Su v. Monsoon Blue, Inc.

JULIE SU, as Commissioner etc., Plaintiff and Respondent, v. THE MONSOON BLUE, INC., Defendant and Appellant.

B259323

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN

February 16, 2016

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. BS148828)

APPEAL from an order of the Superior Court of Los Angeles County, Michael M. Johnson, Judge. Affirmed.

Frank A. Weiser for Defendant and Appellant.

The State of California, Division of Labor Standards Enforcement, Department of Industrial Relations, Deborah D. Graves, for Plaintiff and Respondent.

____________________ The Monsoon Blue, Inc., doing business as Udupi Palace, a restaurant in Artesia, appeals from the order entered after the superior court granted the Division of Labor Standards Enforcement (DLSE)'s petition to enforce an administrative subpoena commanding Monsoon Blue to produce employee and payroll-related documents.¹ Monsoon Blue contends the order enforcing the subpoena violates several provisions of the federal Constitution. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. The DLSE's Investigation and Subpoena Duces Tecum

In November 2013 the DLSE initiated an investigation into Monsoon Blue's employment practices after obtaining information indicating it had failed to properly pay employees for all hours worked or to maintain appropriate payroll records as required under the Labor Code and governing administrative regulations. On May 2, 2014 the DLSE issued a subpoena duces tecum commanding Monsoon Blue to appear on May 6, 2014 at the Office of the Labor Commissioner and produce certain employment and wage-related documents.² After Monsoon Blue failed to appear, California Labor Commissioner Julie Su petitioned the superior court on behalf of the DLSE to compelMonsoon Blue's compliance with the administrative subpoena. (See Lab. Code, § 93; Gov. Code, § 11186.) On June 26, 2014 the superior court issued an order to show cause why the administrative subpoena should not be enforced. In the same order the court provided a briefing schedule and set a hearing date for September 29, 2014.

Deputy Labor Commissioner Steve Moreno testified in a declaration supporting the DLSE's petition that he had issued and personally served the subpoena in May 2014 in connection with the DLSE's investigation of Monsoon Blue's wage practices. Moreno explained the subpoena requested documents required to be maintained under governing Industrial Welfare Commission Wage Order No. 5-2001 (see Cal. Code Regs., tit. 8, § 11050) and were necessary to evaluate Monsoon Blue's compliance with labor laws and governing regulations and determine and assess penalties, if any.

Monsoon Blue opposed the petition, arguing that, in seeking its private business records, the administrative subpoena violated its privilege against self-incrimination under the Fifth and Fourteenth Amendments to the United States Constitution. It also argued the subpoena was overbroad and constituted an unreasonable search in violation of the Fourth Amendment.³

On September 29, 2014, following the hearing on the order to show cause, the superior court granted the DSLE's petition, ruling Monsoon Blue's constitutional arguments were without merit: The constitutional privilege against self-incrimination, the court explained, is a personal right that does not apply to corporations and may not be invoked by a corporate agent to withhold corporate documents on the ground the agent or the corporation may be incriminated. The court also found the subpoena was properly authorized, sufficiently narrow in scope and did not constitute an unreasonable search in violation of the Fourth Amendment.

DISCUSSION

1. Standard of Review

The DLSE is charged with enforcing Labor Code provisions and Industrial Welfare Commission orders governing wages, hours and working conditions of California employees. (See Lab. Code, § 71 et seq.; see also Cal. Code Regs. tit. 8, § 11050 [wage order No. 5-2001 governing persons employed in public housekeeping industry, including restaurant industry].) It has broad investigatory powers and duties, including the authority to issue subpoenas compelling the attendance of witnesses and production of documents. (Lab. Code, § 74 [authorizing issuance of administrative subpoena to compel attendance and production of books and records]; see Craib v. Bulmash (1989) 49 Cal.3d 475, 478 (Craib) [DLSE statutorily empowered to conduct an investigation and subpoena records to determine whether entity under investigation has violated Labor Code provisions and wage and hour regulations it is charged with enforcing].)

On appeal from an order compelling compliance with an administrative subpoena, the superior court's determination on undisputed facts whether the subpoena violates the federal or California Constitution is a question of law subject to de novo review. (City of San Diego v. Shapiro (2014) 228 Cal.App.4th 756, 770; Committee for Responsible School Expansion v. Hermosa Beach City School Dist. (2006) 142 Cal.App.4th 1178, 1184; Millan v. Restaurant Enterprises Group, Inc. (1993) 14 Cal.App.4th 477, 485.)

2. Monsoon Blue, a Corporation, Does Not Have a Federal Constitutional Privilege Against Self-incrimination

The United States Supreme Court has held for more than a century the Fifth Amendment privilege against self-incrimination applies to, and may be invoked by, natural persons, not corporations or other organizations. (Braswell v. United States (1988) 487 U.S. 99, 102 [108 S.Ct. 2284, 101 L.Ed.2d 98] ["[w]e have long recognized that, for purposes of the Fifth Amendment, corporations and other collective entities are treated differently from individuals"]; Doe v. United States (1988) 487 U.S. 201, 206 [108 S.Ct. 2341, 101 L.Ed.2d 184] [corporate bank may not invoke Fifth Amendment indeclining to produce documents; "the privilege does not extend to such artificial entities"]; United States v. White (1944) 322 U.S. 694, 699 [64 S.Ct. 1248, 88 L.Ed. 1542 (White) ["[s]ince the privilege against self-incrimination is a purely personal one, it cannot be utilized by or on behalf of any organization, such as a corporation"]; Hale v. Henkel (1906) 201 U.S. 43, 70 [26 S.Ct. 370, 50 L.Ed. 652] [the privilege against self-incrimination "is limited to a person who shall be compelled in any criminal case to be a witness against himself; and if he cannot set up the privilege of a third person, he certainly cannot set up the privilege of a corporation"]; see George Campbell Painting Corp. v. Reid (1968) 392 U.S. 286, 288-289 [88 S.Ct. 1978, 20 L.Ed.2d 1094]; see also Brovelli v. Superior Court of Los Angeles County (1961) 56 Cal.2d 524, 529 ["[n]either the corporation nor a person having custody of its records can refuse to produce them on the basis of the privilege against self-incrimination"].)

"The reason underlying the restriction of this constitutional privilege to natural individuals acting in their own private capacity is clear. The scope and nature of the economic activities of incorporated and unincorporated organizations and their representatives demand that the constitutional power of the federal and state governments to regulate those activities be correspondingly effective. The greater portion of evidence of wrongdoing by an organization or its representatives is usually to be found in the official records and documents of that organization. Were the cloak of the privilege to be thrown around these impersonal records and documents, effective enforcement of many federal and state laws would be impossible. [Citations.] The framers of the constitutional guarantee against compulsory self-disclosure, who were interested primarily in protecting individual civil liberties, cannot be said to have intended the privilege to be available to protect economic or other interests of such organizations so as to nullify appropriate governmental regulations." (White, supra, 322 U.S. at p. 700.)

Addressing what it concedes is a seemingly "impregnable line" of authority rejecting application of the Fifth Amendment privilege against self-incrimination to corporations, Monsoon Blue offers an imaginative, but illusory, argument: The Supreme Court cases rejecting a privilege against self-incrimination for corporations and theiragents have all done so in the context of federal actions considering the Fifth Amendment itself, not the Fourteenth Amendment's incorporation of Fifth Amendment protections against state encroachment as an element of due process. (See Malloy v. Hogan (1964) 378 U.S. 1, 3 [84 S.Ct. 1489, 12 L.Ed.2d 653].) Corporations are considered "persons" protected under the due process and equal protection clauses of the Fourteenth Amendment. (See Grosjean v. American Press Co. (1936) 297 U.S. 233, 244 [56 S.Ct. 444, 80 L.Ed. 660] ["a corporation is a 'person' within the meaning of the equal protection and due process of law clauses"]; Louis K. Liggett Co. v. Lee (1933) 288 U.S. 517, 536 [53 S.Ct. 481, 77 L.Ed. 929] ["[c]orporations are as much entitled to the equal protection of the laws guaranteed by the Fourteenth Amendment as are natural persons"].) Thus, Monsoon contends, the Fourteenth Amendment protects a broader class of "persons" than the Fifth Amendment. A corporation, therefore, may assert by virtue of the Fourteenth Amendment what it cannot under the Fifth Amendment: a constitutional privilege against self-incrimination.

The Supreme Court has expressly rejected similar arguments that the protections against state action incorporated into the Fourteenth Amendment are broader than the rights set forth in the Bill of Rights itself. (See McDonald v. City of Chicago ...