USS-POSCO Indus. v. Case

Citation244 Cal.App.4th 197,197 Cal.Rptr.3d 791
Decision Date26 January 2016
Docket NumberA142145,A140457
CourtCalifornia Court of Appeals
Parties USS–POSCO INDUSTRIES, Plaintiff, Cross–Defendant, and Respondent, v. Floyd CASE, Defendant, Cross–complainant, and Appellant. USS–POSCO Industries, Plaintiff and Respondent, v. Floyd Case, Defendant and Appellant.

Greenan, Peffer, Sallander & Lally, Robert L. Sallander, Jr., Kyle G. Kunst ; Cory Stephen Anderson for Respondent.

The Law Offices of Jon Webster, Jon Paul Webster and James A. Arcellana for Appellant.

Banke, J.


Defendant and appellant Floyd Case voluntarily enrolled in a three-year, employer-sponsored educational program. He agreed in writing that if he quit his job within 30 months of completing the program, he would reimburse his employer, USS–POSCO Industries (UPI), a prorated portion of program costs. Two months after completing the program, Case went to work for another employer. When he refused to reimburse UPI, the company sued for breach of contract and unjust enrichment. Case cross-complained, asserting the reimbursement agreement was unenforceable and UPI had violated the Labor Code and other statutory provisions in seeking reimbursement.

The trial court granted UPI's motion for summary judgment on both its complaint and Case's cross-complaint, and subsequently granted UPI's motion for attorney fees for defeating Case's wage claims. In granting the fee motion, the court applied the version of Labor Code section 218.5 in effect at the time of the summary judgment proceedings, rather than the version in effect at the time it awarded fees, which permits fees to a prevailing employer only when the employee's wage claims have been brought in "bad faith."

We affirm the summary judgment, but reverse and remand the attorney fees award. Under California Supreme Court precedent, statutory provisions that alter the recovery of attorney fees are deemed procedural in nature and apply to pending litigation.

A. Case's Participation in UPI's Training Program

UPI hired Case in 2007. He initially worked as an entry-level Laborer and Side Trim Operator. As a condition of employment, Case joined Local 1440 of the United Steelworkers of America.

UPI faced a shortage of skilled Maintenance Technical Electrical (MTE) workers. To address this, UPI, after consultation with Local 1440, decided to implement a Learner Program. Thus, in June 2008, the company and Local 1440 entered into a Memorandum of Understanding (MOU) stating UPI would train up to 10 current employees, while continuing to pay their wages and benefits, in an effort to qualify them as MTEs. UPI and the union recognized "that, due to the strong demand for Maintenance Technician Electrical, the Company needs to retain successful candidates as employees for a reasonable period of time in order to recoup its substantial $46,000 investment in their training." UPI and the union therefore agreed UPI "may require candidates in the Learner Program to sign the attached Reimbursement Agreement that would require reimbursement for a portion of the training should a candidate voluntarily terminate employment within 30 months of completion of the Learner Program."

The Learner Program required 135 weeks of instruction, 90 weeks of on the job training and 45 weeks of classroom work (partially courses at a local community college, partially other courses). The goal was to complete training within 162 weeks, or just over three years. If a participant successfully completed the program and then passed UPI's MTE test, he or she would be assigned to an MTE vacancy.

The MTE position and Learner Program aligned with Case's desire to work as an engineer. Case understood joining the Learner Program was voluntary. He also understood he did not need to go through the Learner Program or a similar formal educational program to obtain an MTE position. When asked if "going to the MTE learner program [was] the only avenue ... available to you to become an MTE," Case answered, "No." A prospect could simply take and pass UPI's MTE test. However, Case did not attempt the test prior to participating in the Learner Program because he did not think he had the knowledge to pass. He was also unsure if he would pass if he undertook a self-study program. In any case, the Learner Program allowed him to get trained during the workday instead of after hours, and it would lead to higher pay. Accordingly, he applied for the program and was one of nine selected participants.

Case was informed of the reimbursement obligation during a training session for prospective participants. A presentation slide entitled "Repayment Agreement" told prospects they would "sign an agreement to reimburse a portion of their training cost should they voluntarily terminate employment within 30 months of program completion." The slide, consistent with the MOU, indicated the obligation would be "$46,000 prorated over 30 months."

Case was subsequently presented with a written reimbursement agreement and signed it without objection. Under that one-page agreement, Case acknowledged UPI would pay his "wages, benefits and training expenses" while he was in the Learner Program, but there would be no guarantee participation in the program would insure promotion, transfer, or continued employment with UPI. He further agreed that if he was fired for cause or voluntarily left UPI within 30 months after completing the program, he would, absent a compelling hardship such as a serious injury or family death, refund $30,000 of the expense of his training, less $1,000 per month of subsequent service at UPI.1

Two months after completing the Learner Program and obtaining an MTE position, Case left UPI for Lawrence Livermore National Laboratory to work as a high voltage electrician.

B. The Lawsuit

When Case refused to reimburse UPI, the company filed the instant lawsuit alleging breach of contract and unjust enrichment. UPI sought damages of $28,000—that is, $1,000 per month that remained in Case's 30–month earn-back period.

Case, in turn, filed a cross-complaint on behalf of himself and an asserted class of individuals who signed the same training reimbursement agreement. The first cause of action, for declaratory relief, alleged the agreement was unlawful because: (a) it violated Labor Code 2 sections 221, 222, and 223 (regarding wages), 401–410 (governing bonds), 450 (governing employee expenditures), 3751 (regarding provision of workmens' compensation insurance), and 2802, subd. (a) (regarding employer payment of costs of business operations); (b) it violated the Federal Fair Labor Standards Act's "free and clear" payment requirement and its requirement that an employer negotiate with an employee's union; (c) it violated Business and Professions Code section 16600 (governing restraints on the right to practice a profession); and (d) it lacked consideration. The second cause of action alleged the agreement was an unfair business practice under Business and Professions Code section 17200. The third through eighth causes of action alleged direct violations of various Labor Code provisions raised in the first cause of action, namely sections 221, 222, 223, 400 –410, 2802, and 432.5. The prayer sought a declaration that the reimbursement agreement was invalid, disgorgement of any payments made by employees under the agreement, civil penalties under the Labor Code Private Attorney General Act (PAGA; § 2699), and attorney fees and costs.

UPI subsequently moved for summary judgment on its complaint and Case's cross-complaint, asserting the reimbursement agreement was valid and not unlawful under any theory Case raised in his cross-complaint.

The trial court granted UPI's motion, and the parties thereafter stipulated to a judgment in favor of UPI in the amount of $28,000 plus prejudgment interest and costs.3

On December 5, 2013, pursuant to section 218.5, UPI moved for $166,798.50 in attorney fees for successfully defending against three of the Labor Code claims asserted in Case's cross-complaint (for alleged violations of §§ 221, 222 & 223 ). In justifying the amount sought, UPI claimed it had litigated the case aggressively in part because of the class action allegations and potential civil penalties under various code provisions, including PAGA (assuming Case could have satisfied the requirements of that statute).

Case opposed the motion. He first maintained section 218.5, as amended effective January 1, 2014, authorizes fees to an employer only if the employee's suit is brought in bad faith and he had not asserted his cross-claims in bad faith. He second argued UPI's claimed fees were excessive, the wage claims added no real work for UPI's counsel, and PAGA's one-way fee shifting statute (which favors only prevailing employees) did not support any fee award to UPI.

Applying the pre–2014 version of section 218.5, the trial court granted UPI's fee motion, but cut the requested amount in half, awarding $80,000.

A. Summary Judgment

" 'On appeal after a motion for summary judgment has been granted, we review the record de novo,' " considering all the admissible evidence submitted in support and opposition. (Horne v. District Council 16 International Union of Painters & Allied Trades (2015) 234 Cal.App.4th 524, 534, 183 Cal.Rptr.3d 879.) "A motion for summary judgment is properly granted 'if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' (Code Civ. Proc., § 437c, subd. (c).)" (Ibid. )

1. Labor Code Sections 2802, 2804 and 450

Invoking Labor Code sections 2802, 2804 and 450, which prevent employers from passing certain operating expenses on to employees, Case contends the reimbursement agreement is an unlawful attempt to foist workforce costs onto employees. None of these statutes, however, is implicated by a strictly voluntary, optional training program of the sort UPI offered...

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