NOBLE v. DRAPER

Filed 1/31/08

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Placer)

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APPEAL from a judgment of the Superior Court of Placer County, Larry D. Gaddis, J. Affirmed in part and reversed in part.

Law Offices of Fernando F. Chavez and Anthony J. Palik for Plaintiffs and Appellants.

Rediger, McHugh & Hubbert, E.A. Hubbert, Jr. and Karen L. Turner for Defendants and Respondents.

In this case alleging employment relationships gone awry, plaintiffs Joaquin Noble (Noble), Jose Antonio Hernandez, Manuel Moreno, and Maria de Lourdes Rios de Noble (Maria Noble) appeal from a judgment entered in favor of defendants Martha Draper and Velasco, Inc., doing business as Cha-Chas Cocina Mexicana, following the trial courts granting of defense motions for separate trial of special defenses (Code of Civ. Proc., 597) and for judgment on the pleadings. We shall conclude the judgment must be reversed in part, because this civil action by some of the plaintiffs (Noble and Hernandez), alleging fraudulent inducement to enter employment, is not precluded by their prior pursuit of wage claims in an administrative forum before the Labor Commissioner pursuant to Labor Code section 98 et seq.^[1] We shall also conclude Morenos claims are precluded by the Labor Commissioners conclusion that he was not an employee, and we shall therefore affirm the judgment against Moreno. We shall also affirm judgment on the pleadings entered in favor of defendants as to a cause of action for intentional infliction of emotional distress, and we therefore affirm the judgment against Maria Noble, who was a plaintiff only as to this count.

FACTUAL AND PROCEDURAL BACKGROUND

In December 2004, plaintiffs (and Esteban Salazar, whom we do not discuss because he dismissed his case with prejudice and is not a party to this appeal) filed a complaint asserting eight counts:

The first three counts (breach of contract, statutory violation of overtime wage law, and breach of contract of good faith and fair dealing) were brought by Moreno alone, and they were dismissed with prejudice at his request on the day set for trial. We therefore need not discuss them.

The other counts were:

(4) fraud by intentional misrepresentation;

(5) fraud by negligent misrepresentation;

(6) false advertising;

(7) unfair business practices (Bus. & Prof. Code, 17200); and

(8) intentional infliction of emotional distress by Noble and Maria Noble.

The eighth count is the only count to which Maria Noble is a party. Accordingly, our reference to plaintiffs in this opinion excludes Maria Noble, except in our discussion of the eighth count.

The complaint alleged Noble, Maria Noble, and Jose Hernandez live in Mexico. Moreno lives in Sacramento County.

The complaint alleged plaintiffs lived and worked in Mexico before being induced by Draper to come to the United States (USA) to work in defendants restaurant in Placer County. The complaint alleged: Defendants placed advertisements in Mexican newspapers in November and December 2002, soliciting chefs to work in the USA. Noble, Hernandez, and Moreno (referenced in the complaint as employees despite the Labor Commissioners finding that Moreno was not an employee) responded to the ads by telephoning Draper, who interviewed them by phone and offered them jobs. Draper promised plaintiffs employment, thereby inducing them to quit their jobs in Mexico and incur the expense of traveling to the USA. They worked for defendants for a short period of time before defendants terminated the employment and failed to compensate plaintiffs for their work.

The fourth count, fraud by intentional misrepresentation, alleged that in November and December 2002, to induce plaintiffs to come to work for defendants, defendant Draper told plaintiffs that (1) she would assist them in obtaining legal status to work in the USA; (2) she would pay for their travel to the USA; (3) they would work a normal work week and enjoy the benefits and protections of the California labor laws; (4) defendants would compensate plaintiffs for their work; and (5) defendants would employ plaintiffs for a substantial period of time to justify the expense and hardship of relocating to the USA. The complaint alleged these representations were false, and Draper knew them to be false and made them with the intent to defraud plaintiffs. In reliance on these representations, plaintiffs were induced to leave Mexico and their jobs there and come to the USA, thereby incurring costs and substantial hardship. Plaintiffs alleged they would never have left their respective places of employment and incurred the expense of coming to the United States had they known the falsity of these material representations made by [Draper]. Plaintiffs claimed they suffered damages including the cost of travel, loss of employment opportunities, anxiety, and increased cost of living.

The fifth count alleged FRAUD BY NEGLIGENT MISREPRESENTATION on the same facts.

The sixth count alleged false advertising, in that defendants allegedly offered work in the USA to chefs working in Mexico who either did or did not have a work visa to work in the USA, and the advertisements were false in that Draper knew or should have known that plaintiffs would not be able to work in the USA. Plaintiffs incurred the expense of coming to the USA and worked for a short period of time, sharing with defendants their culinary experience and recipes, to defendants benefit.

The seventh count, for unfair business practices, alleged that the foregoing allegations constituted acts of unfair competition and other acts of impropriety under Business and Professions Code section 17200.

The eighth count, by Noble and Maria Noble for intentional infliction of emotional distress, alleged that on March 11, 2004, four days before a Labor Commissioner administrative hearing of Nobles claim for unpaid wages, an individual associated with defendants called Maria Noble by telephone and warned her that Noble should not appear to testify against defendants. The caller allegedly revealed he knew the Nobles address and the name of their daughter and allegedly threatened that if Noble testified, the daughter would be injured.

Although a date was set for jury trial, the entire case was disposed of without a trial. First, the trial court, at Salazars request, dismissed his entire case with prejudice. The court then dismissed with prejudice, at Morenos request, the first three counts (in which Moreno was the only plaintiff).

Defense counsel then asked to revisit a motion under Code of Civil Procedure sections 597 and 598, to bifurcate and proceed to a court trial on the special defenses of res judicata and collateral estoppel.^[2] Defendants argued that the plaintiffs had pursued claims for unpaid wages in an administrative forum before the Labor Commissioner and, having chosen that forum, were precluded from pursuing in a separate civil action any claims that could have been raised in the administrative forum. The defense motion requested judicial notice (which the court granted) of an ORDER, DECISION, OR AWARD OF THE LABOR COMMISSIONER (ODA) as to Noble (named in the ODA as Noble Coronado), a separate ODA as to Hernandez (named in the ODA as Hernandez Cisneros), and a Labor Commission document labeled, NOTICE - INVESTIGATION COMPLETED which rejected Morenos claim because [b]ased on the information presented both at the conference and prior to the conference, there was not an employee/employer relationship.

As to Noble, the ODA stated he filed a claim with the Labor Commissioner seeking wages for November, 29, 2002, to February 28, 2003, in the approximate amount of $36,540, plus interest, plus additional wages as a penalty under section 203, which penalizes an employer who fails timely to pay an employee who is discharged or who quits. A hearing was conducted, at which testimony, evidence and arguments were presented. The Labor Commissioner found Noble was employed by defendants as a chef under an oral agreement, from November 29, 2002, until February 28, 2003, when Noble quit. Noble did not give advance notice of his intent to quit, did not return for his final paycheck after 72 hours (as set forth by statute), and did not provide a mailing address, and he was therefore not entitled to statutory penalties. Noble performed services for defendants at the residences of the corporate officers by preparing dishes to be used in the restaurant, assisting in the development of menus, cooking, and cleaning. He lived for free at the Drapers residence. He helped with pre-opening duties before the restaurant opened, and then helped supervise employees and performed other duties of a chef. He was not an exempt managerial employee. Noble did not prove his claimed pay rate. Defendants admitted a weekly pay rate of $300 but failed to maintain time and payroll records. The Labor Commissioner ordered defendants to pay Noble $5,760 in back wages, plus $600 in interest.

The ODA regarding Hernandez said he filed a claim for wages of $48,541, plus wages under section 226.7 for failure to provide meal breaks, plus interest, plus the penalty under section 203. A hearing was held at which testimony, evidence, and arguments were presented. The ODA found Hernandez was employed by defendants as executive chef under an oral agreement, from January 18, 2003, until May 27, 2003, when Hernandez quit without notice. He did not return for his last paycheck or leave a mailing address and was therefore not entitled to penalties. The promised rate of compensation was $30,000 per year (less than Hernandez was claiming), with a promised raise once legal resident status was obtained. He performed services at the residence of defendants corporate officers by preparing dishes to be used in the restaurant, organizing and writing menus, setting up presentation dishes, developing a recipe book, shopping for items and food for the restaurant, and other pre-opening duties. When the restaurant opened, Hernandez supervised up to 40 staff members, interviewed and trained employees, prepared menus, decorated food for presentation, ordered items, and made out purchase orders. He performed the duties of an exempt manager or executive employee and was therefore not entitled to the overtime he claimed. He admitted he signed and received cash for checks written to Cesar Cisneros. Deducting that amount, the hearing officer found defendants owed Hernandez wages totaling $8,182, plus interest.^[3]

The trial court initially rejected the special defense of res judicata, but later accepted it, as described in the trial courts written order (which was incorporated by reference in the ensuing judgment):

The Defendants contend that because of the previous decisions of the State Labor Commissioner as to the Plaintiffs, they are precluded from relitigating any issue that was raised and decided in any prior proceedings or that could have been litigated in their original complaints with the Labor Commissioners office. [Citation.] Counsel for the Defendants additionally raised the contention that under multiple legal theories on which recovery might be predicated one injury gives rise to only one claim for relief citing Slater v. Blackwood (1975) 15 Cal.3d 791. The matter having been argued by counsel, the court issued its tentative ruling that the Fourth, Fifth, Sixth and Seventh Causes of Action [misrepresentation claims and unfair business practices] did not meet the criteria for the application of res judicata in that the court questioned whether the complaints contained in those causes of action could have been brought before the State Labor Commissioner. The order went on to describe that, two days later, defense counsel told the court he had advised plaintiffs counsel on the preceding day of an intent to ask the court to revisit the issue on the ground that section 96, subdivision (d),^[4]specifically authorizes the Labor Commissioner to handle claims of misrepresentation of the conditions of employment. The trial court accordingly granted the defense motion to dismiss the three misrepresentation claims (counts four, five, and six) based on res judicata. The court dismissed the unfair practices claim (seventh count) on the ground it was derivative of the misrepresentation claims.

The trial court also issued a written order granting judgment on the pleadings as to the eighth count (intentional infliction of emotional distress), stating, The court noted that you cannot tell from the pleadings where the events alleged took place, the identity of the person complained of, and did not put anyone on notice about who did what or when or where. Counsel for the Plaintiffs . . . stated for the record that the Plaintiffs did not know who committed the actions complained of.

Plaintiffs appeal from the ensuing JUDGMENT ON PRETRIAL ORDERS, which stated (1) Salazars claims were dismissed with prejudice at his request; (2) Morenos contract claims (first, second, and third counts) were dismissed with prejudice at his request; (3) the fourth, fifth, sixth, and seventh counts were dismissed under the doctrines of res judicata and collateral estoppel; and (4) judgment on the pleadings was entered in favor of defendants on the eighth count for intentional infliction of emotional distress.

DISCUSSION

I. Standard of Review

On appeal from a motion granting judgment on the pleadings, we accept as true the facts alleged in the complaint and review the legal issues de novo. (Angelucci v. Century Supper Club (2007) 41 Cal.4th 160, 166.) In reviewing the trial courts ruling to dismiss the fourth, fifth, sixth and seventh counts on the grounds of res judicata and collateral estoppel, we apply de novo review since the matter presents a question of law. (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 800-801.)

II. Res Judicata/Collateral Estoppel

Plaintiffs contend the trial court erred in concluding that res judicata and collateral estoppel barred the claims for fraud, negligent misrepresentation, false advertising, and the derivative unfair business practices claim (collectively, the misrepresentation claims). We shall conclude collateral estoppel does not apply here (except as to Moreno, whom we discuss post). As to the claim preclusion aspect of res judicata, we shall conclude that, even assuming defendants are correct that the wage claims and misrepresentation claims involved the same primary right, res judicata does not apply because the Labor Commissioner lacked jurisdiction over the misrepresentation claims.

A. Noble and Hernandez

Res judicata [claim preclusion] describes the preclusive effect of a final judgment on the merits. Res judicata . . . prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. Collateral estoppel [issue preclusion] precludes relitigation of issues argued and decided in prior proceedings. [Citation; fn. omitted.] Under the doctrine of res judicata, if a plaintiff prevails in an action, the cause is merged into the judgment and may not be asserted in a subsequent lawsuit; a judgment for the defendant serves as a bar to further litigation of the same cause of action. [] A clear and predictable res judicata doctrine promotes judicial economy. Under this doctrine, all claims based on the same cause of action must be decided in a single suit; if not brought initially, they may not be raised at a later date. Res judicata precludes piecemeal litigation by splitting a single cause of action or relitigation of the same cause of action on a different legal theory or for different relief. [Citation.] (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896-897, italics omitted.)

Whereas res judicata bars claims that could have been raised in the first proceeding regardless of whether or not they were raised (Torrey Pines Bank v. Superior Court (1989) 216 Cal.App.3d 813, 821), collateral estoppel bars only issues that were actually and necessarily decided in the earlier litigation.^[5] (People v. Garcia (2006) 39 Cal.4th 1070, 1076.)

Res judicata and collateral estoppel can be applied to administrative decisions generally. [U]nless a party to a quasi-judicial administrative agency proceeding challenges the adverse findings made in that proceeding, by means of a mandate action in superior court, those findings are binding in later civil actions. (Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 65.) [C]ollateral estoppel may be applied to decisions made by administrative agencies [when] an administrative agency is acting in a judicial capacity and resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate . . . . [Citations.] (People v. Garcia, supra, 39 Cal.4th at p. 1076.) Labor Commissioner hearings under section 96 meet this standard.

Res judicata and collateral estoppel additionally have specific application to Labor Commissioner decisions on wage claims under section 98, by virtue of section 98.2,^[6]which gives the administrative order the force of a final, binding judgment in the event (as was the case here) the losing party does not seek judicial review of the administrative order.^[7]

However, res judicata will bar a lawsuit only if the claim could have been raised in the prior proceeding. (People v. Damon (1996) 51 Cal.App.4th 958, 974-975.)

Here, defendants have failed to show the Labor Commissioner had jurisdiction to adjudicate the claims plaintiffs allege in this lawsuit -- fraud, negligent misrepresentation, false advertising, and a statutory claim of unfair business practices under the Business and Professions Code, all arising from defendants allegedly inducing plaintiffs to enter an employment contract. The jurisdictional authority for the claims that were administratively adjudicated is found in section 98,^[8]which is limited to claims for wages, penalties, and other demands for compensation properly before the division [Division of Labor Standards Enforcement] or the Labor Commissioner . . . .

Administrative agencies have only such powers as have been conferred on them, expressly or by implication, by Constitution

or statute. (Ferdig v. State Personnel Bd. (1969) 71 Cal.2d 96, 103.) The Labor Code generally gives the Division of Labor Standards Enforcement (of which the Commissioner is the Chief) the authority to enforce the provisions of the Labor Code and all state labor laws the enforcement of which is not specifically vested in any other officer, board, or commission. ( 21, 79, 82, 95.) None of the claims at issue in this appeal alleged violation of any provision of the Labor Code or other state labor laws.

Story Continues as Part II .

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^[1]Undesignated statutory references are to the Labor Code.

^[2]In a footnote in their opening brief on appeal, plaintiffs say the motion was brought without proper notice. We disregard points not adequately briefed. (Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979.)

^[3]We disregard plaintiffs assertion that they argued defendants were delinquent in paying the administrative awards. The assertion is not supported by the cited portion of the record, and in any event, that claim is not part of this lawsuit.

^[4]Section 96 provides: The Labor Commissioner and his or her deputies and representatives authorized by him or her in writing shall, upon the filing of a claim therefor by an employee, or an employee representative authorized in writing by an employee, with the Labor Commissioner, take assignments of: [] (a) Wage claims and incidental expense accounts and advances. [] (b) Mechanics and other liens of employees. [] (c) Claims based on stop orders for wages and on bonds for labor. [] (d) Claims for damages for misrepresentations of conditions of employment. [] (e) Claims for unreturned bond money of employees. [] (f) Claims for penalties for nonpayment of wages. [] (g) Claims for the return of workers tools in the illegal possession of another person. [] (h) Claims for vacation pay, severance pay, or other compensation supplemental to a wage agreement. [] (i) Awards for workers compensation benefits in which the Workers Compensation Appeals Board has found that the employer has failed to secure payment of compensation and where the award remains unpaid more than 10 days after having become final. [] (j) Claims for loss of wages as the result of discharge from employment for the garnishment of wages. [] (k) Claims for loss of wages as the result of demotion, suspension, or discharge from employment for lawful conduct occurring during nonworking hours away from the employers premises. (Italics added.)

^[5]The five threshold requirements of collateral estoppel are: (1) the issue to be precluded must be identical to that decided in the prior proceeding; (2) the issue must have been actually litigated at that time; (3) the issue must have been necessarily decided; (4) the decision in the prior proceeding must be final and on the merits; and (5) the party against whom preclusion is sought must be in privity with the party to the former proceeding. (People v. Garcia (2006) 39 Cal.4th 1070, 1077.)

^[6]Section 98.2 provides in part: (d) If no notice of appeal of the order, decision, or award is filed within the period set forth in subdivision (a) [10 days after service of notice of the order, decision, or award], the order, decision, or award shall, in the absence of fraud, be deemed the final order.
(e) The Labor Commissioner shall file, within 10 days of the order becoming final pursuant to subdivision (d), a certified copy of the final order with the clerk of the superior court of the appropriate county unless a settlement has been reached by the parties and approved by the Labor Commissioner. Judgment shall be entered immediately by the court clerk in conformity therewith. The judgment so entered has the same force and effect as, and is subject to all of the provisions of law relating to, a judgment in a civil action, and may be enforced in the same manner as any other judgment of the court in which it is entered.

^[7]Both sides in this appeal appear to accept the finality of the administrative orders.

^[8]Section 98, subdivision (a), provides in part: The Labor Commissioner shall have the authority to investigate employee complaints. The Labor Commissioner may provide for a hearing in any action to recover wages, penalties, and other demands for compensation properly before the division or the Labor Commissioner, including orders of the Industrial Welfare Commission, and shall determine all matters arising under his or her jurisdiction. It shall be within the jurisdiction of the Labor Commissioner to accept and determine claims from holders of payroll checks or payroll drafts returned unpaid because of insufficient funds, if, after a diligent search, the holder is unable to return the dishonored check or draft to the payee and recover the sums paid out.