UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

AMY STARR and ANDREW PHELAN, ) 

individually and on behalf of a class of ) 

persons similarly situated, ) 

) No. 12 C 04416 

Plaintiffs, ) 

 ) 

 v. ) Judge Edmond E. Chang 

 ) 

CHICAGO CUT STEAKHOUSE, LLC, ) 

 ) 

Defendant. ) 

MEMORANDUM OPINION AND ORDER

Plaintiffs Amy Starr and Andrew Phelan filed this proposed class-action 

against their former employer, Chicago Cut Steakhouse, LLC, under the Fair Labor 

Standards Act (FLSA), 29 U.S.C. § 201 et seq., the Illinois Minimum Wage Law 

(IMWL), 820 ILCS 105/1 et seq., and the Illinois Wage Payment and Collection Act 

(IWPCA), 820 ILCS 115/1 et seq.1 R. 26, First Am. Compl. ¶ 2. Plaintiffs allege that 

Chicago Cut improperly administered its tip pool by retaining a portion of the tippool proceeds for itself. Id. ¶¶ 14-19. Plaintiffs have moved to certify a class as to 

their state-law tip-pool claims (Counts 1 and 2).2 R. 42, Mot. Class Cert. Plaintiffs 

1The Court has subject matter jurisdiction over the federal-law claims under 28 

U.S.C. § 1331 and supplemental jurisdiction over the Illinois state-law claims under 28 

U.S.C. § 1367. Citation to the docket is “R.” followed by the entry number and, when 

necessary, the page/paragraph number. Citations to the parties’ Local Rule 56.1 Statements 

of Fact are “PSOF” (for Plaintiffs’ Statement of Facts) [R. 98]; “DSOF” (for Chicago Cut’s 

Statement of Additional Facts) [R. 107 at 11-13]; “Def.’s Resp. PSOF” (for Chicago Cut’s 

response to Plaintiffs’ Statement of Facts) [R. 107 at 1-10]; and “Pls.’ Resp. DSOF” (for 

Plaintiffs’ response to Chicago Cut’s Statement of Facts) [R. 109]. 

2Plaintiffs also moved to certify a class for their state-law overtime claim (Count 4). 

Mot. Class Cert. at 1. Defendant successfully moved for summary judgment on that Count. 

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have also moved for summary judgment on all of their tip-pool claims (Counts 1, 2, 

and 3). R. 96, Pls.’ Mot. Summ. J. For the reasons discussed below, Plaintiffs’ 

motion for summary judgment is denied, and their motion for class certification is 

granted. 

I. Background 

Chicago Cut Steakhouse is, as its name says, a steakhouse in Chicago, 

Illinois. PSOF ¶ 1. Chicago Cut treats many of its employees—servers, runners, 

barbacks, bartenders, and busboys—as “tipped employees” under the tip-credit 

provisions of the FLSA and IMWL. Id. ¶ 3; R. 106, Def.’s Mot. Summ. J. Resp. Br. at 

6. Under these provisions, Chicago Cut is allowed to pay tipped employees 40 

percent less than the prevailing minimum wage if the employees are able to make 

up the difference in tips. R. 44, Pls.’ Class Cert. Br. at 3; see also 29 U.S.C. § 203(m); 

820 ILCS § 105/4(c). The difference between the reduced wage and the minimum 

wage is called the “tip credit.” Pls.’ Class Cert. Br. at 3. To take the tip credit, an 

employer generally is not allowed to keep any of the tips received by its employees.

See 29 U.S.C. § 203(m); 820 ILCS § 105/4(c). 

Chicago Cut operates a tip pool on behalf of its tipped employees. PSOF ¶ 15. 

Servers in the main dining room contribute six percent of their net sales to the tip 

pool, which is then distributed to runners, bussers, and bartenders. Id. ¶ 16; see also 

Def.’s Resp. PSOF ¶ 16. For private dining events, the tip pool operates slightly 

differently. Chicago Cut charges a twenty-percent service charge to private dining 

See R. 115, Sept. 23, 2014 Order. Plaintiffs’ motion to certify a class as to the state-law 

overtime claim is therefore denied as moot. 

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clients. See Def.’s Mot. Summ. J. Resp. Br. at 6; R. 61, Pls.’ Position Paper at 3. This 

service charge is divided among the servers who worked the private event, the tip 

pool, and a private dining event coordinator. See Pls.’ Position Paper at 3; R. 60, 

Def.’s Position Paper at 1. Chicago Cut also withholds a portion of this service 

charge to cover credit card processing fees. Def.’s Mot. Summ. J. Resp. Br. at 7. 

Plaintiffs Amy Starr and Andrew Phelan, both of whom worked as bartenders at 

Chicago Cut, argue on behalf of themselves and the proposed class that Chicago Cut 

improperly operated the tip pool (1) by keeping a portion of the tip-pool proceeds for 

itself and (2) by paying tip-pool proceeds to ineligible employees. First Am. Compl. 

¶¶ 14-19; R. 97, Pls.’ Mot. Summ. J. Br. at 6-9; R. 108, Pls.’ Mot. Summ. J. Reply Br. 

at 9-10. 

Plaintiffs allege that this improper tip pool violates the tip credit provisions 

of the FLSA and IMWL because tipped employees did not receive the full measure 

of wages that they are due. First Am. Compl. ¶¶ 49-57, 68-77. Plaintiffs claim the 

improper tip pool also violates the IWPCA because, in withholding tip-pool funds, 

Chicago Cut paid tipped employees less than the amount agreed to in their 

employment agreements with Chicago Cut. Id. ¶¶ 58-67. Plaintiffs have moved for 

class certification on the IMWL and IWPCA tip-pool claims. Mot. Class Cert. 

Plaintiffs have also moved for summary judgment on liability for the FLSA, IMWL, 

and IWPCA tip-pool claims, arguing that the undisputed evidence in the record 

shows that Chicago Cut improperly operated the private dining tip pool by retaining 

a portion of the tip pool for credit card fees and paying the private dining event 

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coordinator from the tip-pool proceeds. Pls.’ Mot. Summ. J. Br. at 6-9; Pls.’ Mot. 

Summ. J. Reply Br. at 9-10. 

II. Plaintiffs’ Motion for Summary Judgment3

A. Legal Standard 

Summary judgment must be granted “if the movant shows that there is no 

genuine dispute as to any material fact and the movant is entitled to judgment as a 

matter of law.” Fed. R. Civ. P. 56(a). A genuine issue of material fact exists if “the 

evidence is such that a reasonable jury could return a verdict for the nonmoving 

party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In evaluating 

summary judgment motions, courts must view the facts and draw reasonable 

inferences in the light most favorable to the non-moving party. Scott v. Harris, 550 

U.S. 372, 378 (2007). The Court may not weigh conflicting evidence or make 

credibility determinations, Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 

704 (7th Cir. 2011), and must consider only competent evidence of a type otherwise 

admissible at trial, Gunville v. Walker, 583 F.3d 979, 985 (7th Cir. 2009). The party 

seeking summary judgment has the initial burden of showing that there is no 

genuine dispute and that they are entitled to judgment as a matter of law. 

3As discussed below, class certification is supposed to be decided before resolving 

merits issues. Fed. R. Civ. P. 23(c)(1). Both parties, however, chose to exchange summary 

judgment briefs before the class-certification decision. In certain circumstances, courts may 

reach a merits decision before a certification decision if the parties are willing to forgo the 

preclusive effect of a potential victory. See Wiesmuller v. Kosobucki, 513 F.3d 784, 787 (7th 

Cir. 2008) (citing Cowen v. Bank United of Texas, FSB, 70 F.3d 937, 941-42 (7th Cir. 1995)). 

Had the Court decided to grant Plaintiffs’ motion for summary judgment, it would have 

asked Plaintiffs whether it preferred to decide class certification first to gain the efficiency 

of a class action. Given the denial of Plaintiffs’ motion, however, there was little to be 

gained in certifying the class first.

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Carmichael v. Village of Palatine, 605 F.3d 451, 460 (7th Cir. 2010); see also Celotex 

Corp. v. Catrett, 477 U.S. 317, 323 (1986); Wheeler v. Lawson, 539 F.3d 629, 634 (7th 

Cir. 2008). If this burden is met, the adverse party must then “set forth specific 

facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256. 

B. Analysis 

Ordinarily, an employer may only take the tip credit under the FLSA and 

IMWL if each tipped employee retains all of his tips. See 29 U.S.C. § 203(m); 820 

ILCS § 105/4(c).4 This restriction does not apply, however, if the tipped employees 

are participating in a valid tip pool. See 29 U.S.C. § 203(m); 820 ILCS § 105/4(c). In 

a tip pool, a portion of the tipped employees’ earned tips are redistributed to other 

employees, such as bussers, bartenders, and food runners. To be valid under the 

FLSA and IMWL, the tip pool must only include employees who “customarily and 

regularly receive tips,” and the employer “may not retain any of the employees’ tips 

for any other purpose.” 29 C.F.R. § 531.54; see also Williams-Green v. J. Alexander’s 

Restaurants, Inc., 277 F.R.D. 374, 380-81 (N.D. Ill. 2011); Morgan v. SpeakEasy, 

LLC, 625 F. Supp. 2d 632, 652-53 (N.D. Ill. 2007). If an employer improperly 

operates a tip pool, the employer cannot take the tip credit under either the FLSA 

or the IMWL. 29 U.S.C. § 203(m); Williams-Green, 277 F.R.D. at 379. 

4The tip-credit provisions of the FLSA and IMWL are coextensive, and courts 

frequently use the same analysis for both statutes. See, e.g., Williams-Green v. J. 

Alexander’s Restaurants, Inc., 277 F.R.D. 374, 378 (N.D. Ill. 2011) (“Tip credits are treated 

identically under both the Illinois Minimum Wage [Law] and the federal Fair Labor 

Standards Act.”); see also Driver v. AppleIllinois, LLC, 265 F.R.D. 293, 307 (N.D. Ill. 2010); 

Morgan v. SpeakEasy, LLC, 625 F. Supp. 2d 632, 650 (N.D. Ill. 2007). 

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In their motion for summary judgment, Plaintiffs argue that Chicago Cut is 

not entitled to the tip credit under the FLSA and IMWL because it cannot show 

that the tip pool it operated was valid. Pls.’ Mot. Summ. J. Br. at 6. Based on what 

Plaintiffs say are undisputed facts in the now-closed evidentiary record,5 Plaintiffs 

contend that Chicago Cut cannot account for “shortfalls between the amount of tips 

Chicago Cut collected as compared to the amount of tips it distributed to tipped 

employees” in the tips collected from its private dining events.6 Id. at 8. Plaintiffs 

claim that the private dining tip pool was improper under the FLSA and IMWL for 

two reasons: (1) the tips collected from private dining servers were distributed to 

the private dining event coordinator, who is not eligible (according to Plaintiffs) to 

5Chicago Cut attached a declaration from one of its managing partners, David Flom, 

to its response to Plaintiffs’ summary judgment motion. See R. 107-1, Def.’s Exh. A, Flom 

Decl. Plaintiffs ask the Court to disregard this declaration because it came after the close of 

discovery. Pls.’ Mot. Summ. J. Reply Br. at 4-5. Because the record evidence cited by both 

sides illustrates that there is a genuine issue of material fact as to the Plaintiffs’ tip-pool 

claims irrespective of the Flom declaration, the Court does not need to consider the 

declaration in resolving Plaintiffs’ motion.

6Although Plaintiffs noted this issue briefly in their position paper, neither party has 

squarely addressed whether the service charges assessed on private dining events are, in 

fact, tips. Under the FLSA (and, consequently, the IMWL), a tip is “a sum presented by a 

customer as a gift or gratuity in recognition of some service performed for him.” 29 C.F.R. 

§ 531.52; see also Reich v. ABC/York-Estes Corp., No. 91 C 6265, 1997 WL 264379, at *4-5 

(N.D. Ill. May 12, 1997). By definition, a tip is discretionary. FLSA regulations distinguish 

this from a “service charge,” which is “[a] compulsory charge for service, such as 15 percent 

of the amount of the bill, imposed on a customer by an employer’s establishment.” 29 C.F.R. 

§ 531.55(a). A mandatory service charge is not a tip, and cannot be used to satisfy the tipcredit provisions of the FLSA. Id. In this case, both parties seem content to treat the 

twenty-percent private dining fee as a tip. Ordinarily, a party’s characterization of a fee or 

charge would not control its FLSA treatment, but for purposes of this litigation—where 

both sides are treating the fee as a tip—the Court will decide the pending motion based on 

the parties’ understanding of the service charge as a tip.

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participate in the tip pool7; and (2) credit card processing fees were deducted from 

the private dining tip-pool contributions. Id. at 8-10. 

The IWPCA claim hinges on the FLSA and IMWL tip-pool claims. Under the 

IWPCA, an employer is liable if it fails to pay its employees the wages they have 

earned under their employment agreements. See Miller v. Kiefer Specialty Flooring, 

Inc., 739 N.E.2d 982, 986 (Ill. App. Ct. 2000). Plaintiffs claim that all of the tipped 

employees had an agreement with Chicago Cut that they would receive a portion of 

the tip pool proceeds. Pls.’ Mot. Summ. J. Br. at 14-15. So if Chicago Cut did not 

properly pay-out the full amount of tip-pool proceeds, Plaintiffs would not have been 

paid their full measure of wages under their employment agreements and would be 

entitled to relief under IWPCA. Id.

Plaintiffs believe that because Chicago Cut cannot show that it operated the 

tip pool properly, summary judgment should be granted as to the tip-pool claims 

under the FLSA, IMWL, and IWPCA. As discussed below, however, the record 

evidence cited by both parties demonstrates that there are genuine issues of 

material fact that preclude summary judgment on Plaintiffs’ tip-pool claims.

1. Private Dining Event Coordinator 

The parties agree that the twenty-percent private dining service charge is 

distributed to the servers who worked the private event, the tip pool, and a private 

7Despite various arguments regarding the private dining event coordinator’s 

participation in the tip pool, see R. 52, Pls.’ Class Cert. Reply Br. at 2; Pls.’ Mot. Summ. J. 

Br. at 8-9; Pls.’ Position Paper; Pls.’ Mot. Summ. J. Reply Br. at 9, Plaintiffs state in their 

reply brief that their “motion is not premised on a theory that the private event coordinator 

is not allowed to receive tip pool proceeds.” Pls.’ Mot. Summ. J. Reply Br. at 9. It is unclear 

whether Plaintiffs have entirely given up this theory of liability, but given the arguments in 

Plaintiffs’ position paper and summary judgment briefs, the Court will address the issue. 

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dining event coordinator, but the parties disagree as to precisely how this occurs. 

See Pls.’ Position Paper; Def.’s Position Paper. Chicago Cut contends that two 

percentage points out of the twenty-percent service charge8 goes directly to the 

private dining event coordinator, and the remaining eighteen percent goes to the 

servers. Def.’s Position Paper at 1. The servers then contribute three percent of the 

net sales to the tip pool and keep the remaining fifteen percent. Id. In support of 

this version of events, Chicago Cut points to the private dining service agreement, 

which states that the twenty-percent fee “consist[s] of 18% banquet gratuity, which 

will be distributed to the wait staff assigned to your function, [and] 2% 

administrative fee to cover the expenses for planning and hosting your function.” R. 

107-1, Exh. A, Private Dining Agreement.9 According to Chicago Cut, the 

administrative fee is not a tip, it is remitted directly to the private dining 

coordinator in its entirety, and it is never a part of the tip pool. DSOF ¶ 1. 

Plaintiffs allege that the servers actually contribute five percentage points to 

the tip pool (a quarter of the twenty-percent fee), and two percent of the tip-pool 

amount then goes to the private dining event coordinator (thus supposedly diverting 

tip-pool proceeds to the private dining event coordinator). Pls.’ Mot. Summ. J. Reply 

Br. at 9. Plaintiffs argue that Chicago Cut’s daily cash report demonstrates that the 

8 To be clear: the reference to two percent is two percent of what the client is charged 

for the private dining event, not merely two percent of the twenty percent service charge. 

9Although the Private Dining Agreement is attached as an exhibit to the Flom 

declaration, which the Court is not considering, Plaintiffs do not seem to dispute the 

exhibit’s authenticity or object to its use in resolving the summary judgment motion. See

Pls.’ Resp. DSOF ¶ 1 (stating that “the Private Dining Agreement speaks for itself”); see 

also Pls.’ Mot. Summ. J. Reply Br. at 4 (objecting to the Flom declaration for introducing 

new information about the credit card processing fees). Nor is there any reason to believe 

that the exhibit was not timely produced during discovery. 

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private dining event coordinator was paid from the tip-pool proceeds collected from 

private dining servers. Pls.’ Resp. DSOF ¶ 1. Looking at the daily cash reports in 

isolation, it is understandable why Plaintiffs reached this conclusion. Typically, the 

amount that a server contributes to the tip pool on a particular day is listed in the 

“tip share” column on the daily cash report. See R. 47, Def.’s Class Cert. Resp. Br. at 

4; see also R. 44-5, Pls.’ Exh. 5, Daily Cash and Tipshare Reports.10 When there is a 

private dining event, the amount in the “tip share” column is five percent of the net 

sales, or a quarter of the twenty-percent fee. Def.’s Class Cert. Resp. Br. at 4; Pls.’ 

Exh. 5, Daily Cash and Tipshare Reports. The administrative fee for the private 

dining event coordinator is then deducted from that amount in another entry on the 

daily cash report marked “to house.” Def.’s Class Cert. Resp. Br. at 4; Pls.’ Exh. 5, 

Daily Cash and Tipshare Reports 

Chicago Cut might have inelegantly accounted for the two-percent fee in the 

restaurant’s daily cash report, but that is not sufficient to show that, as a matter of 

law, the private dining coordinator participated in the tip pool. At a minimum, the 

record evidence demonstrates that there is a genuine dispute of fact as to how the 

administrative fee is distributed. Although the daily cash reports support Plaintiffs’ 

version of events, there is another record maintained by Chicago Cut that is more 

specific to the tip pool. The “daily tipshare reports,” coupled with the private dining 

10In the motion for summary judgment briefs and the Local Rule 56.1 Statements of 

Fact, both parties frequently reference exhibits attached to the class certification briefing 

and previous motion for summary judgment. In particular, both parties discuss the daily 

cash reports and tipshare reports contained in Exhibit 5 to Plaintiffs’ motion for class 

certification. See, e.g., Pls.’ Mot. Summ. J. Br. at 8; Def.’s Mot. Summ. J. Resp. Br. at 14. 

The Court will therefore consider these documents in evaluating the motion for summary 

judgment. 

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agreement, contradict Plaintiffs’ version. The Private Dining Agreement states that 

the two-percent administrative fee goes directly to the private dining event 

coordinator and is not a tip. Def.’s Exh. A, Private Dining Agreement at 1 (“The 2% 

charge will be remitted in its entirety to our private events staff (no management 

personnel) and does not represent a tip, gratuity or service charge for the wait staff, 

service employees or bartenders.”). The daily tipshare reports reinforce the 

statement in the Private Dining Agreement that the administrative fee is 

completely divorced from the tip pool. Each tipshare report explains how the total 

tip-pool proceeds were distributed each day, detailing the precise amounts 

distributed to each bartender, food runner, and busser. Def.’s Class Cert. Resp. Br. 

at 4. Chicago Cut’s tipshare reports do not include the two-percent fee allocated “to 

house” in the total tip-pool amount, nor do they show any distribution of tip-pool 

proceeds to the private dining event coordinator. See Pls.’ Exh. 5, Daily Cash and 

Tipshare Reports. Taken together, the Private Dining Agreement and the daily 

tipshare reports show that the administrative fee is never considered part of the tip 

pool, and instead is separately remitted to the private dining event coordinator. 

Drawing all reasonable inferences in Chicago Cut’s favor, therefore, it is 

certainly possible to conclude that the two-percent service charge is remitted 

directly to the private dining event coordinator and is never a part of the tip pool. 

Although the daily cash reports may be some evidence that the administrative fee 

and the tip-pool proceeds are intermingled, it is not sufficient to support summary 

judgment on this issue.

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2. Credit Card Fees 

Plaintiffs’ second basis for challenging the operation of the tip pool is Chicago 

Cut’s deduction of credit card processing fees. Under the FLSA and IMWL, 

employers may deduct credit card service charges from employees’ tips. Gillis v. 

Twenty Three East Adams Street Corp., No. 04 C 4012, 2006 WL 573905, at *2 (N.D. 

Ill. Mar. 6, 2006) (citing Myers v. Copper Cellar Corp., 192 F.3d 546, 552-53 (6th Cir. 

1999)). To demonstrate that those deductions are valid, the employer must show 

that, “in the aggregate, the amounts collected from its employees, over a definable 

time period, have reasonably reimbursed [the employer] for no more than its total 

expenditures associated with credit card tip collections.” Id. (quoting Myers, 192 

F.3d at 554) (emphasis in original). 

In response to the Court’s request for position papers explaining the privatedining tip-pool pay-out, Chicago Cut explained that credit card processing fees were 

deducted from the amount paid to private dining servers. Def.’s Position Paper at 3. 

This revelation came after the close of discovery, and Chicago Cut had not taken or 

produced any discovery on how the credit card processing fees were calculated. See

R. 83, Dec. 12, 2013 Order. Based on this lack of record evidence, Plaintiffs argue 

that Chicago Cut is unable to establish that that the deducted credit card 

processing fees were no more than the amount necessary to reasonably reimburse it 

for total expenditures associated with credit card tip collections. Pls.’ Mot. Summ. J. 

Reply Br. at 3, 5-6. According to Plaintiffs, if Chicago Cut cannot account for these 

credit card processing fees, it cannot show that the tip-proceeds that it collected 

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were distributed in their entirety to the employees. Pls.’ Mot. Summ. J. Br. at 7-11; 

Pls.’ Mot. Summ. J. Reply Br. at 3-4. 

Despite the lack of evidence regarding the propriety of the credit card 

processing fees, Plaintiffs are not entitled to summary judgment on this issue. 

Plaintiffs’ claims involve Chicago Cut’s improper handling of the tip pool; they 

allege that Chicago Cut did not distribute the entire amount of tip-pool proceeds to 

the tip-pool eligible employees. See First Am. Compl. ¶¶ 14-19, 49-77; Pls.’ Mot. 

Summ. J. Br. at 6 (“Chicago Cut has the burden of proving that it did not 

improperly retain any portion of the Tip Pool proceeds. Chicago Cut has not met 

and cannot meet this burden.”). Drawing all reasonable inferences from the record 

evidence in Chicago Cut’s favor, a jury could find that the credit card processing 

fees were deducted from the tips of the private dining servers, rather than the tippool proceeds. Although deducting credit card processing fees from servers’ tips in 

excess of Chicago Cut’s total expenditures associated with credit card tip collections 

might be a FLSA or IMWL violation, it is not the violation about which Plaintiffs’ 

complain in this lawsuit. 

The daily cash reports illustrate this point. As discussed above, a twentypercent service charge is assessed on private dining clients. Two percent goes to the 

private dining event coordinator, three percent goes to the tip pool, and fifteen 

percent should go to the servers who worked the event. See Def.’s Position Paper; 

Pls.’ Position Paper at 5 (arguing that five percent of the net sales goes to the tip 

pool, including the two-percent fee to the private dining coordinator). On days when 

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a private event occurred, the daily cash reports consistently show that the tip pool 

received three percent of the net sales from the private event. See Pls.’ Exh. 5, Daily 

Cash and Tipshare Reports. The tip pool thus receives the entire three-percent 

amount that it was due from the service charge; there are no deductions for any 

credit card processing fees. 

For example, there was a private dining event at Chicago Cut on September 

13, 2011.11 The net sales from the private event were $8,146. Pls.’ Exh. 5, Daily 

Cash and Tipshare Reports at CCS 005189 (showing net sales of $2,036.50 for four 

private dining servers, totaling $8,146). The daily cash report shows each server 

paying $101.75 into the tipshare column, for a total of $407, with $163 going “to 

house” for the private dining event coordinator. Id. That leaves $244 for the tip pool; 

$244 is three percent of the $8,146 net sales (excusing $0.38 for rounding). The four 

servers who worked the event should have received $1,221.90—fifteen percent of 

the net sales. That comes to $305.48 for each of the four servers. According to the 

daily cash report, however, each server only received $294.15. Id. Chicago Cut 

explained that this discrepancy arose from deducting $45.62 in credit card 

processing fees from the servers’ fifteen percent. Def.’s Position Paper at 3. The 

credit card processing fees, therefore, came from the private dining servers’ tips, not 

the tip-pool proceeds. The tip pool still received the three percent that it was due. 

The other daily cash reports show the same pattern. See Pls.’ Exh. 5, Daily Cash 

and Tipshare Reports. 

11This event is the example used by both parties in their position papers. See Def.’s 

Position Paper; Pls.’ Position Paper. 

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Even under Plaintiffs’ version of the tip pool’s operation (over which there is a 

genuine issue)— that five percent of the private dining service charge goes to the tip 

pool (of which the two-percent fee is then diverted to the private dining event 

coordinator)—the daily cash reports still support the reasonable inference that the 

credit card processing fees are deducted from the servers’ tips, not the tip-pool 

proceeds. Plaintiffs state that five percent of the private dining service fee goes to 

the tip pool. See Pls.’ Position Paper at 5. On September 13, 2011, $407 was paid to 

the tip pool (of which $163 went “to house”). The $407 that went to the tip pool is 

five percent of the $8,146 in net sales (again, excusing $0.30 for rounding). So the 

entire tip-pool amount was distributed to the tip pool.12 Based on the daily cash 

reports, a reasonable jury could conclude that the discrepancy between the tips 

owed and the tips paid arise from the servers’ tips, not the tip-pool proceeds. 

Plaintiffs also argue that Chicago Cut improperly deducts the credit card 

processing fee twice. Pls.’ Mot. Summ. J. Br. at 12. According to Plaintiffs, the 

record shows that the restaurant’s point-of-sale system automatically deducts the 

credit card processing fees when calculating the net sales of a particular 

transaction. Id. at 4-5; PSOF ¶ 25. If Chicago Cut’s post-discovery argument that 

credit card processing fees are also deducted from private dining servers’ tips is 

true, Plaintiffs conclude that Chicago Cut has improperly deducted the processing 

fee twice: once by the point-of-sale system in calculating net sales, and once more 

when calculating the tips to go to the private dining server. Pls.’ Mot. Summ. J. Br. 

12In their motion for summary judgment, Plaintiffs do not challenge the propriety of 

the percentage directed to the tip pool. 

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at 11-12. For its part, Chicago Cut argues that the point-of-sale service merely 

calculates the credit card processing fees; it does not deduct them. Def.’s Resp. 

PSOF ¶¶ 24-25. Even if the credit card processing fees were deducted twice, 

however, a reasonable juror could find that this double deduction affects only the 

private dining servers, not the private dining tip pool. Plaintiffs do not complain 

that net sales—from which they claim credit card processing fees are already 

deducted—is an inappropriate basis for calculating the amount to go to the tip pool. 

Their complaint is that the second deduction of credit card processing fees is 

improper, as it demonstrates that Chicago Cut is keeping a portion of the tips for 

itself in excess of the allowable fees. See Pls.’ Mot. Summ. J. Br. at 12 (“Chicago Cut 

improperly retained Tip Pool proceeds for itself, because its Point of Sale System 

had already deducted the relevant credit card processing fees from the servers’ 

gross sales.”). But as discussed above, the record evidence reflects that the so-called 

second deduction (if it happens at all) is taken only from the tips of the private 

dining servers, not the tip-pool proceeds. Although this might be an FLSA and 

IMWL violation, it is not the violation about which Plaintiffs complain.

Based on the record evidence, a reasonable juror could conclude that Chicago 

Cut’s operation of the tip pool was proper (even if there is evidence of different 

FLSA and IMWL violations not at issue in Plaintiffs’ complaint). Plaintiffs’ motion 

for summary judgment on their FLSA, IMWL, and IWPCA tip-pool claims—all of 

which were premised upon Chicago Cut’s supposed inability to demonstrate that the 

tip pool was properly operated—is therefore denied. 

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III. Class Certification 

A. Legal Standard 

Courts usually should decide the question of class certification before turning 

to the merits of a given action.13 See Wiesmueller, 513 F.3d at 787. To be entitled to 

class certification, a plaintiff must satisfy each requirement of Rule 23(a)—

numerosity, commonality, typicality, and adequacy of representation—as well as 

one of the subsections of Rule 23(b). Messner v. Northshore Univ. Health Sys., 669 

F.3d 802, 811 (7th Cir. 2012) (citation omitted). Here, Plaintiffs seek money 

damages, see First Am. Compl. ¶¶ 57, 67, so they must meet the requirements of 

Rule 23(b)(3). “Failure to meet any of the Rule’s requirements precludes class 

certification.” Harper v. Sheriff of Cook Cnty., 581 F.3d 511, 513 (7th Cir. 2009) 

(quoting Arreola v. Godinez, 546 F.3d 788, 794 (7th Cir. 2008)) (internal quotation 

marks omitted). 

“A class may be certified only if ‘the trial court is satisfied, after a rigorous 

analysis, that the prerequisites of Rule 23(a) have been satisfied.’” Creative 

Montessori Learning Ctrs. v. Ashford Gear LLC, 662 F.3d 913, 916 (7th Cir. 2011) 

(quoting Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011)). The named 

13As noted above, partial summary judgment was previously granted to Chicago Cut 

against Plaintiffs’ overtime claims (Counts 4 and 5). See Sept. 23, 2014 Order. Although 

class certification should typically be decided before turning to the merits of a case, Fed. R. 

Civ. P. 23(c)(1), both parties knowingly opted to exchange summary judgment motions in 

advance of the Court’s ruling on certification. Sept. 23, 2014 Order at 8 n.4; see also 

Wiesmueller, 513 F.3d at 787 (citing Cowen, 70 F.3d at, 941-42) (holding that there are 

situations in which a district court may rule on a summary judgment motion before ruling 

on class certification). The decision granting Chicago Cut’s summary judgment motion on 

the overtime claims, therefore, only affected the rights of the named Plaintiffs. Sept. 23, 

2014 Order at 8 n.4; Wiesmueller, 514 F.3d at 787. 

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plaintiff bears the burden of showing by a preponderance of the evidence that all of 

Rule 23’s requirements are satisfied. See Comcast Corp. v. Behrend, 133 S. Ct. 1426, 

1432 (2013); Messner, 669 F.3d at 811. The Court “must make whatever factual and 

legal inquiries are necessary to ensure that requirements for class certification are 

satisfied before deciding whether a class should be certified, even if those 

considerations overlap the merits of the case.” Am. Honda Motor Co. v. Allen, 600 

F.3d 813, 815 (7th Cir. 2010) (citing Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 

676 (7th Cir. 2001)); see also Dukes, 131 S. Ct. at 2551 (recognizing that classcertification analysis “[f]requently ... will entail some overlap with the merits of the 

plaintiff’s underlying claim”). In the end, the Court has “broad discretion to 

determine whether certification of a class-action lawsuit is appropriate.” Ervin v. 

OS Restaurant Servs., Inc., 632 F.3d 971, 976 (7th Cir. 2011) (internal quotation 

marks and citation omitted). 

B. Analysis 

Plaintiffs advance class-action claims based on alleged violations of the 

Illinois Minimum Wage Law, 820 ILCS 105/1 et seq., and the Illinois Wage Payment 

and Collection Act, 820 ILCS 115/1 et seq. Pls.’ Class Cert. Br. at 8. Plaintiffs have 

proposed two classes under Federal Rule 23(b)(3): 

(1) All persons who worked for Defendant in Illinois as hourly employees at 

any time between September 20, 2010 and the present who participated in 

one or more tip pools operated by Defendant, and who were paid pursuant to 

the tip credit (IMWL class). 

(2) All persons who worked for Defendant in Illinois as hourly employees at 

any time between September 20, 2010 and the present who participated in 

one or more tip pools operated by Defendant (IWPCA class). 

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Id. To be certified, these classes must meet the Rule 23(a) requirements of 

numerosity, commonality, typicality, and adequacy, as well as the Rule 23(b) 

requirements of predominance and superiority. The Court will address each of these 

requirements in turn. 

1. Numerosity 

Plaintiffs have demonstrated that their proposed classes are sufficiently 

numerous for class treatment. To meet the numerosity requirement, a plaintiff 

must show that the proposed class is “so numerous that joinder of all members is 

impracticable.” Fed. R. Civ. P. 23(a)(1). “[A] plaintiff does not need to demonstrate 

the exact number of class members as long as a conclusion is apparent from goodfaith estimates.” Barragan v. Evanger’s Dog and Cat Food Co., 259 F.R.D. 330, 333 

(N.D. Ill. 2009). Here, Plaintiffs have presented evidence that the proposed classes 

contain at least eighty tipped employees. See R. 44-1, Flom Dep. at 48:8-10 (stating 

that Chicago Cut has approximately 200 employees); R. 44-9, Payroll Register 

Report (showing that, in March 2012, there were 94 “active” employees in the “staff” 

group identified as having “tips owed” and/or “tips paid”); Pls.’ Class Cert. Br. at 10 

(stating that various payroll register reports demonstrate between 80 and 120 

putative class members during any given two-week pay period). Joinder of eighty or 

more plaintiffs would certainly be impracticable. See Pruitt v. City of Chicago, 472 

F.3d 925, 926-27 (7th Cir. 2006) (“Sometimes ‘even’ 40 plaintiffs would be 

unmanageable); Swanson v. Am. Consumer Indus., Inc., 415 F.2d 1326, 1333 n.9 

(7th Cir. 1969) (holding that a proposed class of 40 was “a sufficiently large group to 

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satisfy Rule 23(a)”); Oplchenski v. Parfums Givenchy, Inc., 254 F.R.D. 489, 495 

(N.D. Ill. 2008) (“Generally, where class members number at least 40, joinder is 

considered impracticable and numerosity is satisfied.”). Plaintiffs’ proposed classes 

satisfy the numerosity requirement of Rule 23(a).

2. Commonality 

Rule 23(a)(2) requires that “there are questions of law or fact common to the 

class.” Chicago Cut argues that Plaintiffs are unable to satisfy this commonality 

requirement. Def.’s Class Cert. Resp. Br. at 9. Although Chicago Cut’s brief in 

opposition to class certification focuses primarily on the merits of the underlying 

dispute, Chicago Cut does seem to make two arguments against a finding of 

commonality: (1) Plaintiffs cannot demonstrate commonality because they have only 

“raise[d] some common questions ... which do not generate common answers”; and 

(2) Plaintiffs cannot demonstrate “that the employees of Chicago Cut were ever 

actually paid less than the minimum wage.” Id. Neither argument is persuasive. 

To establish commonality, the class representative must demonstrate that 

members of the class “have suffered the same injury.” Dukes, 131 S. Ct. at 2551. 

Commonality requires that all of the class members’ claims “depend upon a common 

contention” that is “of such a nature that it is capable of classwide resolution—

which means that determination of its truth or falsity will resolve an issue that is 

central to the validity of each one of the claims in one stroke.” Id.. In Dukes, the 

Supreme Court concluded that what is most relevant to class certification “is not 

the raising of common questions—even in droves—but, rather the capacity of a 

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classwide proceeding to generate common answers apt to drive the resolution of the 

litigation. Dissimilarities within the proposed class are what have the potential to 

impede the generation of common answers.” Id. (internal quotation marks and 

citation omitted). 

Plaintiffs’ proposed classes meet this commonality requirement because the 

tip-pool claims present a common question that will generate a common answer. 

Plaintiffs allege that Chicago Cut improperly operated the tip pool by retaining a 

portion of the tip-pool proceeds and by including ineligible employees in the tip pool. 

See First Am. Compl. ¶¶ 14-19; Pls.’ Class Cert. Br. If Plaintiffs’ allegations are 

correct, Chicago Cut was not entitled to take the tip credit for employees 

participating in the improper tip pool under the IMWL, and it underpaid each 

employee participating in the tip pool in violation of the IWPCA. See, e.g., WilliamsGreen, 277 F.R.D. at 382. So, if the tip pool was improper, Chicago Cut will be liable 

to all employees who participated in the improper tip pool. If, however, Chicago Cut 

properly operated the tip pool, no participating employee will have a claim. Unlike 

Dukes, in which dozens of discrete decisions by individual managers scattered 

across the country contributed to the putative class’s allegations, 131 S. Ct. at 2554-

56, there are no individualized inquiries here, particularly on liability, that would 

prevent productive classwide litigation. Chicago Cut operated one tip pool, and it 

has not argued that the tip pool operated differently for different employees. The 

classwide claims thus rest on a common question—did Chicago Cut properly 

administer the tip pool—and more importantly, will produce a common answer that 

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can resolve the tip-pool claims for the entire class “in one stroke,” and the 

commonality requirement has been satisfied. 

Apparently in reliance on this Court’s decision in Franks v. MKM Oil, Inc., 

Chicago Cut also argues that Plaintiffs cannot demonstrate “that the employees of 

Chicago Cut were ever actually paid less than the minimum wage.” Def.’s Class 

Cert. Resp. Br. at 9 (“Thus as in Franks, Plaintiffs haven’t met their Rule 23(a)

burden .... Plaintiffs do not make, nor could they ever make, an argument that the 

employees of Chicago Cut were ever actually paid less than the minimum wage.”). 

In Franks, this Court held that a proposed class under the IMWL could not meet 

the predominance and numerosity requirements of Rule 23 because of “uncertainty 

regarding whether the[ ] employees were paid the minimum wage.”14 No. 10 CV 

00013, 2012 WL 3903782, at *6 (N.D. Ill. Sept. 7, 2012). 

Even if the Franks decision had focused on commonality, its reasoning would 

not be applicable in this case. Franks involved an allegation that employees were 

undercompensated when their time was improperly converted between computer 

systems. Id. at *1. This conduct would violate the IMWL if the underpayment 

resulted in an employee being paid less than the minimum wage. Id. at *6. It was 

therefore necessary to know the hourly wage-rate of each employee to determine if 

the underpayment resulted in an IMWL violation. Id. So even liability turned on an 

employee-by-employee inquiry. By contrast, Chicago Cut’s liability under the IMWL 

does not depend upon the individual hourly wage-rate of each tipped employee. If 

14Defendant’s argument could also be construed as an objection to numerosity, as the 

Franks decision focused in part on the numerosity requirement. As discussed above, 

however, Plaintiffs have satisfied their burden as to numerosity. 

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Chicago Cut improperly operated the tip pool, it would not be eligible to receive the 

tip credit in its entirety, regardless of the ultimate hourly wage of each employee. 

See Williams-Green, 277 F.R.D. at 379 (noting that under the IMWL, “an employer 

cannot take a tip credit if it retains any portion of its employees’ tips and, instead, 

must pay its employees the full minimum wage”). 

Determining whether Chicago Cut properly operated the tip pool remains the 

central question, and the answer to that question will resolve the claims on a 

classwide basis. Plaintiffs’ proposed classes meet the commonality requirement of 

Rule 23(a)(2).

3. Typicality 

Chicago Cut does not appear to contest that the named Plaintiffs’ claims 

satisfy the typicality requirement for the proposed classes, see Def.’s Class Cert. 

Resp. Br. at 7-14, and Plaintiffs have adequately shown that “the claims or defenses 

of the representative parties are typical of the claims or defenses of the class.” Fed. 

R. Civ. P. 23(a)(3). “A plaintiff’s claim is typical if it arises from the same event or 

practice or course of conduct that gives rise to the claims of other class members 

and his or her claims are based on the same legal theory.” Keele v. Wexler, 149 F.3d 

589, 595 (7th Cir. 1998) (internal quotation marks and citation omitted). Typicality 

is “closely related to the commonality inquiry.” Id. As discussed above, the success 

of the class’s tip-pool claims will hinge on whether Chicago Cut properly 

administered the tip pool. The claims of the named Plaintiffs, Starr and Phelan, 

depend on the identical question. Because the named Plaintiffs’ claims “have the 

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same essential characteristics as the claims of the class at large,” Retired Chicago 

Police Ass’n v. City of Chicago, 7 F.3d 584, 597 (7th Cir. 1993), their claims are 

sufficiently “typical of the claims or defenses of the class.” 

4. Adequacy 

Plaintiffs must also show that the “representative parties will fairly and 

adequately protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). “[A]dequacy of 

representation is composed of two parts: ‘the adequacy of the named plaintiff's 

counsel, and the adequacy of representation provided in protecting the different, 

separate, and distinct interest’ of the class members.” Retired Chicago Police Ass’n, 

7 F.3d at 598; see also Spano v. The Boeing Co., 633 F.3d 574, 586-87 (7th Cir.2011). 

To be an adequate representative, the named Plaintiffs must not have “antagonistic 

or conflicting claims.” Retired Chicago Police Ass’n, 7 F.3d at 598. Here, the claims 

of the named Plaintiffs are essentially identical to those of the proposed class 

members. See Pls.’ Class Cert. Br. at 14. There are no individual defenses or other 

claims that would in any way impede the named Plaintiffs’ ability to adequately 

represent the interest of the class members. Nor is there any reason to believe that 

Plaintiffs’ counsel will fail to represent the interests of the class members. The 

adequacy requirement of Rule 23(a)(4) is satisfied. 

5. Rule 23(b)(3) Requirements 

In addition to meeting the four Rule 23(a) factors discussed above, Plaintiffs 

must also demonstrate that their proposed classes meet the requirements of Rule 

23(b)(3): predominance and superiority. Although similar to commonality, “the 

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predominance criterion is far more demanding.” Messner, 669 F.3d at 814 (quoting 

Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623-24 (1997)). Under Rule 23(b)(3), 

the plaintiff must show that “questions of law or fact common to class members 

predominate over any questions affecting only individual members.” Fed. R. Civ. P. 

23(b)(3). The Court thus must compare the role of common issues of law and fact 

with the role of individual issues, including whether the Court must examine 

individual transactions in adjudicating the claim. See Messner, 669 F.3d at 815; see 

also Lady Di’s, Inc. v. Enhanced Servs. Billing, Inc., 654 F.3d 728, 738 (7th Cir. 

2011). 

Chicago Cut argues that Plaintiffs cannot meet the predominance 

requirement under the standard imposed by Comcast v. Behrend. Def.’s Class Cert. 

Resp. Br. at 12-14. Comcast held that plaintiffs must “establish that damages are 

susceptible of measurement across the entire class.” 133 S.Ct. at 1433. Noting that 

the named plaintiff in Comcast presented a damage model prepared by an expert, 

Chicago Cut contends that “plaintiffs have offered no expert testimony, no damage 

model, no explanation of how their proof of damages will comport with Rule 

23(b)(3),” and therefore cannot satisfy the predominance requirement. Def.’s Class 

Cert. Resp. Br. at 13 (emphasis omitted). But Comcast does not necessarily require 

expert testimony or a particular damage model; it simply requires that plaintiffs 

show that “the damages sought are the result of the class-wide injury that the suit 

alleges.” Butler v. Sears, Roebuck and Co., 727 F.3d 796, 799 (7th Cir. 2013) 

(interpreting Comcast). To satisfy Rule 23(b)(3), it is not necessary that “every 

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member of the class have identical damages,” but if individual damages issues 

overwhelm the questions common to the class, the predominance requirement 

might not be satisfied. Id. at 801; see also Espenscheid v. DirectSat USA, LLC, 705 

F.3d 770, 773 (7th Cir. 2013) (holding that individual damages issues that would 

“require 2341 separate evidentiary hearings” prevented certification). 

Here, Plaintiffs have satisfactorily shown that the common questions will 

predominate over any individual damages issues. As discussed above, if Chicago 

Cut improperly operated the tip pool, it would not be eligible to receive the tip credit 

in its entirety. See Williams-Green, 277 F.R.D. at 379 (noting that under the IMWL, 

“an employer cannot take a tip credit if it retains any portion of its employees’ tips 

and, instead, must pay its employees the full minimum wage”). Under the IMWL, 

each employee who participated in the improper tip pool would be entitled to the 

full minimum wage for each hour he or she worked under the tip-credit wage. Id. 

Calculation of these damages would likely not require dozens of separate livewitness hearings; the amount owed to each plaintiff would be easily calculated 

based on Chicago Cut’s employment records. “[T]he calculation of monetary relief 

will be mechanical, formulaic, a task not for a trier of fact but for a computer 

program.” Espenscheid, 705 F.3d at 773 (quoting Johnson v. Meriter Health Sers. 

Employee Retirement Plan, 702 F.3d 364, 372 (7th Cir. 2012)). 

The damages for the IWPCA class would be similarly simple to calculate. 

Under the IWPCA, each employee would be entitled to recover the amount that he 

or she was underpaid plus damages of two percent of the underpayment for each 

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month it remained unpaid. 820 ILCS 115/14(a). Calculating damages would involve 

identifying the amount of the underpayments to the tip pool, and looking to Chicago 

Cut’s records to determine which employees were affected by any given 

underpayment. Although these damages calculations would be somewhat more 

involved than the IMWL damages, the common question of whether the tip pool was 

properly operated for all tipped employees predominates over the individual 

damages questions.

To satisfy Rule 23(b)(3), Plaintiffs must also show that “a class action is 

superior to other available methods for fairly and efficiently adjudicating the 

controversy.” Fed. R. Civ. P. 23(b)(3). Chicago Cut does not appear to challenge that 

class treatment is superior to other methods, and the existence of a central common 

legal and factual issue makes class treatment particularly effective in this case. The 

superiority requirement is satisfied. 

Plaintiffs have demonstrated that their proposed classes meet the 

numerosity, commonality, typicality, and adequacy requirements of Rule 23(a) and 

the predominance and superiority requirements of Rule 23(b)(3). Their motion to 

certify classes for their state-law tip-pool claims under the IMWL and IWPCA is 

granted. 

IV. Conclusion 

For the reasons discussed above, Plaintiffs’ motion for summary judgment as 

to the tip-pooling claims (Counts 1, 2, and 3) is denied. Plaintiffs’ motion to certify a 

class as to the state-law claims is granted. By December 29, 2014, Plaintiffs shall 

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provide to Chicago Cut a draft notice of class certification as required under Rule 

23(c)(2)(B), as well as a notice plan. By January 9, 2015, the parties shall confer 

over the proposed notice and notice plan (including whether to include information 

on the summary-judgment decisions so far). The status hearing of December 29, 

2014 is reset to January 13, 2015, at 10 a.m. 

 ENTERED: 

 s/Edmond E. Chang 

 Honorable Edmond E. Chang 

 United States District Judge 

DATE: December 15, 2014 

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