IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 19-50391

JOEL HOENNINGER; MICHAEL KIVITZ; HAYDEN HYDE; ROBERT 

ROMANO; SAMUEL CASKEY; ET AL,

 Plaintiffs - Appellants

v.

LEASING ENTERPRISES, LIMITED, doing business as Perry's Restaurant, 

L.L.C., 

 Defendant - Appellee

Appeal from the United States District Court

for the Western District of Texas

USDC No. 1:14-CV-798

Before KING, JONES, and COSTA, Circuit Judges.

PER CURIAM:*

In a case involving the same defendant and much the same facts, we 

concluded that Perry’s Restaurant violated the Fair Labor Standards Act, but 

we also concluded that the district court neither: (i) abused its discretion by 

failing to award liquidated damages; nor (ii) clearly erred by concluding that 

Perry’s did not violate the statute willfully. The present case involves different 

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not 

be published and is not precedent except under the limited circumstances set forth in 5TH 

CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

March 4, 2020

Lyle W. Cayce

Clerk

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plaintiffs and a different district court, but we again review district-court 

decisions denying liquidated damages and concluding that Perry’s did not 

violate FLSA willfully. For the following reasons, we AFFIRM.

I.

Perry’s is a restaurant company operating throughout Texas. Until 

October 1, 2014, Perry’s paid credit-card tips to its servers on a daily basis 

instead of requiring them to wait for a bi-weekly paycheck. Steele v. Leasing 

Enters., Ltd., 826 F.3d 237, 241 (5th Cir. 2016). To make these daily payments 

without keeping a large amount of cash on premises, “Perry’s arranged for 

armored vehicles to deliver cash to each of its restaurants three times per 

week.” Id. To offset its cash-delivery costs and processing fees charged by 

credit-card companies, Perry’s deducted 3.25% from its servers’ credit-card tips 

before paying out those tips in cash. Id. at 244. That choice produced two FLSA 

cases challenging whether it was proper for Perry’s to offset the cash-delivery 

costs. 

A.

Giullian Steele and other servers at Perry’s commenced a FLSA 

collective action in the United States District Court for the Southern District 

of Texas on August 28, 2009. Among other things, they alleged that Perry’s 

violated FLSA by “deduct[ing] from the amount of tips given to its employees 

by credit card or debit card a fee that exceeded the charge it paid to credit card 

and debit card companies or banks to convert those tips into cash.” The district 

court granted partial summary judgment regarding liability to the plaintiffs 

on August 31, 2010. Perry’s moved for reconsideration or certification of an 

interlocutory appeal, but that motion was denied.

On August 19, 2014, following a bench trial, the district court issued 

findings of fact and conclusions of law holding that a two-year statute of 

limitations applied to the claims against Perry’s, because Perry’s FLSA 

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violations were not willful. The district court amended those findings and 

conclusions on February 24, 2015 to add a finding that Perry’s had acted 

reasonably and in good faith. Simultaneously, the district court entered final 

judgment, which did not include a liquidated damages award. Both Perry’s and 

the plaintiffs appealed, and we affirmed on the merits in a published opinion 

dated June 14, 2016. Steele, 826 F.3d at 244-46.

We also affirmed the district court’s judgment insofar as it declined to 

award liquidated damages, which was based on a determination that Perry’s 

acted reasonably and in good faith. Id. at 246-47. Among other things, we 

considered testimony from Perry’s employees stating that, in connection with 

an “investigation into Perry’s practices regarding tip pools and charging 

employees for certain expenses,” the Department of Labor “advised Perry’s 

that its offset conformed with the FLSA.” Id. at 247. The Steele plaintiffs “did 

not present any evidence explicitly contradicting this testimony” or “any 

evidence showing that Perry’s ever suspected that the offset violated the FLSA 

or that any employee questioned the practice.” Id.

Finally, we affirmed the district court’s determination that Perry’s did 

not violate FLSA willfully. Id. at 248. “The only evidence that Plaintiffs put 

forth to show that Perry’s willfully violated the FLSA is its continual violation 

following the interlocutory judgment that the district court issued on August 

31, 2010.” Id. This was not enough to establish that the district court clearly 

erred, because we have “held many times that an interlocutory order is not a 

final order,” id., and “if Perry’s stopped the practice after the interlocutory 

judgment, and the final judgment was in favor of Perry’s, Perry’s could not 

recover the amount it lost by stopping the practice prematurely,” id. at 248 

n.18. This was sufficient, alongside the conclusion that Perry’s acted in good 

faith, to sustain the district court’s determination regarding willfulness.

B.

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On August 20, 2014, one day after the Steele district court filed its initial 

findings of fact and conclusions of law, a new FLSA collective action against 

Perry’s based on its 3.25% deduction was filed in the United States District 

Court for the Western District of Texas. The second case involved different 

plaintiffs and a different time period. After our decision in Steele, Perry’s 

stipulated that its 3.25% deduction violated FLSA, but the district court 

allowed additional discovery regarding whether Perry’s acted willfully and 

whether Perry’s acted reasonably and in good faith. Ultimately, the district 

court held a bench trial and then issued findings of fact and conclusions of law. 

As in Steele, the district court concluded that Perry’s did not willfully violate 

FLSA and that Perry’s acted reasonably and in good faith. The district court 

accordingly applied a two-year statute of limitations and did not award 

liquidated damages. This appeal followed. 

II.

Under FLSA, employers must pay most employees at least $7.25 per 

hour, 29 U.S.C. § 206(a)(1)(C), but there is a limited exception for tipped

employees. Although tipped employees must receive $7.25 per hour, employers 

do not have to pay the entire amount. FLSA allows employers to claim a tip 

credit, which counts towards the required $7.25 per hour. 29 U.S.C. 

§ 203(m)(2)(A); 29 C.F.R. § 531.59. The tip credit cannot exceed the actual tips 

an employee receives and is capped at $5.12 per hour, so employers must pay 

tipped employees $2.13 or more. 29 U.S.C. § 203(m)(2)(A); 29 C.F.R. § 531.59. 

Further, employers cannot claim a tip credit unless “all tips received” by tipped 

employees “have been retained by the employee,” 29 U.S.C. § 203(m)(2)(A), and 

even if they do not claim a tip credit, an “employer may not keep tips received 

by its employees for any purposes,” 29 U.S.C. § 203(m)(2)(B).

If an employer violates FLSA by keeping tips paid to employees, it “shall 

be liable to the employee or employees affected in the amount of the sum of any 

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tip credit taken by the employer and all such tips unlawfully kept by the 

employer, and in an additional equal amount as liquidated damages.” 29 

U.S.C. § 216(b). Liquidated damages are not mandatory, however, “if the 

employer shows to the satisfaction of the court that the act or omission giving 

rise to [the] action was in good faith and that he had reasonable grounds for 

believing that his act or omission was not a [FLSA] violation.” 29 U.S.C. § 260. 

Proving good faith and reasonableness is a substantial burden borne by a

defendant. Mireles v. Frio Foods, Inc., 899 F.2d 1407, 1415 (5th Cir. 1990). A 

district court’s “[e]valuation of the evidence supporting good faith and 

reasonableness” is reviewed for abuse of discretion. Steele, 826 F.3d at 246.

A two-year statute of limitations normally applies to FLSA violations, 

but the statute of limitations is one year longer for willful violations. 29 U.S.C. 

§ 255(a). A violation is willful if the “employer either knew or showed reckless 

disregard for the matter of whether its conduct was prohibited by the statute.” 

McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988). Mere negligence 

does not suffice. Id. at 135. Plaintiffs bear the burden of demonstrating 

willfulness, which is a fact issue that we review for clear error. Steele, 826 F.3d 

at 248.

III.

A.

The district court did not abuse its discretion by declining to award 

liquidated damages. As in Steele, the record in this case contains testimony 

indicating that advice received during a Department of Labor investigation led 

Perry’s to believe that their practices, including the 3.25% deduction from

credit-card tips, complied with FLSA. Crediting this testimony, the district 

court concluded that Perry’s had a reasonable, good-faith belief that it was not 

violating FLSA and therefore declined to award liquidated damages. 

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Unlike in Steele, the plaintiffs in this case attempt to rebut that 

testimony using a declaration signed by Charles Frasier, the Department of 

Labor employee who performed the investigation of Perry’s.1 Frasier’s 

declaration states, however, that he “do[es] not remember the details of [his] 

conversations with Perry’s Steakhouse’s ownership, management, and/or legal 

counsel.” The declaration also states that Frasier “probably discussed the 

credit card liquidation issue” with Perry’s “because it was such a rampant 

problem among Texas restaurants” and any advice he would have given would 

have been consistent with the Department of Labor Field Manual. Frasier adds 

that, at the time of his investigation, the field manual “stated restaurants 

could charge their tipped employees no more than what the credit card 

companies charged the restaurant for liquidating credit card tips.” Frasier’s

speculation about discussions he does not remember and the advice that he 

would have given is not enough to convince us that the district court abused 

its discretion. Accordingly, we affirm the district court’s judgment insofar as it 

does not award liquidated damages.

B. 

We affirm the district court’ s determination that Perry’s did not willfully 

violate FLSA. According to the plaintiffs, the district court clearly erred, 

because Perry’s continued to apply a 3.25% deduction after the Steele district 

court granted partial summary judgment to the plaintiffs on August 31, 2010.2

1 Perry’s argues that considering this declaration on appeal is improper because it was 

not introduced as evidence at the district court’s bench trial. The declaration is in the record 

on appeal only because it was submitted to support a motion for partial summary judgment 

filed by the plaintiffs, which was denied by the district court. We do not need to resolve this 

issue because we would affirm the district court whether or not we consider the Frasier 

declaration. 

2 The plaintiffs also argue that Perry’s acted willfully by continuing to apply its 3.25% 

deduction following the district court’s August 19, 2014 findings of fact and conclusions of 

law, but that argument—even if correct—has no practical effect. For the purposes of this 

case, a willfulness finding is relevant only because it would extend the statute of limitations 

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We rejected precisely that argument in Steele, 826 F.3d at 248, and we are 

bound to reach the same result here under the rule of orderliness. In re Henry, 

944 F.3d 587, 591 (5th Cir. 2019).

V.

For the foregoing reasons, we AFFIRM the judgment of the district court.

from two years to three. The operative complaint in this case was filed on July 7, 2015, so 

claims based on FLSA violations occurring on or after August 19, 2014 are timely even if a 

two-year statute of limitations applies.

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