Keszey v. Red Hawk Fire & Security CA2/3

Filed 6/5/15 Keszey v. Red Hawk Fire & Security CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
PHILIP KESZEY, B250812
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC421911)
v.
RED HAWK FIRE & SECURITY
(CA), LLC,
Defendant and Respondent.
APPEALS from a judgment and order of the Superior Court of Los Angeles
County, Jane L. Johnson, Judge. Judgment and order affirmed.
The Lewis Law Firm, Anthony B. Lewis, Mario L. Grimm; Helmer Friedman
and Andrew H. Friedman for Plaintiff and Appellant.
The Law Offices of Timothy B. McCaffrey, Jr., Timothy B. McCaffrey, Jr., and
Natasha Chesler for Defendant and Respondent.
_______________________________________
Philip Keszey worked for Detection Logic Fire Protection, Inc. (Detection Logic)
as a salaried salesperson before and after its founder, Siamak Katal (Katal), sold the
corporation.1 Keszey alleges that Detection Logic and Katal agreed to compensate him
upon the sale of the corporation but failed to do so. Keszey appeals a summary
judgment in favor of Detection Logic and a postjudgment order awarding attorney fees
under former Labor Code section 218.5.
Keszey’s principal contentions on appeal are that conflicting extrinsic evidence
concerning the existence and terms of his contract with Detection Logic precludes the
summary adjudication of his count for breach of contract, and that the written contract
properly interpreted in light of the extrinsic evidence obligated Detection Logic to
compensate him upon the sale of its stock. He also challenges the summary
adjudication of other counts, the trial court’s failure to deny the motion based on
procedural defects in the moving papers, the overruling of his evidentiary objections,
and the attorney fee award.
We conclude that Keszey has shown no prejudicial error. We therefore affirm
both the judgment and the fee order.
FACTUAL AND PROCEDURAL BACKGROUND
1. Factual Background
Detection Logic installs and maintains fire alarms in commercial buildings.
Katal founded the company in the mid-1990’s. He served as Detection Logic’s
president until 2007 and was its majority shareholder before the company was sold in
December 2008. His wife, Ingrid Katal, also worked for the company, initially
answering phones and later as a manager and chief administrative officer.
Keszey has worked as a salesperson for Detection Logic since Katal first hired
him in 1995. Katal regarded Keszey as the company’s best salesperson “by far.”
1
Detection Logic changed its name and then converted from a corporation to
a limited liability company, and is now known as Red Hawk Fire & Security (CA),
LLC. We will use the term Detection Logic to refer to both the former corporation and
the current entity.
2
Detection Logic initially treated Keszey as an employee, but after a few years began to
report part of his earned commissions on a W-2 form and the rest on a 1099 form. The
purpose of reporting part of Keszey’s income on a W-2 form was so he would be
regarded as an employee and could continue to receive medical benefits.
Keszey formed Keszey Company in January 2003 to realize tax benefits.
Detection Logic paid Keszey Company for Keszey’s services. Keszey was an employee
of and received income and a W-2 from Keszey Company. This arrangement continued
until January 2009. Keszey earned approximately $380,000 in commissions in 2005.
In May 2006, Keszey and Katal discussed Keszey’s compensation. There had
been disputes about the calculation of his commissions, and Keszey wanted to simplify
his pay structure. Katal sent Keszey an e-mail message on Monday, May 26, 2008, at
10:18 a.m., stating:
“As per our conversation with regards to your new pay schedule I am putting the
following in writing in the hope that this will alleviate some of the problems that we are
facing in the new business climate:
“1. Your pay will be a flat fee of $25,000.00 per month
“2. You would have a three weeks per year paid vacation as per company
requirements and three sick days per year plus all normal holidays
“3. You would get my Lexus LS-430 put in your name, the company will pay
you a car allowance equivalent to the payment for the vehicle. Once the vehicle is paid
off the car allowance will revert to $750.00 per month.
“4. You would receive a one time payment of $25,000.00 to accommodate the
past pay discrepancies
“5. You would continue your efforts in gaining account base and service the
existing client base
“6. You would help other sales people with leads and sales support as needed.
“7. I will give you $500,000.00 of my Stock at the time of the sale of the
business if you continue your efforts as you have been in the past and work with other
sales people to promote the company business and profitability. Our profit goal for the
3
fiscal year 2006 is $12,000,000.00 in EBITDA your stock grant will be fully paid
during any year when the sale of more than 50% of the company stock is accomplished
and the profit forecast for the year is reached, your stock grant will be reduced by the
percentage that the profit forecast is not reached (i.e. if we sell the business in 2006 and
profit is $10,800,000.00 that is 10% lower than forecast your stock grant will be
reduced by 10%). Please know that this is an incentive and it is to motivate you to
continue having an interest in increasing the work load and helping others make this
company more successful.
“The [] timing payout of your monthly stipend is between you and James,
however, I suggest that you do not receive the same amount every month at the same
time!
“If you agree with this, please come in on Tuesday and pick up a check for
May/2006 pay (believe me it is more than your commission came up to – we) and wait
one or two weeks for the one time payout.”
Katal sent the message using his Detection Logic e-mail account to Keszey at
Keszey’s Detection Logic e-mail account. Keszey responded by sending Katal an
e-mail message on May 29, 2006, at 10:54 a.m., stating:
“I will continue to work the way I do..
“Example; I am working today...on DLFP paperwork..
“Your agreement sounds good...
“But we agreet [sic] to 5 days sick pay...
“Also, I have been scheduled to go to New York Thursday and Friday... (then we
start 3 weeks vacation agreement)
“Also, my May pay is actually Commission due from April..
“I am due for May payroll on last day of May...
“Can you please write memo...that you would like me to take over Lexus
payment..with your signature..with account number / phone number...fax me a little
note..I will see that maybe I can take over payment...(need your signature giving me
permission to check it out)”
4
Keszey and Katal did not reach an agreement on the terms stated in the e-mail
messages by May 30, 2006, and Keszey did not pick up a check that day. Instead, they
continued to exchange e-mail correspondence. Keszey sent an e-mail message to Katal
on May 31, 2006, with the subject line “You keep changing the deal!!!” Keszey stated
that he should receive either a car maintenance allowance or a gasoline card and that he
was still awaiting payment for past due commissions. He also stated that if he were to
receive a certain percentage less upon the sale of the company if the company did not
meet its profit goal, he should receive a certain percentage more if the company
exceeded its profit goal.
Katal responded with an e-mail message to Keszey on May 31, 2006, stating that
Keszey would receive more if the company exceeded its profit goal. Katal stated that
Keszey could not receive both a car allowance and a car maintenance allowance or
gasoline card. Katal also stated, “Phil I do not want to discuss this every day, if you
wake up tomorrow morning and have another problem with the deal please cancel it and
let’s go back on our normal pay plan.”
Keszey responded with another e-mail message to Katal on May 31, 2006,
stating that his car maintenance should be included and that he should receive payment
for previously agreed past due commissions, “and you know for a fact that this was not
part of this deal.” Keszey also stated, “I’m genuinely trying to be a team player…but
I don’t want you to take advantage of me.”
Katal sent an e-mail message to Keszey on June 1, 2006, stating:
“Forget about the deal we made, I will finish the commission for April this
weekend and try to push accounting to give me May ASAP. Thank you for trying to
make a better deal for me, but it is not worth the headache. We go forward as we
always had[.]”
Katal sent an e-mail to Keszey on June 12, 2006, stating:
“Thank you for a long and fruitful career at Detection Logic. I can only hope the
best for you for whatever you do in the future. I apologize for not being able to deal
with you anymore, this may be the best for both of us.
5
“Since you have already stopped working, I asked that you return all company
owned equipment to myself by the end of the day today. All commissions due to you
for all money received by Friday 06/09/06 will be calculated and sent to you no later
than 06/30/06.
“Good luck and hope that you make much more money in whatever endeavor
you engage in the future.”
Ingrid Katal then called Keszey into her office and offered to “make peace”
between her husband and Keszey. Keszey went to her office. She told him that she was
going to speak with Katal, and then returned. Keszey could not recall the details of his
conversation with her, but he testified in his deposition that she was trying to get him to
agree to the terms of Katal’s May 29 e-mail message. According to Keszey, he,
Detection Logic, and Katal, through Ingrid Katal, agreed to the terms of Katal’s May 29
e-mail message, as modified by Katal’s e-mail message of May 31, in his meeting with
Ingrid Katal on June 12, 2006.
Detection Logic paid Keszey a monthly salary of $25,000, in lieu of
commissions, from June 2006 through December 2008. Detection Logic also paid him
an additional $25,000 in June 2006 to resolve past pay discrepancies, and it paid
$10,000 toward the purchase of Keszey’s new Lexus in August 2006. In addition,
Detection Logic paid Keszey a $750 monthly car allowance beginning in or about
June 2006.
Detection Logic entered into a Phantom Stock Agreement with other employees
providing for payments to the employees in accordance with a Phantom Stock Plan.
The plan provided for a lump sum payment by Detection Logic to the plan participant
upon the sale of the company. Keszey never signed a Phantom Stock Agreement.
Mustafa Colak became president of Detection Logic in early 2007. Another
company bought Detection Logic in December 2008, and Colak became Detection
Logic’s regional general manager. Katal sold his shares of Detection Logic in
connection with the sale of the corporation and left his employment with Detection
6
Logic. Keszey presented Katal’s May 29 e-mail to Colak after the sale. Colak was not
familiar with the e-mail and suggested that Keszey discuss it with Katal.2
In January 2009 Detection Logic gave Keszey a letter offering him employment
as a sales manager beginning on January 1, 2009. The letter described his compensation
and benefits. It stated, “This letter contains the entire offer to you and supersedes any
other discussion you may have had with us. If you believe there were any other
promises made to you that are not outlined in this letter, please advise me in writing
prior to signing this letter.” Keszey countersigned the letter in January 2009 without
bringing up the change-in-control issue.
2. The Complaint
Keszey sued Detection Logic and Katal in September 2009. He alleges that
Detection Logic and Katal agreed to compensate him according to the terms of Katal’s
e-mails dated May 29 and 31, 2006, and that the two e-mails constitute a written
contract. He alleges he was an employee of Detection Logic at the time. He alleges
that the stock sale in December 2008 was a sale of the business within the meaning of
the contract, that he therefore is entitled to the agreed change-in-control compensation,
and that that compensation constitutes wages. Keszey alleges that Detection Logic and
Katal breached the contract by failing to pay the agreed change-in-control
compensation. He also alleges that the defendants failed timely to pay other wages due
under the contract.
Keszey alleges counts against Detection Logic and Katal for (1) failure to pay
earned wages (Lab. Code, § 204); (2) breach of contract, based on the failure to pay
change-in-control compensation; (3) breach of the covenant of good faith and fair
dealing implied in that same contract; (4) quantum meruit; (5) unjust enrichment;
(6) promissory estoppel; (7) promissory fraud; and (8) breach of contract, based on the
failure to pay compensation due under the terms of the parties’ prior agreement, alleged
2
Although Keszey testified he never sought change-in-control compensation from
Detection Logic before filing his complaint, Colak testified that Keszey presented
Katal’s May 29 e-mail message to him after the sale of Detection Logic.
7
in the alternative. He prays for damages, injunctive and equitable relief, statutory
penalties, and attorney fees under Labor Code section 218.5.
3. The Summary Judgment Motion
Detection Logic moved for summary judgment or summary adjudication in
January 2013. It argued that Katal’s May 29 e-mail was not an enforceable contract
because the parties never reached a meeting of the minds and that Keszey, as an
individual, was not a party to the alleged contract because he provided his services
solely through Keszey Company. It also argued that any contractual obligation to pay
change-in-control compensation was personal to Katal and not binding on Detection
Logic. It argued further that Keszey’s first count for unpaid wages had no merit
because Keszey was not an employee and the change-in-control compensation was not
wages. Detection Logic made other arguments as well. Detection Logic filed
a declaration by its counsel, portions of deposition transcripts, and other documents in
support of its motion.
Keszey argued in opposition that the moving papers were procedurally defective.
He also argued that the parties had achieved a meeting of the minds and formed an
enforceable contract, that he was a party to the alleged contract, and that the contract
was binding on Detection Logic. He argued that a meeting of the minds took place
either (1) in his meeting with Katal preceding the May 29 e-mail; (2) through the
May 29 and 31 e-mails; or (3) in his meeting with Ingrid Katal on June 12. He argued
further that he was an employee of Detection Logic and that the change-in-control
compensation constituted wages . Keszey filed his own declaration, declarations by his
counsel, portions of deposition transcripts, and other documents in support of his
opposition.
Detection Logic filed a reply together with a supplemental declaration by its
counsel and additional exhibits. The trial court allowed Keszey to file a sur-reply
addressing the additional evidence submitted with the reply.
The trial court filed an order granting summary judgment on May 15, 2013. The
court declined to deny the motion based on discrepancies between the issues stated in
8
the notice of motion and those set forth in the separate statement of undisputed facts and
other purported procedural defects. The court also ruled on evidentiary objections.
The trial court concluded that the offer to pay change-in-control compensation
was made by Katal personally and was not made on behalf of Detection Logic. The
court stated that Detection Logic therefore was entitled to summary adjudication of
counts one through seven. The court also concluded that Keszey never accepted the
offer, so no contract was formed. The court stated there was a triable issue of fact
whether Keszey was an employee or an independent contractor, but Detection Logic
could not be liable on the first count for unpaid wages in any event because any
obligation to pay change-in-control compensation was Katal’s personally.3 Finally, the
court concluded that the parties agreed to settle their dispute about past commissions for
$25,000, Keszey accepted a one-time payment of $25,000 accordingly, and he agreed to
payment of $25,000 per month moving forward and was paid that amount each month.
The court stated that Detection Logic therefore was entitled to summary adjudication of
the eighth count for breach of contract as well.
4. The Judgment and Appeal
The trial court entered judgment in favor of Detection Logic on June 26, 2013,
including an award of attorney fees “per statute” in an unspecified amount.4 Keszey
timely appealed the judgment.
3
The trial court also stated the language in the January 2009 letter agreement
quoted ante and Keszey’s failure to claim in writing that Detection Logic owed him
$500,000 “is not a waiver but an acknowledgement and further evidence that Keszey
never considered the payment of the $500,000 to be Detection Logic’s obligation.”
4
The case proceeded to a jury trial against Katal, who apparently had left the
country and did not appear at trial. The trial court entered a judgment on a special
verdict awarding Keszey $694,000 in compensatory damages for unpaid wages and
breach of contract and $3,500,000 in punitive damages based on fraud. Keszey moved
for an attorney fee award under Labor Code section 218.5 as the prevailing party in an
action for nonpayment of wages. The court granted the motion and awarded Keszey
more than two million dollars in attorney fees.
9
5. The Attorney Fee Award and Appeal
Detection Logic filed a motion for an attorney fee award under Labor Code
section 218.5 in September 2013 seeking $468,592.50 in fees. It argued that it was
entitled to a fee award under the statute as the prevailing party in an action for unpaid
wages.
Keszey opposed the fee motion arguing that Detection Logic had failed to show
that he was an employee during the relevant time period and therefore failed to show
that the change-in-control compensation constituted wages. Keszey also argued that an
employer was entitled to a fee award under the statute only if the employee brought the
action in bad faith, and he did not bring this action in bad faith. He requested judicial
notice of a legislative committee analysis of a 2013 bill to amend Labor Code
section 218.5. The trial court granted the request for judicial notice.
The trial court concluded that the plain language of Labor Code section 218.5
mandated a fee award in favor of Detection Logic as the prevailing party because
Keszey requested a fee award in his complaint. It also concluded that the version of the
statute in effect on November 1, 2013 -- the date of its ruling -- did not require a finding
that the employee brought the action in bad faith. The court therefore granted the fee
motion and awarded Detection Logic $390,469.50 in fees in an order filed on
November 1, 2013. Keszey timely appealed the order.
CONTENTIONS
Keszey contends (1) conflicting extrinsic evidence concerning the existence and
terms of his contract with Detection Logic precludes the summary adjudication of his
second count for breach of contract; (2) properly interpreted in light of the extrinsic
evidence, Katal’s May 29 e-mail message included a promise by Detection Logic to pay
him change-in-control compensation; (3) the trial court erroneously granted summary
judgment as to the eighth count based on its misunderstanding of the allegations;
(4) procedural defects in Detection Logic’s notice of motion and separate statement of
undisputed facts preclude summary judgment, and the court improperly considered
evidence presented for the first time with the reply; (5) the court erred by overruling his
10
evidentiary objections and drew improper inferences from the evidence; and
(6) Detection Logic is not entitled to an attorney fee award.5
DISCUSSION
1. Standard of Review
A defendant moving for summary judgment must show that an element of the
plaintiff’s cause of action cannot be established or that there is a complete defense.
(Code Civ. Proc., § 437c, subd. (p)(2).) The defendant can satisfy its initial burden by
presenting evidence that negates an element of the cause of action or evidence that the
plaintiff does not possess and cannot reasonably expect to obtain evidence needed to
establish an essential element. (Miller v. Department of Corrections (2005) 36 Cal.4th
446, 460 (Miller).) If the defendant meets this burden, the burden shifts to the plaintiff
to present evidence creating a triable issue of material fact. (Code Civ. Proc., § 437c,
subd. (p)(2).)
We review the trial court’s ruling on a summary judgment motion de novo,
liberally construe the evidence in favor of the party opposing the motion, and resolve all
doubts concerning the evidence in favor of the opponent. (Miller, supra, 36 Cal.4th at
p. 460.) We must affirm a summary judgment if it is correct on any of the grounds
asserted in the trial court, regardless of the trial court’s stated reasons. (Garrett v.
Howmedica Osteonics Corp. (2013) 214 Cal.App.4th 173, 181 (Garrett).) Even if the
grounds entitling the moving party to a summary judgment were not asserted in the trial
court, we must affirm if the parties have had an adequate opportunity to address those
5
Keszey also contends the trial court’s conclusion that Detection Logic never
agreed to pay him change-in-control compensation does not negate any element of his
fourth through seventh counts and therefore does not justify the summary adjudication
of those counts. He fails to discuss the elements of those counts, provides only
a perfunctory argument in a single sentence, and cites no authority. We therefore
conclude that he abandons any claim of error as to those counts. (Valov v. Department
of Motor Vehicles (2005) 132 Cal.App.4th 1113, 1132; Badie v. Bank of America (1998)
67 Cal.App.4th 779, 784-785.)
11
grounds on appeal. (Ibid.; see Gov. Code, § 68081; Code Civ. Proc., § 437c,
subd. (m)(2).)
A different standard of review applies to the trial court’s evidentiary rulings in
connection with a summary judgment motion. We review those for abuse of discretion.
(Garrett, supra, 214 Cal.App.4th at p. 181; Miranda v. Bomel Construction Co., Inc.
(2010) 187 Cal.App.4th 1326, 1335.)
We review the trial court’s ruling on a motion for attorney fees de novo to the
extent that it turns on an issue of statutory construction. (Kirby v. Immoos Fire
Protection, Inc. (2012) 53 Cal.4th 1244 (Kirby).)
2. Rules of Contract Interpretation
Our goal in interpreting a contract is to give effect to the mutual intention of the
contracting parties at the time of contract formation. (Civ. Code, § 1636.) We ascertain
that intention solely from the written contract if possible, but also consider the
circumstances under which it was made and the matter to which it relates. (Id., §§ 1639,
1647.) We consider the contract as a whole and interpret its language in context giving
effect to each provision, rather than interpret contractual language in isolation. (Id.,
§ 1641.) We interpret words in their ordinary and popular sense, unless the words are
used in a technical sense or a special meaning is given to them by usage. (Id., § 1644.)
Extrinsic evidence is admissible to explain the meaning of a written contract
provided that the contract is reasonably susceptible of the meaning supported by the
extrinsic evidence.6 (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 343;
6
“ ‘[E]ven if a contract appears unambiguous on its face, a latent ambiguity may
be exposed by extrinsic evidence which reveals more than one possible meaning to
which the language of the contract is yet reasonably susceptible.’ (Morey v. Vannucci
(1998) 64 Cal.App.4th 904, 912 [75 Cal.Rptr.2d 573].) ‘The test of admissibility of
extrinsic evidence to explain the meaning of a written instrument is not whether it
appears to the court to be plain and unambiguous on its face, but whether the offered
evidence is relevant to prove a meaning to which the language of the instrument is
reasonably susceptible.’ (Pacific Gas & E. Co. v. G.W. Thomas Drayage etc. Co.
(1968) 69 Cal.2d 33, 37 [69 Cal.Rptr. 561, 442 P.2d 641], citing numerous authorities.)”
(Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 391.)
12
Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co., supra, 69 Cal.2d at p. 40.) We
must interpret a written contract most strongly against the drafting party (Civ. Code,
§ 1654), but only if the other rules of interpretation and any extrinsic evidence do not
resolve the ambiguity. (Steller v. Sears, Roebuck & Co. (2010) 189 Cal.App.4th 175,
183-184.)
3. There Is No Conflict in the Extrinsic Evidence Relating to Contract
Interpretation and No Triable Issue of Fact in This Regard
Keszey contends conflicting extrinsic evidence concerning the existence and
terms of his contract with Detection Logic precludes summary adjudication of his
second count for breach of contract. We disagree.
Contract interpretation is solely a judicial function unless the interpretation turns
on the resolution of a factual dispute concerning the credibility of extrinsic evidence.
(Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 439; Parsons v. Bristol
Development Co. (1965) 62 Cal.2d 861, 865-866 (Parsons).) This is true even if
conflicting inferences can be drawn from the extrinsic evidence.7 (Garcia, supra, at
p. 439; Parsons, supra, at p. 866 & fn. 2.) Absent a factual dispute concerning the
credibility of extrinsic evidence, the trial court interprets a contract in light of the
extrinsic evidence and resolves any ambiguity. (Legacy Vulcan Corp. v. Superior Court
(2010) 185 Cal.App.4th 677, 688; Wolf v. Walt Disney Pictures & Television (2008)
162 Cal.App.4th 1107, 1126-1127 (Wolf).) In those circumstances, the Court of Appeal
interprets the contract de novo in light of the extrinsic evidence. (Parsons, supra,
62 Cal.2d at pp. 865-866; Wolf, supra, at p. 1127.)
Thus, the interpretation of a contract is solely a judicial function unless the
evidence creates a legitimate dispute as to the truth or falsity of a fact that is both
extraneous to the contract and material to its interpretation. If the extrinsic evidence
creates such a question of fact, the jury must decide that question before the contract can
7
Parsons, supra, 62 Cal.2d 861, equated conflicting inferences with conflicting
interpretations. (Id. at p. 866, fn. 2 [“ . . . conflicting inferences, actually conflicting
interpretations . . . ”].)
13
be interpreted. (Wolf, supra, 162 Cal.App.4th at p. 1127.) After the jury decides the
facts, the interpretation of the contract either can be submitted to the jury or the court
can interpret the contract in light of the jury’s factual finding. (City of Hope National
Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 396; see Medical Operations
Management, Inc. v. National Health Laboratories, Inc. (1986) 176 Cal.App.3d 886,
892, fn. 4.)
There is no conflict in the evidence concerning the alleged written promise to
pay change-in-control compensation and the surrounding circumstances relevant to its
interpretation. The historical facts are undisputed. What Keszey describes as conflicts
in the extrinsic evidence are actually conflicting inferences to be drawn from the
undisputed facts. Contrary to Keszey’s argument, his deposition testimony that he
believed the alleged promise to pay change-in-control compensation was made on
behalf of both Katal personally and Detection Logic does not create a triable issue of
fact regarding contract interpretation. Absent any dispute as to the material facts, the
interpretation of Katal’s May 29 e-mail message is solely a question of law that properly
should be decided by the trial court in ruling on the summary judgment motion.
4. Detection Logic Never Promised to Pay Change-in-Control
Compensation
Keszey contends Katal’s May 29 e-mail message, properly interpreted in light of
the extrinsic evidence, included a promise that Detection Logic would pay him
change-in-control compensation. We disagree.
Katal’s May 29 e-mail message to Keszey stated, in part:
“I will give you $500,000 of my Stock at the time of the sale of the business if
you continue your efforts as you have been in the past and work with other sales people
to promote the company business and profitability. Our profit goal for the fiscal year
2006 is $12,000,000.00 in EBITDA your stock grant will be fully paid during any year
when the sale of more than 50% of the company stock is accomplished and the profit
forecast for the year is reached, your stock grant will be reduced by the percentage that
the profit forecast is not reached (i.e. if we sell the business in 2006 and profit is
14
$10,800,000.00 that is 10% lower than forecast your stock grant will be reduced by
10%). Please know that this is an incentive and it is to motivate you to continue having
an interest in increasing the work load and helping others to make this company more
successful.”
The language “I will give you $500,000 of my Stock” reflects an offer by Katal
personally rather than on behalf of Detection Logic. Katal’s use of the words “I will”
and “my Stock” rather than “The company will” and “its stock” shows his intention to
create a personal obligation rather than a company obligation. Another paragraph in the
message stated, “the company will pay you a car allowance.” The two provisions
considered together in the context of the message as a whole evidences an intention to
distinguish Katal’s personal obligations from those of Detection Logic, at least with
respect to change-in-control compensation and a car allowance. This is true despite
Katal’s failure expressly to distinguish his personal obligations from those of the
company with respect to other items, such as Keszey’s monthly compensation (“Your
pay will be a flat fee of $25,000.00 per month”) and his one time payment for past
commissions (“You would receive a one-time payment of $25,000.00 to accommodate
the past pay discrepancies”).8
The undisputed evidence shows that Keszey was highly valued as a salesperson
and played an important role in the success of Detection Logic.9 Katal as the majority
shareholder of Detection Logic stood to gain from the company’s success upon the sale
of his shares in the company. Keszey’s work for Detection Logic of course benefited
the company, but it appears the primary benefit upon the sale of the company would be
to Katal personally. There is no evidence that Detection Logic would benefit from the
sale of the company. These circumstances suggest that Katal personally had good
8
Katal also referred to “my Lexus LS-430,” but the owner was Detection Logic.
9
Katal was clearly enamored of Keszey’s abilities as a salesperson. Katal said in
his deposition that Keszey was “a hell of a salesman” and was the company’s best
salesperson “by far.” Katal stated, “Phil Keszey, if he said ‘hello’ to someone, that was
his customer. That was his attitude.”
15
reason to offer Keszey a substantial monetary incentive to continue to work for
Detection Logic until the company was sold.
Our consideration of deposition testimony by Keszey and Katal does not change
our view. Keszey sometimes described the purported agreement to pay
change-in-control compensation as an agreement with Katal. But he also stated that his
agreement was with Detection Logic and Katal. He testified, “Well, the agreement I
had with Detection Logic and Mack Katal was with Mack Katal, who was the president
of Detection Logic. Okay? He is the one that had sold the company for X number of
dollars, and he was the one that I was going to collect my money from.” Regardless of
any uncertainty in Keszey’s understanding of the purported agreement, the objective
facts -- including the language of Katal’s May 29 e-mail message -- indicate that the
offer to pay change-in-control compensation was made by Katal personally rather than
Detection Logic.
Katal testified, “Change-of-control compensation, if it existed, it would have
been either between me and Phil Keszey or Detection Logic and Phil Keszey. It would
have nothing to do with Keszey Company.” Katal also stated that if a court decided that
Keszey was entitled to payment of $500,000, Katal personally should be responsible to
pay.10 Regardless of Katal’s understanding of the nature of the purported agreement,
the objective facts indicate that the offer to pay change-in-control compensation was
made by Katal personally rather than Detection Logic.
Keszey cites Civil Code section 1659, which states, “Where all the parties who
unite in a promise receive some benefit from the consideration, whether past or present,
their promise is presumed to be joint and several.” This statute concerns the distinction
between a joint obligation, a several obligation, and a joint and several obligation. (See
Civ. Code, §§ 1430, 1431.) We conclude that Detection Logic and Katal did not unite
in a promise to pay change-in-control compensation within the meaning of the statute
for the reasons we have stated, so the statutory presumption is inapplicable.
10
Katal testified in deposition, “If a court decides that, this is my responsibility.”
16
We conclude the trial court properly granted summary judgment in favor of
Detection Logic on Keszey’s second count for breach of contract based on the lack of
any contractual obligation to pay change-in-control compensation.
5. The Court Properly Granted Summary Judgment on the Eighth Count
for Breach of Contract
Keszey contends the trial court misunderstood the eighth count alleging a breach
of his earlier agreement with Detection Logic for payment of commissions. He argues
that, if the parties did not agree to the terms of Katal’s May 29 and May 31 e-mail
messages, his former compensation arrangement remained in place and Detection Logic
breached that contract by failing to pay the agreed commissions. We disagree.
The undisputed evidence shows that Detection Logic paid Keszey $25,000 per
month in lieu of commissions from June 2006 through December 2008. The evidence
suggests the parties through their conduct agreed to replace the former compensation
agreement based on commissions with a new compensation agreement based on
a salary. Keszey presented no evidence to the contrary. (DeLeon v. Verizon Wireless,
LLC (2012) 207 Cal.App.4th 800, 813-814 [mutual consent may be manifested by
conduct].) We therefore conclude that Keszey has shown no error in the summary
adjudication of his eighth count for breach of contract.
6. The Court Properly Declined to Deny the Motion Based on
Procedural Defects
Keszey contends procedural defects in Detection Logic’s summary judgment
moving papers compelled the denial of the motion. He argues that two of the issues for
summary adjudication set forth in the notice of motion failed to correspond with the
issues set forth in Detection Logic’s separate statement, and therefore failed properly to
state the grounds for the motion, in violation of Code of Civil Procedure section 1010
and rules 3.1110(a) and 3.1350(b) of the California Rules of Court.11
11
All further unspecified rule references are to the California Rules of Court.
17
Code of Civil Procedure section 1010 states, in relevant part, that a notice of
motion “must state when, and the grounds upon which it will be made, and the papers, if
any, upon which it is to be based.” Rule 3.1110(a) similarly states, “A notice of motion
must state in the opening paragraph the nature of the order being sought and the grounds
for issuance of the order.” Detection Logic’s notice of motion stated that the summary
judgment motion was based on the grounds that there was no triable issue of fact with
respect to any of the counts alleged against Detection Logic and that it was entitled to
judgment as a matter of law. The notice also stated that Detection Logic was moving
for summary adjudication in the alternative and listed eight issues for summary
adjudication. The notice stated that the motion was based on the notice,
a memorandum, declarations and exhibits, and “the pleadings and other documents on
file with the Court.”
Any defect in a notice of motion as to the grounds for the motion may be
disregarded if other papers supporting the motion and identified in the notice show the
grounds. (Savage v. Smith (1915) 170 Cal. 472, 474; Carrasco v. Craft (1985)
164 Cal.App.3d 796, 808.) Regardless of whether the notice of motion adequately
stated the grounds, Detection Logic’s memorandum supporting the motion explained
the grounds for the motion. Keszey does not argue otherwise. We therefore conclude
that the trial court properly disregarded any defect in the notice of motion.
Rule 3.1350(b) states, in relevant part, “If summary adjudication is sought,
whether separately or as an alternative to the motion for summary judgment, the specific
cause of action, affirmative defense, claims for damages, or issues of duty must be
stated specifically in the notice of motion and be repeated, verbatim, in the separate
statement of undisputed material facts.” This requirement expressly pertains to motions
for summary adjudication -- either separately or as an alternative to a summary
judgment motion -- rather than summary judgment motions. The trial court here
granted summary judgment, rendering the motion for summary adjudication moot. We
therefore conclude that Keszey has shown no prejudicial error.
18
Keszey also argues that Detection Logic failed to highlight relevant portions of
deposition testimony filed in support of its motion as required by rule 3.1116(c), failed
to designate deposition testimony and the associated exhibits as a single exhibit as
required by rule 3.1110(f), and failed to list in its separate statement all evidence cited
in its memorandum. Procedural defects not affecting the substantial rights of the parties
are not reversible error. (Code Civ. Proc., § 475; Reedy v. Bussell (2007)
148 Cal.App.4th 1272, 1289.) Keszey has not shown that these purported deficiencies
in the moving papers rendered them incomprehensible or otherwise prejudiced him. We
therefore conclude that he has shown no reversible error.
Keszey argues further that Detection Logic improperly presented new arguments
and new evidence in its reply. He argues that he countered those matters in his
sur-reply while objecting to the improper argument and evidence, but the trial court
overlooked the arguments in his sur-reply. We presume that the trial court performed
its official duties absent a record showing to the contrary. (Evid. Code, § 664; People v.
Visciotti (1992) 2 Cal.4th 1, 49.) We therefore presume that the court read and did not
overlook any part of Keszey’s sur-reply, and was not persuaded by the sur-reply.
Keszey has shown no prejudicial error.
7. Keszey Has Shown No Prejudicial Error in the Overruling of
Evidentiary Objections
Keszey contends the trial court erred by overruling his evidentiary objections to
his own deposition testimony submitted by Detection Logic. The testimony concerns
Keszey’s seeking payment from Katal of change-in-control compensation. Keszey
contends the court improperly admitted the testimony, drew improper inferences from
the testimony, and disregarded his corrections to the deposition transcript. We have not
relied on any of the challenged testimony in reaching our conclusion that Katal made
the offer to pay change-in-control compensation on his own personal behalf and not on
behalf of Detection Logic. Keszey’s claims of error regarding the admission of
testimony therefore are moot.
19
Keszey also challenges the overruling of his evidentiary objection to the
January 2009 employment agreement and the trial court’s conclusion as to the
significance of the agreement. Even if the language in the employment agreement
quoted ante were not an acknowledgment that Detection Logic had no obligation to pay
change-in-control compensation, any error on this point was harmless. The record
supports our conclusion that Detection Logic never offered to pay change-in-control
compensation without reference to the January 2009 employment agreement. Keszey
therefore has shown no prejudicial error.
8. Keszey Has Shown No Error in the Attorney Fee Award
a. The Court Was Not Required to Find That Keszey Was
an Employee Before Awarding Fees
Keszey contends the trial court erred by awarding Detection Logic attorney fees
under Labor Code section 218.5 without determining that he was an employee during
the relevant time period and that the change-in-control compensation actually
constituted wages.
At the time of the fee award in November 2013, Labor Code section 218.5 stated:
“In any action brought for the nonpayment of wages, fringe benefits, or health
and welfare or pension fund contributions, the court shall award reasonable attorney’s
fees and costs to the prevailing party if any party to the action requests attorney’s fees
and costs upon the initiation of the action. This section shall not apply to an action
brought by the Labor Commissioner. . . .
“This section does not apply to any action for which attorney’s fees are
recoverable under Section 1194.” (Stats. 2010, ch. 697, § 42.)
A statutory amendment effective on January 1, 2014 (Gov. Code, § 9600,
subd. (a)), added the following language after the first sentence: “However, if the
prevailing party in the court action is not an employee, attorney’s fees and costs shall be
awarded pursuant to this section only if the court finds that the employee brought the
court action in bad faith.” (Stats. 2013, ch. 142, § 1.) The amendment also added
subdivision designations. (Ibid.)
20
“Our fundamental task in construing a statute is to ascertain the legislative intent
so as to effectuate the purpose of the law. (Hassan v. Mercy American River Hospital
(2003) 31 Cal.4th 709, 715 [3 Cal.Rptr.3d 623, 74 P.3d 726].) Because the statutory
language ordinarily is the most reliable indicator of legislative intent, we begin by
examining the words of the statute. (Ibid.) We give the words of the statute their
ordinary and usual meaning and construe them in the context of the statute as a whole
and the entire scheme of law of which it is a part. (State Farm Mutual Automobile Ins.
Co. v. Garamendi (2004) 32 Cal.4th 1029, 1043 [12 Cal.Rptr.3d 343, 88 P.3d 71].) If
the language is clear and a literal construction would not result in absurd consequences
that the Legislature did not intend, we presume that the Legislature meant what it said
and the plain meaning governs. (Coalition of Concerned Communities, Inc. v. City of
Los Angeles (2004) 34 Cal.4th 733, 737 [21 Cal.Rptr.3d 676, 101 P.3d 563].) If the
language is ambiguous, we may consider a variety of extrinsic aids, including the
purpose of the statute, legislative history, and public policy. (Ibid.)” (Frontier Oil
Corp. v. RLI Ins. Co. (2007) 153 Cal.App.4th 1436, 1448-1449.)
Labor Code section 218.5 provides for an attorney fee award in an “action
brought for the nonpayment of wages, fringe benefits, or health and welfare or pension
fund contributions.” (Id., subd. (a).) The California Supreme Court in Kirby, supra,
53 Cal.4th 1244, explained that this language means “an action brought on account of
nonpayment of wages.”12 (Id. at p. 1256.) Kirby held that an action under Labor Code
section 226.7 for the alleged failure to provide meal or rest breaks is not an “action
brought for the nonpayment of wages” within the meaning of section 218.5 because the
gravamen of an action under section 226.7 is the failure to provide meal or rest breaks
rather than the failure to pay wages. (Kirby, supra, at pp. 1256-1257.) Kirby stated the
fact that the statutory remedy for a section 226.7 violation is additional wages (id.,
12
Kirby, supra, 53 Cal.4th at pages 1257-1258, also stated that the legislative
history suggested “the Legislature intended ‘action[s] brought for the nonpayment of
wages’ to refer to suits where the allegedly unlawful conduct is the employer’s failure to
comply with an obligation to pay wages or benefits.”
21
§ 226.7, subd. (b); Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094,
1102, 1114) does not mean that an action for failure to provide meal or rest breaks is an
action for nonpayment of wages. (Kirby, supra, at p. 1157.)
Kirby explained that the gravamen of an action -- rather than the nature of the
relief sought -- determines whether it was “brought for the nonpayment of wages”
within the meaning of Labor Code section 218.5, subdivision (a). (Kirby, supra,
53 Cal.4th at pp. 1156-1158.) If the gravamen of an action is the failure to pay wages to
an employee, the action was brought for the nonpayment of wages within the meaning
of the statute. (Ibid.) An action in which the plaintiff expressly alleges that he was an
employee and that his employer failed to pay wages earned and seeks damages for
nonpayment of wages, as here, is an action brought for the nonpayment of wages within
the meaning of the statute. Contrary to Keszey’s argument, Kirby did not hold or
suggest that a court must determine that a plaintiff actually was an employee as alleged
before awarding attorney fees in such an action. The statutory language also does not
suggest that a court must make such a determination before awarding fees. We
conclude Keszey has shown no error.
b. The Court Was Not Required to Find that Keszey Brought
the Action in Bad Faith Before Awarding Fees
Keszey also contends an employer seeking a fee award under the version of
Labor Code section 218.5 in effect in November 2013, before the recent statutory
amendment, was required to show that the employee brought the action in bad faith.
Citing the legislative history, he argues that the amendment merely clarified existing
law and did not change the law.
Whether a statute merely clarifies, rather than changes, existing law is a question
for the courts to decide. (McClung v. Employment Development Dept. (2004)
34 Cal.4th 467, 472-473.) Absent a definitive interpretation of existing law by the
courts, the Legislature’s declaration as to what an earlier Legislature intended is entitled
to consideration, but is not binding on the courts. (Id. at p. 473.)
22
The plain language of former Labor Code section 218.5 said the prevailing party
in any action for the nonpayment of wages or other benefits was entitled to an attorney
fee award whether the prevailing party was an employee or an employer. The operative
language stated, “In any action brought for the nonpayment of wages, fringe benefits, or
health and welfare or pension fund contributions, the court shall award reasonable
attorney’s fees and costs to the prevailing party if any party to the action requests
attorney’s fees and costs upon the initiation of the action.”13 This language did not
distinguish a prevailing employee from a prevailing employer or suggest that a different
standard applied to each.
The California Supreme Court in Kirby, supra, 53 Cal.4th at page 1248,
construed former Labor Code section 218.5 as a two-way fee-shifting statute applicable
to both employees and employers. Kirby stated, “This provision awards fees to the
prevailing party whether it is the employee or the employer; it is a two-way fee-shifting
provision.” (Ibid.) Kirby also said, “Section 218.5 is a two-way fee-shifting statute,
permitting an award of fees to either employees or employers who, as relevant here,
prevail on an ‘action brought for the nonpayment of wages.’ ” (Id. at p. 1251.) Kirby
contrasted the two-way fee-shifting provision in former Labor Code section 218.5 with
the one-way fee-shifting provision in Labor Code section 1194, which authorizes a fee
award in favor of only an employee who prevails in an action for unpaid minimum
wage or overtime compensation. (Kirby, supra, at p. 1248.) But Kirby did not discuss
whether an employer seeking fees under the statute must show that the employee
brought the action in bad faith.
13
This language is unchanged in current Labor Code section 218.5, subdivision (a).
As stated ante, new language in the current statute reads, “However, if the prevailing
party in the court action is not an employee, attorney’s fees and costs shall be awarded
pursuant to this section only if the court finds that the employee brought the court action
in bad faith.” (Ibid.)
23
Keszey cites an analysis by the Assembly Committee on Judiciary of Senate Bill
No. 462 (2013-2014 Reg. Sess.) as introduced on February 21, 2013. The analysis
stated:
“According to the author, the bill enacting section 218.5 was ‘intended to cover
the cost of obtaining wages and benefits from recalcitrant or slow paying employers.’
(Ass. Comm., SB 2570, as amended Jun 17, 1986.) According to the author, ‘the
Legislature explicitly included the word [‘]frivolous’ in describing how employers
would be able to recover attorney’s fees under 218.5. Thus, the most reasonable
construction of section 218.5 is that the two-way fee provision should apply only when
employers defeat frivolous claims. . . . ’ ”
This committee analysis refers to the legislative history of the prior bill that
enacted Labor Code section 218.5, but is not itself part of the legislative history of the
prior bill. We have granted Detection Logic’s request for judicial notice of materials
from the legislative history of the prior bill. (Evid. Code, §§ 452, subd. (c), 459;
Watkins v. County of Alameda (2009) 177 Cal.App.4th 320, 332, fn. 12.) Consistent
with the language of former Labor Code section 218.5, those materials suggest that the
Legislature enacting the bill in 1986 did not intend to limit a fee award against an
employee to circumstances where the employee’s action was frivolous.
Several committee analyses, including an analysis by the Senate Rules
Committee, stated that one of the arguments in support of the bill was that “employers
will be protected from frivolous lawsuits for nonpayment of wages since the employee
will be required to pay the employer’s legal fees when the employer is the prevailing
party.” (Sen. Rules Com., Analysis of Sen. Bill No. 2570 (1985-1986 Reg. Sess.) as
amended Aug. 14, 1986 [sic], p. 2.) This statement suggests that the Legislature
considered the argument that the bill would discourage frivolous employee lawsuits, but
does not mean the Legislature understood or intended that the bill would authorize a fee
award against an employee only if the action was frivolous.
The bill enacting Labor Code section 218.5 also added language to Labor Code
section 1128, subdivision (c) requiring an attorney fee award to the prevailing party in
24
an action to compel compliance with an arbitration award in a dispute involving
a collective bargaining agreement, “unless the other party has raised substantial issues
involving complex or significant questions of law.” (Stats. 1986, ch. 1211, p. 4290.)
But no similar language was included in the bill as to new Labor Code section 218.5.
A committee analysis said of this provision, “This provision is designed to deter
frivolous claims or defenses since the fees may not be awarded where the losing party
has raised substantial issues involving complex or significant questions of law.”
(Assem. Com. on Jud., Analysis of Sen. Bill No. 2570 (1985-1986 Reg. Sess.) as
amended Aug. 12, 1986, p. 2.) The absence of similar language in the same bill as to
new Labor Code section 218.5 suggests the Legislature did not intend to impose
a similar limit on a fee award to the prevailing party under section 218.5, whether the
prevailing party is an employee or an employer.
We conclude that former Labor Code section 218.5 did not require a prevailing
employer to show that an employee brought the action in bad faith in order to justify an
award of attorney fees against the employee. The statutory amendment that took effect
on January 1, 2014, changed the law on this point and did not merely clarify existing
law. We therefore conclude the trial court properly awarded fees in favor of Detection
Logic under the statute.
25
DISPOSITION
The judgment and the order awarding attorney fees are affirmed. Detection
Logic is entitled to recover its costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
EGERTON, J.*
WE CONCUR:
KITCHING, J., Acting P. J.
ALDRICH, J.
*
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant
to article VI, section 6 of the California Constitution.
26