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Prusin v. Canton's Pearls, LLC

United States District Court, D. Maryland

December 22, 2016

Kristofer Prusin
v.
Canton's Pearls, LLC, t/a "Canton Dockside", et al.

         LETTER TO COUNSEL

         Dear Counsel:

         On March 2, 2016, Plaintiff Kristofer Prusin filed a complaint against Defendants Canton's Pearls, LLC's (t/a "Canton Dockside") and its owner, Eric K. Hamilton, under the Fair Labor Standards Act ("FLSA") and Maryland State law. [ECF No. 1]. Plaintiff, a former Canton Dockside employee, alleged that Defendants failed to pay him the statutory minimum wage and overtime wages due during his employment. Id. In response, Defendants argue that Plaintiff was paid all wages owed. [ECF No. 2]. Presently pending is Defendants Motion for Protective Order and Motion to Modify Subpoena. [ECF No. 17]. Plaintiff has filed an opposition. [ECF No. 21]. No hearing is necessary. See Local Rule 105.6 (D. Md. 2016). For the reasons set forth herein, Defendants' Motion is GRANTED IN PART and DENIED IN PART.

         I. BACKGROUND

         On May 17, 2016, the Court entered a scheduling order providing a discovery deadline of October 17, 2016. [ECF No. 7]. On May 18, 2016, Plaintiff served Defendants with initial discovery requests. [ECF No. 9]. Although Defendants responded to Plaintiff's interrogatories, Plaintiff contends that Defendants failed to produce several of the documents requested. Id. After conferring with Defendants' counsel to address purported deficiencies, Plaintiff filed a Motion to Compel. Id. On July 28, 2016, Judge Bredar held a telephone conference to discuss Plaintiff's Motion. [ECF No. 12]. Subsequently, Judge Bredar ordered Defendants to produce "all payroll records relating to Plaintiffs employment for the period extending from March 2, 2013, through March 2, 2016[, ]" and "any documentary evidence reasonably relevant to Plaintiff's wage claim, including written policies and procedural documents to the extent such documents exist[.]" Id. However, Judge Bredar, "[f]or the time being...excused [Defendants] from producing the identities of tip-credit witnesses, including tipped employees[.]" Id. Additionally, Judge Bredar modified the discovery deadline to November 17, 2016. Id.

         On October 7, 2016, Plaintiff served Defendants with a second set of discovery requests, seeking the production of all operating records, daily revenue records, service charge records, gross income records, and tax records for the years 2013 through 2015. [ECF No. 17, Ex. 1]. On October 13, 2016, Plaintiff served Defendants with a third set of discovery requests, seeking all employee time card and job detail reports, employee sales and tip totals reports, and all documents relating to each sales transaction completed by Plaintiff. [ECF No. 17, Ex. 2]. On October 14, 2016, Plaintiff also served a Subpoena Deuces Tecum on Paychex, Inc., [1] requesting production of all payroll records and several IRS forms for the years 2013 through 2015, all documents relating to the taking of credit under Section 45(b) of the Internal Revenue code, all documents provided to it by or on behalf of Defendants, and all contracts or agreements with Defendants. [ECF No. 17, Ex. 3]. On October 27, 2016, Defendants filed the instant Motion for Protective Order and Motion to Modify Subpoena. [ECF No. 17]. In its motions, Defendants argue that Plaintiff's discovery requests are overly broad and request personally identifiable information ("PII") of non-party employees. Id. In opposition, on November 14, 2016, Plaintiff filed a response contending that he is entitled to the requested productions because they are necessary to determine whether service charge payments may be counted towards Defendants' wage obligations under the FLSA. [ECF No. 21]. Finally, on December 5, 2016, the Court conducted a telephone conference to discuss the instant motions.

         II. DISCUSSION

         As an initial matter, the FLSA requires employers to pay "nonexempt employees" a $7.25 minimum wage for each hour worked. 29 U.S.C. § 206(a). However, the FLSA provides an exception, commonly referred to as a tip credit, which allows employers to pay less than the minimum wage to employees who receive tips or non-tip wages such as mandatory service charges.[2] 29 U.S.C. § 203(m); Morataya v. Nancy's Kitchen of Silver Spring, Inc., No. GJH-13-01888, 2015 WL 165305, at *7 (D. Md. Jan. 12, 2015). "Under this provision, an employer may pay a tipped employee less than $7.25 (but at least $2.13) an hour if the combination of the employee's wages and tips equates to at least $7.25 per hour." Morataya, 2015 WL 165305, at *6. Employers may "offset up to fifty percent of all tips received" against its minimum wage obligations. McFeeley v. Jackson St. Entm't, LLC, No. DKC 12-1019, 2012 WL 5928769, at *4 (D. Md. Nov. 26, 2012). In contrast, "service charges and other similar sums which become part of the employer's gross receipts are not tips, " but "may be used in their entirety to satisfy the monetary requirements of the [FLSA]." 29 C.F.R. § 531.55(b) (emphasis added). "There are at least two prerequisites to counting service charges as an offset to an employer's minimum-wage liability. The service charge must have been included in the establishment's gross receipts, and it must have been distributed by the employer to its employees. These requirements are necessary to ensure that employees actually received the service charges as part of their compensation as opposed to relying on the employer's assertion or say-so." McFeeley v. Jackson St. Entm't, LLC, 825 F.3d 235, 246 (4th Cir. 2016) (internal citations and quotations omitted).

         A. MOTION FOR PROTECTIVE ORDER

         Plaintiff seeks discovery of Defendant Canton Dockside's financial and personnel records in order to determine whether service charge payments left by customers may be counted towards Defendants' wage obligations under the FLSA. [ECF No. 21]. Defendants contend that the discovery at issue exceeds the scope of Plaintiffs claim and discloses the personally identifiable information ("PII") of non-party employees. [ECF No. 17] (asserting that disclosure will provide Plaintiff "access to Canton Dockside's employees' social security numbers, home addresses, and specific pay information."). In opposition, Plaintiff argues that that he is entitled to the discovery because it is necessary to determine whether service charge payments may be counted towards Defendants' wage obligations under the FLSA. [ECF No. 21].

         Under Federal Rule of Civil Procedure 26(b), parties may obtain discovery "regarding any non-privileged matter that is relevant to any party's claim or defense." Fed.R.Civ.P. 26(b)(1). Relevance, rather than admissibility, governs whether information is discoverable. See id.; Herchenroeder v. Johns Hopkins Univ. Applied Physics Lab, 171 F.R.D. 179, 181 (D. Md. 1997). Information sought need only "appear[] [to be] reasonably calculated to lead to the discovery of admissible evidence" to pass muster. See Innovative Therapies, Inc. v. Meents, 302 F.R.D. 364, 377 (D. Md. 2014) (citing Fed.R.Civ.P. 26(b)(1)). However, even in the case of relevant information, "the simple fact that requested information is discoverable under Rule 26(a) does not mean that discovery must be had." Nicholas v. Wyndham Int'l, Inc., 373 F.3d 537, 543 (4th Cir. 2004). Instead, Rule 26(b) inserts a proportionality requirement into the amount and content of the discovery sought, and requires courts to consider the "the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit." Fed.R.Civ.P. 26(b)(1). Significantly, Rule 26(c)(1) permits courts to, "for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense." Fed.R.Civ.P. 26(c)(1). "This undue burden category encompasses situations where [a party] seeks information irrelevant to the case." U.S. Home Corp. v. Settlers Crossing, LLC, No. DKC-08-1863, 2013 WL 553282, at *7 (D. Md. Oct. 3, 2013) (internal citations and quotation marks omitted). "Thus, if the discovery sought has no bearing on an issue of material fact-i.e., if it is not relevant-a protective order is proper." Id. (citations and quotation marks omitted).

         Where a protective order is sought, the moving party bears the burden of establishing good cause. See Webb v. Green Tree Servicing LLC, 283 F.R.D. 276, 278 (D. Md. 2012). "Normally, in determining good cause, a court will balance the interest of a party in obtaining the information versus the interest of his opponent in keeping the information confidential or in not requiring its production." UAI Tech., Inc. v. Valutech, Inc., 122 F.R.D. 188, 191 (M.D. N.C. 1988). In other words, "the Court must weigh the need for the information versus the harm in producing it." A Helping Hand, LLC v. Baltimore Cnty., Md., 295 F.Supp.2d 585, 592 (D. Md. 2003) (internal quotation marks omitted). The standard for issuance of a protective order is high. Minter v. Wells Fargo Bank, N.A., 258 F.R.D. 118, 125 (D. Md. 2009). However, trial courts have broad discretion to decide "when a protective order is appropriate and what degree of protection is required." Seattle Times Co. v. Rhinehart, 467 U.S. 20, 36 (1984).

         i. Plaintiff's Second Request for Production of Documents, Request Numbers Two, Three, Four; and Third Request for Production of Documents, Request Number One

         Plaintiff's Second Request for Production of Documents, Request Numbers Two, Three, and Four, ask Defendants to produce all documents which refer or relate to: "daily revenues received, including but not limited to, documents evidencing credit card sales, credit card tips and payments of same, and cash sales in total and by server/bartender;" "service charges received, including but not limited to, credit card receipts;" and "daily operations of Canton Dockside restaurant, including any daily operating reports and/or sales reports." [ECF No. 17, Ex. 1]. Plaintiff's Third Request for Production of Documents, Request Number One, asks Defendants to produce "all Employee Time Card and Job Detail Reports and Employee Sales and Tip Totals Reports for every employee[.]" [ECF No. 17, Ex. 2]. Plaintiff contends that this discovery permits Plaintiff to "meaningfully examine whether the mandatory service charges are reported as income on the employer's tax ...


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