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Kwong v. Osaka Japanese Restaurant Inc.

United States District Court, Fifth Circuit

January 15, 2014

MEGAN KWONG, et al, Plaintiffs,
v.
OSAKA JAPANESE RESTAURANT INC., et al., Defendants.

OPINION AND ORDER

MELINDA HARMON, District Judge.

Pending before the Court is Plaintiff's Motion for Conditional Certification (Doc. 15). Upon review and consideration of the motion, the response (Doc. 25) and reply thereto (Doc. 28), the relevant legal authority, and for the reasons stated below, the Court concludes that the motion should be granted.

I. Background

Plaintiff Megan Kwong ("Kwong") filed this suit on behalf of herself and those similarly situated against Defendants Osaka Japanese Restaurant, Inc. ("Osaka") and Osaka's owner, Xue Yi Lin ("Lin") (collectively "Defendants") for violations of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et. seq. Defendants operate a Japanese restaurant with two locations: one on Westheimer Road ("Osaka 1") and the other on Bellaire Boulevard ("Osaka 2") in Houston, Texas. Kwong was employed as a waitress in both locations from 2007 until approximately September 2012. (Pl.'s Decl., Apr. 4, 2013, Doc. 15-2 ¶¶ 2-6).

According to Kwong, she worked approximately fifty-seven hours per week, and was paid a rate of $2.15 per hour plus tips. (Doc. 15-2 ¶¶ 2-6). Kwong alleges that Osaka took 5% of all the tips she received that were paid by credit card. (Doc. 15-2 ¶ 4). Osaka also employed a practice of pooling the tips of all its waiters and waitresses, including Kwong's, and then keeping 18% of the pool for the restaurant. (Doc. 15-2 ¶ 4). Kwong asserts that as a result of these pay practices, she did not receive minimum or overtime wages. (Pl.'s Original Complaint, Doc. 1 ¶¶ 19, 23).

In support of her motion, Kwong offers the names of three other waiters who were paid under the same method: Alex Yu, Calvin (last name unknown), and Liang (last name unknown). (Doc. 15-2 ¶ 8). Additionally, Kwong provides a declaration from Wei Wang, who worked as a waiter and later as a manager for Defendants at both locations. (Wang Decl, Apr. 5, 2013, Doc. 15-3 ¶ 2). Wang corroborates Kwong's claims regarding Defendants' tip pooling practices, alleging that the restaurant took 5% of tips paid by credit card and 18% of remaining tips without distributing the amounts taken to other employees. (Doc. 15-3 ¶ 6).

Kwong now moves for conditional certification of a class of "all employees of Defendants who, at any point, during the past three years prior to the filing of this lawsuit, worked more than forty hours per week at any location owned and/or operated by the Defendants and did not receive the minimum wage of $7.25 per hour and overtime pay." (Doc. 15 at 7). Defendants contend that certification of this class is not appropriate, as Kwong has not made a sufficient showing that similarly situated individuals exist and wish to opt in to the lawsuit. (Doc. 25 at 3). Further, Defendants ask that if the Court does grant conditional certification in this case, it limit the class to waiters employed by Osaka, since Kwong has not presented any evidence of a policy or plan that affected all current or former employees of Osaka. (Doc. 25 at 3-4). In her reply in support of her motion for conditional certification, Kwong does not oppose adding language to the notice that limits the class to "employees who pooled their tips with the tips of other employees." (Doc. 28 at 4). Therefore, the Court will add this description to the proposed class in considering Kwong's motion.

II. Legal Standard

Under the FLSA, nonexempt employees must earn a minimum wage of $7.25 per hour, and no employer shall employ any nonexempt employee in excess of forty hours per week without compensation at one and one-half times the regular rate. 29 U.S.C. §§ 206(a), 207(a). For tipped employees, employers may offer a wage that, with tips, meets minimum wage requirements. Id. § 203(m). The Code of Federal Regulations elaborates that employers cannot pool tips except among employees who customarily and regularly receive tips and must permit employees to retain all tips. 29 C.F.R. § 531.59(b).

Section 216(b) of the FLSA permits an employee to bring an action "for and [on] behalf of himself... and other employees similarly situated." 29 U.S.C. 216(b). Collective actions serve the purpose of decreasing litigation costs by efficiently resolving common issues of law and fact in a single proceeding. Hoffman-La Roche, Inc. v. Sperling, 493 U.S. 165, 170 (1989). To certify a collective action under the FLSA, two requirements must be satisfied. "First, the named representative and the putative members of the prospective FLSA class must be similarly situated. Second, the pending action must have a general effect." England v. New Century Fin. Corp., 370 F.Supp.2d 504, 507 (M.D. La. 2005). Class treatment is not appropriate where the action arises from circumstances that are "purely personal to the plaintiff, and not from any generally applicable rule or policy." Id.

The Fifth Circuit has noted the two different tests that courts apply to determine if the putative class members are "similarly situated." Mooney v. Armaco Srvcs. Co., 54 F.3d at 1213-14 (5th Cir. 1995). Like most district courts, this Court has generally adopted the two-stage approach articulated in Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987), which consists of (i) a notice stage, followed by (ii) a decertification stage.[1] See Sandoz v. Cingular Wireless LLC, 553 F.3d 913, 916 n.2 (5th Cir. 2008) (finding that "collective actions typically proceed in two stages"). At the notice stage of the Lusardi approach, the district court first makes a preliminary determination of whether potential plaintiffs are similarly situated to the named plaintiff. Mooney, 54 F.3d at 1213-14. If they are, then the court conditionally certifies the action and authorizes notice to potential plaintiffs to opt in, and the suit "proceeds as a representative action throughout discovery." Id. at 1214. Generally, after the close of discovery, the defendant initiates the second stage by filing a motion for "decertification." Id. At the decertification stage, the Court makes a factual determination of whether the plaintiffs are "similarly situated" based on the discovery evidence. Id. If the court determines from the discovery evidence that the plaintiffs are in fact similarly situated, then the case continues as a representative action. Id. If the court finds that the plaintiffs are not similarly situated, then the class is decertified, the "opt-in" plaintiffs are dismissed without prejudice, and the original plaintiffs proceed to trial on their individual claims. Id. at 1213-14.

The instant case concerns the first step of Lusardi, the notice stage. At the notice stage, plaintiffs bear the burden to establish that they are similarly situated to other employees in the proposed class. England, 370 F.Supp.2d at 507. Plaintiffs are similarly situated when they have the same job requirements and pay provisions. Aguilar v. Complete Landsculpture, Inc., 3:04-cv-0776-d, 2004 WL 2293842, at *1 (N.D. Tex. Oct. 7, 2011). Courts determine whether the burden has been met using a "fairly lenient standard, " requiring only "substantial allegations that the putative class members were together the victims of a single decision, policy, or plan infected by discrimination." Mooney, 54 F.3d at 1214, n.8 (citing Sperling, 118 F.R.D. at 407); see also England, 370 F.Supp.2d at 507-08 (Plaintiffs must offer support of "some factual nexus which binds the named plaintiffs and the potential class members together as victims of a particular alleged [policy or practice]."). A court will customarily make a decision "based only on the pleadings and any affidavits which have been submitted." Mooney, 54 F.3d at 1213-14. Generally, to meet this burden, a plaintiff must show "(1) there is a reasonable basis for crediting the assertion that aggrieved individuals exist; (2) those aggrieved individuals are similarly situated to the plaintiff in relevant respects given the claims and defenses asserted; and (3) those individuals want to opt in to the lawsuit[2]." Morales v. Thang Hung Corp., No. 4:08-2795, 2009 WL 2524601, at *2 (S.D. Tex. Aug. 14, 2009) (citing Maynor v. Dow Chemical Co., No. G-07-0504, 2008 WL 2220394, at *6 (S.D. Tex. May 28, 2008)); Aguirre v. SBC Commc'ns, Inc., No. Civ.A.H-05-3198, 2006 WL 964554, at *6 (S.D. Tex. Apr. 11, 2006) (same). "[C]ourts who have faced the question of whether movants established substantial allegations have considered factors such as whether potential plaintiffs were identified...; whether affidavits of potential plaintiffs were submitted...; and whether evidence of a widespread discriminatory plan was submitted." England, 370 F.Supp.2d at 508 (quoting H&R Block, Ltd. v. Housden, 186 F.R.D. 399 (E.D. Tex. 1999).

If a class is conditionally certified, courts have discretion in how notice is distributed. Mooney, 54 F.3d at 1214; see Hoffman-La Roche, Inc., 493 U.S. at 169 (establishing that "courts have discretion, in appropriate cases, to implement 29 U.S.C. § 216(b)... by facilitating notice to potential plaintiffs"); see also Ali v. Sugarland Petroleum, 2009 WL 5173508, at *3 (finding that "the court may exercise its discretion in defining the class of plaintiffs who will receive notice and how they will be notified"). For example, a court may grant ...


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