United States District Court, S.D. Indiana, Indianapolis Division
JACOB A. DAYTON individually and on behalf of all outs similarly situated, Plaintiff,
FOX RESTAURANT VENTURE, LLC, et al., Defendants.
ORDER ON DEFENDANTS' PARTIAL MOTION TO
J. McKINNEY, United States District Court Judge
matter comes before the Court on Defendants', Fox
Restaurant Venture, LLC, Fox NC Acquisition, LLC, and Fox
S.C. Acquisition, LLC, all doing business as Jimmy John's
(collectively “Fox”), Partial Motion to
Dismiss (Dkt. 24) Plaintiff Jacob A. Dayton's
Amended Complaint (Dkt. 23) pursuant to Federal Rule of Civil
Procedure 12(b)(6) (“Rule 12(b)(6)”) for failure
to state a claim. Dayton is pursuing a collective claim
against Fox to recover unpaid minimum wages under the Fair
Labor Standards Act (“FLSA”) on behalf of
similarly situated employees in Indiana. Dayton alleges that
Fox's customer refund policy (“Refund
Policy”) violates the FLSA by exerting unauthorized
control over delivery drivers' tips. Dayton also alleges
individual claims for conversion under Ind. Code. §
34-24-3-1 (conversion) and for illegally deducted tips and
wages under the Indiana Wage Payment Statute
(“IWPS”). Ind. Code § 22-2-5.
reasons set forth below, the Court GRANTS IN PART AND DENIES
IN PART Fox's Motion to Dismiss.
a franchise owner and operator of approximately twenty to
thirty Jimmy John's restaurants. Dkt. 23, ¶ 3.
Dayton worked for Fox as a food delivery driver at its
restaurants in Bloomington, Indiana, from February 26, 2014,
until May 10, 2016. Id., ¶ 4. Fox hires
delivery drivers to transport food to its customers at their
homes, businesses, and other locations. Id., ¶
6. During his employment with Fox, Dayton was paid wages as a
food deliverer on an hourly basis. Id., ¶ 5.
Fox paid its delivery drivers at a rate less than the FLSA
minimum wage of $7.25. Id., ¶ 7. Dayton made
$5.50 per hour at the end of his employment in 2016.
received a tip credit against its minimum wage obligations to
its drivers, which enables Fox to pay its drivers, as tipped
employees, less than the prevailing minimum wage.
Id., ¶ 8; see also 29 U.S.C. §
203(m). Dayton alleges that Fox unlawfully claimed the tip
credit for two reasons: (1) Fox failed to inform Dayton and
other delivery drivers who were tipped employees of the tip
credit provisions of the FLSA; and (2) Fox charged its
delivery drivers, and used their tips, to cover Fox's own
business expenses and costs. Id., ¶ 9. Fox
requires delivery drivers to return a portion of their tips
to the employer. Id., ¶ 11. Specifically, for
purposes of this motion, Fox maintains a Refund Policy that
provides for a full refund - including the amount of the tip
designated for the driver - to any customer that lodges a
complaint. Id., ¶ 12. Upon receipt of a
complaint, Fox either cancelled the whole credit card
transaction (including the tip) or required delivery drivers
to return the cash that was received. Id.
STANDARD OF REVIEW
12(b)(6) permits the dismissal of an action for failure to
state a claim upon which relief can be granted in the
pleadings. Under Rule 12(b)(6), the Court must accept as true
all well-pleaded factual allegations and draw all reasonable
inferences in favor of the plaintiff. See Esekiel v.
Michel, 66 F.3d 894, 897 (7th Cir. 1995). A
pleading must contain a “short and plain statement of
the claim showing that the pleader is entitled to
relief.” Federal Rule of Civil Procedure 8(a)(2).
Detailed factual allegations are not required, but a
plaintiff's complaint may not simply state “an
unadorned, the defendant-unlawfully-harmed-me
accusation.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). The “allegations must be enough to raise a
right to relief above the speculative level[.]”
Bell Atlantic Corp. v. Twombly, 550, U.S. 544, 555
(2007). “[A] complaint must contain sufficient factual
matter … to ‘state a claim to relief that is
plausible on its face.'” Iqbal, 556 U.S.
at 678 (quoting Twombly, 550 U.S. at 570). “A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged[, ]” not when the plaintiff only raises a
“sheer possibility that the defendant has acted
unlawfully.” Id. “[T]he height of the
pleading requirement is relative to the circumstances[,
]” Cooney v. Rossiter, 583 F.3d 967, 971
(7th Cir. 2009), and “[d]etermining the
plausibility of a claim is a context-specific task that
requires [the Court] to draw on [its] judicial experience and
common sense.” Brown v. JP Morgan Chase Bank,
334 Fed.Appx. 758, 759 (7th Cir. 2009).
seeks dismissal on three separate grounds. First, Fox
contends that Dayton never actually “received”
the credit card tips, which is a prerequisite under the FLSA
before money can be considered as a tip. Second, Fox argues
that Dayton's wage claim must fail because tips are not
considered “wages” under the IWPS. Finally, Fox
moves to dismiss Dayton's conversion claims because the
tips are not “special chattel.”
Tip Credit Provisions of the FLSA
first argument is predicated on whether or not the tip moneys
were cancelled prior to the delivery drivers
“receiving” the tip. Fox believes that its
cancellation policy is consistent with the FLSA, which
permits use of the tip credit if “all tips received by
such employee have been retained by the employee.” 29
U.S.C. § 203(m). Fox cites to 29 C.F.R. § 531.52,
which sets forth the general characteristics of
“tips” and states: “Only tips actually
received by an employee as money belonging to the employee
may be counted in determining whether the person is a
‘tipped employee' within the meaning of the Act and
in applying the provisions of section 3(m) which govern wage
credits for tips.” Thus, Fox concludes that when a
credit card transaction is cancelled pursuant to its refund
policy, drivers never actually “received” money
and therefore the Refund Policy does not preclude Fox's
entitlement to a tip credit.
cites the Sixth Circuit case Myers v. The Copper Cellar
Corporation, which reviewed whether an employer could
deduct from credit card charged tips those fees charged by
the credit card company. 192 F.3d 546 (6th Cir. 1999).
Myers found that an employer could in fact deduct
the amount it costs to process the credit card fee.
Id. at 553-54. It also noted, in dicta, that
“[b]efore an employee can be entitled to attain any
funds on account of a charged customer gratuity, that debited
obligation must be converted into cash.” Id.
recognized an exemption that allows for employers to require
tipped employees to contribute to the liquidation of the
money received by credit card, and nothing more. Although
this decision has been relied upon by other courts, Fox cites
to no case or statutory authority ...