Heaps v. Nuriche, LLC

• Decision Date: 30 January 2015
• Docket Number: No. 20130132.,20130132.
• Citation: 2015 UT 26,345 P.3d 655
• Parties: Ron HEAPS and Phillip Sykes, Appellants, v. NURICHE, LLC, David Heaps, Lavorn Sparks, Norm Clyde, Brad Holiday, and David Parker, Appellees.
• Court: Utah Supreme Court

345 P.3d 655

2015 UT 26

Ron HEAPS and Phillip Sykes, Appellants

v.NURICHE, LLC, David Heaps, Lavorn Sparks, Norm Clyde, Brad Holiday, and David Parker, Appellees.

No. 20130132.

Supreme Court of Utah.

Jan. 30, 2015.

Robert H. Wilde, Bruce M. Franson, Michael S. Wilde, Salt Lake City, for appellants.

Mark D. Tolman, Paul R. Smith, Salt Lake City, for appellees.

Justice PARRISH authored the opinion of the Court, in which Chief Justice DURRANT, Associate Chief Justice NEHRING, Justice DURHAM, and Justice LEE joined.

Justice PARRISH, opinion of the Court:

INTRODUCTION

¶ 1 This appeal requires us to decide whether the Utah Payment of Wages Act (UPWA) imposes personal liability on the managers of a limited liability company for unpaid wages. The UPWA imposes liability for unpaid wages on all employers. On summary judgment, the district court found that LLC managers qualify as employers under the UPWA, but nevertheless held that they are not liable for unpaid wages. We affirm the district court's ruling on the alternative ground that LLC managers do not qualify as employers under the UPWA.

BACKGROUND

¶ 2 In 2008, Ron Heaps and Phillip Sykes (collectively, Employees), along with others, founded Nuriche, LLC, a now-defunct limited liability company formed in Nevada and registered to do business in Utah. Employees allege that the other founding members promised them compensation and other benefits in connection with their employment by Nuriche, but that Nuriche and the remaining managers refused to provide the promised compensation upon Employees' termination in 2011.

¶ 3 Shortly after being terminated, Employees filed their complaint in this matter. The complaint alleged that Nuriche and those on its board of managers, David Heaps, Lavorn Sparks, Norm Clyde, Brad Holiday, and David Parker¹ (collectively Managers), breached their agreement to pay Employees $150,000 in annual salaries and benefits. Employees also asserted a claim under the UPWA for failure to pay past-due wages following their termination.

¶ 4 Four of the five Managers—David Heaps, Lavorn Sparks, Norm Clyde, and Brad Holiday—sought summary judgment. They argued first that Nevada limited-liability-company law controlled Employees' claim for unpaid wages and that, under Nevada law, LLC managers could not be held personally liable for unpaid wages. Alternatively, they argued that Utah wage law does not impose personal liability on managers for unpaid wages.

¶ 5 Following a hearing, the district court granted Managers' motion for summary judgment. The court first undertook a conflict-of-laws analysis and concluded that Utah law applies because, under the most significant relationship test, “the majority of [the relevant] contacts were in Utah.” Applying Utah law, the district court ruled that Managers were employers as defined by the UPWA, but that the UPWA does not extend wage liability to individual managers. The district court explained that “[t]here is simply no indication in the UPWA that it is intended to impose individual liability on officers or agents of a business.” Subsequently, the district court granted summary judgment in favor of Manager David Parker, who served as CEO of Nuriche, reasoning that, like the other managers, Parker could not be held personally liable for unpaid wages.² Because there were additional claims pending, Employees sought and obtained rule 54(b) certification of both summary judgment rulings and filed a timely notice of appeal. We have jurisdiction pursuant to Utah Code section 78A–3–102(3)(j).

STANDARD OF REVIEW

¶ 6 Summary judgment is appropriate only where “there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law.” Utah R. Civ. P. 56(c). In this case, the issue before the district court on summary judgment was a matter of statutory interpretation, which presents a legal question. State v. Bluff, 2002 UT 66, ¶ 37, 52 P.3d 1210. We therefore review the district court's decision for correctness. Basic Research, LLC v. Admiral Ins. Co., 2013 UT 6, ¶ 5, 297 P.3d 578.

ANALYSIS

¶ 7 On appeal, Employees argue that the district court erred in granting Managers' motions for summary judgment because the UPWA imposes personal liability on LLC managers for unpaid wages. Managers respond that Nevada wage law should apply because Nuriche is a Nevada LLC and that, under Nevada law, LLC managers are not personally liable for unpaid wages. And if Utah law applies, Managers argue that the UPWA should not be read to impose personal liability on them because the statute does not evince an express legislative intent to override long-standing principles of corporate law. We address these arguments in turn.

I. UTAH WAGE LAW CONTROLS

¶ 8 In arguing that Nevada law applies, Managers rely on the governing law provision of the Utah Revised Uniform Limited Liability Company Act (URULLCA), which provides that “[t]he law of the jurisdiction of formation of a foreign limited liability company governs ... the liability of a member as member and a manager as manager for a debt, obligation, or other liability of the company. ” Utah Code § 48–3a–901(1) (emphasis added). Managers argue that unpaid wages are like any other debt, obligation, or liability of an LLC. Therefore, because Nuriche was formed in Nevada, the URULLCA requires that we apply Nevada law in determining whether Managers are personally liable for unpaid wages.

¶ 9 While it may be the case that Nevada law governs Managers' liability for the obligations of Nuriche, Employees are not seeking to hold Managers liable for an obligation of Nuriche. Instead, Employees argue that the UPWA imposes direct liability on Managers. Therefore, unlike claims that rely on derivative liability to render individual officers responsible for an obligation of a company, see, e.g., Jones & Trevor Mktg., Inc. v. Lowry, 2012 UT 39, ¶ 13, 284 P.3d 630, Employees' claims are premised on a theory of direct liability. Because the URULLCA's governing law provision limits its applicability to those cases implicating officer liability for the obligations of the company, it does not apply here.

¶ 10 Moreover, the URULLCA provides that “[r]egistration of a foreign limited liability company to do business in this state does not authorize the foreign limited liability company to engage in any activities or affairs or exercise any power that a limited liability company may not engage in or exercise in this state.” Utah Code § 48–3a–901(3). Because a foreign LLC employing individuals in Utah is required to follow Utah wage law, any claim of illegal wage practices filed by a Utah employee will be governed by Utah wage law. Accordingly, the question of Managers' liability for unpaid wages is governed by Utah law.

II. THE UPWA DOES NOT IMPOSE CIVIL OR CRIMINAL LIABILITY ON INDIVIDUAL MANAGERS

¶ 11 Having concluded that Utah law applies, we now turn to the language of the UPWA to determine whether it imposes individual liability on Nuriche's managers for unpaid wages. To ensure that employees who are discharged receive unpaid wages, the UPWA imposes civil and criminal penalties when employers fail to fulfill their wage obligations. The UPWA provides that an “employer shall pay [unpaid] wages to [an] employee within 24 hours of the time of separation.” Utah Code § 34–28–5(1)(a) (emphasis added). And “[a]ny employer who shall violate, or fail to comply with any of the provisions of this chapter shall be guilty of a misdemeanor.” Id. § 34–28–12(1). In short, the UPWA renders employers both civilly and criminally liable for unpaid wages.

¶ 12 Because the UPWA imposes liability for unpaid wages on employers, we must determine whether Managers qualify as employers. Under the UPWA, the term employer

includes every person, firm, partnership, association, corporation, receiver or other officer of a court of this state, and any agent or officer of any of the above-mentioned classes, employing any person in this state.

Id. § 34–28–2(1)(c) (emphasis added). Employees argue that Managers, as agents or officers of Nuriche, are employers under the statute and as such are personally liable for unpaid wages. But Managers argue that they do not qualify as employers under the plain language of the statute. They further argue that Employees' proposed construction of the statute conflicts with other provisions of Utah law that limit the liability of LLC and corporate officers. We agree with Managers.

¶ 13 “When interpreting statutes, our primary goal is to evince the true intent and purpose of the Legislature.” State v. Watkins, 2013 UT 28, ¶ 18, 309 P.3d 209 (internal quotation marks omitted). The best available evidence of the Legislature's intent is the statute's plain language. Marion Energy, Inc. v. KFJ Ranch P'ship, 2011 UT 50, ¶ 14, 267 P.3d 863.

¶ 14 The statutory definition of employer includes “every person, firm, partnership, association, corporation, receiver or other officer of a court of this state, and any agent or officer of any of the above-mentioned classes, employing any person in this state. ” Utah Code § 34–28–2(1)(c) (emphasis added). While the phrase “agent or officer of any of the above-mentioned classes” encompasses a large group of individuals, that phrase is narrowed by the last clause of the definition. The last clause—“employing any person in this state”—modifies each of the terms in the preceding list. Thus, the statute limits the definition of employer to one who employs. We must therefore determine the identity of Employees' employer under the facts of this case.

¶ 15 In this case, Employees concede they were employed by Nuriche, not by Managers in their individual capacities. Although, Managers may have exercised supervisory power over Employees, any supervisory power arose from their positions as officers and agents of Nuriche—not as direct employers. Because Managers did not personally employ Employees, they are not personally liable for unpaid wages under the statute.

¶ 16 This...