Priya Verma v. 3001 Castor Inc
937 F.3d 221
3rd Cir.2019Background
- Dancers at the Penthouse Club (owned/operated by 3001 Castor, Inc.) were required to sign independent-contractor agreements, paid only tips and fixed private-dance fees, and paid mandatory stage-rental and tip-out fees to the club and certain staff.
- Plaintiffs (lead: Verma) sued asserting FLSA collective claims (opt-in) and Rule 23 state-law class claims under the PMWA and for unjust enrichment based on mandatory tip-outs.
- The District Court conditionally certified the FLSA collective and certified a Rule 23(b)(3) class for PMWA minimum-wage/overtime and unjust-enrichment claims (excluding some categories).
- The District Court ruled as a matter of law that the dancers were employees, not independent contractors, under the six-factor economic-reality test and that ruling merged into the final judgment.
- After trial the jury awarded the class > $4.5 million (minimum wages + unjust enrichment); Castor appealed, raising jurisdictional, classification, preemption, and offset arguments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| District Court jurisdiction over state-law class claims | Verma relied on supplemental jurisdiction and CAFA to keep state claims in federal court | Castor argued settlement of FLSA claims eliminated federal jurisdiction and §1367 supplemental jurisdiction should be declined | Court held CAFA independently conferred jurisdiction; even if §1367 were at issue, exercising supplemental jurisdiction was within discretion |
| Employee vs. independent contractor classification | Dancers were employees as a matter of economic reality (Court previously ruled) | Castor argued dancers had entrepreneurial control and were independent contractors | Applying Selker Bros. six-factor test, Court affirmed employees: 5 factors favor employment (control, profit/loss managerial skill, investment, special skill, integral service); only permanence favored independent contractor |
| Preemption of unjust-enrichment claim by FLSA/regulations | Plaintiffs: state common-law unjust-enrichment claim is not preempted | Castor: FLSA/regulations (and 2018 amendment regarding tip retention) preempt common-law claims for tips | Court rejected preemption; FLSA is a parallel/supplementary regime and does not displace state common-law claims here |
| Credit/offset for dance fees against unjust-enrichment award | Plaintiffs: no offset; jury award stands | Castor: should receive credit/offset for private dance fees dancers kept when assessing unjust enrichment | Court denied offset: Castor failed to support or show calculation; equitable basis did not justify disturbing jury verdict |
Key Cases Cited
- Knepper v. Rite Aid Corp., 675 F.3d 249 (3d Cir. 2012) (endorsing dual-track FLSA collective and Rule 23 state-law class procedure)
- Stecyk v. Bell Helicopter Textron, Inc., 295 F.3d 408 (3d Cir. 2002) (appellate jurisdiction over final judgments)
- Selker Bros. v. Martin, 949 F.2d 1286 (3d Cir. 1991) (six-factor economic-reality test for employee classification)
- Donovan v. DialAmerica Mktg., Inc., 757 F.2d 1376 (3d Cir. 1985) (economic-reality inquiry guidance)
- McFeeley v. Jackson Street Entm’t, LLC, 825 F.3d 235 (4th Cir. 2016) (nightclub owner’s control supports employee status)
- Reich v. Circle C. Investments, Inc., 998 F.2d 324 (5th Cir. 1993) (dancers not in business for themselves)
- Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697 (U.S. 1945) (statutory protections override private contracts where bargaining power unequal)
- Dart Cherokee Basin Operating Co. v. Owens, 135 S. Ct. 547 (U.S. 2014) (amount-in-controversy allegation accepted if made in good faith)