Contreras v. Ashria, LLC
| Decision Date | 12 June 2020 |
| Docket Number | F076934 |
| Court | California Court of Appeals Court of Appeals |
| Parties | ESTHER CONTRERAS, Plaintiff and Respondent, v. ASHRIA, LLC, Defendant and Appellant. |
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
OPINIONAPPEAL from a judgment of the Superior Court of Fresno County. Jeffrey Y. Hamilton, Jr., Judge.
Braun & Melucci and Kerri M. Melucci for Defendant and Appellant.
Whelan Law Group, Walter W. Whelan and Lucas C. Whelan for Plaintiff and Respondent.
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Esther Contreras (Contreras) brought a wrongful termination lawsuit against her former employer, Ashria, LLC (Ashria), in which she sought to recover damages for lost wages and emotional distress. On the eve of trial, the parties entered into a settlement agreement orally before the trial court, which subsequently was memorialized in writing. The settlement agreement required Ashria to pay Contreras a "gross settlement" of $100,000. A dispute subsequently arose about whether Ashria was to pay the settlement funds without deduction for payroll taxes, which would require Ashria to issue Contreras a 1099-MISC form, or by deducting payroll taxes and issuing Contreras a W-2 form. Ultimately, Ashria deducted payroll taxes from the settlement amount and issued Contreras a check for the net amount.
Contreras filed a motion for judgment to enforce the settlement agreement, asking the trial court to enter a judgment that would designate $7,000 of the settlement amount as payment for lost wages, on which payroll taxes would be withheld and a W-2 form issued, and the remainder designated as emotional distress damages, which would be paid to her in full and a 1099-MISC form issued. The trial court granted the motion and issued the requested judgment.
On appeal, Ashria contends the trial court acted in excess of its jurisdiction when it interpreted the settlement agreement as containing terms not found within it. Ashria asserts the added terms were contrary to its understanding and intent, and resulted in a material alteration of its duties and obligations under the settlement agreement. Finding no merit to Ashria's contentions, we affirm.
In December 2015, Contreras filed a complaint against Ashria alleging causes of action for wrongful termination in violation of public policy, retaliation in violation of Labor Code section 1102.5, and intentional infliction of emotional distress. Contreras alleged she began working as an assistant manager in Ashria's Popeyes Louisiana Kitchen restaurant in January 2014, and her employment was wrongfully terminated on October 2, 2015. In the complaint, Contreras sought to recover: (1) compensatory damages, including "past and future lost wages and employee benefits (with interest on said amounts), diminished employability, other economic injury, and emotional distress damages, all in an amount according to proof"; (2) punitive damages; (3) prejudgment interest; (4) attorney fees; and (5) costs of suit.
On August 11, 2017, after a trial readiness hearing, the parties participated in a judicial settlement conference before the Honorable Jeffrey Y. Hamilton, Jr., and reached a settlement, which was entered into in open court, but not reported. Later that day, Contreras's attorney prepared a draft, written version of the settlement agreement. On August 14, 2017, Ashria's attorney proposed some revisions to the agreement, which were acceptable to Contreras's attorney, and the parties signed the agreement.
The settlement agreement (agreement) provided in the first paragraph that "[f]or the sole consideration of the payment by Defendant ASHRIA, LLC ... of the gross settlement of One Hundred Thousand Dollars ($100,000.00) exactly made payable jointly" to Contreras and her attorney, Contreras would release all her claims against Ashria.
The second paragraph, labeled "Consideration," stated: (1) Ashria "shall pay Plaintiff One Hundred Thousand Dollars ($100,000.00) exactly ('Settlement Amount')"; (2) Ashria "shall deliver the Settlement Amount" to Contreras's attorney within 15 days of the execution of the agreement; and (3) Contreras agreed "payment of the Settlement Amount in the manner set forth in this Agreement is fully acceptable," which she acknowledged "constitutes an accord and satisfaction and a full and complete settlement of her claims and the pending lawsuit," and "the entire amount of monetary consideration to be provided to" Contreras under the agreement. The agreement required Contreras to dismiss the complaint with prejudice within 15 days of receipt of the settlement amount.
The agreement contained an integration clause that provided the agreement "contains the entire agreement of the parties hereto with respect to the subject matter herein contained," and "[t]here are no restrictions, promises, warranties, covenants, undertakings, or representations other than those expressly set forth herein." The parties acknowledged they had not relied on any representations by the other party that were not expressly set forth in the agreement, which could be amended "only by written instrument executed by both parties." The agreement stated it "shall be governed by thelaw of the State of California applicable to contracts executed and wholly performed therein."
A dispute immediately arose over whether Ashria should withhold payroll taxes from the settlement amount. When one of Contreras's attorneys sent Ashria's attorney, William Braun, the agreement adopting Braun's changes on August 14, 2017, the attorney stated he would forward the agreement with Contreras's signature as soon as she signed it, with the understanding she would "receive a check in the amount of $100,000, without any deductions," within 15 days from Ashria's execution of the agreement. Braun responded they would "deliver a settlement check in accordance with the Settlement Agreement" within 15 days of a receiving a fully executed agreement.1 Another of Contreras's attorneys, Walter Whelan, asked Braun whether that meant the check would be for the full amount or Ashria would make payroll deductions.
On August 17, 2017, Whelan emailed Braun they were going to strike the word "gross" that was inadvertently included on the first page of the agreement and forward it to him.2 The next day, Braun forwarded the agreement, signed by himself, Ashria, and one of Contreras's attorneys, to Whelan, noting the agreement Contreras signed was modified after Ashria signed the agreement and it did not agree to the modification. Braun stated they were analyzing what the modifications meant and what Ashria's position would be.
Whelan emailed Braun on August 24, 2017, explaining that while they initially believed there should not be any withholding from the settlement amount based on Lisec v. United Airlines, Inc. (1992) 10 Cal.App.4th 1500 (Lisec), which held it was inappropriate to withhold any portion of a settlement in a wrongful termination case, that case had been "overruled" by Cifuentes v. Costco Wholesale Corp. (2015) 238 Cal.App.4th 65 (Cifuentes). Whelan proposed Ashria withhold the wage loss portion of the settlement which, according to Contreras's deposition testimony, was about $7,000, and the clarification could be included in a revised settlement agreement. If Braun disagreed with that approach, however, they would set up a court hearing to resolve the issue.
Braun responded on August 28, 2017, that he was waiting to discuss the matter with Ashria, but he believed Cifuentes said the entire settlement amount was wages and asked to extend the payment deadline to further discuss the issue. Whelan responded that he did not think an extension was needed to resolve a very narrow issue, as neither Lisec nor Cifuentes stood for the proposition that withholding is required for something other than wages and the only part of the settlement amount that arguably was wages was the gap in wages Contreras suffered between the time she was terminated and when she regained the same income at a new job. Braun responded that since Whelan was unwilling to agree to extend the payment deadline, Ashria would issue the check it thought appropriate on September 1, 2017.
On August 31, 2017, Ashria issued a check payable to Contreras and her attorneys in the amount of $40,186.31. Ashria retained federal income tax of $37,680.64, Medicare tax of $1,450, Social Security tax of $6,200, California state income tax of $13,583.05, and California disability tax of $900.
In a letter accompanying the check, Braun explained the entire settlement amount constituted taxable income because the damages Contreras alleged were taxable as wages under state and federal law. Ashria therefore withheld the required federal and state taxeson the settlement amount, which Ashria's payroll service calculated. Braun stated the proposal to withhold tax only for past lost wages of $7,400, with Contreras indemnifying Ashria as to any tax liability, was unacceptable, as Contreras did not have any significant assets to fulfill the obligation and it is a crime for an employer not to withhold taxes from an employees' income. Braun stated Contreras's recourse was to seek a refund from the taxing authorities for amounts withheld in excess of her claimed tax obligation.
Contreras filed a motion for judgment to enforce the settlement agreement pursuant to Code of Civil Procedure3 section 664.6, to be heard by Judge Hamilton. Contreras sought to enforce the settlement entered into in open court on August 11, 2017, and the "subsequent written affirmation of that binding settlement agreement which was executed by the parties." The motion was made on the grounds that the...
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