Dos Almas LLC v. Industrial Claim Appeals Office , 434 P.3d 777 ( 2018 )

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
September 20, 2018
2018COA145
No. 17CA2147 Dos Almas LLC v. ICAO — Taxation —
Unemployment; Labor and Industry — Colorado Employment
Security Act — Premiums and Coverage — Transfer of
Experience and Assignment of Rates
In this unemployment tax case, a division of the court of
appeals interprets and applies certain statutory provisions for
determining whether an employer that acquires “substantially all of
the assets” of another employer becomes a “successor” employer to
the predecessor for unemployment tax rate liability purposes. If the
statutory criteria in section 8-76-104(1)(a), C.R.S. 2017, are
satisfied, the acquiring employer “succeeds” to the predecessor’s
unemployment experience rating record and account for the purpose
of determining the unemployment tax rate for the successor.
Affirming the Panel’s decision, the division holds that Dos
Almas’s asset acquisition satisfied these statutory criteria. First, the
division holds that the finding that Dos Almas acquired 90% of the
physical and intangible assets of the predecessor supports the
conclusion that it acquired “substantially all” of the predecessor’s
“assets.” The division further holds that employee retention is
irrelevant to the successor issues under the applicable “substantially
all of the assets” provisions of section 8-76-104(1)(a), although such
retention is relevant under other statutory criteria, not at issue in
this case, which provide alternative ways of becoming a successor
employer.
Finally, the division rejects Dos Almas’s due process challenges
as unpreserved and inadequately developed.
COLORADO COURT OF APPEALS 2018COA145
Court of Appeals No. 17CA2147
Industrial Claim Appeals Office of the State of Colorado
DD No. 16040-2017
Dos Almas LLC,
Petitioner,
v.
Industrial Claim Appeals Office of the State of Colorado and Division of
Unemployment Insurance Employer Audits,
Respondents.
ORDER AFFIRMED
Division IV
Opinion by CHIEF JUDGE LOEB
Hawthorne and Berger, JJ., concur
Announced September 20, 2018
John F. K. Sabal, Authorized Representative, Palisade, Colorado, of Petitioner
Cynthia H. Coffman, Attorney General, Evan P. Brennan, Assistant Attorney
General, Denver, Colorado, for Respondent Industrial Claim Appeals Office
No Appearance for Respondent Division of Unemployment Insurance Employer
Audits
¶1 Petitioner, Dos Almas LLC, seeks review of a final order of
the Industrial Claim Appeals Office (Panel). Reversing a hearing
officer’s decision, the Panel ruled that, for unemployment
compensation tax rate liability purposes, Dos Almas is a
“successor” employer to WooPig LLC under the statutory criteria
in section 8-76-104(1)(a), C.R.S. 2017. We affirm the Panel’s
order.
I. Background
¶2 The relevant facts are not in dispute. Dos Almas began
operating a restaurant in Palisade after it acquired nearly all of
the assets of WooPig, which previously operated a different
restaurant at the same location. After this acquisition, Dos
Almas submitted a form to the Department of Labor and
Employment (Department), along with a copy of the asset
purchase agreement, applying for an unemployment
compensation insurance account and a determination of
employer liability.
¶3 Based on these documents, a deputy issued the requested
liability determination in August 2016. In this decision, the
deputy ruled that Dos Almas was a successor employer to
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WooPig for unemployment compensation tax rate liability
purposes because it met the requirements of section
8-76-104(1)(a) due to this acquisition.
¶4 In May 2017, Dos Almas appealed the deputy’s decision,
more than eight months after the applicable twenty-day time
limit. See § 8-74-106(1)(a), C.R.S. 2017. Nevertheless, in July
2017, a hearing officer ruled that good cause was shown under
the applicable regulatory criteria for permitting this untimely
appeal. See Dep’t of Labor & Emp’t Reg. 12.1.8, 7 Code Colo.
Regs. 1101-2; see also § 8-74-106(1)(b).
¶5 Consequently, an evidentiary hearing was held on this
appeal before another hearing officer. At this hearing, the asset
purchase agreement and the application by Dos Almas were
admitted into evidence, and testimony was provided by the
deputy and by one of the owners of Dos Almas.
¶6 After this hearing, the hearing officer found, consistent with
the owner’s testimony, that Dos Almas had purchased
approximately 90% of WooPig’s physical and intangible assets.
The hearing officer also made detailed factual findings
concerning specific physical and intangible assets that Dos
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Almas had acquired, consistent with the asset purchase
agreement. The hearing officer further found that Dos Almas did
not retain WooPig’s employees, and that, although it hired one of
those employees, that employee was not transferred to Dos
Almas as part of the asset sale.
¶7 Based on these factual findings, the hearing officer ruled
that Dos Almas was not a successor to WooPig under the
statutory criteria. Although the hearing officer acknowledged
that Dos Almas acquired “substantially all” of the physical and
intangible assets of WooPig, the hearing officer ruled that Dos
Almas did not acquire substantially all of the “total” assets of
WooPig because it did not retain the employees as part of the
asset sale.
¶8 The Division of Unemployment Insurance (Division) appealed
the hearing officer’s decision to the Panel.
¶9 On review, the Panel reversed the hearing officer’s decision.
The Panel upheld the hearing officer’s factual findings, but it
reached a different conclusion based on those factual findings.
In particular, based on the finding that Dos Almas had acquired
90% of WooPig’s physical and intangible assets, the Panel ruled
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that Dos Almas had acquired “substantially all” of WooPig’s
“assets” and thereby met the statutory criteria in section
8-76-104(1)(a) to be WooPig’s successor for unemployment
compensation tax rate liability purposes. The Panel further ruled
that the findings concerning WooPig’s employees were irrelevant
under the applicable criteria in section 8-76-104(1)(a) because
employees are not “assets” under those statutory provisions.
¶ 10 This appeal by Dos Almas followed.
II. Discussion
¶ 11 Dos Almas contends that the Panel erred in ruling that it is
a successor to WooPig for unemployment compensation tax rate
liability purposes under the circumstances here. We disagree.
A. Good Cause Issues
¶ 12 We first reject the argument raised in the Panel’s answer
brief that Dos Almas’s untimely appeal from the deputy’s
decision requires dismissal of this appeal for lack of subject
matter jurisdiction. This argument is based on the faulty
premise that the initial hearing officer could not permit that
untimely appeal for good cause shown.
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¶ 13 As noted in the July 2017 hearing officer’s decision, Dos
Almas’s appeal from the deputy’s decision was filed in May 2017,
262 days late. Also, as the Panel’s answer brief points out, under
current law, the Department’s regulations provide that an
untimely appeal from a deputy’s decision shall be dismissed and
the deputy’s decision shall become final if the untimely appeal is
received more than 180 days beyond the expiration of the timely
filing period. See Dep’t of Labor & Emp’t Reg. 12.1.3.2, 7 Code
Colo. Regs. 1101-2 (effective Dec. 30, 2017). However, the
Panel’s reliance on these provisions is misplaced because they
were not in effect at the relevant times.
¶ 14 To the contrary, the regulatory provisions concerning an
absolute 180-day time limit for a late appeal from a deputy’s
decision were first adopted on August 14, 2017, and were
effective on September 5, 2017. Dep’t of Labor & Emp’t Reg.
12.1.3.2, 7 Code Colo. Regs. 1101-2 (expired Dec. 12, 2017).
There was no outside time limit for a late appeal from a deputy’s
decision under the regulations in effect when Dos Almas filed its
untimely appeal in May 2017 or when the first hearing officer
made her good cause determination in July 2017. Moreover, the
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Division did not challenge this good cause determination in the
administrative proceedings that followed before the second
hearing officer and the Panel.
¶ 15 Under these circumstances, the propriety of the first hearing
officer’s good cause determination is not properly before us, and
there is no jurisdictional defect requiring the dismissal of this
appeal.
B. Successor Issues Under Applicable Statutory Criteria
¶ 16 Next, we reject Dos Almas’s argument that it is not a
successor employer to WooPig for unemployment tax rate liability
purposes under the applicable statutory criteria in section
8-76-104(1)(a).
¶ 17 Section 8-76-104(1)(a) provides, in pertinent part, that an
employing unit “that becomes an employer because it acquires all
of the organization, trade, or business or substantially all of the
assets of one or more employers” subject to the Colorado
Employment Security Act (CESA) “shall succeed to the entire
experience rating record of the predecessor employer,” and the
predecessor employer’s account “shall pass to the successor for
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the purpose of determining” the successor’s unemployment
compensation tax rate.
¶ 18 At issue in this appeal is whether Dos Almas acquired
“substantially all of the assets” of WooPig as required under
these provisions so as to become a successor employer to WooPig
for purposes of determining Dos Almas’s unemployment
compensation tax rate. Like the Panel, we conclude that Dos
Almas’s asset acquisition satisfied these statutory requirements.
¶ 19 The second hearing officer found from the evidence
presented that Dos Almas had purchased approximately 90% of
WooPig’s physical and intangible assets, including extensive
equipment for the operation of the restaurant business and all
marketing and internet-related intangibles. Because these
factual findings are supported by substantial evidence in the
record, we must accept them on appeal. See § 8-74-107(4),
C.R.S. 2017; Yotes, Inc. v. Indus. Claim Appeals Office, 2013 COA
124, ¶ 10.
¶ 20 Notwithstanding Dos Almas’s arguments concerning the
assets it did not acquire, the hearing officer’s findings concerning
Dos Almas’s acquisition of 90% of WooPig’s physical and
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intangible assets support the conclusion that Dos Almas
acquired “substantially all” of WooPig’s assets, as required under
the applicable statutory criteria. We also note that the changes
Dos Almas made in operating and marketing the restaurant
business after this transaction do not alter the fact that Dos
Almas first acquired “substantially all” of WooPig’s assets, which
is all that was necessary to satisfy the applicable statutory
criteria. Consequently, we agree with the Panel that the hearing
officer’s established factual findings support the conclusion that
Dos Almas is a successor employer to WooPig for unemployment
compensation tax rate liability purposes under the applicable
statutory criteria in section 8-76-104(1)(a). See § 8-74-107(6).
¶ 21 Contrary to Dos Almas’s further argument, we also agree
with the Panel that the lack of employee retention in the asset
purchase transaction is irrelevant to the successor issues in this
case.
¶ 22 In this regard, we note that employee retention is a factor
under other statutory provisions in CESA that govern alternative
ways in which an entity can become a successor employer for
unemployment compensation tax rate liability purposes. In
8
particular, an entity can also become a successor employer
under separate criteria in section 8-76-104(1)(a) by acquiring “all
of the organization, trade, or business” of a predecessor
employer, and section 8-76-104(11)(c) defines “trade” or
“business” as including “an employer’s work force.” Employee
retention can also provide an alternative way in which an entity
can become a successor employer under the provisions of section
8-76-104(9).
¶ 23 Nevertheless, Dos Almas was not determined to be a
successor employer under those statutory provisions, but instead
under the statutory criteria in section 8-76-104(1)(a) concerning
acquisition of “substantially all of the assets” of a predecessor
employer. Under these statutory provisions, employee retention,
or lack of employee retention, is irrelevant to the successor
issues because a predecessor’s employees are simply not “assets”
under the plain meaning of that statutory term. See
§ 8-74-107(6).
¶ 24 Dos Almas also contends that the statutory requirements in
section 8-76-104(1)(a) were not satisfied because it asserts that it
9
did not become an employer simply “because” of its acquisition of
WooPig’s assets. This argument is also unpersuasive.
¶ 25 As noted by Dos Almas, the statutory language in section
8-76-104(1)(a) refers to an entity becoming an employer
“because” it acquires either “all of the organization, trade, or
business” of a predecessor or “substantially all of the assets” of a
predecessor. Contrary to Dos Almas’s argument, however, this
condition was also satisfied in this case.
¶ 26 Here, the record shows that, in its initial application to the
Department, Dos Almas checked a box on the form indicating
that it was completing this application “as a result of a business
acquisition.” The owner completing this application certified,
under penalty of perjury, that this information was true,
accurate, and complete to the best of his knowledge. Moreover,
Dos Almas admits in its opening brief that its acquisition of
WooPig’s assets was “part of” its process of becoming an
employer.
¶ 27 Because Dos Almas has acknowledged the causal link
between its acquisition of WooPig’s assets and becoming an
employer, we conclude that it became an employer “because” of
10
its asset acquisition within the meaning of this statutory term in
section 8-76-104(1)(a).
¶ 28 In essence, Dos Almas contends that the statutory term
“because” should be read as “only because,” and that this
condition was not satisfied because there were also other steps in
the process of becoming an employer. We perceive no basis for
this interpretation in the statutory language, and we will not read
a limitation into the provisions of section 8-76-104(1)(a) that is
not supported by the statutory language used. See Tesmer v.
Colo. High Sch. Activities Ass’n, 140 P.3d 249, 253 (Colo. App.
2006) (holding, in a different context, that the statutory phrase
“because of” required only a showing of “but for” causation,
without any requirement to show a “sole” cause); see also Indus.
Claim Appeals Office v. Colo. Dep’t of Labor & Emp’t, 2013 CO 52,
¶¶ 8-15 (in interpreting other CESA provisions, court declined to
read limitation into statute that did not contain limiting
language).
¶ 29 In short, based on the established factual findings and the
applicable provisions of section 8-76-104(1)(a), the Panel properly
ruled that Dos Almas became a successor employer to WooPig for
11
unemployment compensation tax rate liability purposes due to
its acquisition of “substantially all” of WooPig’s assets.
C. Due Process Issues
¶ 30 We also reject Dos Almas’s arguments that its due process
rights were somehow violated by the determination that it is a
successor employer for unemployment compensation tax rate
liability purposes. As noted in the Panel’s answer brief, the
nature and the contours of Dos Almas’s due process arguments
are unclear, but these arguments are unpersuasive in any event.
¶ 31 First, to the extent that Dos Almas is raising as-applied due
process challenges to the successor liability determination under
the pertinent statutory criteria, such challenges have not been
preserved for our review. Because Dos Almas did not raise such
challenges in the administrative proceedings before the second
hearing officer and the Panel, we decline to address them on
appeal. See § 8-74-107(1); Goodwill Indus. of Colo. Springs v.
Indus. Claim Appeals Office, 862 P.2d 1042, 1045 (Colo. App.
1993); see also Magin v. Div. of Emp’t, 899 P.2d 369, 371 (Colo.
App. 1995).
12
¶ 32 Next, to the extent that Dos Almas is raising facial
challenges to the constitutionality of the pertinent statutory
criteria in section 8-76-104(1)(a), we also decline to address any
such challenges because Dos Almas has not cited any supporting
legal authority and has not adequately developed any such
arguments. See People v. Hicks, 262 P.3d 916, 920 (Colo. App.
2011) (declining to address due process argument asserted on
appeal without reference to any supporting legal authority); see
also Biel v. Alcott, 876 P.2d 60, 64 (Colo. App. 1993) (stating that
an appealing party has the burden to provide supporting
authority for arguments on appeal and that a failure to do so will
result in affirmation).
¶ 33 Finally, it appears that Dos Almas essentially contends that
application of the statutory criteria in section 8-76-104(1)(a) in
determining the successor liability issues is “unfair” because it
asserts that additional or different criteria should be considered.
In this regard, we note that arguments concerning possible
inequities arising from the application of the limited existing
statutory criteria should be directed to the General Assembly
rather than to this court. See Manpower, Inc. v. Indus. Comm’n,
13
677 P.2d 346, 347 (Colo. App. 1983) (changes to statutory
criteria for unemployment compensation successor liability are
for General Assembly, not the courts); see also Lewis v. Colo.
Dep’t of Labor & Emp’t, 924 P.2d 1183, 1185-86 (Colo. App.
1996) (changes to other CESA provisions to address possible
inequities are for legislative branch, not the courts).
III. Conclusion
¶ 34 The Panel’s order is affirmed.
JUDGE HAWTHORNE and JUDGE BERGER concur.
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