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Verma v. 3001 Castor, Inc.

United States Court of Appeals, Third Circuit

August 30, 2019

PRIYA VERMA, On behalf of herself and All others similarly situated
3001 CASTOR, INC., d/b/a The Penthouse Club and/or The Penthouse Club@Philly; ABCDE PENNSYLVANIA MANAGEMENT, LLC; DOE DEFENDANTS 1-10 3001 Castor, Inc., Appellant

          Argued April 17, 2019

          Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil Action No. 2-13-cv-03034) District Judge: Honorable Anita B. Brody

          John F. Innelli (Argued) John F. Innelli (Argued)

          Jamisen A. Etzel (Argued) Gary F. Lynch Carlson Lynch Kilpela & Carpenter Gerald D. Wells, III Connolly Wells & Gray Counsel for Appellee

          Before: AMBRO, GREENAWAY, JR., and SCIRICA, Circuit Judges



         A jury in the District Court awarded more than $4.5 million to a class of dancers at the Penthouse Club, an "adult gentleman's club" in Philadelphia owned and operated by 3001 Castor, Inc., for unpaid minimum wages and unjust enrichment under Pennsylvania law. The Court denied the motion of Castor to set aside the verdict, and it appeals to us. We join our District Court colleague, Judge Brody, in concluding that, as a matter of "economic reality," the dancers were employees of Castor, not its independent contractors, and we reject Castor's novel argument that the federal Fair Labor Standards Act ("FLSA") precludes the class's claims for unjust enrichment. We also conclude that Castor is not entitled to any credit or offset against the jury award for payments already received by the dancers. We thus affirm across the board and sustain the jury's verdict.

         I. Background

         Priya Verma was a dancer at the Penthouse Club, a nightclub in Philadelphia operated by Castor. As Judge Brody explained, the Club provides "topless female dancers" who "entertain [Castor's] customers by performing seductive dances." Verma v. 3001 Castor, Inc., 2014 WL 2957453, at *1 (E.D. Pa. June 30, 2014). As the Club's owner and operator, Castor controlled its atmosphere, policies, operations, and marketing.

         Dancers at the Club were classified into two categories: "Entertainers" and "Freelancers." It required Entertainers to commit to working at least four days per week and submit a weekly schedule. Freelancers had no such commitments. Castor required each dancer in both categories to sign an agreement stating that she is an independent contractor.

         Dancers at the Club worked in shifts. They could choose among five: a "day shift" lasting from noon to 6:00 p.m.; a "mid shift" from 3:00 p.m. to 9:00 p.m.; a "preferred shift" from 6:00 p.m. to midnight; a "premium shift" from 8:00 p.m. to 2:00 a.m.; and a "power shift" from 10:00 p.m. to 2:00 a.m. A dancer had to "rent" stage time for each shift she worked. The rates for these "stage-rental fees" varied depending on the shift and were lower for Entertainers than for Freelancers. Dancers performed in two locations: on the Club's main stage and in private dance rooms.

         The Club did not pay dancers a wage; their compensation consisted entirely of (1) "tips" they received when dancing on stage or (2) fixed "dance fees" at rates established by the Club, which they received from giving "private dances" in the private dance rooms. The Club also took a fee, called a "room-rental fee," for each private dance. Castor also required the dancers to "tip out" certain individuals who worked at the Club. These "mandatory tip-outs" had to be paid for each shift regardless how much money the dancer made in the shift. They included $15 to the Club's disc jockey, $10 to the "house mom" (who kept track of the dancers' schedules and assisted them in other ways), and $5 to the podium host, for a total of $30 per shift.

         The Club provided training to the dancers and closely reviewed their attendance, appearance, demeanor, and customer service. It also had a strict set of rules the dancers must follow. When they violated those rules, they were fined amounts ranging from $10 to $100.

         In 2013 Verma filed this action against Castor on behalf of herself and similarly situated current and former dancers at the Club. She alleged claims for minimum wages and overtime under the FLSA, 29 U.S.C. §§ 206(a), 207(a), 216(b), analogous claims for minimum wages and overtime under the Pennsylvania Minimum Wage Act ("PMWA"), 43 Pa. Stat. §§ 333.104 & .113, a claim for non-payment of wages under the Pennsylvania Wage Payment and Collection Law, 43 Pa. Stat. § 260.9a, and a claim for unjust enrichment under Pennsylvania common law.

         On the FLSA claims, Verma alleged an "opt-in" collective action under 29 U.S.C. § 216(b). See Knepper v. Rite Aid Corp., 675 F.3d 249, 258-59 (3d Cir. 2012).[1] On the state-law claims, she pursued a damages class action under Federal Rule of Civil Procedure 23(b)(3).[2] The case proceeded along two tracks: one under the collective-action provisions of the FLSA, and another under the class-action procedures of Rule 23. We and other circuits have endorsed this dual-track procedure, which is used widely to pursue wage-and-hour cases in federal court simultaneously under federal and state law. See Knepper, 675 F.3d at 262 (collecting cases).

         After some discovery, the District Court entered an order conditionally certifying a collective action under the FLSA comprising current and former dancers of the Club during the covered time period. 3001 Castor, 2014 WL 2957453, at *13. A notice was sent to potential members of the collective action, and 22 dancers filed consent forms to join the action as "opt-in" plaintiffs. (For convenience, Verma and the opt-in plaintiffs are described as "plaintiffs.") The District Court also ruled, as a matter of law, that plaintiffs and the other dancers were "employees" of Castor under the FLSA and the PMWA. Id. at *4-10.

         After further discovery, the Court entered an order granting final certification of the FLSA collective action (covering both the minimum-wage and overtime claims) and granting in part Verma's motion for class certification under Rule 23. See Verma v. 3001 Castor, 2016 WL 6962522, at *6, *14 (E.D. Pa. Nov. 29, 2016). The Court certified a Rule 23(b)(3) class with respect to the following claims under Pennsylvania law: (i) a claim for minimum wages under the PMWA, (ii) a claim for overtime under the PMWA, and (iii) a claim for unjust enrichment based on deductions for mandatory tip-outs. (It denied class certification to the extent plaintiffs sought to recover deductions for stage-rental fees, fines, and room-rental fees. Id. at *10-11.)

         A couple weeks before trial, plaintiffs and Castor purportedly reached an agreement in principle to settle an aspect of plaintiffs' FLSA claims. The terms of that alleged settlement are not in the record, and there appears to be disagreement between counsel concerning what those terms are and whether an agreement was actually reached. What we know is this: plaintiffs were to receive $109, 000 in exchange for not presenting at trial some portion of their FLSA claims.

         Shortly after the alleged settlement, Castor filed a motion to dismiss the action for lack of subject matter jurisdiction. It argued that a settlement concerning the FLSA claims-the only federal claims involved-deprived the District Court of jurisdiction over the case. The Court denied that motion because, in its view, it retained supplemental jurisdiction over the state claims under 28 U.S.C. § 1367(a).

         The remaining claims-class claims for minimum wages under the PMWA, overtime under the PMWA, and unjust enrichment-went to trial. The jury returned a verdict awarding the class more than $4.5 million: $2, 610, 322.61 for its minimum wage claims and $1, 948, 400.12 for its unjust enrichment claims. Castor filed post-trial motions asking the Court to dismiss the suit for lack of jurisdiction, to reconsider its summary-judgment rulings, and to enter judgment for Castor as a matter of law. The Court denied those motions and entered final judgment on the verdict. Castor appeals to us.

         II. Discussion

         We have jurisdiction to review the final judgment of the District Court under 28 U.S.C. § 1291. Stecyk v. Bell Helicopter Textron, Inc., 295 F.3d 408, 412 (3d Cir. 2002). Castor challenges on several grounds the District Court's ...

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