Hobbs Constr. v. Dep't of Indus. Relations, D074385

HOBBS CONSTRUCTION, INC., Plaintiff and Respondent, v. DEPARTMENT OF INDUSTRIAL RELATIONS,DIVISION OF LABOR STANDARDS ENFORCEMENT et al., Defendants and Appellants.

D074385

COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA

November 22, 2019

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 37-2017-00036419-CU-MC-CTL)

APPEAL from an order of the Superior Court of San Diego County, Kenneth J. Medel, Judge. Reversed.

David D. Cross and Lance A. Grucela for Defendants and Appellants.

Finch, Thornton & Baird and Chad T. Wishchuk for Plaintiff and Respondent.

IINTRODUCTION

Hobbs Construction, Inc. (Hobbs) obtained a writ of mandate against the Division of Labor Standards Enforcement (Division), the Department of Industrial Relations (DIR), and former DIR director Christine Baker (collectively, appellants) compelling them to set aside a $149,200 civil wage and penalty assessment imposed against Hobbs for alleged violations of the Prevailing Wage Law (Lab. Code, § 1720 et seq.). Thereafter, the trial court awarded Hobbs $53,165.95 in attorney fees under Code of Civil Procedure section 1021.5,¹ the private attorney general attorney fee statute.

Appellants challenge the attorney fee order on grounds that Hobbs did not satisfy its burden of establishing that the writ proceeding conferred a significant benefit on the general public or a large class of persons. Alternatively, they claim the order was improper because the cost of Hobbs's legal victory did not transcend its personal interest in the litigation. We conclude there is merit to both arguments. Therefore, we reverse.

IIBACKGROUND

A

In 2014, Hobbs entered into a contract with the City of Tracy to provide construction services for park renovations. While construction was ongoing, the Divisionreceived a complaint indicating Hobbs may have underpaid at least one of its employees who worked on the project. Therefore, it issued requests for payroll records to Hobbs demanding, among other documents, original time cards for all work performed on the project. The Division issued its requests under Labor Code section 1776, subdivision (b), which requires public works contractors to furnish or make available certified copies of payroll records upon request, and Code of Regulations, title 8, section 16000, which defines payroll records to include time cards. Hobbs produced several categories of documents in response to the Division's requests, but not original time cards.

The Division issued a $149,200 civil wage and penalty assessment against Hobbs under Labor Code section 1776, subdivision (h), based on Hobbs's failure to produce original time cards. Hobbs sought administrative review of the assessment and, following an administrative hearing, the Director of the DIR affirmed the assessment. The Director found the assessment was warranted after concluding the Division was statutorily authorized to request original time cards from covered contractors, the Division "had a valid need for ... time cards to check the accuracy" of Hobbs's payments to its workers, and Hobbs failed to produce the original time cards as requested.

B

In 2017, Hobbs filed a petition for writ of mandate against appellants, requesting vacatur of the administrative decision and an injunction prohibiting imposition of the challenged assessment. Hobbs contended Labor Code section 1776 did not authorize the Division to request original time cards from public works contractors and the Divisionthus acted without or in excess of its jurisdiction by requesting original time cards from Hobbs and levying an assessment against Hobbs for not producing original time cards.

The trial court granted the petition for writ of mandate. It reasoned that appellants did not proceed in a manner required by law because, under Labor Code section 1776, the Division may assess penalties only when a public works contractor fails to produce or make available certified copies of payroll records and, in the present case, Hobbs provided all certified payroll records requested by the Division. The court opined that "[t]o the extent the [administrative] regulations expand[ed] the definition of payroll records" for which a penalty may be assessed to include uncertified payroll records, the regulations "would be inconsistent with Labor Code Section 1776." Therefore, the court declared the assessment "unwarranted" and vacated the administrative decision.

C

Based on its litigation success, Hobbs filed a motion seeking an award of attorney fees against the Division and the DIR pursuant to section 1021.5. Hobbs asserted its challenge to the assessment and the administrative decision conferred a significant benefit on the public because the Division had purportedly levied similar improper assessments "against other public works contractors and sub-contractors throughout the state." According to Hobbs, the writ of mandate issued in the present case stood "in the way" of the Division's alleged efforts to impose these invalid assessments. Further, Hobbs contended the necessity and financial burden of private enforcement were such as to make an award appropriate because Hobbs "carried a heavy financial burden" in seeking a writ of mandate and "received no personal benefit in the form of affirmativedamages." Hobbs requested $53,165.95 in fees, which it incurred in connection with its response to the assessment, the administrative appeal, and the petition for a writ of mandate.

As the basis for its claim the Division levied improper assessments "in other cases and against other contractors," Hobbs cited an administrative decision, In re Ornelas Enterprises, Inc. dba Ornelas Electric Construction, Pub. Works Case No. 2015-0240, October 31, 2016 (Ornelas), in which the Division requested payroll records from a public works subcontractor, including worker time cards, and the Director of the DIR affirmed an assessment against the subcontractor for failing to produce the requested records.² Hobbs also filed a request for judicial notice of a spreadsheet it received from the Division in response to a Public Records Act request, which reflected all civil wage and penalty assessments imposed by the Division since January 1, 2013. The spreadsheet stated the case number, contractor and subcontractor name(s) and address(es), project name, and assessment amount for 360 cases. It did not indicate which payroll records were requested, which documents were produced, or the bases for the assessments in any of the listed cases.

The Division and the DIR opposed Hobbs's motion for attorney fees on grounds that Hobbs filed the action to protect its own pecuniary interests and, furthermore, theaction did not confer a significant benefit on the general public or a large class of persons. As to the latter argument, they claimed Hobbs did not establish the Division had a pattern or practice of levying assessments against public works contractors for failing to produce uncertified "backup" documents. In particular, they argued the spreadsheet for which Hobbs sought judicial notice included "no proof or analysis showing that any of the[] other cases involved a request for anything other than certified payroll records." Further, they claimed the writ issued in the present case had no precedential value and thus did not benefit any public works contractor other than Hobbs.

The trial court granted the motion, without making any express factual findings, and issued Hobbs an attorney fee award in the requested amount. Appellants appeal the order granting the motion for attorney fees.³

IIIDISCUSSION

A

" '[T]he Legislature adopted section 1021.5 as a codification of the "private attorney general" attorney fee doctrine that had been developed in numerous prior judicial decisions.' " (Conservatorship of Whitley (2010) 50 Cal.4th 1206, 1217(Whitley).) Section 1021.5 "is an exception to the general rule in California, commonly referred to as the American rule and codified in section 1021, that each party to a lawsuit must ordinarily pay his or her own attorney fees." (Adoption of Joshua S. (2008) 42 Cal.4th 945, 954.) Its objective is " ' " 'to encourage suits effectuating a strong [public] policy by awarding substantial attorney's fees ... to those who successfully bring such suits and thereby bring about benefits to a broad class of citizens.' " [Citation.] The [private attorney general attorney fee] doctrine rests upon the recognition that privately initiated lawsuits are often essential to the effectuation of the fundamental public policies embodied in constitutional or statutory provisions, and that, without some mechanism authorizing the award of attorney fees, private actions to enforce such important public policies will as a practical matter frequently be infeasible.' " (Whitley, at pp. 1217-1218.)

"A court may award attorney fees under section 1021.5 only if the statute's requirements are satisfied. Thus, a court may award fees only to 'a successful party' and only if the action has 'resulted in the enforcement of an important right affecting the public interest ....' [Citation.] Three additional conditions must also exist: '(a) a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons, (b) the necessity and financial burden of private enforcement ... are such as to make the award appropriate, and (c) such fees should not in the interest of justice be paid out of the recovery, if any.' " (Vasquez v. State of California (2008) 45 Cal.4th 243, 250-251.) "The burden is on the claimant to establish each prerequisite to an award of attorney fees under section 1021.5." (Ebbetts PassForest Watch...