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Starr v. Chicago Cut Steakhouse, LLC

United States District Court, N.D. Illinois, Eastern Division

December 15, 2014

AMY STARR and ANDREW PHELAN, individually and on behalf of a class of persons similarly situated, Plaintiffs,
v.
CHICAGO CUT STEAKHOUSE, LLC, Defendant

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For Amy Starr, Andrew G Phelan, individually and on behalf of a class of persons similarly situated, Plaintiffs: James X. Bormes, LEAD ATTORNEY, Law Office of James X. Bormes, Chicago, IL; Catherine P. Sons, Law Office of James X. Bormes, P.C., Chicago, IL; Peter E. Converse, Converse Law Offices, LLC, Chicago, IL.

For Chicago Cut Steakhouse, LLC, an Illinois limited liability company, Defendant: Michael E. Pildes, LEAD ATTORNEY, Jeffrey A. Schulman, Wolin and Rosen, Chicago, IL.

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MEMORANDUM OPINION AND ORDER

Honorable Edmond E. Chang, United States District Judge.

Plaintiffs Amy Starr and Andrew Phelan filed this proposed class-action against their former employer, Chicago Cut Steakhouse, LLC, under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., the Illinois Minimum Wage Law (IMWL), 820 ILCS 105/1 et seq., and the Illinois Wage Payment and Collection Act (IWPCA), 820 ILCS 115/1 et seq.[1] R. 26, First Am. Compl. ¶ 2. Plaintiffs allege that Chicago Cut improperly administered its tip pool by retaining a portion of the tip-pool proceeds for itself. Id. ¶ ¶ 14-19. Plaintiffs have moved to certify a class as to their state-law tip-pool claims (Counts 1 and 2).[2] R. 42, Mot. Class Cert. Plaintiffs have also moved for summary judgment on all of their tip-pool claims (Counts 1, 2, and 3). R. 96, Pls.' Mot. Summ. J. For the reasons discussed below, Plaintiffs' motion for summary judgment is denied, and their motion for class certification is granted.

I. Background

Chicago Cut Steakhouse is, as its name says, a steakhouse in Chicago, Illinois. PSOF ¶ 1. Chicago Cut treats many of its employees--servers, runners, barbacks, bartenders, and busboys--as " tipped employees" under the tip-credit provisions of the FLSA and IMWL. Id. ¶ 3; R. 106, Def.'s Mot. Summ. J. Resp. Br. at 6. Under these provisions, Chicago Cut is allowed to pay tipped employees 40 percent less than the prevailing minimum wage if the employees are able to make up the difference in tips. R. 44, Pls.' Class Cert. Br. at 3; see also 29 U.S.C. § 203(m); 820 ILCS § 105/4(c). The difference between the reduced wage and the minimum wage is called the " tip credit." Pls.' Class Cert. Br. at 3. To take the tip credit, an employer generally is not allowed to keep any of the tips received by its employees. See 29 U.S.C. § 203(m); 820 ILCS § 105/4(c).

Chicago Cut operates a tip pool on behalf of its tipped employees. PSOF ¶ 15. Servers in the main dining room contribute six percent of their net sales to the tip pool, which is then distributed to runners, bussers, and bartenders. Id. ¶ 16; see also Def.'s Resp. PSOF ¶ 16. For private dining events, the tip pool operates slightly differently. Chicago Cut charges a twenty-percent service charge to private dining clients. See Def.'s Mot. Summ. J. Resp. Br. at 6; R. 61, Pls.' Position Paper at 3. This service charge is divided among the servers who worked the private event, the tip pool, and a private dining event coordinator. See Pls.' Position Paper at 3; R. 60, Def.'s Position Paper at 1. Chicago Cut also withholds a portion of this service charge to cover credit card processing fees. Def.'s Mot. Summ. J. Resp. Br. at 7. Plaintiffs Amy Starr and Andrew Phelan, both of whom worked as bartenders at Chicago Cut, argue on behalf of themselves and the proposed class that Chicago Cut improperly operated the tip pool (1)

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by keeping a portion of the tip-pool proceeds for itself and (2) by paying tip-pool proceeds to ineligible employees. First Am. Compl. ¶ ¶ 14-19; R. 97, Pls.' Mot. Summ. J. Br. at 6-9; R. 108, Pls.' Mot. Summ. J. Reply Br. at 9-10.

Plaintiffs allege that this improper tip pool violates the tip credit provisions of the FLSA and IMWL because tipped employees did not receive the full measure of wages that they are due. First Am. Compl. ¶ ¶ 49-57, 68-77. Plaintiffs claim the improper tip pool also violates the IWPCA because, in withholding tip-pool funds, Chicago Cut paid tipped employees less than the amount agreed to in their employment agreements with Chicago Cut. Id. ¶ ¶ 58-67. Plaintiffs have moved for class certification on the IMWL and IWPCA tip-pool claims. Mot. Class Cert. Plaintiffs have also moved for summary judgment on liability for the FLSA, IMWL, and IWPCA tip-pool claims, arguing that the undisputed evidence in the record shows that Chicago Cut improperly operated the private dining tip pool by retaining a portion of the tip pool for credit card fees and paying the private dining event coordinator from the tip-pool proceeds. Pls.' Mot. Summ. J. Br. at 6-9; Pls.' Mot. Summ. J. Reply Br. at 9-10.

II. Plaintiffs' Motion for Summary Judgment[3]

A. Legal Standard

Summary judgment must be granted " if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A genuine issue of material fact exists if " the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In evaluating summary judgment motions, courts must view the facts and draw reasonable inferences in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). The Court may not weigh conflicting evidence or make credibility determinations, Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 704 (7th Cir. 2011), and must consider only competent evidence of a type otherwise admissible at trial, Gunville v. Walker, 583 F.3d 979, 985 (7th Cir. 2009). The party seeking summary judgment has the initial burden of showing that there is no genuine dispute and that they are entitled to judgment as a matter of law. Carmichael v. Village of Palatine, 605 F.3d 451, 460 (7th Cir. 2010); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Wheeler v. Lawson, 539 F.3d 629, 634 (7th Cir. 2008). If this burden is met, the adverse party must then " set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256.

B. Analysis

Ordinarily, an employer may only take the tip credit under the FLSA and

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IMWL if each tipped employee retains all of his tips. See 29 U.S.C. § 203(m); 820 ILCS § 105/4(c).[4] This restriction does not apply, however, if the tipped employees are participating in a valid tip pool. See 29 U.S.C. § 203(m); 820 ILCS § 105/4(c). In a tip pool, a portion of the tipped employees' earned tips are redistributed to other employees, such as bussers, bartenders, and food runners. To be valid under the FLSA and IMWL, the tip pool must only include employees who " customarily and regularly receive tips," and the employer " may not retain any of the employees' tips for any other purpose." 29 C.F.R. § 531.54; see also Williams-Green v. J. Alexander's Restaurants, Inc., 277 F.R.D. 374, 380-81 (N.D. Ill. 2011); Morgan v. SpeakEasy, LLC, 625 F.Supp.2d 632, 652-53 (N.D. Ill. 2007). If an employer improperly operates a tip pool, the employer cannot take the tip credit under either the FLSA or the IMWL. 29 U.S.C. § 203(m); Williams-Green, 277 F.R.D. at 379.

In their motion for summary judgment, Plaintiffs argue that Chicago Cut is not entitled to the tip credit under the FLSA and IMWL because it cannot show that the tip pool it operated was valid. Pls.' Mot. Summ. J. Br. at 6. Based on what Plaintiffs say are undisputed facts in the now-closed evidentiary record,[5] Plaintiffs contend that Chicago Cut cannot account for " shortfalls between the amount of tips Chicago Cut collected as compared to the amount of tips it distributed to tipped employees" in the tips collected from its private dining events.[6] Id. at 8. Plaintiffs claim that the private dining tip pool was improper under the FLSA and IMWL for two reasons: (1) the tips collected from private dining servers were distributed to the private dining event coordinator, who is not eligible (according to Plaintiffs) to participate in the tip pool[7]; and (2) credit card

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processing fees were deducted from the private dining tip-pool contributions. Id. at 8-10.

The IWPCA claim hinges on the FLSA and IMWL tip-pool claims. Under the IWPCA, an employer is liable if it fails to pay its employees the wages they have earned under their employment agreements. See Miller v. Kiefer Specialty Flooring, Inc., 317 Ill.App.3d 370, 739 N.E.2d 982, 986, 251 Ill.Dec. 49 (Ill.App.Ct. 2000). Plaintiffs claim that all of the tipped employees had an agreement with Chicago Cut that they would receive a portion of the tip pool proceeds. Pls.' Mot. Summ. J. Br. at 14-15. So if Chicago Cut did not properly pay-out the full amount of tip-pool proceeds, ...


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