Am. Cargo Express, Inc. v. Superior Court of Sacramento Cnty.

• Decision Date: 15 September 2017
• Docket Number: C081125
• Court: California Court of Appeals Court of Appeals
• Parties: AMERICAN CARGO EXPRESS, INC., et al., Petitioners, v. The SUPERIOR COURT of Sacramento County, Respondent; California Self-insurers' Security Fund, Real Party in Interest.

16 Cal.App.5th 145

223 Cal.Rptr.3d 857

AMERICAN CARGO EXPRESS, INC., et al., Petitioners,

v. The SUPERIOR COURT of Sacramento County, Respondent;California Self-insurers' Security Fund, Real Party in Interest.

C081125

Court of Appeal, Third District, California.

Filed September 15, 2017

Roxborough, Pomerance, Nye & Adreani, Drew E. Pomerance and Marina N. Vitek, Woodland Hills, for Petitioners American Cargo Express, Inc., AMR Staffing, Inc., Aware Products, LLC, Brookvale International, LLC, California Cartage Company, Inc., Custom Goods, LLC, Ilad, Inc., Jack H. Caldwell & Sons, Inc., Maruzen Of America, Inc., Michael Kors (USA) Inc., Midas Express, Inc., Nippon Express, USA, Inc., Performance Team Freight Systems, Inc., Price Transfer, Inc., Quest Staffing, Inc., Reliable Resources, Inc., and Trichromatic-West, Inc.

Lewis Brisbois Bisgaard & Smith, Steven G. Gatley and Kerri R. Lutfey for Petitioner Beacon Property Management, Inc.

Brown Law Group, Stacy L. Fode and Luis E. Lorenzana, San Diego, for Petitioner Brook Furniture Rental, Inc.

Morris Polich & Purdy, Lane E. Webb and Micah M. Hoffman, San Diego, for Petitioner Willmark Communities, Inc.

No appearance for Respondent.

Nixon Peabody and Karl D. Belgum, San Francisco, for Real Party in Interest.

MAURO, J.

The California Self-Insurers' Security Fund (SISF) assumed the workers' compensation obligations of Mainstay Business Solutions (Mainstay), a temporary staffing and employee leasing business, when Mainstay defaulted on its obligations to self-insure. SISF then sued Mainstay, Mainstay's clients and others to recover its costs and liabilities. Among other things, the trial court granted SISF's motion for judgment on the pleadings against Mainstay's clients, finding that SISF stated a cause of action under Labor Code section 3744, subdivision (c),¹ that section 3602, subdivision (d) did not constitute a defense thereto, and that SISF's cause of action was not subject to the exclusive jurisdiction of the Workers' Compensation Appeals Board (Appeals Board). Mainstay's clients filed a petition for writ of mandate and/or prohibition in this court challenging the trial court's order.

As a threshold procedural matter, SISF contends (1) writ review is not appropriate because the main issue presented has been rendered moot by the enactment of section 3701.9. On the merits, Mainstay's clients contend (2) SISF's claim is subject to the exclusive remedy provisions of the Workers Compensation Act (§ 3200 et seq.) (the Act) and must be brought before the Appeals Board; and (3) their agreements with Mainstay in compliance with section 3602, subdivision (d) serve to bar SISF's civil action.

We conclude SISF can bring a section 3744, subdivision (c) action against Mainstay's clients in superior court and the section 3602, subdivision (d) defense by Mainstay's clients does not bar SISF's action. We will deny the petition for writ of mandate and/or prohibition by Mainstay's clients.

BACKGROUND

We draw the following facts from the third amended complaint and the matters of which the trial court took judicial notice.

Mainstay, a division of the Blue Lake Rancheria Economic Development Corporation, is a tribal government-sponsored entity of Blue Lake Rancheria, a federally recognized Indian tribe. Mainstay operated a temporary staffing business, assigning temporary workers to its clients. It also operated an employee leasing business in which employees of Mainstay's clients were placed on Mainstay's payroll and leased back to the clients.²

A dispute arose in 2004 between the California Department of Industrial Relations (DIR) and the California Department of Insurance (collectively, the State), on the one hand, and Blue Lake Rancheria and Mainstay, on the other. The State alleged Mainstay failed to comply with State laws requiring employers to pay workers' compensation and to secure the payment of such compensation by obtaining a certificate of consent to self-insure (certificate) or purchasing insurance through an authorized insurer. Mainstay urged that as a government-sponsored entity of a federally recognized Indian tribe it was not required to comply with State workers' compensation laws. The dispute resulted in a civil action that was ultimately resolved through a settlement agreement.

As part of the settlement agreement, Mainstay agreed to seek, and DIR agreed to issue, a certificate. In addition, Mainstay and Blue Lake Rancheria agreed to unconditionally waive sovereign immunity for "any proceedings under the workers' compensation laws," including a waiver in favor of SISF for the purpose of enforcing Mainstay's workers' compensation obligations.

DIR issued the certificate effective March 1, 2005. The workers provided by Mainstay had no other connection with Mainstay and they worked off-reservation for non-tribal employers throughout the State. The workers agreed to be bound by tribal law and to make claims in tribal court to enforce certain employment rights against Mainstay, with the exception of workers' compensation claims. Agreements between Mainstay, Blue Lake Rancheria and Mainstay's clients provided that Mainstay's certificate would cover workers' compensation benefits for the workers. Mainstay's clients benefitted from the arrangement because they avoided higher insurance premiums and did not need to obtain a certificate in their own name.

Mainstay became insolvent and defaulted on its obligations under the certificate. The Legislature had previously established SISF to provide for the continuation of workers' compensation benefits that are due to injured workers when a private self-insured employer defaults on the payment of its workers' compensation obligations. (§ 3740) On or about April 19, 2011, DIR ordered SISF to assume the workers' compensation liabilities of Mainstay pursuant to section 3701.5. (§ 3701.5, subds. (a), (b).)

SISF assumed the workers' compensation liabilities of Mainstay and has since administered over 1,000 such workers' compensation claims. SISF received approximately $16.9 million in collateral posted in connection with Mainstay's certificate, but that collateral was exhausted on or about October 4, 2012. As of March 31, 2014, SISF paid and assumed liabilities totaling $49,872,412 for the injured-worker claims, well in excess of the Mainstay collateral.

SISF sued Mainstay, Mainstay's clients and others to recover its excess costs and liabilities. Mainstay's clients obtained summary adjudication of other causes of action, but SISF obtained judgment on the pleadings on the third cause of action based on section 3744, subdivision (c) [SISF is authorized to seek reimbursement from Mainstay's clients for the amounts SISF paid and the liabilities it assumed in excess of the security deposit posted for Mainstay's certificate, together with reasonable administrative and legal costs]. The trial court granted the request by Mainstay's clients to certify the order on the third cause of action for immediate review under Code of Civil Procedure section 166.1.³ Mainstay's clients filed a petition for writ of mandate and/or prohibition in this court challenging the trial court's order. We issued an order to show cause and stayed the trial court proceedings on March 11, 2016. We also granted the applications of Beacon Property Management, Inc., Brook Furniture Rental, Inc., and Willmark Communities, Inc. to join in the writ petition.

STANDARD OF REVIEW

A motion for judgment on the pleadings serves the same function as a general demurrer. ( Lance Camper Manufacturing Corp. v. Republic Indemnity Co . of America (1996) 44 Cal.App.4th 194, 198, 51 Cal.Rptr.2d 622 ( Lance Camper Manufacturing Corp. ).) A plaintiff may move for judgment on the pleadings on the ground that the complaint states facts sufficient to constitute a cause of action against the defendant and the answer does not state facts sufficient to constitute a defense to the complaint. ( Code Civ. Proc., § 438, subd. (c)(1)(A).) A defendant may move for judgment on the pleadings on the ground that the court has no jurisdiction of the subject of the cause of action alleged or that the challenged pleading does not state facts sufficient to constitute a cause of action against the defendant. ( Code Civ. Proc., § 438, subd. (c)(1)(B).) Our review is confined to the face of the challenged pleading and any matters of which we may judicially notice. ( Code Civ. Proc., § 438, subd. (d) ; Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999, 79 Cal.Rptr.2d 544.) We accept as true all properly pleaded material facts alleged in the challenged pleading, but not contentions, deductions, or conclusions of fact or law. ( People ex rel. Harris v. Pac Anchor Transportation, Inc . (2014) 59 Cal.4th 772, 777, 174 Cal.Rptr.3d 626, 329 P.3d 180.) We give the pleading a liberal interpretation, reading it as a whole and all of its parts in their context. ( Nelson v. Superior Court (2006) 144 Cal.App.4th 689, 692, 50 Cal.Rptr.3d 684 ; Lance Camper Manufacturing Corp., supra, 44 Cal.App.4th at p. 198, 51 Cal.Rptr.2d 622.) We independently determine whether the challenged pleading states a cause of action. ( Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 515, 101 Cal.Rptr.2d 470, 12 P.3d 720 ; Lance Camper Manufacturing Corp., supra, 44 Cal.App.4th at p. 198, 51 Cal.Rptr.2d 622.)

DISCUSSION

I

As a threshold matter, SISF argues writ review is not appropriate becausethe main issue presented has been rendered moot by the enactment of section 3701.9.

Effective January 1, 2013, a "leasing employer," a "temporary services employer," or any employer which the director of DIR determines to be in the business of providing employees to other employers can no longer obtain a certificate. (§ 3701.9, subd. (a).) A "leasing employer" and a "temporary services employer" are employing units that contract with clients to supply workers to perform services for the client and perform all of the following functions: (1) negotiate with...