, 4, and consolidated with Case No. 03 C 1609 filed by the Sorensen Plaintiffs. Defendants oppose class certification by both Larson and Kim and seek judgment on the pleadings on the farmer's unjust enrichment claim in Count VI of the TAC. Page 6

  DISCUSSION

 I. Motion for Judgment on the Pleadings

  A motion for judgment on the pleadings is governed by the same standards as a Rule 12(b)(6) motion to dismiss for failure to state a claim. Gustafson v. Jones, 117 F.3d 1015, 1017 (7th Cir. 1997). A court will grant such a motion only if "it appears beyond doubt that the plaintiff cannot prove any facts that would support his claim for relief," Northern Indiana Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 452 (7th Cir. 1998) (internal quotations omitted). In making this determination, the court views the facts in the complaint in the light most favorable to the nonmoving party. Id.

  Defendants*fn3 argue that they are entitled to judgment on the pleadings on the Sorensen Plaintiffs' unjust enrichment claim because (1) their relationship with Plaintiffs "was clearly governed by contract principles"; (2) they were not "unjustly" enriched by their compensation arrangement; and (3) the FLSA provides a complete ...


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