(APPLICABLE TO ALL CLAIMS FOR RELIEF)  A.  Related Case (Trauth) and Defendants’ Prior Wage Scheme:    1.  Spearmint Rhino Exerts Control as Employers of the  Plaintiff and Putative Class and Collective Action Members.   2.  Working as an Exotic Dancer Employee of Spearmint  Rhino Does Not Require Special Skill or Initiative.   3.  Spearmint Rhino’s Relative Investment in Defendants’  Operations Vastly Exceeds that of Plaintiff and Putative  Class and Collective Action Members.   4.  Plaintiff and Putative Class and Collective Action Members  Did Not Have the Ability to Alter their Opportunity for  Profit and Loss Per the Economic Reality Test.   42.  Like most (if not all) gentlemen’s clubs throughout the country,  Defendants’ prior business practice was to classify all of their exotic dancer  employees as independent contractors.   43.  Defendants’ prior misclassification of their exotic dancers as  independent contractors was not due to any unique factor related to their  employment or relationship with Defendants. Rather, as is common business  practice amongst gentlemen’s clubs, Defendants simply misclassified all of their  exotic dancers as independent contractors instead of employees. As a result of this  uniform misclassification, exotic dancers of Spearmint Rhino were not paid  minimum wages or overtime wages as required by relevant federal and state law.  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  - 10 -  Case No. 5:17-cv-00527   Original Complaint   44.  On July 13, 2009, a group of exotic dancers filed a wage lawsuit (“the  Trauth case”) against Spearmint Rhino for wage violations under federal and state  laws.1 The exotic dancers in that lawsuit alleged that they were misclassified as  independent contractors and were entitled to their wages for all hours worked.  Eventually, the Trauth cases settled, and came before the Court for final approval.  See Trauth v. Spearmint Rhino Cos. Worldwide, Inc., Case No. EDCV 09-01316- VAP (DTBx), 2012 WL 12893448 (C.D. Cal. Nov. 7, 2012) (Phillips, C.J.). In the  order approving the settlement, Chief Judge Virginia A. Phillips ordered Spearmint  Rhino as follows:  Within six months, the Clubs will no longer treat Dancers as  independent contractors or lessees; instead the Clubs will treat  Dancers “as either employees or owners (e.g. shareholder, limited  partner, partner, member or other type of ownership stake)” of any  Clubs in existence at the time of settlement. (Doc. No. 318-1 ¶ 4.2.) In  California, Dancers will no longer be charged stage fees (i.e., fees a  Dancer pays for the privilege of performing at a Club). (Id. ¶ 4.1.)  Id. at *1.   45.  Thereafter, Defendants no longer classified their exotic dancers as  independent contractors. Instead they are now, facially, “members” of a newly  formed limited liability company – Santa Barbara Hospitality Services, LLC.   46.  Apart from this solitary measure, every single aspect of the  employment relationship between the exotic dancers and their employer,  Spearmint Rhino, remains wholly unchanged. In fact, in direct contravention of  1 Tracy Dawn Trauth, et al v. Spearmint Rhino Companies Worldwide, Inc., et al,  Civ. A. No. 5:09-cv-01316-VAP-DTB, in the Central District of California Eastern  Division – Riverside, Before United States District Chief Judge Virginia A.  Phillips.  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  - 11 -  Case No. 5:17-cv-00527   Original Complaint  Chief Judge Phillips order, Defendants continue to require their exotic dancer  employees to pay fees for the privilege of performing at Spearmint Rhino  locations. It is clear that Chief Judge Phillips intended Spearmint Rhino to  reclassify their exotic dancers as employees or actual owners (or members) of  Spearmint Rhino.  It goes without saying, Chief Judge Phillips did not intend for  the Club to continue its illegal pay practice of labeling its exotic dancers something  other than employees (now “members” rather than “independent contractors”) for  the purpose of avoiding its federal and state wage obligations.   47.  Defendants’ actions instead leave their exotic dancer employees with  no real ownership interest in the newly formed LLC. The exotic dancers still work  as employees for Spearmint Rhino, economically dependent on Spearmint Rhino in  all respects relevant to the “economic realities” test described further below, and  regularly making below minimum wage compensation.  B.  Defendants’ New Scheme to Avoid FLSA Compliance   48.  Defendants now embroil their exotic dancer employees in a series of  illusory contractual engagements to give the appearance that the exotic dancers are  “members” of the limited liability company formed subsequent to Chief Judge  Phillips’s order – Defendant Santa Barbara Hospitality Services, LLC. However,  all of the agreements exotic dancers are forced to sign upon being hired with  Spearmint Rhino cannot mask the reality that nothing has really changed in  Spearmint Rhino’s operations. In fact, Defendants use many (if not most) of the  same kinds of documents, policies, and procedures found to create an  employer/employee relationship in other exotic dancer cases with respect to  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  - 12 -  Case No. 5:17-cv-00527   Original Complaint  Plaintiff and Spearmint Rhino’s other exotic dancers. Exotic dancers do not have  any real decision-making authority, do not share equitably in the profitability of  Spearmint Rhino, and do not have the right to control Spearmint Rhino  management. In short, they are not owners of Spearmint Rhino in any  demonstrable sense.   49.  The exotic dancers remain economically dependent and under the  complete control and direction of Defendants, but are paid no wages in connection  with that work. They are still clearly integral to Defendants’ business, since  without the exotic dancers there would be no gentlemen’s clubs. And finally, they  still generate revenue for Spearmint Rhino, as they are still required to share the  tips that they earn with Spearmint Rhino, and are otherwise treated as employees  of Spearmint Rhino in all relevant respects as before.   5.  Plaintiff and Putative Collective Action Members Worked  Exclusively for Spearmint Rhino for Indefinite Periods of  Time.   50.  The totality of the circumstances surrounding the relationship between  Defendants and their exotic dancer employees establishes economic dependence by  the exotic dancers on Defendants, and thus employee status. As a matter of  economic reality, Plaintiff and the putative Collective Action Members are not in  business for themselves, nor truly independent, but rather are economically  dependent upon finding employment through Spearmint Rhino. Plaintiff and the  putative Collective Action Members are not engaged in occupations or business  distinct from that of Defendants, in fact, their work is the basis of Defendants’  business.   1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  - 13 -  Case No. 5:17-cv-00527   Original Complaint   51.  Defendants’ business operation is to obtain the customers who desire  the exotic dance entertainment and provide the workers who conduct the dance  services on behalf of Defendants.   52.  Indeed, a cursory review of the Santa Barbara Hospitality Services,  LLC’s operating agreement shows that Defendants retain pervasive control over  Spearmint Rhino’s operations as a whole and that the exotic dancer’s duties are  integral to those operations.   53.  Plaintiff and Putative Class and Collective Action Members do not  exert control over a meaningful part of Spearmint Rhino’s business and do not  stand as separate economic entities from Defendants. Defendants exercise control  over all aspects of the working relationship with their exotic dancer employees.   54.  Plaintiff and Putative Class and Collective Action Members’  economic status is inextricably linked to conditions over which Defendants have  complete control. Exotic dancer employees of Defendants are completely  dependent on Defendants for their income. Spearmint Rhino controls all of the  advertising and promotion without which Plaintiff and Putative Class and  Collective Action Members could not survive economically. Moreover,  Defendants create and control the atmosphere and surroundings at Spearmint  Rhino locations, the existence of which dictates the flow of customers into  Spearmint Rhino clubs. The exotic dancers have no control over the customer  volume or atmosphere at Spearmint Rhino clubs.  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  - 14 -  Case No. 5:17-cv-00527   Original Complaint   55.  Defendants continue to employ guidelines and rules dictating the way  in which their exotic dancer employees, including Plaintiff and Putative Class and  Collective Action Members, must conduct themselves. Defendants set the hours of  operations, the lengths of shifts their exotic dancer employees must work, the show  time during which an exotic dancer may perform, and sets minimum dance tips.  Defendants also determine the sequence in which a dancer may perform on stage  during her stage rotation; the themes of dancers’ performances, including their  costuming and appearances; their conduct at work (e.g., that they should be on the  floor as much as possible when not on stage to mingle with club patrons); tip splits;  and all other terms and conditions of employment.   56.  Defendants require that their dancers work a minimum number of  shifts each week, each shift comprising a set number of hours. Exotic dancer  employees are required to report in and report out at the beginning and end of  every shift. If an exotic dancer employee arrives late, leaves early, or misses a  shift, she is subject to a fine, penalty, or reprimand by Defendants.   57.  Defendants routinely schedule their exotic dancer employees to work  in excess of 40 hours per week and knowingly permit dancers to work in excess of  40 hours per week regularly. Defendants also routinely schedule their exotic  dancer employees to work in excess of eight hours in a day and knowingly permit  dancers to work in excess of eight hours in a day with frequency.   58.  Defendants, not exotic dancers, set the minimum tip amount that  exotic dancer employees must collect from patrons when performing dances.  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  - 15 -  Case No. 5:17-cv-00527   Original Complaint  Defendants announce the minimum tip amount to patrons in the club wishing to  receive the dance entertainment.   59.  The entire sum a dancer receives from a patron for a dance is not  given to defendants and taken into its gross receipts. Instead, the dancers keep their  share of the payment under the tip share policy and pay over to Defendants the  portion they demand as their share which they now term “rent and/or overhead.”  Defendants’ aforementioned portion bears no actual relation to expenses associated  with rent and/or overhead. For example, for a table dance, Plaintiff would be  required to pay the club a portion of the minimum tip set by Defendants once  collected from a patron of the club.   6.  Exotic Dancers Provide Services at Spearmint Rhino  Locations that Are Integral to the Financial Success of  Defendants’ Enterprise.   60.  Defendants establish the split or percentage which each exotic dancer  employee is required to pay to Spearmint Rhino for each type of dance they may  perform during their shift. In addition, amounts must be shared with disc jockeys,  door staff, and other employees as part of Defendants’ tip sharing policy. Further,  exotic dancer employees are expected to assist Defendants in selling drinks during  their shift. The foregoing non-exhaustively demonstrates that Defendants set the  terms and conditions for the work of each exotic dancer employee.   61.  Plaintiff and Putative Class and Collective Action Members do not  exercise the skill and initiative of those in business for themselves.   62.  Plaintiff and Putative Class and Collective Action Members are not  required to have any specialized or unusual skills to work at Defendants’ club.  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  - 16 -  Case No. 5:17-cv-00527   Original Complaint  Prior dance experience is not required as a prerequisite to employment. Dancers  are not required to attain a certain level of skill in order to dance at Defendants’  club. There are no certification standards for dancers. There are no dance seminars,  no specialized training, no instructional booklets, and no choreography provided or  required in order to work at Defendants’ club. The dance skills utilized are  commensurate with those exercised by ordinary people dancing at a typical  nightclub or a wedding.   63.  Plaintiff, like the putative Class and Collective Action Members, did  not have the opportunity to exercise business skills and initiative necessary to  elevate her status to that of an owner of Spearmint Rhino. Dancers exercise no  business management skills. They maintain no separate business structures or  facilities. Exotic dancer employees do not actively participate in any effort to  increase a club’s client base, enhance goodwill, or establish contracting  possibilities. The scope of a dancer’s initiative is restricted to decisions involving  what clothing to wear (within Defendants’ guidelines) or how provocatively to  dance.   64.  Plaintiff and Putative Class and Collective Action Members are not  permitted to hire or contract other qualified individuals to provide dances to  patrons and increase the club’s revenue as an owner of the club would.  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  - 17 -  Case No. 5:17-cv-00527   Original Complaint   65.  Plaintiff’s investment in the exotic dancing business is minute when  compared with that of Defendants.   66.  Plaintiff, like all other exotic dancer employees of Spearmint Rhino,  has made no capital investment in the facilities, advertising, maintenance, sound  systems, lights, food, beverage, inventory, or staffing at Defendants’ club. A  dancer’s investment is limited to expenditures on costumes or makeup. But for  Defendants’ provision of the lavish club work environment, the dancers would  earn nothing.   67.  Defendants, not the exotic dancer employees such as Plaintiff, manage  all aspects of the business operation including attracting investors, establishing  working hours and hours of operations, setting the atmosphere, coordinating  advertising, hiring, selling a club’s real and personal property, and controlling the  staff. Defendants alone took the true business risks related to Spearmint Rhino  clubs.   68.  Exotic dancer employees, such as Plaintiff and Putative Class and  Collective Action Members, do not control the key determinations for profit and  loss of the Spearmint Rhino enterprise. Specifically, Plaintiff was not responsible  for any aspect of the enterprise’s ongoing business risk. For example, Defendants  are responsible for all financing, for the acquisition and/or lease of physical  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  - 18 -  Case No. 5:17-cv-00527   Original Complaint  facilities and equipment, for inventory, for the payment of wages of individuals  such as managers and bartenders (but not exotic dancer employees), and for  obtaining appropriate business insurance, permits, and licenses.   69.  Defendants, not exotic dancer employees, establish the minimum  dance tip amounts that should be collected from patrons when dancing. Exotic  dancer employees are not charged with the authority to accept a lower rate.   70.  The tips received by exotic dancer employees are not a return on a  capital investment. They are a gratuity for services rendered. From this  perspective, it is clear that a dancer’s supposed “return on investment” is no  different than that of a waiter who serves food during a customer’s meal at a  restaurant.   71.  Plaintiff worked exclusively for Defendants while employed as an  exotic dancer at a Spearmint Rhino club. Plaintiff was not employed for a set term,  but rather anticipated that her employment with Spearmint Rhino would be on an  ongoing basis.   72.  On information and belief, many exotic dancer employees work  exclusively for Defendants for protracted periods of time, often for years at a time.  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  - 19 -  Case No. 5:17-cv-00527   Original Complaint   73.  Plaintiff and putative Class and Collective Action Members are  essential to the success of Defendants’ clubs. The continued success of clubs such  as Defendants’ turns upon the provision of dances by exotic dancers for the club’s  patrons. In fact, the sole reason establishments like the Spearmint Rhino exist is to  showcase dancers’ physical attributes for customers of the business.   74.  Moreover, Defendants are able to charge higher admission prices and  a much higher price for their drinks than a comparable establishment without  dancers because exotic dancers are the main attraction of such clubs. As a result,  the dancers are an integral part of Defendants’ business.   75.  The foregoing demonstrates that dancers like Plaintiff and Putative  Class and Collective Action Members are economically dependent on Defendants  and subject to significant control by Defendants. Therefore, Plaintiff and Putative  Class and Collective Action Members are employees, not business owners, and  should have been paid minimum wage at all times that they worked at Defendants’  clubs. Similarly, they should have been afforded all rights and benefits of an  employee pursuant to relevant state and federal law, including the payment of  overtime wages whenever they worked over forty hours in a given workweek or  over 8 hours in a given day in the state of California.   76.  All actions described above are willful, intentional, and the result of  design rather than mistake or inadvertence. Defendants were aware that the FLSA  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  - 20 -  Case No. 5:17-cv-00527   Original Complaint  applied to the operation of their clubs at all relevant times and were aware of the  economic realities test under which its exotic dancers are clearly employees.  V. 