Cortez v. Purolator Air Filtration Products

• Citation: 999 P.2d 706,96 Cal.Rptr.2d 518,23 Cal.4th 163
• Decision Date: 05 June 2000
• Docket Number: No. S071934.,S071934.
• Court: United States State Supreme Court (California)
• Parties: Rosalba CORTEZ, Plaintiff and Appellant, v. PUROLATOR AIR FILTRATION PRODUCTS COMPANY, Defendant and Appellant.

96 Cal.Rptr.2d 518

23 Cal.4th 163

999 P.2d 706

Rosalba CORTEZ, Plaintiff and Appellant, v. PUROLATOR AIR FILTRATION PRODUCTS COMPANY, Defendant and Appellant.

No. S071934.

Supreme Court of California.

June 5, 2000.

Cameron M. Cunningham and Newman Strawbridge, Santa Rosa, for Plaintiff and Appellant.

McCarthy, Johnson & Miller, John J. Davis, Jr., and Patricia A. McCormick, San Francisco, for Pipe Trades District Council No. 36 as Amicus Curiae on behalf of Plaintiff and Appellant.

Van Bourg, Weinberg, Roger & Rosenfeld, Victor J. Van Bourg, David Rosenfeld, Oakland, and Ellyn Moscowitz, Anaheim, for the California Labor Federation, AFL-CIO and the State Building and Construction Trades Council of California, AFL-CIO as Amicus Curiae on behalf of Plaintiff and Appellant.

California Rural Legal Assistance, William G. Hoerger and Michelle Crawford, San Francisco, for Isabel Delgado Carrillo as Amicus Curiae on behalf of Plaintiff and Appellant.

Brad Seligman, Berkeley; Saperstein, Goldstein, Demchak & Bailer, Linda M. Dardarian and Aaron Kaufmann, Oakland, for Asian Law Caucus, Inc., East San Jose Community Law Center, Employment Law Center — A Project of the Legal Aid Society of San Francisco, La Raza Centro Legal, The Impact Fund and Women's Employment Rights Clinic — Golden Gate University School of Law as Amici Curiae on behalf of Plaintiff and Appellant.

Rosner, Owens & Nunziato, Tom A. Nunziato, Phil J. Montoya, Jr., Los Angeles; Haight, Brown & Bonesteel, Theresa M. Marchlewski, Jules S. Zeman and Morton Rosen, Santa Monica, for Defendant and Appellant.

Manatt, Phelps & Phillips, Robert E. Hinerfeld, Barry S. Landsberg and Terri D. Keville, Los Angeles, for First Healthcare Corporation as Amicus Curiae on behalf of Defendant and Appellant.

Fred J. Hiestand, Sacramento, for the Association for California Tort Reform as Amicus Curiae on behalf of Defendant and Appellant.

Severson & Werson, Jan T. Chilton and William L. Stern, San Francisco, for California Bankers Association as Amicus Curiae on behalf of Defendant and Appellant.

Brobeck, Phleger & Harrison, James N. Penrod, David J. Brown, Samuel J. Fleischmann, San Francisco, and Edward D. Totino, Los Angeles, for the Employers Group as Amicus Curiae on behalf of Defendant and Appellant.

Mitchell, Silberberg & Knupp, Lawrence A. Michaels, Los Angeles, and Jenny Schneider for California Employment Law Council as Amicus Curiae on behalf of Defendant and Appellant.

Heller Ehrman White & McAuliffe, Paul Alexander, Vanessa Wells, Victoria Collman Brown and Amy Van Zant, Palo Alto, for State Farm Mutual Automobile Insurance Company as Amicus Curiae on behalf of Defendant and Appellant.

Robie & Matthai, Pamela E. Dunn, Los Angeles, and Daniel J. Koes for United Services Automobile Association as Amicus

Curiae on behalf of Defendant and Appellant.

Bill Lockyer, Attorney General, Hershel T. Elkins, Assistant Attorney General, and Ronald A. Reiter, Deputy Attorney General, for the Attorney General of California as Amicus Curiae.

Thomas J. Orloff, District Attorney (Alameda), Julie Dunger, Assistant District Attorney; and Lawrence G. Brown for California District Attorneys Association as Amicus Curiae.

BAXTER, J.

In this matter, a companion to Kraus v. Trinity Management Services, Inc. (2000) 23 Cal.4th 116, 96 Cal.Rptr.2d 485, 999 P.2d 718 (Kraus), we address additional issues arising out of a representative action brought under the unfair competition law (UCL). (Bus. & Prof. Code, § 17200 et seq.)¹ Defendant and petitioner Purolator Air Filtration Products Company (Purolator) contends, as did the defendants in Kraus, that failure to certify this action as a class action denied due process. It also argues that the Court of Appeal erred in holding that an order to disgorge the benefit of failing to pay statutorily mandated overtime wages is a monetary remedy authorized by section 17203,² that equitable defenses may not be asserted in a UCL action for unpaid wages, and that the four-year statute of limitations of section 17208³ governs, rather than the three-year period of limitations of Code of Civil Procedure section 338, subdivision (a), that would otherwise apply in an action to recover unpaid overtime brought pursuant to Labor Code section 1194.

Consistent with our conclusion in Kraus, supra, 23 Cal.4th 116,96 Cal.Rptr.2d 485,999 P.2d 718, that the UCL does not authorize fluid recovery in a representative UCL action, we conclude here that, while disgorgement to a fluid recovery fund of all profit defendant may have earned by withholding overtime wages is not permitted, defendant may be compelled to restore unpaid wages to its employees and former employees. Once earned, those unpaid wages became property to which the employees were entitled. Failure to promptly pay those wages was unlawful and thus an unfair business practice. Section 17203 expressly authorizes orders necessary to restore money or property to any person in interest from whom the money or property has been obtained through an unfair business practice.

We also conclude that, while the Court of Appeal correctly rejected defendant's statute of limitations claim, equitable considerations may guide the court in fashioning the appropriate remedy in a UCL action. We shall, therefore, affirm the judgment of the Court of Appeal as modified to direct the trial court to proceed in conformity with these conclusions.

I BACKGROUND

On November 2, 1993, plaintiff Rosalba Cortez filed an action "on behalf of herself and the general public" denominated a "COMPLAINT FOR RESTITUTION, PENALTIES, AND ATTORNEY'S FEES FOR FAILURE TO PAY OVERTIME WAGES. (Bus. & Prof.Code, § 17200; Lab.Code, §§ 1194, 1198.)" The complaint alleged in substance that plaintiff had been a production worker at the Santa Rosa plant operated by defendant's predecessor in interest Servodyne Corporation from June 20, 1990, until May 11, 1993. Throughout that time plaintiff and other manufacturing workers at the plant worked four consecutive 10-hour or longer days per week. The first cause of action, "Unfair Business Practices — Failure to Pay Overtime," alleged that an applicable Industrial Welfare Commission (IWC) wage order mandated payment of overtime of one and one-half the regular rate of pay for hours worked in excess of eight hours in a workday and double the rate of pay for hours worked in excess of 12 hours a day, and that she and the other production workers suffered a loss of wages in the amount of that overtime pay that was not paid to them. This cause of action also alleged that defendant failed to pay overtime wages promptly on termination of the employees as mandated by Labor Code section 203. These omissions were alleged to constitute an unfair business practice proscribed by section 17200.⁴

The second cause of action, "Failure to Pay Overtime," apparently one under Labor Code section 1194,⁵ alleged that defendant had failed to pay overtime wages to plaintiff, and sought both those wages and a Labor Code section 203⁶ penalty for failure to pay those wages at the time of her termination.

Plaintiff sought restitution to her and the other employees of the unpaid overtime pursuant to section 17203, with interest, and waiting time penalties for the alleged violations of Labor Code section 203. She also sought injunctive relief in the form of an order requiring defendant to give notice to persons to whom restitution was owing of the means by which to file for restitution, the disgorgement of unpaid overtime wages which could not be restored directly to the persons to whom they were owed, attorney fees, and costs of suit. As an affirmative defense, Purolator asserted the failure of plaintiff to bring the action as a class action, but did not raise that issue again until it moved unsuccessfully to strike the first cause of action.

Following a nonjury trial the court found that defendant had failed to meet its burden of demonstrating that it was exempt from the applicable wage order by virtue of an employee ratification of the four-day 10-hour workweek. The court therefore awarded plaintiff the overtime pay, interest, and penalty she sought on her own behalf. It denied the requested injunction, however, finding that defendant had believed in good faith it was exempt and had immediately abandoned the four-day schedule when it learned otherwise.⁷ There being no threat of a repeated violation, an injunction was not warranted. The court then ruled that it was without power to order restitution on behalf of other, absent, employees because that relief could only be ancillary to injunctive relief. Judgment was entered accordingly. Plaintiff appealed from the judgment insofar as it denied relief on her UCL cause of action on behalf of other employees. Defendant appealed from the judgment insofar as it granted relief to plaintiff on her individual cause of action.

After the superior court judgment was rendered, but before the appeal was heard, this court held in ABC Interned. Traders, Inc. v. Matsushita Electric Corp. (1997) 14 Cal.4th 1247, 1271, 61 Cal.Rptr.2d 112, 931 P.2d 290 (ABC Internal Traders), that section 17203 authorizes an order for restitution regardless of whether an injunction to prohibit future violations issues. Defendant acknowledged that the trial court's basis for denying relief to plaintiff on the UCL cause of action was inconsistent with ABC Internal Traders. As pertinent here, however, it argued that the judgment denying relief should be affirmed nonetheless because plaintiff lacked standing to seek restitution on behalf of the other employees and a judgment ordering payment of the unpaid overtime wages would award damages, not restitution.

The Court of Appeal assumed that Purolator raised the class certification issue in a timely manner. Relying on Bronco Wine Co. v. Frank A. Logoluso Farms (1989) 214 Cal.App.3d 699, 262 Cal.Rptr. 899, defendant argued in support of its standing claim that...