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McFeeley v. Jackson Street Entertainment, LLC

United States Court of Appeals, Fourth Circuit

June 8, 2016

LAURA MCFEELEY, On Behalf of Herself and All Others Similarly situated, a/k/a Dynasty; DANIELLE EVERETT, a/k/a Jasmine; CRYSTAL NELSON; DANNIELLE ARLEAN MCKAY; JENNY GARCIA; PATRICE HOWELL, Plaintiffs – Appellees,
v.
JACKSON STREET ENTERTAINMENT, LLC, d/b/a Fuego Exotic Dance Club, d/b/a Club Extasy Exotic Dance Club; RISQUE, LLC, d/b/a Fuego Exotic Dance Club; QUANTUM ENTERTAINMENT GROUP, LLC, d/b/a Fuego Exotic Dance Club; NICO ENTEPRISES, INC., d/b/a Fuego Exotic Dance Club; XTC ENTERTAINMENT GROUP, LLC, d/b/a Fuego Exotic Dance Club; UWA OFFIAH, Defendants-Appellants. and EBONY WASHINGTON; FERRIS PACE; SHANIEKA DANIELS; SCHARLENE ALUGBUO; NICOLE PRECIOUS GRAY; TARSHEA JACKSON; CLEMENTINA IBE, as personal representative of the Estate of Scharlene Alugbuo, Plaintiffs, SECRETARY OF LABOR, Amicus Supporting Appellees.

          Argued: May 11, 2016

         Appeal from the United States District Court for the District of Maryland, at Greenbelt. Deborah K. Chasanow, Senior District Judge. (8:12-cv-01019-DKC)

         ARGUED:

          Michael Lloyd Smith, SMITH GRAHAM & CRUMP, LLC, Largo, Maryland, for Appellants.

          Gregg Cohen Greenberg, ZIPIN, AMSTER & GREENBERG, LLC, Silver Spring, Maryland, for Appellees. Katelyn Jean Poe, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Amicus Curiae.

         ON BRIEF:

          Michael K. Amster, ZIPIN, AMSTER & GREENBERG, LLC, Silver Spring, Maryland, for Appellees.

          M. Patricia Smith, Solicitor of Labor, Jennifer S. Brand, Associate Solicitor, Paul L. Frieden, Counsel for Appellate Litigation, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Amicus Curiae.

          Before WILKINSON, GREGORY, and DIAZ, Circuit Judges.

          WILKINSON, Circuit Judge:

         In this case, exotic dancers have sued their dance clubs for failure to comply with the Fair Labor Standards Act and corresponding Maryland wage and hour laws. The district court held that plaintiffs were employees of the defendant companies and not independent contractors. The court properly captured the economic reality of the relationship here, and we now affirm its judgment.

         I.

         Plaintiffs, as noted, are exotic dancers who worked at Fuego Exotic Dance Club (Fuego) and Extasy Exotic Dance Club (Extasy) in Prince George's County, Maryland for various periods between April 2009 and April 2012. Defendant Uwa Offiah owns and manages both Fuego and Extasy. No other party has a financial interest in them.

         Plaintiffs alleged on behalf of themselves and others similarly situated that defendant clubs and Offiah had misclassified them as independent contractors rather than as club employees and accordingly had failed to pay them the minimum wage required by the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201, et seq., the Maryland Wage and Hour Law (MHWL), Md. Code Ann., Lab. & Empl. § 3-401, et seq. (West 2014), and the Maryland Wage Payment and Wage Collection Law (MWPWC), Md. Code Ann., Lab. & Empl. § 3-501, et seq. (West 2014). They sued defendants both for unpaid wages and liquidated damages. The clubs denied that plaintiffs were employees at any point of their working relationship and raised counterclaims, all of which were unsuccessful, for breach of contract, unjust enrichment, conversion, and fraud.

         We shall summarize at the outset the working relationship between the dancers and the clubs. Anyone wishing to dance at either club was required to fill out a form and perform an audition. Defendants asked all hired dancers to sign agreements titled "Space/Lease Rental Agreement of Business Space" that explicitly categorized dancers as independent contractors. The clubs began using these agreements after being sued in 2011 by dancers who claimed, as plaintiffs do here, to have been employees rather than independent contractors. Defendant Offiah thereafter consulted an attorney, who drafted the agreement containing the "independent contractor" language.

         Plaintiffs' duties at Fuego and Extasy primarily involved dancing on stage and in certain other areas of the two clubs. At no point did the clubs pay the dancers an hourly wage or any other form of compensation. Rather, plaintiffs' compensation was limited to performance fees and tips received directly from patrons. The clubs also collected a "tip-in" fee from everyone who entered either dance club, patrons and dancers alike. The dancers and clubs dispute other aspects of their working relationship, including work schedules and policies.

         On January 3, 2014, plaintiffs filed a motion for partial summary judgment, and defendants countered with a cross-motion for summary judgment. The district court granted plaintiffs' motion in part, finding that plaintiffs were employees and not independent contractors under both federal and state law. In drawing that conclusion, the district court applied the six-factor "economic realities" test for classifying employees and independent contractors. The court placed special emphasis on "the degree of control that the putative employer has over the manner in which the work is performed, " Schultz v. Capital Int'l Sec., Inc., 466 F.3d 298, 304-05 (4th Cir. 2006), observing that defendants "exercised significant control over the atmosphere, clientele, and operations of the clubs." J.A. 996-97.

         The court reserved various disputes over monetary recovery for the jury. Prior to trial, plaintiffs filed a motion in limine seeking to prohibit defendants from asking plaintiffs about their income tax records, performance fees, and tips. After conducting a hearing, the court granted the motion.

         The case was tried before a jury from February 3 to 5, 2015. The trial court rejected the clubs' objections to the jury instructions and the verdict sheet. The jury found in favor of plaintiffs and awarded them damages for unpaid wages. Separately, the district court heard testimony on the issue of liquidated damages and defendants' proffered good-faith defense. The court found that defendants had consulted an attorney in September 2011 regarding classifying dancers as independent contractors and thereafter reasonably believed that they were not violating the FLSA. The court awarded liquidated damages to each of the plaintiffs only for the period prior to September 2011. Defendants filed a motion for judgment as a matter of law and/or for a new trial. Both motions were denied on May 5, 2015. This appeal followed.

         II.

         Appellants seek review as to five questions: (1) whether plaintiffs were employees or independent contractors under the FLSA and related state laws; (2) whether defendants acted in good faith prior to September 2011 and were therefore not liable to pay liquidated damages for that time period; (3) whether the district court erred in barring defendants from presenting evidence related to plaintiffs' income taxes, performance fees, and tips; (4) whether the district court erred in formulating its jury instructions and verdict sheet; and (5) ...


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