Employment
Personal Liability for Unpaid Wages. In Morgan v. Kingen, 166 Wn.2d 526, the Supreme Court affirmed personal liability of a chief executive officer and a chief operating officer (debtors in possession) under RCW §§ 49.52.050 and .070 for employee wages when the debtors converted a Chapter 11 bankruptcy to a Chapter 7 proceeding and controlled which debts of the employing entity would be paid and “whether to continue running an inadequately capitalized corporation.”
The statute provides for an employer’s personal liability for willfully depriving wages. A class action was filed and certified in state court, and liability was imposed on summary judgment.
Bottom line: Employers are not personally immune from claims for wages; an illiquid corporation provides a setting for such claims.
“Concerted Activities” under RCW § 49.32.020. The Supreme Court wrestled with RCW § 49.32.020 in Briggs v. Nova Services, 166 Wn.2d 794. The labor statute provides in part that a worker shall “be free from interference, restraint, or coercion of employers of labor, or their agents, in the designation of such representatives or in self-organization or in other concerted activities for the purpose of collective bargaining or other mutual aid or protections.”
The employees in Briggs worked under the supervision of an executive director and alleged that they were wrongfully terminated by their employer after complaining to the board of directors about their boss and walking off the job. They asserted that their conduct constituted “concerted activity.” The trial court entered summary judgment for the employer and director, finding that the employees had not engaged in concerted activities protected under RCW § 49.32.020.
The Court of Appeals affirmed, as did the Supreme Court, albeit via multiple opinions. The justices differed as to whether a claim for violation of the policies of RCW § 49.32.020 was a claim for wrongful discharge in violation of public policy or its own claim. The justices were more unified in agreeing that the activities at issue were not concerted activities because they did not relate to the employees’ working conditions, but were complaints about mismanagement, and that they did not want to create broad exceptions to Washington’s general rule of at-will employment.
Bottom line: If you have a “concerted activities” case, you will have to sort carefully through the opinions in Briggs.
The 2007 Amendments to Definition of “Disability” Are Retroactive. The Supreme Court held that when the Legislature amended RCW § 49.60.040(25)(a)2 to provide a substantive definition of “disability” that was broader than the definition in the Americans with Disabilities Act, it could and did make the new definition retroactive. [Hale v. Wellpinit School Dist. No. 49, 165 Wn.2d 494.] Thus, there is only a narrow window of time, between the Supreme Court’s July 6, 2006 decision in McClarty v. Totem Elec., 157 Wn.2d 214 (2006), and the effective date of the 2007 amendments, when the narrower definition of “disability” will apply.
Bottom line: The Legislature intends a broad view of “disability” and acted in response to Supreme Court case law to correct what the Legislature viewed as a misinterpretation.
Land Use
“Date Certain” Vesting Rule Affirmed. The Supreme Court applied the “date certain” vesting rule codified by the Legislature in RCW § 19.27.095, which states that development rights vest upon the filing of a complete building permit application. In general, the Washington rule is more protective of development rights than the majority rule which requires both obtaining a building permit and substantial development for vesting.
In Abbey Road Group, LLC, v. City of Bonney Lake, 167 Wn.2d 242, the developer sought leniency in that rule based on the circumstances of his filing pursuant to the locality’s rules. The Supreme Court declined to apply other principles, including due process or “fundamental fairness,” to support a different vesting date.
Bottom line: Continues Washington’s approach for certainty in development process.
Fines for Code Violations Unconstitutional; No LUPA-Hole. The Supreme Court invalidated fines levied administratively pursuant to a city building code in Post v. City of Tacoma, 2009 Wash. LEXIS 970. The Court also found that the subject-matter fell outside the Land Use Petition Act pursuant to RCW § 36.70C.020(a)(c), which excludes enforcement that is “required by law … in a court of limited jurisdiction.”
The Court held that the fines had to be enforced in the courts and, therefore, fell within this exception. As a result, LUPA deadlines did not bar the action. The Court then invalidated the city’s procedure for administratively levying successive fines under its building code without an opportunity to be heard.
Bottom line: You can fight city hall.
Business
Liability of Dissolved LLCs. The Supreme Court clarified that cancellation of an LLC will truncate its liability, regardless of whether the three-year statute of limitations has run from its dissolution. In the consolidated cases Chadwick Farms Owners Ass’n v. FHC, LLC and Emily Lane Homeowners Ass’n v. Colonial Dev., LLC, 166 Wn.2d 178 (2009), the Court reviewed RCW § 25.15.270, which permits an LLC to be dissolved administratively by the Secretary of State, judicially or voluntarily. The LLC is cancelled only when a certificate of cancellation is filed with the Secretary of State. A claim against the LLC can be brought three years after it is dissolved or until it is cancelled, whichever occurs first.
Bottom line: LLCs should file a certificate of cancellation promptly if dissolving. Plaintiffs should not delay on the assumption that they have three years from dissolution to file suit.
Arbitration
Narrow Public Policy Exception To Enforcing Arbitration Decisions. In Kitsap County Deputy Sheriff’s Guild v. Kitsap County, 2009 Wash. LEXIS 979, decided on October 29, the Supreme Court reaffirmed the policy of limited review for arbitral decisions, holding that a court should reverse an arbitration decision on public policy grounds only if the policy is “explicit,” “well defined” and “dominant.” With that, it found that a police officer’s truthfulness does not touch upon a sufficiently defined public policy and, thus, reinstated the arbitrator’s decision to reverse his termination.
Bottom line: Courts will second guess an arbitration result only in very limited circumstances.
Sanctions
$8 Million Default Judgment as Discovery Sanction. On Nov. 29, in Magaña v. Hyundai Motor Am., 2009 Wash. LEXIS 1066. the Supreme Court found that Hyundai’s “false, misleading and evasive” responses to written discovery substantially prejudiced the plaintiff and that the trial court’s decision to impose a default sanction for $8 million was not an abuse of discretion. The opening paragraph captures the Court’s message:
Trial courts need not tolerate deliberate and willful discovery abuse. Given the unique facts and circumstances of this case, we hold that the trial court appropriately diagnosed Hyundai’s willful efforts to frustrate and undermine truthful pretrial discovery efforts by striking its pleadings and rendering an $8,000,000 default judgment plus reasonable attorney fees. This result appropriately compensates the other party, punishes Hyundai, and hopefully educates and deters others so inclined.
Hyundai maintained that it was reasonable to search for responsive records only in its legal department. The Court saw this, however, as an attempt to use the legal department “as a shield” and characterized Hyundai’s behavior, which included a failure to meaningfully respond to discovery requests without first seeking a protective order, as “atrocious.”
Bottom line: Appellate courts will defer to trial courts on sanctions with very little “safety net” on review. Always seek a protective order to narrow the scope of discovery if you think it is too broad or if you intend to provide limited responses. On the flip side, supported by the dissent, if you do not like the completeness of the answers you receive in discovery, move to compel immediately.
1 This list is not intended to be comprehensive. In fact, some of the year’s most important cases are not included here because they have been discussed in prior Bar Bulletin articles.
2 See Laws of 2007, ch. 317, § 1.
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