Stanford Law School - Robert Crown Law Library

Filed 8/9/10

IN THE SUPREME COURT OF CALIFORNIA

LOUIE HUNG KWEI LU,
Plaintiff and Appellant,
S171442
v.
Ct.App. 2/3 B194209
HAWAIIAN GARDENS CASINO, INC., )
et al.,
Los Angeles County
Defendants and Respondents. )
Super. Ct. No. BC286164

Labor Code1 section 351 prohibits employers from taking any gratuity
patrons leave for their employees, and declares that such gratuity is “the sole
property of the employee or employees to whom it was paid, given, or left for.”
A number of Courts of Appeal have held that this prohibition, at least in the
restaurant context, does not extend to employer-mandated tip pooling, whereby
employees must pool and share their tips with other employees. (See Leighton v.
Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062, 1067 (Leighton); see also
Etheridge v. Reins Internat. California, Inc. (2009) 172 Cal.App.4th 908, 921-922;
Budrow v. Dave & Buster’s of California, Inc. (2009) 171 Cal.App.4th 875, 878-
884; Jameson v. Five Feet Restaurant, Inc. (2003) 107 Cal.App.4th 138, 143.)

1
All further statutory references are to the Labor Code unless otherwise
noted.
1

---

In this case, a card dealer brought a class action against his casino employer
based on its mandatory tip pooling policy. The casino‟s policy required dealers to
contribute 15 to 20 percent of their tips to a tip pool to be shared among other
designated employees who provided service to casino patrons. The dealer alleged
that this policy constituted a conversion of his tips and violated, among other
provisions, section 351.
As a threshold issue, the trial court concluded that section 351 does not
provide a private cause of action for employees to recover any misappropriated
tips from employers. The Court of Appeal agreed that section 351 does not itself
contain a private right to sue. Less than two months later, another Court of Appeal
expressly disagreed with the holding on section 351 of the appellate court below.
(See Grodensky v. Artichoke Joe’s Casino (2009) 171 Cal.App.4th 1399, review
granted June 24, 2009, S172237.) We granted review to resolve the conflict on
this narrow issue.
For reasons that follow, we conclude that section 351 does not contain a
private right to sue.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Louie Hung Kwei Lu (plaintiff) was employed as a card dealer at
defendant Hawaiian Gardens Casino, Inc. (the Casino), from 1997 to 2003. The
Casino had a written tip pooling policy that required dealers to set aside 15 to 20
percent of the tips they received on each shift. The dealers kept the remaining 80
to 85 percent of the tips received; the Casino did not deduct these sums from the
minimum hourly wages the dealers earned. The Casino deposited the pooled tips
into a “tip pool bank account” and later distributed the money to designated
employees who provided service to casino customers. These employees included
chip service people, poker tournament coordinators, poker rotation coordinators,
hosts, customer service representatives or “floormen,” and concierges. The tip
2

---

pool policy specifically prohibited employers, managers, and supervisors from
receiving any money from the tip pool. Plaintiff brought a class action against the
Casino and its general manager. His complaint alleged that the Casino‟s tip
pooling policy amounted to a conversion of his tips, and violated the employee
protections under sections 221 (prohibiting wage kickbacks by employer), 351
(prohibiting employer from taking, collecting, or receiving employees‟ gratuities),
450 (prohibiting employer from compelling employees to patronize employer),
1197 (prohibiting payment of less than minimum wage), and 2802 (indemnifying
employee for necessary expenditures). The complaint also alleged that the
Casino‟s conduct giving rise to each statutory violation constituted an unfair
business practice under the unfair competition law (UCL) (Bus. & Prof. Code, §
17200 et seq.).
The trial court granted the Casino‟s motion for judgment on the pleadings
on the causes of action based on sections 351 and 450. It agreed with the Casino
that neither section contained a private right to sue. The court also granted the
Casino‟s successive motions for summary adjudication on the remaining causes of
action. Plaintiff appealed.
The Court of Appeal held, “pursuant to the analysis in Leighton, that tip
pooling in the casino industry is not prohibited by Labor Code section 351.”
However, it reversed the trial court‟s order granting summary adjudication of the
UCL cause of action based on section 351. While section 351 itself contains no
private right to sue, the Court of Appeal concluded this provision may nonetheless
serve as a predicate for a UCL claim because plaintiff presented triable issues of
fact as to whether section 351 prohibited certain employees who participated in the
tip pool from doing so because they were “agents” of the Casino. In all other
respects, the Court of Appeal affirmed the judgment.
3

---

We granted review limited to the sole issue of whether section 351 gives
employees a private right of action.2
DISCUSSION
A. General Principles
A violation of a state statute does not necessarily give rise to a private cause
of action. (Vikco Ins. Services, Inc. v. Ohio Indemnity Co. (1999) 70 Cal.App.4th
55, 62 (Vikco).) Instead, whether a party has a right to sue depends on whether the
Legislature has “manifested an intent to create such a private cause of action”
under the statute. (Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46
Cal.3d 287, 305 (Moradi-Shalal) [no legislative intent that Ins. Code, §§ 790.03 &
790.09 create private cause of action against insurer for bad faith refusal to settle
claim]; Crusader Ins. Co. v. Scottsdale Ins. Co. (1997) 54 Cal.App.4th 121, 131,
135 (Crusader) [no legislative intent that Ins. Code, § 1763 gave admitted insurers
private right to sue surplus line brokers].) Such legislative intent, if any, is
revealed through the language of the statute and its legislative history. (See
Moradi-Shalal, supra, 46 Cal.3d at pp. 294-295.)
A statute may contain “ „clear, understandable, unmistakable terms,‟ ”
which strongly and directly indicate that the Legislature intended to create a
private cause of action. (Moradi-Shalal, supra, 46 Cal.3d at p. 295.) For instance,
the statute may expressly state that a person has or is liable for a cause of action
for a particular violation. (See, e.g., Civ. Code, § 51.9 [“A person is liable in a
cause of action for sexual harassment” when a plaintiff proves certain elements];
Health & Saf. Code, § 1285, subd. (c) [“Any person who is detained in a health

2
We express no view on whether tip pooling is permissible under section
351.
4

---

facility solely for the nonpayment of a bill has a cause of action against the health
facility for the detention”].) Or, more commonly, a statute may refer to a remedy
or means of enforcing its substantive provisions, i.e., by way of an action.3 (See,
e.g., § 218 [“Nothing in this article shall limit the right of any wage claimant to
sue directly or through an assignee for any wages or penalty due him under this
article”]; Bus. & Prof. Code, § 17070 [“Any person . . . may bring an action to
enjoin and restrain any violation of this chapter and, in addition thereto, for the
recovery of damages”]; id., § 6175.4, subd. (a) [“A client who suffers any damage
as the result of a violation of this article by any lawyer may bring an action against
that person to recover or obtain one or more of the following remedies”]; Civ.
Code, § 1748.7, subd. (d) [“Any person injured by a violation of this section may
bring an action for the recovery of damages, equitable relief, and reasonable
attorney‟s fees and costs”]; see Crusader, supra, 54 Cal.App.4th at p. 136 [listing
other statutes expressly creating cause of action].) If, however, a statute does not
contain such obvious language, resort to its legislative history is next in order.
(Moradi-Shalal, supra, 46 Cal.3d at pp. 300-301; see Crusader, supra, 54
Cal.App.4th at pp. 133-134, 136 [relying on principles of general statutory
interpretation].)

3
Strictly speaking, the term “action” is not interchangeable with “cause of
action.” “While „action‟ refers to the judicial remedy to enforce an obligation,
„cause of action‟ refers to the obligation itself.” (Nassif v. Municipal Court (1989)
214 Cal.App.3d 1294, 1298.) For purposes of the issue here, the distinction is not
significant because the inclusion of either term would reveal a legislative intent to
provide for a private cause of action. (See Moradi-Shalal, supra, 46 Cal.3d at p.
295; Vikco, supra, 70 Cal.App.4th at p. 62.)
5

---

B. Statutory Language
As part of article 1 (§ 350 et seq.) covering “Gratuities” in division 2, part
1, chapter 3 (“Privileges and Perquisites”) of the Labor Code, section 351 provides
in pertinent part: “No employer or agent shall collect, take, or receive any gratuity
or a part thereof that is paid, given to, or left for an employee by a patron, or
deduct any amount from wages due an employee on account of a gratuity, or
require an employee to credit the amount, or any part thereof, of a gratuity against
and as part of the wages due the employee from the employer. Every gratuity is
hereby declared to be the sole property of the employee or employees to whom it
was paid, given, or left for.” (Italics added.)4
This italicized language suggests that employees may bring an action to
recover any misappropriated tips to which they are entitled, just as with other
property rights. (See Code Civ. Proc., § 28 [“An injury to property consists in
depriving its owner of the benefit of it”]; id., § 30 [“A civil action is prosecuted by
one party against another for the declaration, enforcement or protection of a right,
or the redress or prevention of a wrong”].) However, we conclude that the
statutory language does not “ „unmistakabl[y]‟ ” reveal a legislative intent to
provide wronged employees a private right to sue. (Moradi-Shalal, supra, 46
Cal.3d at p. 295.)
For instance, section 351 does not expressly state that there is a cause of
action for any violation; nor does it refer to an employee‟s right to bring an action
to recover any misappropriated gratuities. Rather, if an employer violates section
351 or any other provision in article 1, that employer is guilty of a misdemeanor

4
“Gratuity” is defined as including “any tip, gratuity, money, or part thereof
that has been paid or given to or left for an employee by a patron of a business
over and above the actual amount due the business for services rendered or for
goods, food, drink, or articles sold or served to the patron.” (§ 350, subd. (e).)
6

---

and is subject to a fine and/or imprisonment. (§ 354 [maximum 60 days
imprisonment and/or $1,000 fine].) Moreover, the Department of Industrial
Relations is specifically charged with “enforc[ing] the provisions of this article.”
(§ 355 [all collected fines paid into state treasury and credited to general fund]; see
§ 356 [“purpose of this article is to prevent fraud upon the public in connection
with the practice of tipping”].) Because section 351 does not include explicit
language regarding a private cause of action, and related provisions create some
ambiguity, we look to section 351‟s legislative history for greater insight. (See
Moradi-Shalal, supra, 46 Cal.3d at pp. 300-301.)
C. Legislative History
Over 20 years ago, we extensively examined, in another context, the
legislative history of section 351 and related provisions. (Henning v. Industrial
Welfare Com. (1988) 46 Cal.3d 1262, 1270-1275 (Henning) [holding no
legislative intent to create “two-tier” minimum wage system in § 351 by
permitting lower minimum wage for tipped employees].) Section 351, which can
be traced back to 1917, has been amended a number of times. (Stats. 1917, ch.
172, § 1, p. 257; Stats. 1929, ch. 891, § 2, p. 1972 [predecessor statute to § 351
enacted as part of uncodified act]; Stats. 1937, ch. 90, § 351, p. 203 [§ 351 enacted
and codified as part of act establishing Lab. Code]; Stats. 1965, ch. 686, § 1, pp.
2062-2063; Stats. 1973, ch. 879, § 1, pp. 1610-1611; Stats. 1974, ch. 552, § 1, p.
1375; Stats. 1975, ch. 324, § 1, p. 771; Stats. 2000, ch. 876, § 9; see Henning,
supra, 46 Cal.3d at pp. 1270-1275.)
7

---

From 1929 to 1973, former section 351 (along with former section 352)5
remained strictly “notice” statutes. (See Cal. Drive-in Restaurant Assn. v. Clark
(1943) 22 Cal.2d 287, 293 [1929 statute “does not purport to authorize or legalize
the retention or deduction of the tips received by the employees . . . the essential
requirement being that the public be informed of the practice”].) In other words,
former section 351 generally permitted an employer or agent to collect, take, or
receive any gratuity or a part thereof given to an employee by a patron, or to
require that such gratuity be deducted from or credited towards the employee‟s
wages, as long as the employer posted a notice to the public in a conspicuous place
regarding the disposition of tips. (See Henning, supra, 46 Cal.3d at pp. 1271-
1274.) The former statute did not refer to “[e]very gratuity” as being the “sole
property” of an employee or employees; the Legislature added this language in
1973. (Stats. 1973, ch. 879, § 1, p. 1611.) This language, which has largely
remained unchanged to date, in fact originated in 1972 legislation that was not
passed. (See Assem. Bill No. 78 (1 Assem. J. (1972 Reg. Sess.) p. 120; Henning,
supra, 46 Cal.3d at pp. 1273-1274.) While unpassed legislation ordinarily reveals
very little regarding legislative intent (see People v. Mendoza (2000) 23 Cal.4th
896, 921), we have recognized that Assembly Bill No. 78 is “the ultimate source
of section 351 in its current form.” (Henning, supra, 46 Cal.3d at p. 1278.)

5
As originally enacted in 1929 as part of an uncodified act, the precursor to
section 352 provided in part: “Such notice shall also state the extent to which the
employees are required by such employer to accept such tips or gratuities in lieu of
wages or the extent to which the employee is required to accept and credit such
tips and gratuities against wages due such employees.” (Stats. 1929, ch. 891, § 2,
p. 1972; see Stats. 1937, ch. 90, § 352, p. 203 [codifying § 352 as part of act
establishing Lab. Code]; see also Stats. 1965, ch. 686, § 2, p. 2063; Henning,
supra, 46 Cal.3d at pp. 1271-1273.) In 1973, former section 352 was repealed and
its substance was incorporated into section 351. (Stats. 1973, ch. 879, §§ 1, 2, pp.
1610-1611.)
8

---

In general, Assembly Bill No. 78 “was introduced by the author
[Assemblyman Leroy F. Greene] when he learned that all tips did not necessarily
accrue to the employee who received the gratuity. [¶] Section 351 of the Labor
Code is amended to spell out that gratuities are the sole property of the employee
or employees in receipt of same, and the employer would be prohibited from
taking any such gratuities or crediting them as part of any wages that might be due
to his employees.” (Sen. Com. on Industrial Relations, analysis of Assem. Bill
No. 78 (1972 Reg. Sess.) as amended June 5, 1972, p. 1; see Henning, supra, 46
Cal.3d at p. 1278.) Assembly Bill No. 78 would have prohibited employers from
taking any part of an employee‟s gratuity, without exception. (Assem. Bill No. 78
(1 Assem. J. (1972 Reg. Sess.) p. 120.)
Just a year later, the Legislature passed Assembly Bill No. 10, which was
nearly identical in relevant part to Assembly Bill No. 78, except, significantly, it
allowed an employer to take, deduct, or credit an employee‟s gratuity if “permitted
by a valid regulation of the California Division of Industrial Welfare,” and if
notice to patrons was posted. (Stats. 1973, ch. 879, § 1, pp. 1610-1611, enacting
Assem. Bill No. 10 (1973-1974 Reg. Sess.); see Henning, supra, 46 Cal.3d at p.
1273.) In 1975, the Legislature deleted this exception in section 351, which
remains in substantially the same form today. (Stats. 1975, ch. 324, § 1, p. 771;
see Stats. 2000, ch. 876, § 9 [deleting exception for situation “in which no charge
is made to a patron for services rendered” and adding provision governing tips
paid by credit card].)
Based on our review of section 351‟s legislative history, we conclude that
there is no clear indication that the Legislature intended to create a private cause of
action under the statute. The pertinent legislative history reveals that the “sole
property” language was included in section 351 to prevent employers from
“obtain[ing] the benefit (as, in effect, the payment of wages) of tips and other
9

---

gratuities received by their employees . . . .” (Ops. Cal. Legis. Counsel, No. 3740
(Feb. 29, 1972) Tips: A.B. 78, p. 1; see Henning, supra, 46 Cal.3d at p. 1278
[“Our reading of the legislative intent is grounded in the words of A.B. 78 . . . and
its legislative history”].) Specifically, Assembly Bill No. 78 would have
invalidated an Industrial Welfare Commission (IWC) regulation “authorizing the
crediting of tips or gratuities against the minimum wage . . . .” (Ops. Cal. Legis.
Counsel on Assem. Bill No. 78, supra, at p. 3.) The subsequent successful
amendments in 1973 and 1975 confirm that the Legislature‟s ultimate goal was to
prevent an employer from taking any part of an employee‟s gratuity by crediting
an employee‟s tips against any wages earned. (See Assem. Com. on Labor
Relations, Rep. on Assem. Bill No. 10 (1973-1974 Reg. Sess.) for hearing on Apr.
4, 1973, p. 1 [as introduced, “AB 10 prohibits an employer from taking any tip
given by a patron to his employee and prohibits an employer from requiring that
such tip be credited against wages”]; Sen. Com. on Industrial Relations, analysis
of Assem. Bill No. 232 (1975-1976 Reg. Sess.) May 19, 1975, p. 1 [Assem. Bill
No. 232‟s purpose is “[t]o eliminate the authority of the [IWC] to permit
employers to credit tips against the wages of employees”]; Henning, supra, 46
Cal.3d at p. 1274 [Assem. Bill No. 232 introduced “to reflect the policy
[Assemblyman Greene] previously urged”].) And, in Henning, based on our
review of the legislative history, we concluded that section 351 barred an IWC
wage order that had permitted a lower minimum wage for tipped employees.
(Henning, supra, 46 Cal.3d at p. 1279 [“in function the „tip credit‟ and the
„alternative minimum wage‟ are identical”].)
In sum, we find that the declaration that “[e]very gratuity” is the “sole
property of the employee or employees to whom it was paid, given, or left for” (§
351), simply affirmed what courts had “long held”: that gratuities ordinarily
belonged to the waiter or waitress absent a contrary agreement. (Ops. Cal. Legis.
10

---

Counsel, No. 20547 (Nov. 4, 1971) Waiters and Waitresses: Tips and Gratuities,
p. 1.) It did not reflect a legislative intent to give employees a new statutory
remedy to recover any misappropriated gratuities. Indeed, the fact that neither the
Legislative Analyst nor the Legislative Counsel acknowledged that a private right
of action exists under section 351 at the time the Legislature included the “sole
property” language or thereafter “is a strong indication the Legislature never
intended to create such a right of action.” (Moradi-Shalal, supra, 46 Cal.3d at p.
300.)6 “Thus when neither the language nor the history of a statute indicates an
intent to create a new private right to sue, a party contending for judicial
recognition of such a right bears a heavy, perhaps insurmountable, burden of

6
We reject plaintiff‟s contention that our pronouncements in Moradi-Shalal
should be tempered here because the significant amendments to section 351 were
passed in 1973 and 1975, well before we decided that case in 1988. Plaintiff
asserts that before Moradi-Shalal, the Legislature would have believed “that if
they created a property right there was a remedy.” First, our holding in Moradi-
Shalal that the Legislature must clearly manifest an intent to create a private cause
of action under a statute is hardly novel. (Moradi-Shalal, supra, 46 Cal.3d at p.
295.) Second, as relevant here, in Moradi-Shalal, we validated the dissent in
Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880, which had relied on
a 1941 statute (see Bus. & Prof. Code, § 17070), to point out that “the Legislature
was fully capable of writing an unambiguous statute creating civil liability for
particular unfair business practices.” (Royal Globe, supra, 23 Cal.3d at pp. 896-
897 (conc. & dis. opn. of Richardson, J.).) “The legislative tools were at hand.
They were not used.” (Id. at p. 897.) Finally, although section 351 was again
amended in 2000, we find no reference to a private cause of action in that
particular portion of legislative history, despite the fact that the Legislature then
amended another Labor Code provision expressly referring to an employee‟s right
to bring an action. (Stats. 2000, ch. 876, § 3 [amending § 203.1 to add that penalty
“shall not apply in any case in which an employee recovers the service charge
authorized by Section 1719 of the Civil Code in an action brought by the
employee thereunder” (italics added)].)

11

---

persuasion.” (Crusader, supra, 54 Cal.App.4th at p. 133.) For reasons that
follow, plaintiff‟s arguments do not persuade us otherwise.
D. Plaintiff’s Arguments
While recognizing that section 351 is silent on whether employees may
bring a private cause of action, plaintiff argues that it would be “absurd” to
conclude that the Legislature would declare that gratuities belong to employees
and yet deny them access to the courts to enforce these property rights. Plaintiff
maintains, therefore, that the Legislature must have “implicitly created” such an
action when it amended section 351 in 1973 and 1975, and relies heavily on the
Restatement test (Rest.2d Torts, § 874A) for determining whether such an action
may be implied from the statute.7 (See Middlesex Ins. Co. v. Mann (1981) 124
Cal.App.3d 558 (Middlesex); Goehring v. Chapman University (2004) 121
Cal.App.4th 353 (Goehring); Jacobellis v. State Farm Fire & Casualty Co. (9th
Cir. 1997) 120 F.3d 171 (Jacobellis).) The “Restatement approach allows the
court itself to create a new private right to sue, even if the Legislature never
considered creation of such a right, and if the court is of the opinion that a private
right to sue is „appropriate‟ and „needed.‟ ” (Crusader, supra, 54 Cal.App.4th at
pp. 124-125 [rejecting Restatement approach to determine whether violation of
statute gives rise to private right to sue].) Plaintiff asserts that we “confirmed the

7
The Restatement test for determining tort liability for a violation of a statute
is as follows: “When a legislative provision protects a class of persons by
proscribing or requiring certain conduct but does not provide a civil remedy for
the violation, the court may, if it determines that the remedy is appropriate in
furtherance of the purpose of the legislation and needed to assure the effectiveness
of the provision, accord to an injured member of the class a right of action, using a
suitable existing tort action or a new cause of action analogous to an existing tort
action.” (Rest.2d Torts, § 874A.)
12

---

viability” of this test in Katzberg v. Regents of University of California (2002) 29
Cal.4th 300, 324 (Katzberg).
In Katzberg, we considered whether an individual may bring a damages
action based on an alleged violation of the due process clause of the state
Constitution (Cal. Const., art. I, § 7, subd. (a)), “in the absence of a statutory
provision or an established common law tort authorizing such a damage remedy
for the constitutional violation.” (Katzberg, supra, 29 Cal.4th at p. 303.) After an
exhaustive analysis, we determined there was nothing in the language of article I,
section 7, subdivision (a), nor was there any evidence in that section‟s legislative
history, “from which we [might] find, within that provision, an implied right to
seek damages for a violation of the due process liberty interest.” (Id. at p. 324.)
Only then did we apply the Restatement test (Rest.2d Torts, § 874A). (Katzberg,
supra, 29 Cal.4th at pp. 324-325.) While ultimately concluding that there was no
constitutional tort action for monetary damages, we did not end our inquiry with
the section‟s language or legislative history because we noted “we also have not
discovered any basis for concluding that a damages remedy was intended to be
foreclosed.” (Id. at p. 324; cf. id. at p. 330 (conc. & dis. opn. of Brown, J.
[concluding majority‟s extended analysis unnecessary].) Based on these
statements, plaintiff asserts that Katzberg should inform our decision here. We
conclude that Katzberg is distinguishable.
In Katzberg, we limited our endorsement of the Restatement test to
determining whether to “recognize a tort action for damages to remedy a
constitutional violation.” (Katzberg, supra, 29 Cal.4th at p. 325, italics added.)
Indeed, we noted that “with regard to most constitutional provisions, the words of
the provision do not on their own manifest any such intent” to support a damages
action. (Id. at p. 318.) In contrast, the case here concerns the availability of a
private action for a statutory violation. As noted above (see ante, at pp. 4-5), our
13

---

inquiry is different in that regard because we consider the statute‟s language first,
as it is the best indicator of whether a private right to sue exists. (See Moradi-
Shalal, supra, 46 Cal.3d at pp. 294-295; Vikco, supra, 70 Cal.App.4th at p. 62
[“provisions are themselves expression of legislative intent”].) Moreover, while
we noted in Katzberg there was nothing to suggest “that a damages remedy was
intended to be foreclosed” (29 Cal.4th at p. 324, italics added), the inquiry here is
more limited because we begin with the premise that a violation of a state statute
does not necessarily give rise to a private cause of action. (See ante, at p. 4;
Vikco, supra, 70 Cal.App.4th at p. 62; see also Crusader, supra, 54 Cal.App.4th at
p. 133.) Based on the foregoing, we decline to apply the Restatement test in this
context.8
Plaintiff nonetheless maintains that the only way an employee may recover
any misappropriated gratuities would be through a civil action. In support of this
argument, plaintiff contends that the Department of Industrial Relations, which is
charged with enforcing section 351, may only prosecute employers for
misdemeanor violations and does not have the authority to bring an action to

8
The case plaintiff heavily relies on to support his request to apply the
Restatement test here (Middlesex, supra, 124 Cal.App.3d 558) is distinguishable.
(Crusader, supra, 54 Cal.App.4th at pp. 128-129 [explaining in depth why
“Middlesex did not use section 874A . . . to create a wholly new cause of action
out of a regulatory statute”].) Thus, we also find unpersuasive those cases plaintiff
cites that rely on Middlesex in applying that test. (See Faria v. San Jacinto
Unified Sch. Dist. (1996) 50 Cal.App.4th 1939, 1947; Jacobellis, supra, 120 F.3d
at pp. 174-175.) Moreover, contrary to plaintiff‟s suggestion, Goehring is also
distinguishable. (Goehring, supra, 121 Cal.App.4th at p. 378 [Bus. & Prof. Code,
§ 6061‟s “refund language explicitly denotes a private right of action”]; Bus. &
Prof. Code, § 6061, subd. (h) [“If any school does not comply with these
requirements, it shall make a full refund of all fees paid by students” (italics
added)].) In the present case, there is no such language “expressly entitl[ing]
individuals to a refund or any other type of payment for violation of the statute.”
(Goehring, supra, 121 Cal.App.4th at p. 377.)
14

---

recover any misappropriated gratuities. (See §§ 354, 355.) In that regard, plaintiff
argues that there is no comprehensive scheme for enforcing section 351 because,
while section 351 has been amended numerous times since its official codification
in 1937, sections 354 and 355 have remained virtually unchanged since 1937.
(Stats. 1937, ch. 90, §§ 354, 355, p. 203; cf. Stats. 1983, ch. 1092, § 190, p. 4011
[amending § 354 to double the fine].)
Contrary to plaintiff‟s suggestion, our holding that section 351 does not
provide a private cause of action does not necessarily foreclose the availability of
other remedies. To the extent that an employee may be entitled to certain
misappropriated gratuities, we see no apparent reason why other remedies, such as
a common law action for conversion, may not be available under appropriate
circumstances. (See Moradi-Shalal, supra, 46 Cal.3d at pp. 304-305 [even
without private cause of action under statute, “courts retain jurisdiction to impose
civil damages or other remedies . . . in appropriate common law actions”]; see also
Civ. Code, § 3523 [“For every wrong there is a remedy”].)9 Likewise, “nothing
we hold herein would prevent the Legislature from creating additional civil or
administrative remedies, including, of course, creation of a private cause of action
for violation of” section 351. (Moradi-Shalal, supra, 46 Cal.3d at p. 305.)

9
We reject, however, plaintiff‟s contention that a violation of section 351 is
a per se violation of an employment contract. The case he relies on most heavily
is distinguishable. (Lockheed Aircraft Corp. v. Superior Court (1946) 28 Cal.2d
481, 486 [“upon violation of the section [1101], an employee has a right of action
for damages for breach of his employment contract”].) In Lockheed, we
recognized that another provision clearly and expressly provided for a private right
of action for the statutory violation. (Ibid., citing § 1105 [“Nothing in this chapter
shall prevent the injured employee from recovering damages from his employer
for injury suffered through a violation of this chapter”].)
15

---

CONCLUSION
Based on the above, we affirm the Court of Appeal‟s judgment and remand
the matter for further proceedings consistent with this opinion.
CHIN, J.
WE CONCUR:

GEORGE, C.J.
KENNARD, J.
BAXTER, J.
WERDEGAR, J.
MORENO, J.
CORRIGAN, J.
16

---

See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Lu v. Hawaiian Gardens Casino, Inc.
__________________________________________________________________________________

Unpublished Opinion

Original Appeal
Original Proceeding
Review Granted XXX 170 Cal.App.4th 466
Rehearing Granted

__________________________________________________________________________________

Opinion No.

S171442
Date Filed: August 9, 2010
__________________________________________________________________________________

Court:

Superior
County: Los Angeles
Judge: David L. Minning

__________________________________________________________________________________

Attorneys for Appellant:

Spiro Moss Barness, Spiro Moss, Dennis F. Moss; Law Offices of Andrew Kopel and Andrew Kopel for
Plaintiff and Appellant.

Arbogast & Berns and David Arbogast for Consumer Attorneys of California as Amicus Curiae on behalf
of Plaintiff Appellant.

__________________________________________________________________________________

Attorneys for Respondent:

Sheppard, Mullin, Richter & Hampton, Tracey A. Kennedy; Law Offices of Michael St. Denis and Michael
St. Denis for Defendants and Respondents.

Winston & Strawn, Anna Segobia Masters and Jennifer Rappoport for California Gaming Association as
Amicus Curiae on behalf of Defendants and Respondents.

---

Counsel who argued in Supreme Court (not intended for publication with opinion):

Dennis F. Moss
Spiro Moss
11377 West Olympic Boulevard, 5th Floor
Los Angeles, CA 90064-1683
(310) 235-2468

Tracey A. Kennedy
Sheppard, Mullin, Richter & Hampton
333 South Hope Street, 48th Floor
Los Angeles, CA 90071-1448
(213) 620-1780

---

Petition for review after the Court of Appeal affirmed in part and reversed in part the judgment in a civil action. The court limited review to the following issue: Does Labor Code section 351, which prohibits employers from taking "any gratuity or part thereof that is paid, given to, or left for an employee by a patron," create a private right of action for employees?

Opinion Information

Date:	Citation:	Docket Number:	Category:	Status:
Mon, 08/09/2010	50 Cal. 4th 592, 236 P.3d 346, 113 Cal. Rptr. 3d 498	S171442	Review - Civil Appeal	submitted/opinion due

Opinion Authors
Opinion	Justice Ming W. Chin

Dockets
Mar 24 2009	Petition for review filed   Appellant, Louie Hung Kwei Lu by counsel, Dennis F. Moss. order filed Feb. 11, 2009 modifying opinion with change in judgment.
Mar 24 2009	Record requested
Apr 9 2009	Received Court of Appeal record
Apr 29 2009	Petition for review granted; issues limited   The petition for review is granted. The issue to be briefed and argued is limited to the following: Does Labor Code section 351, which prohibits employers from taking "any gratuity or part thereof that is paid, given to, or left for an employee by a patron," create a private right of action for employees? Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, Moreno, and Corrigan, JJ.
May 1 2009	2nd record request   for balance of the record
May 6 2009	Received Court of Appeal record
May 11 2009	Certification of interested entities or persons filed   Attorney Dennis F. Moss, counsel for appellant (Louie Hung Kwei Lu)
May 12 2009	Certification of interested entities or persons filed   Tracey A. Kennedy, Sheppard Mullin, counsel for respondent (Hawaiian Gardens Casino)
May 18 2009	Request for extension of time filed   to and including July 20, 2009, to file Appellant's Opening Brief on the Merits
May 26 2009	Extension of time granted   On application of appellant and good cause appearing, it is ordered that the time to serve and file the Appellant's Opening Brief on the Merits is extended to and including July 20, 2009.
Jun 9 2009	Note: Mail returned and re-sent   to Attorney Michael St Denis, PC at address appearing on the State Bar's website.
Jul 21 2009	Opening brief on the merits filed Plaintiff and Appellant: Lu, Louie Hung KweiAttorney: Dennis F. Moss   Louie Hung Dwei Lu, et al. plaintiff and appellant Dennis F. Moss, Spiro Moss LLP, retained counsel and Andrew Kopel, counsel CRC 8.25(b)
Aug 14 2009	Request for extension of time filed   by Hawaiian Gardens Casino, Defendant and Respondent to file answer brief/merits to October 30, 2009
Aug 19 2009	Extension of time granted   On application of Respondent Hawaiian Gardens Casino and good cause appearing, it is ordered that the time to serve and file the Answer Brief on the Merits is extended to and including October 30, 2009.
Oct 30 2009	Answer brief on the merits filed Defendant and Respondent: Hawaiian Gardens Casino, Inc.Attorney: Tracey Adano Kennedy   by Respondent Hawaiian Gardens Casino
Nov 6 2009	Request for extension of time filed   for a 33-day extension of time to file reply brief on the merits to December 22, 2009. Dennis F. Moss and Andrew Kopel, counsel for appellant and class
Nov 10 2009	Extension of time granted   On application of appellant and good cause appearing, it is ordered that the time to serve and file the reply brief on the merits is extended to and including December 22, 2009.
Nov 18 2009	Note: Mail returned and re-sent   Attorney Andrew Ross Kopel to address appearing on the State Bar's website.
Dec 23 2009	Reply brief filed (case fully briefed) Plaintiff and Appellant: Lu, Louie Hung KweiAttorney: Dennis F. Moss   CRC 8.25(b)
Jan 21 2010	Application to file amicus curiae brief filed   California Gaming Association in support of Respondent Hawaiian Gardens Casino.
Jan 25 2010	Permission to file amicus curiae brief granted   The application of California Gaming Association for permission to file an amicus curiae brief in support of Respondent Hawaiian Gardens Casino is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Jan 25 2010	Amicus curiae brief filed Amicus curiae: California Gaming AssociationAttorney: Anna Segobia Masters
Jan 25 2010	Application to file amicus curiae brief filed   Consumer Attorneys of California in support of appellant. David M. Arbogast, counsel. CRC 8.25(b)
Jan 29 2010	Permission to file amicus curiae brief granted   Consumer Attorneys of California, in support of Plaintiff-Appellant David M. Arbogast, Counsel
Jan 29 2010	Amicus curiae brief filed Amicus curiae: Consumer Attorneys of CaliforniaAttorney: David Mills Arbogast
Feb 11 2010	Request for extension of time filed   to and including March 1, 2010 to file appellant's response to brief of Amicus Curiiae california Gaming Association. Dennis F. Moss, counsel.
Feb 19 2010	Extension of time granted   On application of appellant and good cause appearing, it is ordered that the time to serve and file Response to Amicus Curiae Brief of California Gaming Association is extended to and including March 1, 2010.
Feb 25 2010	Note: Mail returned and re-sent   to Andrew Ross Kopel at address appearing on the State Bar's website, and noted herein.
Mar 2 2010	Response to amicus curiae brief filed Plaintiff and Appellant: Lu, Louie Hung KweiAttorney: Dennis F. Moss   By appellant Louie H. Lu to AC Brief filed by California Gaming Association. CRC 8.25 (b)
May 5 2010	Case ordered on calendar   to be argued Tuesday, May 25, 2010, at 9:00 a.m., in San Francisco
May 14 2010	Stipulation filed   Stipulation by counsel Tracey Kennedy, that respondents have no objection to Justice Kennard's participation in the deliberations and decision in this matter notwithstanding her absence from oral argument.
May 17 2010	Stipulation filed   Stipulation by counsel Denis F. Moss, that appellant has no objection to Justice Kennard's participation in the deliberations and decision in this matter notwithstanding her absence from oral argument.
May 25 2010	Stipulation filed   Stipulation by counsel Dennis F. Moss, that appellant has no objection to Justice Corrigan's participation in the deliberations and decision in this matter notwithstanding her absence from oral argument.
May 25 2010	Stipulation filed   Stipulation by counsel Tracey Kennedy, that respondent has no objection to Justice Corrigan's participation in the deliberations and decision in this matter notwithstanding her absence from oral argument.
May 25 2010	Cause argued and submitted
Aug 6 2010	Notice of forthcoming opinion posted   To be filed on Monday, August 9, 2010 @ 10 a.m.

Briefs
Jul 21 2009	Opening brief on the merits filed Plaintiff and Appellant: Lu, Louie Hung KweiAttorney: Dennis F. Moss
Oct 30 2009	Answer brief on the merits filed Defendant and Respondent: Hawaiian Gardens Casino, Inc.Attorney: Tracey Adano Kennedy
Dec 23 2009	Reply brief filed (case fully briefed) Plaintiff and Appellant: Lu, Louie Hung KweiAttorney: Dennis F. Moss
Jan 25 2010	Amicus curiae brief filed Amicus curiae: California Gaming AssociationAttorney: Anna Segobia Masters
Jan 29 2010	Amicus curiae brief filed Amicus curiae: Consumer Attorneys of CaliforniaAttorney: David Mills Arbogast
Mar 2 2010	Response to amicus curiae brief filed Plaintiff and Appellant: Lu, Louie Hung KweiAttorney: Dennis F. Moss

Brief Downloads
Defendant Hawaiian Gardens Casino Answer Brief.pdf (4253849 bytes) - Defendant Hawaiian Gardens Casino Answer Brief
Consumer Attorneys of California Amicus Brief in Support of Plaintiff.pdf (48791 bytes) - Consumer Attorneys of California Amicus Brief in Support of Plaintiff
California Gaming Association Amicus Brief in Support of Defendant.pdf (1436503 bytes) - California Gaming Association Amicus Brief in Support of Defendant
Plaintiff Lu Answer Brief to California Gaming Association Amicus Brief.pdf (726189 bytes) - Plaintiff Lu Answer Brief to California Gaming Association Amicus Brief

If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website

Jan 28, 2011 Annotated by jholmes

FACTS Louie Hung Kwei Lu, appellant, was a card dealer at respondent, Hawaiian Gardens Casino, Inc. between 1997 and 2003. Hawaiian Gardens had a tip pooling policy that required dealers to contribute 15 to 20 percent of their tips into a tip pool bank account. Hawaiian Gardens then distributed the funds from the account to other service employees in the casino such as chip services people, hosts, and concierges. Employers, managers and supervisors did not receive funds from the account. Lu brought a class action suit against Hawaiian Gardens and its general manager, claiming that the tip pooling policy 1) constituted tortious conversion of property; 2) violated employee rights under California Labor Code sections 221, 351, 450, 1197, 2802; and 3) constituted an unfair business practice under unfair competition law (Bus. & Prof. Code § 17200 et seq.). Labor Code section 351 states that gratuity “is the sole property of the employee or employees to whom it was paid, given, or left for” and prohibits employers from these gratuities. PROCEDURAL HISTORY Regarding Lu’s claims under Labor Code sections 351 and 450, the trial court granted a motion for judgment on the pleadings for Hawaiian Gardens, holding that neither provision creates a private right of action. The trial court also granted Hawaiian Gardens’s subsequent motions for summary adjudication on Lu’s remaining causes of action. The Court of Appeals affirmed the judgment except on Lu’s claims under the unfair competition law, which it held presented triable issues of fact and should proceed. The Supreme Court granted Lu’s petition for review on the single issue of Labor Code 351. ISSUE Does California Labor Code section 351 create a private right of action by which employees can sue for violations of the statute? HOLDING No, California Labor Code section 351 does not create a private right of action. ANALYSIS Whether a statute grants a private party the right to sue depends on the legislative intent to create a private right of action under that statute. Legislative intent can be revealed in the language of the statute and in the legislative history of the statute. Statutory language can provide “clear, understandable, unmistakable terms” that indicate legislative intent to create a private right of action. The language of section 351 declaring gratuities to be the property of employees may suggest that employees can sue to recover tips just as one may sue to recover other property. However, the language does not meet the standard of unmistakable in the absence of explicit language about private rights of action. Furthermore, related sections prescribe remedies such as imprisonment or fines and charge the Department of Industrial Relations with the power to enforce the provisions, which may suggest that private suits are foreclosed. At best, the language of the statute is ambiguous. The legislative history also does not reveal a legislative intent to create a private right of action. The provision stating that gratuities are the property of the employee was added to Section 351 in 1973 to affirm the long-held belief that tips usually belonged to the server. Legislative Counsel at the time, however, did not recognize a right of action under this language. Additionally the provision was subject to exceptions; for example, employers were permitted to take an employee’s gratuity or deduct the equivalent from the employee’s minimum wage as long as they posted notice of the policy to their patrons. Amendments eventually eliminated the exceptions, but the purpose was to prevent employers from benefiting from employee tips, not to add a remedy of private suits. Because neither the statutory language nor the legislative history indicate a legislative intent to create a private right of action, Lu bears a heavy burden of persuasion to demonstrate that section 351 nonetheless authorizes private suits. Lu’s argument that the court should endorse the test found in the Restatement (Second) of Torts §874A does not meet this burden. The Restatement test states that if in the opinion of the court, a private right of action is appropriate and needed, the court will create an implied right of action. The court had endorsed this test in Katzenberg v. Regents of University of California (2002) 29 Cal. 4th 300, but Katzenberg is distinguishable because it concerned the recognition of a cause of action under the California constitution. Constitutional language rarely indicates an intent concerning remedies or enforcement whereas in statutes, language is the primary indicator of intent. An absence of language to create a private right of action in a statute suggests that such a remedy is foreclosed and therefore the Restatement test does not apply in the context of statutes. However, an employee could still seek recovery under a common law conversion action, and the legislature can amend the section 351 to add additional civil remedies such as a private suits. Judgment of the Court of Appeals was affirmed and the case remanded. TAGS Hawaiian Gardens Casino, casino, restaurant, gratuities, tips, tip pooling, private rights of action, employment, employee rights, employment remedies -Annotation by Jennifer Holmes

Related Media	California's Highest Court Rules That Employees Do Not Have A Private Right of Action Under Tip Misappropriation Statute
	Another Crack in the Community Tip Jar -- Lu v. Hawaiian Gardens Casino, Inc.