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Prusin v. Canton's Pearls, LLC

United States District Court, D. Maryland

September 29, 2017

CANTON'S PEARLS, LLC, et al., Defendants.


          James K. Bredar, United States District Judge.

         Kristofer Prusin ("Plaintiff) filed suit against Canton's Pearls, LLC, and Eric K. Hamilton ("Defendants"), alleging violations of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201, et seq., the Maryland Wage and Hour Law ("MWHL"), Md. Code Ann. Labor & Emp't §§ 3-401, et seq., and the Maryland Wage Payments and Collection Law ("MWPCL"), Md. Code Ann. Labor & Emp't §§ 3-501, et seq. Now pending before the Court is Defendants' Motion for Partial Summary Judgment on statute of limitations grounds. (ECF No. 27.) The issues have been briefed (ECF Nos. 27, 71, & 77), and no hearing is required, Local Rule 105.6 (D. Md. 2016). For the reasons explained below, Defendants' motion will be GRANTED IN PART and DENIED IN PART.

         I. Background

         Plaintiff previously worked as a server at Canton Dockside, a restaurant and crab house operated by Defendants. He was employed in that position from April 2013 through October 2015. During that time, Canton Dockside was managed by Eric Hamilton and Timothy Mitchell.[1] Hamilton and Mitchell had previously worked together as servers and shift managers at another local restaurant, Seaside.[2]

         As a server, Plaintiff was a non-exempt employee within the meaning of the FLSA and MWHL. Plaintiff was paid an hourly wage of $3.63 plus voluntary tips and mandatory service charges paid by customers.[3] At the end of each shift he was given one-hundred percent of his tips and service charges in cash less the amount he was required to tip-out to bussers and bartenders. Servers were required to give bussers thirteen percent of their tips and to give bartenders five percent of their beer, wine, and liquor sales.[4] Plaintiff was not compensated at a different rate for overtime hours-i.e., hours worked in excess of forty hours per week.

         On March 3, 2016, Plaintiff filed this lawsuit alleging that Defendants violated the FLSA, the MWHL, and the MWPCL by failing to pay him minimum and overtime wages. Furthermore, he alleges that these violations were willful, thereby entitling him to recover damages for the three year period preceding the filing of this suit. Defendants filed a motion for partial summary judgment pursuant to Federal Rule of Civil Procedure 56 arguing that any violation (which they do not concede) was not willful, and therefore Plaintiff's FLSA claims should be subject to the default two-year statute of limitations.[5]

         II. Standard for Summary Judgment

         A party seeking summary judgment must show "that there is no genuine dispute as to any material fact" and that he is "entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The burden is on the moving party to demonstrate the absence of any genuine dispute of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). If a party carries this burden, then the court will award summary judgment unless the opposing party can identify specific facts, beyond the allegations or denials in the pleadings, that show a genuine issue for trial. Fed.R.Civ.P. 56(e)(2). If sufficient evidence exists for a reasonable jury to render a verdict in favor of the party opposing the motion, then a genuine dispute of material fact is present and summary judgment should be denied. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To carry these respective burdens, each party must support its assertions by citing specific evidence from the record. Fed.R.Civ.P. 56(c)(1)(A). The court will assess the merits of the motion, and any responses, viewing all facts and reasonable inferences in the light most favorable to the party opposing the motion. Scott v. Harris, 550 U.S. 372, 378 (2007); Iko v. Shreve, 535 F.3d 225, 230 (4th Cir. 2008).

         III. Analysis

         Plaintiff alleges that Defendants willfully violated the FLSA thereby entitling him to recover up to three years' of back pay. Defendants contend that any violation was not willful because they reasonably believed their pay structure was consistent with the "industry standard" and therefore presumably lawful. More specifically, Defendants assumed that William Ottey (Canton Dockside's accountant and former payroll processor) and Paychex, Inc., (a third-party payroll processor used by Canton Dockside) would have informed them of any potential noncompliance with wage laws. They also contend that they reasonably relied on Defendant Hamilton and Mr. Mitchell's past experience as servers at Seaside in determining whether to pay servers at Canton Dockside overtime wages.

         If Defendants' alleged violations were willful, a three-year statute of limitations applies to Plaintiffs claims; if not, a two-year statute of limitations applies. See 29 U.S.C. § 255(a); see also, e.g., Desmond v. PNGI Charles Town Gaming, LLC, 630 F.3d 351, 357 (4th Cir. 2011). "The question of whether an employer acted willfully is generally a question of fact." Calderon v. GEICO Gen. Ins. Co., 809 F.3d 111, 130 (4th Cir. 2015), cert. denied, 137 S.Ct. 53 (2016).

         To establish that Defendants' conduct was willful, Plaintiff must show that they "either knew or showed reckless disregard for the matter of whether [their] conduct was prohibited by the [FLSA]." Desmond, 630 F.3d at 358 (second alteration in original) (quoting McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988)); see also Calderon, 809 F.3d at 130 ("The burden to establish willfulness rests with the employee."). "Negligent conduct is insufficient to show willfulness." Desmond, 630 F.3d at 358. Nor is an employer's violation of the FLSA willful where it is the result of a "completely good-faith but incorrect assumption that a pay plan complied with the FLSA in all respects." McLaughlin, 486 U.S. at 135. Indeed, even where "an employer acts unreasonably, but not recklessly, in determining its legal obligation" a violation is not willful. Id. at 135 n.13 (emphasis added); cf. Williams v. Md. Office Relocators, 485 F.Supp.2d 616, 621 (D. Md. 2007) (noting that willfulness is a demanding standard, which generally requires "evidence that the defendant had previously been investigated for FLSA violations, or evidence of a scheme by the employer to cover-up FLSA violations"), superseded by statute on other grounds as recognized by Butler v. DirectSAT USA, LLC, 307 F.R.D. 445, 450 (D. Md. 2015).

         A. FLSA Minimum Wage Claims

         Assuming arguendo that they violated the FLSA's minimum wage provisions, Defendants contend that their conduct was not willful because they reasonably believed that they were in compliance with federal and state labor laws. Specifically, Defendants contend that they assumed they were in compliance with the law because "it was [their] understanding . . . that $3.63 an hour across the board was the industry standard." (ECF No. 27, Ex. B at 60-61, Mitchell Dep., Corporate Designee.) Moreover, they relied on third-party payroll processors to advise them of any errors in their pay structure. (ECF No. 27, Ex. A ΒΆΒΆ 17-20, Affidavit of Defendant Eric Hamilton.) Notably, ...

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