Opinion
A115568
4-16-2008
ANGELA M. BRADSTREET, as Labor Commissioner, etc., Plaintiff, v. ANNA WONG et al., Defendants and Respondents; CHINESE PROGRESSIVE ASSOCIATION, Intervener and Appellant.
NOT TO BE PUBLISHED
The Chinese Progressive Association (CPA) appeals a postjudgment order awarding attorney fees to defendants Anna Wong and Toha Quan, the owners of the Wins Corporations, after they obtained a judgment in their favor on a complaint in intervention filed by the Chinese Progressive Association (CPA) and two former employees. The court granted fees pursuant to Labor Code section 218.5.
All subsequent statutory references are to the Labor Code unless otherwise indicated
The court determined that defendants were entitled to fees under section 218.5 for the defense of claims made by the CPA pursuant to section 2677, "and attendant issues." It apportioned $25,000 of the fees incurred to defense of such claims, and specified that the award did not include any fees incurred defending claims pursuant to section 1194.
We shall hold that that the court erred in finding defendants were entitled to any fees pursuant to section 218.5 because CPA brought only a claim under the Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.), which does not provide for attorney fees, and had no standing to bring any of the causes of action for nonpayment of wages.
FACTS
Interveners first amended complaint pleaded six causes of action arising out of the failure of the Wins Corporations to pay their employees. The first cause of action was for violation of Labor Code sections requiring the payment of minimum wage and overtime (see, e.g., §§ 1194, 1194.2, 1182.11), and failure to pay wages when due (see, e.g., §§ 201, 202, 204, 2926-2927). The second cause of action was for waiting time penalties pursuant to section 203 for the failure to pay all wages earned at the time of termination. The third cause of action was for penalties for payment of wages by checks not supported by sufficient funds. (See §§ 203.1; 212.) Each of the first three causes of action also alleged that defendants were employers as defined in the applicable IWC wage order, or were the alter egos of the Wins Corporations, or were deemed employers of the Wins Corporations employees within the meaning of section 2677. The fourth cause of action alleged that defendants were liable to the Wins Corporations employees for the unpaid wages, damages or penalties as a deemed employer pursuant to section 2677. According to the prefatory allegations in paragraphs 5 and 6, which were incorporated into each specific cause of action, interveners Yan Fang Mei (Yan) and Li Qin Yang Zhou (Zhou), on behalf of themselves and other similarly situated Wins Corporations employees, brought the first four causes of action for "wages, damages, penalties and interest" owed under the Labor Code.
The fifth cause of action was for a violation of Business and Professions Code section 17200 (hereafter the UCL claim). It alleged that the Labor Code violations underlying the preceding causes of action also constituted unlawful business practices, and sought restitution of the difference between the unpaid minimum wages and overtime wages, and the amounts actually paid to the Wins Corporations employees. It also alleged that defendants were liable for the unfair business practices as alter egos of the Wins Corporations employers, or deemed employers pursuant to section 2677. The sixth cause of action sought civil penalties for the UCL violation. According to the allegation in the prefatory paragraph seven, which was also incorporated into each cause of action, CPA brought the UCL claim on behalf of the general public. Interveners Yan and Zhou also joined in this cause of action on behalf of themselves and other employees of the Wins Corporations.
The wages and penalties interveners sought to recover in their first four causes of action essentially tracked those sought by the Labor Commissioner. Prior to trial the Labor Commissioner also amended the complaint to include allegations that defendants were liable for the Wins Corporations failure to pay their employees, under the common law alter ego doctrine.
After a bench trial, the court entered judgment in defendants favor on the Labor Commissioners complaint, and the complaint in intervention.Defendants then filed a motion seeking an award of attorney fees against CPA, and the two individual employee interveners, pursuant to section 218.5. Defendants submitted their counsels declaration that they had incurred fees in the total amount of $129,923 defending the action brought by the Commissioner and the plaintiffs in intervention. Defendants argued that CPA and the two individual employees had sought in all causes of action to hold defendants personally liable for the Wins Corporations failure to pay wages on one of twobases: (1) liability as employers pursuant to section 1194 and the IWC definition of "employer"; and (2) common law alter ego liability and as deemed employers pursuant to section 2677. Defendants recognized that section 218.5 did not apply to the former, but argued they were entitled to fees attributable to the successful defense against the latter statutory theory of liability, as well as the common law alter ego theory. Their defense counsel estimated that half the total fees incurred could fairly be apportioned to defense of these claims.
The Labor Commissioner and intervener Yan appealed from that judgment, and this court, in a separate opinion (Bradstreet v. Wong (April 16, 2008, A113760/A114106) ___ Cal.App.4th ___) has affirmed the judgment.
This argument conflated the common law alter ego allegations and the deemed employer allegations into one, and overlooked the additional theory advanced by both the Labor Commissioner and the interveners that defendants were wage guarantors pursuant to section 2673.1.
CPA and the two individual employees opposed the motion. They argued that defendants were not entitled to fees because section 218.5 expressly states that it is inapplicable "to any action brought by the Labor Commissioner," and to "any action for which attorneys fees are recoverable under Section 1194." They reasoned that the "action" was originally brought by the Labor Commissioner, and that the complaint in intervention merely joined in claims for minimum wage and overtime compensation alleged by the Commissioner. Interveners further contended the complaint in intervention was an "action for which attorneys fees are recoverable under Section 1194" because it sought recovery of unpaid wages, which included failure to pay minimum wage and overtime. Nor, they argued, could defendants recover fees incurred with respect to the claim that defendants were liable as deemed employers pursuant to section 2677, because section 2677, subdivision (b), provides only for fees to "a prevailing plaintiff," not a defendant (italics added). Finally, they argued, defendants could not recover fees incurred defending the UCL claim, because fees are recoverable for the successful defense of a UCL claim only pursuant to Code of Civil Procedure section 1021.5, and defendants did not meet, or even argue that they met, the criteria for a fee award under that statute.
Interveners finally argued that even if there were some claims in the complaint in intervention to which the bilateral fee shifting provision of section 218.5 might apply, the general rule allowing apportionment of fees when fees are recoverable as to some claims, but not others, was inapplicable because the section 2677 claims, and the alter ego theory of liability, were inextricably related to the claims for which more specific statutory provisions allowed only for unilateral fee awards to the employee under section 1194, or "prevailing plaintiff" under section 2677.
Before the motion was heard, defendants withdrew their request for fees as to the individual employees, and at the hearing, defendants conceded that the one-way fee-shifting provision of section 2677 precluded an award of fees apportioned to the section 2677 claims of the individual employee interveners. Nonetheless, they urged that CPA could be required pursuant to section 218.5 to pay fees attributable to defense against liability under section 2677 because CPA was not an employee entitled to benefit from the one-way fee-shifting provisions of sections 1194 or 2677. Counsel suggested to the court that since there were three interveners, it could apportion fees by awarding one-third of the amount defendants had originally proposed, or approximately $25,000.
Without further comment, the court ordered that CPA pay defendants fees incurred in the defense of claims brought by CPA pursuant to section 2677, "and attendant issues." It apportioned fees to these claims in the amount of $25,000, and specified that the award did not include any fees incurred in the defense of claims brought pursuant to section 1194.
ANALYSIS
Fee Award Pursuant to Section 218.5
We review the issue of entitlement to fees pursuant to section 218.5, including the interpretation of this attorney fees statute and its application to the circumstances in this case, as questions of law, subject to independent review on appeal. (See, e.g., City of Lafayette v. East Bay Mun. Utility Dist. (1993) 16 Cal.App.4th 1005, 1013; Haworth v. Lira (1991) 232 Cal.App.3d 1362, 1367.) If a party is entitled to fees with respect to some but not all claims, a court may apportion fees and the apportionment of that award rests within the courts sound discretion. (Bell v. Vista Unified School Dist. (2000) 82 Cal.App.4th 672, 687.)
1. Summary of Relevant Statutes
Before reviewing the courts order, we briefly summarize the relevant statutes.
Section 218.5 provides: "In any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, 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." The complaint in intervention did include a prayer for attorney fees pursuant to Code of Civil Procedure section 1021.5 and Labor Code sections 1194 and 2677. Section 218.5 expressly states that it is inapplicable to any action brought by the Labor Commissioner, and "to any action for which attorneys fees are recoverable under Section 1194." Otherwise, it is a bilateral fee-shifting provision that provides for attorney fees to the "prevailing party."
Section 1194 gives "any employee" (italics added) the right to bring a "civil action" to recover minimum wages and overtime. It provides in relevant part: "(a) Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorneys fees, and costs of suit." As this court explained in Bell v. Farmers Ins. Exchange (2001) 87 Cal.App.4th 805, 829, section 1194 is a one-way fee-shifting statute. It gives employees the right to recover reasonable attorney fees in a successful action for minimum wage or overtime compensation. Employers do not have a corresponding right to attorney fees for successful defense of such claims
The Legislature added the express exclusion in section 218.5 of "any action for which attorneys fees are recoverable under Section 1194" to reflect the decision in Earley v. Superior Court (2000) 79 Cal.App.4th 1420 (Earley). (Stats. 2000, ch. 876, Assem. Bill 2509, § 4.) In Earley, the court noted the potential conflict between the bilateral fee provision of section 218.5 and the one-way fee-shifting provision of section 1194, because recovery of overtime and minimum wage compensation pursuant to section 1194 could also come within the more general category of an "action for nonpayment of wages" to which section 218.5 would apply. The Earley court held that in light of the clear public policy underlying the unilateral fee-shifting provision of section 1194, to encourage and enable employees to enforce Californias minimum wage and overtime laws, "[t]he only reasonable interpretation which would avoid nullification of section 1194 would be one which bars employers from relying on section 218.5 to recover fees in any action for minimum wages or overtime compensation." (Earley, at p. 1430.) The court further noted that "to the extent that there is any irreconcilable conflict between these two sections, section 1194, as the later-enacted and more specific statute, would supersede section 218.5 as a matter of statutory construction." (Id. at p. 1430, fn. 9.)
The Earley court noted that section 218.5 would still apply to an action brought to recover nonpayment of contractually agreed-upon or bargained-for "wages, fringe benefits, or health and welfare or pension fund contributions." (Earley, supra, 79 Cal.App.4th at p.1430.) Section 1194 would not preclude a fee award under section 218.5 with respect to claims for contractual wages. Yet, defendant did not seek apportionment of fees on this theory, and instead asked only that the court apportion fees attributable to the 2677 claims and the alter ego allegations. Defendants also did not challenge interveners assertion that the total nonpayment of wages necessarily was a claim pursuant to section 1194 for overtime and minimum wages.
Subdivision (b) of section 2677 was added by a 1999 amendment (Stats. 1999, ch. 554 (Assem. Bill 633), § 5). It provides that "[a]ny employee of a person or persons engaged in garment manufacturing who are not registered" (italics added) may "bring a civil action" against any person who is a deemed employer within the meaning of section 2677, subdivision (a), for wages, damages, or penalties to which the employee may be entitled because of a violation of specified Labor Code sections by the unregistered garment manufacturer. It further provides: "In any civil action brought pursuant to this subdivision, the court shall grant a prevailing plaintiffs reasonable attorneys fees and costs." It, like section 1194, is a unilateral fee-shifting provision intended to encourage and enable workers in the garment industry to hold not only their direct employer liable for certain Labor Code violations, but also other persons in the business of garment manufacturing who benefit from their labor by contracting work out to unregistered manufacturers.
2. Entitlement to Fees Under Section 218.5 for the Defense of Claims Brought by CPA
It is undisputed that section 218.5 is inapplicable to at least some of the claims brought in this case. By the plain terms of section 218.5, no fees were available with respect to any of the claims brought by the Labor Commissioner. Nor did section 218.5 apply to any of interveners Yans and Zhous claims for the recovery of unpaid minimum wages and overtime compensations pursuant to section 1194. Also, despite having initially sought fees from all three interveners for fees incurred with respect to defending claims pursuant to section 2677, defendants dropped their request as to Yan and Zhou, and conceded at the hearing on their fee motion that the "Earley analysis [is] applicable to 2677 as far as employees." Nonetheless, defendants argued, and the court apparently agreed, that they could at least recover pursuant to section 218.5 fees incurred in defending against claims brought by CPA for "recovery of unpaid wages based upon . . . section 2677 and attendant issues."
Defendants argue that they were entitled to fees under section 218.5 against CPA because CPA was not an employee protected by the unilateral fee-shifting provisions of section 2677 or 1194. They assert that the first cause of action for violation of Labor Code sections requiring the payment of minimum wage and overtime, and failure to pay wages when due, and the fourth cause of action alleging that defendants were liable to the Wins Corporations employees for the unpaid wages, damages or penalties as a deemed employer pursuant to section 2677, all were for "the nonpayment of wages" within the meaning of section 218.5, and that defendants, as the prevailing parties with respect to these claims, were entitled to fees from CPA.
Yet, defendants argument is premised upon an interpretation of the complaint that is not supported by the pleading itself. Defendants rely solely upon the fact that the first and fourth causes of action commence by stating, "Plaintiff-Interveners complain of Defendants." Defendants assert that, whether intended or not, CPA must therefore be deemed to have brought these claims. Yet, when the complaint is read as a whole it is obvious that these causes of action were brought by the individual employee interveners, and that the only cause of action brought by CPA was under the UCL. CPA is specifically mentioned only in the UCL claim, which states: "Pursuant to § 17200, et seq. . . . Plaintiff-Interveners YAN, ZHOU, and CPA bring this cause of action. . . ." (Italics added.) The rest of the causes of action refer generally to "Plaintiff-Interveners," but they incorporate the prefatory paragraphs defining the roles of each intervener. These prefatory paragraphs unambiguously state that "CPA brings this action on behalf of the general public pursuant to Business & Professions Code § 17200 " (italics added). They describe only interveners Yan and Zhou as seeking to recover wages and penalties under the Labor Code. Moreover, although all three interveners are included in the pleading of the UCL claim, the pleading further specified that only "YAN and ZHOU and other similarly employed members of the general public are entitled to restitution" of unlawfully withheld wages.
In addition to conflicting with the plain language of the complaint in intervention, defendants assertion that CPA joined the former Wins Corporations employees Yan and Zhou in bringing the first and fourth causes of action for "nonpayment of wages" is also not a reasonable construction of the complaint, because CPA obviously had no standing to bring any cause of action except the UCL claim. Sections 1194 and 2677 authorize only an "employee" or an "employee of a person . . . engaged in garment manufacturing" to bring a civil action under those sections. Except for cases when the Labor Commissioner files a civil action on behalf of a wage claimant, only an "employee may seek judicial relief by filing a court action against the employer for breach of contract and/or for the wages prescribed by statute. [Citations.] Section 218 authorizes an employee or his or her assignee to `sue directly for any unpaid wages or penalty owed under the Labor Code. Section 1194 provides an additional remedy to file a civil action to resolve unlawful failure to pay minimum wage and overtime compensation." (Sampson v. Parking Service 2000 Com., Inc. (2004) 117 Cal.App.4th 212, 220 (Sampson), fn. omitted, italics added.) CPA was neither an employee nor an assignee of any employee wage claims, and therefore had no standing to bring any of the causes of action for contractual or statutory wages and penalties under the Labor Code. (See Killian v. Millard (1991) 228 Cal.App.3d 1601, 1605.) This substantive obstacle to CPA bringing the first and fourth causes of action, taken together with the plain language of the first amended complaint in intervention, demonstrates that the only reasonable construction of the complaint is that CPA brought only the UCL claim.
The complaint in intervention was filed before the passage of Proposition 64 on November 3, 2004, which amended Business and Professions Code section 17204.
The question then is whether defendants were entitled to any fees pursuant to section 218.5 for the successful defense of a UCL claim. As a general rule, "[t]he unfair competition law does not provide for attorney fees, and relief is generally limited to injunctive relief and restitution." (Walker v. Countrywide Home Loans, Inc. (2002) 98 Cal.App.4th 1158, 1179 (Walker).) Therefore, "where a plaintiff sues solely under the unfair competition law, fees may not be recovered by a prevailing defendant."(Id. at p. 1180.) "If a plaintiff prevails in an unfair competition law claim, it may seek attorney fees as a private attorney general pursuant to Code of Civil Procedure section 1021.5. There is no provision for such a right for a successful defendant." (Id. at p. 1179.)
Where a plaintiff brings more than one claim, one of which allows a prevailing defendant to recover fees and one of which does not, the trial court, of course, has discretion to apportion fees to claims authorizing attorney fee awards. (Walker, supra, 98 Cal.App.4th at p. 1180.) Here, however, we have determined that CPA only brought a UCL claim.
In any event, the successful defense against these wage claims on the ground that defendants were not personally liable for the nonpayment of wages by corporations they owned and controlled could not conceivably have vindicated any important right affecting the public interest, nor is it plausible that the cost of litigation exceeded defendants private interest in avoiding liability. (See Luck v. Southern Pacific Transportation Co. (1990) 218 Cal.App.3d 1, 30; Beach Colony II. v. California Coastal Commission (1985) 166 Cal.App.3d 106, 113.)
The only possible theory for an award of fees as against CPA for the successful defense of the UCL claim would therefore have to be that the unfair competition claim was based upon "borrowed" Labor Code provisions to which section 218.5 applied, and that an exception exists to the general rule that fees are not available under the UCL when a direct action under the borrowed statute would allow an award of attorney fees. Yet this rationale for awarding fees pursuant to section 218.5 in the context of a UCL claim was rejected by the only published decision to consider it.
In Californians for Population Stabilization v. Hewlett-Packard Co. (1997) 58 Cal.App.4th 273 (Hewlett-Packard) (disapproved on other grounds byCortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 171-172, 177-178 (Cortez)),the court addressed the question whether fees may be awarded pursuant to section 218.5 for the successful defense of a UCL claim when some of the predicate laws underlying the allegations of unfair or unlawful business practices are Labor Code violations involving the nonpayment of wages. Californians for Population Stabilizations (CPS), a public interest organization, had brought a UCL claim against several defendants, seeking injunctive relief, based in part on alleged violations of minimum wage laws, failure to compensate for all hours worked, and unlawful deductions from wages (Hewlett-Packard, at pp. 279, 290-292). A successful defendant sought attorney fees pursuant to Labor Code section 218.5, and the trial court denied the motion. (Id. at p. 294.) The Court of Appeal gave two reasons for affirming the order. First, it questioned whether "[o]n its face" section 218.5, which by its terms applies to "any action brought for nonpayment of wages," had any application to an unfair competition claim for which the only available remedies are injunctive relief and restitution, especially where, as in the case before it, the plaintiff sought only injunctive relief. (Id. at p. 295.) Second, CPS, as a community organization, did "not have standing to bring a direct action under the Labor Code [for nonpayment of wages]. It is illogical to claim that a party is entitled to attorneys fees pursuant to a statutory scheme wherein it has no standing to bring an action." (Id. at p. 296.)
In Cortez, supra, 23 Cal.4th at pp. 171-172, 177-178, the court disapproved the categorical assertion in Hewlett-Packard, supra, 58 Cal.App.4th 273 that unpaid wages are damages, and therefore can never be the subject of a restitution order under the UCL.
We find the reasoning in Hewlett-Packard, supra, 58 Cal.App.4th 273, persuasive and equally applicable in this case. First, we, like the Hewlett-Packard court, question whether section 218.5 has any application at all to a UCL claim, which is an action to prevent unfair competition, not for "nonpayment of wages." The only difference between the facts of this case, and those in Hewlett Packard, is that here, the relief sought in the UCL claim did include a prayer for restitution of unpaid wages. The mere fact that such restitution is sought as a remedy for unfair competition does not convert the UCL claim into "an action for nonpayment of wages." A "UCL action is independent of a statutory claim for back wages" (Cortez, supra, 23 Cal.4th at p. 179) and it does not directly enforce a contractual or statutory right to wages. Although wages may be recovered as restitution in the context of a UCL claim, such recovery is only available at the discretion of the court as an equitable remedy for the unfair business practice. Such remedies under the UCL "have an independent purpose—deterrence of and restitution for unfair business practices." (Ibid.) Therefore, seeking such restitutionary relief does not change the fact that a UCL action is fundamentally an action to prevent unfair competition, not one for "nonpayment of wages." (§ 218.5.)
Second, CPA was not an employee, nor a wage assignee, and therefore had no standing to bring a direct action for nonpayment of wages under the Labor Code or based upon a contractual relationship with the Wins Corporations. (See Sampson, supra, 117 Cal.App.4th 212, 220.) It also did not have standing to sue pursuant to section 2677 because CPA was not an "employee of a person . . . engaged in garment manufacturing." (§ 2677, subd. (b).) It is "illogical" to award fees to defendants under section 218.5 as against CPA, when CPA could not and did not bring a direct action for the nonpayment of wages because it had no standing to do so. (Hewlett-Packard, supra, 58 Cal.App.4th at p. 296.) For the foregoing reasons, we hold that the court erred in finding defendants were entitled to attorney fees under section 218.5 for the successful defense of claims brought by CPA pursuant to section 2677.
The courts order also stated that the fees it awarded pursuant to section 218.5 were for defense of CPAs claims pursuant to section 2677 "and attendant issues," without specifying what the "attendant issues" were. Based upon defendants written arguments below, we construe "attendant issues" to refer to the alter ego allegations that CPA pleaded in connection with the UCL claim. The court also erred in awarding any fees pursuant to section 218.5 attributable to the defense against application of the alter ego doctrine. We have already determined that there was no entitlement to fees pursuant to section 218.5 for the defense against CPAs UCL claim. The pursuit of the alter ego doctrine in connection with the UCL claim does not create any new or independent basis for an award of fees. The alter ego allegations merely stated a common law basis for imposing personal liability upon defendants for the unfair practices committed by the corporations they owned and controlled. Since fees were not available pursuant to section 218.5 for the defense against the underlying UCL claim, it was also error to award any fees for the defense of the alter ego allegations made in connection with it.
In light of our holding that the court erred in finding defendants were entitled to any fees pursuant to section 218.5, we need not reach CPAs additional contentions that the court abused its discretion in apportioning fees, because CPAs claims were inextricably intertwined with: (1) claims brought by the Labor Commissioner for which no fees could be awarded under section 218.5; and (2) the claims of Yan and Zhou and the other employees for unpaid wages to which the unilateral fee-shifting provisions in section 1194 and 2677 applied.
CONCLUSION
The order awarding attorney fees to defendants is reversed. CPA is awarded its costs on appeal.
We concur:
MARCHIANO, P. J.
SWAGER, J.