Robert & Patricia Ruhl, Resps v. Project Corps, Llc, Apps.

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION ONE
ROBERT RUHL and PATRICIA No. 72604-8-
PETERSON,
Respondents,
PROJECTCORPS, LLC, a
Washington limited liability company,
MICHELLE D. GADDIE, individually;
and the marital community of en
MICHELLE D. GADDIE and
KIMBERLY D. VALENZANO-GADDIE, UNPUBLISHED OPINION
Appellants. FILED: February 16, 2016
Verellen, A.C.J. — ProjectCorps, LLC appeals the partial summary judgment
order awarding unpaid salary and commissions, double damages, attorney's fees, and
prejudgment interest to its former employees, Robert Ruhl and Patricia Peterson.
RCW 49.52.070 provides for double damages when an employer willfully refuses to pay
an employee wages owed. But ifa "bona fide dispute" exists over the employer's
obligation to pay all of the employee's wages, or ifthe employee "knowingly submitted"
to the withholding of wages, then RCW 49.52.070 does not apply.
We conclude genuine issues of material fact remain whether a bona fide dispute
exists for Ruhl's and Peterson's 2013 salary and whether Ruhl and Peterson knowingly
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submitted to the withholding of their commissions. Accordingly, we reverse the partial
summary judgment order regarding the 2013 salary and the commissions and related
double damages and attorney's fees award. We remand for further proceedings
consistent with this opinion.
FACTS
Michelle Gaddie formed and owned ProjectCorps. In 2011, ProjectCorps hired
Ruhl and Peterson. Their compensation included salary and commissions. Ruhl and
Peterson were paid salary twice per month at the rate of $7,083.33 every pay period.
ProjectCorps experienced financial difficulties. In March 2012, Gaddie told Ruhl
and Peterson that she intended "to cut" their salaries because of the company's
"precarious financial position."1 Ruhl and Peterson were "interested in becoming
owners of the company."2 Ruhl and Peterson agreed "to defer" their salaries so that
those funds could be used as a buy-in if they became owners, or until ProjectCorps was
in a better financial situation.3
In July 2012, ProjectCorps ended the "salary deferment" and returned Ruhl and
Peterson to full salary.4 Ruhl and Peterson did not become owners.
In January 2013, ProjectCorps faced "insurmountable financial difficulties."5
Gaddie told Peterson "the company needed to cut salaries."6 Gaddie informed
1 Clerk's Papers (CP) at 272,1j 13.
2 CP at 272,1J13.
3 CP at 272, U 13 (internal quotation marks omitted).
4 CP at 272,1114.
5 CP at 273,1J14.
6 CP at 273,1J14.
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Peterson that "effective March 16, 2013, her salary and her husband's salary would be
cut by 20%."7 Gaddie directed the office manager Karen Chenkovich "to make the
changes in payroll."8 Ruhl's and Peterson's salaries were reduced by 20 percent.
On April 8, 2013, Gaddie e-mailed Ruhl and Peterson with the subject line "Total
for 2012 Salary Deferral":
As you know, Karen has done a nice job of keeping track of and we have
maintained visibility of your 2012 salary deferral since March 2012. This is
itemized below.
Please know that repayment of this money is very important to
ProjectCorps and will be paid just as soon as we are able to. Once we
return to a level of profitability that can support repayment, I will put a
repayment plan in place for this amount and will then turn my attention to
2012 commissions.191
The parties agree ProjectCorps owes Ruhl and Peterson each $11,333.36 for 2012
salary.
On April 12, 2013, Gaddie e-mailed Ruhl and Peterson with the subject line
"Deferred Commissions."10 Gaddie stated ProjectCorps owed them deferred
commissions payments for "commissions earned" of $24,316.72 to Ruhl and
$45,114.93 to Peterson.11
On June 20, 2013, ProjectCorps terminated Ruhl and Peterson. A few days
later, Chenkovich resigned as ProjectCorps's office manager. ProjectCorps hired
7 CP at 273, H14.
8 CP at 273, If 14.
9 CP at 119, 162.
10 CP at 119, 162.
11 CP at 119, 162.
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Kimberly Valenzano to replace Chenkovich. Valenzano reviewed ProjectCorps's
financial records and concluded ProjectCorps had overpaid Ruhl and Peterson.
In July 2013, Ruhl and Peterson sued ProjectCorps on a variety of legal theories,
including violations of the wage rebate and wage payment acts,12 for ProjectCorps's
withholding of their salaries and commissions. Ruhl and Peterson sought partial
summary judgment on their statutory wage claims. The trial court granted Ruhl and
Peterson partial summary judgment. The court concluded ProjectCorps's withholding of
their salaries and commissions was "willful," and Ruhl and Peterson "did not knowingly
submit to the violation."13 The partial summary judgment order awarded Ruhl and
Peterson $216,529.98 in unpaid compensation and double damages. The court also
struck Valenzano's declaration testimony.
The trial court awarded Ruhl and Peterson $18,029.36 in attorney's fees. The
parties stipulated to entry of a CR 54(b) final judgment for purposes of an immediate
appeal, which awarded Ruhl and Peterson $256,499.65.
ProjectCorps appeals.
ANALYSIS
Standard of Review
We review a summary judgment order de novo.14 The de novo standard also
applies to all evidentiary rulings on summary judgment.15 We view the facts and all
12 Ch. 49.52 RCW; ch. 49.48 RCW.
13 CP at 593.
14 McDevitt v. Harborview Med. Ctr., 179 Wash. 2d 59, 64, 316 P.3d 469 (2013).
15 Folsom v. Burger King, 135 Wash. 2d 658, 663, 958 P.2d 301 (1998).
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reasonable inferences in the light most favorable to the nonmoving party.16 Summary
judgment is proper if there are no genuine issues of material fact.17 "A material fact is
one that affects the outcome of the litigation.'"18
2012 Salary
ProjectCorps has not assigned error to the $11,333.36 award of 2012 salary to
Ruhl and Peterson. ProjectCorps has not argued the award of 2012 salary was
improper. Nor does ProjectCorps challenge the award of attorney's fees and double
damages for the 2012 salary. Absent an assignment of error, briefing, and argument,
we conclude the award of 2012 salary, together with attorney's fees and double
damages associated with that salary, are uncontested on appeal.19
2013 Salary
ProjectCorps contends a genuine issue of material fact remains whether a bona
fide dispute exists for Ruhl's and Peterson's 2013 salary. We agree.
RCW 49.52.070 provides for double damages "when an employer willfully
withholds wages due an employee."20 The term "willful" means the employer's failure to
16 Fulton v. State, Dep't of Soc. & Health Servs.. 169 Wash. App. 137, 147, 279
P.3d 500 (2012).
17 CR 56(c); Lowman v. Wilbur. 178 Wash. 2d 165, 168-69, 309 P.3d 387 (2013)
(quoting Michak v. Transnation Title Ins. Co., 148 Wash. 2d 788, 794-95, 64 P.3d 22
(2003)).
18 Morgan v. Kingen, 166 Wash. 2d 526, 533, 210 P.3d 995 (2009) (quoting Owen v.
Burlington N. & Santa Fe R.R., 153 Wash. 2d 780, 789, 108 P.3d 1220 (2005)).
19 RAP 10.3(a)(6) (parties must support their arguments with citations to legal
authority and references to relevant parts of the record); Valente v. Bailey, 74 Wash. 2d
857, 858, 447 P.2d 589 (1968) (errors not set forth as "assignments of error" precludes
appellate review); Norcon Builders, LLC v. GMP Homes VG, LLC, 161 Wash. App. 474,
486, 254 P.3d 835 (2011) ("We will not consider an inadequately briefed argument.").
20 Schilling v. Radio Holdings, Inc., 136 Wash. 2d 152, 154, 961 P.2d 371 (1998).
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pay was "volitional."21 "If an employer knows that [s]he is not paying wages when due,
and intends such conduct, then the action is willful."22
Two instances negate a finding of willfulness: the employer's failure to pay wages
was due to carelessness or inadvertence or was "the result of a bona fide dispute."23
The employer bears the burden of showing a "bona fide dispute."24 The employer must
have a "genuine belief that she is not obligated to pay certain wages,25 and such belief
must be "fairly debatable."26
The issue of whether an employer acts willfully is generally a question of fact.
But the issue may be resolved on summary judgment when no material facts are in
dispute.27 The trial court here concluded in its oral ruling:
[Tjhere's no evidence that there was a reduction of salary as opposed to a
continuing financial straits that... the defense found itself in and that just
as it did before, it simply started paying them less than their salary.
There's no evidence of a salary change. There is evidence of... shorting
them on their payment. And I find that. . . there's not a genuine issue of
material fact[ ] as to the salary that was withheld for 2013.[28]
21 Failla v. FixtureOne Corp., 181 Wash. 2d 642, 655, 336 P.3d 1112 (2014).
22 Chelius v. Questar Microsystems, Inc., 107 Wash. App. 678, 684, 27 P.3d 681
(2001).
23 Failla, 181 Wash. 2d at 655; Wash. State Nurses Ass'n v. Sacred Heart Med. Ctr..
175 Wash. 2d 822, 834, 287 P.3d 516 (2012).
24 Schilling. 136 Wash. 2d at 161.
25 Duncan v. Alaska USA Fed. Credit Union Inc., 148 Wash. App. 52, 79, 199 P.3d
991 (2008).
26 Moore v. Blue Frog Mobile, Inc., 153 Wash. App. 1, 8, 221 P.3d 913 (2009).
27 Schilling, 136 Wash. 2d at 160.
28 Report of Proceedings (May 9, 2014) at 42.
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From January 1, 2013 to March 15, 2013, Ruhl and Peterson each received $7,083.33
per pay period. From March 16, 2013 to May 15, 2013, Ruhl and Peterson each
received $5,666.67 per pay period.29
In her declaration, Gaddie states she informed Peterson that her and her
husband's salaries "would be cut by 20%" effective March 16, 2013.30 Contrary to
Ruhl's and Peterson's arguments, this statement is not inadmissible hearsay. Gaddie
was an authorized agent for ProjectCorps stating the terms of Ruhl's and Peterson's
employment. An out-of-court statement that has "independent legal significance" is not
hearsay.31 Gaddie's statement had independent legal significance as a change in the
terms of compensation. Ruhl and Peterson offer no authority to support their
suggestion that an employer is limited to written business records to establish changes
in the terms of employment.32
Ruhl and Peterson claim a party cannot create a genuine issue of material fact
by offering a declaration opposing summary judgment that contradicts admissions
29 Ruhl and Peterson each received $5,666.66 for the April 1, 2013 to April 15,
2013 pay period. Ruhl and Peterson claim ProjectCorps also withheld $1,416.66 in
wages during the May 16, 2013 to May 31, 2013 pay period, but that paycheck is
absent from the record.
30 CP at 273, H 14.
31 5B Karl B. Tegland, Washington Practice: Evidence Law and Practice
§ 801.10, at 342 (5th ed. 2007); see also Cranwell v. Mesec. 77 Wash. App. 90, 101, 890
P.2d 491 (1995) (tenant's consent to inspection is significant "'solely in the fact that it
was made'" and is not hearsay (quoting Robert H. Aronson and Maureen A. Howard,
The Law of Evidence in Washington, 801-5 (Supp. 1989))); United States v. Pang, 362
F.3d 1187, 1192 (9th Cir. 2004) ("out-of-court statements that are offered as evidence of
legally operative verbal conduct are not hearsay"); Steadman v. Green Tree Servicing,
LLC, No. C14-0854JLR, 2015 WL 2085565, at *6 n.3 (W.D. Wash. 2015) (statements
that have independent legal significance are exempted from the hearsay definition).
32 See Haley v. Brady, 17 Wash. 2d 775, 788, 137 P.2d 505 (1943) (oral
modification of written contract enforceable).
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pleaded in an answer. Generally, a party's affidavit that contradicts prior deposition or
interrogatory answers "cannot be used to create an issue of material fact."33 The cases
that Ruhl and Peterson rely upon involve deposition testimony or interrogatories that
were later contradicted by an affidavit opposing a summary judgment motion. But
Gaddie's declaration does not contradict any deposition testimony or answers to
interrogatories. Ruhl and Peterson provide no authority that for purposes of opposing
summary judgment, a party is precluded from making a declaration that conflicts with an
admission pleaded in an answer.34
Ruhl and Peterson offer evidence challenging the credibility of Gaddie's
declaration testimony of a salary pay cut. For example, Ruhl's and Peterson's earnings
records filed with the Washington State Department of Enterprise Services do not reflect
a wage decrease, but similar earnings records for two other ProjectCorps employees
reveal their salary change. Such contradictory evidence merely attacks the credibility or
weight of Gaddie's declaration. "Courts do not weigh the evidence or assess witness
credibility on a motion for summary judgment."35
33 McCormick v. Lake Wash. Sch. Dist, 99 Wash. App. 107, 111, 992 P.2d 511
(1999): see also In re Kelly and Moesslang, 170 Wash. App. 722, 739, 287 P.3d 12(2012)
(cannot create an issue of material fact by filing an affidavit that contradicts a prior
statement without explanation); Dep't of Labor & Indus, v. Kaiser Aluminum & Chem.
Corp., 111 Wash. App. 771, 778, 48 P.3d 324 (2002) (rejecting affidavit that contradicts
prior admissions made through interrogatories); Selvig v. Caryl, 97 Wash. App. 220, 225,
983 P.2d 1141 (1999) (rejecting affidavit that contradicts prior deposition testimony).
34 Cowiche Canyon Conservancy v. Boslev, 118 Wash. 2d 801, 809, 828 P.2d 549
(1992) (arguments not supported by authority or analysis need not be considered).
35 Volk v. Demeerleer. 184 Wash. App. 389, 430, 337 P.3d 372 (2014); see also
Powell v. Viking Ins. Co., 44 Wash. App. 495, 502-03, 722 P.2d 1343 (1986) (credibility
questions of a witness whose statements are critical to an important issue in the case
should preclude summary judgment); Hotchkiss v. CSK Auto Inc., 918 F. Supp. 2d
1108, 1131 (E.D. Wash. 2013) (employee's "self-serving" statement that he spent many
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No. 72604-8-1/9
Therefore, we conclude Gaddie's declaration creates a genuine issue of material
fact whether Ruhl's and Peterson's salaries were cut 20 percent effective March 16,
2013. Any such wage cut could negate a willful withholding of 2013 salaries.
Commissions
ProjectCorps contends a genuine issue of material fact remains whether Ruhl
and Peterson "knowingly submitted" to the withholding of their commissions. We agree.
Double damages for willful withholding "are not available to any employee who
has knowingly submitted to such violations."36 To have "knowingly submitted" to a
withholding of commissions, the employee must have "deliberately and intentionally"
deferred to his or her employer the decision of whether or when he or she would "ever
be paid."37 "An employee does not 'knowingly submit' to unlawful withholding of wages
by staying on the job even after the employer fails to pay."38
Washington courts have analyzed the "knowingly submitted" language of
RCW 49.52.070 in two leading decisions: Chelius v. Questar Microsystems39 and
Durand v. HMIC Corporation.40
hours completing mandatory training modules during his unpaid lunch breaks was
sufficient to create issue of fact as to employee's unpaid wages claim).
36 RCW 49.52.070.
37 Chelius, 107 Wash. App. at 682; see also Durand v. HMIC Corp., 151 Wash. App.
818, 836-37, 214 P.3d 189 (2009); Bury v. NCS Power Inc., No. C12-5641 BHS, 2013
WL 6682943, at *3 (W.D. Wash. Dec. 18, 2013) (court order) (employee "knowingly
submits" to the unlawful withholding of wages by deferring all payment decisions to the
employer).
38 Durand. 151 Wash. App. at 837.
39 107 Wash. App. 678, 27 P.3d 681 (2001).
40 151 Wash. App. 818, 214 P.3d 189 (2009).
No. 72604-8-1/10
In Chelius. employees Feuer and Chelius sued their employer for back wages.
During his employment, Feuer repeatedly "asked" and "expected to be paid."41 The
employer assured Feuer that it "would catch him up when it received its next financing
check."42 No one asked Feuer to defer his wages.43 Chelius agreed to defer his wages,
but only for the first three months of his employment.44 His compensation agreement
provided that, upon termination, the employer "would pay all wages due and owing
within 30 days of his separation date."45 Chelius testified he and his employer never
orally modified the compensation agreement to provide that "any payment of wages due
was conditioned on the company having sufficient funds at the time to pay."46
The employer argued both employees had "knowingly submitted" to the wage
withholding. The Chelius court concluded the employees had never agreed to forgo
their right to ever be paid despite accepting sporadic payments.47 Any "constructive
agreement" to defer wages "ceased" as soon as the employment relationship ended.48
In Durand. an employee sued his employer for back wages. During his
employment, the employee agreed to accept a reduced salary but always expected to
receive full compensation once the employer's "financial condition improved."49 The
41 Chelius. 107 Wash. App. at 682-83.
42 \± at 683.
43 Id, at 682-83.
44 ]± at 680.
45 Id at 683.
46 Id,
47 Id, at 683-84.
48 Id, at 683.
49 Durand. 151 Wash. App. at 824.
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No. 72604-8-1/11
employer knew "the pay cut was intended to be temporary"50 and promised the
employee the back pay when the company was "financially able."51 The Durand court
concluded the employee, by agreeing to defer his salary "until the [employer was] in
better financial circumstances," did not knowingly submit to withholding of wages.52
Gaddie's declaration chronicles the history of ProjectCorps's financial instability,
the commission program, and Ruhl's and Peterson's "salary" deferral.53 Although
Gaddie's declaration does not mention any deferral of commissions, the April 12, 2013
e-mails do refer to "Deferred Commissions" and confirm the "deferred commission total
owed" to Ruhl and Peterson.54 Because Chenkovich tracked Ruhl's and Peterson's
commissions and Gaddie sent the April 12 e-mail totaling the deferred commissions,
there is a reasonable inference ProjectCorps contemplated possible future payment.
But nothing in the record from either party indicates whether the deferral of Ruhl's and
Peterson's commissions was absolute and indefinite, i.e., completely within
ProjectCorps's control, or conditional and temporary.
Ruhl and Peterson sought summary judgment on terse declarations that lack the
details present in Durand and Chelius.55 They only state they were not paid
commissions. They never testified that the deferral of commissions was temporary and
lasted only until ProjectCorps was in betterfinancial circumstances.56 They neither
50 Id,
51 ]± at 837.
52 jd,
53 CP at 272, H13.
54 CP at 119, 162.
55 See CP at 78-79, 121-22.
56 Durand. 151 Wash. App. at 837.
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No. 72604-8-1/12
testified that they were "promised the back pay when [ProjectCorps] was financially
able" nor that they always asked and expected to be paid the deferred commissions.57
And Ruhl's employment contract does not provide that any unpaid compensation is due
upon termination.
Absent any details about the nature of the deferral, Ruhl and Peterson did not
meet their initial burden as moving parties to establish an unlawful withholding of the
deferred commissions.58 A genuine issue of material fact exists whether Ruhl and
Peterson knowingly submitted to an absolute and indefinite deferral of their
commissions that would preclude double damages and attorney's fees.
Valenzano's Declaration Testimony
If the issue arises on remand, we note that portions of Valenzano's declaration
testimony are admissible. A lay witness's testimony must be based on personal
knowledge.59 Representations of fact by a person currently in charge of a company's
financial records for which he or she has personal knowledge are admissible.60 For
57 id, (internal quotation marks omitted); Chelius. 107 Wash. App. at 682-83.
58 Ruhl and Peterson claim "knowingly submitted" is an affirmative defense, but
they cite no authority for that proposition. Respondents' Br. at 33-34. As the moving
parties, they had the burden to show the commissions were willfully withheld. The
statutory provision regarding "knowingly submitted" is one part of the statutory scheme
governing what is considered a willful withholding. RCW 49.52.070. The April 12
e-mails that they submitted supporting their summary judgment motion expressly refer
to "deferred commissions." CP at 119, 162. Their declarations did not disavow a
deferral. In this setting, their initial burden on summary judgment to establish a willful
withholding included some showing of the terms or context of the deferral.
59 ER 602, 701; Moore v. Hagge. 158 Wash. App. 137, 157, 241 P.3d 787 (2010).
60 Carlisle Packing Co. v. Deming. 62 Wash. 455. 462-63. 114 P. 172(1911)
(statements from account books properly admitted through the company's manager's
testimony that "he had personal knowledge of all the items of the statement, and that
the items were correct"); Pacific Int'l Grout Co. v. Zinkova. No. 2:12-CV-00778-MJP,
2012 WL 3051771, at *3 (W.D. Wash. July 25, 2012) (court order) ("a review of the
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No. 72604-8-1/13
example, Valenzano has personal knowledge that "the commission rate was changed
from 25% of Gross [M]argin to 18% of Gross Margin."61 She may also have personal
knowledge of the amounts paid to Ruhl and Peterson.
But the portions of her declaration requiring expertise for a forensic audit are
inadmissible. Valenzano admits she is "not a forensic accountant."62 She does not
qualify as an expert under ER 702. A lay opinion admissible under ER 701 must be "(a)
rationally based on the perception of the witness, (b) helpful to a clear understanding of
the witness' testimony or the determination of a fact in issue, and (c) not based on
scientific, technical, or other specialized knowledge within the scope of rule 702."63 A
witness with "particularized knowledge" by virtue of her position in a business may
provide a lay opinion about the business.64
Valenzano states that she took over Chenkovich's responsibilities and reviewed
"timesheet records, accounting records, and expense data/reports" to conclude
ProjectCorps had overpaid Ruhl and Peterson.65 But ProjectCorps does not establish
Valenzano has particularized knowledge of its accounting or business practices.
declarations shows that while some do not directly pertain to Zinkova's time as a
bookkeeper, they all establish through personal knowledge what the general
bookkeeping practices at PIGCO were"); see also State v. Ortiz, 119 Wash. 2d 294, 308-
09, 831 P.2d 1060 (1992) (tracker's lay opinion testimony permissible based on training
and experience as a tracker).
61 CP at 236, H 7.
62 CP at 234, H 3.
63ER701.
64 Fed. R. Evid. 701 advisory committee's note to 2000 amendment. ER 701
parallels its federal counterpart, FRE 701. "Where a state rule parallels a federal rule,
analysis of the federal rule may be looked to for guidance." Beal v. City of Seattle. 134
Wash. 2d 769, 777, 954 P.2d 237 (1998).
65 CP at 236-39
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No. 72604-8-1/14
Neither is there a showing that Valenzano has lay experience analyzing sophisticated,
business-accounting practices. On this record, the portions of Valenzano's declaration
analyzing the application of the commission program to specific projects are not
admissible lay testimony under ER 701.
Attorney's Fees
On remand, any attorney's fees award for the 2013 salary and the commissions
is proper only if ProjectCorps willfully withheld Ruhl's and Peterson's compensation.66
Attorney's fees depend upon whether a bona fide dispute exists over Ruhl's and
Peterson's 2013 salary and whether Ruhl and Peterson knowingly submitted to the
withholding of their commissions.
Prejudgment Interest
ProjectCorps contends the trial court abused its discretion in awarding
prejudgment interest from the date of deferment on all of Ruhl's and Peterson's wage
claims, including interest on the 2012 salary. But ProjectCorps cites no authority for this
proposition in its opening brief. In its reply brief, it merely attempts to distinguish one
case cited by Ruhl and Peterson. On this briefing, we decline to address when
prejudgment interest began to accrue on unpaid salaries and commissions.67
CONCLUSION
We affirm the unchallenged award of 2012 salary and related double damages.
On remand, the trial court shall determine the amount of attorney's fees and
66 RCW 49.52.070.
67 RAP 10.3(a)(6) (parties must support their arguments with citations to legal
authority); Norcon Builders, 161 Wash. App. at 486 ("We will not consider an inadequately
briefed argument.").
14
No. 72604-8-1/15
prejudgment interest allocable to the 2012 salary.
We reverse the partial summary judgment order regarding the disputed
commissions and the 2013 salary. Genuine issues of material fact remain whether a
"bona fide dispute" exists over Ruhl's and Peterson's 2013 salary and whether Ruhl and
Peterson "knowingly submitted" to the withholding of their commissions. We remand for
further proceedings consistent with this opinion.
WE CONCUR:
'*fo**T i ^ ^TJmI^.P^.,,
15