Filed 11/30/18 Andrews v. Lawrence Livermore Natl. Security, LLC CA1/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

In September 2015, after six years of litigation, Elaine Andrews and 128 other individual plaintiffs settled a wrongful termination action against Lawrence Livermore National Security, LLC (LLNS). The combined value of the settlements totaled over $37 million, effected through individual agreements modeled on a form agreement and executed by and for each plaintiff.

The amount allocated to each plaintiff included not only the money the individual would ultimately receive, but also LLNS’s employer’s share of the payroll taxes that would be due on the portion of the payments to be taxed as wages. Specifically, the settlement agreement allocates 34.33% percent of the payment to each plaintiff for “interest and litigation costs” and 65.67% for “alleged economic damages,” to be made in “equal installments, less appropriate federal and state withholding and LLNS’s share of all payroll taxes, on or before each of the following dates: September 30, 2015, January 15, 2016, and January 15, 2017.” LLNS paid the first installment on September 30, 2015. Plaintiffs dismissed their action the same day.

In January 2016 plaintiffs filed their First Amended Complaint for Declaratory and Injunctive Relief. The first cause of action sought a judicial declaration that “a. The provision of the Release purporting to require Plaintiffs to pay Defendant’s share of the payroll taxes is contrary to public policy and illegal, and therefore void. [¶] b. Defendant illegally withheld its share of the payroll taxes from the first and second installments payable to Plaintiffs in settlement of their claims in the Andrews Litigation. [¶] c. Alternatively, to the extent the payroll tax provision is valid, Defendant is required to make a pretax deduction for its share of the payroll taxes from the amounts payable to each plaintiff.” In the second cause of action, plaintiffs asked the court to enjoin LLNS from “a. Deducting its share of the payroll taxes from the third installment of the settlement in the Andrews Litigation payable to Plaintiffs on or before January 15, 2017. [¶] b. Refusing to refund its share of the payroll taxes illegally withheld from the first and second installments, with interest. [¶] c. Alternatively, to the extent the payroll tax provision is valid, refusing to make a pretax deduction for its share of the payroll taxes from the amounts payable to each plaintiff, with interest.”

LLNS demurred. It argued that: (1) it was entirely legal to structure the settlement agreement to include the employer’s share of payroll taxes generated by the settlement in the gross settlement amount; (2) declaratory and injunctive relief were unavailable because plaintiffs had an adequate remedy at law through a breach of contract action for monetary damages; and (3) the complaint in effect sought reformation of the settlement agreement to preserve the gross settlement amounts while excising the employer payroll tax provision, but failed to plead facts that would support reformation.

The trial court sustained the demurrer. The court found plaintiffs’ arguments that the payroll tax provision was illegal or void were unsupported by law and that plaintiffs failed to “show that there is anything void, illegal or unenforceable about characterizing the . . . payroll taxes as an after-tax deduction from the amounts paid to Plaintiffs,”

The court also found that equitable relief was unavailable. “Plaintiffs’ allegations show an existing breach of contract with regard to the first and second payments under the Settlement Agreement. Plaintiffs have not characterized any of their claims as a breach of contract or reformation claim, but they seek to recover sums deducted from the first and second payments. Declaratory relief is prospective in nature. Plaintiffs cannot obtain monetary relief from Defendant’s past conduct under their claims for declaratory relief or injunctive relief. Thus, Plaintiffs must bring a claim for damages with regard to the first and second payments and claims for declaratory relief and injunctive relief are not appropriate with regard to those payments.

“In light of the fact that Plaintiffs have not stated a cause of action for declaratory relief based on losses incurred at the time of the first and second payments, the court is justified, under the circumstances, in finding that there is no actual controversy with regard to the future rights of the parties. The right to declaratory relief, like injunctive relief, is equitable. If the face of the pleadings does not allege facts stating a viable claim for monetary relief resulting from the first and second payments, there is no reason for the court to exercise its equitable powers to declare the rights of the parties with regard to the third payment. . . .

“Similarly, there is no equitable basis for a claim for injunctive relief to enjoin future conduct, unless facts are alleged supporting a right to recover damages for the same conduct committed in the past. On the facts alleged, the Second Cause of Action for injunctive relief fails to state a cause of action.”

The court granted leave to amend the complaint to state a cause of action for reformation, specifically permitting plaintiffs to allege “facts supporting a claim for monetary damages with regard to the first and second payments under the Settlement Agreement, and a claim for injunctive and/or declaratory relief with regard to the third payment.”

Appellants declined to amend, and the case was dismissed with prejudice. Appellants timely appealed from the judgment of dismissal. But in January and February, 2017, LLNS delivered the third and final settlement payment checks for each of the 129 plaintiffs.[1] No further amounts remain to be paid under the settlement agreements.

DISCUSSION

On February 15, 2017, LLNS filed a motion to dismiss this appeal as moot. This court deferred ruling on the motion until consideration of the appeal on its merits. We do so now, and agree the appeal is moot.

“It is well settled that an appellate court will decide only actual controversies and that a live appeal may be rendered moot by events occurring after the notice of appeal was filed. We will not render opinions on moot questions or abstract propositions or declare principles of law which cannot affect the matter at issue on appeal. [Citation.] This rule has regularly been applied when injunctive relief is sought but, pending appeal, the act sought to be enjoined has been performed. [Citation.]” (Daily Journal Corp. v. County of Los Angeles (2009) 172 Cal.App.4th 1550, 1557.) Thus, for example, Giles v. Horn (2002) 100 Cal.App.4th 206 was an appeal in an action to enjoin as illegal a county’s expenditure of public funds to hire private contractors to provide services under a state welfare program. Because those contracts expired and were fully performed pending appeal, the appeal was dismissed as moot. (Id. at pp. 227-228; see Jennings v. Strathmore Public Utility Dist. (1951) 102 Cal.App.2d 548, 549 [appeal in action to declare a public utility district contract invalid after the work was completed was moot].)

It is also settled that “ ‘[d]eclaratory relief operates prospectively to declare future rights, rather than to redress past wrongs. [Citation.]’ [Citations.] A declaratory judgment ‘ “serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs; in short, the remedy is to be used in the interests of preventive justice, to declare rights rather than execute them.” ’ ” (County of San Diego v. State of California (2008) 164 Cal.App.4th 580, 607-608 [declaratory judgment stating county was owed a certain sum for costs of providing state-mandated programs and services was improper; “[t]he portion of the judgment awarding the Counties the amount of their reimbursement claims as declaratory relief does not operate prospectively to declare future rights; it redresses the State’s ‘past wrongs’ in failing to meet its constitutional obligations . . . ”]; see also Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909-910; Gafcon, Inc. v. Ponsor & Associates (2002) 98 Cal.App.4th 1388, 1403 (Gafcon); Travers v. Louden (1967) 254 Cal.App.2d 926, 929.)

Plaintiffs argue their appeal is not moot because LLNS’s quarterly federal tax return covering the third installment was not due until April 30, 2017, approximately six weeks after plaintiffs filed their opposition to the motion to dismiss. Moreover, they add, even if LLNS had already filed the quarterly return, it could file a corrected return with the tax authorities “allowing Defendant to adopt Plaintiffs’ construction.” No matter. There is no existing controversy. The parties’ dispute concerns who was responsible under the settlement agreements for paying LLNS’s share of the payroll taxes due on the portion of the payments to plaintiffs taxed as wages, not LLNS’s obligation to file appropriate tax reports. The settlement agreement has now been fully executed. Accordingly, plaintiffs’ remedy “lies in pursuit of a fully matured cause of action for money, if any exists at all.” (Gafcon, supra, 98 Cal.App.4th 1388, 1404.)

Plaintiffs ask this court to decide their appeal even if it is moot because it poses the issue of whether employer payroll tax withholding pursuant to such settlement agreements is properly treated as a pretax or after-tax deduction. They provide no support for their view that this issue is one of “substantial and continuing public interest” (see Abbot Ford, Inc. v. Superior Court (1987) 43 Cal.3d 858, 868, fn. 8), and the proposition is far from self-evident. Indeed, the trial court rejected such a claim because the action was simply one for mistake or reformation of a contract between private parties. “Those claims are not based on a public policy and do not impact the public interest.” We agree. The appeal is moot, and therefore must be dismissed.

DISPOSITION

The appeal is dismissed.

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Siggins, P.J.

We concur:

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Jenkins, J.

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Ross, J.*