Cardinal Care Mgmt., LLC v. Afable

• Decision Date: 20 April 2020
• Docket Number: A154062, A155229
• Court: California Court of Appeals Court of Appeals
• Parties: CARDINAL CARE MANAGEMENT, LLC et al., Plaintiffs and Appellants, v. Edgardo AFABLE et al., Defendants and Respondents.

47 Cal.App.5th 1011

261 Cal.Rptr.3d 353

CARDINAL CARE MANAGEMENT, LLC et al., Plaintiffs and Appellants,

v.Edgardo AFABLE et al., Defendants and Respondents.

A154062, A155229

Court of Appeal, First District, Division 4, California.

Filed April 20, 2020

Counsel for Appellants: Ferber Law, APC, Michelle R. Ferber, Jonathan R. Babione, San Ramon, Jennifer R. Lucas, Walnut Creek

Counsel for Respondents: Law Offices of Allan A. Villanueva, Allan A. Villanueva, San Bruno

TUCHER, J.

Appellants operate several residential care facilities for the elderly. Respondents are seven former employees who worked at the facilities, and who brought administrative proceedings against appellants before the Labor Commissioner (the Commissioner) seeking unpaid wages and penalties. When the Commissioner awarded the employees more than $2.5 million, appellants sought de novo review in the trial court, an action that required them to post an undertaking in the amount of the award or to obtain a waiver. ( Lab. Code, § 98.2 ;¹ Code Civ. Proc., § 995.240.) The primary question we must address is whether the trial court provided an adequate hearing on appellants’ financial ability to post the undertaking. We conclude the proceedings were adequate and comported with due process, and accordingly affirm the trial court’s dismissal of the consolidated trial court actions. Appellants also challenge an award of attorney fees, which we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Respondents Edgardo Antonio Afable, Ma Christina Milan, Jennifer Panopio, Alexander Ranoco, Dennielain Ranoco, Francis Sobremonte, and Rosalina Sumile each filed claims with the Commissioner’s office seeking unpaid overtime wages, liquidated damages (§ 1194.2), and waiting time penalties (§ 203), and a hearing on their claims was held before a hearing officer.

Appellants Cardinal Care Management, LLC (Cardinal Care) and Welcome Home Senior Residence LLC (Welcome Home) operated several licensed residential care facilities for the elderly. Both entities had a sole member, appellant Steve Chou. Appellants employed respondents either as live-in caregivers or as relief caregivers. The hearing officer found appellants failed to pay respondents for all of the time they worked and, as to each appellant, awarded overtime wages, liquidated damages, interest, and waiting time penalties. The combined amount of the seven awards was more than $2.5 million. Cardinal Care and Welcome Home were found liable for all of this amount. With Chou individually liable for all or a portion of each of the awards, his liability came to more than $2.2 million.

Appellants sought to appeal the Commissioner’s award to the trial court. ( § 98.2.) The clerk of the superior court refused to file the notices of appeal, but permitted appellants to file petitions for relief from the requirement that they first post an undertaking in the amount of the award. ( § 98.2, subd. (b).) The trial court later allowed appellants to file their appeals conditionally, subject to being stricken if their petition to waive the bond requirement was denied. The actions were consolidated.²

In support of appellants’ motion for relief from the requirement to post an undertaking, Chou submitted a declaration stating that he, Cardinal Care, and Welcome Home lacked the financial ability to pay the awards or to deposit the amount of the awards with the court; that he had contacted two bonding companies, which had informed him they would not provide a bond unless he provided collateral for the amount of the bond sum; and that neither he, Cardinal Care, Welcome Home, nor the three collectively, could provide security in that amount. Chou also stated he was willing to provide copies of his, Cardinal Care’s, and Welcome Home’s financial statements, for the court’s in camera review. Appellants’ attorney submitted a declaration stating on information and belief that Chou was "in the process of rebuilding his life after a bankruptcy and divorce. He owns no real property, and has no income other than that of his businesses, both of which have significant expenses."

In their turn, respondents argued Chou had made no showing he was indigent, and provided evidence that, while the administrative action was pending, Chou had transferred title to four residential care facilities, as well as another property, from his own name to that of certain trusts and limited liability companies of which Chou’s wife was the sole manager; that Chou and his wife were governors of a Washington State corporation that operated a 50-bed assisted-living facility; and that Chou was the sole manager of a limited liability company that was the licensee of another Welcome Home senior residence. They also provided evidence that the value of the four residential care properties Chou had recently transferred collectively exceeded five million dollars, according to the Internet site Zillow, and that the fifth property had been purchased in April 2015 for $1,050,000.

In reply, appellants reiterated their willingness to provide documents for the court’s review in camera and asserted that Chou and his wife were involved in divorce proceedings. Chou did not deny that he transferred the properties, but averred that each of the properties had a mortgage debt and that the properties were transferred "as part of an estate plan to clarify the rights and interests of the respective businesses" managed by Chou, not as part of an effort to hide his assets; that he had no family member or friend willing and able to provide a bond or collateralize an undertaking; that he was unable to provide collateral for an undertaking without depriving himself and his dependents of the necessities of life; that neither he, Cardinal Care, nor Welcome Home owned any real property or personal property sufficient to provide collateral for a bond; that he had no ownership interest in the corporations that owned the transferred properties; and that the award would bring financial ruin to himself, Welcome Home, and Cardinal Care, and could accordingly disrupt services to the elderly residents of the senior care facilities.

Chou was not present at the hearing on the motion to waive the undertaking requirement, nor did his counsel explain his absence. The trial court stated that there were no witnesses to conduct an in camera showing of appellants’ financial position, and that, in any case, appellants had not shown why any hearing should be conducted in camera. The court also found not credible Chou’s assertions that he transferred the corporations out of his own control for estate planning purposes and that he was unable to post a bond, finding the transfers "transparently an effort to avoid a judgment." Appellants’ attorney said she had a declaration that Chou had signed, which included his tax returns and profit-and-loss statements, and that she could probably arrange for Chou to come to court that day and testify about the documents, an offer the court found untimely. The trial court denied appellants’ request for a waiver of the requirement of an undertaking and dismissed their appeals from the Commissioner’s award.

DISCUSSION

I. Fair Hearing on Waiver of Undertaking

A. Statutory Framework

When an employer does not pay wages as required by law, an employee may file either a civil action in court or a wage claim with the Commissioner. (§§ 98-98.8.) If the employee chooses the administrative route, a deputy commissioner then holds a hearing commonly known as a "Berman" hearing. ( OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 121, 251 Cal.Rptr.3d 714, 447 P.3d 680 ( OTO ).) The Berman procedure " ‘is designed to provide a speedy, informal, and affordable method of resolving wage claims.’ " ( Ibid . )

Within ten days after service of notice of the Commissioner’s order, decision, or award, either party may appeal to the superior court, which considers the matter de novo. ( § 98.2, subd. (a) ; Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1116-1117, 56 Cal.Rptr.3d 880, 155 P.3d 284 [ section 98.2 proceeding is not conventional appeal or review of Commissioner’s decision, but review de novo of wage dispute].) As a condition to filing an appeal, an employer must first post an undertaking in the amount of the award, in the form of either an appeal bond or a cash deposit. ( § 98.2, subd. (b).) This requirement discourages unmeritorious appeals and minimizes the time for an employer to divest itself of assets in order to deprive the employee of the possibility of enforcing the award. ( Palagin v. Paniagua Construction, Inc. (2013) 222 Cal.App.4th 124, 137, 165 Cal.Rptr.3d 612 ( Palagin ); OTO , supra , 8 Cal.5th at p. 123, 251 Cal.Rptr.3d 714, 447 P.3d 680.)

An escape valve exists for employers who are unable to post the necessary security: "[A] party appealing a decision of the Commissioner is entitled as a matter of due process to seek relief from the section 98.2(b) undertaking requirement. ‘The right of an indigent civil litigant to proceed in forma pauperis is grounded in a common law right of access to the courts and constitutional principles of due process. [Citations.] "[R]estricting an indigent’s access to the courts because of his poverty ... contravenes the fundamental notions of equality and fairness which since the earliest days of the common law have found expression in a right to proceed in forma pauperis." ’ " ( Burkes v. Robertson (2018) 26 Cal.App.5th 334, 343-344, 237 Cal.Rptr.3d 89 ( Burkes ).) Thus, statutory provisions applying to all bonds include an exception for indigency. ( Williams v. Freedomcard, Inc. (2004) 123 Cal.App.4th 609, 614, 20 Cal.Rptr.3d 220 ( Williams ).) Specifically, Code of Civil Procedure section 995.240 provides that a court "may, in its discretion, waive a provision for a bond in an action or proceeding ... if the court determines that the principal is unable to give the bond because the principal is indigent and is unable to obtain sufficient sureties."

Burkes an...