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Mason v. Fantasy LLC

United States District Court, D. Colorado

July 27, 2015

JESSICA MASON, MICHELLE CROSS, ALLISON STEBBING, CIERRA SUTTON, SIREENA FORTENBERRY, ANDREA M. CONDE, RHEA WILSON, ALLISON HAMEL, GEORGINA SANTICH, BRICKELL CLARK, AIMEE R. TRUMPEY, and THE ESTATE OF JAMIE TENCZA[1], Plaintiffs,
v.
FANTASY, LLC d/b/a FANTASY GENTLEMEN’S CLUB, and KEVIN EARDLEY, Defendants.

ORDER

RAYMOND P. MOORE UNITED STATES DISTRICT JUDGE

This matter is before the Court on Plaintiffs Jessica Mason (“Mason”), Michelle Cross (“Cross”), Allison Stebbing (“Stebbing”), Cierra Sutton (“Sutton”), Sireena Fortenberry (“Fortenberry”), Andrea M. Conde (“Conde”), Rhea Wilson (“Wilson”), Allison Hamel (“Hamel”), Georgina Santich (“Santich”), Brickell Clark (“Clark”), Aimee R. Trumpey (“Trumpey”), and the Estate of Jamie Tencza’s (“Tencza”) (collectively, “Plaintiffs” or “Dancers”) motion for summary judgment against Defendants Fantasy, LLC (“Fantasy”), doing business as Fantasy Gentlemen’s Club, and Kevin Eardley (“Eardley”) (collectively, “Defendants”) for violating the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. § 201 et seq., and the Colorado Minimum Wage Act (“CMWA”), Colo. Rev. Stat. § 8-6-101 et seq. (ECF No. 54[2].) Also before the Court is Plaintiffs’ motion for a preliminary injunction. (ECF No. 79.) The motion for summary judgment is fully briefed. (ECF Nos. 60; 63; 76-1.)

This matter has a complicated procedural history which the Court will attempt to set forth below.

For the reasons stated below, the Court GRANTS, in part, and DENIES, in part, Plaintiffs’ motion for summary judgment and DENIES, without prejudice, Plaintiffs’ motion for a preliminary injunction.

I. BACKGROUND

A. Procedural Background

On July 30, 2013, Plaintiffs Mason, Cross, Stebbing, Tencza, individually and on behalf of all others similarly situated, filed suit against Defendants for: (1) violating the FLSA (ECF No. 1 ¶¶ 102-19); (2) violating the CMWA (ECF No. 1 ¶¶ 120-33); and (3) unjust enrichment (ECF No. 1 ¶¶ 134-37). Thereafter, certain Plaintiffs filed notices of consent to join this matter pursuant to 29 U.S.C. § 216(b). (ECF Nos. 9; 10; 17; 20; 21; 22; 32; 33.)

On December 3, 2013, Magistrate Judge Mix entered a scheduling order setting January 17, 2014 as the deadline for amendment of pleadings and for joinder of parties. (ECF No. 25 at 16.)

On June 11, 2014, Magistrate Judge Mix entered an order amending the class-certification date to August 25, 2014. (ECF No. 43.) To date, no motion for class certification has been filed. (See generally Dkt.)

On June 27, 2014, certain Plaintiffs filed a motion to amend the Complaint (“First Motion to Amend the Complaint”). (ECF No. 44.) They sought to amend (1) “the case caption (and statement of the parties) to include all the dancers who [had] joined the lawsuit as named party plaintiffs”; (2) “factual additions based on newly acquired information”; and (3) “the complaint to add legal claims based on Defendants’ retaliatory conduct after Plaintiffs filed their initial complaint”. (ECF No. 44 at 2 (emphasis removed).) Plaintiffs’ First Motion to Amend the Complaint stated that “twelve dancers are part of the litigation, four as named Plaintiffs and an additional eight have filed Consents to Join.” (ECF No. 44 at 4.) On July 18, 2014, Defendants responded to Plaintiffs’ First Motion to Amend the Complaint by stating that “Defendants do not oppose amending the Complaint to add the names of additional individuals [who] have executed consents to join since the filing of this action.” (ECF No. 46 at 1.)

On September 17, 2014, Plaintiffs filed the instant motion for summary judgment on their FLSA and CMWA claims. (ECF No. 54.) Defendants filed a response (ECF No. 60) and Plaintiffs filed a reply in support of their motion for summary judgment. (ECF Nos. 63; 64.)

On January 6, 2015, Plaintiffs filed a motion for leave to file a second amended complaint (“Second Motion to Amend the Complaint”) to add a claim for fraudulent conveyance. (ECF No. 71.)

On January 30, 2015, the Court entered an order which granted, in part, and denied, in part, certain Plaintiffs’ First Motion to Amend the Complaint. (ECF No. 78.) In pertinent part, the Court granted certain Plaintiffs’ First Motion to Amend the Complaint to add as named Plaintiffs all persons who have filed the Consent to Join forms. (ECF No. 78 at 2.) The Court’s order denied certain Plaintiffs’ “motion to the extent it seeks to add factual allegations and legal claims.” (ECF No. 78 at 2.)[3]

On February 9, 2015, Plaintiffs filed a motion for a preliminary injunction which seeks, in pertinent part, that the Court enter an order enjoining (1) Eardley and Betty Elaine Lehr (“Lehr”) (a non-party to this matter) from further disposing “Fantasy property” and (2) “further disposition by Eardley of other property and assets in his possession.” (ECF No. 79 at 13.)

On February 17, 2015, Eardley filed a notice of automatic stay pursuant to his bankruptcy petition, Case No. 15-11415 in the United States Bankruptcy Court for the District of Colorado (“Bankruptcy Court”). (ECF No. 82.)

On February 19, 2015, Fantasy moved to stay the matter. (ECF No. 83.)

On February 20, 2015, Magistrate Judge Mix stayed the matter in its entirety but ordered that Fantasy and Plaintiffs should continue to fully brief Fantasy’s motion to stay at which point she would determine whether the stay should be lifted as to Fantasy. (ECF No. 85.)

On March 24, 2015, Fantasy filed a notice of automatic stay pursuant to its bankruptcy petition, Case No. 15-12881 in the Bankruptcy Court. (ECF No. 87.)

On April 2, 2015, Magistrate Judge Mix, in pertinent part, denied Plaintiffs’ Second Motion to Amend the Complaint and denied as moot Fantasy’s motion to stay. (ECF No. 88.)

On April 21, 2015, certain Plaintiffs[4] filed a motion for relief of the automatic stay against Fantasy in the Bankruptcy Court. (ECF No. 45 in Case No. 15-12881 (Bankr. Colo.).) In pertinent part, certain Plaintiffs informed the Bankruptcy Court that they are former “[d]ancers” of Fantasy. (ECF No. 45 at 1 in Case No. 15-12881 (Bankr. Colo.).) Further, certain Plaintiffs informed the Bankruptcy Court of the nature of this lawsuit including who are the parties. (ECF No. 45 at 1-3 in Case No. 15-12881 (Bankr. Colo.).) On May 5, 2015, Fantasy filed its status report in the Bankruptcy Court and informed the court that “a number of [Fantasy’s] former dancers filed suit against [Fantasy] for violations of the FLSA.” (ECF No. 48 at 2 in Case No. 15-12881 (Bankr. Colo.).) On May 13, 2015, the Bankruptcy Court granted partial relief from the automatic stay to permit “[d]ancers (along with the two additional named plaintiffs in the [d]ancers’ [l]awsuit) to proceed with the Dancers’ Lawsuit for purposes of fully liquidating their claims against the Debtor.” (ECF No. 53 at 1 in Case No. 15-12881 (Bankr. Colo.).)

Similarly, on April 21, 2015, certain Plaintiffs[5] filed a motion for relief of the automatic stay against Eardley in the Bankruptcy Court. (ECF No. 27 in Case No. 15-11415 (Bankr. Colo.).) In pertinent part, certain Plaintiffs informed the Bankruptcy Court that they are former “[d]ancers” of Fantasy. (ECF No. 27 at 1 in Case No. 15-11415 (Bankr. Colo.).) Further, certain Plaintiffs informed the Bankruptcy Court of the nature of this lawsuit including who are the parties. (ECF No. 27at 1-3 in Case No. 15-11415 (Bankr. Colo.).) On May 12, 2015, the Bankruptcy Court held a hearing on this motion and no objections to or requests for hearing on it were filed with the Bankruptcy Court. (ECF No. 33 at 1 in Case No. 15-11415 (Bankr. Colo.).)

On May 13, 2015, the Bankruptcy Court granted partial relief from the automatic stay to permit “[d]ancers (along with the two additional named plaintiffs in the [d]ancers’ [l]awsuit) to proceed with the Dancers’ Lawsuit for purposes of fully liquidating their claims against the Debtor.” (ECF No. 37 at 1 in Case No. 15-11415 (Bankr. Colo.).)

On May 18, 2015, Plaintiffs filed a status report with the Court to inform it of the partial lifting of the automatic stays in Defendants’ respective bankruptcy petitions. (ECF No. 90.) Plaintiffs informed the Court that “any judgment entered by [the] Court against Defendants shall not be the subject of any direct enforcement action against Defendants or Defendants’ property, absent further order of the bankruptcy court.” (ECF No. 90 at 2.) Therefore, Plaintiffs requested that the Court “proceed with adjudicating Plaintiffs’ fully briefed [m]otion for [s]ummary [j]udgment.” (ECF No. 90 at 2.)

On May 22, 2015, Magistrate Judge Mix lifted the stays. (ECF No. 91.)

B. Factual Background

1. Fantasy Gentlemen’s Club

Plaintiffs are former dancers[6] at Fantasy. (ECF No. 53 at 1 in Case No. 15-12881 (Bankr. Colo.); (ECF No. 37 at 1 in Case No. 15-11415 (Bankr. Colo.); ECF No. 54-4, Cross. Decl. ¶ 4; ECF No. 54-5, Stebbing Decl. ¶ 3.) Fantasy is an adult entertainment establishment that is engaged in interstate commerce. (Compare ECF No. 1 ¶ 104 with ECF No. 19 ¶ 104; ECF No. 54-2, Eardley Dep. at 104:19-25, 105:1-7.) Eardley is, and has been since Fantasy’s opening, the sole owner and member of Fantasy. (ECF No. 54-2, Eardley Dep. at 84:23-25, 85:1-6, 93:11-12.)

Fantasy employs several categories of employees including bartenders, disc jockeys (DJs), security guards, and cocktail waitresses. (ECF No. 54-2, Eardley Dep. 73:8-17.) Fantasy also employed John Paul Jay (“Jay”) as its on-site manager. (ECF No. 60-2, Jay Dep. 12:23-25, 13:1-6.) Fantasy pays its bartenders, DJs, security guards, and cocktail waitresses hourly wages and provides them with Internal Revenue Service (“IRS”) W-2s. (ECF No. 54-2, Eardley Dep. 73:18-20, 76:9-14, 79:11-12.) Eardley sets the hourly wages of Fantasy’s bartenders, DJs, security guards, and cocktail waitresses. (ECF No. 54-2, Eardley Dep. 78:13-24, 79:11-14, 82:9-11.) Fantasy’s primary attraction is its dancers and without them, Fantasy would not be a gentlemen’s club. (ECF No. 54-2, Eardley Dep. 27:9-15, 104:19-23; ECF No. 54-3, Jay Dep. 28:10-12.) Thus, Fantasy’s dancers are integral to its business. (ECF No. 54-2, Eardley Dep. 105:2-7.)

Fantasy does all of its own advertising. (ECF No. 54-2, Eardley Dep. 210:13-22.) Fantasy requires customers to pay a cover charge to enter its club. (ECF No. 54-2, Eardley Dep. 18:9-20; ECF No. 54-3, Jay Dep. 49:16-24; ECF No. 54-12, Daily Specials.) Eardley sets all of Fantasy’s prices, including the cover charges, stage/house fees, lap dance prices, and drink prices. (ECF No. 54-2, Eardley Dep. 69:15-25, 70:1-8, 126:3-5.) Fantasy retains all income it generates from door charges, beverage, and food sales. (ECF No. 54-8, Independent Contractor Agreement ¶ 2.) Fantasy incorporates fines paid by dancers into the total stage/house fees it collects for each night. (ECF No. 54-2, Eardley Dep. 129:22-25, 130:1-4.)

2. Kevin Eardley’s Relation to Fantasy

At all times relevant to this matter, Eardley acted directly or indirectly in the interest of Fantasy in relation to Plaintiffs. (ECF No. 54-2, Eardley Dep. 93:13-22.) Eardley has hiring and firing authority over Fantasy’s dancers. (ECF No. 54-2, Eardley Dep. 64:20-22.) Eardley created all of Fantasy’s rules some of which may relate to various laws and/or ordinances. (ECF No. 54-2, Eardley Dep. 72:12-14, 108:22-25, 109:1-11, 114:7-11, 124:14-25, 125:1, 126:3-5; ECF No. 54-3, Jay Dep. 14:3-8.) Whether to enforce a rule, fee, or fine on a dancer is in the sole discretion of Eardley and/or the employees to whom Eardley delegated such authority. (ECF No. 54-2, Eardley Dep. 72:15-19, 125:2-11, 202:18-25, 203:1-3; ECF No. 54-3, Jay Dep. 26:4-20.) Eardley has a high school diploma. (ECF No. 60-4, Eardley Dep. 103:21-23.) Fantasy is the first gentlemen’s club Eardley has owned. (ECF No. 60-4, Eardley Dep. 64:7-9.) Additionally, Eardley owns the limited liability corporation that owns the property and building on and in which Fantasy operates. (ECF No. 54-2, Eardley Dep. 209:13-25, 210:1-2; ECF No. 60-4, Eardley Dep. 8:2-18.)

3. Fantasy’s Dancers

Fantasy classifies its dancers as independent contractors. (ECF No. 54-2, Eardley Dep. 71:4-8; ECF No. 54-4, Cross. Decl. ¶ 5; ECF No. 54-5, Stebbing Decl. ¶ 4; ECF No. 54-7, Eardley Text Messages.) Based upon speaking with other gentlemen’s clubs owners, Eardley determined to treat dancers as independent contractors or as non-employee tenants. (ECF No. 60-4, Eardley Dep. 215:25, 216:1-6, 219:19-21.) Prior to dancing at Fantasy, Fantasy requires its dancers to sign an independent contractor agreement. (ECF No. 54-4, Cross. Decl. ¶ 5; ECF No. 54-5, Stebbing Decl. ¶ 4; ECF No. 54-8, Independent Contractor Agreement.) Fantasy does not pay dancers any wages. (ECF No. 54-2, Eardley Dep. 152:22-25, 153:1-8.) Fantasy’s dancers receive money directly from Fantasy’s customers in the form of tips or a portion of fees collected from customers in “Champagne Rooms.” (ECF No. 54-4, Cross Decl. ¶ 4; ECF No. 54-5, Stebbing Decl. ¶ 3; ECF No. 54-8, Independent Contractor Agreement ¶ 2; ECF No. 54-10, Champagne Room Rules.) The Independent Contractor Agreement between Fantasy and its dancers provides that “the rights or benefits afforded to Fantasy’s employees, including disability or unemployment insurance, workers’ compensation, medical insurance, sick leave, or any other employment benefit” are not available to its dancers. (ECF No. 54-8, Independent Contractor Agreement ¶ 5; accord ECF No. 54-2, Eardley Dep. 153:9-11.) Fantasy does not provide its dancers with W-2s, 1099s, or other tax documentation. (ECF No. 54-2, Eardley Dep. 73:21-22, 153:12-14.) Stebbing asked Eardley for a W-2 but Eardley refused to provide any tax documentation. (ECF No. 54-2, Eardley Dep. 198:1-25, 199:1-25, 200:1-25, 201:1-25, 202:1-25, 203:1-21; ECF No. 54-5, Stebbing Decl. ¶ 5; ECF No. 54-7, Eardley Text Messages at 1.)

Eardley intentionally classified Fantasy’s dancers, including Plaintiffs, as independent contractors based on models from other clubs. (ECF No. 54-2, Eardley Dep. 63:17-25, 64:1-6, 70:20-23, 211:23-25, 212:1-16.) At the time during which Eardley made the decision to designate the dancers as independent contractors, Eardley understood that rules exist regarding the classification of individuals as “employees” or “independent contractors.” (ECF No. 54-2, Eardley Dep. 212:17-20.) However, Eardley did not familiarize himself with such rules. (ECF No. 54-2, Eardley Dep. 212:21-25, 213:1.) At the time during which Eardley made the decision to designate the dancers as independent contractors, Eardley understood that he would be saving Fantasy money by avoiding employment taxes, minimum wage, workers’ compensation, ...


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