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Third District Affirms Arbitrator’s Award Denying Mandatory Attorneys’ Fees to Prevailing Plaintiff

In Arbitration, Attorney's Fees on September 4, 2010 at 6:32 am
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The Third District in Miller v. Lifestyles Senior Housing Managers et al., No. C059843, 2010 WL 3398750 (Cal. Ct. App. 3d Dist. Aug. 31, 2010), affirmed the trial court’s judgment confirming an arbitrator’s decision denying statutorily mandated attorneys fees to the prevailing plaintiff.  Id. *1.

Facts

After plaintiff was terminated as executive director of defendant’s assisted living facility, she sued defendant and her supervisor alleging various torts and Labor Code violations.  Id. In accordance with the parties’ agreement, the complaint was heard by an arbitrator. The arbitrator decided against plaintiff on four of her causes of action, but found in her favor on two others.  Id. Plaintiff prevailed on her Labor Code section 1102.5(c) cause of action, where she alleged she was fired because she refused to retain residents who required a higher level of care than defendant could legally provide.  Id. Labor Code section 1102.5, subdivision (c) precludes an employer from retaliating against an employee “for refusing to participate in an activity that would result in a violation of state or federal statute, or a violation or noncompliance with a state or federal rule or regulation.” The arbitrator also found for plaintiff on her fifth cause of action for wrongful termination in violation of public policy, based on the same set of facts. Id.

Attorneys Fees

The arbitrator awarded plaintiff $29,030 in lost income and $10,000 in penalties pursuant to section 1102.5(f). Id. He asked the parties to provide additional briefing on the issue of whether attorney fees could be awarded. Id. Plaintiff filed a motion seeking $414,720 in attorney fees under section 2699.

Section 2699 (a) provides:

Notwithstanding any other provision of law, any provision of this code that provides for a civil penalty to be assessed and collected by the Labor and Workforce Development Agency . . . for a violation of this code, may, as an alternative, be recovered through a civil action brought by an aggrieved employee on behalf of himself or herself and other current or former employees . . . .”  Section 2699(f) establishes the civil penalties to be imposed when a penalty is not specifically provided. For example, subdivision (f)(2) provides that an employer of one or more employees is subject to a penalty of $100 for each aggrieved employee per pay period for the initial violation and $200 per employee for each subsequent violation.

Section 2699 (g)(1) provides:

[A]n aggrieved employee may recover the civil penalty described in subdivision (f) in a civil action pursuant to [specified procedures] filed on behalf of himself or herself and any other current or former employees against whom one or more of the alleged violations was committed. Any employee who prevails in any action shall be entitled to an award of reasonable attorney’s fees and costs. Nothing in this part shall operate to limit an employee’s right to pursue or recover other remedies available under state or federal law, either separately or concurrently with an action taken under this part.

The arbitrator denied plaintiff’s motion for attorney fees, ruling that section 2699:

[H]as two separate and distinct provisions for private enforcement. Subsection (a) authorizes an aggrieved employee to bring an action to recover any civil penalty provided for in the Labor Code under certain circumstances. Here, plaintiff brought such an action to recover the penalty awarded pursuant to Labor Code section 1102.5. That action was successful; however, it is authorized by section 2699(a). That section of the Labor Code does not provide for a recovery of attorneys fees.  The attorney’s fees provision of Labor Code section 2699[g] provides for the recovery of attorneys fees if the aggrieved employees successfully [bring] an action to recover the penalties provided for in section 2699[f]. The plaintiff did not bring such an action. Frankly, the link between the attorney fees clause in subsection [g], and the penalties in subsection [f] is so clear there is no discretion to be exercised.

Although this decision with respect to plaintiff’s claim for attorneys’ fees appears to be compelled by the statute, it would also appear to be compelled by considerations of due process. Basic due process requires that any litigant be put on notice of the claims made against them. The attorneys fees shifting provisions of code sections like Labor Code section 2699[g] create such huge exposure for a defendant that it would appear an unconstitutional deprivation of due process to award those fees in any case where the fact of that request has not been made crystal clear.”

Id. *2.

The trial court confirmed the award and denied plaintiff’s motion to vacate, ruling: “The court finds that, even if the arbitrator’s interpretation of [section] 2699, [subdivision] (g) was incorrect, the court does not have authority to overrule that determination. As stated by our Supreme Court …, ‘arbitrator’s do not “exceed their powers” … merely by rendering an erroneous decision on a legal or factual issue, so long as the issue was within the scope of the controversy submitted to the arbitrators.’ Moshonov v. Walsh [2002] 22 Cal.4th 771, 775-776…. In the present case, the arbitrator interpreted the attorney’s fee provision of [section] 2699, [subdivision] (g), finding that it excluded cases sought under [section] 2699, [subdivision] (a).” Id. *3.

Appeal

The Third District agreed with the trial court.  Citing Moncharsh v. Heily & Blase, 3 Cal. 4th 1, 11 (1992), the Court noted that arbitration is designed to resolve disputes quickly, inexpensively and conclusively, and thus judicial review is available only in limited circumstances. Id. *3 Plaintiff asserted that the arbitrator’s award should have been vacated under Code of Civil Procedure section 1286.2 (a)(4), which provides in relevant part that “the court shall vacate the [arbitration] award if … [t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.”  Id. Citing Moncharsh, the court held that an arbitrator’s decision is not generally reviewable for errors of fact or law, whether or not such error appears on the face of the award and causes substantial injustice to the parties.  Id. *3.

The court concluded:

Whether or not the arbitrator’s decision was correct is beside the point. He did not exceed his powers in deciding the matter submitted to him by the parties. The trial court recognized the well-established principles governing review of arbitration decisions and confirmed the arbitrator’s award. Plaintiff’s claim of error is without merit.

Judges and Attorneys

Justice Hull wrote the opinion for the court.  Justices Blease and Butz concurred.

Joseph M. Earley, III, Law Offices of Joseph M. Earley, III, Paradise, CA, for Plaintiff and Appellant.

John Douglas Vaughn, Luce, Forward, Hamilton & Scripps LLP, San Diego, CA, for Defendants and Respondents.

By CHARLES H. JUNG

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