Dugan et al v. Reservoir Restaurant Inc

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
ANNALIESE DUGAN, ET AL., 	§
§
Plaintiffs, 	§
§
v. 	§ 	Civil Action No. 4:23-CV-01219-O
§
RESERVOIR RESTAURANT INC 	§
§
§
Defendant. 	§
OPINION & ORDER
Before the Court are Plaintiffs’ Motion for Partial Summary Judgment, Brief in Support,
and Appendix in Support (ECF Nos. 62–64); Defendant’s Response (ECF No. 68); and Plaintiffs’
Reply (ECF No. 69). Having reviewed the briefing and applicable law the Court finds that the
Motion should be, and hereby is, GRANTED.
I. 	BACKGROUND1
Plaintiffs are all former servers employed by Defendant. While working as servers,
Defendant paid Plaintiffs an hourly wage of $2.13 per hour, which is less than the $7.25 minimum
wage required by the Fair Labor Standards Act (“FLSA”). For every shift Plaintiffs worked as
servers, Defendant took a $1 fee from their tips “for things such as silverware, pens, things like
that[.]” In addition to that $1 per-shift fee, for each shift worked, Defendant required Plaintiffs to
surrender additional amounts from their tips equal to either 3.25% or 2.25% of each server’s total
1 Unless otherwise stated, the Court’s recitation of the undisputed facts is taken from the parties’ summary
judgment briefing.
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sales for the shift. These additional tips were pooled together with the tips Defendant collected
from all its servers.
The Parties dispute what amount Defendant actually withheld from Plaintiffs’ tips.2 They
also disputed to whom Defendant distributed the pooled money and whether that money was only
distributed to those employees who were engaged in “customarily and regularly tipped”
occupation.3 Plaintiffs filed suit alleging violations of the FLSA for Defendant’s failure to pay the
minimum wage pursuant to 29 U.S.C. § 206 and for unlawful “kick-backs” under 29 U.S.C.
§ 203(m). Plaintiffs now move for partial summary judgment on Defendant’s liability as to both
claims and for damages as to the failure to pay the minimum wage claim. The Motion has been
briefed and is now ripe for this Court’s review.
II. 	LEGAL STANDARD
The Court may grant summary judgment when the pleadings and evidence show “that there
is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” FED. R. CIV. P. 56(a). Summary judgment is not “a disfavored procedural shortcut, but rather
. . . an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy
and inexpensive determination of every action.” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986)
(internal quotation marks and citation omitted).
“[T]he substantive law will identify which facts are material.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). A genuine dispute as to any material fact exists “if the evidence is
such that a reasonable jury could return a verdict for the nonmoving party.” Id. The movant must
inform the court of the basis for its motion and demonstrate from the record that no genuine dispute
as to any material fact exists. Celotex, 477 U.S. at 323. The Court must view the evidence in the
2 Pls.’ Br. Supp. Mot. Summ. J. 9–12, ECF No. 63.
3 Id.; Def.’s Resp. Pls.’ Mot Summ. J. 3–4, ECF No. 68
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light most favorable to the nonmovant. Ion v. Chevron USA, Inc., 731 F.3d 379, 389 (5th Cir.
2013). And if there appears to be some support for disputed allegations, such that “reasonable
minds could differ as to the import of the evidence,” the Court must deny the motion for summary
judgment. Anderson, 477 U.S. at 250.
“The party opposing summary judgment is required to identify specific evidence in the
record and to articulate the precise manner in which that evidence supports his or her claim.” Ragas
v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). “The opposing parties’ failure to
produce proof as to any essential element of a claim renders all other facts immaterial.” 2223
Lombardy Warehouse, LLC v. Mount Vernon Fire Ins. Co., No. 3:17-CV-2795-D, 2019 WL
1583558, at *6 (N.D. Tex. Apr. 12, 2019) (Fitzwater, J.). Summary judgment is mandatory if the
parties fail to meet this burden. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
III. 	ANALYSIS
Plaintiffs move for partial summary judgment on Defendant’s liability under the FLSA’s
minimum provisions codified as 29 U.S.C. §§ 206, 216(b).4 Plaintiff asserts that Defendant is
liable on two independent bases. Plaintiffs first argue that Defendant unlawfully took a $1.00 per
shift fee directly from every server’s tips.5 Second, they argue that Defendant cannot show all tips
contributed to the tip pool were fully distributed solely among customarily and regularly tipped
employees, as required by the FLSA.6
Section 206(a) of the FLSA requires employers to pay employees a minimum wage
currently set at $7.25 per hour. 29 U.S.C. § 206(a)(1)(C). The FLSA contains an exception which
permits employers to pay “tipped employees” $2.13 per hour—less than the minimum wage—
4 Pls.’ Mot. Summ. J. 2, ECF No. 62.
5 Pls.’ Br. Supp. Mot. Summ. J. 17–19, ECF No. 63.
6 Id. at 19–26.
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when the tipped employees’ tips make up the difference to the minimum wage. § 203(m). The
employer’s discount is called the “tip credit.” See id.; Montano v. Montrose Rest. Assocs., Inc.,
800 F.3d 186, 188 (5th Cir. 2015). Defendant “bear[s] the burden of establishing its entitlement to
the tip credit.” Montano, 800 F.3d at 189.
To receive the tip credit, Defendant must prove (1) the employee being paid less than
minimum wage also earns tips; (2) the total amount of tips earned equals or exceeds the minimum
wage; and (3) “all tips received by the tipped employee [are] retained by that employee.” Black v.
DMNO, LLC, No. cv 16-2708, 2018 WL 2306939, at *3 (E.D. La. May 21, 2018). “If an employee
is required to share tips with an employee who does not customarily and regularly receive tips, the
employer may not take a tip credit, and must compensate its employees at the full minimum wage
rate.” Id. The Fifth Circuit has held that “because [defendant] has the burden to prove its
entitlement to the tip credit,” to prevail on summary judgment, a plaintiff only need to “point out
that [Defendant’s] evidence contains insufficient proof” to satisfy an element of the tip credit. See,
e.g., Ettorre v. Russos Westheimer, Inc., No. 21-20344, 2022 WL 822181, at *2 (5th Cir. Mar. 18,
2022) (citing Celotex Corp v. Catrett, 477 U.S. 317, 323-24 (1986)).
Plaintiffs assert that “Defendant violated the tip credit as a matter of law because Defendant
cannot prove (1) Plaintiffs retained all tips; and (2) to the extent Defendant claims a portion of the
tips it took from Plaintiffs was for a tip pool, Defendant cannot show all the tips it took for any tip
pool were fully distributed solely to pay employees who were engaged in an occupation that is
customarily and regularly tipped.”7 Defendant concedes that Plaintiffs did not retain all of their
tips.8
7 Pls.’ Br. Supp. Mot. Summ. J. 14, ECF No. 63.
8 Def.’s Resp. Pls.’ Mot Summ. J. 3, ECF No. 68 (“Defendant concedes Plaintiffs did not retain all tips at
all times.”).
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A. The $1.00 Fee
Defendant “does not dispute the factual allegations regarding the $1.00 reimbursement
charge,” and concedes that if the Court follows Ettorre then “Plaintiffs are entitled to partial
summary judgment.”9 The Court finds the Fifth Circuit’s reading in Ettorre to be applicable and
finds that Defendant violated the FLSA’s tip credit as a matter of law.
“The FLSA does not permit an employer to transfer to its employees the responsibility for
the expenses of carrying on an enterprise.” Reich v. Priba Corp., 890 F. Supp. 586, 596–97 (N.D.
Tex. 1995) (holding employer liable for violation of tip credit because employees were required
to pay for their uniforms) (citing 29 C.F.R. § 531.3(d)(1), (2)); see also e.g., Steele v. Leasing
Enters., 826 F.3d 237, 244–46 (5th Cir. 2016) (affirming the district court’s holding that employer
may not transfer standard operating costs of running a business upon its tipped employees).
Here, Defendant does not dispute that it took $1 per shift from Plaintiffs’ tips each shift to
pay “for things such as silverware, pens, things like that.”10 This $1 dollar deduction violates
§ 203(m) unless the “facilities” it covers counts as a “wage.” An employer may count towards
wages, “the reasonable cost ... of furnishing [an] employee with board, lodging, or other facilities,
if [they] are customarily furnished by [the] employer to his employees.” § 203(m)(1). “Reasonable
cost” means the “actual cost” to the employer and does not include any profit to the
employer. 29 C.F.R. § 531.3(a)–(b). And any facility provided that is “primarily for the benefit or
convenience of the employer” is not a reasonable cost. Id. § 531.3(d)(1). The cost of silverware,
pens, 	and 	“things 	like 	that” 	is 	primarily 	for 	the 	benefit 	of 	the 	employer 	and 	is 	thus
unreasonable. Id. § 531.3(d)(2)(iii); see also Ettorre, 2022 WL 822181, at *3 (holding that a $10
9 Id. at 2–3.
10 Pls.’ App. Supp. Mot. Summ. J. Ex. 1 (Reed Dep.) 51:3–15, App. 014, ECF No. 64-1.
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bi-weekly deduction taken from server’s paycheck for a “linen fee” violated the tip credit as a
matter of law).
The FLSA provides that an employer who violates its minimum wage provisions be liable
in the full amount of the minimum wage and an additional equal amount as liquidated damages,
plus attorney’s fees. Singer v. City of Waco, 324 F.3d 813, 822 (5th Cir. 2003); 29 U.S.C. § 216(b).
Here, because Defendants have paid only $2.13 of the $7.25 minimum wage, they owe $5.12 per
hour for all hours worked by Plaintiffs when the $1 fee was imposed and liquidated damages in an
equal amount.11
B. Defendant’s Tip Pool Defense
Plaintiffs also argue that Defendant is liable under the FLSA’s tip credit for failing to prove
that it operated a lawful tip pool.12 Under the FLSA, “the general rule is that an employer may not
claim the tip credit unless a tipped employee is permitted to retain all of his tips.” See Montano,
800 F.3d at 188. “The statute provides a limited exception to this rule by permitting ‘the pooling
of tips among employees who customarily and regularly receive tips.’” Id. at 188–89 (citing 29
U.S.C. § 203(m)).
As noted supra, Defendant admits Plaintiffs “did not retain all tips at all times,” but
maintains that “when Plaintiffs did tip-out, all tips were distributed solely to pay employees who
were engaged in an occupation customarily and regularly tipped.”13 The inquiry into who is
11 An employer may avoid the imposition of liquidated damages if the employer shows: (1) that the act or
omission giving rise to such action was in good faith and (2) that he had reasonable grounds for believing
that his act or omission was not a violation of the FLSA. See Williams v. Sake Hibachi Sushi & Bar, Inc.,
Civil Action No. 3:18-CV-0517-D, 2020 WL 3317096, at *4 (N.D. Tex. June 18, 2020) (citations omitted).
The burden of proving that the two-prong test has been met is on the employer. 29 U.S.C. § 260 (“if the
employer shows to the satisfaction of the court”); Thomas v. Louisiana, 348 F. Supp. 792, 796 (W.D. La.
1972). Defendant offers no evidence or argument that it acted in good faith. Accordingly, Defendant has
failed to meet its burden and the Court takes it as undisputed that Defendant did not act in good faith. Id.
12 Pls.’ Br. Supp. Mot. Summ. J. 16–24, ECF No. 63.
13 Def.’s Resp. Pls.’ Mot Summ. J. 3, ECF No. 68.
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“customarily and regularly tipped” is fact-intensive and depends on actual duties, not job titles.
See Montano, 800 F.3d 186, 194 (5th Cir. 2015) (“Determining whether an employee is one who
‘customarily and regularly receives tips’ is a fact intensive inquiry that requires a case-by-case
analysis of the employee’s duties and activities.”). Defendant has the burden of showing its tip
pool was lawful. Id. at 189.
The only evidence Defendant has offered to support its position is the affidavit of
Defendant’s authorized agent, Emil Bragdon (“Bragdon”). Federal Rule of Civil Procedure
56(e) requires an affidavit or declaration used to support or oppose a motion for summary
judgment to (1) be made on personal knowledge; (2) set forth facts that would be admissible in
evidence; and (3) show affirmatively that the affiant is competent to testify to the matters
stated. See FED. R. CIV. P. 56(c)(4). Declarations asserting personal knowledge must include
enough factual support to show that the declarant possesses that knowledge. See Amie v. El Paso
Ind. Sch. Dist., 253 F. App’x 447, 451 (5th Cir. 2007). Conclusory declarations cannot create fact
issues to defeat a summary judgment. See First Colony Life Ins. Co. v. Sanford, 555 F.3d 177, 181
(5th Cir. 2009); see also Amie, 253 F. App’x at 451 (summary assertions or conclusory allegations
in a declaration are simply not enough proof to raise a genuine issue of material fact).
“[U]nsupported allegations or affidavits setting forth ‘ultimate or conclusory facts and conclusions
of law’ are insufficient to either support or defeat a motion for summary judgment.” Galindo v.
Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); see also Hugh Symons Grp. v.
Motorola, Inc., 292 F.3d 466, 468 (5th Cir. 2002).
Here, Bragdon does not aver the basis of his “personal knowledge.” In fact, Bragdon’s
affidavit contradicts his prior testimony.14 In his deposition testimony, Bragdon expressly stated
14 See e.g., Pls.’ App. Supp. Mot. Summ. J. Ex. 2 (Bragdon Dep.) 23:11–25:1, 31:5–14, 34:3–37:12, App.
034–38, ECF No. 64-2 (“I do not have personal knowledge because I don’t hand out the money.”).
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that he did not know which employees received money from the tip pool and that records of tip
distributions were not kept.15 Even setting aside Bragdon’s testimonial inconsistencies, his
affidavit consists solely of summary assertions and conclusory decelerations.16 Bragdon’s
conclusory and unsubstantiated assertions that “all amounts Plaintiffs tipped out were distributed
to bartenders, bussers, and . . . hosts” and that “[n]one of these tip-outs were distributed to any
other employee of Defendant”17 are insufficient to meet Defendant’s burden. Ryan v. Phillips, 558
Fed. 	App’x 	477, 	478 	(5th 	Cir. 	2014) 	(holding 	that 	the 	appellant’s 	“conclusory 	and
unsubstantiated assertion that he initiated the applicable grievance procedure is insufficient to
refute the lack of evidence” that he did initiate it). Here, the summary judgment evidence shows
Bragdon cannot even name a particular employee who received tips from a tip pool, let alone
establish that those unnamed employees were the kind that “customarily and regularly receives
tips.”18 Montano, 800 F.3d at 194 (“[W]hether an employee is one who ‘customarily and regularly
receives tips’ is a fact-intensive inquiry that requires a case-by-case analysis of the employee’s
duties and activities.”).
Defendant’s lack of evidence to support its tip pool defense is fatal. The Court will not
assume “in the absence of any proof . . . that the nonmoving party could or would prove the
necessary facts” and will grant summary judgment “in any case where critical evidence is so weak
or 	tenuous 	on 	an 	essential 	fact 	that 	it 	could 	not 	support 	a 	judgment 	in 	favor 	of 	the
nonmovant.” Little, 37 F.3d at 1075. “Rule 56 does not impose upon the district court a duty to sift
through the record in search of evidence to support a party’s opposition to summary judgment,”
and “[a] failure on the part of the nonmoving party to offer proof concerning an essential element
15 Id.
16 Def.’s Resp. Pls.’ Mot Summ. J. Ex. A, ECF No. 68.
17 Id.
18 Pls.’ App. Supp. Mot. Summ. J. Ex. 2 (Bragdon Dep.) 31:5–14, 34:3–37:12, App. 036–38.
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of its case necessarily renders all other facts immaterial and mandates a finding that no genuine
issue of fact exists.” Adams v. Travelers Indem. Co. of Conn., 465 F.3d 156, 164 (5th Cir.
2006) (internal quotation marks omitted). Accordingly, Defendant has failed to meet its burden to
prove it operated a lawful tip pool in compliance with the FLSA.
IV. 	CONCLUSION
For the forging reasons, Plaintiffs’ Motion for Partial Summary Judgment (ECF No. 62) is
GRANTED. The Court DEFERS entering judgment as to Plaintiffs’ damages on their failure to
pay the minimum wage claim until the issue of damages for Plaintiffs’ kick-back claim is resolved.
SO ORDERED on this 3rd day of March, 2026.
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