Kuhr v. City of Billings

DA 06-0373
IN THE SUPREME COURT OF THE STATE OF MONTANA
2007 MT 201KRIS L. KUHR, CARL L. ZABROCKI, ED NEWLIN, DONALD
REGNIER, GILBERT SOMMERVILLE, WALT KUHR, RON
MARTIN, URIAH THATCHER, VINCE CHRISTENSEN,
GARY PUCKETT, RICK ELSENPETER, MILO LAMPHIER,
MICHAEL ERBEN, WAYNE HIRSHI, LARRY RENNICH,
GEORGE WALKKI, RONALD D. SNELLING, LESLIE SOHLHIEM,
MARK PADDOCK, JEFFREY M. BRANDT, ROBERT B. DUNN,
JEFF BLOOM, GREG BOCHY, MATTHEW J. HOPPEL,
JOE E. KEENER, FRANCIS A. EWALT, GENE A. SPEIDEL,
CLAYTON L. POST, KELLY FUGERE, STEVE WILSON,
JAMES MANNING MERTZ, HERMAN ROOKHAIZEN, BRET A.
THORMAHLEN, STEPHEN P. HOKLIN, JAMES V. DAY,
SANDY ROGERS, MICHAEL W. MARTIN, EDWARD J.
RIESINGER, LEE BRADY, KEVIN BENTZ, WADE MADISON,
TERRY O'TOOLE, LARRY PINNOW, LAWRENCE J. HART,
BRIAN D. CORNELIUSEN, TERRY LARSON, ALAN HARPER,
ALLAN D. MARKUSON, JASON FRANK, VERNON MASHEK,
MARCUS EVENSON, TOOD B. KINKHEAD, PATRICK J. NISSEN,
MITCHELL W. ERDMANN, TIMOTHY A. McLEOD, ROBERT D.
MEYER, THEORDIS WARREN, JAMES LYNCH, GREGORY S.
DILLON, DERRECK MITCHELL, JOHN R. DILLON, WAYNE M.
FISHER, and WILLIAM T. HARVEY,
Plaintiffs, Respondents, and Cross-Appellants,
v.
CITY OF BILLINGS,
Defendant and Appellant.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and For the County of Yellowstone, Cause No. DV-00-160
Honorable G. Todd Baugh, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Charles B. Brooks, City Attorney, Billings, Montana
Richard Larson, Harlen, Chronister, Parish & Larson, P.C.,
Helena, Montana
For Respondents:
Lawrence A. Anderson, Attorney at Law, Great Falls, Montana
Gene R. Jarussi, Jarussi & Bishop, Billings, Montana
Submitted on Briefs: August 9, 2007
Decided: August 15, 2007
Filed:
__________________________________________
Clerk
2
Justice W. William Leaphart delivered the Opinion of the Court.
¶1 This appeal arises from a wage claim filed by the plaintiffs, all firefighters
(Firefighters) formerly or currently employed by the City of Billings (City). The City
appeals from the Thirteenth Judicial District Court’s order granting the Firefighters’
motion for partial summary judgment and from the court’s judgment awarding damages
to the Firefighters for unpaid wages and leave time, and awarding a penalty, attorney
fees, and costs. The Firefighters cross-appeal the amount of damages for unpaid wages
and leave time, and the amount of the penalty, attorney fees, and costs. We affirm in
part, reverse in part, and remand.
¶2 We restate the issues on appeal as follows:
1. Did the District Court err in granting the Firefighters’ motion for partial
summary judgment concluding the City was liable for unpaid wages and leave time?
2. Did the District Court err in assessing the penalty for the City’s failure to pay
wages?
3. Did the District Court err in awarding costs to the Firefighters?
4. Did the District Court abuse its discretion in awarding attorney fees to the
Firefighters?
BACKGROUND
¶3 The City and the Local 521 International Association of Fire Fighters, on behalf of
the Firefighters, entered into a collective bargaining agreement with regard to employer-
employee relations, wages, hours and other conditions of employment, and to provide a
means of resolving grievances. The agreement was renewed every two or three years.
3
¶4 The agreement in effect prior to July 1, 1995 (the pre-1995 agreement) provided
the following pay formula:
a. Hourly rate is based on 2,080 hours per year. To determine this figure,
annual base salary will be divided by 2,080 hours.
b. Formula for Regular Monthly Salary: Twenty-six (26) times the last full
regular pay, (base pay plus longevity plus holiday pay) divided by
twelve (12) equals regular monthly salary. (26 x 1 frp./12 = rms)
c. Regular paydays will be every other Friday.
The salary schedule attached to the pre-1995 agreement set forth a base salary dependent
on a firefighter’s position. For example, the base salary listed for a Firefighter 1 position
for 1994-1995 was $2,069.79, which was then used to calculate a firefighter’s regular
monthly salary.
¶5 The agreement that went into effect on July 1, 1995 (the post-1995 agreement)
provided the following pay formula:
a. Annual base salary is equal to 2080 hours x hourly base rate of pay
listed on the attached Salary Schedule. Hourly base rate is base pay
plus special certification pay.
b. Regular payday will be every other Friday.
The salary schedule attached to the post-1995 agreement set forth a base hourly salary.
In this case, a Firefighter 1, in 1995-1996, received the base pay of $12.5624 per hour,
plus special certification pay of $0.1731 per hour if eligible.
¶6 The Firefighters’ work schedule set forth in both pre-1995 and post-1995
agreements was as follows:
The work schedule shall be a 27-day total work cycle consisting of seven
(7) consecutive work shifts of twenty-four (24) hours on duty and forty-
eight (48) hours off duty, immediately followed by six (6) consecutive days
off.
4
Based on this work schedule, the Firefighters worked approximately 2,272 hours per
year. When the Firefighters were paid every other Friday, the pay stub reflected that they
were paid for forty hours per week, regardless of whether they worked more or less than
forty hours per week. Although schedules were kept, which would indicate the number
of hours worked by the Firefighters, the actual number of hours worked was not sent to
the payroll department. This resulted in the Firefighters being paid for only 2,080 hours
each year, rather than the 2,272 hours the Firefighters worked each year while on the 27-
day work schedule.
¶7 Seventeen Firefighters filed a complaint alleging that the City failed to properly
account for or pay the Firefighters for all hours worked and for earned leave time. They
claimed that pursuant to Article XII, Section 2(2) of the Montana Constitution, the City
was liable for its failure to pay for or account for hours worked in excess of eight hours
per day. Further, they alleged the City’s failure to pay wages entitled the Firefighters to a
penalty. The Firefighters requested that a class be certified and a common fund be
established.
¶8 The Firefighters filed a motion for partial summary judgment. They argued that
they had a constitutional right to be paid for every hour they worked in excess of an
eight-hour day, and that this right could not be waived or bargained away. They did not
argue that they were entitled to overtime for those hours worked, but that the hours were
unpaid “straight time.” The Firefighters did not base their claim on any violations of the
Fair Labor Standards Act (FLSA). Further, the Firefighters claimed, in addition to
straight time, the City failed to properly account for and pay sick and vacation leave time.
5
The City responded that the eight-hour work day provision in the Montana Constitution
had no application in this case in light of §§ 39-4-107 and 39-3-406, MCA, which
provide that the eight-hour day does not apply to firefighters working under an
established collective bargaining agreement. The City noted that the Firefighters did not
allege a violation of any terms of the collective bargaining agreement. The City then
filed its own motion requesting summary judgment on all of the Firefighters’ issues.
¶9 The District Court rejected the Firefighters’ claims that they were entitled to
unpaid wages pursuant to Article XII, Section 2, of the Montana Constitution. Instead,
the court compared the pre- and post-1995 collective bargaining agreements and
determined the matter based on a breach of contract theory. The court found that the pre-
1995 agreement was an annual wage contract and the post-1995 agreement was an hourly
wage contract. Thus, the pre-1995 agreement provided the exact wage to be paid for the
year regardless of the number of hours worked. The post-1995 agreement, on the other
hand, required that the Firefighters be paid for each hour worked. Accordingly, the
Firefighters were entitled to unpaid straight time from 1995 forward. The court
determined that the issue of leave time could be worked out under the agreements as
well—that the Firefighters’ “leave time should be credited and debited at the same rate.”
¶10 The court certified the matter as a class action and defined the class as all past and
present firefighters of the City of Billings who work or worked under the 27-day work
schedule. The complaint was amended to include dozens more firefighters.
¶11 A bench trial was held on May 3 and 4, 2005, to determine damages. Based on the
court’s prior conclusion that the post-1995 agreement was an hourly wage contract, the
6
court found at trial that the Firefighters worked approximately 2,272 hours per year but
were paid for only 2,080 hours per year, and thus concluded they were entitled to recover
for wages and benefits associated with the unpaid hours. The court further concluded
that the City did not breach its duty to maintain proper payroll records, and that the
records were not falsified or intentionally misleading. The court assessed a penalty
against the City in the amount of 8.45 percent of the unpaid wages. After a hearing on
the amount of attorney fees and costs, the court awarded $625,000 in attorney fees to the
Firefighters, declining to award the full one-third contingency fee the Firefighters
requested. The court awarded $3,972.98 in costs, although the Firefighters requested
$60,154.72. The City appeals the order granting the Firefighters’ motion for partial
summary judgment and from the court’s judgment awarding damages in the amount of
$3,075,590.30, an 8.45 percent penalty in the amount of $253,000, and the above-
mentioned attorney fees, and costs. The Firefighters cross-appeal the amount of damages
for unpaid wages and leave time, and the amount of the penalty, attorney fees and costs.
Other facts will be discussed below as necessary.
STANDARD OF REVIEW
¶12 This Court’s standard of review of a district court’s grant of summary judgment is
de novo. Tefft v. State, 271 Mont. 82, 88, 894 P.2d 317, 321 (1995). A grant of summary
judgment is proper only if no genuine issues of material fact exist and the moving party is
entitled to judgment as a matter of law. M. R. Civ. P. 56(c); Tefft, 271 Mont. at 88, 894
P.2d at 321.
7
¶13 We review the findings of a trial court sitting without a jury to determine if the
court’s findings are clearly erroneous. M. R. Civ. P. 52(a); Reier Broadcasting Co., Inc.
v. Reier, 2000 MT 120, ¶ 19, 299 Mont. 463, ¶ 19, 1 P.3d 940, ¶ 19. A court’s findings
are clearly erroneous if they are not supported by substantial credible evidence, if the trial
court has misapprehended the effect of the evidence, or if a review of the record leaves
this Court with the definite and firm conviction that a mistake has been committed. Reier
Broadcasting Co., Inc., ¶ 19 (citations omitted). We review a district court’s conclusions
of law to determine whether those conclusions are correct. Reier Broadcasting Co., Inc.,
¶ 20 (citations omitted).
¶14 This Court’s standard of review of a district court’s grant or denial of attorney fees
and costs is whether the court abused its discretion. Denton v. First Interstate Bank of
Commerce, 2006 MT 193, ¶ 19, 333 Mont. 169, ¶ 19, 142 P.3d 797, ¶ 19. A district court
abuses its discretion when it acts arbitrarily, without employment of conscientious
judgment, or in excess of the bounds of reason resulting in substantial injustice.
Pumphrey v. Empire Lath and Plaster, 2006 MT 255, ¶ 9, 334 Mont. 102, ¶ 9, 144 P.3d
813, ¶ 9. Although this Court recognizes that a district court has broad authority to award
costs, the issue raised in this appeal regarding the award of costs involves a question of
law as to entitlement to costs. See Valeo v. Tabish, 1999 MT 146, ¶ 15, 295 Mont. 34,
¶ 15, 983 P.2d 334, ¶ 15. We review a district court’s conclusions of law to determine if
they are correct. Valeo, ¶ 15.
8
DISCUSSION
¶15 ISSUE 1: Did the District Court err in granting the Firefighters’ motion for
partial summary judgment concluding the City was liable for unpaid wages and
leave time?
¶16 The City argues on appeal that the District Court erred in granting the Firefighters’
motion for partial summary judgment on the basis of a breach of contract theory when the
Firefighters’ theory of recovery was based on the Montana Constitution’s eight-hour day
provision. The court disregarded the constitutional argument, stating that Article XII,
Section 2, at most “prohibit[s] an employer from compelling an employee to toil more
than eight hours as a regular day’s work,” and that in this case, the Firefighters had
agreed to the 27-day work cycle which included working more than eight hours in a day.
Therefore, using a “common sense” analysis, the District Court concluded that the pre-
1995 agreement was an annual wage contract which the City had not breached, and the
post-1995 agreement was an hourly wage contract which the City had breached.
¶17 The City contends that the court’s analysis is flawed because the pre-1995
agreement and post-1995 agreement, while expressing the pay formula in different ways,
were intended to compensate the Firefighters the same way. In fact, the City states that it
intended to compensate the Firefighters for all hours worked under both pre-1995 and
post-1995 agreements. The City draws attention to the fact that both sets of contracts
refer to annual base salary and hourly rates. In making that argument, the City exposed
itself to the possibility that the courts could conclude that the Firefighters were entitled to
an hourly wage and, thus, unpaid straight time under both the pre- and post-1995
9
agreements. However, the Firefighters have not cross-appealed the denial of pre-1995
wages on a breach of contract theory. Thus, the issues before us are whether the District
Court erred in concluding that the post-1995 agreement was an hourly wage contract, and
secondly, whether the District Court erred in concluding Article XII, Section 2(2) of the
Montana Constitution was inapplicable in this case.
A. Did the District Court err in concluding that the post-1995 agreement was
an hourly wage contract?
¶18 The interpretation of provisions in a collective bargaining agreement is a question
of law. Hughes v. Blankenship, 266 Mont. 150, 154, 879 P.2d 685, 687 (1994). In
interpreting written contracts, the court must ascertain the intention of the parties from
the writing alone. Wurl v. Polson School Dist. No. 23, 2006 MT 8, ¶ 16, 330 Mont. 282,
¶ 16, 127 P.3d 436, ¶ 16 (citations omitted). Where a contract provision is clear and
unambiguous, a court must apply the language as written. Wurl, ¶ 16. If a contract term
is ambiguous, interpretation of the term requires resolving a question of fact regarding the
intent of the parties to the contract. Wurl, ¶ 17. The initial determination of whether an
ambiguity exists in a contract is also a question of law for the court’s determination.
Wurl, ¶ 17. An ambiguity exists where the language of the contract, as a whole, could
reasonably be subject to two different meanings. Wurl, ¶ 17. The fact that the parties
disagree as to the meaning of a contract provision does not necessarily create an
ambiguity. Wurl, ¶ 17.
¶19 In this case, as stated above, the post-1995 agreement provided a pay formula
based on hourly base pay plus special certification pay. The “base hourly salaries” were
10
attached as Exhibit A to the post-1995 agreement. Special Certification Pay was defined
in the agreement as pay that any member of the fire department would receive if he or she
held a certification, such as EMT-basic, hazardous material technician, rope rescue
technician, etc. Regardless of how many certifications a member held, the pay was $30
per month. However, this pay was further broken down on Exhibit A as $0.1731 per
hour. Further, the agreement provided for Higher Classification Pay, which was paid to
any firefighter who was “required to accept the responsibilities and carry out the duties of
a position or rank above that which he/she normally holds for a period for two (2) hours
or more.” This pay was also broken down by hour on Exhibit B of the post-1995
agreement. The pay formula then provided that an annual base salary could be reached
by multiplying the hourly base rate by 2,080. Despite this mention of an annual base
salary, the post-1995 agreement clearly provided for an hourly wage.
¶20 Given that the post-1995 agreement specifically lists actual hourly wages, there is
no basis for treating the contract as an annual salary contract, as the City suggests. For
example, a Firefighter I with one certification would have an hourly base rate of
$12.7355. Thus, the annual salary would be $26,489.84. Dividing this number by the
actual hours worked on the defined schedule would equate to only $11.66 per hour, more
than a dollar less per hour than the agreement stated the firefighter was to receive. It is
illogical to provide an actual hourly wage but then not pay for every hour worked, thus
lowering the agreed-upon hourly wage.
¶21 Although not at issue on appeal, the pre-1995 agreement did not provide an hourly
break-down of wages for regular pay, special certification pay, or high certification pay,
11
but rather provided an amount for each type of pay that was then used to determine the
regular monthly salary. Further, rather than starting with an hourly rate to reach an
annual rate, the pre-1995 agreements provided that an hourly rate was to be derived from
the annual rate, presumably for high certification pay and overtime pay purposes.
Comparing the agreements further bolsters the court’s conclusion that the post-1995
agreement was intended to be an hourly wage contract.
¶22 The District Court did not err in concluding that the post-1995 agreement provided
for an hourly wage and that the Firefighters were to be compensated for each hour
worked and were entitled to earn leave time accordingly.
B. Did the District Court err in concluding Article XII, Section 2(2) of the
Montana Constitution was inapplicable in this case?
¶23 The Firefighters argue that Article XII, Section 2(2) of the Montana Constitution
gives rise to a duty by employers to account for every hour worked. This part provides:
A maximum period of 8 hours is a regular day’s work in all industries and
employment except agriculture and stock raising. The legislature may
change this maximum period to promote the general welfare.
This constitutional provision was carried over from the 1889 Montana Constitution which
provided: “A period of eight hours shall constitute a day’s work in all industries,
occupations, undertakings and employments, except farming and stock raising . . . .”
Mont. Const., art. XVIII, § 4 (1889, amended 1935). We have previously held that this
provision was not self-executing, but rather it was dependent upon legislative
enforcement, pursuant to Article XVIII, Section 5, of the Montana Constitution (1889),
which stated: “The legislature by appropriate legislation shall provide for the
12
enforcement of the provisions of this article.” Weston v. Montana State Hwy. Com’n, 186
Mont. 46, 50, 606 P.2d 150, 152 (1980).
¶24 The Firefighters argue that the 1972 Constitution is not so restricted; that is, the
eight-hour day guarantee is self-executing. However, the Firefighters ignore the
permissive language in Article XII, Section 2(2), allowing the legislature to change the
maximum period of eight hours. In fact, the legislature has enacted legislation which
provides that, while eight hours is a day’s work in most state and municipal government
employment, § 39-4-107(1), MCA, the eight-hour day does “not apply to firefighters who
are working a work period established in a collective bargaining agreement entered into
between a public employer and a firefighters’ organization or its exclusive
representative.” Section 39-4-107(2), MCA. The legislature further provided that in
“municipal and county governments, the employer and employee may agree to a workday
of more than 8 hours and to a 7-day, 40-hour work period: (a) through a collective
bargaining agreement when a collective bargaining unit represents the employee . . . .”
Section 39-4-107(4), MCA.
¶25 Here, the Firefighters are represented by a collective bargaining unit, the Local
521 International Association of Fire Fighters, which entered into a collective bargaining
agreement on behalf of the Firefighters. The agreement was for a 27-day work cycle
which included working 24-hour shifts and sometimes more than 40 hours per week. The
Firefighters do not dispute the validity of the agreement, nor do they challenge the
statutes that allow such an agreement. Thus, the eight-hour day provision of Article XII,
Section 2(2) of the Montana Constitution does not apply in this case. Because it does not
13
apply, we do not need to address the Firefighters’ contention that this provision gives rise
to liability when an employer fails to account for every hour its employees work.
¶26 The District Court did not err in granting partial summary judgment to the
Firefighters. We affirm the District Court’s judgment awarding unpaid wages and leave
time.
¶27 ISSUE 2: Did the District Court err in assessing the penalty for the City’s
failure to pay wages?
¶28 Section 39-3-204, MCA, provides in part:
[E]very employer of labor in the state of Montana shall pay to each
employee the wages earned by the employee in lawful money of the United
States or checks on banks convertible into cash on demand at the full face
value of the checks, and a person for whom labor has been performed may
not withhold from any employee any wages earned or unpaid for a longer
period than 10 business days after the wages are due and payable.
If an employer fails to pay wages within the specified time, a penalty must be “assessed
against and paid by the employer to the employee in an amount not to exceed 110% of
the wages due and unpaid.” Section 39-3-206, MCA. The maximum penalty of 110
percent of the wages owed must be assessed if the following special circumstances exist:
(a) the employer fails to provide information requested by the
department and/or does not cooperate in the department’s investigation of
the wage claim;
(b) there is substantial credible evidence that the employer’s payroll
records are falsified or intentionally misleading;
(c) the employer has previously violated similar wage and hour
statutes within three years prior to the date of filing of the wage claim; or
(d) the employer has issued an insufficient funds paycheck.
Admin. R. M. 24.16.7556. If none of the special circumstances exist, then the penalty
will be reduced to 55 percent of the wages determined to be due. Admin. R. M.
14
24.16.7566. 1 The amount of the penalty to be imposed is not discretionary. Pursuant to
the Department of Labor and Industry administrative rules, the penalty must either be 55
percent, 15 percent, or 110 percent of the wages owed depending on the circumstances.
Reier Broadcasting Co., Inc., ¶ 27. A district court is required to take judicial notice of
the administrative rules and apply the appropriate penalty. Reier Broadcasting Co., Inc.,
¶¶ 28, 30; M. R. Evid. 202(d).
¶29 In this case, the District Court disregarded the minimum penalty required by the
Administrative Rules and instead imposed a penalty on the City in the amount of 8.45
percent of the unpaid wages. The District Court recognized that the Montana Legislature
delegated rule-making authority to the commissioner of the Department of Labor and
Industry, but summarily concluded that the commissioner overstepped that authority in
fixing a minimum penalty for wage claim cases. Section 2-4-305, MCA, addresses
agencies’ rulemaking authority and provides:
(6) Whenever by the express or implied terms of any statute a state agency
has authority to adopt rules to implement, interpret, make specific, or
1
The parties argued and the District Court decided this issue based on Admin. R. M.
24.16.7561, which is entitled “Penalty for Minimum Wage and Overtime Claims.” This
case involves neither a minimum wage claim nor an overtime claim. The appropriate
rule is Admin. R. M. 24.16.7566, entitled “Penalty for Claims Involving Other Kinds of
Compensation.” Admin. R. M. 24.16.7566 provides that penalties are to be calculated as
follows:
(a) a penalty equal to 55% of the wages determined to be due to the employee
will be imposed in all determinations issued by the department, but
(b) the department will reduce the penalty to 15% of the wages determined to
be due if the employer pays the wages found due in the time period specified in
the determination as well a penalty equal to 15% of that amount.
(2) If the claim involves any of the special circumstances of [Admin. R. M.]
24.16.7556, the department will impose the maximum penalty allowed by law.
15
otherwise carry out the provisions of the statute, an adoption, amendment,
or repeal of a rule is not valid or effective unless it is:
(a) consistent and not in conflict with the statute; and
(b) reasonably necessary to effectuate the purpose of the statute.
An administrative rule will be considered invalid “only upon a clear showing that the
regulation adds requirements which are contrary to the statutory language or that it
engrafts additional provisions not envisioned by the legislature.” Christenot v. State,
Dept. of Commerce, 272 Mont. 396, 400, 901 P.2d 545, 548 (1995) (citing Board of
Barbers v. Big Sky College, 192 Mont. 159, 161, 626 P.2d 1269, 1270-71 (1981)). To
make this determination, the court must interpret the statute. Christenot, 272 Mont. at
401, 901 P.2d at 548. If the legislative intent cannot be ascertained from the plain words
of the statute, then the court must look to the legislative history of the statute. Christenot,
272 Mont. at 401, 901 P.2d at 548. Looking at the plain words of § 39-3-206, MCA, the
legislature clearly intended to dissuade employers from violating wage provisions by
making such a violation a misdemeanor and requiring a penalty to be assessed, in
addition to requiring payment of the full amount of wages. Establishing a 15 percent or
55 percent penalty does not add another requirement. Rather, it sets a minimum within
the range acceptable to the legislature. Imposition of a 55 percent penalty for failure to
pay wages certainly helps effectuate the purpose of the statute. Reducing that penalty to
15 percent provides an incentive for quick payment of wages. Thus, the District Court
erred when it failed to take judicial notice of Admin. R. M. 24.16.7566 and 24.16.7556
and impose a penalty of at least 55 percent, with a possible reduction to 15 percent, of the
unpaid wages owed to the Firefighters.
16
¶30 The Firefighters argue that the record justifies imposing the full penalty of 110
percent, alleging that the City did not cooperate in an investigation of the wage claim,
that certain records were not provided in discovery, and that the City’s payroll records
were falsified or intentionally misleading. In support of their argument that the City did
not cooperate in the investigation of the wage claim, the Firefighters assert that the City
retaliated against the Firefighters who filed the lawsuit by reassigning a majority of the
original plaintiffs to Station 1, the least desirable of the City’s six fire stations. Further, a
supervisor stated that “if it was up to him, he would line them up against the wall and
have them shot.” In response, the fire chief explained at the summary judgment hearing
that firefighters were transferred according to where they were needed, and that Station 1
may seem to be the least desirable station because that is where the chief is located and
that the “perception is you work harder at the station where the chief works.” With
regard to the threat from the supervisor, the chief testified that he addressed the matter
with the supervisor and instructed all personnel that they were not to discuss the lawsuit.
No grievances were filed concerning either incident. The Firefighters fail to show how
this conduct constitutes a failure to cooperate with an investigation of the claim.
¶31 The Firefighters also assert that records which might have been used to reconstruct
hours worked were not produced in response to their request for production. They point
to trial testimony of an assistant fire chief discussing what records he thought he had, or
what he thought the City payroll department had, and what he thought had been thrown
away as being unimportant since the Firefighters were paid based on forty hours each
17
week regardless of the hours worked. However, the record does not provide conclusive
evidence that the City withheld any requested records.
¶32 In support of the Firefighters’ argument that the City kept falsified or intentionally
misleading payroll records, the Firefighters point to the fact that records showing actual
hours the Firefighters worked were not sent down to the payroll department, but instead
were thrown away. Further, the Firefighters assert that the City failed to keep accurate
payroll records because the check register showed that each firefighter was paid for forty
hours per week, regardless of whether they worked more or less than forty hours per
week. The Firefighters analogize this situation with the scenario in Tefft where the court
awarded liquidated damages to the plaintiffs for claims brought under the FLSA. Tefft,
271 Mont. at 91, 894 P.2d at 323. The employer in Tefft failed to keep accurate records
of the plaintiffs’ actual hours worked. Tefft, 271 Mont. at 86, 894 P.2d at 320. However,
that was not the basis for the liquidated damages award to the Tefft plaintiffs. Rather, the
State failed to demonstrate it acted in good faith or on reasonable grounds in reducing
employees’ wages, thus warranting an award of liquidated damages under the FLSA.
Tefft, 271 Mont. at 93, 894 P.2d at 324. Admin. R. M. 24.16.7556 provides a different
standard—that there be substantial credible evidence that the employer’s records are
falsified or intentionally misleading. Here, the records show that the Firefighters were
paid for only forty hours per week. As discussed above, the City was operating under the
assumption that pursuant to the collective bargaining agreements, it was only required to
pay Firefighters for forty hours per week. This does not provide substantial evidence that
the records were falsified or intentionally misleading.
18
¶33 We conclude the District Court did not err in assessing a penalty, but did err in
failing to assess the required 55 percent minimum penalty, with a reduction to 15 percent
of the wages determined to be due if the City pays the wages and penalty in a time period
specified by the court. We remand to the District Court to assess the appropriate penalty.
¶34 ISSUE 3: Did the District Court err in awarding costs to the Firefighters?
¶35 The Firefighters requested costs in the amount of $60,154.72. The court awarded
$3,972.98, limiting recovery of costs to filing and service fees, postage, photocopies, and
long distance telephone calls. The court did not award reimbursement of costs for travel
expenses, witness fees, or deposition costs. The Firefighters argue they are entitled to all
costs pursuant to § 39-3-214, MCA, which provides:
(1) Whenever it is necessary for the employee to enter or maintain a suit at
law for the recovery or collection of wages due as provided for by this part,
a resulting judgment must include a reasonable attorney’s fee in favor of
the successful party, to be taxed as part of the costs in the case.
(2) Any judgment for the plaintiff in a proceeding pursuant to this part must
include all costs reasonably incurred in connection with the proceeding,
including attorneys’ fees.
¶36 The District Court concluded, and the City agrees, that costs should still be limited
by § 25-10-201, MCA, which provides:
A party to whom costs are awarded in an action is entitled to include in his
bill of costs his necessary disbursements, as follows:
(1) the legal fees of witnesses, including mileage, or referees and other
officers;
(2) the expenses of taking depositions;
(3) the legal fees for publication when publication is directed;
(4) the legal fees paid for filing and recording papers and certified copies
thereof necessarily used in the action or on the trial;
(5) the legal fees paid stenographers for per diem or for copies;
(6) the reasonable expenses of printing papers for a hearing when required
by a rule of court;
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(7) the reasonable expenses of making transcript for the supreme court;
(8) the reasonable expenses for making a map or maps if required and
necessary to be used on trial or hearing; and
(9) such other reasonable and necessary expenses as are taxable according
to the course and practice of the court or by express provision of law.
The District Court reasoned that Delaware v. K-Decorators, Inc., 1999 MT 13, ¶ 70, 293
Mont. 97, ¶ 70, 973 P.2d 818, ¶ 70, “seems to guide the Court toward limiting costs to
those in § 25-10-201, MCA.”
¶37 A trial court has broad discretion in taxing costs, but not every litigation expense
is recoverable. Springer v. Becker, 284 Mont. 267, 275, 949 P.2d 641, 645 (1997)
(citations omitted). Section 25-10-201, MCA, is an exclusive list of costs which may be
taxed to an opponent unless the case is taken out of its operation by a more specialized
statute, by stipulation of the parties, or by rule of court. Springer, 284 Mont. at 275, 949
P.2d at 645 (citations omitted); Roseneau Foods, Inc. v. Coleman, 140 Mont. 572, 580,
374 P.2d 87, 91 (1962). This is a wage claim case specifically covered by a more
specialized statute, § 39-3-214, MCA, which requires an award of costs which “must
include all costs reasonably incurred in connection with the proceeding.” This Court has
previously determined that “the legislature’s intent in passing [§ 39-3-214, MCA,] was to
provide an employee who wins a judgment for wages due against an employer a vehicle
by which to receive attorneys fees and thus be made whole.” Glaspey v. Workman
(Glaspey I), 230 Mont. 307, 309, 749 P.2d 1083, 1084 (1988). The same purpose applies
in awarding costs—passing the burden to the employer so that the “employee’s net award
is preserved intact and is not eroded by the cost of litigation.” Stimac v. State, 248 Mont.
412, 415, 812 P.2d 1246, 1248 (1991). The broad application of § 39-3-214, MCA,
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allowing recovery of all costs, including attorney fees, incurred in a suit to recover wages
is best illustrated in Glaspey I, 230 Mont. at 308-09, 749 P.2d at 1084, where the Court
awarded attorney fees when an employee was forced to file suit to pierce the corporate
veil of his prior employer in order to collect wages awarded in a prior successful wage
claim action.
¶38 We disagree that Delaware provides authority requiring the court to limit costs in
a wage claim case. The issue in Delaware was whether the claimant timely filed his
memorandum of costs allowed by § 39-3-214, MCA. Delaware, ¶ 65. In that case, we
concluded that § 25-10-501, MCA, controlled when a party was required to file his or her
memorandum of costs. Delaware, ¶ 71. Unlike § 25-10-201, MCA, delineating
allowable costs in general, § 25-10-501, MCA, setting a deadline of five days for filing a
memorandum of costs, does not have a more specific counterpart in the wage claim
statutes.
¶39 We conclude that the District Court erred in awarding only $3,972.98 in costs.
We reverse and remand for an entry of judgment awarding the Firefighters all reasonable
costs incurred in this litigation pursuant to § 39-3-214, MCA.
¶40 ISSUE 4: Did the District Court abuse its discretion in awarding attorney fees
to the Firefighters?
¶41 Contrary to the general rule, attorney fees in wage claim actions are taxed as part
of the prevailing party’s costs to be awarded. Section 39-3-214, MCA; Delaware, ¶ 70.
The purpose of awarding attorney fees to an employee who obtains a judgment in a wage
claim is to make the employee whole. Glaspey I, 230 Mont. at 309, 749 P.2d at 1084;
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Stimac, 248 Mont. at 415, 812 P.2d at 1248. The amount of attorney fees to be awarded
is within the discretion of the District Court, and unless an abuse of discretion is shown,
an award based on competent evidence will not be disturbed on appeal. Glaspey v.
Workman (Glaspey II), 234 Mont. 374, 377, 763 P.2d 666, 668 (1988). The court must
hold an evidentiary hearing to determine the reasonableness of the requested fees and
elicit evidence based on oral testimony, cross-examination, and the introduction of
exhibits, which will be competent evidence upon which attorney fees can be based.
Glaspey II, 234 Mont. at 377-78, 763 P.2d at 668. In considering whether to award the
full amount of a contingent fee agreement as a reasonable attorney fee pursuant to § 39-3-
214, MCA, a district court must consider the following factors:
1. The novelty and difficulty of the legal and factual issues involved;
2. The time and labor required to perform the legal service properly;
3. The character and importance of the litigation;
4. The result secured by the attorney;
5. The experience, skill, and reputation of the attorney;
6. The fees customarily charged for similar legal services at the time and
place where the services were rendered;
7. The ability of the client to pay for the legal services rendered; and
8. The risk of no recovery.
Stimac, 248 Mont. at 417, 812 P.2d at 1249.
¶42 In this case, sixty-four of the Firefighters signed retainer agreements providing for
a one-third contingency fee for their attorneys, with the remaining Firefighters to bear a
portion of the litigation costs according to the common fund doctrine. The court held a
hearing and heard testimony from one of the Firefighters regarding the contingency fee
agreement he had signed and his inability to pay attorney fees when he initiated the case.
The court also heard argument from the attorneys on both sides with regard to the Stimac
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factors. The District Court declined to grant the one-third contingency fee. In issuing its
judgment, the court considered the Stimac factors and applied them as follows:
1. The novelty and difficulty of the legal and factual issues was moderate;
this was an unpaid wages and contract case.
2. The time and labor required from the attorneys was moderate; even
though the case is six years old there are only 158 documents in the
court file; discovery was extensive and difficult; the in-depth and time
consuming analysis was mostly an accounting project.
3. The character and importance of the litigation exceeds that of most
cases as it was important not only to the litigants but also to others
similarly situated and to the public in general.
4. The results secured by plaintiffs’ attorneys were excellent.
5. The experience, skill and reputation of plaintiffs’ attorneys, and
defendant’s attorneys, are seldom surpassed by others in any court; all
were very experienced, highly skilled, and very reputable.
6. & 7. The contingency fee agreement was standard and customary for
plaintiffs who were not able to pay an hourly fee either individually or
as a group.
8. The risk of no recovery was very real to plaintiffs’ attorneys, as it is in
all contingency cases.
¶43 The court expounded on some of these factors and considered additional factors.
It noted that only one-half of the Firefighters actually agreed to and signed a one-third
contingency fee, leaving the others to pay according to the common fund doctrine. It
placed great emphasis on the fact that, although the case had gone on for nearly six years,
the court file contained fewer documents than might be expected. Further, although the
Firefighters’ attorneys took this case on as a contingency fee case, they knew or should
have known that if successful, they would be awarded attorney fees as part of their costs.
Thus, the court concluded, the attorneys should have kept track of their time. The court
relied on its own experience and knowledge of the case to conclude that, despite the
significant amount of time, effort and skill on the part of the Firefighters’ counsel, fees
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based on time would not have amounted to $1,000,000. Noting that the court had been
involved with the case from the beginning, heard the evidence, weighed the arguments,
and reviewed case law, the court awarded $625,000 in attorney fees. The court stated
that this “amount should surely be two to three times the actual time, skills, experience,
effort, and all costs (even those not awarded) plaintiffs have invested in this case.”
Finally, the court reasoned that this would reasonably, adequately and appropriately
reward the Firefighters for the risk of no recovery at all.
¶44 The Firefighters argue that the court abused its discretion when it did not award
the full one-third contingency fee, stating that six of the eight factors strongly supported a
contingent fee. They contend the court put great weight on the fact that the case went on
for six years, and allege that the City was principally responsible for the delay. However,
as noted, the court downplayed the significance of the lengthy litigation in that there were
few documents in the court file given that length of time. Furthermore, the Firefighters
did not provide any evidence showing how the City was responsible for the delay.
¶45 Based on the evidence provided and the court’s familiarity with the case, the court
analyzed each of the Stimac factors and exercised its discretion in determining an amount
of reasonable attorney fees. We conclude the court’s decision is supported by the record.
Since the court did not abuse its discretion in awarding fees, we will not disturb the
court’s ruling. Glaspey II, 234 Mont. at 377, 763 P.2d at 668.
CONCLUSION
¶46 We conclude the District Court did not err in granting partial summary judgment
in favor of the Firefighters and we affirm the award of unpaid wages and leave time in
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the amount of $3,075,590.30. We conclude the District Court did not abuse its discretion
when it awarded $625,000 in attorney fees. Finally, we conclude the District Court erred
when it failed to assess the minimum penalty pursuant to administrative rule, and when it
failed to award all reasonable costs incurred by the Firefighters. We reverse and remand
for further proceedings consistent with this Opinion.
/S/ W. WILLIAM LEAPHART
We concur:
/S/ PATRICIA COTTER
/S/ JAMES C. NELSON
/S/ BRIAN MORRIS
Justice Jim Rice, concurring in part and dissenting in part.
¶47 I concur with the Court’s resolution of Issues 1, 3 and 4, but dissent from the
resolution of Issue 2.
¶48 I believe that all of the administrative rules which set penalty floors are defective
for the same reason—they are in conflict with the statute. Although the Court relies on
Reier’s application of these provisions, the Reier Court was careful to note that the
employer there “[did] not dispute, in any of its briefing, the validity . . . of the
administrative rules . . . .” Reier, ¶ 30. Here, the City of Billings does so.
¶49 Section 39-3-206, MCA, provides, in pertinent part, that:
(1) An employer who fails to pay an employee as provided in this part or who
violates any other provision of this part is guilty of a misdemeanor. A penalty
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must also be assessed against and paid by the employer to the employee in an
amount not to exceed 110% of the wages due and unpaid. [Emphasis added.]
Clearly, the statute requires a penalty, but does not limit the penalty to be imposed to a
few mandatory floors. Instead, it sets a wide range between near zero up to 110 percent.
Neither does the statute’s rulemaking authority delegate to the Department the duty of
designating the penalty level(s). Rather, the broad penalty range is to be applied
discretionarily in each wage collection proceeding. The Department’s penalty floors are
mandatory (“[t]he maximum penalty is mandatory under the above circumstances . . . .”
Admin. R. M. 24.16.7556(3); “a penalty equal to 55% . . . will be imposed . . . .” Admin.
R. M. 24.16.7566(1)(a); “the department will impose the maximum penalty allowed by
law.” Admin. R. M. 24.16.7566(2)) and arbitrary, eliminating the exercise of any
discretion by the court or decisionmaker, as well as the freedom to weigh the significance
of the violation under the circumstances of each case.
¶50 The Court concludes in ¶ 29 that “[e]stablishing a 15 percent or 55 percent penalty
does not add another requirement. Rather, it sets a minimum within the range acceptable
to the legislature.” The flaw in this reasoning can readily be seen—it would likewise
allow the Department to require a 110 percent penalty in all cases, because such a rule
would be within the range “acceptable to the legislature.” To the contrary, this Court has
held that regulations are “out of harmony” with statute if “they engraft additional,
noncontradictory requirements on the statute which were not envisioned by the
legislature.” Board of Barbers, Etc. v. Big Sky College, Etc., 192 Mont. 159, 161, 626
P.2d 1269, 1270 (1981) (citation omitted). Thus, a regulation may be within statutory
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parameters, yet invalid as imposing additional, unforeseen restrictions. In Board of
Barbers, the relevant statute stated as follows:
“On completion of 1 year of apprenticeship under the immediate personal
supervision of a licensed barber, an apprentice must apply to the
department to take the examination for a barber’s certificate of
registration.”
Board of Barbers, 192 Mont. at 160, 626 P.2d at 1270 (quoting § 37-30-305, MCA).
Pursuant thereto, the Board of Barbers adopted this rule:
Every apprentice must serve one normal work year, or its equivalent at the
discretion of the board, as an apprentice before he can take the barber
examination.
Board of Barbers, 192 Mont. at 160, 626 P.2d at 1270. In turn, the Board defined
“normal work year” as one served in a commercial barber shop only. Board of Barbers,
192 Mont. at 162, 626 P.2d at 1271. The Court struck down the rule, concluding:
[T]he statute simply requires a year’s apprenticeship served “under the
immediate personal supervision of a licensed barber.” Thus the Board’s
rule engrafts an additional requirement on apprenticeship not contained in
the statute. In our view, this additional requirement that apprenticeship be
served in a commercial barbershop does not satisfy the test of “reasonable
necessity to effectuate the purpose of the statute,” section 2-4-305(5),
MCA, viz. requiring a period of training prior to qualifying for examination
and licensing as a barber. It engrafts additional, noncontradictory
requirements on apprenticeship prohibited by Bell and Michels. We hold
the rule as interpreted by the Board invalid.
Board of Barbers, 192 Mont. at 162, 626 P.2d at 1271 (emphasis added).
¶51 By requiring that all employers violating the wage statute be assessed one of three
arbitrary penalties, the Department has both added requirements and narrowed the
statute’s application, thus “exceed[ing] the authority provided by statute . . . .” Taylor v.
Taylor, 272 Mont. 30, 36, 899 P.2d 523, 526 (1995). The penalty rules force the
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Department and the courts to hammer inevitably “square peg” fact patterns into one of
three “round hole” penalty levels, despite legislative authority to the contrary. Likewise,
the rule violates § 2-4-305(6)(b), MCA, because the arbitrary penalties cannot be said to
be “reasonably necessary to effectuate the purpose of the statute.” If anything, the rules
constrict the statute’s intended effect and make it more difficult to effectuate the statute.
¶52 I agree with the District Court’s conclusion that, to the extent the Commissioner or
the Department has fixed penalties, “they have exceeded their authority. . . . Only the
legislature can set the minimum penalty; the legislature . . . has not delegated this
authority.” While the Department may well be able to issue guidelines for penalty
assessments under the statute, it cannot set arbitrary penalty levels.
¶53 I would affirm on Issue 2.
/S/ JIM RICE
Chief Justice Karla M. Gray and Justice John Warner join the concurring and dissenting
opinion of Justice Rice.
/S/ KARLA M. GRAY
/S/ JOHN WARNER
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