PINEDA v. BANK OF AMERICA

Reset A A Font size: Print

Court of Appeal, First District, Division 3, California.

Jorge A. PINEDA, Plaintiff and Appellant, v. BANK OF AMERICA, N.A., Defendant and Respondent.

No. A122022.

Decided: January 21, 2009

Spiro Moss Barness LLP, Gregory N. Karasik, Los Angeles, for plaintiff and appellant. Paul, Hastings, Janofsky & Walker LLP, Maria A. Audero, Stephen P. Sonnenberg, Los Angeles, for defendant and respondent.

Plaintiff Jorge A. Pineda appeals an adverse judgment entered after the trial court granted a motion for judgment on the pleadings by defendant Bank of America, N.A.   He contends that the court applied the wrong statute of limitations to his claim under Labor Code 1 section 203 for penalties incurred for the late payment of wages;  that the court erred in concluding that section 203 penalties are not restitution within the meaning of Business and Professions Code section 17203;  and that the court abused its discretion in denying him leave to amend.   In the unpublished portion of this opinion we adopt the conclusion reached in McCoy v. Superior Court (2007) 157 Cal.App.4th 225, 233, 68 Cal.Rptr.3d 483, that the extended statute of limitations for the recovery of section 203 penalties found in that section applies only if the penalties are sought in conjunction with an action for recovery of the unpaid wages.   Since plaintiff here acknowledges that all wages due were paid before this action was filed, we reject his contention that the court erred in applying the one-year statute of limitations for an action upon a statute for a penalty found in Code of Civil Procedure section 340, subdivision (a), and we also reject the contention that the court abused its discretion in denying plaintiff leave to amend his complaint.   In the published portion of the opinion we affirm the trial court's conclusion that section 203 penalties may not be recovered as restitution under Business and Professions Code section 17203.

Factual and Procedural Background

Plaintiff's complaint, filed on October 22, 2007, alleges that “Plaintiff was employed by defendant Bank of America within the three-year period preceding the filing of the complaint․  Plaintiff gave Bank of America two weeks advance notice of his resignation, which occurred on May 11, 2006.   Bank of America did not pay him his final pay until May 15, 2006.”   Plaintiff seeks to represent a class of persons formerly employed by Bank of America “whose final wage payment occurred after their last day of employment.”   His first cause of action alleges that “Bank of America failed to pay plaintiff and members of the class final wages timely upon separation from employment in accordance with Labor Code section 201 or 202” and that as a result of Bank of America's conduct, “plaintiff and members of the class are entitled to recover the full amount of their continuation wages under Labor Code section 203․”  Plaintiff's second cause of action alleges that “[t]he unlawful conduct of Bank of America alleged herein constitutes unfair competition within the meaning of Business and Professions Code section 17200.”   As a result of the unfair competition, the pleading continues, “plaintiff and members of the class were deprived of their rights to timely payment of final wages ․ and were not paid continuation wages owed to them under Labor Code section 203.”   The complaint seeks “restitution of all the unpaid continuation wages” owed to plaintiff and other class members under Labor Code section 203.

The trial court ultimately granted defendant's motion for judgment on the pleadings.   The trial court concluded that plaintiff's claim under the Labor Code was barred by the one-year statute of limitations for the recovery of a penalty prescribed by Code of Civil Procedure section 340, subdivision (a), and that plaintiff could not allege a cause of action under the Unfair Competition Law (UCL) because section 203 penalties are not recoverable as restitution under Business and Professions Code section 17203.   The court denied plaintiff leave to amend to substitute a new plaintiff in the first cause of action.   Plaintiff filed a timely notice of appeal.

Discussion

1. Standard of Review

 “The standard of review for a motion for judgment on the pleadings is the same as that for a general demurrer:  We treat the pleadings as admitting all of the material facts properly pleaded, but not any contentions, deductions or conclusions of fact or law contained therein․  We review the complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any theory.”  (Dunn v. County of Santa Barbara (2006) 135 Cal.App.4th 1281, 1298, 38 Cal.Rptr.3d 316.)

2.-3.**

4. Penalties under section 203 cannot be recovered as restitution under the UCL.

Plaintiff's second cause of action alleges that defendant's failure to pay his final wages immediately upon termination constitutes an unfair business practice within the meaning of the UCL.   As set forth above, plaintiff's complaint does not seek restitution of unpaid wages.   He seeks only “restitution of all the unpaid continuation wages owed under Labor Code section 203.”   The trial court granted defendant's motion for judgment on the pleadings on the ground that continuation wages made payable by section 203 are a penalty, rather than wages, the recovery of which does not constitute restitution within the meaning of Business and Professions Code section 17203.2

 “A UCL action is an equitable action by means of which a plaintiff may recover money or property obtained from the plaintiff or persons represented by the plaintiff through unfair or unlawful business practices.   It is not an all-purpose substitute for a tort or contract action.  ‘[D]amages are not available under [Business and Professions Code] section 17203.’ ”   (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 173, 96 Cal.Rptr.2d 518, 999 P.2d 706;  Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1150, 131 Cal.Rptr.2d 29, 63 P.3d 937.)

 Unpaid wages can be recovered as restitution pursuant to Business and Professions Code section 17203.  “[A]n order that a business pay to an employee wages unlawfully withheld is consistent with the legislative intent underlying the authorization in [Business and Professions Code] section 17203 for orders necessary to restore to a person in interest money or property acquired by means of an unfair business practice.”  (Cortez v. Purolator Air Filtration Products Co., supra, 23 Cal.4th at p. 178, 96 Cal.Rptr.2d 518, 999 P.2d 706.)  “The concept of restoration or restitution, as used in the UCL, is not limited only to the return of money or property that was once in the possession of that person.   The commonly understood meaning of ‘restore’ includes a return of property to a person from whom it was acquired [citation], but earned wages that are due and payable pursuant to section 200 et seq. of the Labor Code are as much the property of the employee who has given his or her labor to the employer in exchange for that property as is property a person surrenders through an unfair business practice.   An order that earned wages be paid is therefore a restitution remedy authorized by the UCL.   The order is not one for payment of damages.”  (Id. at p. 178, 96 Cal.Rptr.2d 518, 999 P.2d 706.)

 Penalties under section 203, however, are not imposed as compensation for the labor of the employee, but are triggered by the employer's willful failure to timely pay the wages that have been earned.   As the court explained in Tomlinson v. Indymac Bank, F.S.B. (C.D.Cal.2005) 359 F.Supp.2d 891, 895, “the remedy contained in Section 203 is a penalty because Section 203 does not merely compel [the employer] to restore the status quo ante by compensating Plaintiffs for the time they worked;  rather, it acts as a penalty by punishing [the employer] for willfully withholding the wages and forces [the employer] to pay Plaintiffs an additional amount.   This type of payment clearly is not restitutionary, and thus cannot be recovered under the UCL.” (See also Montecino v. Spherion Corp. (C.D.Cal.2006) 427 F.Supp.2d 965, 967 [“ § 203 payments are clearly a penalty, and thus cannot be claimed pursuant to the UCL”];  In re Wal-Mart Stores, Inc. Wage and Hour Litigation (N.D.Cal.2007) 505 F.Supp.2d 609, 619;  Murphy, supra, 40 Cal.4th at pp. 1108-1109, 56 Cal.Rptr.3d 880, 155 P.3d 284.) 3

 Plaintiff argues that section 203 penalties are recoverable as restitution not for the employee's past services, but for a vested property interest wrongly retained by the employer.   Plaintiff suggests that an employee has a vested right to receive the penalty that arises immediately upon the employer's willful failure to pay final wages upon termination.   Relying on Korea Supply Co. v. Lockheed Martin Corp., supra, 29 Cal.4th at page 1150, 131 Cal.Rptr.2d 29, 63 P.3d 937, the plaintiff suggests that the employee's interest in the penalty payment can “be likened to ‘property’ converted by [the employer] that can now be the subject of a constructive trust.”   However, in Korea Supply, the court reiterated that “[t]o create a constructive trust, there must be a res, an ‘identifiable kind of property or entitlement in defendant's hands.’  [Citation.]  As the United States Supreme Court recently said, a constructive trust requires ‘money or property identified as belonging in good conscience to the plaintiff [which can] clearly be traced to particular funds or property in the defendant's possession.’ ”  (Ibid.)  Despite plaintiff's creative attempt to recharacterize the liability imposed by the statute, section 203 penalties do not meet this definition.   There is no automatic right to the penalty.   The employee must first bring an enforcement action and establish that the employer willfully failed to timely pay his or her wages.  (Murphy, supra, 40 Cal.4th at p. 1108, 56 Cal.Rptr.3d 880, 155 P.3d 284 [“Labor Code provisions imposing penalties state that employers are ‘subject to’ penalties and the employee or Labor Commissioner must first take some action to enforce them.   The right to a penalty ․ does not vest until someone has taken action to enforce it”];  see also People v. Durbin (1966) 64 Cal.2d 474, 479, 50 Cal.Rptr. 657, 413 P.2d 433 [“No person has a vested right in an unenforced statutory penalty or forfeiture”].)

Hence, the trial court properly granted defendant's motion for judgment on the pleadings with regard to plaintiff's second cause of action.

Disposition

The judgment is affirmed.   Defendant is to recover its costs on appeal.

FOOTNOTES

FN1. All statutory references are to the Labor Code unless otherwise noted..  FN1. All statutory references are to the Labor Code unless otherwise noted.

FOOTNOTE.   See footnote *, ante.

2.   Business and Professions Code section 17203 provides in pertinent part:  “Any person who engages, has engaged, or proposes to engage in unfair competition may be enjoined in any court of competent jurisdiction.   The court may make such orders or judgments, including the appointment of a receiver, as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition, as defined in this chapter, or as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.”

3.   We note that in Cortez v. Purolator Air Filtration Products Co., supra, 23 Cal.4th at pages 169-170, 96 Cal.Rptr.2d 518, 999 P.2d 706, the plaintiff sought to recover waiting time penalties in conjunction with her claim for unpaid wages under the Labor Code but did not seek to recover such penalties as restitution under the UCL.

POLLAK, Acting P.J.

Copied to clipboard