Three strip clubs are asking a Denver judge to stop city investigators from collecting dancers’ contracts, contact information and pay records in a first-of-its-kind wage-theft probe.
RCI Holdings, which owns PT’s Showclub, Diamond Cabaret and PT’s Centerfold, sued the city’s Labor Division this week. It claims that the division’s issuance of “overreaching and unjustified” subpoenas is “an alarming abuse of power” that threatens privacy rights.
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“It appears to the clubs’ legal counsel that Denver Labor is operating with the belief that they have unfettered access to private business records, wasting thousands of taxpayer dollars in an attempt to unilaterally bolster the limited and narrow subpoena powers granted to them by City Council,” RCI said in a statement when asked about Tuesday’s lawsuit.
“We are committed to ensuring that this investigation proceeds within legal and reasonable boundaries and fully intend to bring Denver Labor to answer before the district courts in vehement defense of our legal and ethical business practices,” it added.
In April, the Denver City Council voted unanimously to give Denver Labor the power to subpoena documents from companies that are suspected of stealing wages. Prior to that vote, investigators could only fine companies that didn’t willingly turn over their files.
“Through this new legislation passed by City Council and my team’s hard work, we’re making it clear that we’re watching for law breakers who are stealing from workers and undercutting fair business,” Denver Auditor Timothy O’Brien said in a Sept. 17 press release.
But his office’s first use of its new power is now being contested in court.
RCI, which is being investigated for allegedly misclassifying exotic dancers to avoid paying them appropriately, said that dancers at its clubs are not employees or workers of any sort “but rather licensees who pay a site rental fee to use” RCI’s locations, according to its lawsuit.
RCI claims it is contractually prohibited from releasing contact information about its dancers to the government. The strip club operator also takes issue with the city’s verbiage.
“The penalty determinations used alarmingly paternalistic language, referring to entertainers as ‘nude dancers’ and accusing the (clubs) of failing to treat the entertainers ‘with dignity and fairness,’” RCI’s lawyers, all of whom are women, said of letters that the city sent RCI in June, “rather than recognizing that these entertainers have the agency to negotiate their own contractual relationships…which they have chosen to keep confidential.”
Tayler Overschmidt, a spokeswoman for O’Brien, defended the subpoenas Wednesday.
“A neutral hearing officer already reached the right decision in rejecting these clubs’ arguments,” she said in a statement to BusinessDen. “We’re confident the courts will too, and that we’ll finally be able to ensure all workers involved get the money they earned.”
RCI said that hearing officer’s decision is one reason the subpoenas should be quashed.
According to RCI, Denver Labor Executive Director Matthew Fritz-Mauer appointed Ellen Kelman to hear the matter in July. Before he took his current job, Fritz-Mauer worked at the law firm of Kelman Buescher — where his boss was Ellen Kelman, according to RCI.
After refusing to recuse herself, Kelman ruled in favor of Denver Labor on several points, including at a hearing where she called Fritz-Mauer “Matt,” RCI said. It is asking District Court Judge Jon Olafson to overturn Kelman’s decision and quash the subpoenas.
“Plaintiffs were denied procedural due process when they were deprived of a fair and neutral hearing due to the inherent conflict of interest,” the company said.
Its lawyers are Leah VanLandschoot, Ruth McLeod and Morgan Pullam with The Litigation Boutique firm in Denver. The City Attorney’s Office will represent Denver Labor.
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