Judge Denies Houlihan’s Restaurants’ Motion to Dismiss Tip-Pooling Suit

On June 12, 2017, U.S. District Judge Joseph Rodriguez denied a motion to dismiss the U.S. Department of Labor’s lawsuit against the operator of 17 New York and New Jersey Houlihan’s restaurants for allegedly taking portions of employees’ tips, failing to pay employees for all hours worked, failing to pay overtime premiums, and failing to make and preserve employee time records, in violation of the Fair Labor Standards Act.

The defendant, Houlihan’s restaurants’ parent company A.C.E. Restaurant Group, Inc., filed a motion to dismiss the lawsuit, arguing that the complaint should be dismissed because it was not sufficiently specific, but Judge Rodriguez said that the federal government, suing on behalf of the workers, had included enough factual information to make the basis of a claim. Quoting the 2009 U.S. Supreme Court ruling in Ashcroft v. Iqbal, he said, “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 . . . Defendants’ demand that the Complaint include additional information is understandable. Comprehensive pleadings, however, are not required at this stage of the case.”

A.C.E. also argued that the workers’ claims should be dismissed because the New Jersey Department of Labor made a determination of “no violation.” Judge Rodriguez said that because the New Jersey state claims were investigated by a state agency rather than litigated in court, the lawsuit did not need to be dismissed on these grounds.

Attorneys for A.C.E. said that the company may move for summary judgment during the discovery stage of the lawsuit. They also said that the suit was filed under the Obama administration, and the lawyers hoped the Trump administration would give employers like their clients a more “fair shake.”

We will continue to monitor this litigation.