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Miller v. Centerfold Entertainment Club, Inc.

United States District Court, W.D. Arkansas, Hot Springs Division

August 9, 2017

DEANNA MILLER, individually and on behalf of all others similarly situated PLAINTIFF
v.
CENTERFOLD ENTERTAINMENT CLUB, INC.; and JESSIE ORRELL, individually and as officer and/or director of Centerfold Entertainment Club DEFENDANTS

          OPINION AND ORDER

          P.K. HOLMES, III CHIEF U.S. DISTRICT JUDGE

         On July 17, 2017, the Court held a bench trial in this action and took the matter under advisement. The Court heard testimony from Defendant Jessie Orrell, opt-in Plaintiff Michelle Johnson, opt-in Plaintiff Kristina Garton, Plaintiff Deanna Miller (collectively, “Plaintiffs”), and Diana Day.[1] Several exhibits were also received into evidence. After carefully considering the evidence at trial and the legal arguments made, and based upon observation of the witnesses and an opportunity to weigh their credibility, the Court now makes its findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. For the reasons set forth below, the Court concludes that Plaintiffs were employees entitled to coverage under the Fair Labor Standards Act (“FLSA”), that Defendants violated the FLSA by not paying Plaintiffs a minimum wage, and that Plaintiffs are entitled to damages.

         I. Procedural History

         This case was originally filed on June 4, 2014 by Tamatrica Bonton. The complaint alleged that while Ms. Bonton and others performed as exotic dancers for Defendants, they were not paid a minimum wage or overtime compensation in violation of the FLSA, 29 U.S.C. § 201, et. seq., and the Arkansas Minimum Wage Act (“AMWA”), Ark. Code Ann. § 11-4-201, et. seq. Ms. Miller filed notice of her consent to join on the next day. (Doc. 5). On October 9, 2014, the Court[2]granted conditional collective action certification of the FLSA class under 29 U.S.C. § 216(b) so that notice could be disseminated to potential plaintiffs. (Doc. 12). An amended complaint was then filed on November 20, 2014, adding Ms. Miller as a named Plaintiff with her own individual claims under the FLSA and AMWA. (Doc. 17). On May 19, 2015, the Court granted Rule 23 class certification on the AMWA claim. (Doc. 37). On September 17, 2015, the Court granted attorneys Josh Sanford and Josh West's motion (Doc. 44) to withdraw as counsel for Ms. Bonton, and the Court subsequently terminated Ms. Bonton's individual claims and converted her to an opt-in Plaintiff after it became apparent that she was no longer interested in pursuing her claims as a class representative. (Doc. 57). Ms. Garton and Ms. Johnson filed notices of their consent to join the collective action on December 15, 2015. (Docs. 51, 52). On December 28, 2015, the case was reassigned to the undersigned. The Court sua sponte decertified the Rule 23 class action on March 10, 2017 (Doc. 64). On July 17, 2017, a bench trial was held. The Court heard evidence at trial for Ms. Miller, Ms. Garton, and Ms. Johnson. Because Plaintiffs' counsel has withdrawn from representing Ms. Bonton, and she did not appear at trial to pursue her claims, Ms. Bonton's claims will be dismissed without prejudice as to their refiling.

         II. Findings of Fact[3]

         Mr. Orrell is the owner and sole shareholder of Centerfold Entertainment Club, Inc. (the “Club”). Defendants obtained and maintained a permit to operate the Club as a sexually-oriented business. The Club is located in Hot Springs, Arkansas and provides adult entertainment in the form of exotic dancers. Defendants also hired managers, waitresses, and doormen. Ms. Miller, Ms. Garton, and Ms. Johnson performed as exotic dancers at the Club. Ms. Miller performed at the Club as an exotic dancer from June 2011 until November 2012, except for approximately two months during her pregnancy. Ms. Garton performed at the Club as an exotic dancer from August 2011 until July 2014, when she was fired for dancing at a private party. Ms. Johnson performed at the Club as an exotic dancer from 2006 until June 2014. She also worked at the Club as an assistant manager for approximately four months during that period.

         As part of their job at the Club, Plaintiffs would perform dances on stage pursuant to a stage rotation, give personal dances to patrons called “lap dances, ” and spend time with patrons who purchased the dancer a “lady's drink.” Defendants had a stage rotation policy of requiring dancers to perform their stage dances for two songs. Defendants set a policy that lap dances would cost $20 for one dance and $50 for three dances, and that ladies' drinks would cost $20. Defendants required the dancers to pay the disc jockey (“DJ”) ten percent of what the dancers made during stage dances. For lap dances and ladies' drinks, Defendants required the dancers to evenly split proceeds with the Club. Dancers were not allowed to handle any money other than their tips. Plaintiffs did not receive any wages or other form of compensation from the Club for their work there.

         When Plaintiffs performed stage dances, they would request certain songs from the DJ who would play those songs through a computer if they were available. When the Club had Internet connection, the DJ would play songs through YouTube. When Internet was unavailable, music would be chosen by the DJ from a play list, potentially streamed via iTunes or through a computer hard drive. Defendants did not allow dancers to select rap music for their stage dances.

         Dancers were subject to numerous fines if they did not comply with policies set by Defendants. Dancers would be fined for arriving late or leaving a shift early. Dancers were required to wear shoes on stage, although Mr. Orrell would make exceptions to this rule. Defendants maintained a store at the Club from which dancers could purchase costumes or shoes, though dancers could also purchase costumes elsewhere. While on stage, dancers were not allowed to go over the stage. Dancers were not allowed to go outside in their costume. Dancers could not leave the Club with a customer, and they were forbidden from dancing at other clubs or private parties. The penalty for being caught outside with a customer was a $500 fine. The penalty for dancing at another club or a private party was either termination or up to a $500 fine.

         Decisions about the Club's facilities, interior décor and design, budget, and policies, all were made by Defendants. Some dancers advertised their services over social media, but Defendants controlled all of the Club's advertising, including maintaining the Club's Facebook page and online job announcements. Ms. Johnson would send text messages to regular customers to let them know when she was working at the Club.

         All of the Club's managers were personally hired and supervised by Mr. Orrell. He also maintained his own table at the Club. While he previously supervised at the Club four to six nights a week, the frequency of his visits declined due to health concerns. As a result of his health deteriorating, Mr. Orrell went to the Club approximately once every three weeks. Nevertheless, Mr. Orrell installed live video surveillance at the Club so that he could supervise Club activities while at home.

         Dancers were required to work a minimum of four days a week unless they had another job, in which case they were allowed to work a minimum of three days a week. The Club was generally open Monday through Saturday every week. Despite their record-keeping obligations, Defendants have no records as to the tenure, hours worked, or the amount of money in tips collected by Plaintiffs during their time at the Club.

         III. Discussion

         A. FLSA Coverage

         The Court must first determine whether there is FLSA coverage in the instant matter. The FLSA mandates that every employer pay each of his or her employees a minimum wage and overtime compensation for any workweek that the employees are (1) “engaged in commerce[4] or in the production of goods for commerce” (individual coverage) or (2) “employed in an enterprise engaged in commerce or in the production of goods for commerce” (enterprise coverage). 29 U.S.C. §§ 206(a), 207(a). Plaintiffs do not contend that enterprise coverage exists, but claim that individual coverage exists for each of them.

         For individual coverage, “[t]he burden of proof lies on employees to establish that they were engaged in interstate commerce, or in the production of goods, and that such production was for interstate commerce.” Joseph v. Nichell's Caribbean Cuisine, Inc., 862 F.Supp.2d 1309, 1312 (S.D. Fla. 2012) (citations omitted). As evidence of individual coverage, Plaintiffs stated that they performed dances for customers who visited from outside the state of Arkansas, danced on furniture from outside the state, regularly handled beverages that came from outside the state, danced to music that originated from out of state, and wore costumes and stilettos that came from outside the state. The test “is not whether the employee's activities affect or indirectly relate to interstate commerce but whether they are actually in or so closely related to the movement of the commerce as to be a part of it.” McLeod v. Threlkeld, 319 U.S. 491, 497 (1943). Plaintiffs' proffered activities are not closely enough related to interstate commerce for purposes of individual coverage. See McLeod, 319 U.S. 491 at 494 (“[H]andlers of goods for a wholesaler who moves them interstate on order or to meet the needs of specified customers are in commerce, while those employees who handle goods after acquisition by a merchant for general local disposition are not.”); Joseph, 862 F.Supp.2d at 1314 (“whether the customers Plaintiff served at Defendant's restaurant were local or from out-of-state is immaterial to establishing individual FLSA coverage).

         Nevertheless, testimony elicited at trial confirms that individual coverage exists. Plaintiffs were required to regularly use the Internet to perform their dances. Individual coverage exists for dancers who “regularly use the instrumentalities of interstate commerce in [their] work.” Thorne v. All Restoration Servs., 448 F.3d 1264, 1266 (11th Cir. 2006). Furthermore, “[i]t is well-settled that ‘[t]he internet is an instrumentality of interstate commerce.'” Foster v. Gold & Silver Private Club, Inc., 2015 WL 8489998, at *6 (W.D. Va. Dec. 9, 2015) (citing United States v. Hornaday, 392 F.3d 1306, 1311 (11th Cir. 2004); AvePoint Inc. v. Power Tools, Inc., 981 F.Supp.2d 496, 512 (W.D. Va. 2013). When Plaintiffs performed stage dances, they would request songs from the DJ who would often stream the music over the Internet via YouTube.[5] Whether on stage or providing a private dance, dancers are hired by the Club to dance, and music is an indispensable part of a dancer's work. The music regularly streamed over the Internet while Plaintiffs performed at the Club, and their use of an instrumentality of interstate commerce is sufficient for individual coverage for each of the Plaintiffs in this action.

         As an additional basis for individual coverage, Ms. Johnson regularly texted her clientele to let them know when she would be performing at the Club. Individuals whose work involves the continued use of the interstate mails, telegraph, telephone or similar instrumentalities for communication across state lines are covered by the FLSA. 29 C.F.R. § 776.10(b); Schmidt v. Peoples Tel. Union of Maryville, Mo., 138 F.2d 13, 15 (8th Cir. 1943). Testimony at trial also confirmed that some of the dancers advertised their services on social media. While it is not clear whether Ms. Garton engaged in this activity, [6] Ms. Johnson also qualifies for individual coverage based on her use of a telephone to advertise her work at the Club.

         B. Plaintiffs' Employment Status

         Having found that FLSA coverage exists, the Court next considers whether Plaintiffs were employees of the Club. The FLSA defines an employee as “any individual employed by an employer, ” and states that “employ” includes “to suffer or permit to work.” 29 U.S.C. § 203(e)(1), (g). The Supreme Court has interpreted “employ” under the FLSA to be defined with “striking breadth.” Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326 (1992); see also Hodgson v. Taylor, 439 F.2d 288, 290 (8th Cir. 1971) (“The definition of employee under the Act is very broad and comprehensive.”). The Eleventh Circuit has described the statute's definition of an employee as the “the broadest definition [of employee] that has ever been included in any one act.” Antenor v. D & S Farms, 88 F.3d 925, 929 n.5 (11th Cir. 1996).

         Courts typically employ the economic realities test to determine whether an individual is an employee under the FLSA. See, e.g., Whitworth v. French Quarter Partners, LLC, 2014 WL 12594213, at *3 (W.D. Ark. June 30, 2014). “In determining whether an entity functions as an individual's employer, courts generally look to the economic reality of the arrangement.” Blair v. Wills, 420 F.3d 823, 829 (8th Cir.2005) (citing Goldberg v. Whitaker, 366 U.S. 28, 33 (1961) (“[T]he ‘economic reality' rather than ‘technical concepts' is to be the test of employment”)). Under this test, the Court looks “to the ‘economic reality' of all of the circumstances concerning whether the putative employee is economically dependent upon the alleged employer.” Whitworth, 2014 WL 12594213, at *3. Factors the Court will consider are: (i) the degree of control exercised by the Club over the business operations, (ii) the relative investments of the Club and dancers, (iii) the degree to which the dancers' opportunity for profit and loss is determined by the Club, (iv) the skill and initiative required by the dancers in performing the job, (v) the permanency of the work relationship, and (vi) the extent to which the work performed by the dancers is an integral part of the Club's business. See, e.g., Harrell v. Diamond A Entm't, Inc., 992 F.Supp. 1343, 1348 (M.D. Fla. 1997); 51 A.L.R. Fed. 702, § 2.5 (collecting cases). “[T]he final and determinative question must be whether the total of the testing establishes the personnel are so dependent upon the business with which they are connected that they come within the protection of the FLSA or are sufficiently independent to lie outside its ambit.” Usery v. Pilgrim Equip. Co., 527 F.2d 1308, 1311-12 (5th Cir. 1976). If, after applying the six factors and viewing them in their totality, Plaintiffs have “shown that there is no doubt as to the relationship between the parties, the court may determine as a matter of law that the worker is an employee or independent contractor.” McFeeley v. Jackson St. Entm't, LLC, 47 F.Supp.3d 260, 268 (D. Md. 2014), aff'd. 825 F.3d 235 (4th Cir. 2016) (citations omitted).

         1. Degree of Control

         In examining the degree of control exercised by the Club, the key inquiry is whether the dancer's “freedom to work when she wants and for whomever she wants reflects economic independence, or whether these freedoms merely mask the economic reality of dependence.” Harrell, 992 F.Supp. at 1349 (citing Reich v. Priba Corp., 890 F.Supp. 586, 592 (N.D. Tex. 1995)); see also Mednick v. Albert Enters., Inc., 508 F.2d 297, 303 (5th Cir. 1975) (“An employer cannot saddle a worker with the status of independent contractor, thereby relieving itself of its duties under the FLSA, by granting [her] some legal powers where the economic reality is that the worker is not and never has been independently in the business which the employer would have [her] operate”). The Court looks “not only at the [C]lub's rules and guidelines regarding the dancers' performances and behavior, but also to the [C]lub's control over the atmosphere and clientele”' McFeeley, 47 F.Supp.3d at 268 (internal quotation and citation omitted). “An entertainer can be considered an independent contractor only if she exerts such a control over a meaningful part of the business that she stands as a separate economic entity.” Usery, 527 F.2d at 1312-13.

         The Court finds that the Club exerted a significant amount of control over business operations and that Plaintiffs were not separate economic entities. Plaintiffs had no authority to hire, fire, discipline, order goods, enter into contracts, set prices, or create policies-the Club retained this authority exclusively. Plaintiffs did not advertise for the Club, even though Ms. Johnson advertised her personal services to certain clients. Mr. Orrell installed video surveillance at the Club so that he could oversee Club activities even when he was not there. The Club required Plaintiffs to work four nights a week unless they had another job, in which case they were required to work three nights a week. The Club also ...


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