McDaniel v. West Virginia Div. of Labor

• Decision Date: 04 December 2003
• Docket Number: No. 31272, No. 31273.
• Citation: 591 S.E.2d 277,214 W.Va. 719
• Parties: Larry McDANIEL, Petitioner Below, Appellee, v. WEST VIRGINIA DIVISION OF LABOR, Respondent Below, Appellant. L. Dean Schwartz and Michael Johnston, Petitioners Below, Appellees, v. West Virginia Division of Labor, Respondent Below, Appellant.
• Court: West Virginia Supreme Court

591 S.E.2d 277

214 W.Va. 719

Larry McDANIEL, Petitioner Below, Appellee, v. WEST VIRGINIA DIVISION OF LABOR, Respondent Below, Appellant.

L. Dean Schwartz and Michael Johnston, Petitioners Below, Appellees, v. West Virginia Division of Labor, Respondent Below, Appellant.

Nos. 31272, 31273.

Supreme Court of Appeals of West Virginia.

Submitted October 8, 2003.

Decided December 4, 2003.

Concurring Opinion of Justice Albright December 8, 2003.

Darrell V. McGraw, Jr., Esq., Attorney General, Katherine A. Campbell, Esq., Assistant Attorney General, Shirley Skaggs, Esq., Assistant Attorney General, Charleston, for the Appellant, West Virginia Division of Labor.

George J. Cosenza, Esq., Cosenza, Merriman & Wolf, PLLC, Parkersburg, for the Appellee, Larry McDaniel.

Joseph M. Brown, Esq., Parkersburg, for the Appellees, L. Dean Schwartz and Michael Johnston. DAVIS, Justice.

The appellant herein, and respondent below, the West Virginia Division of Labor [hereinafter referred to as "the Division" or "Division of Labor"], appeals from two orders entered by the Circuit Court of Wood County. In Case Number 31272, the Division appeals from the circuit court's July 10, 2002, order finding that the appellee herein, and petitioner below, Larry McDaniel [hereinafter referred to as "Mr. McDaniel"], was not a director or officer of MCDI and therefore was not liable to MCDI's former employees under the West Virginia Wage Payment and Collection Act, W. Va.Code § 21-5-1, et seq. In Case Number 31273, the Division appeals from the circuit court's July 10, 2002, order ruling that (1) the appellees herein, and petitioners below, L. Dean Schwartz [hereinafter referred to as "Mr. Schwartz"] and Michael Johnston [hereinafter referred to as "Mr. Johnston"], were officers of MCDI and, thus, liable to MCDI's former employees, but that (2) the hearing examiner lacked the authority to award damages occasioned by their actions.

By order entered October 8, 2003, the Court consolidated these cases "for purposes of consideration and decision." Upon a review of the arguments of the parties, the appellate record, and the pertinent authorities, we affirm the circuit court's rulings in both Case Number 31272 and Case Number 31273.

I.

FACTUAL AND PROCEDURAL HISTORY

The instant appeals originated in January, 2001, when three former employees¹ of MCDI² requested the appellant herein, the West Virginia Division of Labor, to conduct a wage and payment collection investigation³ for wages and reimbursable business expenses to which they claimed to be entitled following MCDI's cessation of business on December 19, 2000.⁴ The appellees herein were all upper level employees of MCDI: appellee Larry McDaniel served on MCDI's board of directors, as president of McDaniel, Inc., and was a shareholder in McDaniel, Inc.; appellee L. Dean Schwartz was MCDI's senior vice-president and charged with overseeing the company's general operations; and Michael Johnston supervised residential appraisers at both MCDI and McDaniel, Inc. and served on MCDI's board of directors.⁵ Following the Division's preliminary investigation, it was determined that MCDI owed its former employees approximately $27,510.68 for unpaid wages from November 9, 2000, through December 19, 2000, and approximately $14,229.19 in reimbursable business expenses for this same time period. Additionally, MCDI was found to be liable for another $47,721.16 in liquidated damages⁶ resulting from its nonpayment of said wages.

In accordance with its administrative procedure in such matters, the Division contacted MCDI and requested payment of these sums on behalf of the former employees. MCDI responded by requesting a meeting with the Division to dispute the amount of compensation it allegedly owed. Because no resolution was reached during the parties' March 7, 2001, meeting, the matter was scheduled for an administrative hearing before the West Virginia Division of Labor. Following hearings on the matter, the Division's hearing examiner, by recommended order entered March 22, 2002, determined that

McDaniel, Inc. individually and doing business as MCDI is liable to its employees for the wages, expenses and the liquidated damages claimed.

According to Syllabus Point 1[,] [i]n Mullins v. Venable, , 297 S.E.2d 866 ([W].Va.1982):

An officer in the management of a corporation who knowingly permits the corporation to violate the provisions of the Wage Payment and Collection Act, W. Va.Code §§ 21-5-1 through 21-5-16 (1981 Replacement Vol.), may be held personally liable for unpaid wages, fringe benefits, and liquidated damages under W. Va.Code § 21-5-4.

By the testimony and documents submitted in this hearing it is also clear that Larry M. McDaniel, L. Dean Schwartz, and Michael R. Johnston are responsible for the wages, expenses and liquidated damages not paid.

The hearing examiner then held that

the Division's finding that the back wages due to the claimants in the total amount of $27,510.68, plus expenses in the amount of $14,229.19 plus liquidated damages in the amount of $47,721.16 is AFFIRMED and that the respondent McDaniel, Inc. d/b/a MCDI and the responsible individuals Larry M. McDaniel, L. Dean Schwartz, and Michael R. Johnston are found to be jointly and severally liable for payment of the said wages and damages and are hereby ORDERED to pay the same to the Division within 30 days of entry of this Order by the Commissioner.

Following this adverse decision, the appellees herein, McDaniel, Schwartz, and Johnston, appealed to the circuit court pursuant to W. Va.Code § 29A-5-4 (1998) (Repl.Vol.2002).⁷

By order entered July 10, 2002, the circuit court ruled, as to Mr. McDaniel, that

it is the opinion of the court that the findings concerning Larry McDaniel are clearly wrong in view of the reliable and probative evidence on the whole record and the commissioner's order is, therefore, Reversed. There is no probative evidence that he was and remained a director or officer of the corporation at the time in question[ ] nor that he "knowingly permitted" the violation of the statute.

In a separate order, also entered July 10, 2002, the circuit court ruled, as to Mr. Schwartz and Mr. Johnston, that

It appears that there is authority for the administrative agency to hold hearings and investigate matters in order to determine whether any person has violated any provision of the Wage Payment and Collection Act. In furtherance thereof the agency has power to subpoena and examine witnesses under oath. W. Va.Code, § 21-5-11 (Michie 1996); [W. Va.Code §§] 29A-5-1 through 3 (Michie 1998).

However, although such administrative remedies must be exhausted before actions in court are instituted, such agencies are not authorized to award damages. There is nothing in the legislation to such effect. See Bank of Wheeling v. Morris Plan Bank[ & Trust Co.], 155 W.Va. 245, 183 S.E.2d 692 (1971).

The findings of the commissioner with respect to Dean Schwartz and Michael J. Johnston appear to be supported by the evidence on the record and the commissioner's order is, therefore, Affirmed, except to the extent that it purports to award damages, to which extent it is hereby Reversed.

From these decisions, the Division appeals to this Court.

II.

STANDARD OF REVIEW

On appeal to this Court, the Division contests the circuit court's review of the hearing examiner's decision. Pursuant to the West Virginia Administrative Procedures Act, a reviewing circuit court

may affirm the order or decision of the agency or remand the case for further proceedings. It shall reverse, vacate or modify the order or decision of the agency if the substantial rights of the petitioner or petitioners have been prejudiced because the administrative findings, inferences, conclusions, decision or order are:

(1) In violation of constitutional or statutory provisions; or

(2) In excess of the statutory authority or jurisdiction of the agency; or

(3) Made upon unlawful procedures; or

(4) Affected by other error of law; or

(5) Clearly wrong in view of the reliable, probative and substantial evidence on the whole record; or

(6) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

W. Va.Code § 29A-5-4(g) (1998) (Repl.Vol.2002). Accord Syl. pt. 1, St. Mary's Hosp. v. State Health Planning & Dev. Agency, 178 W.Va. 792, 364 S.E.2d 805 (1987); Syl. pt. 2, Shepherdstown Volunteer Fire Dept. v. State ex rel. State Human Rights Comm'n, 172 W.Va. 627, 309 S.E.2d 342 (1983).

Thereafter,

[o]n appeal of an administrative order from a circuit court, this Court is bound by the statutory standards contained in W. Va.Code § 29A-5-4(a) and reviews questions of law presented de novo; findings of fact by the administrative officer are accorded deference unless the reviewing court believes the findings to be clearly wrong.

Syl. pt. 1, Muscatell v. Cline, 196 W.Va. 588, 474 S.E.2d 518 (1996). Accord Syl. pt. 2, Walker v. West Virginia Ethics Comm'n, 201 W.Va. 108, 492 S.E.2d 167 (1997). See also Syl. pt. 1, Wheeling-Pittsburgh Steel Corp. v. Rowing, 205 W.Va. 286, 517 S.E.2d 763 (1999) ("Under the West Virginia Administrative Procedures Act, W. Va.Code ch. 29A, appellate review of a circuit court's affirmance of agency action is de novo, with any factual findings made by the lower court in connection with alleged procedural defects being reviewed under a clearly erroneous standard.").

Mindful of these standards, we proceed to consider the parties' arguments.

III.

DISCUSSION

The parties to the instant proceedings have presented various issues for our deliberation and determination. We will consider each of these assignments of error in conjunction with the appeal to which it relates.⁸

A. Case Number 31272: Mr. McDaniel

In its appeal of this case, the Division assigns error to the circuit court's ruling finding that Mr. McDaniel was not a director or officer of MCDI and, thus, that he was not liable to MCDI's...