Levy v. Miller

Filed 6/20/07 Levy v. Miller CA1/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

Rubin, Palache, Miller & Associates, Inc. (RPMA) and its president, Jahn Miller, appeal from a judgment awarding damages to former employee Brian Levy for RPMAs failure to timely pay wages. We conclude Miller, a corporate officer of RPMA, is not personally liable for the judgment, but otherwise affirm. Appellants also appeal from a postjudgment award of attorney fees and costs. We similarly conclude Miller was not personally liable for attorney fees and costs, but otherwise affirm that order.

FACTUAL AND PROCEDURAL BACKGROUND^[1]

Levy was a solicitor employed by two companies that provided public adjusting services. He was hired to visit loss sites and secure clients for his employers, who represented insureds in negotiations with their insurers after a compensable loss. From 1988 until August 1994, Levy worked in Southern California for Rubin, Palache & Associates (RPA), a partnership owned by Michael Rubin and Michael Palache. Beginning in August 1994, he went to work in Northern California for RPMA.^[2]

The terms of Levys employment with RPMA were set forth in a letter signed by Jahn Miller, its president. Levys compensation included a $3,000 monthly salary, a draw against future commissions, commissions of 15 percent, a salesmens override of 3 percent, and a 2 percent share in gross profits. Levy became entitled to a commission when he participated in the successful solicitation of a potential client, and the monies were disbursed to him in the pay period after RPMA received its fee from the client. Levys employment with RPMA terminated in March 1998.^[3]

Levys third amended complaint alleged causes of action against RPMA for breach of contract, violation of the Labor Code, and intentional and negligent misrepresentation and concealment.^[4] The complaint sought compensatory damages, interest, and statutory penalties and attorney fees for the Labor Code violations. The complaint also included allegations that RPMA and RPA were the alter ego of each of their members or shareholders, but the trial court granted RPMAs motion for nonsuit on that issue.

The court conducted a bench trial beginning in January 2003 and concluding in July 2003. After considering the parties posttrial briefs, the court issued a 30-page statement of decision. The court concluded plaintiff was entitled to specified compensation under his employment contract, and that RPMA violated the Labor Code by failing to pay those amounts when due.^[5] The court entered judgment for Levy against RPMA in the amount of $43,937.93. The court also found RPMA president Miller individually liable, based on his personal conduct that breached Levys contract and violated the Labor Code, and entered judgment against Miller in the amount of $24,096.93.^[6] The court further concluded Levy was entitled to recover attorney fees from RPMA and Miller under Labor Code section 218.5. The court ruled against Levy on his causes of action for intentional and negligent misrepresentation, because it found there was no meaningful evidence that would support a claim that [Levy] was induced by negligent or intentional conduct to leave RPA and accept employment in Northern California with RPMA. RPMA and Miller timely appealed from both the judgment and the order awarding Levy attorney fees, and we ordered the appeals consolidated at appellants request.

DISCUSSION

A. Millers Personal Liability

It was error for the trial court to hold Miller personally liable for his acts as a corporate officer once it rejected alter-ego liability. The court concluded Miller was liable in part based on [a general] agency allegation set forth in paragraph 8 of the [complaint]. But [u]nder the common law, corporate agents acting within the scope of their agency are not personally liable for the corporate employers failure to pay its employees wages. (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1087; accord, Jones v. Gregory (2006) 137 Cal.App.4th 798, 800, 804, 811 [concluding CEO could not be held individually liable for his corporations failure to pay wages and penalties due under the Labor Code].)

Respondent relies on a general rule that [c]orporate officers are of course personally liable for torts committed by them in the course of their employment . . . . (1 Marsh et al., Marshs Cal. Corporation Law (4th ed. 2000)  10.16, p. 10-88 (rel. 2001-2 Supp.).) But Miller was held personally liable on causes of action for breach of contract and violations of the Labor Code, and they were brought only against RPMA.^[7] Moreover, the court granted judgment in favor of RPMA and Miller on the only torts alleged in the complaint, intentional and negligent misrepresentation. The authority RPMA relies upon for the general rule also recognizes that [i]n general, corporate officers are privileged to participate in their representative capacities in a breach of a contract by their corporate principal. (1 Marsh et al., supra, at p. 10-90.) No exception to that rule was shown here. The judgment holding Miller individually liable is reversed.

B. Labor Code Penalties

RPMA contends that Levy was not entitled to statutory penalties because it did not violate the Labor Code.^[8] But RPMA has not demonstrated that the courts findings of Labor Code violations were not supported by substantial evidence. (See Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881 [appellant must demonstrate there is no substantial evidence to support the challenged findings, and must set forth all the material evidence]; accord, Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246 [when appellants brief ignores evidence favorable to respondent, the appellate court may treat the substantial evidence issues as waived]; see also Toigo v. Town of Ross (1998) 70 Cal.App.4th 309, 317 [when appellant fails to set forth all material evidence, court may presume the record contains evidence to sustain every finding of fact].)

Although RPMA contends that there were no commissions due Levy at the time he resigned, the trial court found: The evidence further supports . . . Levys contention that he earned his salary, draw and car allowance on the first and 15th of each month, and that these earnings were based on work performed the previous weeks. RPMAs stop payment on Levys March check, and [its] failure to pay Levy for salary resulted in the nonpayment of wages then due. The court found RPMA failed to pay Levy the sums to which he was entitled under his employment contract. The court determined the dates of the violations and the applicable statutory penalties. The court noted the uncontested evidence . . . fixed the statutory penalty at $7,912.08 per violation. The court also observed that its calculation of penalties does not take into account that a separate penalty could be assessed for each separate instance in which Defendant separately withheld subsequently received commissions. RPMA argues it was engaged in a good faith dispute regarding the commissions owed to Levy. But the trial court found there was no credible evidence of a good faith effort to comply with RPMAs statutory obligations, and that RPMA intentionally refused to pay Levys wages when due. RPMA has not demonstrated that the courts findings lack support by substantial evidence.

C. Liability for Diverted Commissions

In April 1999, RPMA sent RPA $14,604.21 of commissions then owing to Levy, allegedly to satisfy a debt owed to RPA by Levy.^[9] RMPA argues its action was reasonable because it notified Levy in advance of its intention to divert the commission payment, and Levy did not object. But the trial court concluded that Levy had no legal duty to respond, and that [u]nder the Labor Code, the duty is placed upon the employer to pay the employee the undisputed portion of the wages which are claimed to be due. The court also determined that Defendants had no right to transfer money, assert an off-set, withhold or make any deductions from Plaintiffs wages which were conceded as due. RPMA cites no authority to support its suggestion that Levy should be estopped to assert his right to the wages due, or in support of its diversion of Levys commissions to RPA.^[10]

D. Attorney Fees

RPMA argues that attorney fees should not have been awarded under Labor Code section 218.5 because Levy could have resolved the matter without litigation before the State Labor Commission.^[11] But RPMA does not argue that Levy was legally required to file with the Commission before filing suit, nor does RPMA cite any authority to support such a proposition.^[12] (Cf. Smith v. Rae-Venter Law Group (2002) 29 Cal.4th 345, 350 [when an employer fails to pay wages, an employee has two optionseither to file a civil action in court, or to file a wage claim with the Labor Commissioner].) RPMA also neglects to mention that the trial court specifically found Levys attorney fees award should not be reduced because he filed suit without first filing a wage claim. The court commented: Some of the apparent complexity of this action is a product of a self fulfilled prophecy of heightened and unrealistic expectations, but, at core, the case exceeds the far simpler scenario of a typical proceeding before the Labor Commissioner. Nor does RPMA argue the trial court abused its discretion in setting the amount of fees payable to Levy.^[13] (See PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095 [experienced trial judge is in better position to evaluate legal services rendered in trial court, and fee award will not be disturbed unless clearly wrong]; accord, Childrens Hospital & Medical Center v. Bonta′ (2002) 97 Cal.App.4th 740, 782.) We agree with appellants, however, that attorney fees and costs should not have been awarded against Miller individually, for the reasons explained above in Section A.

DISPOSITION

That portion of the judgment imposing individual liability on Jahn Miller, and the portion of the order awarding attorney fees/costs against him personally, is reversed. The

judgment and attorney fees/costs order are otherwise affirmed. Each party to bear their own costs on appeal.

_________________________

Siggins, J.

We concur:

_________________________

McGuiness, P.J.

_________________________

Parrilli, J.

Publication courtesy of California pro bono lawyer directory.

Analysis and review provided by Chula Vista Property line Lawyers.

^[1] Our summary of the facts is drawn largely from the trial courts 30-page statement of decision.

^[2] The shareholders of RPMA include Miller (50 percent), Rubin (25 percent) and Palache (25 percent).

^[3] The trial court found that Levy established he was fired after he attempted to quit effective two weeks after March 4, 1998.

^[4] The complaint also included causes of action against RPA and its individual partners for breach of oral contract, and for intentional and negligent misrepresentation and concealment. Those claims were denied by the trial court, as were the cross-claims asserted by RPA and its individual partners. They are not at issue on this appeal.

^[5] The court found Levy had shown he was entitled to contractual damages of 2 percent of gross revenues, in the amount of $3,568.40; a 3 percent salesmens override, in the amount of $6,040.69; and the recovery of diverted commissions paid by RPMA to RPA, in the amount of $14,604.21. The court found RPMA was liable for statutory penalties because it failed to pay wages due at the time Levy was terminated in March 1998, diverted his commissions to RPA in April 1999, and failed to timely pay commissions that became due in May 1999, June 1999, and February 2000.

^[6] Miller stopped payment on Levys March 1998 payroll check, sent $14,604.21 in Levys commissions to RPA, and delayed payment of Levys commissions earned after April 29, 1999. The court concluded: These actions were not taken to promote the interests of the Corporation. To the contrary, Miller disregarded his responsibilities as a corporate officer and exposed the Corporation to unnecessary litigation and civil penalties to pursue a course of conduct designed to harm a former employee who elected to pursue employment elsewhere.

^[7] In paragraph 32, under the second cause of action for breach of contract against RPMA, the complaint alleges: The above list of breaches is not intended to be complete or exclusive, but merely illustrative of the nature of the breaches by Defendants Miller and RPMA, INC. But none of the specifically alleged breaches listed above charge defendant Miller with any acts. Nor do the complaints causes of action for violation of the Labor Code charge conduct by Miller that could give rise to his individual liability.

^[8] The Labor Code provides, in relevant part: If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately. ( 201, subd. (a).) If an employee not having a written contract for a definite period quits his or her employment, his or her wages shall become due and payable not later than 72 hours thereafter . . . . ( 202, subd. (a).) If an employer willfully fails to pay, without abatement or reduction, . . . any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days. ( 203.) In case of a dispute over wages, the employer shall pay, without condition and within the time set by this article, all wages, or parts thereof, conceded by him to be due, leaving to the employee all remedies he might otherwise be entitled to as to any balance claimed. ( 206, subd. (a).)

^[9] RPMA contends Levys draw at RPA exceeded his commissions at the time he moved to Northern California to work for RPMA, and that RPA loaned Levy $10,000 to assist in his move.

^[10] RPMA also contends the commissions diverted to RPA included the Purcell commission, which should be credited to RPMA in the amount of $2,877.66. But the trial court found the Purcell commission was due in May 1999, and was paid to the court in December 1999. RPMA has not shown that finding was not supported by substantial evidence. The judgment credited RPMA for the amounts deposited with the court.

^[11] Labor Code section 218.5 provides: In any action brought for the nonpayment of wages . . . the court shall award reasonable attorneys fees and costs to the prevailing party if any party to the action requests attorneys fees and costs upon the initiation of the action. Levys complaint sought attorney fees pursuant to the statute, as did RMPAs answer.

^[12] At the hearing on attorney fees in the trial court, RPMAs counsel in fact acknowledged that Mr. Levy does have a choice to go to the Court versus the Labor Commissioner . . . [and that] Mr. Levy is certainly entitled to come to the superior court . . . . The court also stated that given the contentious history of this case which continues through today, I dont fault Mr. Levy at all for having elected to proceed by way of civil litigation.

^[13] The record indicates Levy requested attorney fees in the amount of $333,222, and the trial court awarded $31,250 for attorney fees jointly and severally against RPMA and Miller. Levys memorandum of costs claimed a total of $40,122, of which the court awarded him $8,442, after RPMA and Miller moved to tax costs.