### FILED NOVEMBER 17,2015 In the Office oftheClerk orCourt W A State CourtorAppeals, Division III

INTHE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION THREE FIRE CONTROL RESOURCES, LLC, ) dbaFIRE CONTROL RESOURCES, ) No. 32440-1-111 ) Appellant, ) ) 

### v. ) ) UNPUBLISHED OPINION STATE OF WASHINGTON, ) DEPARTMENT OF LABOR

### & ) INDUSTRIES, ) ) Respondent. ) SIDDOWAY, C.J.

- Fire Control Resources, LLC soughtjudicialreview ofa decision ofthe Board ofIndustrial Insurance Appeals affirming an assessment ofunpaid industrial insurance taxes, butwithoutprepaying the taxes or obtaining ajudicial finding ofunduehardship asrequiredbyRCW 51.52.112. Following dismissal ofits action for noncompliance it appeals, contending that (1) the superior court'srefusal to find undue hardship was based onthe court'smisunderstanding ofasuretybond alternative and (2) the superior court shouldhave exercised its inherent authorityto find arbitrary, capricious orunlawful actionby the Department ofLabor andIndustries.No. 32440-1-III Fire ControlResources 

### v. Dep'tof Labor & Indus. By no reasonable reading did Fire Control'spleadings identifY or imply that itwas asking the superior courtto exercise its inherent power ofreview. And had such a request been made itwould have failed, since Fire Control had an adequate remedy of appeal. Forthose reasons and because there is no showing that the superior court's undue hardship ruling was based on confusion aboutthe law orthe material facts, we affirm. FACTS AND PROCEDURAL BACKGROUND Paul Fuchs was the sole officer and shareholder ofFCREnterprises, Inc. (FCR), a corporation he contends was a general building contractorthat sometimes contracted with state and federal agencies to provide fire control services. FCRwas dissolved in 2005 after it failed topay industrial insurance taxes and the Department ofLabor and Industries took legal action to enforce liens against FCRfor the unpaid taxes. Mr. Fuchs is also the managing member ofthe appellant, Fire Control Resources, LLC (Fire Control), which he formed in 2006 afterFCRwent out ofbusiness. Mr. Fuchs testified thatthe two entities are separate but the department contends that Fire Control is

a successor to FCR. Underthe Industrial Insurance Act, Title 51 RCW, successors are liable for the unpaid taxes ofthe business they succeed. RCW 51.16.200. 1 The department'sprincipal basis for contending that Fire Control is a successorto FCRis that

1RCW 51.08.177 defines "successor" as "anypersonto whom a taxpayer quitting, selling out, exchanging, ordisposing ofa business sells orotherwise conveys, directly or indirectly, in bulk and not in the ordinary course ofthe taxpayer's business, a major part ofthe property, whether real orpersonal, tangible or intangible, ofthe taxpayer." 2No. 32440-1-III Fire ControlResources v. Dep't of Labor & Indus.

both companies primarily engage or did engage in the business ofproviding fire control services to governmental agencies, both use or used the business name "Fire Control," both are or were managed by Mr. Fuchs, and Fire Control-as the asserted successorneverpaid FCRto acquire the business name orthe skill and expertise ofMr. Fuchs. Having concluded that Fire Control was a successor, the department in February 2009 issued a notice and order assessing $19,364.19 against it for FCR's unpaid workers' compensation premiums for quarters between 2002 and 2004. A return ofservice indicatedthatMr. Fuchs was personally served with the February 2009 assessment order. Mr. Fuchs responded with a letterto the departmentrequesting that itreconsider the February 2009 assessment. The department promptly acknowledged its receipt ofthe request for reconsideration. Itultimately denied it in October 2011 by an order and notice affirming the February 2009 assessment. According to a return ofservice, the order was served on Mr. Fuchs's father on October 26,2011 at Fire Control's business address. Fire Control appealed the October 2011 decision to the Board ofIndustrial Insurance Appeals. Among its contentions on appeal was that Mr. Fuchs was not served with the October 2011 order affirming the assessment. Following a hearing ofthe appeal, the industrial appealsjudge (IAJ) issued a proposed decision concluding thatthe board hadjurisdiction and affirming the department's 2009 assessment. 

### 3No. 32440-1-II1 Fire ControlResources 

### v. Dep 't of Labor & Indus.

Fire Control appealed the lArs proposed decision to the board. The board denied the petition for review, thereby adopting the proposed decision as its own. Fire Control then appealed the board's decision to the Spokane County Superior Court. Fire Control raised several arguments in its notice ofappeal filed with the superior court, including (1) lack of jurisdictionresulting from the department's failure to effect proper service ofprocess, (2) that the assessment was untimely under the statute of limitations and the doctrine oflaches, and (3) the lack ofa factual basis supportingthe department's determination that it was the successor to FCR. RCW 51.52.112 provides thatbefore pursuing an appeal ofa board decision in superior court, "[a]ll taxes, penalties, and interest shall be paid in full

... unless the court determines thatthere would be an undue hardship tothe employer." Itis undisputedthat Fire Control did not pay the assessed taxes before filing its appeal with the superior court. The department responded to Fire Control's notice ofappeal with a motion to dismiss it in light ofFire Control's failure to comply with RCW 51.52.112. Fire Control responded by moving the superior court to waive RCW 51.52.112's prepaymentrequirement on the basis ofundue hardship. In a supporting declaration, Mr. Fuchs asserted that Fire Control had no assets and was "heavily encumbered"with debt. Clerk's Papers (CP) at 89. The department opposed Fire Control's motion onthe grounds thatMr. Fuchs's declarations were inadequate and he provided no recent financial records or other documentation. Whilethe department agreed to strike its 

### 4No. 32440-1-111 Fire ControlResources v. Dep 't of Labor & Indus.

motion to dismiss,2 it "specifically reserve[d] the right to renew the motion if, after a hearing on the issue, [Fire Control] does not obtain an order ofundue hardship or paythe taxes due and owing herein." CP at 61. After allowing Fire Control time to produce evidence demonstrating undue hardship, the court conducted a hearing on December 6,2013, at the conclusion ofwhich it denied Fire Control's motion for waiver ofthe prepaymentrequirement. While acknowledging that Fire Control had "repeatedly advised the court it has no assets," the court found that the limited liability company failed to support its arguments with any recent documentary evidence. CP at 121. The court further found that "there has been a lack ofcandor by 

### Mr. Fuchs with the court," noting that Mr. Fuchs "received income during the continuance ofthis motion ofwhich he did not advise his counselorthe court." Id. The court's order gave Fire Control one more opportunity to provide a surety bond in the amount of$20,000 by January 31, 2014, warning that "[tJailure to do so may result in dismissal ofthis appeal." Id. 3

2 InAsh v. Department of Labor & Industries, 173 Wn. App. 559, 561,294 P.3d 834 (2013), this court held that RCW 51.52.112 does not require a detennination on the hardship waiver before an appeal to superior court is filed. 3 The department points out that it is debatable whether the court had authority to allow Fire Control to post a $20,000 bond in lieu ofpayingthe full amount ofthe assessed taxes and interest, given that nothing in RCW 51.52.112 contemplates such an alternative. Br. ofResp'tat 16 n.2. But as the department further notes, we need not resolve the issue because neitherparty has ever challenged the court's decision to authorize this alternative to payment. 

### 5No. 32440-1-III Fire ControlResources 

### v. Dep 't of Labor & Indus.

On January 31, 2014, rather than postthe bond, Fire Control filed its own motion to dismiss, based largely on the theories 

### ithad raised in its appeal. The department renewed its motion to dismiss, arguing that the court lackedjurisdictionto proceed in light ofFire Control's failure to pay the taxes orpost a bond. The superior court conducted a hearing on the parties' motions to dismiss on March 21, 2014, at the conclusion ofwhich it ruled that because it had denied Fire Control's request for a finding ofundue hardship, "[t]he only alternative to enable an action to be instituted by any Court is payment ofall taxes, penalties and interest." Report ofProceedings (RP) at 8. Concluding that it lackedjurisdictionto hear the arguments raised in Fire Control's motion, it dismissed the appeal. Fire Control appeals. ANALYSIS Fire Control assigns error to all ofthe findings offact and all but one ofthe conclusions oflaw adopted by the Board ofIndustrial Insurance Appeals. But errorby the board (ifany) is not before us ifthe superior courtproperly dismissed the appeal on account ofFire Control's failure to establish undue hardship orprepay the taxes, penalties and interest assessed. Fire Control contends thatthe superior court improperly dismissedthe action because the court had, but failed to exercise, inherent authority to review department actions that were arbitrary or capricious. 

### It also contends that the superior court committed error in denying its request for waiver ofthe prepayment requirement based 

### 6No. 32440-1-II1 Fire ControlResources v. Dep't

## 0/ Labor & Indus.

on the court's misunderstanding aboutthe availability ofa bond. We address the issues in turn. Failure to exercise inherentauthority Article IV, section 6 ofthe Washington Constitution addresses thejurisdiction of superior courts and provides (among other matters) that superior courts and theirjudges "shall have power to issue writs ofmandamus, quo warranto, review [and] certiorari." Fire Control contends that the superior court erred in failing to exercise its "inherent authority" to issue writs ofcertiorari to address "administrative action which is contrary to law as well as that which is arbitrary and capricious," citing Pierce County Sheriff v. CivilService Commission/orSheriff's Employees

## 0/ Pierce County, 98 Wn.2d 690, 694, 658 P.2d 648 (1983), Saldin Securities, Inc. v. Snohomish County, 134 Wn.2d 288,292, 949 P.2d 370 (1998), Devine v. Department o/Licensing, 126 Wn. App. 941,955, 110 P.3d 237 (2005) and other cases. "The scope of judicialreview ofadministrative decisions in [the court's] inherent supervisory capacity is quite narrow," and is limited to '" determin[ing] if[the agency's] conclusions may be said to be, asa matter oflaw, arbitrary, capricious, or contrary to law.'" Williams v. Seattle Sch. Dist. No.1, 97 Wn.2d 215,221,643 P.2d 426 (1982) (emphasis omitted) (quotingHellandv. King County Civil Servo Comm 'n, 84 Wn.2d 858, 862,529 P.2d 1058 (1975)). "Arbitrary and capricious action has been defined as willful and unreasoning action, without consideration and in disregard offacts and 7No. 32440-1-III Fire ControlResources v. Dep't of Labor & Indus.

circumstances." State v. Rowe, 93 Wn.2d 277,284,609 P.2d 1348 (1980). "Wherethere is room for two opinions, action is not arbitrary and capricious even though one may believe an erroneous conclusion has beenreached." Id. The first problem with Fire Control's argument is that it is premised on claims that it never asserted inthe superior court. In the superior court, Fire Control framed its action as an administrative appeal. Itinitiated action in the superior court with a notice of appeal and petition forjudicial review, not a summons and complaint. Its notice of appeal did not request a writ ofcertiorari or writ ofreview. Itdid not identify the department's action as arbitrary or capricious. A word search ofthe entire record on appeal-both the report ofproceedings and clerk'spapers-reveals that the words "writ" and "certiorari" were never used anywhere, at any time. Itreveals thatthe words "arbitrary" and "capricious"were used only once, in Fire Control's combined reply/response brief-butnot in its argument; instead in a long block quote from a decision that Fire Control cited for the proposition that flawed service ofprocess violates due process. By no reasonable reading ofthe record did Fire Control invoke the inherent authority ofthe superior court to issue a writ ofcertiorari or imply that it was requesting such relief. The superior court could notbe expected to infer such a claim. "Although inexpertpleading is permitted, insufficient pleading is not." Kirby v. City of Tacoma, 124 Wn. App. 454, 470, 98 P.3d 827 (2004) (internal quotation marks omitted) (complaint did 8No. 32440-1-II1 Fire ControlResources v. Dep 't of Labor 

### &Indus.

not sufficiently assert a claim for deprivation ofFirstAmendmentrights where it failed to

use the words "FirstAmendment" or "free speech"). A second problem for Fire Control is that "although exercise ofthis inherent power [ofsuperior courts] is discretionary, it will not ordinarily occur ifeither a statutory writ or a direct appeal is available, unless the appellant can show good cause for not using those methods." Saldin, 134 Wn.2d at 292-93; see Bridle Trails Comm'ty Club v. City of Bellevue, 45 Wn. App. 248, 254, 724 P.2d 1110 (1986) (noting that review by constitutional writ ofcertiorari "is rarely granted where a petitionerhas failed to take advantage ofanother avenue ofreview without an adequate excuse"). Here, Fire Control had the right to appeal the board's decision to the superior court and it initially undertook to exercise that right. To perfect its appeal, however, it was required to eitherpay the assessed taxes or obtain a finding ofundue hardship. "An appeal from an administrative tribunal invokes the appellate, rather than the general, jurisdiction ofthe superior court." SkagitSurveyors andEng 'rs, LLCv. Friends of Skagit County, 135 Wn.2d 542, 555, 958 P.2d 962 (1998) (citing Union BayPreservation Coalition v. Cosmos Dev. & Admin. Corp., 127 Wn.2d 614, 617, 902 P.2d 1247 (1995)). "Acting in its appellate capacity, the superior court is oflimited statutoryjurisdiction, and all statutory procedural requirements must be met beforejurisdiction is properly invoked." Id. Where an employer fails to comply with RCW 51.52.112 by either "tenderingpayment ofthe assessment orrequesting an order ofundue hardship," a 9No. 32440-1-II1 Fire ControlResources v. Dep'tof Labor & Indus. superior court properly declines to exercisejurisdiction and dismisses the employer's appeal. Probst v. Dep'tof Labor & Indus., 155 Wn. App. 908, 916,919,230 P.3d 271 (2010). For two reasons, then, Fire Control fails to demonstrate that the superior court erred by failing to exercise its inherent authority to review arbitrary, capricious or unlawful action.4 Erroneous construction of bondrequirement Fire Control'sremaining argument is thatthe superior court misunderstood the nature ofthe surety bond market in deciding whetherto grant a hardship waiver. Itrelies

on the following exchange taking place atthe hearing on March 21: [FIRE CONTROL'S LAWYER]:

... [1]fl understood it correctly, [the department is] saying you can'teven hear [Fire Control's motion to dismiss] becausethe bond wasn'tposted. Andthat's correct; the bond wasn'tposted. And for the Court's edification, I can simply tell you the situation is this, interestingly so: You set the bond at, well, whatever it was, $20,000 or something like that, and the bonding companies insistthatthe entire bond plus $400 gets paid. So, you know, ifyou don'thave the full amount,

4 Fire Control asserts a seemingly related contention that itwas denied constitutional access to the courts. But it fails to demonstrate any denial ofaccess. '" [N]aked castings into the constitutional sea are not sufficient to commandjudicial consideration and discussion.'" In re Rosier, 105 Wn.2d 606, 616, 717 P.2d 1353 (1986) (quoting UnitedStates 

### v. Phillips, 433 F.2d 1364, 1366 (8th Cir. 1970)). Dueprocess requires only that an individual be afforded a reasonable right ofaccess, or a meaningful opportunity to be heard, absent an overriding state interest. Yurtis v. Phipps, 143 Wn. App. 680, 694, 181 P.3d 849 (2008). 10No. 32440-I-II1 Fire ControlResources v. Dep 't of Labor & Indus.

which you would have tendered to the Clerk ofthe Court in the first place, you wouldn'tneed the bond and save yourself400 bucks. THE COURT: They didn'tjustrequire ten percent? [FIRE CONTROL'S LAWYER]: Ten percent? No. THE COURT: Or 25 percent? [FIRE CONTROL'S LAWYER]: In appeal situations, apparently they require the 

### full amount up front. Why, I don'tknow, but that's life. RP at 2-3. Fire Control's argument appears to be that the superior court's decision not to waive the prepaymentrequirement was based on its mistaken beliefthat it was possible to obtain a bond in a tax appeal action at a cost that was a fraction ofthe penal sum. We could remand for a further hearing onundue hardship ifthe record suggested that the superior court abused its discretion in denying a waiver based on a misunderstanding oflaw or ofthe material facts. Among other things, discretion is abused when it is based on untenable grounds. Little v. King, 160 Wn.2d 696, 703, 161 P.3d 345 (2007). For three reasons no remand is needed here, however. First, Fire Control has not demonstrated thatthe superior court had a misunderstanding ofthe insurance market. A surety bond is a matter ofcontract. The terms available to a party will turn on the principal's creditworthiness. Fire Control does not demonstrate that no one can obtain a bond in a case such as this one without paying 100 percent ofthe penal sum plus a premium. The fact that insurers approachedby Fire Control required full collateralization might have turned onits creditworthiness orthe

same inadequate financial information that concerned the superior court.

11No. 32440-l-II1 Fire ControlResources 

### v. Dep'tof Labor & Indus. Second, Fire Control's lawyer explained his client's situation to the superior court. His explanation demonstrably did not change the court's mind. Third, the reason the court rejected Fire Control's request for a finding ofundue hardship was its failure to presentreliable evidence ofits current financial condition. The lawyer's representation about the surety market did not cure Fire Control's failure of proof. Fire Control fails to demonstrate that confusion on the part ofthe superior court requires that we remand for a new hearing on whether the prepayment requirement should have been waived. Attorney fees Fire Control requests attorney fees and costs underRAP 18.1, relying on RCW 51.52.130 and RCW4.84.350. RCW 51.52.130 provides for an award ofattorney fees to workers orbeneficiaries, and only where they successfully defend or improve their position on appeal. 

### It has no application here. And because Fire Control does not prevail on appeal, it is not entitled to attorney fees under RCW4.84.350(1).

12No. 32440-1-II1 Fire ControlResources v. Dep 't of Labor & Indus.

Affirmed. A majority ofthe panel has determined this opinion will notbeprinted inthe Washington Appellate Reports, but it will be filed for public record pursuantto RCW 2.06.040.

WE CONCUR:

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