Wash. Trucking Ass'ns v. State

Decision Date09 February 2016
Docket NumberNo. 47681–9–II.,47681–9–II.
Parties WASHINGTON TRUCKING ASSOCIATIONS, a Washington nonprofit corporation; Eagle Systems, Inc., a Washington corporation, Gordon Trucking, Inc., a Washington corporation; Haney Truck Line, Inc., a Washington corporation; Jasper Trucking, Inc., a Washington corporation; PSFL Leasing, Inc., a Washington corporation; and System–TWT Transportation d/b/a System–TWT, a Washington limited liability company, Appellants, v. The STATE of Washington, Employment Security Department; Paul Trause, individually and in his official capacity as the former Commissioner of the Employment Security Department, and Jane Doe Trause, husband and wife and the marital community composed thereof; Bill Ward, individually and in his official capacity, and Jane Doe Ward, husband and wife and the marital community composed thereof; Lael Byington, individually and in his official capacity, and Jane Doe Byington, husband and wife and the marital community composed thereof; Joy Stewart, a single individual, individually and in her official capacity; Melissa Hartung, a single individual, individually and in her official capacity; Alicia Swangwan, a single individual, individually and in her official capacity; Respondents.
CourtWashington Court of Appeals

192 Wash.App. 621
369 P.3d 170

WASHINGTON TRUCKING ASSOCIATIONS, a Washington nonprofit corporation; Eagle Systems, Inc., a Washington corporation, Gordon Trucking, Inc., a Washington corporation; Haney Truck Line, Inc., a Washington corporation; Jasper Trucking, Inc., a Washington corporation; PSFL Leasing, Inc., a Washington corporation; and System–TWT Transportation d/b/a System–TWT, a Washington limited liability company, Appellants,
v.
The STATE of Washington, Employment Security Department; Paul Trause, individually and in his official capacity as the former Commissioner of the Employment Security Department, and Jane Doe Trause, husband and wife and the marital community composed thereof; Bill Ward, individually and in his official capacity, and Jane Doe Ward, husband and wife and the marital community composed thereof; Lael Byington, individually and in his official capacity, and Jane Doe Byington, husband and wife and the marital community composed thereof; Joy Stewart, a single individual, individually and in her official capacity; Melissa Hartung, a single individual, individually and in her official capacity; Alicia Swangwan, a single individual, individually and in her official capacity; Respondents.

No. 47681–9–II.

Court of Appeals of Washington, Division 2.

Feb. 9, 2016.


369 P.3d 174

Philip Albert Talmadge, Thomas M. Fitzpatrick, Talmadge/ Fitzpatrick/Tribe, Aaron Paul Riensche, Ogden Murphy Wallace PLLC, Seattle, WA, for Appellants.

Eric Daniel Peterson, Attorney at Law, Dionne Maren Padilla–Huddleston, Office of the Attorney General, Seattle, WA, for Respondents.

MAXA, J.

¶ 1 The Washington Trucking Association (WTA) and six Washington based trucking carriers (the Carriers) appeal the trial court's dismissal under CR 12(b)(6) or CR 12(c) of their lawsuit against the Washington Employment Security Department (ESD) and various ESD employees. The lawsuit arose from a series of audits of the Carriers (and other WTA members) that ESD conducted, after which ESD determined that "owner/operators" of trucking equipment leased by the Carriers were the Carriers' employees. This determination resulted in additional unemployment tax assessments. WTA and the Carriers allege that ESD targeted the trucking

369 P.3d 175

industry and conducted rigged audits in which ESD required the auditors find an employment relationship and liability for unemployment taxes. WTA and the Carriers asserted claims (1) against ESD employees under 42 U.S.C. § 1983 for violation of the Carriers' due process and other constitutional rights based on the failure to properly conduct the audits; and (2) against ESD for tortious interference with the Carriers' contracts and business expectancies based on ESD's decision to classify owner/operators as employees.1

¶ 2 We hold that (1) WTA does not have individual standing to assert § 1983 or tortious interference claims and does not have associational standing to assert tortious interference claims, but whether WTA has associational standing to assert a § 1983 claim cannot be determined based on the complaint allegations; (2) WTA's and the Carriers' § 1983 claim is barred by the principle of comity to the extent that they seek damages in the amount of the tax assessments, but not to the extent that they seek damages unrelated to the assessment amounts; (3) RCW 50.32.180 and the doctrine of exhaustion of administrative remedies bar the Carriers' claim of tortious interference with a contract or business expectancy to the extent that claim is based on an allegation that the reclassification of owner/operators as employees was incorrect, but not to the extent that the claim is based on allegations that ESD had an improper motive or used improper means in making that reclassification; and (4) the Carriers' complaint allegations were sufficient to state a claim for tortious interference with a contract or business expectancy.

¶ 3 Accordingly, we affirm in part and reverse in part, and remand to the trial court for proceedings consistent with this opinion.

FACTS

The Parties

¶ 4 WTA is a trade association that seeks to protect and promote the interests of the Washington trucking industry. WTA's mission is to promote a favorable and profitable operating environment for the industry's members, which includes protecting the industry's use of owner/operators and ensuring that members are taxed only as allowed by Washington law.

¶ 5 The six plaintiff trucking carriers are Eagle Systems, Inc.; Gordon Trucking, Inc.; Haney Truck Line, Inc.; Jasper Trucking, Inc.; PSFL Leasing, Inc.; and System–TWT Transport. All of the Carriers have been assessed state unemployment taxes based on their lease contracts with owner/operators of trucking equipment. The Carriers are members of WTA.

¶ 6 ESD is a state agency that administers Washington's unemployment compensation system under the authority granted to its commissioner by the Employment Security Act (ESA), Title 50 RCW. ESD employees named as defendants are (1) Paul Trause, former commissioner; (2) Bill Ward, director of unemployment insurance audits and collections; (3) Lael Byington, former manager of the tax investigations and specialized collections unit; (4) Joy Stewart, auditor; (5) Melissa Hartung, auditor; and (6) Alicia Swangwan, auditor.

Carriers and Owner/Operators

¶ 7 The Carriers are for-hire general freight carriers that operate in a number of states. The Carriers meet fluctuating demand for their services by contracting with owner/operators to lease trucking equipment from them on an as-needed basis.

¶ 8 Owner/operators own their own trucking equipment (the truck tractor and sometimes also the trailer). General freight carriers contract with the owner/operator to lease their trucking equipment. The contracts also include truck operating services, which can be provided either by the owner/operator personally or by employees hired by the owner/operator. Federal regulations dictate many terms of these contracts.

369 P.3d 176

Procedural History

¶ 9 In 2010, ESD audited and assessed additional unemployment taxes on three of the Carriers: Gordon Trucking, Haney Truck Line, and System–TWT Transport. Each carrier timely appealed to the Office of Administrative Hearings pursuant to RCW 50.32.030. The appeals were assigned to an administrative law judge (ALJ).

¶ 10 The three carriers filed a consolidated motion for summary judgment before the ALJ. They argued for dismissal of the ESD tax assessments on various grounds, including federal preemption and the violation of auditing standards. In March 2011, the ALJ denied the motion for summary judgment, finding that there were genuine disputes of material fact regarding the relationships between carriers and owner/operators and the conduct of the auditors.

¶ 11 The ALJ then remanded System–TWT Transport's assessment to ESD for reconsideration and new audits. The order instructed ESD to review whether owner/operators who contracted with the carrier were "in employment" under RCW 50.04.100, if so whether the services the owner/operators provided actually took place in Washington, and whether the assessment was properly limited to services provided and not equipment. The ALJ's remand order also instructed the parties to engage in settlement negotiations after the new audits were performed. The ALJ remanded the assessments of Eagle Systems, Gordon Trucking, Haney Truck Line, Jasper Trucking, and PSFL Leasing under the same terms as the System–TWT Transport remand.

Alleged Settlement Agreement

¶ 12 After the ALJ's remand order, the Carriers and ESD engaged in settlement negotiations. The Carriers believed a settlement had been reached, but ESD disagreed.

¶ 13 In 2013 the Carriers obtained an ex parte show cause order from the Pierce County Superior Court directing ESD to show cause why the court should not enforce the settlement agreement. After a show cause hearing, the superior court concluded that a settlement had been reached and entered an order enforcing the agreement. The terms of the settlement included that the appeals be dismissed from the administrative hearing and that "[n]o further exhaustion of administrative remedies shall be required in order to permit the judicial appeals by the respective Carriers." Clerk's Papers (CP) at 341.

¶ 14 ESD appealed the superior court's order enforcing the settlement agreement. This court reversed the order, holding that the superior court lacked personal jurisdiction because the show cause procedure was inappropriate to start an action. Eagle Sys., Inc. v. State Emp't Sec. Dept., 181 Wash.App. 455, 457, 326 P.3d 764 (2014). This court did not address whether or not a valid settlement agreement had been reached. Id. at 461, 326 P.3d 764.

Damages Lawsuit against ESD

¶ 15 In May 2013, WTA and the Carriers filed suit against ESD and certain named ESD employees. In February 2014, WTA and the Carriers filed a second amended complaint. WTA's and the Carriers' allegations in that complaint are summarized as follows:

1. Pursuant to the ESD commissioner's authority under RCW 50.12.010, ESD
...

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    ...are invalid if they result from audits that violate [the Department's] own standards." Br. of Appellant System at 46 (citing 192 Wash.App. 621, 647, 369 P.3d 170 (2016), rev'd , 188 Wash.2d 198, 393 P.3d 761 (2017), cert. denied , No. 17-145, –––U.S. ––––, ––– S.Ct. ––––, ––– L.Ed.2d ––––, ......
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