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Granite Outlet Inc. v. Baker

United States District Court, E.D. California

March 27, 2017

CHRISTINE BAKER, Director of the Department of Industrial Relations Defendant.


          Troy L. Nunley United States District Judge.

         This is a lawsuit challenging the constitutionality of California Labor Code § 98.2 and associated practices of the California Labor Commissioner. The matter is before the Court following court-ordered supplemental briefing regarding Defendant Christine Baker's (“Defendant”) Motion for Summary Judgment (ECF No. 45) and Plaintiff Granite Outlet, Inc.'s (“Plaintiff”) Motion for Partial Summary Judgment (ECF No. 46). For the reasons set forth below, the case is DISMISSED in part for lack of subject matter jurisdiction, Defendant's motion is GRANTED, and Plaintiff's motion is DENIED.

         I. Factual and Procedural Background

         This dispute began with the administrative adjudication of two wage claims and subsequent, abortive appeals to state superior court. From that humble beginning, the matter evolved into the instant case-a slapdash attempt at forum shopping carried out through something akin to a collateral attack on a state judicial proceeding and several state statutes. Now the case has been pared down substantially and only one question remains: is Defendant, the Director of the California Department of Industrial Relations, personally liable for money damages because her subordinate, the Labor Commissioner, implements a statutory scheme that Plaintiff charges is unconstitutional? Before turning to that question, the Court provides an overview of the relevant statutory scheme and the history of the case.

         A. Statutory Scheme

         In California, an employee pursuing a wage-related claim has two principal options. Murphy v. Kenneth Cole Prods., Inc., 40 Cal.4th 1094, 1115 (2007). First, the employee can bring a garden-variety civil lawsuit against his or her employer. Id. Second, the employee can seek administrative relief by filing a wage claim with the Labor Commissioner pursuant to a statutory scheme set forth in Labor Code § 98. Id. In some administrative cases, the Labor Commissioner or a deputy will conduct an adjudication known as a Berman hearing (so named for the sponsor of the legislation). Id. The Berman hearing “is designed to provide a speedy, informal, and affordable method of resolving wage claims.” Id.

         Following the Berman hearing, the Labor Commissioner files an order, decision, or award (“ODA”) summarizing the hearing and setting forth the reasons for the Labor Commissioner's decision. Cal. Lab. Code § 98.1(a). Labor Code § 1194.2 provides that the Labor Commissioner may award to the employee liquidated damages “in an amount equal to the wages unlawfully unpaid and interest thereon.” Cal. Lab. Code § 1194.2(a).

         Either party can appeal the ODA to the superior court within ten days. Cal. Lab. Code § 98.2(a). Although review by the superior court is denoted an “appeal, ” it is entirely de novo and the ODA “is entitled to no weight whatsoever.” Kenneth Cole, 40 Cal.4th at 1116. “The decision of the [superior] court, after de novo hearing, is subject to a conventional appeal to an appropriate appellate court.” Id.

         Wage claimants and employers are treated differently in their ODA appeals. Labor Code § 98.2(b) constrains an employer's ability to appeal the ODA, providing in relevant part:

As a condition to filing an appeal [of the ODA], an employer shall first post an undertaking with the reviewing court in the amount of the [ODA]. The undertaking shall consist of an appeal bond issued by a licensed surety or a cash deposit with the court in the amount of the [ODA].

         Cal. Lab. Code § 98.2(b). The undertaking must be posted before the superior court can review the case because the undertaking requirement is “mandatory and jurisdictional.” Palagin v. Paniagua Constr., Inc., 222 Cal.App.4th 124, 140 (2013). Unlike the employer, the wage claimant need not post an undertaking to appeal the ODA. See Id. at 130. A wage claimant who cannot afford counsel for the de novo appeal may be represented by an attorney from the Division of Labor Standards Enforcement (“DLSE”), appointed by the Labor Commissioner. Cal. Lab. Code § 98.4.

         B. Underlying Wage Claims and State Court Litigation

         Plaintiff is a business that faced wage claims in 2013 from two employees, Shao Hui Zhao (“Zhao”) and Chau Van (“Van”). (Pl.'s Resp. to Def.'s Statement of Undisputed Material Facts, ECF No. 47-1 at Nos. 4-5.) In August of 2013, a Labor Commissioner hearing officer held a joint Berman hearing on both claims. (ECF No. 47-1 at No. 6.) The Labor Commissioner issued ODAs awarding Zhao $43, 332.52 and Van $61, 425.21. (ECF No. 47-1 at Nos. 8-10.)

         Plaintiff filed appeals of both ODAs in superior court, but did not post an undertaking in either case. (ECF No. 47-1 at Nos. 12-13.) A DLSE attorney represented Zhao and Van in the appeals. (ECF No. 47-1 at No. 15.) Zhao and Van filed motions to dismiss the respective appeals because Plaintiff had not posted an undertaking in either case. (ECF No. 47-1 at No. 16.) Plaintiff opposed the motions, arguing that the undertaking requirement was unconstitutional. (ECF No. 47-1 at No. 17.) The superior court considered Plaintiff's constitutional argument, but found it unpersuasive and granted both motions to dismiss. (ECF No. 47-1 at Nos. 18-19.) The superior court then entered judgments in favor of Zhao and Van, requiring Plaintiff to pay a total of $104, 757.73. (ECF No. 47-1 at Nos. 20-21.)

         Plaintiff appealed the superior court's judgments but elected to settle with Zhao and Van while the appeals were pending. (ECF No. 47-1 at Nos. 24-31.)

         C. Federal ...

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