MF Obtains Victory in Sixth District Court of Appeal

Practices: Appellate Law, Employment Law


Result:
The Court of Appeal of the State of California, Sixth Appellate District, affirms Trial Court decision in tip pool case.

Client:
Sutter’s Place, Inc. dba Bay 101

Overview:

McManis Faulkner successfully represented Bay 101, a casino in San Jose, in a class action brought by card dealers claiming they were illegally required to contribute a portion of gratuities received from players to a common account that was distributed to other casino employees. This arrangement is commonly called a tip pool.

At trial in May 2011, the plaintiffs claimed Bay 101 was liable to the dealers because this ‘tip pooling” arrangement was illegal.  The causes of action at issue at trial were for the common count of money had and received and unfair business practices under Business and Professions Code section 17200.  All of the other claims, failure to pay minimum wage, conversion,  reimbursement, breach of contract, collecting and receiving employee wages and violation of Labor Code section 351 were dismissed prior to the trial in pretrial motions. The money had and received claim was tried to a jury and the unfair competition claim was tried at the same time to Judge James Kleinberg.  After the plaintiffs presented their case, Bay 101 brought a motion for nonsuit on the money had and received claim and a motion for judgment on the unfair competition claim.  Judge Kleinberg granted both motions and entered judgment for Bay 101.  Plaintiffs appealed the trial court’s decisions on the following: money had and received, conversion, failure to pay minimum wage and the unfair competition.

In the Court of Appeal of the State of California Sixth Appellate District, plaintiffs’ lawyers argued that all of the dealers’ claims should not have been dismissed because the tips belonged to the dealers and Bay 101 was not legally permitted to require the dealers to contribute to the tip pool.  Plaintiffs claimed that although tip pooling had been found by the courts to be legal in the restaurant setting, the method of tipping in a casino demonstrated that players intended tips to be the sole property of the dealers.  Plaintiffs claimed that because tips are tossed in the direction of the dealer from a winning hand, contrasted with tips being left on a table for a group in a restaurant, the player intends the tips to be for the dealers only and Bay 101 could not legally require the dealers to contribute any of the tips for other employees.  The Court of Appeal agreed with the trial court that the intent of the tipper was not relevant to the outcome of the case.  The Court of Appeal held that tip pools mandated by employers can be legal in casinos if the purpose of Labor Code section 350 et seq. is not contravened by distributing the tip pool to any employer’s “agent,” as defined in section 350.  In addition to arguing that any tip pool in a casino is illegal, plaintiffs also claimed that some of the tips were distributed to “agents.”  The Court of Appeal found that plaintiffs failed to prove that any of the recipients of the tip pool were agents because none of them had “management level” authority.  The Court of Appeal agreed with the trial court that merely “directing another employee in the performance of some of his or her duties” did not amount to the degree of supervision and control that an employee would need in order to be an agent of the employer within the meaning of Section 350.

The Court of Appeal also confirmed the trial court’s ruling that the money had and received claim failed noting that the plaintiffs’ evidence was insufficient to establish that the money contributed by the dealers into the tip pool was their money, which, in equity and good conscience, should be returned to them.  Rather, the evidence presented by the plaintiffs established that the amount of money dropped into the tip pool did not exceed an amount that was a fair and equitable portion of the gratuities that rightfully belonged to other employees of Bay 101.  The Court of Appeal ruled that the money Bay 101 received and distributed to other employees belonged to these other employees and was intended by the dealers to be used for their benefit and not for the benefit of the dealers. 

As to the minimum wage claim the Court of Appeal held the evidence proved that the dealers were paid the minimum wage and there was no evidence that their contribution to the tip pool ever exceeded the amount of the dealers’ tips.  Accordingly, the plaintiffs could not prevail on their minimum wage claim.  

As to the conversion claim, the Court of Appeal upheld the trial court’s decision that because the dealers could not prove that the money in the tip pool belonged exclusively to them, they could not prove conversion.

On May 1, 2013, the California Supreme Court denied Avidor’s petition for review.