On-Line Power, Inc. v. Mazur

• Decision Date: 17 April 2007
• Docket Number: No. B189251.,B189251.
• Citation: 149 Cal.App.4th 1079,57 Cal.Rptr.3d 698
• Court: California Court of Appeals Court of Appeals
• Parties: ON-LINE POWER, INC., Plaintiff and Respondent, v. David MAZUR, Defendant and Appellant.

57 Cal.Rptr.3d 698

149 Cal.App.4th 1079

ON-LINE POWER, INC., Plaintiff and Respondent, v. David MAZUR, Defendant and Appellant.

No. B189251.

Court of Appeal, Second District, Division 8.

April 17, 2007.

Law Offices of Faryan A. Afifi and Faryan Andrew Afifi, Los Angeles, for Plaintiff and Respondent.

Henry J. Josefsberg, Long Beach, for Defendant and Appellant.

RUBIN, J.

Cross-complainant David Mazur appeals from an order denying his motion for attorney's fees after settling his action for unpaid wages pursuant to a statutory offer of compromise. (Code Civ. Proa, § 998.) Because the trial court erred in ruling that the Labor Code provisions ensuring an employee's right to payment of wages did not apply to salaried corporate executives, we reverse and remand for further proceedings.

FACTS AND PROCEDURAL HISTORY

David Mazur sued his former employer, On-Line Power, Inc. (OLP), for unpaid wages.¹ Mazur alleged he was OLP's vice president of sales and marketing, and, under a written employment contract, was owed an annual salary of $180,000, to be paid in weekly installments. According to Mazur, OLP paid him less than that for some period of time. Evidence produced by OLP showed that Mazur later renegotiated his agreement to require OLP to pay $80,000 of that amount as consulting fees to a separate business owned by Mazur. Mazur's cross-complaint included causes of action for: breach of his written employment contract, which did not contain an attorney's fee provision; unpaid wages and penalties for violations of various Labor Code sections, along with attorney's fees pursuant to Labor Code section 218.5; conversion; and unfair business practices.

On August' 2, 2005, OLP mailed to Mazur a statutory offer to compromise under Code of Civil Procedure section 998 (§ 998). The offer said OLP "offers to settle and compromise [Mazur's cross-complaint] for a total payment of [$25,000] by OLP to MAZUR as full and complete resolution of all of the claims raised by the Cross-Complaint to be dismissed with prejudice. [¶] Acceptance of this offer requires that MAZUR notify OLP's counsel of record herein in writing of its acceptance prior to the commencement of trial or within 30 days of this offer, whichever occurs first."

On the trial date of August 29, 2005, counsel for the parties notified the court that Mazur had accepted OLP's section 998 offer, but had yet to do so in writing. Because the section 998 offer said nothing about costs or attorney's fees, the trial court asked the parties whether they had reached agreement on that point. Because case law held that the absence of such language in a section 998 offer meant the prevailing party could seek those fees and costs, Mazur's lawyer said that he would do so. OLP's lawyer said that his client had intended to obtain a full resolution of all claims, including attorney's fees and costs, and did not intend to let Mazur seek recovery of those items. OLP's lawyer also said that the section 998 offer was not yet effective because Mazur had not accepted in writing, as required by the offer's terms. The trial court ruled that Mazur's on-the-record acceptance was sufficient.² The court also agreed with Mazur's lawyer that the offer's silence regarding fees and costs allowed Mazur to bring a motion for their recovery.

Mazur then brought a motion to enforce the section 998 offer, have judgment entered, and recover his attorney's fees pursuant to Labor Code section 218.5, along with his costs. OLP opposed the motion, on several grounds. Those relevant to the issues raised on appeal were: (1) Mazur was not a prevailing party because a dismissal with prejudice was to be entered in OLP's favor;³ and (2) decisions holding that a section 998 offer's silence about attorney's fees and costs permitted the prevailing party to seek their recovery applied to only those section 998 offers that called for entry of judgment, not a dismissal with prejudice. On October 20, 2005, the trial court issued a minute order finding that Mazur was entitled to seek his costs because the section 998 offer was silent on that point. However, the court found that Mazur was not entitled to recover his attorney's fees under Labor Code section 218.5 because that section was designed to protect workers who received an hourly wage, not those who were compensated by salary pursuant to a written employment contract. Mazur has appealed the order denying his request for attorney's fees.⁴

DISCUSSION

1. Mazur Was Entitled to Seek Attorney's Fees

Under section 998, a party to a civil action may serve upon any other party an offer to "allow judgment to be taken or an award to be entered in accordance with the terms and conditions stated at that time." (§ 998, subd. (b).) "If the offer is accepted, the offer with proof of acceptance shall be filed and the clerk or the judge shall enter judgment accordingly." (§ 998, subd. (b)(1).) If a plaintiff does not accept the offer and fails to obtain a more favorable judgment at trial, then the plaintiff is liable for the offering party's attorney and expert witness fees. (§ 998, subd. (c)(1).)

OLP contends Mazur was not entitled to recover his attorney's fees because its section 998 offer called for the complete resolution of all of Mazur's claims and should therefore be read under general contract principles to exclude such fees. However, when a section 998 offer is silent about attorney's fees and costs, it cannot reasonably be interpreted to exclude their recovery and the prevailing party may seek them. (Ritzenthaler v. Fireside Thrift Co. (2001) 93 Cal.App.4th 986, 990-991, 113 Cal.Rptr.2d 579 [attorneys fees may be recoverable following accepted section 998 offer that called for judgment against the defendant and payment by the defendant of certain sums, "in final settlement of all damages and injunctive claims ... arising out of or related to the allegations in this action"]; Lanyi v. Goldblum (1986) 177 Cal.App.3d 181, 192-193, 223 Cal.Rptr. 32; Rappenecker v. Sea-Land Service, Inc. (1979) 93 Cal.App.3d 256, 155 Cal.Rptr. 516; see Wilson v. Wal-Mart Stores, Inc. (1999) 72 Cal.App.4th 382, 387, 85 Cal. Rptr.2d 4 [parties could have provided that section 998 offer excluded attorney's fees by stating that each party would bear its own fees].)

OLP contends that these decisions are not applicable because they involved section 998 offers that called for entry of judgment, not dismissal with prejudice, and that OLP's dismissal from the action made it the prevailing party. Several courts have held that a section 998 offer calling for a dismissal with prejudice instead of entry of judgment is valid and enforceable. (Berg v. Darden (2004) 120 Cal.App.4th 721, 15 Cal.Rptr.3d 829 (Berg); American Airlines, Inc. v. Sheppard, Mullin, Richter & Hampton (2002) 96 Cal.App.4th 1017, 117 Cal.Rptr.2d 685 (American Airlines); Goodstein v. Bank of San Pedro (1994) 27 Cal.App.4th 899, 32 Cal.Rptr.2d 740 (Goodstein).) The rationale of these decisions was that a dismissal with prejudice is tantamount to a judgment and a final disposition of the case, and was therefore in accord with section 998. (Berg, supra, at pp. 731-732, 15 Cal. Rptr.3d 829; American Airlines, supra, at pp. 1055-1056, 117 Cal.Rptr.2d 685; Goodstein, supra, at pp. 905-906, 32 Cal. Rptr.2d 740.) We recognize that the context of those decisions is different—they involved attempts to make a party who rejected a section 998 offer pay the other side's attorney's fees and costs when the offering party did better at trial than the 998 offer provided. On appeal, the issue concerned whether a valid section 998 offer existed when the offer called for a dismissal with prejudice, not a judgment. We see the context as a distinction without legal significance. Because a dismissal with prejudice is equivalent to a judgment for purposes of making a section 998 offer valid and enforceable, and because the parties have essentially conceded the validity and enforceability of OLP's 998 offer (see footnote 2, ante), we see no reason to interpret OLP's offer any differently than if OLP had agreed to the entry of a more formal judgment, rather than a dismissal with prejudice.⁵

2. The Trial Court Erred by Holding That Labor Code Section 218.5 Does Not Apply to Salaried Executive Employees

The Labor Code contains several provisions designed to ensure that employees receive their full wages at specified intervals while employed, as well as when they are fired or quit. (Labor Code, §§ 201-204.) The employee shall be awarded reasonable attorney's fees and costs to the prevailing party in an action for nonpayment of wages if those items were requested when the action was initiated. (Labor Code, § 218.5.) The trial court ruled that these protections were not applicable to Mazur because he was not an hourly employee, and that his claims were really for breach of his employment contract. We disagree.⁶

Under well accepted rules, we determine this matter of statutory construction as an issue of law subject to our de novo review. Our primary purpose is to determine the intent of the Legislature, and if the words of a statute are unambiguous, there is no need for construction. The meaning of a statute may not be determined from a single word or sentence. Instead, the words must be construed in context, and provisions relating to the same subject matter must be harmonized to the extent possible. Each sentence must be read in light of the statutory scheme. (People ex rel. Allstate Ins. Co. v. Weitzman (2003) 107 Cal.App.4th 534, 544-545,132 Cal.Rptr.2d 165.)

Labor Code section 200, subdivision (a) defines wages as "all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation." (Italics added.) Labor Code sections 201 through 202 call for the payment of wages upon termination or resignation of employees working in...