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Brown v. California Unemployment Insurance Appeals Board

California Court of Appeals, First District, Fourth Division

February 28, 2018

MARK A. BROWN, Plaintiff and Appellant,

         San Francisco City & County Super. Ct. No. CPF-12-512499 Ernest H. Goldsmith, J.

          Counsel: Garfinkle Law Office, Garfinkle Law Firm, Gary S. Garfinkle and Maria J. Garfinkle for Plaintiff and Appellant.

          Kamala D. Harris, Attorney General, Julie Weng-Gutierrez, Senior Assistant Attorney General, Susan M. Carson and Cheryl L. Feiner, Supervising Deputy Attorneys General, Dane C. Barca, Deputy Attorney General, for Defendants and Respondents.

          REARDON, J.

         The question in this case is a narrow one, involving the correct rate of interest to be applied after a court determines that unemployment benefits have been wrongfully withheld by the Employment Development Department (EDD) and the California Unemployment Insurance Appeals Board (Board). Appellant Mark Brown (Brown) argues that interest should be charged at the contract rate of 10 percent from the date that each benefit payment was due, in accordance with Civil Code section 3289, subdivision (b).[1] EDD, in contrast, asserts that the trial court correctly determined that any such interest should be calculated at the rate of 7 percent, as authorized by article XV, section 1, of the California Constitution and Government Code section 965.5, subdivisions (a) and (d). We conclude that the trial court applied the incorrect interest rate to the wrongfully withheld benefits at issue. Accordingly, we reverse for recalculation of interest, but affirm in all other respects.

         I. BACKGROUND

         The underlying facts of this matter are largely undisputed.[2] Brown had worked for Bay Cities Patrol (BCP), a private security business, for almost 10 years when he was terminated on January 2, 2012, for wearing the wrong shirt to work in violation of BCP's uniform policy. To accommodate Brown's large size, BCP had previously permitted Brown to wear same-color polo shirts that had BCP patches sewn on them, rather than a formal uniform shirt. However, after discovering that it could order larger-size uniform shirts from its supplier, BCP purchased a number of such shirts for Brown in late 2011. Brown wore the new uniform shirts throughout December 2011. On January 2, 2012, however, he improperly wore the old polo-style shirt to work, leading to his termination. According to Brown, he had grabbed the wrong shirt by mistake and offered to return home to change or cover the shirt with a jacket. Brown's employer, in contrast, claims that Brown never mentioned that he wore the shirt by mistake, but told him only that he thought wearing the shirt wouldn't be a problem.

         When Brown applied for unemployment benefits, EDD initially determined that he was eligible, stating: “[Brown] just wore his own shirt by mistake. [BCP] should have given him warning instead of terminating him. [BCP] did not give opportunity to [Brown] to correct this mistake. [He] was even ready to go back home and change his shirt. Hence, [his action] does not constitute a willful misconduct.” After BCP appealed, however, an administrative law judge concluded that Brown had “willfully breach[ed] his duty and obligation to the employer” by wearing the wrong shirt and thus reversed EDD's initial eligibility determination. Brown subsequently appealed this denial of benefits, but the Board affirmed it.

         Thereafter, in September 2012, Brown filed a petition for writ of administrative mandate, seeking to set aside the Board's eligibility determination and arguing that his actions in wearing the wrong shirt were insufficient to constitute misconduct for purposes of denying him eligibility for unemployment benefits. The trial court agreed and, in May 2013, granted Brown's writ petition, concluding that Brown had not engaged in misconduct sufficient to disqualify him from unemployment benefits because he had offered to go home and change shirts and he was terminated on the first instance that he had violated his employer's new uniform policy. As a consequence of this determination, the trial court issued a peremptory writ of administrative mandate commanding EDD and the Board to “immediately” award Brown “the unemployment insurance benefits that were withheld in the administrative proceedings in this matter plus interest on those benefits” (Writ).

         In August 2013, EDD filed a return to the Writ, stating that the Board had swiftly reversed its prior eligibility determination and that EDD had subsequently paid Brown “all the benefits for which he has been found eligible....” EDD further noted, however, that it was requiring Brown to submit benefit certification forms for the weeks related to the past-due benefits and that an eligibility issue had arisen with respect to a particular three-week period that would need to be resolved before further benefits could be paid or certification forms sent for any additional weeks. It claimed that it would continue to pay Brown “for the weeks that [he] is eligible and for which he submits the required certification claim forms demonstrating his continued eligibility for unemployment benefits.”

         Over a year later, in October 2014, Brown filed a motion to enforce the Writ, claiming that EDD had unilaterally imposed improper conditions on the payment of benefits pursuant to the Writ, had caused extended delays, and had continued to withhold benefits and interest without justification. For example, despite several requests from Brown's attorney that EDD meet and confer regarding the amount of unpaid benefits as required by the trial court, EDD did not respond. At one point, EDD bypassed Brown's attorney and contacted Brown directly regarding an eligibility dispute. Thereafter, it insisted that Brown attend a “ ‘mandatory reemployment assessment appointment' ” or face indefinite disqualification for benefits and asked numerous questions about Brown's continuing efforts to obtain employment, despite the fact that Brown's current employability was irrelevant to the payment of the past-due benefits. And, at the time he filed his enforcement action-14 months after the issuance of the Writ-EDD had, by Brown's calculation, still failed to pay all amounts owed to Brown. In addition to full enforcement, Brown sought attorney's fees under Government Code section 800 as well as imposition of a fine and sanctions pursuant to Code of Civil Procedure sections 177.5 and 1097 based on EDD's continued unjustifiable conduct.[3]

         In April 2015, the trial court issued its order granting in part and denying in part Brown's motion to enforce the Writ (Enforcement Order). Specifically, the court concluded that EDD did not “reasonably compl[y]” with the Writ both by unilaterally demanding that Brown “retroactively fill out bi-weekly certifications for the entire period” before paying him the past-due benefits and by refusing to meet and confer with Brown's attorney as ordered. Moreover, because EDD's failure to comply was “without good cause or substantial justification, ” the court levied a $1, 000 fine against EDD under Code of Civil Procedure section 1097 and awarded reasonable attorney fees to Brown up to the $7, 500 maximum authorized by Government Code section 800.

         In contrast, the court determined that the correct rate of interest for wrongfully withheld unemployment benefits was not the 10-percent contract rate, as Brown argued, but was instead 7 percent, the “generic interest rate on judgments” suggested by EDD. Prior to the instant enforcement action, however, EDD had conceded that the appropriate rate of interest was the 10-percent contract rate, and had paid interest to Brown based on that rate.[4] It therefore claimed that it had actually overpaid Brown. Under these circumstances, the trial court ordered EDD to “immediately pay any unpaid amount to [Brown] less overpayments, if any.” However, it further declared that this provision “not be construed to reduce the amount of attorney fees or to require [Brown] to repay any sum.”

         Brown's timely notice of appeal from the Enforcement Order now brings ...

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