Doustkam v. Sage

HOFFSTADT, J.

NOT TO BE PUBLISHED

APPEAL from a judgment and orders of the Superior Court of Los Angeles County, No. 19SMCV00394 Helen Zukin, Judge. Affirmed.

Azadegan Law Group, Ramin Azadegan, Michael Yellin; and Joseph S. Socher for Plaintiff and Appellant.

De Castro, West, Chodorow, Mendler &Glickfeld and Mark L. Share for Defendants and Respondents.

HOFFSTADT, J.

An independent contractor hired to solicit clients for a company sued the company for its alleged failure to pay unpaid commissions. The trial court granted summary adjudication to the company after finding no evidence to support some of the contractor's claims. After the contractor voluntarily dismissed her remaining Labor Code claims, the trial court awarded the company attorney fees and costs after finding the contractor's action was brought in bad faith. On appeal, the contractor argues that the court erred in granting summary adjudication and in awarding costs and attorney fees. We conclude there was no error, and affirm.

FACTS AND PROCEDURAL BACKGROUND

I. Facts

A. Employment relationship

Back in 2013, Tax Credit Group was in the business of helping other businesses apply for tax credits from the State of California. Pejman J. Sage (Sage) was the key principal of Tax Credit Group (collectively, Tax Group). In exchange for Tax Group's assistance, the businesses promised to give Tax Group 30 percent of any tax savings they received if their tax credit applications were eventually granted.

Between February and December 11, 2013, Adrienne Doustkam (plaintiff)-through a corporation set up in her own name-held the title of a "Client Relationship Executive" for Tax Group. Both plaintiff and Tax Group considered plaintiff to be an "independent contractor." In exchange for her recruitment of possible tax credit applicants, Tax Group agreed to pay her a commission of 30 percent of whatever amount Tax Group collected from the businesses she solicited; Tax Group also allowed plaintiff to take monetary "advances" or "draws" against her future commission payments.

Between June and October 2013, Tax Group paid plaintiff's corporation a total of $12,046, of which $9,441 had memo lines reflecting payment for "outside services" or "marketing" or "consulting."

B. Postemployment efforts to collect commissions

In January 2015, plaintiff emailed Sage asking about the status of the tax credit applications for 60 businesses she claimed to have solicited for Tax Group. Sage responded that plaintiff was at most eligible for her work on the applications for nine businesses, but indicated that none of those nine had yet paid Tax Group any commission. Sage assured plaintiff that he would "let [her] know when anything comes in."

Ultimately, only three businesses paid Tax Group a percentage of their tax credit rebate; Tax Group could "locate" no other "records of payments" from any other businesses plaintiff had solicited. Specifically, Payam Barzivand paid Tax Group $6,950 in December 2017; Universal E-Com Call Center paid Tax Group $6,691.80 in May 2017 and November 2018; and Traffic Safety Consultants paid Tax Group $5,995.60 in November 2017. This total came to $19,637.40. Those three businesses were among the nine businesses Sage had listed as possible sources of commissions to plaintiff.

Because these three businesses' payments entitled plaintiff to, at most, commissions of $5,891.22 (which is 30 percent of the total the businesses paid to Tax Group), and because plaintiff had already taken advances of $9,441 against those commissions, Tax Group did not pay plaintiff any further commissions.

In October 2016 (and hence prior to when any of three businesses had paid Tax Group any rebate money), plaintiff filed a complaint with the California Labor Commissioner seeking $747,000 in "commissions" for her work on the nine clients Sage had identified in the January 2015 email. The Labor Commissioner declined jurisdiction over plaintiff's claim on the ground that plaintiff was an "incorporated business."

II. Procedural Background

A. Pleadings

On February 26, 2019, plaintiff sued Tax Group. In the operative second amended complaint filed on June 4, 2021, plaintiff asserted 12 claims at issue in this appeal-namely, (1) breach of contract; (2) quantum meruit; (3) unjust enrichment; (4) failure to pay earned but unpaid wages; (5) statutory penalties under Labor Code section 203; (6) failure to pay overtime wages; (7) failure to provide meal and rest periods; (8) failure to provide accurate itemized wage statements; (9) failure to pay wages when due under section 204 and an applicable Industrial Welfare Commission wage order; (10) misclassification of an employee as an independent contractor; (11) failure to reimburse business-related expenses; and (12) unfair business practices. Although plaintiff sought commissions from 60 clients, she only specifically prayed for unpaid commissions of $747,000 from the nine clients Sage had listed in his January 2015 email.

B. Summary adjudication

In September 2021, Tax Group moved for summary adjudication on nine of plaintiff's claims-but later withdrew its request for adjudication of four of those claims. Thus, at the time of the hearing, Tax Group sought summary adjudication of plaintiff's claims for breach of contract, quantum meruit, unjust enrichment, failure to pay wages, and statutory penalties under section 203.

After a full round of briefing and a hearing, the trial court granted the motion on December 13, 2021. As to plaintiff's breach of contract claim (and her derivative quantum meruit and unjust enrichment claims), the court ruled that (1) plaintiff's claims for commissions based on payments made to Tax Group by the 51 businesses not listed in the January 2015 email were untimely, and (2) plaintiff's claims against all of the businesses based on alleged nonpayment of commissions lacked merit as a matter of law because Tax Group had only received payments from three businesses and the amount plaintiff had already received as advances on her commissions exceeded the commissions Tax Group owed her as to those three businesses. As to plaintiff's claim for failure to pay wages, plaintiff's admission that the money she received from Tax Group was an "advance" on her "commissions" meant that she was not owed any wages because "[a]dvances against commissions cannot be considered a wage." And as to plaintiff's claim for statutory penalties, the "good faith dispute" over whether Tax Group owed plaintiff any wages precluded, as a matter of law, a finding that Tax Group had willfully withheld her wages.

C. Disposition of plaintiff's remaining claims

At the parties' request, the trial court set a "mini-trial" for March 2022 on (1) "whether any of [plaintiff's remaining claims] are time barred," including whether those claims might be "equitably tolled"; and (2) whether plaintiff was an independent contractor.

On the day before that mini-trial was to begin, plaintiff voluntarily dismissed all of her remaining claims with prejudice.

D. Award of costs and attorney fees

Tax Group filed a cost memorandum seeking $8,469.76 in costs. Plaintiff responded with a motion to tax costs. Tax Group also filed a motion seeking $245,531 in attorney fees. After a full round of briefing on each motion and a hearing on each motion, the trial court issued orders awarding Tax Group costs and attorney fees. In its June 6, 2022 order awarding costs, the court found that Tax Group was the prevailing party, and, as required by section 218.5, that plaintiff had filed her lawsuit in "bad faith" because she "had no objective, factual basis" to support her claims of unpaid commissions and instead relied "solely on her unsupported belief that [Tax Group] must have been withholding payments." In its September 12, 2022 order awarding attorney fees, the court ruled that Tax Group was the prevailing party because it achieved its "litigation objectives" as to all of the claims summarily adjudicated and voluntary dismissed by plaintiff; the court also reaffirmed its earlier finding that plaintiff's lawsuit was brought in "bad faith" because her claims lacked any factual basis. The court rejected plaintiff's contention that she was being punished for not having "all facts supporting [her] cause[s] of action before filing suit," and explained that its "finding of bad faith . . . is not based on [p]laintiff's failure to secure all supporting evidence and facts before filing suit, [but] rather it is based on [p]laintiff's failure to secure any evidence or factual support before filing suit." (Italics added.)

E. Appeal

Plaintiff filed timely notices of appeal from the grant of summary adjudication, the award of costs, and the award of attorney fees. We subsequently consolidated the three appeals.

DISCUSSION

I. Motion for Summary Adjudication

Plaintiff argues that the trial court erred in granting Tax Group's motion for summary adjudication as to her claims for breach of contract, quantum meruit, unjust enrichment, failure to pay wages, and statutory penalties under section 203.

"Summary adjudication, like summary judgment, is appropriate when the moving party shows '[it] is entitled to a judgment as a matter of law' (Code Civ. Proc., § 437c, subd. (c)) because, among other things, the nonmoving party (here, [plaintiff]) cannot establish '[o]ne or more of the elements of [her] cause of action' (Code Civ. Proc., § 437c, subd. (o)(1); see id., subd. (p)(2))." (QDOS, Inc. v. Signature Financial, LLC (2017) 17 Cal.App.5th 990, 998.) We review an order granting summary adjudication de novo. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860.) A. Claims for breach of contract, quantum meruit, and unjust enrichment

To establish a breach of contract claim, a plaintiff must demonstrate an actual breach of that contract. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) "There can be no actual breach of a contract until the time specified therein for performance has arrived." (Taylor v. Johnston (1975) 15 Cal.3d 130, 137; McCaskey v. California State Automobile Assn. (2010) 189 Cal.App.4th 947, 958.) Along similar lines, a plaintiff establishes claims for quantum meruit and unjust enrichment only if she demonstrates that her services have "conferred a benefit" on the defendant and that the defendant has unjustly retained that benefit, respectively. (Port Medical Wellness, Inc. v. Connecticut General Life Ins. Co. (2018) 24 Cal.App.5th 153, 180; Lyles v. Sangadeo-Patel (2014) 225 Cal.App.4th 759, 769.)

The trial court did not err in granting summary adjudication on these three causes of action because the undisputed evidence shows that (1) as to the three businesses that paid Tax Group a commission, plaintiff already received her share of those commissions from her "advances"; and (2) as to the remaining 51 businesses, Tax Group received no commission and hence did not owe plaintiff any share of those nonexistent commissions (such that there is not yet any breach and Tax Group did not obtain or unjustly retain a benefit). Because plaintiff's operative complaint explicitly alleges that she is entitled to relief under these three causes of action on the theory that Tax Group did not pay her commissions she was owed by contract or by equity, plaintiff cannot oppose summary adjudication on the new and different theory that she had a contractual or equitable entitlement to wages as an employee. (E.g., Vulk v. State Farm General Ins. Co. (2021) 69 Cal.App.5th 243, 255 ["the pleadings set the boundaries of the issues to be resolved at summary judgment"].) Further, plaintiff cannot avoid summary adjudication on the ground that an agreement to receive commissions must be in writing because (1) the cases that require a writing before an employer may deduct advances from an employee's wages (e.g., Sciborski v. Pacific Bell Directory (2012) 205 Cal.App.4th 1152, 1166-1167) are not relevant where, as here, Tax Group did not deduct any advances (and, instead, plaintiff took advances), and (2) this rule would end up defeating plaintiff's contract-based claims for those commissions because she never produced a writing entitling her to the commissions.

B. Claim for failure to pay wages

To establish a claim for failure to pay wages, a plaintiff must demonstrate that she was an "employee" who was still owed "unpaid" "wages" when she ended her employment. (§ 201, subd. (a).) Here, the "unpaid wages" plaintiff seeks is the $747,000 in commissions. Because plaintiff unequivocally admitted in her discovery responses that she was entitled to "commissions" and that the money Tax Group had paid her was an "advance" against those commissions, and because "[a]n advance . . . by definition is not a wage" (Steinhebel v. Los Angeles Times Communications, LLC (2005) 126 Cal.App.4th 696, 705, italics omitted), plaintiff did not raise a triable issue of fact as to whether Tax Group failed to pay her any unpaid wages. Even if we apply the general rule that the parties' characterization of a person as an "employee" or "independent contractor" is not necessarily dispositive to the characterization of payments to that person as "wages" or "advances" on "commissions," that label can be dispositive where the person's "actual conduct [does not] establish[] a different relationship" or characterization of the payments. (E.g., Vendor Surveillance Corp. v. Henning (2021) 62 Cal.App.5th 59, 84.) Here, both Tax Group and plaintiff (in her deposition and discovery responses) consistently refer to the payments plaintiff received as being "advances" on "commissions," and plaintiff adduced no evidence that they were wages. And although the operative pleading pleads this claim broadly, plaintiff offers no reasoned argument on appeal that she is entitled to any further "wages" beyond those advances on commissions; any such argument is accordingly waived. (Tsasu LLC v. Bank Trust, N.A. (2021) 62 Cal.App.5th 704, 714.)

C. Claim for statutory penalties

To establish a claim for statutory penalties under section 203, the plaintiff must show that the employer has "willfully fail[ed] to pay . . . wages" to an "employee." (§ 203, subd. (a).) Due to the willfulness requirement, an employer is not liable for statutory penalties when there is a good faith dispute over the duty to pay. (Amaral v. Cintas Corp. No. 2 (2008) 163 Cal.App.4th 1157, 1201.) Here, even if we assume there are triable issues as to whether plaintiff was an "employee," she has admitted that she was paid with an "advance" (and hence not a "wage"); thus, at a minimum, there was a good faith dispute over whether Tax Group owed her a wage. It did not act willfully.

D. Plaintiff's remaining arguments

Plaintiff marshals what boils down to three further arguments in support of her challenge to the trial court's summary adjudication ruling.

First, plaintiff argues that the trial court erred in its findings that her claims for commissions as to the 51 businesses who did not pay Tax Group any money were untimely and that the equitable tolling doctrine was inapplicable. We need not address the merits of these arguments because the trial court alternatively held that plaintiff stated no claims based on the commissions she was allegedly owed as to these 51 businesses because plaintiff presented no evidence that those businesses had ever paid Tax Group; absent such a payment, plaintiff herself acknowledged, she herself was not entitled to any commission. Thus, whether the trial court got the timeliness question right or wrong does not affect the court's ultimate ruling. (Kids' Universe v. In2Labs (2002) 95 Cal.App.4th 870, 878 [we review the trial court's ruling, not its rationale].)

Second, plaintiff argues that there may be some other evidence out there that Tax Group had received commissions from the other 51 businesses, and that a jury might disbelieve Tax Group's denial of any further commission payments because it did not tell her about the three payments it received until this litigation began. In opposing summary adjudication, however, it was plaintiff's burden to adduce evidence showing a factual dispute; her claim that there might be additional, hidden payments is little more than speculation. That cannot create a triable issue of fact. (McHenry v. Asylum Entertainment Delaware, LLC (2020) 46 Cal.App.5th 469, 479 ["speculation cannot create a triable issue of material fact"].) Relatedly, plaintiff asserts that Sage was "equivocal" about the lack of payment from the other 51 businesses when, in his declaration, he stated that "[n]o records of payments" by the other 51 businesses "ha[d] been located." This is not equivocation. Our Evidence Code explicitly provides that "[e]vidence of the absence from the records of a business of a record of an asserted act . . . or event" is proof of "the nonoccurrence of the act or event" (Evid. Code, § 1272); thus, Sage's declaration that Tax Group's records revealed no payments by the other 51 businesses is proof that no such payments were made, not equivocation.

Third and lastly, plaintiff argues that her failure to pay unpaid wages claim has merit because Tax Group ultimately did not seek summary adjudication on her Labor Code-related claims. According to plaintiff, Tax Group's failure to seek summary adjudication amounted to a "concession" that she was an "employee," and hence had a viable claim for failing to pay her unpaid wages. As explained above, her claim for unpaid wages lacks merit as a matter of law. Moreover, the underlying premise of plaintiff's argument is contrary to law. In essence, she seems to be arguing that a party's failure to seek summary adjudication or judgment on a claim amounts to a concession of that claim's merit. If true, there would be no need to go to trial on any claim on which summary adjudication or summary judgment was not sought because the nonmoving party's inaction would conclusively concede the result of the trial. This is obviously not the law.

II. Costs and Attorney Fees

Plaintiff next argues that the trial court erred in awarding Tax Group costs and attorney fees. We review an award of costs and attorney fees for an abuse of discretion (Coastline JX Holdings LLC v. Bennett (2022) 80 Cal.App.5th 985, 1013 [costs]; Cruz v. Fusion Buffet, Inc. (2020) 57 Cal.App.5th 221, 243 [attorney fees under section 218.5]), although we review subsidiary issues of law de novo (Hyduke's Valley Motors v. Lobel Financial Corp. (2010) 189 Cal.App.4th 430, 434) and subsidiary questions of fact for substantial evidence (Cruz, at p. 243).

Section 218.5 provides that an employer may obtain costs or "reasonable attorney's fees" only if it is the "prevailing party" and if "the court finds that the employee brought the court action in bad faith." (§ 218.5, subd. (a); Arave v. Merrill Lynch, Pierce, Fenner &Smith, Inc. (2018) 19 Cal.App.5th 525, 545.)

The trial court did not abuse its discretion in awarding costs and attorney fees.

To begin, Tax Group was the prevailing party on all of plaintiff's claims. Tax Group prevailed on five of the claims when it prevailed on its summary adjudication motion. And Tax Group prevailed on the remaining claims after plaintiff voluntarily dismissed those claims, which allowed Tax Group to achieve its litigation objective of not paying plaintiff any additional funds. (Salehi v. Surfside III Condominium Owners Assn. (2011) 200 Cal.App.4th 1146, 1154-1156 [voluntary dismissal by a plaintiff does not "'automatically'" mean the defendant is the prevailing party; court must look to whether the defendant has achieved its litigation objective]; Sharif v. Mehusa, Inc. (2015) 241 Cal.App.4th 185, 192 (Sharif) [same].)

Substantial evidence also supports the trial court's finding that plaintiff brought her action against Tax Group in bad faith. For these purposes, "bad faith" includes, among other things, bringing a lawsuit when it was "objectively without foundation when brought" (Williams v. Chino Valley Independent Fire Dist. (2015) 61 Cal.4th 97, 111, 115), which includes when "there was absolutely no evidence to support" the plaintiff's claims (Leek v. Cooper (2011) 194 Cal.App.4th 399, 421; Villanueva v. City of Colton (2008) 160 Cal.App.4th 1188, 1200). Here, plaintiff had no evidence that she was owed unpaid commissions at the time she filed suit, and the discovery she subsequently obtained showed that she was not owed any money because she had already received advances exceeding the commissions she was owed for the three businesses that paid Tax Group a commission. Plaintiff also had no evidence to support her Labor Code claims; all she had were her own admissions, in her deposition, that she was an "independent contractor" who was paid "advances" on "commissions" rather than wages. And because she dismissed those claims prior to the mini-trial, she adduced no evidence to support them.

Plaintiff responds with what boils down to three further arguments.

First, she argues that, as to the claims at issue here, she prevailed against Tax Group's demurrer and against its separately filed judgment on the pleadings. This is true, but irrelevant. Demurrers and motions for judgment on the pleadings test the sufficiency of the allegations; they say nothing about the existence of the evidence needed to support those allegations.

Second, plaintiff argues that the assessment of whether a lawsuit was brought in bad faith must look to the entirety of the alleged claims, and that she would have prevailed on many of the claims if she had not decided to voluntarily dismiss them. As a threshold matter, the premise of plaintiff's argument is debatable: While some cases say courts should look to the "entire complaint" (Jersey v. John Muir Medical Center (2002) 97 Cal.App.4th 814, 832), other cases urge a more claim-by-claim analysis (Sharif, supra, 241 Cal.App.4th at pp. 193-194). But even if we look to the entire complaint, the fact remains that plaintiff lost five of her claims on summary adjudication and voluntarily dismissed the rest. The core of her complaint-as illustrated by the fact these are the claims she has asserted from the start-was aimed at the $747,000 she sought to recover as commissions, and those claims lacked any evidentiary basis whatsoever. The sole argument she offers in support of her claim that her dismissed claims had merit is her supposition that, if she had not dismissed those claims, she would have gone to trial and prevailed. However, supposition about what might have happened in a parallel universe does not address the critical question, which is whether plaintiff had facts to support those Labor Code claims at the time she filed her lawsuit. Because she has not demonstrated the existence of such facts, the trial court did not abuse its discretion in concluding that her claims had no basis. Somewhat relatedly, plaintiff asserts that the court penalized her for being "unable to marshal sufficient evidence" to rebut Tax Group's motion for summary adjudication, but the court explicitly noted that its bad faith finding was based-not on plaintiff's failure to adduce more evidence prior to summary adjudication-but rather on her failure to have any evidence at the time of filing.

Third and lastly, plaintiff argues that she would not have dismissed her remaining claims if she had known that the dismissal might weigh in favor of a finding of bad faith. Plaintiff's buyer's remorse is irrelevant. The issue is whether plaintiff had a sufficient factual basis to initiate her claim. It was the absence of that basis that rendered her claims frivolous and hence brought in bad faith.

DISPOSITION

The judgment and posttrial orders are affirmed. Tax Group is entitled to its costs on appeal.

We concur: ASHMANN-GERST, Acting P.J., CHAVEZ, J.