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
April 17, 2019
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
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
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.
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.
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
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.
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.
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.
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.
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). On the state-law claims, she pursued a
damages class action under Federal Rule of Civil Procedure
23(b)(3). 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).
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.
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.)
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.
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).
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.
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