v. Goei , 2018 COA 55 ( 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
April 19, 2018
2018COA55
No. 16CA1909, Paradine v. Goei — Corporations — Piercing the
Corporate Veil; Labor and Industry — Colorado Wage Claim Act
A division of the court of appeals holds that the Colorado Wage
Claim Act does not categorically bar a plaintiff from piercing the
corporate veil to hold an individual liable for unpaid wages. In the
course of reaching that conclusion, the opinion disagrees with the
defendant’s assertion that language in Leonard v. McMorris, 63 P.3d
323, 331 (Colo. 2003), established such a bar. Because the plaintiff
pled sufficient facts to establish a plausible claim that the plaintiff
could pierce the corporate veil, the trial court erred when it granted
defendant’s motion to dismiss on the pleadings. The division
therefore reverses the trial court’s judgment and remands the case
with instructions.
COLORADO COURT OF APPEALS 2018COA55
Court of Appeals No. 16CA1909
Boulder County District Court No. 16CV30186
Honorable Norma A. Sierra, Judge
Robert Paradine,
Plaintiff-Appellant,
v.
Esmond Goei,
Defendant-Appellee.
JUDGMENT REVERSED AND CASE
REMANDED WITH DIRECTIONS
Division VI
Opinion by JUDGE BERNARD
Terry and Harris, JJ., concur
Announced April 19, 2018
Jung & Associates, P.C., Ronald D. Jung, Boulder, Colorado; Weston M. Cole
Law Office, LLC, Weston M. Cole, Littleton, Colorado, for Plaintiff-Appellant
Jester Gibson & Moore LLP, Marcel Krzystek, Jay S. Jester, Denver, Colorado,
for Defendant-Appellee
¶1 Does the Colorado Wage Claim Act, sections 8-4-101 to -123,
C.R.S. 2017, bar claimants from piercing the corporate veil to hold
an individual personally liable for unpaid wages? We answer that
question “no.”
¶2 We ask and answer that question in the case of plaintiff,
Robert Paradine, who appeals the trial court’s order that granted a
motion for judgment on the pleadings that defendant, Esmond Goei,
had filed. Because of our answer and our resolution of a second
issue, we reverse the court’s judgment and remand for further
proceedings.
I. Background and Procedural History
¶3 Plaintiff served as the Chief Financial Officer and Vice
President of Administration for a corporation called Aspect
Technologies, Inc. Defendant was the Chief Executive Officer.
¶4 Plaintiff sued defendant and Aspect, raising three claims: a
claim under the Wage Claim Act, fraud, and breach of contract. He
alleged that defendant and Aspect owed him about $8100 in unpaid
wages.
¶5 Defendant filed a motion for judgment on the pleadings under
C.R.C.P. 12(c). The trial court granted the motion and dismissed
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the three claims against defendant with prejudice. (The claims
against Aspect are still alive.) After denying plaintiff’s motion to
reconsider, the court certified its order dismissing the claims
against defendant as a final judgment under C.R.C.P. 54(b).
II. Analysis
A. Standard of Review and C.R.C.P. 12(c)
¶6 We review C.R.C.P. 12(c) judgments on the pleadings de novo.
Fischer v. City of Colorado Springs, 260 P.3d 331, 334 (Colo. App.
2010). Courts generally disapprove of such judgments. Colo.
Criminal Justice Reform Coal. v. Ortiz, 121 P.3d 288, 294 (Colo. App.
2005). Historically, this meant that we would affirm a judgment on
the pleadings “only if it appear[ed] beyond doubt that the party
asserting a claim [could] prove no set of facts in support of the
claim that would entitle the party to relief.” Id. “This standard
[was] essentially consistent with that employed in resolving a
motion to dismiss for failure to state a claim” under C.R.C.P.
12(b)(5). Id.
¶7 Our supreme court changed the C.R.C.P. 12(b)(5) standard in
2016. Warne v. Hall, 2016 CO 50. Now, “only a complaint that
states a plausible claim for relief survives a motion to dismiss.” Id.
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at ¶ 9 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). “Under
this standard, a party must plead sufficient facts that, if taken as
true, suggest plausible grounds to support a claim for relief.”
Campaign Integrity Watchdog, LLC v. All. for a Safe and Indep.
Woodmen Hills, 2017 COA 22, ¶ 28 (cert. granted Oct. 30, 2017).
And “the tenet that a court must accept as true all of the allegations
contained in a complaint is inapplicable to legal conclusions.”
Warne, ¶ 9 (quoting Iqbal, 556 U.S. at 678).
¶8 Because, before Warne, the C.R.C.P. 12(b)(5) and C.R.C.P.
12(c) standards were the same, see Colo. Criminal Justice Reform
Coal., 121 P.3d at 294, we conclude that the changes in the
C.R.C.P. 12(b)(5) standard effected by Warne also apply to C.R.C.P.
12(c). Indeed, federal courts use the same standard to resolve
claims under Fed. R. Civ. P. 12(b)(6), the federal equivalent of our
C.R.C.P. 12(b)(5), and Fed. R. Civ. P. 12(c). See, e.g., Grajales v.
P.R. Ports Auth., 682 F.3d 40, 44 (1st Cir. 2012)(“When . . . a motion
for judgment on the pleadings under Federal Rule of Civil Procedure
12(c) is employed as a vehicle to test the plausibility of a complaint,
it must be evaluated as if it were a motion to dismiss under Federal
Rule of Civil Procedure 12(b)(6).”); Sensations, Inc. v. City of Grand
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Rapids, 526 F.3d 291, 295-96 (6th Cir. 2008); Basile v. Prometheus
Global Media, 225 F. Supp. 3d 737, 741 (N.D. Ill. 2016).
B. Leonard v. McMorris
¶9 The trial court’s judgment relied significantly on Leonard v.
McMorris, 63 P.3d 323 (Colo. 2003). In that case, employees sued
corporate officers individually for unpaid wages following the
company’s declaration of bankruptcy. Id. at 325. The supreme
court held that the corporation’s officers and agents were “not
jointly and severally liable for payment of employee wages and other
compensation” under the Colorado Wage Claim Act. Id.
¶ 10 The employees in Leonard did not raise claims, such as fraud
or breach of contract, besides the one under the Wage Claim Act.
Rather, the supreme court’s holding arose primarily from its
analysis of the statutory language in the civil liability provisions of
the Wage Claim Act. Id. at 333.
¶ 11 In reaching this result, the supreme court observed generally
that, “[i]n the absence of some exception, neither the officers nor
the directors of a corporation are personally responsible for the
debts of a corporation merely because they are officers or directors
of the corporation.” Id. at 332 (quoting 3A William Meade Fletcher
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et al., Fletcher Cyclopedia of the Law of Corporations § 1117 (perm.
ed., rev. vol. 2002)). One possible exception would arise if a court
allowed a plaintiff to pierce the corporate veil to proceed against a
corporation’s officers. Id. at 330.
C. The Wage Claim Act Claim
¶ 12 Plaintiff asserts that Leonard did not bar him from “piercing
the corporate veil and hold[ing] [defendant] personally liable under”
the Wage Claim Act. We agree.
¶ 13 Leonard’s analysis seemed to be categorical: “We find no
provision of the Wage Claim Act . . . that makes the personal assets
of officers available for recourse to other employees of the
corporation when the hiring entity discharges them.” Id. at 331
(emphasis added).
¶ 14 But, when we look deeper, we conclude, for the following
reasons, that Leonard’s language was not meant to prevent
plaintiffs from piercing the corporate veil in Wage Claim Act claims
under the appropriate circumstances.
¶ 15 First, the remedies available under the Wage Claim Act are
designed to encourage employers to make timely payments to
employees of the wages that they have earned. § 8-4-109(3)(b),
5
C.R.S. 2017; Lee v. Great Empire Broad., Inc., 794 P.2d 1032, 1034
(Colo. App. 1989). Piercing the corporate veil in the right
circumstances would further this legislative intent.
¶ 16 Second, the Wage Claim Act was adopted “during a time when
the General Assembly was enacting labor legislation in order to
combat employer fraud and oppression.” Leonard, 63 P.3d at 337
(Mullarkey, C.J., dissenting). Because the statute’s purpose was to
prevent employer fraud, logic indicates that the legislature would
not exclude an employer whose existence may be fraudulent from
the Act’s reach. See McCallum Family L.L.C. v. Winger, 221 P.3d 69,
74, 79 (Colo. App. 2009)(The test for piercing the corporate veil
requires (1) evidence that the corporation was a mere alter ego of
the officer; (2) evidence that the officer used the corporation to
perpetrate a fraud or to defeat a rightful claim; and (3) the trial
court’s evaluation of whether “an equitable result will be achieved
by disregarding the corporate form and holding the shareholder
personally liable for the acts of the business entity.” (quoting In re
Phillips, 139 P.3d 639, 644 (Colo. 2006))).
¶ 17 Third, Leonard’s fundamental premise was that the Wage
Claim Act incorporated common law principles, including the
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concept of piercing the corporate veil. Leonard, 63 P.3d at 330.
This means that a corporate officer is not automatically liable to pay
an employee wages. Id. at 328, 331 (“[T]he legislature did not
intend to impose personal liability on officers and agents that is
equal to the corporation’s liability”; employers are not “always
responsible” for the corporation’s obligation to pay wages; “the
General Assembly did not intend blanket corporate officer and
agent liability for unpaid wages.”).
¶ 18 But Leonard also recognized that, under well-established
exceptions, officers or agents could be personally liable for a
company’s debts. Id. at 332 (“In the absence of some exception,
neither the officers nor the directors of a corporation are personally
responsible for” the corporation’s debts. (quoting 3A Fletcher et al.,
§ 1117)). Two of these well-established exceptions are piercing the
corporate veil, and when an officer acts on behalf of an undisclosed
principal, id. at 330.
¶ 19 Fourth, the supreme court’s intent to apply the concept of
piercing the corporate veil to Wage Claim Act claims becomes
clearer when we consider the sentence that immediately preceded
the categorical language that we have quoted above: “Under [the
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employees’] view, the officers and agents of corporations are always
responsible for wages due as a result of the employment
relationship . . . .” Id. at 331 (emphasis added). In other words, the
supreme court held that a corporation’s officers and agents were
not always liable under the Wage Claim Act; they would only
become liable if one of the well-established exceptions, such as
piercing the corporate veil, applied.
D. The Fraud and the Breach-of-Contract Claims
¶ 20 Addressing the fraud claim, the trial court wrote that, “to find
[defendant] personally liable for fraud, the [c]ourt would have to
pierce the corporate veil and find that Aspect was [defendant’s] alter
ego . . . .” If the court were to make such a finding, “the result
would be that [defendant] would be personally liable for paying
[p]laintiff any unpaid wages.” Such a result, the court decided,
would be barred by Leonard.
¶ 21 As far as the breach-of-contract claim was concerned, the trial
court, again relying on Leonard, wrote that, “[a]s [defendant] was
not a party to the employment contract between [p]laintiff and
[A]spect, he therefore cannot be held personally liable for breach of
its terms.”
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¶ 22 We conclude, for the following reasons, that (1) Leonard did
not bar plaintiff’s fraud and breach-of-contract claims; and
(2) plaintiff pled sufficient facts that, if taken as true, suggested
plausible grounds to support his fraud and breach-of-contract
claims, see Campaign Integrity Watchdog, LLC, ¶ 28.
¶ 23 First, we have concluded above that Leonard does not hold
that the Wage Claim Act bars plaintiffs from piercing the corporate
veil.
¶ 24 Second, plaintiff’s fraud claim made allegations in support of
his request that the trial court pierce the corporate veil to impose
liability on defendant. See generally Griffith v. SSC Pueblo Belmont
Operating Co., 2016 CO 60M, ¶ 11. For example, the complaint
alleged that defendant had
 collected funds for Aspect, and said that those funds would
be used to pay Aspect’s employees;
 “utilize[d] [Aspect’s] income . . . for his own personal use
and divert[ed] corporate funds in a manner which was
inconsistent with corporate requirements”; and
 “treated Aspect as his alter ego by requiring the corporation
to pay for his personal expenses, apartment lease, vehicle
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payments, commingled bank accounts and credit cards in
individual names[,] and paying personal credit card
expenses.”
¶ 25 Third, plaintiff’s breach-of-contract claim incorporated the
allegations in the fraud claim, and it additionally alleged that
 Aspect “acted through its agent” — defendant — “who
sanctioned and actively participated in negotiating and
entering into” an employment agreement with plaintiff; and
 Aspect and defendant had “willfully, intentionally and
materially breached the employment agreement by failing to
make required payments.”
¶ 26 Fourth, Leonard did not involve either a fraud claim or a
breach-of-contract claim; it only involved a claim under the Wage
Claim Act. We cannot find any language in Leonard that indicates
that the supreme court intended its holding to apply beyond Wage
Claim Act cases. And, as we have observed above, Leonard did not
create a categorical bar to the personal liability of corporate officers
in Wage Claim Act cases.
¶ 27 Fifth, Leonard’s analysis was thoroughly dependent on the
language of the Wage Claim Act. It did not analyze the elements of
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a fraud claim or of a breach-of-contract claim, and those latter
claims do not involve any of the Wage Claim Act’s provisions.
¶ 28 Sixth, Leonard’s general discussion of individual liability in the
corporate context, including the concept of piercing the corporate
veil, was anchored to the Wage Claim Act claim. The fraud and
breach-of-contract claims arise in a different context in which
piercing the veil may be difficult, but, at this stage of the
proceedings, still possible. See Leonard, 63 P.3d at 330. (We take
no position on whether plaintiff can successfully pierce the
corporate veil for either the fraud claim or the breach-of-contract
claim. Whether he can do so is a question to be decided in the trial
court.)
¶ 29 The trial court’s judgment is reversed. We remand this case to
the trial court to reinstate the Wage Claim Act claim, the fraud
claim, and the breach-of-contract claim, and to proceed
accordingly.
JUDGE TERRY and JUDGE HARRIS concur.
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