Sue v. The Monsoon Blue CA2/7 ( 2016 )

Filed 2/16/16 Sue v. The Monsoon Blue CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
JULIE SU, as Commissioner etc., B259323
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BS148828)
v.
THE MONSOON BLUE, INC.,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los Angeles County, Michael M.
Johnson, Judge. Affirmed.
Frank A. Weiser for Defendant and Appellant.
The State of California, Division of Labor Standards Enforcement, Department of
Industrial Relations, Deborah D. Graves, for Plaintiff and Respondent.
__________
The Monsoon Blue, Inc., doing business as Udupi Palace, a restaurant in Artesia,
appeals from the order entered after the superior court granted the Division of Labor
Standards Enforcement (DLSE)’s petition to enforce an administrative subpoena
1
commanding Monsoon Blue to produce employee and payroll-related documents.
Monsoon Blue contends the order enforcing the subpoena violates several provisions of
the federal Constitution. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
1. The DLSE’s Investigation and Subpoena Duces Tecum
In November 2013 the DLSE initiated an investigation into Monsoon Blue’s
employment practices after obtaining information indicating it had failed to properly pay
employees for all hours worked or to maintain appropriate payroll records as required
under the Labor Code and governing administrative regulations. On May 2, 2014 the
DLSE issued a subpoena duces tecum commanding Monsoon Blue to appear on May 6,
2014 at the Office of the Labor Commissioner and produce certain employment and
2
wage-related documents. After Monsoon Blue failed to appear, California Labor
Commissioner Julie Su petitioned the superior court on behalf of the DLSE to compel
1 An order enforcing an administrative subpoena is appealable. (See Dana Point
Safe Harbor Collective v. Superior Court (2010) 51 Cal. 4th 1, 11 [“‘an order compelling
compliance with [legislative or administrative] subpoenas is an appealable final
judgment’”]; Macaluso v. Superior Court (2013) 219 Cal. App. 4th 1042, 1049 [same].)
2 The subpoena requested nine categories of documents from Monsoon Blue dating
from November 2010: (1) A list of all its employees (defined as any individual “who
performs work or provides services on behalf of” Monsoon Blue, including those
classified as independent contractors), their last known addresses, occupations and phone
numbers; (2) time records reflecting work hours of each of its employees; (3) documents
reflecting payments to employees, including bank statements and payroll records;
(4) copies of cancelled checks and check stubs for each employee; (5) copies of any
itemized pay statements for each employee; (6) workers’ compensation policies;
(7) copies of IRS Form 1099 provided to any employee since 2010; (8) copies of
Employment Development Department, Quarterly Contribution Return and Report of
Wages (DE 9) for tax years 2010 through 2013; and (9) copies of IRS Form 1040 for tax
years 2010 through 2013.
2
Monsoon Blue’s compliance with the administrative subpoena. (See Lab. Code, § 93;
Gov. Code, § 11186.) On June 26, 2014 the superior court issued an order to show cause
why the administrative subpoena should not be enforced. In the same order the court
provided a briefing schedule and set a hearing date for September 29, 2014.
Deputy Labor Commissioner Steve Moreno testified in a declaration supporting
the DLSE’s petition that he had issued and personally served the subpoena in May 2014
in connection with the DLSE’s investigation of Monsoon Blue’s wage practices. Moreno
explained the subpoena requested documents required to be maintained under governing
Industrial Welfare Commission Wage Order No. 5-2001 (see Cal. Code Regs., tit. 8,
§ 11050) and were necessary to evaluate Monsoon Blue’s compliance with labor laws
and governing regulations and determine and assess penalties, if any.
Monsoon Blue opposed the petition, arguing that, in seeking its private business
records, the administrative subpoena violated its privilege against self-incrimination
under the Fifth and Fourteenth Amendments to the United States Constitution. It also
argued the subpoena was overbroad and constituted an unreasonable search in violation
3
of the Fourth Amendment.
On September 29, 2014, following the hearing on the order to show cause, the
superior court granted the DSLE’s petition, ruling Monsoon Blue’s constitutional
arguments were without merit: The constitutional privilege against self-incrimination,
the court explained, is a personal right that does not apply to corporations and may not be
invoked by a corporate agent to withhold corporate documents on the ground the agent or
the corporation may be incriminated. The court also found the subpoena was properly
authorized, sufficiently narrow in scope and did not constitute an unreasonable search in
violation of the Fourth Amendment.
3 Monsoon Blue also argued the subpoena violated Code of Civil Procedure
section 1985.3 in seeking documents without noticing consumers. It has since abandoned
that argument.
3
DISCUSSION
1. Standard of Review
The DLSE is charged with enforcing Labor Code provisions and Industrial
Welfare Commission orders governing wages, hours and working conditions of
California employees. (See Lab. Code, § 71 et seq.; see also Cal. Code Regs. tit. 8,
§ 11050 [wage order No. 5-2001 governing persons employed in public housekeeping
industry, including restaurant industry].) It has broad investigatory powers and duties,
including the authority to issue subpoenas compelling the attendance of witnesses and
production of documents. (Lab. Code, § 74 [authorizing issuance of administrative
subpoena to compel attendance and production of books and records]; see Craib v.
Bulmash (1989) 49 Cal. 3d 475, 478 (Craib) [DLSE statutorily empowered to conduct an
investigation and subpoena records to determine whether entity under investigation has
violated Labor Code provisions and wage and hour regulations it is charged with
enforcing].)
On appeal from an order compelling compliance with an administrative subpoena,
the superior court’s determination on undisputed facts whether the subpoena violates the
federal or California Constitution is a question of law subject to de novo review. (City of
San Diego v. Shapiro (2014) 228 Cal. App. 4th 756, 770; Committee for Responsible
School Expansion v. Hermosa Beach City School Dist. (2006) 142 Cal. App. 4th 1178,
1184; Millan v. Restaurant Enterprises Group, Inc. (1993) 14 Cal. App. 4th 477, 485.)
2. Monsoon Blue, a Corporation, Does Not Have a Federal Constitutional
Privilege Against Self-incrimination
The United States Supreme Court has held for more than a century the Fifth
Amendment privilege against self-incrimination applies to, and may be invoked by,
natural persons, not corporations or other organizations. (Braswell v. United States
(1988) 487 U.S. 99, 102 [108 S. Ct. 2284, 101 L. Ed. 2d 98] [“[w]e have long recognized
that, for purposes of the Fifth Amendment, corporations and other collective entities are
treated differently from individuals”]; Doe v. United States (1988) 487 U.S. 201, 206
[108 S. Ct. 2341, 101 L. Ed. 2d 184] [corporate bank may not invoke Fifth Amendment in
4
declining to produce documents; “the privilege does not extend to such artificial
entities”]; United States v. White (1944) 322 U.S. 694, 699 [64 S. Ct. 1248, 88 L. Ed. 1542
(White) [“[s]ince the privilege against self-incrimination is a purely personal one, it
cannot be utilized by or on behalf of any organization, such as a corporation”]; Hale v.
Henkel (1906) 201 U.S. 43, 70 [26 S. Ct. 370, 50 L. Ed. 652] [the privilege against self-
incrimination “is limited to a person who shall be compelled in any criminal case to be a
witness against himself; and if he cannot set up the privilege of a third person, he
certainly cannot set up the privilege of a corporation”]; see George Campbell Painting
Corp. v. Reid (1968) 392 U.S. 286, 288-289 [88 S. Ct. 1978, 20 L. Ed. 2d 1094]; see also
Brovelli v. Superior Court of Los Angeles County (1961) 56 Cal. 2d 524, 529 [“[n]either
the corporation nor a person having custody of its records can refuse to produce them on
the basis of the privilege against self-incrimination”].)
“The reason underlying the restriction of this constitutional privilege to natural
individuals acting in their own private capacity is clear. The scope and nature of the
economic activities of incorporated and unincorporated organizations and their
representatives demand that the constitutional power of the federal and state governments
to regulate those activities be correspondingly effective. The greater portion of evidence
of wrongdoing by an organization or its representatives is usually to be found in the
official records and documents of that organization. Were the cloak of the privilege to be
thrown around these impersonal records and documents, effective enforcement of many
federal and state laws would be impossible. [Citations.] The framers of the
constitutional guarantee against compulsory self-disclosure, who were interested
primarily in protecting individual civil liberties, cannot be said to have intended the
privilege to be available to protect economic or other interests of such organizations so as
to nullify appropriate governmental regulations.” (White, supra, 322 U.S. at p. 700.)
Addressing what it concedes is a seemingly “impregnable line” of authority
rejecting application of the Fifth Amendment privilege against self-incrimination to
corporations, Monsoon Blue offers an imaginative, but illusory, argument: The Supreme
Court cases rejecting a privilege against self-incrimination for corporations and their
5
agents have all done so in the context of federal actions considering the Fifth Amendment
itself, not the Fourteenth Amendment’s incorporation of Fifth Amendment protections
against state encroachment as an element of due process. (See Malloy v. Hogan (1964)
378 U.S. 1, 3 [84 S. Ct. 1489, 12 L. Ed. 2d 653].) Corporations are considered “persons”
protected under the due process and equal protection clauses of the Fourteenth
Amendment. (See Grosjean v. American Press Co. (1936) 297 U.S. 233, 244 [56 S. Ct.
444, 80 L. Ed. 660] [“a corporation is a ‘person’ within the meaning of the equal
protection and due process of law clauses”]; Louis K. Liggett Co. v. Lee (1933) 288 U.S.
517, 536 [53 S. Ct. 481, 77 L. Ed. 929] [“[c]orporations are as much entitled to the equal
protection of the laws guaranteed by the Fourteenth Amendment as are natural
persons”].) Thus, Monsoon contends, the Fourteenth Amendment protects a broader
class of “persons” than the Fifth Amendment. A corporation, therefore, may assert by
virtue of the Fourteenth Amendment what it cannot under the Fifth Amendment: a
constitutional privilege against self-incrimination.
The Supreme Court has expressly rejected similar arguments that the protections
against state action incorporated into the Fourteenth Amendment are broader than the
rights set forth in the Bill of Rights itself. (See McDonald v. City of Chicago (2010)
561 U.S. 742, 765 [130 S. Ct. 3020, 177 L. Ed. 2d 894 [the 14th Amendment’s
incorporation of certain provisions of the Bill of Rights does not create new rights; rather,
it allows for those federal rights to be enforced against state action “‘according to the
same standards that protect those personal rights against federal encroachment’”]; Malloy
v. Hogan, supra, 378 U.S. at p. 10 [same].) Neither Citizens United v. Federal Election
Commission (2010) 558 U.S. 310 [130 S. Ct. 876, 175 L. Ed. 2d 753] nor Burwell v. Hobby
Lobby Stores, Inc. (2014) __U.S. __ [134 S. Ct. 2751, 2771, 189 L. Ed. 2d 675], cited
generally by Monsoon Blue, alters this analysis. In both cases the Court considered the
historic purpose of the First Amendment and recognized corporate personhood for First
Amendment protections only. (See Citizens United, at p. 342 [“political speech does not
lose First Amendment protection ‘simply because its source is a corporation’”]; Burwell,
at pp. 2771-2773 [closely held corporations may invoke protections of Free Exercise
6
clause under First Amendment].) Neither case overruled the century-old precedent
recognizing the privilege against self-incrimination as a uniquely individual right, nor
does Monsoon Blue suggest otherwise. Instead, expanding exponentially on general
language from concurring and dissenting opinions in those cases, Monsoon Blue asserts,
by the time the Fourteenth Amendment was adopted, corporations had taken on a
significant societal presence more worthy of corporate personhood than when the
Constitution was ratified. From this wholly untethered premise, it leaps to the assertion
the Fourteenth Amendment was intended to extend broader protection to corporations
than the Bill of Rights, including the privilege against self-incrimination. As discussed,
not only is there no authority for such a proposition, but also it directly contravenes the
Supreme Court’s substantial and long-standing jurisprudence.
For similar reasons we reject Monsoon Blue’s corollary argument the failure to
recognize a corporate privilege against self-incrimination while recognizing a similar
right for individuals violates the Equal Protection Clause. In limiting the privilege to
natural persons, the Supreme Court has consistently, albeit implicitly, found individuals
and corporations are not similarly situated for purposes of the privilege against self-
incrimination. (See generally White, supra, 322 U.S. 698; Braswell v. United States,
4
supra, 487 U.S. at p. 102.)
4 In Craib, supra, 49 Cal.3d at page 490, the California Supreme Court held the
constitutional privilege against self-incrimination “does not apply to [an administrative]
subpoena for records required to be maintained and produced under [Labor Code]
section 1174.” Monsoon Blue contends Craib does not control this case because at least
some of the documents requested are not required by Labor Code section 1174 and
because at least one United States Supreme Court case decided after Craib has
recognized that compelling the production of nonprivileged documents, coupled with
custodial testimony, may in some instances violate the privilege against self-
incrimination. (See generally United States v. Hubbell (2000) 530 U.S. 27, 37 [120 S. Ct.
2037, 147 L. Ed. 2d 24]; see also United States v. Doe (1984) 465 U.S. 605, 612 [104 S. Ct.
1237, 79 L. Ed. 2d 552].) In light of our holding that Monsoon Blue and its agents lack
standing to assert a constitutional privilege against self-incrimination on behalf of a
corporation, we need not address these issues.
7
3. The Court’s Order Did Not Violate Monsoon Blue’s Fourth Amendment Rights
The Fourth Amendment protects “‘[t]he right of the people to be secure in their
persons, houses, papers, and effects, against unreasonable searches and seizures . . . .’”
(City of Los Angeles v. Patel (2015) __ U.S. __ [135 S. Ct. 2443, 2451-2452, 192 L. Ed. 2d
435].) Searches conducted without a warrant are per se unreasonable, subject only to a
few well-delineated exceptions. (Ibid.; Arizona v. Gant (2009) 556 U.S. 332, 338
[129 S. Ct. 1710, 173 L. Ed. 2d 485].) One such exception is an administrative search
when special needs make the warrant and probable cause requirements impracticable.
(Patel, at p. 2452; see Craib, supra, 49 Cal.3d at pp. 481-482; City of Santa Cruz v. Patel
(2007) 155 Cal. App. 4th 234, 250.)
For an administrative search to be permissible under the Fourth Amendment, the
subject of the search must be afforded an opportunity for precompliance review before a
neutral decision maker. (City of Los Angeles v. Patel, supra, 135 S.Ct. at p. 2452.) In
addition, as pertinent here, the subpoena itself must relate to an inquiry the agency is
authorized to make, seek only those records that would be available in light of statutory
or regulatory record-keeping requirements, and describe the records to be turned over
with sufficient particularity so as not to be indefinite or unreasonably burdensome.
(Craib, supra, 49 Cal.3d at p. 484; City of Santa Cruz v. Patel, supra, 155 Cal.App.4th at
p 251; cf. De La Cruz v. Quackenbush (2000) 80 Cal. App. 4th 775, 784 [administrative
search conducted without benefit of warrant or administrative subpoena violated Fourth
Amendment].)
Monsoon Blue contends requests numbers 2 through 6—demanding all
documents reflecting time records, work schedules, payroll records, itemized wage
statements of employees and workers’ compensation policies—lack specificity and are
tantamount to a general warrant unsupported by probable cause. The argument is without
merit. Like the administrative subpoena seeking wage-related documents in Craib, the
subpoena in the instant case relates to the scope of the DLSE’s authority, demands
documents required by law to be maintained (see Cal. Code Reg., tit. 8, § 11050, Lab.
8
Code, § 1174, subd. (c)), and describes the documents sought with particularity. The
court did not err in overruling Monsoon Blue’s facial challenge to the subpoena.
Monsoon Blue also contends that items 7 through 9—copies of its state and
federal tax filings—in the administrative subpoena are “clearly subject to objection on
privacy grounds.” This bare contention, offered without any supporting argument or
citation to authority, is forfeited. (See Cal. Rules of Court, rule 8.204(a)(1)(B) [each
point in appellate brief must be supported by argument and, if possible, by citation to
authority]; Osornio v. Weingarten (2004) 124 Cal. App. 4th 304, 316, fn. 7 [“‘[i]ssues do
not have a life of their own: if they are not raised or supported by argument or citation to
authority, we consider the issues waived’”].)
Finally, citing evidence that Moreno had entered the restaurant several times prior
to, and then later in conjunction with, his personal service of the subpoena on Monsoon
5
Blue’s agent for service of process, Monsoon Blue contends the DLSE trespassed on its
property to gather information for its investigation, conduct it claims amounted to an
unlawful search in violation of the Fourth Amendment. (Cf. Florida v. Jardines (2013)
__ U.S. __ [133 S. Ct. 1409, 1414-1415, 185 L. Ed. 2d 495] [probable cause for search
warrant obtained by use of drug-sniffing dog on front porch to home was a trespassory
invasion of the home’s curtilage, constitutionally protected private property, and
therefore constituted an unlawful search in violation of the Fourth Amendment]; United
States v. Jones (2012) __ U.S. __ [132 S. Ct. 945, 949, 181 L. Ed. 2d 911] [government’s
trespass on private property to attach global positioning device to defendant’s vehicle to
monitor vehicle’s movement was a search; although defendant had no reasonable
expectation of privacy on public street, the trespass on constitutionally protected private
property to gain the information constituted the unlawful search].)
5 Jerome Fernandez, the onsite manager at the restaurant, testified in a declaration
supporting Monsoon Blue’s objections that Moreno had come into the restaurant “several
times in the last year” without identifying himself. The declaration does not state
Moreno requested documents or did anything other than enter the public area of the
premises.
9
This contention, too, is without merit. At most, Moreno entered the public area of
an open restaurant. There is no evidence he entered any private portion of the restaurant,
much less acquired any information for purposes of his investigation. (See Donovan v.
Lone Steer, Inc. (1984) 464 U.S. 408, 413 [104 S. Ct. 769, 78 L. Ed. 2d 567 [“[a]n entry
into the public lobby of a motel and restaurant for the purpose of serving an
administrative subpoena is scarcely the sort of governmental act which is forbidden by
the Fourth Amendment”]; Craib, supra, 49 Cal.3d at p. 483 [same]; Patel v. City of
Montclair (9th Cir. 2015) 798 F.3d 895, 898-899 [police officers’ entry onto areas of
motel open to public did not constitute trespass onto constitutionally protected property;
no reasonable expectation of privacy in public area of motel]; cf. Camara v. Municipal
Court of the City and County of San Francisco (1967) 387 U.S. 523, 528-529 [87 S. Ct.
1727, 18 L. Ed. 2d 930] [entry of government inspector into area of a private business
being used as a residence constituted an unlawful search].)
DISPOSITION
The court’s September 29, 2014 order granting the Labor Commissioner’s petition
to compel compliance with the DLSE’s subpoena is affirmed. The DLSE is to recover its
costs on appeal.
PERLUSS, P. J.
We concur:
ZELON, J.
BLUMENFELD, J.*
* Judge of the Los Angeles County Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
10