AMICUS CURIAE

1. Introduction

Approving a settlement that extinguishes the claims of a class of all female[j1]  exotic dancers based on inadequate, reversionary consideration despite an abysmal claims rate and despite unique and disturbing settlement terms is inappropriate because it places the Court’s imprimatur on the scofflaw[j2]  club owners’ dogged attempts to end run basic employment protections.  All workers in California (and elsewhere) deserve the basic employment protections provided by federal and state law.  This need for protection is heightened when dealing with a class of vulnerable[j3] , young women who face the harsh reality of a significant gender [j4] pay gap in nearly every industry and who often opt to work in adult entertainment as one [j5] of the only viable alternatives to provide for themselves and their families. 

The settlement agreement adopts two uniquely inappropriate methods to ascribe illusory, or at least inflated, value to the settlement so that it would be approved by the District Court.  First, a substantial portion of the settlement “value” is only available to class members as “[j6] credits” or coupons redeemable against illegal fees the clubs charge class members to perform.  The approval of these credits is tantamount to the Court condoning a labor system that permits club owners to charge performers fees to perform in their clubs – fees which would be illegal under state and federal law if the performers are in reality employees. By approving the settlement, the Court tacitly approves of the independent contractor business model, which runs contrary to the FLSA and California state law, without so much as an evidentiary hearing on the legality of Defendants’ business model.  If exotic dancers are employees, then the dance fees which are subject to the credits would constitute illegal kickbacks or otherwise violate state and federal law.  See, e.g., 29 CFR 561.35 (“Whether in cash or in facilities, ‘wages’ cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or ‘free and clear.’ The wage requirements of the Act will not be met where the employee ‘kicks-back’ directly or indirectly to the employer or to another person for the employer's benefit the whole or part of the wage delivered to the employee. This is true whether the ‘kick-back’ is made in cash or in other than cash.”).

Second, the agreement ascribes value to purported injunctive relief in which the Defendants will offer performers the choice to perform as independent contractors or employees.  This is a false choice that runs contrary to well established law.  The Fair Labor Standards Act looks to economic realities and not the contractual agreements of the parties to determine whether individuals are employees covered by the protections under the Act. See, e.g., Real v. Driscoll Strawberry Assoc., 603 F.2d 748, 755 (9th Cir. 1979)(“Economic realities, not contractual labels, determine employment status for the remedial purposes of the FLSA.”).   The California Supreme Court recently issued a decision presuming that workers are employees instead of contractors and establishing a new ABC test under which the class members would never qualify as contractors.[1] Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 2018 Cal. LEXIS 3152 (Cal. Apr. 30, 2018).  Neither the injunctive relief nor the dance fee credits should not be approved by the Court and neither should be considered to as value to the class members upon which to approve the settlement.  Therefore, the settlement approval should be reversed.[2] 

Exotic dancers are no less deserving of wage and hour protections (and other employee protections) than any other workers.  The approval of a settlement this abysmal sends a message to exotic dancers, and women workers in general, that the law does not protect them.  Aside from wiping away the valuable claims of thousands of class members who get nothing, approval of this settlement will likely chill any future attempts by exotic dancers to vindicate their rights.  This is particularly true in an industry where working conditions are difficult at best and there is little or know governmental enforcement of employment laws.

This is a bad settlement that extinguishes the rights of XXXX class members, YYYY of which will receive nothing.  What’s more, to receive between X% and Y% of the “benefit” available [CY7] to class members, requires these class members to enter into an independent contractor performer agreement with the Defendants and dance[j8]  nude in order to receive the benefit.  This is distasteful [j9] and turns the age-old notion of working off a debt on its head.  Here, instead of the party who did not pay what was owed having to work to pay a debt, the party owed the money has to work – performing naked and generating significant profits in the process – to receive this “benefit.”  It is hard to reconcile this settlement provision with other wage and hour settlements in other industries.  Undersigned counsel has engaged in almost an exclusively employment law practice for twenty years and, other than three settlements by Déjà vu related defendants, has never seen an agreement that requires workers to do future work in order to recover past wages.[3]

It is hard to imagine that such an awful settlement, with such a uniquely bad dance credit redemption making up a large portion of the available “benefit” to class members would be presented for approval, or approved by the District Court, without some implicit bias against the class of all female[j10]  exotic dancers.  It is hard to imagine this settlement being approved for a class of men in a more mainstream occupation.  The Parties have not provided any evidence of similar settlement structures – a structure that requires the class members to enter into an allegedly illegal contract and continue working without wages just to be compensated for past, unpaid wages.

Thus, it appears that this settlement approval is the result of implicit (likely unconscious) biases and stereotypes as to the class members including that they are more[j11]  transient than other workers.  Regardless of any bias, approval of this lowly settlement sends the clear message that this class of all[j12]  female workers are not deserving of protection and neither the law nor the courts are viable options.  In short, it tells them, it just is not worth it to stand up. 

The Parties did not present the District Court with a compelling reason to allow so much of the “value” of the settlement to be tied to the unusual and arguably illegal business model of the Defendants.  Similarly, there was no significant analysis of how much money the class members could win at trial compared to what is actually obtained by the class members and excluding the unclaimed amounts that revert to the Defendants.  For these reasons the order approving the settlement should be reversed.

2. The Settlement Perpetuates Industry Norms Denying Exotic Dancers the Basic Protections Afforded Employees.

Exotic dancers are routinely denied basic employment benefits like unemployment insurance, workers compensation coverage and wage and hour protections.  This is due to the overwhelming majority of exotic dance clubs categorizing their performers as “independent contractors” rather than employees.  The settlement condones the approach of allowing exotic dancers and the clubs they work for to decide for themselves whether the dancer is an employee or independent contractor.[4]  This upends well established precedent, which require courts to look into the “economic realities” of the relationship to determine employee status. See, e.g., Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 301 (1985) (noting that the test of employment under the FLSA is economic reality).  The economic realities of the relationship, rather than any structure or labels given by the parties, control. See Goldberg v. Whitaker House Coop, Inc., 366 U.S. 28, 33 (1961); Real, 603 F.2d at 755 (“Economic realities, not contractual labels, determine employment status for the remedial purposes of the FLSA.”).  The focus is on “whether the worker ‘is economically dependent on the business to which [she] renders service or is, as a matter of economic [reality], in business for [herself].’” Schultz v. Capital Int’l Sec., Inc., 466 F.3d 298, 304 (4th Cir. 2006) (quoting Henderson v. Inter–Chem Coal Co., 41 F.3d 567, 570 (10th Cir. 1994)); see also Brock v. Superior Care, Inc., 840 F.2d 1054, 1059 (2d Cir. 1988) (“The ultimate concern is whether, as a matter of economic reality, the workers depend upon someone else’s business . . . or are in business for themselves.”).

In light of the strong public policy favoring employment status under the FLSA, as well as California’s strong public policy favoring employment status as set forth recently by the California Supreme Court in Dynamex, there is no reason to approve a settlement that implicitly condones the illegal business practices of the industry by presenting class members coupons and ascribing value to meaningless injunctive relief.  It is one thing to approve a settlement in which an employer does not come into compliance with the law.  It is quite another to approve of a settlement which condones an illegal, or at best questionable, business model, where at least 25% of the purported value to class members rests on that model. A large portion of the “value” of the settlement, requires the District Court to presume that the class members may be required to pay to work and are entitled to be paid in “coupons”, both of which violate of the provisions of the FLSA and California law.  See, e.g., 29 CFR §531.27 (“standing alone, section 6 and 7 of the Act require payments of the prescribed wages, including overtime compensation, in cash or negotiable instrument at par.”); 29 CFR §531.34 (“Scrip, tokens, credit cards, ‘dope checks,’ coupons, and similar devices are not proper mediums of payment under the Act. They are neither cash nor “other facilities” within the meaning of section 3(m).”); 29 CFR 561.35 (“Whether in cash or in facilities, ‘wages’ [j13] cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or ‘free and clear.’ The wage requirements of the Act will not be met where the employee ‘kicks-back’ directly or indirectly to the employer or to another person for the employer's benefit the whole or part of the wage delivered to the employee. This is true whether the ‘kick-back’ is made in cash or in other than cash.”); see also, e.g., CA Labor Code § 212(a) (prohibiting payment of wages in scrip or coupons).

3. Exotic Dancers Who Come Forward Fare Much Better

Most courts examining the issue presented in this case have found exotic dancers across the country misclassified as independent contractors; holding instead that they were employees entitled to the FLSA’s protections.  See, e.g., McFeeley v. Jackson Street Entertainment, 4th Cir., No. 15-1583 (June 8, 2016) (exotic dancers were employees rather than independent contractors); Reich v. Circle C Invs., Inc., 998 F.2d 324 (5th Cir. 1993) (same); Foster v. Gold & Silver Private Club, Inc., No. 7:14CV00698, 2015 WL 8489998 (W.D. Va. Dec. 9, 2015) (same); Degidio v. Crazy Horse Saloon and Rest. Inc., No. 4:13-cv02136-BHH, 2015 WL 5834280 (D. S.C. Sept. 30, 2015) (same); Butler v. PP & G, Inc., No. WMN-13-430, 2013 WL 5964476 (D. Md. Nov. 7, 2013) (same); Hart v. Rick’s Cabaret Int’l, Inc., 967 F. Supp. 2d 901 (S.D.N.Y. Sept. 10, 2013) (same); Martin v. Priba Corp., No. 3:91–CV–2786–G, 1992 WL 486911 (N.D. Tex. Nov. 6, 1992) (same).

This is not surprising given the extremely broad coverage provided by the FLSA, which defines “employer” to include “any person acting directly or indirectly in the interest of an employer in relation to an employee,” 29 U.S.C. 203(d), and “employee” as “any individual employed by an employer.” 29 U.S.C. 203(e)(1).  The FLSA further defines “employ” to include “to suffer or permit to work.” 29 U.S.C. 203(g).  The Supreme Court has repeatedly recognized that the FLSA’s definitions demonstrate Congress’ intent for the FLSA to apply as broadly as possible. See, e.g., Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326 (1992) (“employ” is defined with “striking breadth” (citing Rutherford Food Corp. v. McComb, 331 U.S. 722, 728 (1947))); United States v. Rosenwasser, 323 U.S. 360, 362 (1945) (“A broader or more comprehensive coverage of employees  . . . would be difficult to frame.”).  The FLSA’s definition of “employee” is the “‘broadest definition that has ever been included in any one act.’” Rosenwasser, 323 U.S. at 363 n.3 (quoting 81 Cong. Rec. 7657 (statement of Senator Black)).

This overwhelming trend of successful cases has led to substantial recoveries for exotic dancers exceeding tens of thousands, and in some cases over $100,000, in wages.  In Dina Nicol D’Antuono v. C&G of Groton Et Al and Karen Vilnit v. C&G of Groton Et al. an arbitrator awarded one plaintiff $58,756.80 and another $69,738.00 for a case involving federal and state wage claims and defenses similar to the ones at issue in this case. See, Case 3:14-cv-03616-LB Document 150-1. [need correct citation form][CY14]  Other cases have produced similar and even larger awards for misclassified dancers.  See, e.g., Alex v. KHG of San Antonio, LLC d/b/a Tiffany’s Cabaret, No. 13-728 (W.D. Tex.)(Jury awarded two exotic dancers of $121,923 and $130,016, respectively, for FLSA violations); Thompson v. Linda and A. Inc., No. 09-1942 (D.D.C.) (Special master awarded $345,632 to five dancers, for an average award of $69,126); McFeeley v. Jackson Street Entertainment, LLC, No. 12-1019 (D. Md.) (Jury award of $265,276.50 to six dancers, for an average of $44,213 per dancer); Thornton v. Crazy Horse, Inc., No. 06-cv-00251 (D. Alaska) (Award after a bench trial of $148,388.54 to four dancers, for an average award of $37,097). 

Similarly, settlements involving classes of exotic dancers have been much better than the proposed settlement here.  This is true even though most of these settlements were made under laws less protective that those in California. See, e.g., Dittus v. K.E.G., Inc., No. 14-300 (D.S.C.) (Settlement with payments ranging from $14,000 for dancers who worked for four years to $2,000 for dancers who worked for four months or less); Alvarez v. KWLT, Inc., No. 14-7075 (E.D. Pa.) (Settlement on behalf of thirty performers with an average payment to class members of $5,916.); Hart v. RCI Hosp. Holdings, Inc., 2015 WL 5577713, at *5, *11 (S.D.N.Y. Sept. 22, 2015) (15,000,000 cash settlement fund for one nightclub, which represented 66% of the performers’ maximum recovery at trial on their wage claims, with an average payment of $4,255 per class member (assuming full participation of the 2,208 person class) and with 288 dancers receiving more than $10,000.); Clincy v. Galardi, No. 09-2082 (N.D. Ga.) ($1,550,000 cash settlement of FLSA action on behalf of 80 dancers equivalent to 50% of possible recovery, and with 34 class members receiving more than $10,000.); Eley v. Stadium Grp., LLC, 2017 WL 663525, at *2 (D.D.C. Feb. 17, 2017) (Settlement providing for payments of between $1,700 and $17,200 to class members.); In re Penthouse Executive Club Compensation Litigation, No. 10 Civ. 1145 (S.D.N.Y.) (Settlement with payments of $3,727 for first year worked by any dancer, $988 for any additional years after that, with average settlement shares of $4,666.94); Jones v. JGC Dallas LLC, 2014 WL 7332551, at *9 (N.D. Tex. Nov. 12, 2014) ( report and recommendation adopted in part, 2014 WL 7336889 (N.D. Tex. Dec. 24, 2014)) ($2,300,000 FLSA settlement on behalf of 194 plaintiffs, with an average payment of $7,900); Demaria-Dominguez v. Keys Prods., 2016 U.S. Dist. LEXIS 185591 ($1.2 million dollar settlement for a single location).

4. The Settlement Appears to Be Based on Implicit Biases or Stereotypes of Exotic Dancers

It seems that the presentation of the settlement to the district court, and the District Court’s approval of the settlement is based, in part, on implicit bias against, or stereotypes about, women who work as exotic dancers.[5]  First, the District Court and all parties accepted the notion, without any evidence, that exotic dancers are “transient” in nature. Class members’ purported transience served as a justification for the low claim rate, the failure to deliver an effective notice to x% of class members, and the reversionary nature of the settlement. 

Although there is one study that identifies exotic dancers as transient, it uses the term transient to describe women who enter the industry for a short period of time with a discreet goal, such as to pay for college, versus women who make a career in exotic dancing.  See Andreas G. Philaretou (2006) Female Exotic Dancers: Intrapersonal and Interpersonal Perspectives, Sexual Addiction & Compulsivity, 13:1, 41-52, DOI: 10.1080/10720160500529243.   The[j15]  IEAU has found nothing to indicate that exotic dancers are any more transient than those workers in male dominated professions such as truck drivers, mechanics, or stone masons.  Many exotic dancers[j16]  do travel away from home to work and many are protective of their home addresses for safety reasons, but most have a stable home and can be reached just as easily as other professions whose job requires travel. 

Approving a settlement based on the unsupported and unsubstantiated notion that exotic dancers could not be located to be notified of the settlement, seems to be based on implicit, unconscious bias that results from societal stereotypes that many exotic dancers are drug addicted prostitutes, are somehow otherwise less stable than individuals working in other industries, or are merely “other” than the upstanding women who choose occupations with a large gender pay gap.  Without empirical evidence that this class of exotic dancers is more transient than other groups who receive much more favorable settlement terms, the District Court erred in relied in anyway on the transienct nature of the class members in approving the settlement. [insert a cite where court relies on transience of class members]

Similarly, the notion that somehow the class members should be provided the option of choosing to be an employee or choosing to remain an independent contractors[j17]  and claim dance credits, suggests that this class of workers is less worthy of legal protections afforded all workers.  As set forth above, workers and their employers cannot choose whether to be governed by the FLSA.  Permitting this obviously illegal choice sends the message that this class of all female workers is somehow less deserving and will have a chilling effect on other exotic dancers coming forward to vindicate their important statutory rights.  When such workers do come forward, they typically win (often winning big).  See Section III herein. 

In contrast, here, the parties have entered into an arrangement that results in the District Court’s implicitly finding, without any hearing on the merits, that exotic dancers are properly classified as independent contractors who must pay Defendants for the privilege to work in their clubs in California.  This also adopts the position that this class of workers is not entitled to the protection of federal or state wage laws.  Moreover, the practical impact of this settlement is to extinguish the rights of thousands of exotic dancers, many of them who never even received notice of this settlement, through a reversionary settlement that is estimated by Objector to be less than 1%, and by the parties at 4%, [CY18] of the value of the case if the class were successful at trial.  Although some litigation risks may justify taking such a low percentage of the value of a claim in a settlement, there is no justification for such a substantial discount in this case. 

Indeed, in light of the recent California Supreme Court decision, Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 2018 Cal. LEXIS 3152 (Cal. Apr. 30, 2018), the class members seem to be nearly assured of employment status, at least going forward.  The Dynamex decision strips the dance credits and the injunctive relief of any value to the class.  [CY19] Thus, the Court cannot accept the Parties’ values of dance credits in the amount of $1,000,000 or the value of injunctive relief of $XXX.  This leaves the only value of this settlement as the cash portion, which is $xxx to be split among YYY class members.  This means that ZZZ class members will be left with no recovery but will nevertheless have their valuable California claims extinguished.  [CY20] 

5. Dance Credits and Injunctive Relief are Worthless and Inappropriate in A Court Approved Settlement

Both the dance credits and the injunctive relief offer little more than a formal approval of the approaches used by exotic dance clubs and their scofflaw [j21] owners to avoid the costs associated legal requirements for all employers.  These same owners, who have profited immensely by ignoring the rules that apply to all employers, will continue to benefit from their illegal[j22]  scheme of having young, exploitable women choose whether they will perform as employers or independent contractors.  This is a false choice which is not available under the Fair Labor Standards Act, which looks to economic realities and not the contractual agreements of the parties, to determine whether individuals are employees covered by the protections under the Act. See, e.g., Real v. Driscoll Strawberry Assoc., 603 F.2d 748, 755 (9th Cir. 1979)(“Economic realities, not contractual labels, determine employment status for the remedial purposes of the FLSA.”).   

Similarly, adopting a plan where the class members perform for “free” without having to pay the traditional, and illegal, dance fees to the club, necessarily requires the District Court and this Court to approve Defendants’ illegal business practice without a trial on the merits.  Although settlements are and should be favored, this settlement goes too far by including relief that requires the courts to condone the Defendants illegal, or at best questionable, business practices.  Rather than settling the claim and each side agreeing to disagree about the merits of the underlying case, this settlement essentially requires the Plaintiffs, Class Counsel, and the District Court to agree that the Defendants’ business model (in which they pay no wages but rather charge dancers to work in their clubs) is legal and appropriate.  This is true because if the Defendants’ business model were not legal, neither Class Counsel nor the District Court could approve of, and the courts could not enforce this settlement. [cite a case that says courts will not enforce illegal contracts]  Instead of vindicating the rights of the class members, the Plaintiffs and Class Counsel, have conceded that the practices which are at the heart of their Complaint, are legal and should be continued with the approval of the Court. 

The District Court need not require Defendants to change their business model to enforce a cash settlement agreement. The District Court, however, should not approve a settlement that requires the continuation of the Defendants business model of charging dancers to perform and offering dancers the illegal choice of whether class members want to be employees or independent contractors.  Doing so sends the clear message that Defendants are complying with the law and the court approves of their business practices. 

Assuming it is appropriate for the District Court to approve a settlement that is illegal if the class members are in fact employees based on the FLSA’s economic reality test or California’s ABC test, the value of the dance credits and injunctive relieve are worthless.  Even before the Dynamex decision, the dance credits left all former employees without a viable option to claim either benefit.  This means that at least x% of the class would receive nothing.  Even for those class members currently under contract, as presented by Objector Mehraban, it is very unlikely that class members would earn more than $100 per hour in dance fees, rendering a portion of the purported relief worthless. [CY23] 

Approving a settlement containing these provisions was error and the decision should be reversed.

6. The Settlement Failed to Ensure Class Members Could Make Claims, Object or Opt-Out Pseudonymously

The Named Plaintiff and Class Counsel did not fairly, reasonably, or adequately represent class members who might have sought to exclude themselves from, object to, or participate in the proposed settlement because they failed to provide notice of or implement a process through which class members could exclude themselves from, object to, or participate in the proposed settlement without fear that their identities would become public.  Rather, the process for exclusion, objection and participation suggests that participation in any fashion will result in public disclosure of their identity.

The Cash Election Form requires that the unnamed class member provide “stage name(s); Your Legal Name; Street Address; City; State; Zip; Phone Number; And Email address.” (Doc. 34-4) The notice required those individuals seeking to exclude themselves include their “legal name, current address, and telephone number.” (Doc. 34-5).[CY24] 

In contrast, Jane Roe proceeded through the litigation and settlement process pseudonymously. She, and Class Counsel, failed to explicitly protect the unnamed class members’ privacy interests to the same level that Roe was protected.  It is common for adult entertainers to proceed pseudonymously both for their safety and to be free from public scorn. E.g., Roes 1-2 v. SFBSC Mgmt., LLC, 77 F. Supp. 3d990, 994 (N.D. Cal. 2015)(The court allowed the plaintiffs and future opt-ins to proceed pseudonymously and file redacted consents forms, holding that plaintiffs’ interest in safeguarding their personal well-being outweighed the public’s interest in knowing the plaintiffs’ identities.); Does 1-3 v. Coliseum, Inc., 2013 U.S. Dist. LEXIS 158416.  

The fact that Roe participated in this case pseudonymously suggests that she and Class Counsel were aware that of the “chilling” and “in terrorem” effect that publicly disclose of the identities of class members would have on any type of participation (be it opting-out, objecting or claiming benefits) in this case.  Nevertheless, they did not insist that class members be assured that their identities would be protected from public disclosure.  This failure demonstrates another reason why their failed to adequately represented the interests of unnamed class members.  This is an additional reason why the court’s order approving the settlement should be reversed.

7. Conclusion.

For the reasons set forth herein and by the Objectors, the district court’s approval of this settlement should be reversed. 

/s/ Charles P. Yezbak, III

Charles P. Yezbak, III

Yezbak Law Offices PLLC

2002 Richard Jones Rd., Suite B-200

Nashville, TN 37215

Main: 615.250.2000

Fax: 615.250.2020

yezbak@yezbaklaw.com

CERTIFICATE OF COMPLIANCE[CY25] 

The undersigned counsel for Objectors B.D. furnish the following in compliance with FRAP Rule 32(a)(7)(B):

I hereby certify that this Reply Brief conforms to the rules contained in FRAP Rule 32(a)(7)(B) as well as the Order of the Court February 20, 2018 permitting Reply Briefs “not to exceed 9,700 words in length.” This brief was prepared in Times New Roman, using 14-point type in the body and footnotes, using Microsoft Word. The referenced word processing system indicates a total word count of 8,217 words, beginning at page “1,” as authorized and determined under FRAP Rule 32(a)(7)(B).

Dated: June 22, 2018

                                                      /s/ Charles P. Yezbak, III___________

CERTIFICATE OF SERVICE

I hereby certify that on June 22, 2018, the Reply Brief of Objectors-Appellants B.D. was filed with the Clerk of the Court for the United States Court of Appeals for the Sixth Circuit by using the appellate CM/ECF system. I certify that all participants in the case are registered CM/ECF users and that service will be accomplished by the appellate CM/ECF system.

                                             /s/ Charles P. Yezbak, III___________

ADDENDUM

DESIGNATION OF RELEVANT DISTRICT COURT DOCUMENTS

 Pursuant to 6 Cir. R. 30(G)(1), Objector-Appellant B.D. Designates the following as relevant district court documents referenced in their Reply Brief:

2018-06-22 - Roe Reply Brief Draft v2 CPY-1 (1).docx