Opinion
E066700
04-03-2018
JACOB R. DAVIS, Plaintiff and Appellant, v. INTERNATIONAL COFFEE AND TEA, LLC, Defendant and Respondent.
Osborn Law and Daniel A. Osborn for Plaintiff and Appellant. Littler Mendelson, Keith A. Jacoby and Rachael Lavi for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. CIVDS1413685) OPINION APPEAL from the Superior Court of San Bernardino County. Bryan Foster, Judge. Affirmed. Osborn Law and Daniel A. Osborn for Plaintiff and Appellant. Littler Mendelson, Keith A. Jacoby and Rachael Lavi for Defendant and Respondent.
I. INTRODUCTION
Plaintiff and appellant, Jacob R. Davis, brings this putative class action against his former employer, defendant and respondent, International Coffee and Tea, LLC, (International Coffee), on the theory that the company's tip-pooling policy violates Labor Code section 351. The trial court sustained International Coffee's demurrer to the second amended complaint (SAC) without leave to amend. According to the SAC, International Coffee pools tips on a weekly basis and distributes them to service employees based on the number of hours each employee worked that week. We conclude this policy does not violate section 351, and moreover, the statute does not create a cause of action for unfair and unreasonable tip pooling. We hold the court did not err in sustaining the demurrer and affirm.
All further statutory references are to the Labor Code unless otherwise indicated.
II. FACTS AND PROCEDURE
A. Allegations of the SAC
International Coffee operates retail stores under the name Coffee Bean and Tea Leaf. Davis worked as a server at a store in Rancho Cucamonga. Customers at the stores may leave tips in a "tip jar." At the close of business each day, a shift supervisor collects the tips in the jar. The supervisor then places the tips in a deposit box in the store safe. International Coffee does not require supervisors to count the amount of tip money collected each day. Nor does it require them to count or segregate the tips collected during each of the three daily shifts. Instead, at the end of each week, the supervisor counts the tips collected throughout the week and distributes the tips to tip-eligible employees. Thus, the supervisors commingle the tip money from 21 different shifts. Each tip-eligible employee receives a pro rata share of the tips based on the number of hours he or she worked that week.
Davis believes certain business days and certain shifts collect more tips than others. By failing to count and segregate the tips left on those more profitable days and shifts, International Coffee is taking tips from the employees who worked those days and shifts and giving them to employees who worked the less profitable days and shifts. A 1998 opinion letter from the Division of Labor Standards Enforcement (DLSE) concluded that any tip-pooling policy must be fair and reasonable, and any policy that was not would violate section 351. International Coffee's tip-pooling policy is patently unfair and unreasonable. The company's failure to count tips on a daily or shift-by-shift basis also make it impossible to comply with the recordkeeping requirements of section 353.
Davis seeks an accounting and injunctive relief requiring International Coffee to collect, record, and distribute tips on a shift-by-shift basis. He also seeks monetary relief consisting of the tip money "earned by some employees but distributed to other employees." The SAC alleges seven causes of action. The first is styled an action for accounting, damages, and injunctive relief. The remaining causes of action allege a constructive trust; conversion or trespass to chattel; violations of the unfair competition law (Bus. & Prof. Code, § 17200 et seq.); a Private Attorney General Act (PAGA) claim (Code Civ. Proc., § 1021.5); class action status; and a failure to provide accurate wage statements (Lab. Code, § 226). B. International Coffee's Demurrer
International Coffee demurred to the first through sixth causes of action. It argued that Davis based each cause of action on a violation of section 351, which prevents employers from taking tips intended for employees. International Coffee asserted its policy of pooling and distributing tips weekly on a pro rata basis did not violate section 351, and several published decisions had validated the practice of tip pooling. Additionally, it argued, Davis was not entitled to an accounting because he could not establish any balance was due to him, nor could he establish a constructive trust, conversion, or trespass to chattel, since International Coffee had not wrongfully retained, converted, or intentionally interfered with any of his personal property.
Davis acknowledged in opposition that tip pooling in general does not violate section 351, so long as it is fair and reasonable. But, he argued, International Coffee's specific policy involves taking tips from some employees who earned them and redistributing them to others who did not earn them, which is unfair and unreasonable. He also asserted that if the court sustained the demurrer, it should grant him leave to amend the SAC.
The court sustained the demurrer by signing the proposed order International Coffee submitted with its papers. Specifically, the court sustained the demurrer "to all causes of action alleged in the Second Amended Complaint . . . without leave to amend for the reasons set forth in the moving papers." The court later entered a judgment of dismissal in favor of International Coffee.
Notably, International Coffee's notice of demurrer failed to state that it was demurring to the seventh cause of action for failure to provide accurate wage statements. Similarly, its memorandum of points and authorities and reply brief did not mention the seventh cause of action. Still, the record reveals Davis did not object to the court sustaining the demurrer to "all causes of action" in the SAC, or to the court entering a judgment of dismissal disposing of the entire action. On appeal, Davis does not challenge the omission of the seventh cause of action from the demurrer. He has thus forfeited the issue, and we need not address it any further.
III. STANDARD OF REVIEW
We review a complaint independently to determine whether it alleges facts sufficient to state a cause of action. (McCall v. PacifiCare of California, Inc. (2001) 25 Cal.4th 412, 415.) "'We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.' [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) When the trial court sustains a demurrer without leave to amend, we ask whether there is a reasonable possibility the plaintiff can cure the defect by amendment. (Ibid.) If so, "the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff." (Ibid.)
IV. DISCUSSION
Relying on section 351, Davis contends International Coffee's policy of pooling and distributing tips weekly constitutes an unlawful taking of property from certain employees. Based on this unlawful taking, he argues the SAC sufficiently states causes of action for conversion, trespass to chattel, constructive trust, and an accounting. Furthermore, he contends, International Coffee's tip-pooling policy must be fair and reasonable. It is not, he argues, and the court erred when it impliedly ruled otherwise on a demurrer. We reject these arguments. Section 351 does not support Davis's reading of it. A. Section 351 Does Not Prohibit the Tip Pooling in This Case
Tip pooling is the "practice by which tips left by patrons at restaurants and other establishments are shared among employees." (Etheridge v. Reins Internat. California, Inc. (2009) 172 Cal.App.4th 908, 910 (Etheridge).) In the restaurant business, employer-mandated tip pooling is a long-standing practice, "which, through custom and usage, has become an industry policy or standard." (Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062, 1067 (Leighton).) It permits employers "to ensure an equitable sharing of gratuities in order to promote peace and harmony among employees and provide good service to the public." (Id. at p. 1071.)
Section 351 does not expressly address tip pooling or tip sharing between employees. (Etheridge, supra, 172 Cal.App.4th at p. 910 ["No California statutes expressly address the practice."].) Rather, the statute proscribes certain conduct by employers. The purpose of section 351 is to prevent employers from taking gratuities for themselves as part of their daily gross receipts. (Leighton, supra, 219 Cal.App.3d at p. 1068.) It states, in pertinent part: "No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron . . . . Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for." (§ 351.) The Legislature intended "to ensure that employees, not employers, receive the full benefit of gratuities that patrons intend for the sole benefit of those employees who serve them." (Leighton, supra, at p. 1068; accord, Chau v. Starbucks Corp. (2009) 174 Cal.App.4th 688, 699 (Chau) ["[S]ection 351 was enacted to prevent an employer from pressuring an employee to give the employer tips left for the employee."].)
The first published decision to discuss tip pooling relative to section 351 was Leighton, which considered a policy requiring the restaurant server to share 15 percent of her tips with the busser and 5 percent with the bartender. (Leighton, supra, 219 Cal.App.3d at pp. 1606-1067.) Leighton determined that, so long as the employer or its agents are not sharing in tips left for employees, section 351 does not proscribe tip pooling. (Leighton, supra, at p. 1071.) Even when mandated by the employer, tip pooling among employees is not a "taking" by the employer within the meaning of section 351. (Leighton, supra, at p. 1068.) The court noted that "[t]ip pooling has been around for a long time, as has section 351, and had the Legislature intended to prohibit or regulate such practice, it could have easily done so, just as it prohibited the various enumerated employer practices." (Id. at p. 1067.) The court rejected the server's argument that all tips left on her tables constituted her sole personal property, as against all other employees. (Id. at p. 1069.) Rather, the tips were the property of all employees who had served the diners. (Id. at p. 1070.) By declaring that tips are the "'sole property of the employee or employees'" for whom they were left, the Legislature intended section 351 to permit an arrangement in which multiple employees shared a pool of tips. (Leighton, supra, at pp. 1069-1070, quoting § 351.)
Since Leighton, several decisions have approved tip-pooling policies and concluded they do not violate section 351. For instance, in Budrow v. Dave & Buster's of California, Inc. (2009) 171 Cal.App.4th 875 (Budrow), the court held tip pools are not limited to those employees who directly serve a table, and thus bartenders may participate in restaurant tip pools. (Id. at pp. 879, 882, 884.) Along the same lines, in Etheridge, the court held any employee who contributes to the "chain of service" may participate in the tip pool, even if he or she did not provide direct table service. (Etheridge, supra, 172 Cal.App.4th at p. 923.) Accordingly, dishwashers and other kitchen staff may share in the tip pool. (Id. at pp. 921-923.) In Avidor v. Sutter's Place, Inc. (2013) 212 Cal.App.4th 1439, the court extended approval of tip pooling to the casino setting, where the employer required dealers to contribute a certain amount of their tips to a pool for other employees, such as floor persons, casino hosts, porters, and housekeepers. (Id. at pp. 1444-1445, 1450.)
And, in Chau, the court held shift supervisors at Starbucks could share in the tip pool with baristas, even if shift supervisors could be considered agents of the employer. (Chau, supra, 174 Cal.App.4th at pp. 691, 696.) Starbucks's tip pooling was like the tip pooling in our case. Customers could place tips in a collective tip box near the cash register. (Id. at p. 692.) At the end of the day, an employee would securely store the tips, and once a week, each tip-eligible employee would receive a pro rata share of tips, based on the number of hours he or she worked that week. (Id. at pp. 692-693, 697.) The plaintiffs did not challenge the formula for dividing the tip pool, only the inclusion of shift supervisors as tip-eligible employees. (Id. at p. 697.) The shift supervisors performed basically the same work as baristas and the employees worked as a team. (Id. at pp. 698-699.) Section 351, therefore, did not prohibit supervisors from taking a share of the tips left in a collective box for all service employees. (Chau, supra, at p. 699.)
Here, Davis alleges the pooling of tips on a weekly basis unlawfully takes some of the tip money from employees who worked the busier shifts and redistributes it to employees who worked slower shifts. But his theory rests on the faulty premise that this type of inter-shift sharing runs afoul of section 351. It does not. Section 351 prohibits the employer from taking tips left for employees. It is well established this was the Legislature's intent in enacting the statute—to protect employees against the employer. (Leighton, supra, 219 Cal.App.3d at p. 1068.) Nothing in section 351 precludes the sharing of tips between employees. (Leighton, supra, at p. 1067.) Davis focuses on the second sentence of section 351 to argue employees on one shift have a property right in the tips left during their shift, to the exclusion of employees on other shifts. The second sentence says tips are "the sole property of the employee or employees" for whom they are left. (§ 351.) "Given that restaurants differ, there must be flexibility in determining the employees to whom the tip was 'paid,' 'given,' or 'left.' A statute should be interpreted in a reasonable manner." (Budrow, supra, 171 Cal.App.4th at p. 882.)
With a collective tip jar, like the one alleged here, the manner of collecting tips signals to customers that they are leaving tips for an undefined group. The tip jar money has been "left" for a multitude of service employees. (See Chau, supra, 174 Cal.App.4th at p. 697 ["The obvious purpose of a tip box is for the customer to leave a tip to be shared among the service employees."].) Does this mean that only employees present during a customer's visit may share in the money the customer left in the collective tip jar? We think not. Not only does that seem unworkable in practice, but we cannot say distributing tips on a shift-by-shift basis is any more predictive of what customers intended than International Coffee's policy of a weekly, pro rata distribution. Either way, the employees who served any given customer will receive a share of the tip the customer left. But trying to determine precisely for whom the customer left the entire tip in a collective situation like this is a fool's errand. As Leighton put it, "[w]e dare say that the average [customer] has little or no idea and does not really care who benefits from the gratuity he leaves [in a tip jar], as long as the employer does not pocket it . . . ." (Leighton, supra, 219 Cal.App.3d at p. 1069.) Thus, the courts have concluded tips are "left" for all manner of service employees, whether the employees are front of the house, back of the house, directly serving a customer, or merely in the chain of service. (Id. at pp. 1068-1071; Etheridge, supra, 172 Cal.App.4th at pp. 921-923; Budrow, supra, 171 Cal.App.4th at pp. 878-879, 883-884.) In short, we see nothing in section 351 that prohibits the tip-pooling arrangement here—that is, sharing tips on a pro rata, weekly basis as opposed to a shift-by-shift basis.
Because the facts as alleged do not amount to a taking of employees' property by International Coffee within the meaning of section 351, the SAC does not state facts sufficient to support Davis's causes of action. Conversion and trespass to chattel both require that the defendant interfere with the plaintiff's ownership of or right to possess the subject property. (Intel Corp. v. Hamidi (2003) 30 Cal.4th 1342, 1350; Moore v. Regents of University of California (1990) 51 Cal.3d 120, 136.) A constructive trust is technically an equitable remedy, not a substantive claim for relief, to compel the return of property to the rightful owner. (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 398.) A cause of action for accounting requires a showing that "some balance is due the plaintiff that can only be ascertained by an accounting." (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179.) In all four cases, the theory of relief presupposes some sort of wrongful taking of the plaintiff's property. As we have discussed, section 351 does not support the theory that weekly tip pooling constitutes an unlawful taking. Accordingly, the trial court did not err in sustaining International Coffee's demurrer. B. Section 351 Does Not Create a Cause of Action for Unfair and Unreasonable Tip Pooling
Davis concedes that his unfair competition law and PAGA claims are derivative and viable only if the conversion, trespass, constructive trust, and accounting causes of action are viable. We therefore do not address his unfair competition law and PAGA claims.
Davis asserts the tip-pooling policy is also actionable because it is not fair and reasonable. Essentially, Davis wants us to create a cause of action for unfair and unreasonable tip pooling. We decline to do so.
According to the California Supreme Court in Lu v. Hawaiian Gardens Casino, Inc., section 351 does not create a private cause of action. (Lu v. Hawaiian Gardens Casino, Inc. (2010) 50 Cal.4th 592, 595, 603 (Hawaiian Gardens).) An employee may have remedies "such as a common law action for conversion" for allegedly misappropriated tips "under appropriate circumstances" (id. at pp. 603-604), but we have already determined this case does not present the appropriate circumstances—the facts as alleged do not constitute an unlawful taking of property. Even were we not bound by our high court's decision in Hawaiian Gardens—and we are—the plain language of section 351 says nothing at all about tip-pooling arrangements being fair and reasonable. Davis cites no case law for the proposition that he may sue for allegedly unfair and unreasonable tip pooling. And since Leighton, 28 years ago, no published decision has recognized such a cause of action. Nor has the Legislature amended section 351 or enacted another statute to create this cause of action. Only the concurring opinion in Etheridge has ever proposed "a cause of action for an unfair or inequitable tip pool." (Etheridge, supra, 172 Cal.App.4th at pp. 926-927 (conc. opn. of Croskey, J.).) But the Etheridge concurrence came before our Supreme Court's decision in Hawaiian Gardens. Moreover, even the Etheridge concurrence recognized the cause of action "would implicate serious policy concerns. The courts are ill equipped to determine whether, for example, bussers at a particular restaurant provide 5 percent or 10 percent of the service received by a patron, and are even less equipped to determine whether a specific busser earned his or her specific share." (Etheridge, supra, 172 Cal.App.4th at p. 927.) This is all the more reason, in our view, that Davis's remedy lies with the Legislature, which may create a cause of action for unfair and unreasonable tip pooling, if it is so inclined. C. No Leave to Amend the SAC
Instead of case law or statutes, Davis relies on an opinion letter issued by the DLSE in 1998, which concluded "any tip pooling arrangement must be fair and reasonable," otherwise it violates section 351. (Cal. Dept. of Industrial Relations, Div. of Labor Standards Enforcement, Opinion Letter No. 1998.12.28-1 (Dec. 28, 1998), pp. 2-3<https://www.dir.ca.gov/dlse/OpinionLetters-byDate.htm/1998-12-28-1.pdf>[as of Apr. 3, 2018].) We are not persuaded by his citation to the DLSE letter. The DLSE's opinion letter is not binding on us "or necessarily even authoritative" (Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 8), but Hawaiian Gardens is both. "[S]tatutory interpretation is an issue for the courts. The court is to independently judge the text of the statute; the agency's interpretation is just one of several tools available to the court." (Etheridge, supra, 172 Cal.App.4th at p. 924, fn. 21 [declining to defer to the DLSE's interpretations of Leighton]; Budrow, supra, 171 Cal.App.4th at p. 883 [declining to follow the DLSE's interpretation of § 351 as including a "direct table service" requirement].)
Davis requests that we reverse the judgment with directions to permit him to amend the SAC. But he must show there is a reasonable possibility he can cure the defects in the SAC. He has not. He has not explained how he would amend it at all, either in the trial court or before us. The court did not abuse its discretion in sustaining the demurrer without leave to amend.
V. DISPOSITION
The judgment is affirmed. International Coffee shall recover its costs on appeal.
International Coffee requests that we take judicial notice of a 2009 judgment and ruling on a motion for summary judgment in an unrelated San Diego County Superior Court case, Jones v. International Coffee & Tea, LLC, No. 37-2008-00080741-CU-0E-CTL. We do not find the unpublished ruling of another jurisdiction's superior court to be relevant or helpful in this matter and thus deny the request for judicial notice. (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 418.)
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
FIELDS
J. We concur: RAMIREZ
P. J. SLOUGH
J.