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Shanna Thornton, Jennifer Prater, and Heather Kidd v. Crazy Horse

June 14, 2012

SHANNA THORNTON, JENNIFER PRATER, AND HEATHER KIDD, PLAINTIFFS,
v.
CRAZY HORSE, INC., JEANETTE H. JOHNSON, SANDS NORTH, INC. D/B/A/ FANTASIES ON 5TH AVENUE, KATHLEEN HARTMAN, CAROL J. HARTMAN, AND MARCO GONZALEZ, DEFENDANTS.



The opinion of the court was delivered by: Timothy M. Burgess United States District Judge

MEMORANDUM OF DECISION

I.INTRODUCTION

The Defendants in this case operate clubs featuring adult entertainment in Anchorage, Alaska. Defendants Crazy Horse, Inc. and Jeanette H. Johnson (the "Crazy Horse Defendants") operate an establishment known as the Crazy Horse Saloon ("Crazy Horse"). During all relevant times, Defendants Sands North, Inc. d/b/a/ Fantasies on 5th Avenue ("Sands North"), Kathleen Hartman, Carol J. Hartman, and Marco Gonzalez (the "Fantasies Defendants") operated an establishment known as Fantasies on 5th Avenue ("Fantasies"). Plaintiffs Shanna Thornton, Jennifer Prater, and Heather Kidd were formerly employed as dancers at the clubs. In this action, they have asserted claims against Defendants for violations of the Fair Labor Standards Act ("FLSA"), the Alaska Wage and Hour Act ("AWHA"), and Alaska Statutes § 23.05.140.*fn1

Specifically, Plaintiffs seek to recover: (a) unpaid wages resulting from hourly charges levied by Defendants that they claim reduced their wages below the minimum wage; (b) unpaid overtime;

(c) other allegedly compulsory charges; and (d) amounts that they claim they were forced to "tip out" to other employees as part of an illegal tip pool. Plaintiffs bear the burden of proving that they were not properly compensated.*fn2

The Court held a four day bench trial commencing on January 3, 2012.*fn3 The Parties subsequently submitted written summary arguments and proposed findings of fact and conclusions of law.*fn4 Federal Rule of Civil Procedure 52(a) provides that "[i]n an action tried on the facts without a jury . . . the court must find the facts specially and state its conclusions of law separately." Having considered the testimony of the witnesses, exhibits admitted into evidence, and the Parties' submissions, the Court makes the findings of fact and conclusions of law set forth below.*fn5

II.FINDINGS OF FACT

A.The Evidence

1.Witnesses

1. Twelve witnesses testified at the trial.*fn6 The three Plaintiffs all testified on their own behalf. Plaintiffs also called Monique Alicia Seybold, a former dancer at Crazy Horse, as a rebuttal witness. The Court finds that Plaintiffs' testimony was generally credible; however, as discussed below, Plaintiffs' recollections were more favorable to their present litigation position than what likely occurred in several respects, most notably, those bearing on their potential damages calculations. The Court also finds that Seybold's testimony was generally credible.

2. The Crazy Horse Defendants called Jeanette Johnson, Mark R. Yost, Irina Gabryushina, Mernie Anna Myrtle Davies, Jenada Johnson, and Barbara Taylor. At all relevant times, Jeanette Johnson has been the owner and manager of Crazy Horse.*fn7 Yost is a former doorman*fn8 and Gabryushina is a former dancer at Crazy Horse.*fn9 Davies currently works and previously worked at Crazy Horse in a number of different roles, including as a "house mom"

(i.e., floor manager), bartender, and waitress.*fn10 Jenada Johnson is Jeanette Johnson's daughter and is the payroll manager at Crazy Horse.*fn11 Barbara Taylor is Jeanette Johnson's sister and is a house mom at Crazy Horse.*fn12

3. The Court finds that Gabryushina, Davies, Jenada Johnson, and Taylor generally testified credibly. Jeanette Johnson and Yost, however, did not. Jeanette Johnson's testimony was frequently contradicted, including by exhibits, her own prior affidavits, and other witnesses, including other Crazy Horse witnesses. Although the Court does commend Jeanette Johnson for what is undoubtedly her sincere belief in supporting charitable causes, her testimony was defensive, self-serving, and not believable. Additionally, Yost was clearly uncomfortable on the stand, his demeanor suggested that he was not being truthful, and the gist of his testimony -- which, in essence, was that he worked for tips, but rarely received them -- simply does not make sense. Jeanette Johnson and Yost's lack of credibility serves only to bolster Plaintiffs' testimony.

4. The Fantasies Defendants called Carol Hartman, the current owner of the club and former minority owner of Sands North, and Marco Gonzalez, Carol Hartman's son, who formerly had a two percent interest in Sands North.*fn13 Kathleen Hartman, who is Carol Hartman's sister and was the majority owner at the time,*fn14 did not testify. At all relevant times, Carol Hartman handled the club's bookkeeping.*fn15 Gonzalez was the disc jockey and had no management authority.*fn16 The Court finds that their testimony was generally credible.

5. Resolving the numerous factual disputes in this case has required Court to sort through two or more contradictory but equally plausible accounts put forward by witnesses who were generally credible. In these instances, the Court has weighed the evidence, considered the totality of the circumstances, and the burden of proof to make its findings. In some cases, the Court has made findings consistent with one of these accounts. In others, it has found that the truth lies somewhere in between the Parties' characterizations, and has done its best to determine what it is. Accordingly, in certain instances, the Court has not accepted (in whole or in part) the testimony of witnesses who were generally credible.

2.Exhibits

6. The Parties submitted a number of exhibits, most of which were admitted without significant dispute.*fn17 Crazy Horse's records, however, require further comment. The Court admitted Crazy Horse's daily records, which were kept in spiral bound notebooks,*fn18 over Plaintiffs' objection.*fn19 The testimony at trial established that these records were kept using an unorthodox methodology relying heavily on symbols and abbreviations which required lengthy explanations to interpret, were kept by a number of different individuals, that there was no formalized training for keeping the records, that there was no formalized process for determining who was in charge of keeping the records on any particular day, and that there were many instances where the records may have been inaccurate, or at the very least, incomplete. Under these circumstances, the Court finds that Crazy Horse's daily records are unreliable and entitled to no weight.

7. These problems were not limited to the spiral notebooks, however. Crazy Horse's records in general were shown to be highly unreliable. They were kept by many different people who used inconsistent notation methods, are fraught with errors and omissions, and, as Jeanette Johnson conceded, may not be accurate in important respects.*fn20 Accordingly, the Court has significantly discounted the weight of this evidence.

B.The Clubs' Operations & Plaintiffs' Employment

1.Crazy Horse

8. Thornton worked at Crazy Horse in 2003 and 2004.*fn21 Based on her recollection, commencing in September of 2003, she worked a total of 608 standard time hours and 108.5 overtime hours over the course of 83 days of work at Crazy Horse.*fn22 This included approximately 192 standard time hours, 18.5 overtime hours worked in excess of 40 per week, and 2 hours worked in excess of 8 per day, over the course of 25 days of work between August 22, 2003, and August 21, 2004.*fn23

9. Prater worked at Crazy Horse from November 2005 to May of 2006.*fn24 Based on her recollection, she worked a total of 930 standard time hours and 207 overtime hours over the course of 124 days of work at Crazy Horse.*fn25 This did not include any time prior to August 22, 2004.

10. Kidd worked at Crazy Horse from July 29, 2003, to April 29, 2006.*fn26 Based on her recollection, she worked a total of 4,485 standard time hours and 671 overtime hours over the course of 568 days of work at Crazy Horse.*fn27 This included approximately 1,513 standard time hours, 51.5 overtime hours worked in excess of 40 per week, and an additional 168.5 overtime hours worked in excess of 8 per day, over the course of 205 days of work between August 22, 2003, and August 21, 2004.*fn28 It also included approximately 120 standard time hours and 22.5 overtime hours over the course of 15 days of work prior to August 22, 2003.*fn29

11. The Plaintiffs testified that they generally worked at least eight hours, if not more, although this included time spent changing clothes, doing their hair and makeup, and "get[ting] in the right frame of mind" to work.*fn30 Davies indicated that she had never seen a dancer work more than eight hours, although the dancers often did spend significant amounts of time preparing for work or "hav[ing] coffee or get[ting] something to eat."*fn31 There was no requirement that the dancers conduct these activities at the club, as opposed to at home, before they came to work.*fn32 The weight of the evidence suggests that to the extent that the Plaintiffs were present at the club for more than eight hours on any given day, approximately one hour was spent preparing for work or on meals. With that exception, the Court finds that Plaintiffs' estimates based on their recollections support a just and reasonable inference of the amount and extent of their work at Crazy Horse.

12. At Crazy Horse, the dancers were compensated in a number of ways. First, the dancers received biweekly paychecks supposedly in the amount of the minimum wage from the club.*fn33 Second, dancers received discretionary amounts paid by customers for dances on the club's main stage (referred to as "stage tips"). Third, dancers received fees from customers for "table dances" performed for specific customers. Fourth, dancers received fees from customers for dances performed for specific customers in the club's VIP room.

13. There was no established amount for stage tips. Customers chose to pay or not pay whatever amount they thought was appropriate.*fn34

14. The dancers charged the customers $20 or more for each table dance, which they kept.*fn35 The dancers were responsible for collecting these fees, which everyone considered to be "their" property.*fn36

15. The dancers charged the customers $50 or more for each VIP dance. The dancers then paid $10 out of the fee for each dance to the club for the use of the room and kept the remainder of the fee, which belonged to them. The dancers paid the $10 fee to the club either immediately before or after going into the VIP room.*fn37

16. The Parties referred to and regarded the sums collected and retained by the dancers from the customers on stage, for table dances, and for VIP dances as "tips."*fn38

17. The dancers also paid out certain amounts to the club and to other employees. Dancers were required to pay $10 for each hour they worked, or $80 per eight-hour shift, to the club.*fn39 They did not pay more than $80 per day, and accordingly, were not paid in their biweekly paychecks for any time spent beyond eight hours in any given day.*fn40

18. The primary means by which the club tracked the dancers' time was the amount of hourly house fees they paid.*fn41 Although there was a time clock, Dancers were not required to clock in and clock out.*fn42 All other employees were required to do so.*fn43

19. The Plaintiffs and Seybold testified that they were instructed by Jeanette Johnson and others at the club that they had to pay tips to -- or "tip out" -- several other employees, including house moms and house dads, disc jockeys, poker announcers, doormen, and bartenders. They testified that when they did not pay these sums, they were "intimidate[d]" into doing so by these individuals.*fn44 The intimidation consisted of verbal harassment from those receiving the tip outs, including Jeanette Johnson.*fn45 Plaintiffs, however, were not threatened with the loss of their employment.*fn46 The Crazy Horse witnesses generally indicated that although there may have been some expectations of tip outs, it was not required and, although the other employees may have occasionally asked for tips or complained about not receiving tips, there was no intimidation.*fn47 Crazy Horse's "Dance Policies" at the time further indicate that "[i]t is customary to tip the House Moms, Doorm[e]n and DJs either d[ur]ing or at the end of" each shift.*fn48

20. The Court finds that although tipping was expected and frequently solicited in a badgering manner, there was no formal or informal requirement that the dancers tip out other employees at Crazy Horse. Tipping among the employees at Crazy Horse was very similar to tipping in other industries in this country. For example, customers at restaurants are expected to tip the wait staff and a patron's failure to do so is regarded as an insult. The level of service a patron receives may vary based on the patron's failure to tip and the environment might become increasingly uncomfortable if the patron fails to do so. Similarly, at Crazy Horse -- although expected and strongly encouraged -- tipping out was not mandated by the club's management as a condition of employment. To the extent that there may have been isolated instances of intimidation by some employees, they were not condoned as part of an official or unofficial management policy. There was evidence to the contrary; however, Plaintiffs bear the burden of proof on this issue, and the Court finds that they did not satisfy it.

21. The dancers were also required to attempt to sell souvenirs, such as t-shirts with the Crazy Horse logo, for $10 each. Plaintiffs testified that if they failed to sell these items (generally, one per night), they were required to purchase them.*fn49 The Crazy Horse witnesses testified that the dancers were permitted to return the items if they failed to sell them.*fn50

22. Crazy Horse also participated in charitable fundraising, including for the Muscular Dystrophy Association and a drug program called "Freedom Frog." The charitable promotions occurred for several weeks at a time at different points during the year. During these periods of time, the dancers did not have to sell souvenirs.*fn51 The dancers were asked to solicit two $5 donations per night from the customers. Plaintiffs testified that if they failed to do so -- which was nearly always -- they were required to make the donations themselves.*fn52 The Crazy Horse witnesses claimed that the dancers were not required to make the donations if they were unable to persuade the customers to do so.*fn53

23. The Court finds that although the dancers were expected to -- and arguably even "required" to -- attempt to sell souvenirs and participate in charitable fundraising efforts, they were not compelled to purchase items that they could not sell or make charitable donations.*fn54 As with the tip outs, the Plaintiffs did offer evidence to the contrary, but they also bear the burden of proof and having considered all of the evidence, the Court finds that it was not satisfied.

24. Jeanette Johnson and numerous others at Crazy Horse kept track of the dancers hours, whether they had sold souvenirs, and solicited charitable contributions in the spiral notebooks, referenced above.*fn55 The dancers would report their fees from dances (which they referred to as "tips") to the club on "tip slips" or verbally to Johnson or whoever else was in charge of the spiral notebooks.*fn56 This information was then recorded on sheets summarizing the house fees paid by each dancer to the club (supposedly corresponding to the number of hours worked*fn57 ) for biweekly periods.*fn58

"Tips" reported by the dancers on the tip slips or verbally were also occasionally recorded in the margin of the sheets.*fn59 As discussed above, there were significant problems with these records. These sheets were then used to prepare the payroll.*fn60

Payroll taxes were deducted from both the hourly wages and the reported tips.*fn61

25. Jeanette Johnson testified that the "tip" information that the dancers reported to the club was used to determine their withholding taxes and was reported in the club's gross receipts.*fn62 This claim, however, was not credible because -- in addition to the previously noted problems with Johnson's testimony -- it would mean that Crazy Horse was including amounts that were undisputedly the employees' "tips" (including the stage tips) in its gross receipts.*fn63 To the contrary, the weight of the evidence suggests that Crazy Horse reported the house fees that the dancers paid to it (including the hourly $10 charge and the $10 fee for the VIP room) in its gross receipts,*fn64 ...

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