IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

KELSEY BREWER,INDIVIDUALLY AND §

ON BEHALF OF ALL OTHERS SIMILARLY §

SITUATED UNDER 29 U.S.C. § 216(b), §

PLAINTIFF, §

 §

V. § CIVIL CASE NO. 21-CV-151-L-BK

 §

SAKE HIBACHI SUSHI & BAR,INC., §

HIBACHI & SUSHI JAPANESE,INC., §

WEN QIN LU, AND AMY CHEN, §

DEFENDANTS. §

FINDINGS, CONCLUSIONS, AND RECOMMENDATION

OF THE UNITED STATES MAGISTRATE JUDGE

Pursuant to 28 U.S.C. § 636(b) and the district judge’s Order of Reference, Doc. 27, 

this case is before the Court for consideration of Defendants’ separate Motions to Dismiss 

Pursuant to Federal Rule of Civil Procedure 12(b)(6). Doc. 10; Doc. 12; Doc. 14; Doc. 16. 

For the reasons that follow, Defendants’ motions should be DENIED.

I. BACKGROUND AND PROCEDURAL HISTORY

In January 2021, Plaintiff filed this putative collective action under the Fair Labor 

Standards Act (“FLSA”) against Hibachi & Sushi Japanese, Inc. (“Hibachi”) and Sake 

Hibachi Sushi & Bar, Inc. (“Sake”), as well as their owner, Wen Qin Lu (“Lu”), and Amy 

Chen (“Chen”) who co-owns and manages Sake. Doc. 1 at 5-6. Plaintiff avers that when 

she worked as a server at Sake, Defendants utilized the FLSA’s “tip credit” provision, but 

willfully failed to comply with all of the attendant duties such as providing Plaintiff with 

sufficient notice, not allowing her to retain all of her tips, and requiring her and other potential 

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collective action members to contribute to an illegal “tip pool” as well as pay various business 

expenses. Doc. 1 at 3-5, 9-12.

Plaintiff claims Defendants have thus forfeited the tip credit and are liable to Plaintiff 

and others for the full minimum wage for every hour they worked during the statutory period,

plus any other statutory damages provided for under the FLSA. Doc. 1 at 3, 14-15. Plaintiff 

brings causes of action for Defendants’ violations of the minimum wage law and collection of 

unlawful kickbacks. Doc. 1 at 14-16. Plaintiff further alleges that Lu and Chen, as 

employers, are individually liable for the FLSA violations. Doc. 1 at 7. Finally, she asserts 

that Sake and Hibachi fall within FLSA enterprise coverage and that she is covered 

individually as well. Doc. 1 at 7-8. Defendants now move to dismiss Plaintiff’s complaint 

pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Doc. 10; Doc. 12; Doc. 

14; Doc. 16. If the Court determines that Plaintiff’s complaint is subject to dismissal, she 

requests leave to amend. Doc. 22 at 15-16.

II. APPLICABLE LAW

A. FLSA

The FLSA imposes both a minimum wage and maximum hours restriction on 

employers. Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 147 (2012) (citing 29 

U.S.C. §§ 206-207). As relevant here, the FLSA sets the national minimum wage at $7.25

per hour. Montano v. Montrose Rest. Assoc., Inc., 800 F.3d 186, 188 (5th Cir. 2015); 29 

U.S.C. § 206(a)(1). A plaintiff attempting to make an overtime compensation claim under 

the FLSA must establish four elements: “(1) that there existed an employer-employee 

relationship during the unpaid overtime periods claimed; (2) that the employee engaged in 

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activities within the coverage of the FLSA; (3) that the employer violated the FLSA’s 

overtime wage requirements; and (4) the amount of overtime compensation due.” Johnson v. 

Heckmann Water Resources (CVR), Inc., 758 F.3d 627, 630 (5th Cir. 2014).

The FLSA contains an exception to the $7.25 hourly minimum wage, however, which 

allows employers to pay $2.13 per hour to a “tipped employee” if the employee’s tips 

compensate for the difference between the $2.13 minimum wage and the general minimum 

wage. Montano, 800 F.3d at 189 (citing 29 U.S.C. § 203(m)). This employer “discount” is 

commonly referred to as a “tip credit.” Id. An employer may not claim a tip credit unless 

either the tipped employee receives all of the tips or all tips are pooled among employees who 

customarily and regularly receive tips. Id. at 188. If an employee is otherwise required to 

share tips, the employer may not legally use a tip credit. Id. at 189; see also 29 U.S.C. § 

203(m)(2)(B) (“An employer may not keep tips received by its employees for any purposes, 

including allowing managers or supervisors to keep any portion of employees’ tips, regardless 

of whether or not the employer takes a tip credit.”).

The FLSA’s minimum wage and maximum hours requirements only apply, however, 

if either the employee or the employing business enterprise is engaged in commerce or in the 

production of goods for commerce. 29 U.S.C. §§ 206(a), 207(a)(2); Molina-Aranda v. Black 

Magic Enterprises, L.L.C., 983 F.3d 779, 785-86 (5th Cir. 2020) (citations omitted). These 

theories of recovery are referred to as individual coverage and enterprise coverage, 

respectively. For both types of FLSA coverage, “commerce” means “trade, commerce, 

transportation, transmission, or communication among the several States or between any State 

and any place outside thereof.” 29 U.S.C. § 203(b).

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For an employee to qualify as being “engaged in commerce” under the FLSA’s 

individual coverage provision, the employee’s work must be “so directly and vitally related to 

the functioning of an instrumentality or facility of interstate commerce as to be, in practical 

effect, a part of it rather than isolated local activity.” Sobrinio v. Med. Ctr. Visitor’s Lodge, 

Inc., 474 F.3d 828, 829 (5th Cir. 2007) (quoting Mitchell v. H.B. Zachry Co., 362 U.S. 310, 

324 (1960)). Employees are considered engaged “in the production of goods for commerce” 

if they are involved with any “incidental operation preparatory to putting goods into the 

stream of commerce” such as packaging a product, bottling liquid, or labeling goods. 

Western Union Tel. Co. v. Lenroot, 323 U.S. 490, 503 (1945).

Concomitantly, to demonstrate enterprise coverage, a business must either “ha[ve] 

employees engaged in commerce or in the production of goods for commerce” or “ha[ve] 

employees handling, selling, or otherwise working on goods or materials that have been 

moved in or produced for commerce by any person.” Molina-Aranda, 983 F.3d at 786

(citation and internal punctuation omitted). The enterprise’s annual gross volume of sales 

made or business done also must not be less than $500,000. Biziko v. Van Horne, 981 F.3d

418, 420 (5th Cir. 2020). The difference between the two theories is that in the individual 

coverage analysis, the question is whether the plaintiff herself engaged in interstate 

commerce, whereas in the enterprise coverage analysis, the question is whether any two or 

more of the business’s other employees engaged in interstate commerce. Mendoza v. Detail 

Sols., LLC, 911 F.Supp.2d 433, 439 n.4 (N.D. Tex. 2012)

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B. Rule 12(b)(6)

A plaintiff fails to state a claim under Rule 12(b)(6) when the complaint does not 

contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. 

Twombly, 550 U.S. 544, 570 (2007). In order to overcome a Rule 12(b)(6) motion, a 

plaintiff’s complaint should “contain either direct allegations on every material point 

necessary to sustain a recovery . . . or contain allegations from which an inference may fairly 

be drawn that evidence on these material points will be introduced at trial.” Campbell v. City 

of San Antonio, 43 F.3d 973, 975 (5th Cir. 1995) (quotation omitted). When considering a 

Rule 12(b)(6) motion, a court may consider documents outside the complaint when they are: 

(1) attached to the motion to dismiss; (2) referenced in the complaint; and (3) central to the 

plaintiff’s claims.

III. PARTIES’ ARGUMENTS AND ANALYSIS

A. Hibachi and Sake – Enterprise Coverage

Hibachi and Sake assert first that Plaintiff––and the purported opt-in plaintiffs––lack 

“case-or-controversy” standing because Hibachi did not employ them, and Plaintiff did not 

adequately plead that Sake employed her. Doc. 11 at 3-6; Doc. 13 at 10, 14-15. 

Alternatively, Hibachi and Sake argue that Plaintiff has failed to adequately allege that an 

“enterprise” existed between them as required establish enterprise coverage under the FLSA. 

Doc. 11 at 6-8; Doc. 13 at 12-14. In particular, Hibachi and Sake assert that Plaintiff has not 

sufficiently pleaded that Hibachi and Sake (1) were engaged in related activities, (2) were a 

unified operation or under common control, and (3) shared a common business purpose. 

Doc. 11 at 6-8; Doc. 13 at 13-14. 

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Plaintiff responds that the term “employer” is defined broadly in the FLSA context. 

Doc. 22 at 7-10 (citing 29 U.S.C. § 203(d) (“Employer” includes “any person acting directly 

or indirectly in the interest of an employer”)); Doc. 23 at 9. Plaintiff contends that whether 

she or any of the collective plaintiffs were employed by Hibachi, i.e., whether Hibachi and 

Sake are joint employers for purposes of the FLSA, is a fact-specific question not appropriate 

for resolution at the motion to dismiss stage. Doc. 22 at 5-12; Doc. 23 at 8. Moreover, 

Plaintiff claims that she has sufficiently alleged the required enterprise theory elements, 

namely (1) unified operations; (2) under common control; (3) that engaged in related activities 

and share a common business purpose; (4) Sake and Hibachi have employees handling goods 

that have been moved in interstate commerce; and (5) Sake and Hibachi have sales of at least 

$500,000.00. Doc. 22 at 12-15; Doc. 23 at 11-14. Plaintiff also asserts that she has 

adequately alleged FLSA enterprise coverage by specifying that Hibachi and Sake (1) have 

employees handling goods that have been moved in interstate commerce and (2) are doing the 

requisite dollar amount of sales. Doc. 22 at 13-15.

Turning to the sufficiency of Plaintiff’s allegations, the Court concludes that she has 

adequately pled that (1) Defendants violated the FLSA by failing to pay her the required 

minimum wage due to their misuse of the tip credit by, for example, requiring that servers 

participate in a tip pool, but distributing tips to persons who are not customarily and regularly 

tipped employees, such as Chen who is a salaried manager, Doc. 1 at 9-12; and (2) she lost 

wages as a result of the FLSA violation, Doc. 1 at 13-14; Molina-Aranda, 983 F.3d at 788. 

The closer question is whether Plaintiff has successfully alleged that she engaged in activities 

within the FLSA enterprise coverage theory.

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In that respect, Plaintiff alleges Lu and Chen “control the day-to-day decisions” for 

Sake and Hibachi, which entities are jointly “engaged in the performance of related activities 

for a common business purpose – namely, operating a full-service restaurant offering a 

Japanese cuisine and specializing in sushi and hibachi grill services.” Doc. 1 at 7. 

Regarding the commerce element, Plaintiff avers that she and the proposed collective action 

members:

[H]andled food and other food service items that were purchased across 

state lines or traveled in interstate commerce, or both. In addition, 

Plaintiff and Collective Members regularly served customers dining at 

Defendants’ restaurants who were traveling from out-of-state or across 

interstate lines. Finally, Plaintiff and Collective Members regularly and 

frequently processed multiple interstate credit card transactions during 

every shift they worked.

Doc. 1 at 8.

This case is similar to Molina-Aranda. There, the United States Court of Appels for 

the Fifth Circuit held the plaintiffs adequately alleged enterprise coverage by asserting that (1) 

the defendants employed multiple drivers to haul water, sand, gravel, and construction 

supplies both into and out of the state and (2) the plaintiffs worked with equipment that had 

moved in or been produced for commerce. Molina-Aranda, 983 F.3d at 786. The court 

concluded:

 [A]t least some of these items are plausibly goods or materials: they are all items 

one could plausibly conclude are used in or produced during construction and 

trucking work. It is also plausible that some or all of these items had travelled 

interstate at some point in their life cycle. Texas is a large state with 

considerable industrial capacity, but it does not stretch the definition of plausible 

for Plaintiffs to allege that at least some of the raw materials and machinery that 

they handled came from beyond Texas’s borders.

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Id. at 787 (cleaned up). The same result is warranted here. Plaintiff has adequately alleged 

enterprise coverage via her allegations that she handled food and food service items which 

plausibly could have been moved in or produced for interstate commerce. Id.; see also 

Sandles v. Wright, No. 1:12-CV-309, 2013 WL 5497788, at *7 (E.D. Tex. Oct. 3, 2013)

(considering, inter alia, processing of credit card payments electronically across state lines in 

determining whether plaintiff established the commerce requirement in the individual FLSA 

coverage context).

B. Sake, Lu, Chen – Individual Coverage 

These Defendants contend that Plaintiff has failed to demonstrate individual FLSA 

coverage because she has not sufficiently alleged that she was engaged in commerce or in the 

production of goods for commerce. Doc. 13 at 16-19; Doc. 15 at 15-17; Doc. 17 at 15-17.

Plaintiff argues she has adequately alleged individual FLSA coverage, vis a vis engaging in 

commerce because she pled that she (1) handled food and food service items that were 

purchased across state lines and/or traveled in interstate commerce; (2) regularly served outof-state customers dining at Defendants’ restaurants; and (3) frequently processed interstate 

credit card transactions. Doc. 23 at 17; Doc. 24 at 18-19; Doc. 25 at 18-19.

As discussed above, employees are considered engaged “in the production of goods 

for commerce” if they are involved with any “incidental operation preparatory to putting 

goods into the stream of commerce.” Western Union Telegraph Company v. Lenroot, 323 

U.S. 490, 503 (1945). However, “the test of whether one is in commerce is obviously more 

exacting than the test of whether [an] occupation is necessary to production for commerce.” 

Armour & Company v. Wantock, 323 U.S. 126, 131 (1944) (emphasis added). The “in 

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commerce” clause requires the court to consider whether the work Plaintiff performed is 

directly related to the “functioning of an instrumentality or facility of interstate commerce.” 

Sobrinio, 474 F.3d at 829; see also McLeod v. Threlkeld, 319 U.S. 491, 497 (1943) (stating 

that the test for individual FLSA coverage is whether the employee's activities “are actually in 

or so closely related to the movement of the commerce as to be a part of it”). Thus, it is not 

sufficient “for purposes of the ‘engaged in commerce’ clause of the individual coverage 

provision, that an employee's work merely ‘affects’ interstate commerce in some way.” 

Mendoza, 911 F.Supp.2d at 439 (quoting Wirtz v. Wohl Shoe Co., 382 F.2d 848, 850 (5th Cir. 

1967)). Nonetheless, the Fifth Circuit has also held that “[t]here is no de minimis

requirement.” Sobrinio, 474 F.3d at 829. “‘[A]ny regular contact with commerce, no matter 

how small, will result in coverage.’” Sobrinio, 474 F.3d at 829 (quoting Marshall v. Victoria 

Transp. Co., Inc., 603 F.2d 1122, 1124 (5th Cir. 1979)); Sandles v. Wright, 1:12-CV-309, 

2013 WL 5497788, at *7 (E.D. Tex. Oct. 3, 2013) (holding that processing credit card 

payments for out-of-state campers, plus receiving and making out-of-state telephone calls 

related to booking reservations or contacting out-of-state campers for other reasons and 

handling interstate mail was sufficient to show that Defendant was engaged in commerce). 

In Sobrinio, an employee of a motel that served the Texas Medical Center worked 

variously as a janitor, security guard, and driver for the motel’s guests. 474 F.3d at 829. 

While he drove guests on local errands, he never drove to the airport or any other 

transportation centers. Id. The court held that although many guests were from out of state, 

the employee was not “engaged in commerce” under the FLSA’s individual coverage 

provision. Id. (citation omitted). Similarly, a judge in this district held that an employee’s 

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washing of cars which had allegedly been moved in interstate commerce was not closely 

related to the movement of those cars in commerce for purposes of FLSA individual coverage. 

Mendoza, 911 F.Supp.2d at 440 (on summary judgment). To that end, the court observed 

that the plaintiff did not utilize any instrumentalities of interstate commerce in the 

performance of his job, such as computers or telephones, and presented no evidence of where 

the cars he washed were manufactured. Id.; see also Williams v. Henagan, 595 F.3d 610, 621 

(5th Cir. 2010) (holding that plaintiff’s work mowing lawns and setting up inflatable 

playgrounds was “localized” and did not qualify as “engaged in commerce”); Romero v. 

Funes, No. H-11-3373, 2013 WL 655250 at *2 (S.D. Tex. Feb. 21, 2013) (holding that 

plaintiff working as a local security guard was not “personally engaged in commerce.”).

In a somewhat recent decision, a judge of this court ruled on a similar issue as the one 

presented here. See Ecoquij-Tzep v. Hawaiian Grill, No. 3:16-CV-625-BN, 2016 WL 

8674569, at *4 (N.D. Tex. Dec. 16, 2016) (Horan, J.). There, the plaintiff averred that during 

his employment with the defendant, he worked as a cashier and server and (1) “the materials 

and goods that Plaintiff handled and/or used on a constant and/or continual basis and/or that 

were supplied to Plaintiff by the Defendant to use on the job moved through interstate 

commerce prior to and/or subsequent to Plaintiff's use of the same” and (2) he regularly 

processed credit card payments for out-of-state customers. Id. The Court concluded that 

these allegations were insufficient to establish individual coverage and “the mere usage of 

credit cards is insufficient for purposes of establishing FLSA individual coverage.” Id.

(quoting Thorne v. All Restoration Servs., Inc., 448 F.3d 1264, 1266-67 (11th Cir. 2006)); see 

also Ovalle v. DRG Concepts, LLC, 3:17-CV-2714-G, 2018 WL 2762553, at *4 (N.D. Tex. 

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June 8, 2018) (Fish, J.) (holding insufficient to state an individual FLSA claim allegations that 

the plaintiff waiter “engaged with [the] [d]efendant’s customers, ran credit cards and handled 

other forms of payment for [the] [d]efendant, and generally engaged in commerce on [the] 

defendant’s behalf.”).

The Court finds Ecoquij-Tzep and Ovalle distinguishable and concludes that Plaintiff 

has adequately pled that she engaged in commerce. Specifically, Plaintiff alleges that she:

[H]andled food and other food service items that were purchased across 

state lines or traveled in interstate commerce, or both. In addition, 

Plaintiff . . . regularly served customers dining at Defendants’ restaurants 

who were traveling from out-of-state or across interstate lines. Finally, 

Plaintiff . . . regularly and frequently processed multiple interstate credit 

card transactions during every shift they worked.

Doc. 1 at 8 (emphasis added). Although she could have been more specific about the nature 

of the food and service supplies she references, on balance, the Court concludes that Plaintiff 

has adequately pled individual FLSA coverage. See Sandles, 2013 WL 5497788, at *7.

C. Lu and Chen — Employer Status

Lu and Chen argue that Plaintiff failed to plead sufficient factual allegations to 

establish their employer status and, thus, individual liability under the FLSA. Doc. 15 at 12-

15; Doc. 17 at 12-15. Plaintiff disagrees, pointing out that she pled Lu owns and is the 

president and director of both Hibachi and Sake, Chen is the co-owner of Sake, and both 

defendants make operational decisions for the restaurants such as employee hiring, 

compensation, termination, and discipline and creating and enforcing employee policies. 

Doc. 24 at 15-16; Doc. 25 at 15.

As relevant here, the FLSA defines an “employer” as “any person acting directly or 

indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. § 203(d). The 

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Fifth Circuit relies on the “economic reality test” when determining whether a party is an 

employer within the meaning of FLSA. See, e.g., Gray v. Powers, 673 F.3d 352, 354 (5th 

Cir. 2012). Under that test, the court evaluates “whether the alleged employer: (1) possessed 

the power to hire and fire the employees, (2) supervised and controlled employee work 

schedules or conditions of employment, (3) determined the rate and method of payment, and 

(4) maintained employment records.” Id. at 355 (citation and internal quotation marks 

omitted). A party need not, however, establish each element in every case. Id. at 357. 

“The dominant theme in the case law is that those who have operating control over employees 

within companies may be individually liable for FLSA violations committed by the 

companies.” Id. Moreover, “[t]he remedial purposes of the FLSA require the courts to 

define ‘employer’ more broadly than the term would be interpreted in traditional common law 

applications.” McLaughlin v. Seafood, Inc., 867 F.2d 875, 877 (5th Cir. 1989) (per curiam) 

(citation omitted).

A review of Plaintiff’s complaint supports her argument in favor of Lu’s and Chen’s 

status as employers. See Doc. 1 at 7 (“Defendants Wen Qin Lu and Amy Chen control the 

day-to-day decisions of the restaurants by making strategic, operational, and policy decisions, 

and exerting operational control over its employees. Moreover, Defendants Wen Qin Lu and 

Amy Chen have the power to hire and fire employees, discipline employees, create and 

enforce employee policies, and set employee compensation.”). This is sufficient to plead 

claims against both Lu and Chen for purposes of individual FLSA liability. See Gray, 673

F.3d at355. Indeed, another judge of this Court has reached an identical conclusion with 

regard to similar arguments made by Lu and Chen in a FLSA case involving claims similar to 

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those here. See Williams v. Sake Hibachi Sushi & B., Inc., 3:18-CV-0517-D, 2020 WL 

3317096, at *6-8 (N.D. Tex. June 18, 2020) (Fitzwater, J.) (granting summary judgment for 

plaintiffs on this point).

D. Lu and Chen and — Minimum Wage Violation

Lu and Chen next argue that Plaintiff has inadequately pled that they violated FLSA’s 

minimum wage requirements in relation to the tip credit provision. Doc. 15 at 17-18; Doc. 

17 at 13-14. Plaintiff responds that she has sufficiently pled minimum wage violations and 

detailed why Lu and Chen are not entitled to the tip credit defense. Doc. 24 at 19-22; Doc. 

25 at 19-22.

Generally, the “tip credit” exception can only be claimed if the employer demonstrates 

that (1) she informed the employees of the tip credit law and (2) the tipped employees retain 

all of their tips. 29 U.S.C. § 203(m). The employer “has the burden of establishing its 

entitlement to the tip credit.” Montano, 806 F.3d at 189. The problem with Lu’s and Chen’s 

argument is readily apparent. The FLSA’s tip credit provision is a defense to a minimum 

wage claim. Gustavus v. Cazos, Inc., 774 F.Supp.2d 856, 858 (S.D. Tex. 2011) (“Since the 

use of a tip credit is an affirmative defense, the defendants bear the burden of proof on this 

issue.”); Williams, 2020 WL 3317096, at *3 (referring to tip credit as an affirmative defense). 

Plaintiff has adequately pled a minimum wage violation and need not defend against an 

affirmative defense at this stage of the case. Moreover, to the extent Lu and Chen maintain 

Plaintiff’s complaint is deficient because she failed to allege the approximate number of hours 

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of work for which she was underpaid, that issue is appropriately left to summary judgment or 

trial.

1

IV. CONCLUSION

For the foregoing reasons, Defendants’ Motions to Dismiss Pursuant to Federal Rule 

of Civil Procedure 12(b)(6) should be DENIED.

SO RECOMMENDED on January 19, 2022.

INSTRUCTIONS FOR SERVICE AND

NOTICE OF RIGHT TO APPEAL/OBJECT

A copy of these findings, conclusions and recommendation shall be served on all parties in the 

manner provided by law. Any party who objects to any part of these findings, conclusions and 

recommendation must file specific written objections within 14 days after being served with a 

copy. See 28 U.S.C. § 636(b)(1); FED. R. CIV. P. 72(b). To be specific, an objection must 

identify the finding or recommendation to which objection is made, state the basis for the 

objection, and indicate where in the magistrate judge’s findings, conclusions, and 

recommendation the disputed determination is found. An objection that merely incorporates 

by reference or refers to the briefing before the magistrate judge is not specific. Failure to file 

specific written objections will bar the aggrieved party from appealing the factual findings and 

legal conclusions of the magistrate judge that are accepted or adopted by the district court, 

except upon grounds of plain error. See Douglass v. United Servs. Automobile Ass’n, 79 F.3d 

1415, 1417 (5th Cir. 1996).

1 Sake, Lu, and Chen’s arguments urging dismissal of Plaintiff’s kickback claim are also 

based on the premise that she did not adequately defend against the tip credit exception. See 

Doc. 13 at 20-23; Doc. 15 at 18-22; Doc. 17 at 18-22. The Court thus rejects this argument 

for the same reasons stated above. 

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