Opinion ID: 2543911
Heading Depth: 1
Heading Rank: 8

Heading: Relevant case law: Triad and Cardenas

Text: Smith next argues that merely winning a judgment in the trial de novo constitutes success in the appeal, and whether or not that judgment represents an improvement over or decrease in the commissioner's award is irrelevant. He relies on two decisions in support of his position: Triad, supra, 153 Cal.App.3d Supp. 1, 200 Cal. Rptr. 418 and Cardenas, supra, 226 Cal. App.3d 952, 277 Cal.Rptr. 247. RVLG disagrees and urges that success in an appeal from a commissioner's decision requires a more favorable result at the trial de novo than at the administrative hearing. The Court of Appeal rejected the reasoning of Cardenas and Triad and adopted a more favorable judgment standard. Triad was decided by the former appellate department of the Los Angeles Superior Court. ( Triad, supra, 153 Cal.App.3d Supp. 1, 200 Cal.Rptr. 418.) In that case the employee, a bookkeeper, was terminated less than three months after her employment status had been changed to a salaried employee pursuant to a written employment agreement. ( Id. at p. 5.) She filed a complaint with the commissioner and ultimately won an award that included $2,275 for wages or compensation and $2,310 for waiting time. (153 Cal.App.3d Supp. at p. 6, 200 Cal.Rptr. 418.) The employer elected a trial de novo in the municipal court, where judgment was entered for the employee as followsa reduced amount ($1,631) for principal, $1,000 for attorney fees, and $4,998 in treble punitive damages under section 206, subdivision (b). (153 Cal.App.3d at p. supp. 6.) The employer appealed to the former appellate department of the superior court, which court entered a new judgment striking the award of treble punitive damages, substituting in its stead the sum of $1,666 as waiting time penalties under section 203, and otherwise affirming the award of attorney fees and costs to the nonappealing employee, even though the net judgment recovered by the employee in the trial de novo was less than she had recovered in the administrative hearing before the commissioner. (153 Cal.App.3d Supp. at p. 15, 200 Cal.Rptr. 418.) In its appeal to the former appellate department of the superior court, the employer in Triad sought to establish ... success in the trial de novo by comparing the judgment issued by the trial court with the award or decision of the commissioner. ( Triad, supra, 153 Cal.App.3d Supp. at p. 14, 200 Cal.Rptr. 418.) Over a vigorous dissent, the Triad majority rejected the employer's argument as without merit, concluding an employer seeking judicial review is unsuccessful in the appeal if trial de novo results in any judgment for the employee, even if it is lower than that which the commissioner originally awarded. As the Triad court put it: the statutory language contained in section 98.2, subdivision (b) [now (c) ] of `unsuccessful in [the] appeal', should be given the inverse meaning to that of `prevailing party' which is well settled in this state. The prevailing party is the party in whose favor final judgment is rendered. [Citation.] `The general rule is that net recovery is the basis upon which attorneys' fees are computed. [Citation.]' [Citation.] We find that the defendant [employee] `prevailed,' or, conversely, the plaintiff [employer] was `unsuccessful' below. The trial judge properly granted attorney's fees and costs to defendant [employee] pursuant to ... section 98.2. ( Triad, supra, 153 Cal. App.3d Supp. at p. 15, 200 Cal.Rptr. 418.) In Cardenas, the Second District Court of Appeal, relying heavily on the majority decision in Triad, reached a similar conclusion. In that case the commissioner had awarded the employee overtime pay, waiting time penalties, and interest. ( Cardenas, supra, 226 Cal.App.3d at pp. 955-956, 277 Cal.Rptr. 247.) The employer opted for a trial de novo in the superior court, which court rendered a judgment for the employee reducing the compensation awarded by the commissioner for overtime pay, affirming the awards of waiting time penalties and interest, and adding an award of statutory attorney fees. ( Id. at P. 957, 277 Cal.Rptr. 247.) On appeal, the employer contested the award of attorney fees, arguing that it was not unsuccessful in the appeal (§ 98.2(c)) for purposes of the fee statute because the court's award of overtime pay was less than that of the Labor Commissioner.... (226 Cal.App.3d at pp. 959-960, 277 Cal. Rptr. 247.) The Cardenas court rejected the employer's argument, holding as follows: Appeal to a court of the Labor Commissioner's order is not an appeal in the usual sense; rather, it is a trial de novo. (... § 98.2 [, subd.] (a).) For an appellant to be considered the successful party when seeking judicial review of an award of the Labor Commissioner, the judgment of the trial court must completely eliminate the Labor Commissioner's prior award. (See Triad Data Services, Inc. v. Jackson [, supra ,] 153 Cal.App.3d [Supp. at p. 14, 200 Cal.Rptr. 418]....) ... [¶] In the present case, the judgment of the trial court was not in favor of [the employer]. The court found against [the employer] on all the issues in this case. The fact that the amount of overtime wages awarded by the Labor Commissioner was reduced by the trial court is irrelevant. [The employee] was the prevailing party. ( Cardenas, supra, 226 Cal.App.3d at p. 960, 277 Cal. Rptr. 247.) [8] We first observe that Cardenas and Triad are factually distinguishable from the case before us since both decisions involved employer appeals. As the Court of Appeal below observed, This distinction carries significant practical consequences. Although [section 98.2(c) ] does not distinguish between [employer and employee appeals], and although appeals by either party in theory may slow wage payments, only employer appeals involuntarily delay payment. Even Smith acknowledges that an employee appeal `does not thwart the overriding policy interest in making an employer pay wages when due.' To the extent that the reasoning of [Cardenas and Triad ] derives from the fact that they were both employer appeals, their rationale is inapplicable here. This distinction was not lost on the dissenting judge in Triad. After observing that section 98.2, subdivision (a) explicitly contemplates that either party may appeal a decision of the commissioner, and that the purpose of section 98.2(c) is to provide for fee shifting against either party who unsuccessfully seeks review of such a decision, be it the employer or the employee, the dissenting judge in Triad explained: The majority's interpretation of [section 98.2(c) ] would not accomplish this purpose. Under that interpretation, an award of such sanctions against the employer is made to depend entirely upon whether in the trial de novo appeal the employee recovers any amount, no matter how small and no matter how much less than the award of the Labor Commissioner. In circumstances similar to the present case, in which the employer has appealed an admittedly unjustly high award, he is penalized for exercising his appeal rights by being compelled to pay the costs and attorneys' fees of the employee whose recovery has been properly reduced. In the converse circumstance, of an employee's appeal, an equally unjust result would follow. An employee dissatisfied with an award might appeal and, after a trial de novo, recover no greater, or even a far lesser sum, but under the majority's reasoning he would not be `unsuccessful in such appeal.' The result of this reasoning is to penalize employers for taking meritorious appeals and to reward employees for taking unmeritorious ones. ( Triad, supra, 153 Cal.App.3d Supp. at p. 30, 200 Cal.Rptr. 418 (dis. opn. of Foster, P.J.).) Apart from the factual differences between employer and employee appeals, the Triad and Cardenas courts further erred in concluding that the commissioner's decision must be entirely disregarded when applying the fee-shifting mandate of section 98.2(c). As a practical matter, whether the party electing a trial de novo after the commissioner issues a decision and award is successful in that appeal cannot be determined without comparing the trial court's judgment to the earlier administrative award from which the appeal was taken. On this point we again agree with the Court of Appeal belowthe judicial arbitration statute provides an apt analogy: In a trial de novo after judicial arbitration, the court `hears the evidence and makes its decision based on that evidence. It is imperative in cases such as these that the trier of fact reach its decision independently and without any reference to the arbitrator's findings....' ( Weber v. Kessler, supra, 126 Cal.App.3d at p. 1036, 179 Cal.Rptr. 299.) `However, in order to comply with [the cost-shifting provisions of Code of Civil Procedure] section 1141.21 and insure that the costs of the arbitration and trial are borne by the proper party, the court must refer to the arbitrator's findings at some point prior to entry of judgment.' ( Ibid.) By parity of reasoning, the same logic applies to trials de novo following decisions and awards of the commissioner, in which trials the court hears the evidence anew, and must reach its decision based on that new evidence, with the decision of the commissioner `entitled to no weight whatsoever ....' ( Post v. Palo/Haklar & Associates, supra, 23 Cal.4th at p. 948, 98 Cal. Rptr.2d 671, 4 P.3d 928, quoting Sales Dimensions v. Superior Court, supra, 90 Cal.App.3d at p. 763, 153 Cal.Rptr. 690.) As the Court of Appeal below aptly observed, the requirement of [a trial de novo] is satisfied as soon as the evidentiary proceedings end with a decision on the merits by the trial court. The de novo trial requirement [does not, in law or logic,] foreclose[ ] subsequent consideration of the commissioner's decision for [the limited] purpose[ ] of determining success in the trial court [for cost and fee-shifting purposes under section 98.2(c) ]. Indeed, given the informal nature of a Berman hearing, the commissioner has no occasion to consider, much less award, attorney fees or other costs in the administrative proceeding in the first instance. As the Court of Appeal opined, in order to comply with the mandate of section 98.2[ (c) ] and to insure that the proper party bears the costs of the de novo trial, the court must compare its judgment to the commissioner's award in order to assess the appealing party's success. To do otherwise [would] contravene[ ] the statute's purpose. (Italics added) As previously noted, the Triad court concluded that the statutory language contained in [section 98.2(c) ] of `unsuccessful in [the] appeal', should be given the inverse meaning to that of `prevailing party' which is well settled in this state. The prevailing party is the party in whose favor final judgment is rendered. [Citation.] ( Triad, supra, 153 Cal.App.3d Supp. at p. 15, 200 Cal.Rptr. 418.) The Cardenas court adopted Triad's reasoning, putting it in even terser terms: For an appellant to be considered the successful party when seeking judicial review of an award of the Labor Commissioner, the judgment of the trial court must completely eliminate the Labor Commissioner's prior award. (See Triad Data Services, Inc. v. Jackson [, supra ,] 153 Cal.App.3d Supp. 1, 14, 200 Cal.Rptr. 418.) ( Cardenas, supra, 226 Cal.App.3d at p. 960, 277 Cal. Rptr. 247.) In short, both the Triad and Cardenas courts went well beyond a mere holding that the commissioner's findings must be disregarded when determining the appealing party's success, for statutory fee and cost-shifting purposes, in a trial de novo following the commissioner's decision and award. We find the very wording and nature of the rule adopted by those courts to be strong evidence that they were focusing primarily on the employer appeals before them when seeking to construe the language of section 98.2(c). In suggesting that the judgment of the trial court must completely eliminate the Labor Commissioner's prior award, the Cardenas court must have had as its principal focus the circumstance that, in the context of the employer appeal before it, unless the employer obtains a complete victory in the trial de novo, any resulting judgment for the employee, even a judgment of $1, will render the employee the prevailing party at trial and the employer liable for the employee's fees and costs. But of course the same harsh rule must be applied in employee appeals as well, because the statutory language itself makes no distinction between employer and employee appeals, and as we have explained, the legislative purpose behind section 98.2(c) is to discourage frivolous and meritless appeals from the commissioner's decisions by either party. Hence, under the Triad/Cardenas test, in an employee appeal, as in the case now before us, unless the appealing employee loses every last dollar of the commissioner's prior award, he or she will be deemed successful in the appeal. Put otherwise, the Triad/Cardenas courts' construction of section 98.2(c) shields an appealing employee from virtually all risk of fee and cost shifting, because an employee appealing from the commissioner's award is all but guaranteed some kind of judgment on appeal. [9] On the other hand, it penalizes an employer who files a meritorious appeal and succeeds in substantially reducing the employee's administrative awardonly in the rare case, in which an employee's award is reduced to zero, would an appealing employer be able to avoid liability for the employee's attorney fees and costs in the de novo trial. As with the judicial arbitration and statutory settlement fee-shifting statutes, section 98.2(c) is designed to penalize appealing employers and employees who turn to the courts after rejecting what, in retrospect, was a reasonable commissioner's award. (Cf. Bodell Construction Co. v. Trustees of Cal. State University, supra, 62 Cal.App.4th at p. 1518, 73 Cal.Rptr.2d 450 [settlement offer].) We have shown that the legislative purpose behind section 98.2(c)'s fee-shifting provision is to discourage frivolous and meritless appeals by either party from the commissioner's decisions. As a practical matter, whether an appeal is unsuccessful for purposes of assigning fees and costs can only be determined with the benefit of hindsight by comparing the trial court's judgment with the prior administrative award. There is no legal impediment to doing so. The Cardenas/Triad test is at odds with each of these principlesit erroneously assumes comparison of the awards in each forum is prohibited as a matter of law; it encourages rather than discourages marginal employee appeals, because employees run little risk of liability for employer fees and costs in such appeals; and it discourages meritorious employer appeals, because employers who win a partial victory will still be liable for the employee's fees and costs except for the rare case in which the employee's award is reduced to zero.