The Art of War as a Criminal Lawyer in Houston Texas

Filed 6/3/09

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

RANDELL JOHNSON,

Plaintiff and Appellant,

v.

ARVIN-EDISON WATER STORAGE DISTRICT,

Defendant and Respondent.

F056201

(Super. Ct. No. S-1500-CV-261871)

O P I N I O N

APPEAL from a judgment of the Kern County Superior Court. Arthur E. Wallace, Judge.

Palay Law Firm, Daniel J. Palay and Jenna H. Strauss for Plaintiff and Appellant.

Atkinson, Andelson, Loya, Ruud & Romo, Nate J. Kowalski, Kevin R. Dale and Jennifer D. Cantrell; Young Wooldridge, Ernest A. Conant and Jerry W. Pearson for Defendant and Respondent.

Renne Sloan Holtzman Sakai, Emily Prescott and Danielle DuCaine for Association of California Water Agencies as Amicus Curiae on behalf of Defendant and Respondent.

Richard L. Hamilton for Education Legal Alliance of the California School Boards Association as Amicus Curiae on behalf of Defendant and Respondent.

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Appellant, Randell Johnson, filed a class action complaint against respondent, Arvin-Edison Water Storage District (District), alleging that he, and a putative class of current and former District employees, had not been paid overtime and provided with meal breaks in accordance with the California Labor Code and the Industrial Welfare Commission (IWC) wage orders. The District demurred to the complaint on the ground that, as a public entity, it is exempt from the subject wage and hour statutes. The trial court agreed with the District and sustained the demurrer.

Appellant argues that, contrary to the trial court’s ruling, public employers are subject to the California wage and hour provisions at issue unless they are expressly made exempt. According to appellant, under statutory construction rules, it is evident that the Legislature intended that water storage districts provide their employees with overtime and meal periods as required by Labor Code sections 510 and 512, and IWC Wage Order No. 17. Appellant further asserts that these Labor Code requirements will not infringe on the execution of the District’s sovereign powers.

Additionally, appellant argues the District is required to immediately pay wages due upon an employee’s termination or resignation under sections 201 and 202 and is subject to penalties for failure to do so under section 203. Although “other municipal corporations” are exempt from these requirements under section 220, subdivision (b), appellant contends the District does not qualify as such.

As discussed below, unless Labor Code provisions are specifically made applicable to public employers, they only apply to employers in the private sector. Since sections 510 and 512 do not expressly apply to public entities, they are not applicable here. Further, applying sections 510 and 512 to the District would infringe on its sovereign power to regulate its workforce. Also, IWC Wage Order No. 17 is inapplicable to this case. Finally, the District is a “municipal corporation” and, therefore, is exempt from sections 201, 202, and 203. Accordingly, the trial court correctly sustained the District’s demurrer and the judgment will be affirmed.

BACKGROUND

The District was formed as a water storage district in 1942 under Water Code section 39000 et seq., and has been designated as a “public agency of the State of California.” As a water storage district, it acts in the nature of irrigation, reclamation, or drainage districts. (Wat. Code, § 39060.) Specifically, the District operates facilities for storage and distribution of water. (Wat. Code, § 43000.) As part of this operation, the District has the power to: set tolls and charges for the use of water (Wat. Code, § 43006); issue bonds (Wat. Code, § 45100); buy and sell property (Wat. Code, §§ 43500, 43507); acquire property it deems necessary by condemnation (Wat. Code, § 43530); sue or be sued (Wat. Code, § 43700); and contract (Wat. Code, §§ 43005, 44000).

The District is governed by an elected board of directors (Wat. Code, §§40302, 40658) that is expressly charged with power and authority in the nature of “police and regulatory powers … necessary to the accomplishment of a purpose that is indispensable to the public interest” (Wat. Code, § 39059). This authority includes the power to hire employees, set employees’ compensation, and prescribe employees’ duties. (Wat. Code, §§ 40356, 43152, subd. (c).)

In compensating its employees, the District complies with the wage and hour laws set forth in the federal Fair Labor Standards Act (FLSA). (29 U.S.C. § 201 et seq.) Appellant contends that the District is subject to the more stringent California Labor Code provisions and wage order, specifically section 510, requiring overtime be paid for any work performed in excess of eight hours in one work day, and section 512, requiring specific meal periods. Under the FLSA, employees are only entitled to overtime wages for work performed in excess of 40 hours in a work week and meal periods are not required.

The trial court concluded the District was exempt from these California wage and hour statutes and IWC Wage Order No. 17. Accordingly, the trial court sustained the District’s demurrer to the complaint without leave to amend.

DISCUSSION

At issue in this appeal is the construction of the relevant statutes and wage orders. The facts are not in dispute. Therefore, this court is faced with questions of law requiring independent review. (County of Fresno v. Malaga County Water Dist. (2002) 100 Cal.App.4th 937, 941.)

In construing a statute, the court’s fundamental task is to ascertain and effectuate the intent of the Legislature. (County of Fresno v. Malaga County Water Dist., supra, 100 Cal.App.4th at p. 941.) The statutory language itself is the most reliable indicator. Therefore, the first step is to scrutinize the statute’s words, assigning them their usual and ordinary meanings, and construing them in context. (Wells v. One2One Learning Foundation (2006) 39 Cal.4th 1164, 1190.) However, if the language allows more than one reasonable construction, the court looks to such aids as the legislative history of the measure and maxims of statutory construction. (Ibid.)

1. The District, as a public agency, is exempt from sections 510 and 512.

a. The genesis of sections 510 and 512.

The IWC, established by Legislature in 1913, was the state agency authorized to formulate the regulations, or wage orders, that govern employment in California. (Industrial Welfare Com. v. Superior Court (1980) 27 Cal.3d 690, 700.) In fulfilling its broad statutory mandate to regulate wages, hours, and working conditions of California employees, the IWC acted in a quasi-legislative capacity. (Id. at p. 702.) Although the IWC was defunded effective July 1, 2004, its wage orders remain in effect. (Bearden v. U. S. Borax, Inc. (2006) 138 Cal.App.4th 429, 434, fn. 2.)

Effective January 1, 1998, the IWC eliminated daily overtime from five of the then existing 15 wage orders. (Assem. Bill No. 60 (1999-2000 Reg. Sess.) 3d reading as amended July 1, 1999.) These five wage orders covered the following industry or occupational groups: manufacturing; professional, clerical, mechanical and similar occupations; public housekeeping industry; mercantile industry; and transportation industry. (Ibid.) In response, the Legislature passed, and the Governor signed, Assembly Bill No. 60 (1999-2000 Reg. Sess.), the Eight-Hour-Day Restoration and Workplace Flexibility Act of 1999. (Bearden v. U.S. Borax, Inc., supra, 138 Cal.App.4th at p. 434.) Among other things, this legislation restored the eight-hour workday in section 510 and mandated meal periods in section 512.

Section 510 provides that eight hours of labor constitutes a day’s work. It then sets forth the various minimum overtime rates for work in excess of eight hours in one workday, 40 hours in one workweek, and 12 hours in one workday, and hours worked on the seventh day of work in a workweek. Section 512 sets forth requirements for meal periods for employees working more than five hours per day. Neither section either expressly applies to, or exempts, public entities. The District’s status as a public entity is undisputed on appeal.

b. Public agencies are not subject to a general statute.

Appellant argues that the District is subject to sections 510 and 512 because those sections do not exempt public entities. According to appellant, if the Legislature had intended to exempt public entities, it could easily have done so. Appellant notes that both sections contain certain exemptions. Section 510 exempts employees working pursuant to an alternative workweek schedule and section 512 exempts employees in the wholesale baking, motion picture, or broadcasting industry who are covered by valid collective bargaining agreements.

However, traditionally, “absent express words to the contrary, governmental agencies are not included within the general words of a statute.” (Wells v. One2One Learning Foundation, supra, 39 Cal.4th at p. 1192.) The Legislature has acknowledged that this rule applies to the Labor Code. In the context of reviewing the legislative history of an amendment to provide whistleblower protection to public employees (§ 1102.5), the court in Campbell v. Regents of University of California (2005) 35 Cal.4th 311, quoted the Senate Committee on Industrial Relations as follows: “‘These provisions are silent as to their applicability to public employees. Generally, however, provisions of the Labor Code apply only to employees in the private sector unless they are specifically made applicable to public employees.’” (35 Cal.4th at p. 330.) Thus, appellant’s position is contrary to an established rule that has been recognized by the Legislature, i.e., public entities are not subject to a general statute unless expressly included. The Legislature’s iteration of this rule is an indication that the Legislature follows it.

c. Maxims of statutory construction indicate the Legislature did not intend sections 510 and 512 to apply to public agencies.

Further, appellant’s interpretation of sections 510 and 512 violates two maxims of statutory construction. Sections 510 and 512 are contained in division 2, part 2, chapter 1 of the Labor Code, which encompasses sections 500 through 558. Section 555 provides that the sections in this chapter pertaining to maximum consecutive working days (sections 550, 551, 552 and 554), “are applicable to cities which are cities and counties and to the officers and employees thereof,” i.e., to specified public entities. Thus, the Legislature has expressly applied certain wage and hour provisions to public entities.

If this court were to hold that, because not expressly exempted, public entities are subject to sections 510 and 512, we would be implying a term that has been used in one place, i.e., section 555, but excluded in another, i.e., sections 510 and 512. Such an interpretation would violate the maxim that “when the Legislature ‘has employed a term or phrase in one place and excluded it in another, it should not be implied where excluded.’” (Pasadena Police Officers Assn. v. City of Pasadena (1990) 51 Cal.3d 564, 576.) The reference to public entities in section 555 indicates that, in the context of wage and hour provisions, the Legislature expressly refers to public entities when it intends them to be included.

Additionally, if the Legislature intended chapter 1 to be generally applicable to public entities, section 555 is unnecessary. “When two statutes touch upon a common subject, they are to be construed in reference to each other, so as to ‘harmonize the two in such a way that no part of either becomes surplusage.’” (DeVita v. County of Napa (1995) 9 Cal.4th 763, 778.) Construing sections 510 and 512 as applying to public entities violates this maxim of statutory construction by rendering section 555 surplusage.

Appellant points to two other sections contained within division 2, part 2, chapter 1 to support his position. According to appellant, based on sections 515 and 512.5, it can be inferred that the Legislature intended sections 510 and 512 to apply to public entities.

Section 515 grants the IWC the power to establish exemptions from the overtime requirements for executive, administrative and professional employees. However, no reference is made to public employees. Thus, contrary to appellant’s position, this section does not indicate a legislative intent to apply section 510 to public employers.

Section 512.5 provides that, “if the Industrial Welfare Commission adopts or amends an order that applies to an employee of a public agency who operates a commercial motor vehicle, it may exempt that employee from the application of the provisions of that order which relate to meal periods or rest periods .…” According to appellant, by providing the IWC with the power to exempt public agency employees, it is logical to infer that the Legislature intended section 512 and the IWC wage orders to automatically include public agency employees. However, neither the statute’s language nor its legislative history support appellant’s interpretation.

Section 512.5 provides for a two-step process. The IWC must first adopt or amend an order that applies to one specific type of public agency employee, i.e., an employee who operates commercial motor vehicles. This section was enacted in anticipation of such an IWC action. (Assem. Bill No. 98 (2003-2004 Reg. Sess.) as amended March 12, 2003.) Further, in analyzing Assembly Bill No. 98, the Senate Committee on Labor and Industrial Relations recognized that, under existing law, public employers were exempt from the meal and rest period provisions. Thus, section 512.5 merely codifies a potential limited IWC wage order exception to the general public employer exemption. It does not indicate a legislative intent to automatically apply section 512 and IWC wage orders to public employers.

d. Sections 510 and 512 would infringe on the District’s sovereign powers.

Finally, appellant relies on the “sovereign powers” maxim of statutory construction. As noted above, a traditional rule of statutory construction is that, in the absence of express words to the contrary, governmental agencies are not included within the general words of a statute. (Wells v. One2One Learning Foundation, supra, 39 Cal.4th at p. 1192.) However, under the “sovereign powers” maxim, government agencies are excluded only if their inclusion would result in an infringement upon sovereign governmental powers. (Ibid.) “‘“Where … no impairment of sovereign powers would result, the reason underlying this rule of construction ceases to exist and the Legislature may properly be held to have intended that the statute apply to governmental bodies even though it used general statutory language ….”’” (Regents of University of California v. Superior Court (1976) 17 Cal.3d 533, 536.) Nevertheless, “while the ‘sovereign powers’ principle can help resolve an unclear legislative intent, it cannot override positive indicia of a contrary legislative intent.” (Wells v. One2One Learning Foundation, supra, 39 Cal.4th at p. 1193.)

As discussed above, the indicia of legislative intent lead to the conclusion that the District, as a public entity, is exempt from sections 510 and 512. In any event, the District is also exempt under the “sovereign powers” maxim. If the District were subjected to sections 510 and 512, its sovereign powers would be infringed upon.

A statute infringes upon a public entity’s sovereign powers if the statute affects the entity’s governmental purposes and functions. (Regents of University of California v. Superior Court, supra, 17 Cal.3d at p. 537.) Appellant argues that overtime and meal period provisions have nothing to do with the District’s functions. However, the District can only perform its purposes and functions through its employees. As the Attorney General has opined, “‘it is manifest that the relationship between a public employer and its employees affects the fundamental purposes and functions of the governmental body.’” (71 Ops.Cal.Atty.Gen. 39, 43 (1988).)

One of the statutory powers granted to the District to enable it to accomplish its purposes is the power to set employees’ compensation. (Wat. Code §§ 39059, 43152, subd. (c).) Sections 510 and 512 address matters of employee compensation. (Curcini v. County of Alameda (2008) 164 Cal.App.4th 629, 643, 645.) Accordingly, sections 510 and 512 would affect the District’s power to accomplish its purposes and thus would infringe upon its sovereign powers. Therefore, the trial court correctly concluded that the District was exempt from the requirements of sections 510 and 512.

2. Wage Order No. 17 is inapplicable.

As discussed above, the IWC formulated the regulations, or wage orders, that govern employment in California. Each wage order applies to a different classification of employee. For example, Wage Order No. 1 applies to the manufacturing industry, Wage Order No. 2 applies to the personal service industry, and Wage Order No. 4 applies to professional, technical, clerical, mechanical and similar occupations.

The IWC promulgated Interim Wage Order – 2000, effective March 1, 2000, to implement wage order amendments required by Assembly Bill No. 60. At a public meeting held January 9, 2001, the IWC voted to change the name of “Interim Wage Order – 2000” to “Wage Order 17 – Regulating Miscellaneous Employees.”

Wage Order No. 17 applies to “any industry or occupation not previously covered by, and all employees not specifically exempted in, the Commission’s wage orders in effect in 1997, or otherwise exempted by law.” (Cal. Code Regs., tit. 8, § 11170.) Although the majority of the wage orders expressly exempt public employees, this wage order does not. Nevertheless, Wage Order No. 17 does not alter the public employee exemptions in the prior wage orders.

At the January 2001 hearing on Wage Order No. 17, one of the IWC commissioners explained that this wage order would apply to an industry that was “something altogether new that couldn’t be identified as belonging in any other wage order.” However, water districts have existed in California since before the IWC was created in 1913. (See, e.g., Jenison v. Redfield (1906) 149 Cal. 500.) Accordingly, the IWC must have been aware of this industry when Wage Order No. 17 was enacted, i.e., it was not “altogether new.” In fact, in its January 2003 pamphlet entitled “WHICH IWC ORDER? Classifications,” a guide for determining the classifications of businesses and occupations under the IWC orders, the Division of Labor Standards Enforcement stated that it had not “identified any occupations that meet the definition of ‘miscellaneous employees’ in Industrial Welfare Commission Order 17-2001.”

Appellant contends that Wage Order No. 17 applies to the District’s employees and thus, the District is liable for violating this wage order’s overtime and meal period requirements. According to appellant, “the District and its employees are subject to the provisions of Wage Order No. 17 because they are part of an industry and occupation not covered in any other Wage Order.”

However, the operative complaint does not allege that the District violated Wage Order No. 17. Moreover, aside from the bald assertion that this industry and occupation are not covered in any other wage order, appellant provides no argument or explanation to support his position. In light of the history of, and the IWC’s comments regarding, Wage Order No. 17, this deficiency is not surprising. No basis for applying Wage Order No. 17 to the District appears to exist and appellant has not demonstrated otherwise.

3. The District is exempt from the requirements of sections 201, 202 and 203 because it qualifies as a “municipal corporation.”

Sections 201 and 202 require an employer to immediately pay wages to an employee upon that employee’s termination, layoff or resignation. Section 203 imposes penalties against an employer who willfully fails to pay such wages in accordance with sections 201 and 202. However, under section 220, subdivision (b), these sections do not apply to “employees directly employed by any county, incorporated city, or town or other municipal corporation.”

Appellant contends that sections 201, 202 and 203 apply to the District because the District is not exempt as an “other municipal corporation.” According to appellant, in the context of the Labor Code, the term “municipal corporation” should be narrowly and strictly construed. However, case law is contrary to appellant’s position.

In Division of Labor Law Enforcement v. El Camino Hosp. Dist. (1970) 8 Cal.App.3d Supp. 30, the court concluded that the Legislature did not intend the term “municipal corporation” to be used in its strict or proper sense, i.e., to mean an incorporated city or town. Rather, in the context of section 220, “other municipal corporation” refers to “municipal corporations in the commonly accepted sense–namely, public corporations or quasi-municipal corporations.” (8 Cal.App.3d Supp. at p. 35.) In other words, the term applies to a corporation exercising a governmental function. (Ibid.)

In contexts other than the Labor Code, it has long been established that irrigation districts and water districts are municipal corporations. (Metropolitan W. Dist. v. Co. of Riverside (1943) 21 Cal.2d 640; Nissen v. Cordura Irr. Dist. (1928) 204 Cal. 542, 544.) “It is no longer open to doubt that the legal status of an irrigation district is that of a municipal corporation. Although its duties and powers are of narrower scope in the subjects of their action than in the case of a city, or other general municipal organization, nevertheless the affairs concerning which such district does act are those ‘of a public corporation to be invested with certain political duties which it is to exercise in behalf of the state.’” (People v. Cardiff Irr. Dist. (1921) 51 Cal.App. 307, 312.) Although the specific functions of irrigation districts, water districts, and water storage districts may differ, there is no essential difference between them. Their principal function of supplying water is the same. (Rock Creek etc. Dist. v. County of Calaveras (1946) 29 Cal.2d 7, 12.)

As discussed above, water storage districts are governed by elected boards of directors that have regulatory and police powers to operate facilities for storage and distribution of water, “a purpose that is indispensable to the public interest.” (Wat. Code, § 39059.) These powers include setting tolls and charges for the use of water, issuing bonds, and acquiring property through eminent domain. Additionally, as with other local agencies, water storage districts are subject to open meeting laws and their records are subject to public disclosure. (Wat. Code, §§ 40656, 40657.) Thus, water storage districts perform an essential governmental function for a public purpose, i.e., the development, preservation and conservation of water for the beneficial use of the district’s inhabitants (cf. City of Modesto v. Modesto Irrigation District (1973) 34 Cal.App.3d 504, 507), through an elected board of directors with regulatory powers. As such, water storage districts qualify as other municipal corporations under section 220, subdivision (b). Accordingly, the trial court correctly concluded that the District is exempt from the requirements of sections 201, 202 and 203.

DISPOSITION

The judgment is affirmed. Costs on appeal are awarded to respondent.

_________________________

Levy, J.

WE CONCUR:

_______________________________

Vartabedian, Acting P.J.

_______________________________

Cornell, J.

Tags: defending people, Mark Bennett, Published

Filed 6/3/09 CERTIFIED FOR PARTIAL PUBLICATION*

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

BRANDON S., a Minor, etc.,

Plaintiff and Appellant,

v.

THE STATE OF CALIFORNIA ex rel. FOSTER FAMILY HOME AND SMALL FAMILY HOME INSURANCE FUND,

Defendant and Respondent.

B196249

(Los Angeles County

Super. Ct. No. BC333074)

APPEAL from a judgment of the Superior Court of Los Angeles County, Elihu M. Berle, Judge. Affirmed.

Law Offices of Sanford Jossen and Sanford Jossen, Esq., for Plaintiff and Appellant.

Edmund G. Brown, Jr., Attorney General, Doulas M. Press, Assistant Attorney General, Jennifer M. Kim and Chara L. Crane, Deputy Attorneys General, for Defendant and Respondent.

INTRODUCTION

In response to the inability of foster parents to obtain insurance for claims arising from foster parent activities, the Legislature created the Foster Family Home and Small Family Home Insurance Fund (the Fund). (Health & Saf. Code, § 1527 et seq.) The Fund has the statutory obligation, subject to procedural and financial limitations, to pay claims filed by foster children against foster parents for occurrences arising from the foster-care relationship. However, the Legislature limited the Fund’s liability by enacting section 1527.3 to exclude coverage for eight classes of claims. At issue here is the exclusion of subdivision (a), under which the Fund is not liable for “any loss arising out of a dishonest, fraudulent, criminal, or intentional act.” (Italics added.)

Appellant Brandon S., a foster child, was molested by the stepson of his licensed foster mother, Monique M. Through his guardian ad litem, he filed a claim with the Fund, alleging that Monique M.’s negligent supervision resulted in the molestation. He sought damages for emotional and physical injuries caused by the molestation. Based on the exclusion for “any loss arising out of a . . . criminal act” (§ 1527.3, subd. (a)), the Fund denied the claim. Brandon then filed a complaint in the superior court for declaratory relief against the Fund and for negligent supervision against Monique M. Following Monique M.’s default, the court held a bench trial on Brandon’s declaratory relief claim against the Fund, and also heard his default prove up against Monique M. The court awarded Brandon $250,000 in damages against Monique M., but ruled that the Fund had no liability based upon the statutory exclusion of section 1527.3, subdivision (a).

On appeal, Brandon contends that the statutory exclusion does not apply to claims arising from a third party’s criminal conduct. Rather, he construes the statute to bar claims arising only from criminal conduct of a foster parent. We disagree. The unambiguous language of the statute bars any loss arising from a criminal act, whether the act was committed by the foster parent or a third party. Indeed, in four other subdivisions of section 1527.3, the Legislature expressly tied the specified exclusions to conduct by the foster parent. That the Legislature did not so limit the exclusion of subdivision (a) suggests that the omission was intentional. Moreover, nothing in the relevant legislative history supports Brandon’s interpretation of the statute. Further, when creating the Fund, the Legislature also sought to deal with the insurance crisis by enacting Insurance Code section 676.2, now Insurance Code section 676.7, to ensure that foster parents will have access to homeowner’s, tenant’s, and liability insurance, including liability coverage for the type of claim involved here. We hold, therefore, that section 1527.3, subdivision (a), precludes the Fund’s liability for losses caused by criminal acts, whether committed by the foster parent or a third party.

Brandon further contends that the trial court’s ruling violates equal protection. Because Brandon did not raise this claim below, it has been forfeited. Lastly, Brandon urges that the trial court awarded him insufficient damages in his action against Monique M. In the non-published portion of this opinion, we reject that claim. We therefore affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

The parties presented the case on the following stipulated facts. Brandon is a dependent of the juvenile court (Welf. & Inst. Code, § 300). In July 2003, when he was nearly 12 years old, he was placed in a licensed foster home operated by Monique M. Three other dependent minors also resided there. Monique M.’s 13-year old stepson Eric B. regularly visited the home. During these visits, Eric B. sexually molested Brandon and two of the other children living there.

In February 2004, the police arrested Eric B. Brandon was removed from the home. Proceedings were commenced against Eric B. in juvenile court (Welf. & Inst. Code, § 602), resulting in Eric B.’s admission that he had committed a lewd act on a child under 14 years of age. (Pen. Code, § 288, subd. (a).) The Department of Social Services revoked Monique M.’s license, finding that she provided negligent supervision for the children under her care.

Brandon, through his guardian ad litem, filed a claim with the Fund in which he sought damages for “emotional and physical injuries” arising from the molestation, and alleged that Monique M.’s negligent supervision caused the molestation. The Fund denied the claim, relying on the exclusion of section 1527.3, subdivision (a). Brandon then filed suit in superior court in which he alleged a cause of action against Monique M. for negligent supervision and sought declaratory relief that the Fund was obligated to pay his claim for damages arising out of Monique M.’s negligence. Monique M. failed to respond and a default was entered against her.

At a combined default prove up against the Monique M. and declaratory relief trial against the Fund, two issues were presented for the trial court to resolve. The first was the legal issue whether the Fund was liable for Brandon’s claim. The trial court concluded that the statutory exclusion under section 1527.3, subdivision (a), for any loss arising out of a criminal act precluded the Fund’s liability because Brandon’s damages directly arose from Eric B.’s criminal sexual molestation. The second issue was factual: whether Monique M. was liable to Brandon based on her negligent supervision. The trial court found that she had been negligent in leaving Brandon unsupervised in the care of Eric B. who then sexually molested him. The court awarded Brandon $250,000 in damages against Monique M.

This appeal by Brandon follows.

DISCUSSION

1. Historical Background

In 1986, the Legislature recognized that a crisis existed in the ability of foster family homes and small family homes to obtain homeowner’s, renter’s, and liability insurance to cover the rising number of claims made against them by foster children and their parents or legal guardians. The Legislature further recognized that this inability put the personal assets of foster parents at risk and imperiled the foster care system. (§ 1527, stats. 1986, ch. 1330; see Hill v. Newkirk (1994) 26 Cal.App.4th 1047, 1052.) The Legislature addressed these problems in two interrelated ways.

First, the Legislature created the Fund by adding section 1527, et seq., to the Health and Safety Code. “The purpose of the fund is to pay, on behalf of foster family homes and small family homes . . . , claims of foster children, their parents, guardians, or guardians ad litem resulting from occurrences peculiar to the foster-care relationship and the provision of foster-care services.” (§ 1527.1.) Thus, section 1527.2 provides in relevant part that “the fund, subject to this article, shall pay, on behalf of foster family homes and small family homes, any claims of foster children, their parents, guardians, or guardians ad litem for damages arising from, and peculiar to, the foster-care relationship and the provision of foster-care services, or shall reimburse foster family homes and small family homes for those damages.”

Section 1527.6 requires a claimant to file a claim with the Fund “within the applicable period of limitations for the appropriate civil action underlying the claim” (§ 1527.6, subd. (b)), and forbids any civil action against the foster parent unless such a claim has been rejected, or has been approved and paid and damages in excess of the payment are sought (§ 1527.6, subd. (d).) Section 1527.5 provides: “The fund shall be liable, if a claim is approved, to pay on behalf of each licensed foster family home or small family home, all sums which the foster family home or small family home is obligated to pay as a result of a valid claim of bodily injury or personal injury arising out of the activities of a foster parent or foster parents, which occurs while the foster child resides in the foster family home or small family home. Claims specified in this section of a foster child or a parent, guardian, or guardian ad litem of a foster child shall be the sole responsibility of the fund.”

In creating the Fund, however, the Legislature limited amount of the Fund’s liability, and the classes of claims for which the Fund is liable. Section 1527.4 provides: “Notwithstanding any other provision of this article, the fund shall not be liable for damages in excess of three hundred thousand dollars ($300,000) for any single foster family home . . . for all claims arising due to one or more occurrences during a single calendar year.” Moreover, the Legislature excluded coverage for eight classes of classes of claims. Section 1527.3 provides:

“The fund shall not be liable for any of the following:

“(a) Any loss arising out of a dishonest, fraudulent, criminal, or intentional act.

“(b) Any occurrence which does not arise from the foster-care relationship.

“(c) Any bodily injury arising out of the operation or use of any motor vehicle, aircraft, or watercraft owned or operated by, or rented or loaned to, any foster parent.

“(d) Any loss arising out of licentious, immoral, or sexual behavior on the part of a foster parent intended to lead to, or culminating in, any sexual act.

“(e) Any allegation of alienation of affection against a foster parent.

“(f) Any loss or damage arising out of occurrences prior to October 1, 1986.

“(g) Exemplary damages.

“(h) Any liability of a foster parent which is uninsured due solely to the foster parent’s failure to obtain insurance specified in former Section 676.2 now section 676.7 of the Insurance Code. Nothing in this subdivision shall be construed to expand the liability of the fund with respect to insured foster parents.” (Italics added.)

At the same time the Legislature created the Fund, the second way it addressed the insurance crisis facing foster parents was to add section 676.2 (now section 676.7; see fn. 5, ante) to the Insurance Code, seeking to ensure that foster parents would be able to obtain homeowner’s, tenant’s, and personal liability insurance policies. The statute prohibits insurers from refusing to issue and from cancelling homeowner’s or tenant’s policies for the sole reason that the insured engages in licensed foster care activities (Ins. Code, § 676.7, subd. (a)), and it requires coverage for a foster child under such policies to be the same as that for a natural child (id., subd. (b)). The statute, however, includes certain limitations on the liability coverage of homeowner’s and tenant’s policies issued to foster parents. Thus, it provides that “it is against public policy for a policy of homeowner’s or tenant’s insurance subject to this section to provide liability coverage for” certain specified losses (id., subd. (c)), including losses “of a type payable by” the Fund. (Id., subd. (c)(1).) The statute also excludes homeowner’s and tenant’s policies issued to foster parents from covering some of the same losses excluded from coverage by the Fund: “Alienation of affection of a foster child,” “Any loss arising out of licentious, immoral, or sexual behavior on the part of a foster parent intended to lead to, or culminating in, any sexual act,” and “Any loss arising out of a dishonest, fraudulent, criminal, or intentional act.” (Id., subds. (c)(3) through (5), italics added; compare § 1527.3, subds. (a), (d), and (e).)

Although the Legislature thus precluded a homeowner’s or tenant’s policy from providing liability coverage for certain losses arising from the foster care relationship, it did not leave foster parents without recourse to liability insurance to cover such losses. As to claims arising from the foster care relationship that are not excluded from homeowner’s and tenant’s policies, the statute permits insurers to “provide a special endorsement to a homeowners’ or tenants’ policy covering” such claims. (Ins. Code, § 676.7, subd. (e).) As to claims arising from the foster care relationship that are excluded from homeowner’s and tenant’s policies, the statute permits an insurer to “provide by a separate policy for some or all of” such claims. (Ins. Code, § 676.7, subd. (f).) As here relevant, therefore, insurers may provide separate foster care liability policies to cover claims that the statute excludes from homeowner’s and tenant’s policies, including, inter alia, claims for “any loss arising out of a . . . criminal . . . act” (id., (c)(5).) Of course, under Insurance Code section 533, no such insurance policy may provide coverage for criminal conduct by the insured foster parent. But it may provide coverage for a foster parent’s negligent supervision that results in a foster child being injured by the criminal conduct of a third party.

2. Analysis of the Fund’s Liability for Brandon’s Claim

As we have noted, the Fund’s purpose is to pay claims of a foster child “resulting from occurrences peculiar to the foster-care relationship and the provision of foster-care services.” (§ 1527.1.) Brandon argues that his claim falls within that broad mandate because he has successfully established that Monique M. was negligent and that her negligence resulted in his sexual molestation by Eric B. He further contends that section 1527.3 contains no specific exclusion for “claims by foster children against foster parents arising out of the foster child relationship which result from the illegal acts of third parties as a result of the negligence of foster parents.” (Underlining omitted; italics in original.) Therefore, according to Brandon, the Fund is required to pay the claim.

In determining the scope of the Fund’s liability, we are guided by well-settled principles. Interpretation of a statute is a question of law. (California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 699.) We conduct a de novo review of the trial court’s decision. (Bialo v. Western Mutual Ins. Co. (2002) 95 Cal.App.4th 68, 76-77.) When the statutory language is clear, it governs. (McPherson v. City of Manhattan Beach (2000) 78 Cal.App.4th 1252, 1260.)

Section 1527.3 provides: “The fund shall not be liable for any of the following: (a) Any loss arising out of a dishonest, fraudulent, criminal or intentional act.” (Italics added.) Here, it is undisputed that Brandon’s “loss” directly arises out Eric B.’s criminal conduct: Brandon seeks monetary damages to compensate him for the harm caused by the molestation. Under the plain meaning of the statute, therefore, the Fund is not obligated to pay the claim. That Monique M.’s negligence permitted the molestation to occur is irrelevant to the exclusion. The “loss” arises out of Eric B.’s criminal conduct, and any loss arising out of criminal conduct is excluded.

Brandon argues that subdivision (a) should be read to exclude coverage only for a criminal act committed by a foster parent as opposed to a third party. He urges that the “exception set forth in section 1527.3 (a) is clearly ambiguous because it does not indicate whether it refers solely to the criminal acts of foster parents or to the criminal act of anyone.” We find no ambiguity. The Fund is not liable for “any loss arising out of a . . . criminal . . . act.” The word “any” is not ambiguous. “The ordinary meaning of the word ‘any’ is clear, and its use in a statute unambiguously reflects a legislative intent for that statute to have a broad application. Citations.” (Department of California Highway Patrol v. Superior Court (2008) 158 Cal.App.4th 726, 736.) Here, use of the word “any” conveys the intent to exclude all losses arising from criminal acts, without restriction. (See Delaney v. Superior Court (1990) 50 Cal.3d 785, 798 “the word ‘any’ means without limit and no matter what kind”; see also Department of California Highway Patrol v. Superior Court, supra, 158 Cal.App.4th at p. 736.)

Thus, under section 1527.3, subdivision (a), the Fund has no liability for “any loss” caused by a criminal act regardless of whether the perpetrator is the foster parent or a third party. “Where the language of the statute is unambiguous, the Legislature is presumed to have meant what it said and the plain meaning of the statute governs.” (Tucker Land Co. v. State of California (2001) 94 Cal.App.4th 1191, 1198.)

Moreover, the Legislature knew how to limit exclusions to an act of the foster parent. Each of the exclusions found in section 1527.3, subdivisions (c), (d), (e) and (h), is explicitly based upon conduct by the foster parent. Thus, subdivision (c) precludes coverage for “any bodily injury arising out of the operation or use of any motor vehicle, aircraft, or watercraft owned or operated by, or rented or loaned to, any foster parent.” (Italics added.) Subdivision (d) applies to losses “arising out of licentious, immoral, or sexual behavior on the part of a foster parent intended to lead to, or culminating in, any sexual act.” (Italics added.) Subdivision (e) applies to “any allegation of alienation of affection against a foster parent,” and subdivision (h) to “any liability of a foster parent which is uninsured due solely to the foster parent’s failure to obtain insurance specified in Section 676.2 now section 676.7 of the Insurance Code.” (Italics added in both; see also fn. 5, ante.)

By contrast, subdivision (a) contains no language limiting the excluded losses to prohibited conduct by the foster parent. It applies, as here relevant, to “any loss arising out of a . . . criminal . . . act.” The only reasonable conclusion from this broad language is that the Legislature consciously chose not to condition the exclusion on criminal conduct by the foster parent. (See Shaw v. McMahon (1987) 197 Cal.App.3d 417, 425.)

Brandon suggests that because his molestation arose out Monique M.’s negligent supervision in the foster care relationship, it is an occurrence which the Fund must cover pursuant to sections 1527.1 and 1527.2. But he overlooks the effect of section 1527.3, which expressly limits the types of losses for which the Fund is liable even though such losses arise from the foster-care relationship. We must give effect to that specific statute limiting the Fund’s general purpose. “‘It is well settled . . . that a general provision here is controlled by one that is special § 1527.3, the latter being treated as an exception to the former. A specific provision relating to a particular subject will govern in respect to that subject, as against a general provision, although the latter, standing alone, would be broad enough to include the subject to which the more particular provision relates.’ Citation.” (San Francisco Taxpayers Assn. v. Board of Supervisors (1992) 2 Cal.4th 571, 577.)

Brandon also relies on selected portions of the legislative history. But when, as here, the plain language of the statute is clear and unambiguous, “no court need, or should, go beyond that pure expression of legislative intent.” (Green v. State of California (2007) 42 Cal.4th 254, 260.) In any event, nothing in the legislative history directly addresses subdivision (a) of section 1527.3. Most of the documents cited by Brandon merely discuss the general point that the Fund’s purpose is to pay for claims arising out of the foster care relationship. Yet, as we have observed, through the enactment of section 1527.3, the Legislature also severely limited the class of claims for which the Fund is liable. Thus, the true issue in the present case is the scope of section 1527.3 and, in particular, the criminal act exclusion found in subdivision (a). On that point, the legislative history is silent.

The other documents cited by Brandon do not support his interpretation. For instance, Brandon claims that the Assembly Ways and Means Committee Republican Analysis of Senate Bill No. 1159 “clarifies the distinction of the bill’s authors between exclusions arising out of illegal acts by foster parents as compared to illegal acts by third parties.” (Underlining omitted.) Not only does the Analysis not support that claim, it actually supports the conclusion that the criminal act exclusion includes illegal acts of a third party. The Analysis states “the bill is worthwhile in that it is of . . . limited scope (the fund is not liable for any claims for losses arising out of intentional acts, punitive damages, or losses arising out of licentious, immoral, or sexual behavior on the part of the foster parent).” The phrase “on the part of the foster parent” modifies only the exclusion for losses arising out of licentious, immoral or sexual behavior. The first two exclusions (intentional acts and punitive damages) remain unmodified, exactly as now set forth in subdivisions (a) and (g) of section 1527.3, with the addition that subdivision (a) also includes “dishonest, fraudulent, and criminal” conduct as part of its exclusion. Further, the statement that the Senate Bill No. 1159 has a limited scope supports the conclusion that the criminal act exclusion applies to foster parents and third parties because that interpretation limits the scope of liability created by the law.

Brandon also cites a press release issued by Senator Ed Royce, the author of Senate Bill No. 1159, shortly before the law was enacted. The press release states, among other things, that the new law would establish the Fund but that “liability arising out of illegal acts by a foster parent would not be covered.” This press release, a document of unknown authorship, is not a proper source of legislative history. (See Williams v. Garcetti (1993) 5 Cal.4th 561, 569 “In construing a statute ‘we do not consider the motives or understandings of an individual legislator even if he or she authored the statute.’”.)

Urging that the Fund is the equivalent of insurance, Brandon relies on case law interpreting insurance policies to support coverage of his claim. But the Fund is not insurance. “Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.” (Ins. Code, § 22.) The Fund does not issue insurance policies, collect premiums, make profits or assume a contractual obligation to any putative insured. Instead, the Fund is an entity created by statute. Its statutory obligation is to pay claims, subject to a specified financial limitation, that arise out of the foster-care relationship as long as its liability for the claim is not excluded by section 1527.3. Because the Fund is a creature of statute, the scope of its liability is governed by rules of statutory construction, not rules applicable to construing insurance contracts. (J.C. Penney Casualty Ins. Co. v. M. K. (1991) 52 Cal.3d 1009, 1020, fn. 9.) Thus, Brandon’s reliance on cases which have interpreted a liability insurance policy to provide coverage when the insured’s negligence results in a third party sexually molesting a child in the insured’s care is misplaced. (National Union Fire Ins. Co. v. Lynette C. (1991) 228 Cal.App.3d 1073 foster care liability policy covered claim against foster mother who negligently failed to protect foster child from sexual molestation by her husband; American States Ins. Co. v. Borbor by Borbor (9th Cir. 1987) 826 F.2d 888 comprehensive insurance policy issued to husband-and-wife operators of a nursery school covered claims where wife’s negligence permitted husband to molest many of the children.)

That the Fund’s full title — the Foster Family Home and Small Family Home Insurance Fund — includes the word “insurance” does not change this conclusion. We note, for instance, that the California Insurance Guarantee Association (CIGA) includes “insurance” in its title, but its obligations, like those of the Fund, derive solely from statute and not from principles of contractual interpretation. Thus, CIGA’s obligations are not co-extensive with that of the insolvent insurer. (Industrial Indemnity Co. v. Workers’ Comp. Appeals Bd. (1997) 60 Cal.App.4th 548, 557; R. J. Reynolds Co. v. California Ins. Guarantee Assn. (1991) 235 Cal.App3d 595, 599-600.) In short, the Fund’s statutory title does not obviate the need to use rules of statutory construction to interpret the scope of the Fund’s coverage rather than rules for construing provisions of an insurance contract.

In support of his assertion that the Legislature intended the scope of coverage by the Fund to be interpreted like insurance, Brandon refers to a typed three-page document entitled “SB 2613 Amendments” found in the statute’s legislative history file. A hand-written notation on the document indicates that it was given to a staff member of Senator Ed Royce, the author of the bill. But neither the author nor original source of the document is stated. Brandon relies upon the fact that the document includes the words “Coverages (modeled after the Mission Insurance Co’s policy)” to suggest that the Legislature intended the Fund’s liability to be co-extensive with that of an insurance company. However, this passing reference in a document of unknown authorship to an unknown insurance policy is not persuasive evidence that the Legislature intended the statutory provisions limiting the scope of the Fund’s coverage to be interpreted like the provisions of an insurance policy.

Further, Brandon is incorrect in asserting that the Fund “serves in the place of insurance because foster parents could not obtain insurance.” (Italics deleted.) True, the Fund covers certain losses arising from the foster care relationship, and such covered losses “shall be the sole responsibility of the fund.” (§ 1527.5.) But those covered losses are limited in scope by section 1527.3. Moreover, as we have mentioned in our discussion of the Fund’s historical background, when the Legislature created the Fund, it also enacted former Insurance Code section 676.2, now Insurance Code section 676.7, to ensure that foster parents would have access to homeowner’s, tenant’s, and personal liability insurance policies. In subdivisions (a) and (b), that Insurance Code statute prohibits insurers from refusing to issue and from cancelling homeowner’s or tenant’s policies for the sole reason that the insured is a foster parent, and it requires that coverage for a foster child under such policies be the same as that for a natural child. (Ins. Code, § 676.7, subds. (a) & (b).) In subdivision (c), the statute also prohibits homeowner’s and tenant’s policies from providing liability coverage for claims “of a type payable by the” Fund (subd. (c)(1)) and for certain losses that are likewise excluded from the Fund. (Id., subd. (c).) However, the statute permits homeowner’s and tenant’s polices, by special endorsement, to provide coverage for foster-care-related losses that are not excluded by subdivision (c). (Id., subd. (e).) And significantly for the instant case, in subdivision (f) it permits insurers to provide separate foster care liability policies to cover losses that are excluded from homeowner’s and tenant’s policies by subdivision (c), including as here relevant claims for “any loss arising out of a . . . criminal . . . act.” (Id., subd. (c)(5).)

As we have observed in our earlier discussion of the statutory scheme, Insurance Code section 533 precludes any insurance policy from insuring against criminal conduct by the insured foster parent, but not from insuring against a foster parent’s negligent supervision that results in a foster child being injured by the criminal conduct of a third party. Thus, a foster care liability policy permitted by current Insurance Code section 676.7, subdivision (f), would cover the type of claim made by Brandon in the instant case, even though not covered by the Fund. Indeed, such a policy was involved in one of the insurance coverage cases cited by Brandon. (See National Union Fire Ins. Co. v. Lynette C., supra, 228 Cal.App.3d at p. 1075 “The only issue on appeal is whether the foster parents’ liability insurance policy issued by National affords coverage to the foster mother who negligently failed to protect the foster child from sexual molestation by error or omission of the Insured and arising out of the Insured’s activities as a Foster Parent occurring while the foster child is in the care and custody of the Foster Parent’” (italics added.)

Further, it is clear that the Legislature expected foster parents to obtain such insurance. One of the claims that section 1527.3 explicitly excludes from coverage by the Fund is “any liability of a foster parent which is uninsured due solely to the foster parent’s failure to obtain insurance specified in Section 676.2 now section 676.7 of the Insurance Code.” (§ 1527.3, subd. (h); see fn. 5, ante.) The Legislature thus fully expected foster parents to obtain insurance, including liability insurance, for foster care activities as permitted by former Insurance Code section 676.2 (now section 676.7), and did not intend the Fund to be a substitute for that insurance if the sole reason coverage was unavailable was the foster parent’s failure to obtain it. In short, the Fund does not wholly supplant insurance to cover foster care activities, and section 676.7 permits coverage by foster care liability policies for a claim such as Brandon’s.

Finally, Brandon asserts that excluding Fund coverage for claims by foster children based on negligent supervision by the foster parent resulting in injury by third-party criminal conduct is “bad law, bad policy and bad for those directly affected – dependent minors injured in foster care and foster parents who may be personally liable.” The argument, however, is more appropriately directed to the Legislature. Although legitimate policy questions are raised by the legislative decision to exclude coverage for a claim like Brandon’s, we decline to rewrite the statutory language and depart from governing principles of statutory construction to reach the result Brandon seeks. That is a task for the Legislature. We simply hold that section 1527.3, subdivision (a), means what it says: the Fund is not liable for “any loss arising out of a . . . criminal . . . act,” whether that act is committed by the foster parent or a third party.

3. Brandon’s Equal Protection Claim Has Been Forfeited

Brandon contends that applying section 1527.3, subdivision (a) to preclude the Fund’s liability on his claim results in a denial of equal protection. He urges that a foster child placed in a licensed foster home (as he was) is treated differently from a child placed in a certified foster home. Brandon argues that “the fact exists that there is a bifurcated system for the placement of dependent minors which includes both certified and foster homes. . . . Foster homes cannot be both licensed and certified.” Licensed homes are covered by the Fund (§ 1527, subds. (c) & (d)) but, according to Brandon, “certified homes are often covered by insurance with a typical limit of $1 million dollars” and it “is common knowledge that in a certified home, where insurance is provided, general insurance principles apply.” (Italics added.) Based upon these factual allegations, Brandon contends: “A dependent child who was placed in a licensed home should not suffer defeat of his claim that a foster parent’s negligence resulted in his sexual molestation by a third party by operation of subd. (a) where a child in a certified home who suffers the same tragic fate with the same facts would be afforded coverage under the general principles of insurance law if private insurance was available.” “This is a violation of Constitutional equal protection for all dependent minors placed in foster care because those placed in licensed homes do not enjoy the same panoply of rights for recovery in the event of harm while in foster care which dependent minors placed in certified homes enjoy. The fact that the placement in either a licensed or certified home is itself made at random exemplifies the arbitrariness of the application of The Fund.” (Underlining deleted.)

Brandon did not raise this equal protection contention in the trial court. Therefore, he never offered any evidence to support the various factual allegations set forth in the previous paragraph, allegations which go to the core of his contention. Because the Fund did not have a chance to respond to any of Brandon’s evidentiary claims and the trial court did not have an opportunity to pass on these points, Brandon may not raise this theory for the first time on appeal. (Richmond v. Dart Industries, Inc. (1987) 196 Cal.App.3d 869, 879.)

4. Sufficiency of the Damages Award

Brandon contends that the trial court’s damages award of $250,000 is “totally unconscionable and without evidentiary justification.” Relying upon Johnson v. Stanhiser (1999) 72 Cal.App.4th 357 (Johnson), Brandon asks us to order the trial court to recalculate the award. We decline to do so.

a. Factual Background

In determining Brandon’s damages, the parties stipulated the trial court could consider various documents, including the police reports generated by the investigation of Eric B. and the hearsay statements contained in those reports. Those reports indicate that Brandon told an investigator that Eric B. had sexually abused him approximately 100 times in 2003.

In addition, Brandon presented, pursuant to stipulation, a declaration from Dr. Paul Abramson. Dr. Abramson, a psychology professor at UCLA, had met with Brandon twice in June 2006. The doctor’s declaration explained that Eric B.’s sexual molestation had created a cycle of destructive emotions in Brandon that could be addressed only through intensive long-term psychotherapy. He estimated the cost for that treatment until Brandon (who was then almost 16) reached 21 at $140,400. However, Dr. Abramson did not “believe that Brandon would be stable and self-sufficient when he reaches 21, and therefore recommended that an additional $150,000 be put aside to cover his treatment as needed through adulthood.”

Lastly, Brandon testified briefly at the September 25, 2006 hearing. He explained that Eric had forced him to engage in oral copulation and sodomy “like over a hundred” times. Brandon was now seeing a therapist twice a week. Brandon did not identify the therapist. Brandon was equivocal about the value of the therapy. When asked if the therapy was helpful, Brandon replied “not really” but when asked if he “would like to talk to somebody in the future about” what had happened, he answered: “Yeah.”

b. Analysis

Brandon relies on Johnson, supra, 72 Cal.App.4th 357 to support his contention that the damages award is unconscionable. Johnson, however, is inapposite. There, the plaintiff obtained a default. A prove-up hearing was conducted at which the plaintiff presented evidence of damages. The trial court declined to award any damages, finding that the plaintiff had failed “‘to prove by a preponderance of the evidence that there were actual damages incurred.’” (Id. at p. 360.) On appeal, the reviewing court first found that the trial court had erred in applying a preponderance of the evidence standard. Because the defendant had defaulted, the plaintiff was required only to establish a prima facie case of damages. (Id. at p. 361.) After meticulously reviewing the evidence presented at the prove-up hearing, the court concluded “that substantial evidence exists to support the claim for damages. Plaintiff’s burden was to establish a prima facie showing that he was damaged by defendant’s actions. He did so. An award of $0 damages compels reversal and remand for a new hearing on the issue of damages.” (Id. at pp. 364-365.) The court reasoned that “this case presents just the set of circumstances where the award, or lack thereof, is totally unconscionable and without justification, thus begging for our review.” (Id. at p. 361.)

Here, on the other hand, the trial court did award substantial damages to Brandon in the sum of $250,000. Consequently, our power to review that determination is narrowly circumscribed. We cannot, as Brandon appears to suggest, reweigh the evidence and substitute our judgment for that of the trier of the fact simply because the evidence could have supported a higher award. Instead, we must defer to the trial court’s determination of the weight and credibility of the evidence that it made in fashioning its award. (See, e.g., Rufo v. Simpson (2001) 86 Cal.App.4th 573, 614.) We can interfere with this award only if it so completely lacks evidentiary justification that it is unconscionable. (Johnson, supra, 72 Cal.App.4th at p. 361.)

Brandon urges the award is unconscionable in light of his testimony that “he was sodomized over 100 times” and Dr. Abramson’s opinion that he “will require $290,000.00 for therapeutic services.” The argument is not persuasive. Brandon’s testimony about whether therapy was helpful and whether or for how long he would pursue it was equivocal. Given that testimony, the trial court was not, as Brandon now argues, required to award him a sum equal to that found in Dr. Abramson’s declaration. The $250,000 damages award was therefore not unconscionable.

DISPOSITION

The judgment is affirmed.

CERTIFIED FOR PARTIAL PUBLICATION

WILLHITE, J.

We concur:

EPSTEIN, P. J. MANELLA, J.

Tags: defending people, Mark Bennett, Published

Filed 6/3/09

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

THE PEOPLE,

Plaintiff and Appellant,

v.

SCOT B. GEROLD,

Defendant and Respondent.

E045848

(Super.Ct.No. FCF00952)

OPINION

APPEAL from the Superior Court of San Bernardino County. David Cohn, Judge. Reversed.

Michael A. Ramos, District Attorney, Grover D. Merritt and Stephanie H. Zeitlin, Deputy District Attorneys for Plaintiff and Appellant.

Phillip I. Bronson, under appointment by the Court of Appeal, for Defendant and Respondent.

The People charged defendant and respondent, Scot B. Gerold, by information with assault with a deadly weapon by force likely to produce great bodily injury and terrorist threats. Defendant pled not guilty by reason of insanity (NGI). The court found defendant guilty of the charged offenses after completion of the initial stage of the trial. Upon conclusion of the sanity phase, the court found defendant NGI. Defendant was committed to a state hospital for just over four years. Nearly five and one-half years after his release from confinement, defendant filed a petition pursuant to Penal Code section 851.8 to have his arrest records for the underlying offenses sealed and destroyed. The court granted the request.

On appeal, the People contend the court acted in excess of its jurisdiction in granting the petition because it was not brought within the statutory time frame, i.e., within two years of the filing of the accusatory pleading. Likewise, the People maintain that defendant failed to sustain his burden of showing, and the court failed to find, good cause for not complying with that statutory deadline. Finally, the People argue that defendant is simply not the type of individual the Legislature envisioned section 851.8 would apply to, i.e., while defendant was not “convicted” of the charged offenses, neither was he “acquitted” of the charges, the charges against him were not “dismissed,” and defendant was not “factually innocent.” We hold that the People forfeited the applicability of the statute of limitations by failing to raise the issue below. Nevertheless, we also hold that section 851.8 was inapplicable to defendant and, thus, reverse the court’s order granting his petition to seal and destroy his arrest records.

FACTUAL AND PROCEDURAL HISTORY

On January 23, 1998, defendant woke up and became angry because he could not find a pair of his jeans. He thought someone within the residence had stolen them. After “raving” for five to 10 minutes, defendant picked up an eight- to nine-inch long kitchen knife, threatened to kill his father, and moved towards his father moving the knife back and forth in slashing motions. Defendant’s father, fearing for his safety, backed outside the home, after which defendant closed and locked the door. Defendant’s mother called the authorities. Deputies arrived shortly thereafter and detained defendant.

On January 27, 1998, the People charged defendant by felony complaint with assault with a deadly weapon by force likely to produce great bodily injury (count 1—Pen. Code, § 245, subd. (a)(1)) and terrorist threats (count 2—§ 422). On March 30, 1998, the court held defendant to answer for the charges following a preliminary hearing. The People filed the information on April 13, 1998. On June 10, 1998, the court held both phases of the trial, finding defendant guilty as charged after the first phase and NGI after the second. The court ordered defendant committed to Patton State Hospital and determined that his maximum term of confinement expired on September 22, 2002.

On May 13, 2002, the People filed a petition to extend defendant’s period of confinement. On November 6 and 7, 2002, the People proceeded by way of a jury trial on the allegations in the petition. The jury found the allegations in the petition not true. The court thereafter released defendant.

On January 25, 2008, defendant filed a petition to have his arrest records for the underlying offenses sealed and destroyed. On February 29, 2008, the court held a conference regarding the petition in chambers, off the record. On the record thereafter, the court engaged in a colloquy with both parties regarding the issue of whether a defendant who was found NGI is entitled to have arrest records expunged pursuant to section 851.8. The court continued the matter to permit the parties to brief the issue. Both parties filed supplemental briefs. At the hearing thereafter, the court indicated it had read the supplemental briefs and heard argument from defendant’s counsel. The court stated, “I think this is a situation that the Legislature clearly didn’t foresee, and I think we need to dispense a little justice here.” The court, therefore, granted the petition.

The People appealed and filed a request that the order to seal and destroy defendant’s arrest records be stayed pending the appeal. The trial court granted the stay request.

DISCUSSION

A. Statute of Limitations

The People contend that since defendant’s petition to seal and destroy his arrest records was not filed within the statutory deadline of two years from the filing of the accusatory pleading, the court was barred from granting it. Similarly, the People maintain that since defendant failed to allege, and the court failed to find, good cause in relieving him from compliance with that deadline, the court’s order granting the petition must be reversed as an act in excess of its jurisdiction. Defendant responds that the People are estopped from raising the statute of limitations because they failed to raise it below. We hold that the People forfeited the applicability of the statute of limitations by failing to raise it at the hearing on the matter.

Section 851.8, subdivision (c), provides in pertinent part that “in any case where a person has been arrested, and an accusatory pleading has been filed, but where no conviction has occurred, the defendant may, at any time after dismissal of the action, petition the court that dismissed the action for a finding that the defendant is factually innocent of the charges for which the arrest was made.” If the court makes such a finding, the court shall order the appropriate law enforcement agency to seal the arrest records for three years from the date of the arrest and, thereafter, destroy such records. (§ 851.8, subds. (b) & (c).) “For accusatory pleadings filed on or after January 1, 1981, petitions for relief under this section may be filed up to two years from the date of the . . . filing of the accusatory pleading . . . .” (§ 851.8, subd. (l).) “Any time restrictions on filing for relief under this section may be waived upon a showing of good cause by the petitioner and in the absence of prejudice.” (Ibid.) The time limitation imposed in section 851.8, subdivision (l), applies to all petitions brought under section 851.8. (People v. Bermudez (1989) 215 Cal.App.3d 1226, 1230, fn. 5.)

The People filed the felony complaint on January 27, 1998, and the information on April 13, 1998. Defendant filed the petition to seal and destroy his arrest records on January 25, 2008. Even assuming the latter instrument was the effective accusatory pleading in this case, defendant failed to file his petition within the statutory deadline. Moreover, defendant made no showing of good cause; indeed, he made no showing whatsoever to account for his delay in filing the petition. Assuming arguendo that defendant’s confinement to mental institutions between July 1998 and November 2002 would be deemed a per se showing of good cause for the delay in filing the petition during that period, defendant still failed to account for his delay in filing the petition in the nearly five and one-half years that elapsed since his release. Nevertheless, no mention of that delay or the statute of limitations was made in either parties’ oral arguments or written submissions regarding the petition. Thus, defendant contends the People are estopped from asserting it now.

We hold that the People have forfeited the issue by failing to raise it below: “Our Supreme Court has explained that ‘jurisdictional errors are of two types. “Lack of jurisdiction in its most fundamental or strict sense means an entire absence of power to hear or determine the case, an absence of authority over the subject matter or the parties.” Citation.’ Citation. The term ‘lack of jurisdiction’ may also be applied when the court possesses jurisdiction over the subject matter and parties in the fundamental sense but ‘“has no ‘jurisdiction’ (or power) to act except in a particular manner, or to give certain kinds of relief, or to act without the occurrence of certain procedural prerequisites.” Citation.’ Citation. ‘When a court lacks jurisdiction in a fundamental sense, an ensuing judgment is void and “thus vulnerable to direct or collateral attack at any time.” Citation.’ Citation. By contrast, when a court has fundamental jurisdiction to act but acts in excess of jurisdiction, its actions are merely voidable, ‘that is, its act or judgment is valid until it is set aside, and a party may be precluded from setting it aside by “principles of estoppel, disfavor of collateral attack or res judicata.” Citation.’ Citation. Whereas a lack of fundamental jurisdiction may be raised at any time, a challenge to a ruling in excess of jurisdiction is subject to forfeiture if not timely asserted. Citation.” (People v. Ramirez (2008) 159 Cal.App.4th 1412, 1422.)

Here, as the text of the statute makes plain, the statute of limitations does not implicate fundamental jurisdiction because it does not affect the court’s personal or subject matter jurisdiction. The court had jurisdiction over the parties and the petition in the sense that it had the power to relieve defendant from the statutory deadline upon a showing of good cause and the power then to address the merits of the petition. Indeed, in its opening brief, the People contend not that the court acted without fundamental jurisdiction, but that it acted in excess of jurisdiction. Thus, the statute of limitations is subject to forfeiture. (People v. Mower (2002) 28 Cal.4th 457, 474, fn. 6 forfeiture is “the loss of a right through failure of timely assertion”.) Nevertheless, in its reply brief the People cite People v. Williams (1999) 21 Cal.4th 335 (Williams), for the implied proposition that the court here acted without fundamental jurisdiction.

Williams is distinguishable in that it narrowly decided that “if the charging document indicates on its face that the charge is untimely, absent an express waiver, a defendant convicted of that charge may raise the statute of limitations at any time.” (Williams, supra, 21 Cal.4th at p. 338.) The statute of limitations with regard to the initiation of the prosecution of a criminal act is a substantive, rather than a procedural right, which cannot be forfeited. (Id. at pp. 339-340.) “The statute of limitations, when applicable, completely bars the prosecution. To allow defendants to lose the protection of the limitation accidentally could mean that persons could languish in prison under convictions that could not have occurred had they merely thought of the statute of limitations in time.” (Id. at p. 341.) Thus, strong public policy reasons favored finding a statute of limitations for the initiation of a criminal proceeding an issue of fundamental jurisdiction. Such policy reasons do not exist to so construe the statutory deadline for filing a petition to expunge arrest records. Rather, the section 851.8, subdivision (l), time frame is more akin to a filing deadline for which relief from default may regularly be granted.

B. Because Defendant Was Not “Factually Innocent” of the Underlying Crimes, He Is Not Entitled to Relief Pursuant to Section 851.8

The People contend that a defendant found NGI is not entitled to arrest record expungement pursuant to section 851.8. This is because, the People argue, section 851.8 necessitates that the defendant not have been convicted, that the matter be dismissed thereafter or that the defendant have been acquitted, and that the defendant be found factually innocent of the crime. Thus, since a defendant found NGI necessarily has been found to have actually committed the actus reus of the charged offenses and has neither been acquitted nor had the action dismissed, such a defendant has not met the requirements of section 851.8. Defendant contends that a defendant found NGI has, necessarily, not been convicted. Moreover, defendant essentially responds that a defendant found NGI has necessarily been found incapable of committing the crime because he was powerless to meet the essential mens rea element of the crime; thus, such a defendant was effectively factually innocent of the offense. We decline to address the broader issue of whether a defendant found NGI is categorically barred from relief pursuant to section 851.8 because we find that, regardless, defendant was not factually innocent of the underlying charges since reasonable cause exists to believe that defendant committed the offenses for which the arrest was made.

As noted above, section 851.8, subdivision (c), provides, in pertinent part, that “in any case where a person has been arrested, and an accusatory pleading has been filed, but where no conviction has occurred, the defendant may, at any time after dismissal of the action, petition the court that dismissed the action for a finding that the defendant is factually innocent of the charges for which the arrest was made.” If the court makes such a finding, the court shall order the appropriate law enforcement agency to seal the arrest records for three years from the date of the arrest and, thereafter, destroy such records. (§ 851.8, subds. (b) & (c).)

The parties below recognized the novelty of defendant’s situation. The People noted that “defendant was found NGI, so the question is whether that is factual innocence under the standard. It does not appear to be so. . . . I understand and appreciate the argument that he may have been not guilty of the crime because of his mental state. I understood this was a burglary conviction; a specific intent crime, which was negated by reason of his mental illness. However, the standard under . . . section 851.8 for factual innocence is if it appears that there was no probable cause to believe that the crime was committed. And even though defendant may have been insane at the time of the commission of the offense, there certainly was probable cause to believe that the offense was committed.” In analyzing the statute and applying it to the factual context of defendant’s case, the court noted that “‘there was no trial where an acquittal occurred.’” Defendant acknowledged the veracity of the court’s notation; nevertheless, he argued that under section 851.8, subdivision (c), defendant was eligible for the sealing and destruction of his arrest records in that no conviction had occurred. The court responded that defendant was, in fact, convicted. Defendant replied that, in actuality, he was found NGI. The court responded, “oh, I see. Okay. I understand.”

Defendant noted that had he been convicted, the procedure for “clearing his good name would be pursuant to section 1203.4”; however, because he was “‘acquitted,’” only the procedures outlined in section 851.8 were applicable. Defendant contended that the court should determine that he was factually “innocent because he was found NGI.” The court then observed that section 851.8, subdivision (c), applied only to cases that had been dismissed, querying counsel whether the instant action had been dismissed. Counsel responded that defendant had pled NGI: “I cannot say that is a dismissal.” Counsel erroneously stipulated that there was no trial; rather, defendant had entered into a plea agreement. The court then noted that “the criminal case had to have been dismissed because it didn’t proceed to trial.” Defendant agreed with the court’s assessment. The court reiterated, “logically that’s the case.” The People responded, “but, still, I don’t know if it’s entered into the same thing as a dismissal, though.” The court replied, “you know, this is interesting; when we came out of chambers, my inclination was to deny this motion, and now I’m considering otherwise.” The court then continued the matter to permit the parties to brief the issue.

In its points and authorities in opposition to defendant’s petition, the People contended that defendant failed to meet his burden of proving that he was factually innocent of the underlying charges, that there was reasonable cause to arrest defendant, and that section 851.8 provided no mechanism for expunging the records of those found NGI. In his supplemental brief, defendant asserts that “after an exhaustive search of cases dealing with section 851.8, we have not come up with a single case dealing with its application to a person found NGI pursuant to section 1026. Not a single one.” Defendant cited People v. McCann (2006) 141 Cal.App.4th 347, 358 (McCann), for the proposition that “even if a defendant were ‘factually’ guilty of an offense,” so long as he could not have been convicted of the crime, “relief must be granted under section 851.8.” “We ask for the relief under section 851.8 so that defendant can get a job without having to deal with all these issues.” After hearing argument from defense counsel, the court granted the petition, stating that “I think this is a situation that the Legislature clearly didn’t foresee, and I think we need to dispense a little justice here.”

“In any court hearing to determine the factual innocence of a party, the initial burden of proof shall rest with the petitioner to show that no reasonable cause exists to believe that the arrestee committed the offense for which the arrest was made. If the court finds that this showing of no reasonable cause has been made by the petitioner, then the burden of proof shall shift to the respondent to show that a reasonable cause exists to believe that the petitioner committed the offense for which the arrest was made.” (§ 851.8, subd. (b); see also People v. Laiwala (2006) 143 Cal.App.4th 1065, 1068 (Laiwala).) “The present tense ‘exists’ necessarily means that the existence of reasonable cause depends on the current evidence rather than simply the evidence that existed at the time that the arrest and prosecution occurred. ‘In the context of a defendant who seeks a finding of factual innocence notwithstanding probable cause to arrest, facts subsequently disclosed may establish the defendant’s innocence.’ (People v. Adair (2003) 29 Cal.4th 895, 905, fn. 4 (Adair).)” (Laiwala, supra, 143 Cal.App.4th at p. 1069, fn. 3.)

When reviewing a lower court’s ruling concerning a petition for sealing and destroying arrest records, an appellate court “must apply an independent standard of review and consider the record de novo.” (Adair, supra, 29 Cal.4th at p. 905.) “The appellate court should defer to the trial court’s factual findings to the extent they are supported by substantial evidence, but it must independently examine the record to determine whether the defendant has established ‘that no reasonable cause exists to believe’ he or she committed the offense charged.” (Id. at p. 897.) “‘“‘Reasonable cause’”’ is a well-established legal standard, ‘“defined as that state of facts as would lead a man of ordinary care and prudence to believe and conscientiously entertain an honest and strong suspicion that the person is guilty of a crime.”’ Citations.” (Id. at p. 905.)

This means defendant must establish “‘as a prima facie matter not necessarily just that the defendant had a viable substantive defense to the crime charged, but more fundamentally that there was no reasonable cause to arrest him in the first place.’ Citation.” (Adair, supra, 29 Cal.4th at p. 905, fn. omitted.) “The record must exonerate the defendant, not merely raise a substantial question as to guilt.” (Id. at p. 909.) “‘Section 851.8 is for the benefit of those defendants who have not committed a crime. It permits those petitioners who can show that the state should never have subjected them to the compulsion of the criminal law—because no objective factors justified official action—to purge the official records of any reference to such action. . . .’” (Id. at p. 905.)

Here, defendant is not factually innocent of the charges against him. On the contrary, during the initial phase of the trial, the court determined that defendant had committed the acts constituting the crimes of which he was charged. Defendant has not sustained his burden of proving that he was factually innocent, i.e., that “no reasonable cause exists to believe that the arrestee committed the offense for which arrest was made.” (§ 851.8, subd. (b).) Even from the current temporal perspective, i.e., with all the benefit of hindsight, we cannot say that an officer, knowing that defendant was legally insane when committing the underlying offenses, would not have had reasonable cause with which to arrest him. Nor could we say, in retrospect, that defendant should not have been subjected to the “compulsion of the criminal law—because no objective factors justified official action.” (Adair, supra, 29 Cal.4th at p. 905.) Here, every objective factor would support reasonable cause to arrest and compel defendant to face criminal process. There is no disagreement regarding whether defendant actually committed the acts of assaulting his father with a knife and verbally threatening to kill him. While defendant was determined not to have been sufficiently mentally competent to sustain punishment for his acts, that determination does not equate with factual innocence of the acts underlying the charges against him.

Defendant cites McCann, supra, 141 Cal.App.4th at p. 358, for the proposition that a finding that a defendant was NGI is the functional equivalent of an acquittal, thus, entitling him to relief pursuant to section 851.8. Likewise, as he did below, defendant cites McCann for the additional proposition that factual innocence need only involve a determination that the defendant could not have been convicted for the offense, whether he actually committed the underlying act or not. Thus, defendant maintains that since he was not and could not have been convicted of the underlying offenses because the mens rea element of those crimes was negated by the finding that defendant was legally insane at the time he committed them, he is, necessarily, factually innocent of the charges and, therefore, entitled to expungement of his arrest records. We find McCann distinguishable from the present circumstances.

In McCann, the defendant was found guilty by court trial of two felony counts of practicing medicine without a license. (McCann, supra, 141 Cal.App.4th at p. 351.) The appellate court reversed the convictions finding that the defendant could not have committed the offenses because “he had a valid license to practice medicine at all relevant times.” (Ibid.) Thereafter, the defendant moved to have his arrest records expunged pursuant to section 851.8. (McCann, at p. 351.) The trial court determined that it could not find the defendant factually innocent of the charges despite the reversal; thus, it denied the defendant’s petition. (Ibid.) On appeal, the court held that the defendant was entitled to seek relief pursuant to section 851.8 because “‘an appellate ruling of legal insufficiency is functionally equivalent to an acquittal.’” (McCann, at p. 355.)

While McCann established a defendant’s right to seek relief pursuant to section 851.8 when the defendant’s conviction has been reversed for insufficiency of the evidence, it did not conclude that such a defendant would, necessarily, be entitled to such relief. (McCann, supra, 141 Cal.App.4th at p. 355.) Rather, a determination of the defendant’s “factual innocence” would still be required. In McCann, the appellate court determined that the defendant was factually innocent because it had already determined he had not committed the charged offenses. (Id. at p. 358.) Here, defendant did not have his conviction overturned for insufficiency of the evidence. Moreover, even if a NGI finding could be deemed the functional equivalent of an acquittal, no determination of factual innocence was made. Indeed, as noted above, there is no contention that defendant did not actually commit the acts of which he stood accused. Thus, if we were to deem McCann properly analogized to the present circumstances, defendant would only be entitled to seek such relief, not be entitled to it. However, as discussed above, because defendant was not factually innocent of the charges, he is not entitled to such relief.

Furthermore, the People in McCann, assuming arguendo that the defendant was factually innocent of the charged offenses, contended that there was still reasonable cause to prosecute him for violating the misdemeanor lesser included offense of the felonies. (McCann, supra, 141 Cal.App.4th at p. 357.) Hence, it argued that the defendant was not factually innocent and, therefore, not entitled to relief pursuant to section 851.8. (McCann, at p. 357.) The appellate court noted, however, that even if the misdemeanor offenses could properly be considered lesser included offenses of the felony charges, prosecution would be barred because the statute of limitations on the misdemeanors had expired by the day the defendant was indicted. (Id. at pp. 357-358.) Thus, the court would have lacked fundamental jurisdiction to proceed against the defendant on the misdemeanor charges; hence, he could not have been properly convicted of those offenses. (Id. at p. 358 & fn. 5.) However, contrary to defendant’s implicit contention, McCann did not rule that inability to obtain a conviction necessarily equates to factual innocence. Indeed, the court did not even conclude that the misdemeanor offenses were properly construed lesser included offenses of the felonies charged against the defendant. Rather, it simply concluded that the defendant was factually innocent of the offenses with which he was charged. (Id. at p. 358.) Indeed, the court in Laiwala similarly concluded that “a factual innocence petition must be granted if the petitioner is ‘factually innocent of the charges for which the arrest was made.’” (Laiwala, supra, 143 Cal.App.4th at p. 1072.) Thus, at best, McCann is dictum for the narrow proposition that a defendant may be deemed factually innocent of a charge in which a court lacks fundamental jurisdiction over the offense, i.e., the defendant could not be convicted of the offense because of the expiration of the statute of limitations. We disagree that McCann can be construed broadly to convey the principle that any defense that would prohibit a defendant’s conviction must equate with a determination of factual innocence for purposes of section 851.8. Factual innocence means “‘not necessarily just that the defendant had a viable substantive defense to the crime charged, but more fundamentally that there was no reasonable cause to arrest him in the first place.’ Citation.” (Adair, supra. 29 Cal.4th at p. 905, fn. omitted.)

Finally, defendant cites Laiwala, supra, 143 Cal.App.4th 1065, for the proposition that since defendant lacked the requisite mens rea to be found culpable of the charged offenses, he must be deemed factually innocent. In Laiwala, the defendant was convicted of grand theft of a trade secret. (Id. at p. 1067.) The appellate court reversed the conviction finding that there was “‘insufficient evidence that information taken by the defendant qualified as a trade secret . . . .’” (Ibid., italics added.) The defendant filed a petition seeking a finding of factual innocence. (Ibid.) The superior court denied the petition. (Ibid.) The appellate court ruled that a defendant can establish “factual innocence by demonstrating the absence of reasonable cause to support a single element of the crime.” (Id. at p. 1070.) Thus, since there was no evidence to support the contention that what the defendant had taken was a trade secret, the defendant was factually innocent of the crime with which he was charged. (Id. at p. 1072.) Quoting People v. Matthews (1992) 7 Cal.App.4th 1052, 1056-1057, the court noted that “‘Some legal defenses may be so related to the defendant’s own conduct that the existence of the defense negates a requisite element of the offense or otherwise eliminates culpability, thereby revealing no reasonable cause to believe the arrestee committed an offense and establishing factual innocence, within the meaning of Penal Code section 851.8.’ Citation.” (Laiwala, at p. 1072.) Hence, defendant contends that because he was found NGI, there is a lack of reasonable cause to support the requisite mens rea elements of the charged offenses, compelling a finding of factual innocence.

We find Laiwala distinguishable. First, while Laiwala ruled that lack of evidence on a single element supports a finding of factual innocence, that court held that the defendant was entitled to relief pursuant to section 851.8 based on a lack of reasonable cause to arrest on an actus reus element of the charged offense, not a mens rea element. Second, defendant is not factually innocent in that there was, even when viewed retrospectively, reasonable cause to arrest him and compel him to face criminal process for the charged offenses.

DISPOSITION

The order granting defendant’s petition to have his arrest records for the underlying offenses sealed and destroyed is reversed.

/s/ MILLER

J.

We concur:

/s/ HOLLENHORST

Acting P. J.

/s/ KING

J.

Tags: defending people, Mark Bennett, Published

Filed 6/3/09

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

DAVE NICHOLLS,

Plaintiff and Appellant,

v.

HOLIDAY PANAY MARINA, L.P.,

Defendant and Respondent.

B202356

(Los Angeles County

Super. Ct. No. SC089574)

ORDER MODIFYING OPINION

No Change in Judgment

GOOD CAUSE appearing, the opinion filed in the above entitled matter on May 5, 2009, is modified as follows:

On page 1, the second line in the first paragraph, the sentence “Josh M. Fredericks, Judge.” is deleted, and is replaced with: “Patricia B. Collins, Judge.”

No change in judgment.

______________________________________________________________________

RUBIN, ACTING P. J. FLIER, J.

Tags: defending people, Mark Bennett, Published

Filed 6/3/09

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

RANDY NEIN,

Plaintiff and Appellant,

v.

HOSTPRO, INC., et al.,

Defendants and Respondents.

B199497

(Los Angeles County
Super. Ct. No. BC346190)

APPEAL from a judgment of the Superior Court of Los Angeles County, Haley J. Fromholz, Judge. Affirmed.

Randy Nein, in pro. per., and John Jahrmarkt for Plaintiff and Appellant.

Graves Law Office, Philip J. Graves, and Fredricka Ung for Defendants and Respondents.

INTRODUCTION

Plaintiff Randy Nein was employed by defendants HostPro, Inc. and Interland, Inc. (collectively, defendant) as a salesperson between October 1999 and December 2001. In December 2000, plaintiff approached AT&T Corporation (AT&T) and suggested that defendant provide web-hosting services to some of AT&T’s business customers. Such a transaction was still being negotiated when defendant terminated plaintiff in December 2001, and it was consummated the following month.

Plaintiff seeks through the present action to recover commissions he claims are due him in connection with the AT&T transaction. The trial court granted summary judgment for defendant, concluding that the entire action is barred because plaintiff was not a licensed business opportunity broker. Additionally, the court found that plaintiff’s termination cut off his right to any additional commissions under the plain language of plaintiff’s written employment agreement.

We do not agree with the trial court that plaintiff’s action is barred by his failure to procure a broker’s license. In this regard, we reject defendant’s claim that plaintiff is collaterally estopped by the Court of Appeal’s opinion in a related case from raising the broker’s license issue. (Salazar v. Interland, Inc. (2007) 152 Cal.App.4th 1031, 1033-1034 (Salazar).) Like the trial court, however, we conclude that under the plain language of the written employment agreement, plaintiff was not permitted to recover additional commissions after his termination. Accordingly, we affirm the grant of summary judgment.

FACTUAL AND PROCEDURAL HISTORY

I. Plaintiff’s Employment and the AT&T Transaction

Defendant hired plaintiff as a sales representative on October 4, 1999. On that date, the parties entered a written employment agreement, which provided (among other things) that: (1) plaintiff was responsible for web-hosting sales; (2) plaintiff’s starting salary was $24,000 per year, plus commissions of 4 percent “on all direct initial sales”; (3) defendant “will be eligible for commission pay as set forth in this document, so long as plaintiff remains employed with the Company as a Sales Representative”; and (4) the employment agreement “may be amended only by a written agreement executed by each of the parties hereto.”

In April 2001, defendant promoted plaintiff to “Channel Manager.” The parties entered a new oral agreement that provided (among other things) that: (1) plaintiff’s salary was increased to $75,000 per year, and (2) plaintiff would receive commissions of “‘20% of the up front costs’ revenues on all accounts brought in by plaintiff or through plaintiff’s contacts or efforts.”

In December 2000, plaintiff introduced himself to Vincent Salazar, then an agent for AT&T, at a networking event. Subsequent to that introduction, Salazar proposed to defendant and AT&T that defendant acquire all of AT&T’s small to medium-sized web-hosting clients. Plaintiff “was not involved in the ‘nuts and bolt’ negotiations” concerning defendant’s acquisition of AT&T’s web-hosting clients, but he “was responsible for procuring and advising HostPro of the potential to consummate a lucrative deal with AT&T.” Further, he did not “at anytime solicit AT&T regarding the deal,” but he “was responsible for engineering the getting together of AT&T and HostPro which ultimately led to the acquisition of AT&T’s web hosting business by HostPro following months of extended negotiation by higher ups at HostPro.”

Defendant terminated plaintiff on December 6, 2001. Subsequently, on January 14, 2002, defendant and AT&T executed an asset purchase agreement pursuant to which defendant purchased all of AT&T’s contractual rights relating to its small and medium-sized web-hosting customer accounts and the equipment used to service those customers.

After defendant and AT&T executed the asset purchase agreement, plaintiff sought compensation for his role in the transaction. Defendant has never paid plaintiff any commission in connection with the AT&T transaction.

II. The Present Action

Plaintiff filed the present action on January 20, 2006. The operative second amended complaint, filed December 29, 2006, asserts four causes of action: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) violation of Labor Code sections 206 and 2926; and (4) unfair business practices in violation of Business and Professions Code section 17200. It alleges that plaintiff entered an employment contract with defendant in 1999. The employment contract provided that plaintiff would market defendant’s web-hosting services and would be compensated by a salary and commissions of 4 percent. Later, plaintiff was promoted to manager and his commissions were increased to 20 percent. In this capacity, plaintiff initiated a deal with AT&T, valued at more than $12 million, pursuant to which defendant acquired all of AT&T’s small to medium-sized web-hosting clients. However, approximately 30 days before the AT&T deal closed, defendant summarily terminated plaintiff and withheld his commissions.

Defendant moved for summary judgment. The trial court granted summary judgment on March 28, 2007, finding as follows:

1. The entire action is barred because plaintiff was not a licensed broker at the time of the AT&T transaction. Under the plain language of Business and Professions Code, section 10030, the AT&T deal must be considered a “business opportunity” because it is indisputable that the sale of customers and assets constitutes a sale of AT&T’s “business.” Thus, “the analysis is straightforward: (1) a license is required to solicit prospective sellers of business opportunities; (2) the AT&T deal was a business opportunity; (3) Plaintiff solicited the AT&T deal; (4) Plaintiff did not have a license. Thus, Plaintiff’s entire action for commission is barred under Bus. & Prof. Code §§ 10131 and 10136. The motion for summary judgment is granted on this basis.”

2. There is a triable issue of fact as to whether plaintiff is entitled to a commission under the terms of his employment contract. “Defendant first argues that Plaintiff’s Employment Agreement does not provide for Plaintiff to receive any commission for the AT&T transaction. Defendant argues that although Plaintiff alleges that the Employment Agreement was modified to provide him with a 20% commission on sales of new business brought in by him, no written agreement, modification, or addendum was ever executed. Furthermore, Defendant argues that the Employment Agreement by its terms provides that it may be amended or modified only by a writing signed by both parties. Citations. Plaintiff presents his declaration, in which he states the initial Employment Agreement was not amended, but that he entered into a new agreement when he was promoted to Channel Manager and that this agreement provided for a commission of 20%. . . . Plaintiff here argues that Defendant has redacted information from relevant pay records that would show that he was paid a 20% commission under the later agreement. There appears to be a triable issue of material fact as to whether Plaintiff entered into a new oral agreement. However, as stated above, the motion is nevertheless granted because Plaintiff did not possess a broker’s license.”

3. Plaintiff was not entitled to any further commissions after his employment was terminated. “The Employment Agreement clearly states that Plaintiff will only be eligible for commission pay while he is employed as a Sales Representative. Plaintiff has not provided any authority showing that where an employment agreement is clear that commission payments cease upon termination, an employee is nevertheless entitled to commissions for transactions that he might have initiated as an employee but which were consummated after his termination.”

4. Plaintiff’s claims are not barred by the statute of limitations. “Defendants argue that all of Plaintiff’s contract-related causes of action accrued on January 14, 2002, the date on which the AT&T transaction closed. . . . Plaintiff argues that his cause of action did not accrue until he received a letter from Defendant’s counsel Michael French on April 28, 2004, which constituted an anticipatory repudiation. Citation. Plaintiff argues that prior to that date, Defendants had not given him any indication that he would not eventually receive a 20% commission on the AT&T deal. Defendants have not presented any evidence to the contrary. Since the action was filed on January 20, 2006, it is timely.”

5. Second cause of action: breach of the implied covenant of good faith and fair dealing. “Defendants’ arguments as to this cause of action are substantially identical to their arguments as to the first cause of action. Essentially, Defendants argue that Plaintiff did not have a contract entitling him to a 20% commission, and that the cause of action is time-barred. The above discussion applies equally to these arguments.”

6. Third cause of action: violation of the Labor Code. “Defendant’s arguments as to this cause of action are again substantially identical to those discussed above. Defendant argues that although commissions are wages under the Labor Code, contractual terms authorizing the commissions must be established before the wages are due. Defendant argues that the express terms of the contract prevent Plaintiff from obtaining commissions after he was terminated. As discussed above, the Court agrees.”

7. Fourth cause of action: unfair business practices. “Where a UCL claim is derivative of another claim that fails as a matter of law, the UCL claim must similarly fail. Citation. As discussed above, Plaintiff’s first three causes of action fail as a matter of law.” “Plaintiff also argues that ‘Defendants have not raised any credible challenge to plaintiff’s UCL claim that defendant’s practice of terminating its employees in order to avoid the payment of earned commission is a fraudulent business practice and thus prohibited by the UCL.’ Citation. The Court is unable to find any allegation in the Second Amended Complaint that Defendant had a practice of terminating its employees to avoid payment of commission. The pleadings serve as the ‘outer measure of materiality’ in a summary judgment motion, and the motion may not be granted or denied on issues not raised by the pleadings. Citation.”

Judgment was entered on June 22, 2007, and notice of entry of judgment was served on June 27, 2007. Plaintiff timely appealed.

III. The Salazar Litigation

Meanwhile, in a separate action, Vincent Salazar (plaintiff’s contact at AT&T) sued defendant for breach of contract and fraud on March 8, 2004. Salazar alleged that he was an agent of AT&T and was authorized to market internet and web-hosting services to small and medium-sized businesses. In 2001, he advised defendant, which also provided web-hosting services to small and medium-sized businesses, that AT&T no longer wished to provide these services. Defendant expressed an interest in acquiring AT&T’s small and medium-sized business clients. On February 13, 2001, Salazar entered a written contract with defendant to market defendant’s web-hosting services to small and medium-sized business customers and to arrange the acquisition of AT&T’s small and medium-sized business customers. Defendant represented to Salazar that he would receive a 10 percent commission on all monthly recurring fees received by defendant up to $10,000, a 20 percent commission on monthly recurring fees over $10,000, and a 5 percent commission payment as a one-time setup fee for each customer acquired due to his efforts. However, defendant subsequently refused to pay Salazar the commissions allegedly due him. (Salazar, supra, 152 Cal.App.4th 1031, 1033-1034.)

Defendant moved for summary judgment, contending that Salazar could not recover the claimed commissions because he did not have a broker’s license. On December 13, 2005, the trial court granted the motion.

Salazar appealed the grant of summary judgment, contending that the trial court erred in finding that the transaction between AT&T and defendant constituted the purchase and sale of a “business opportunity” under section 10131, subdivision (a). Specifically, Salazar argued that because only a small portion of AT&T’s assets were sold, the sale did not constitute the sale of a business opportunity. (Salazar, supra, 152 Cal.App.4th at pp. 1035-1036.) On June 26, 2007, Division Two of this court disagreed and affirmed. It explained that although “business opportunity” under section 10030 includes the sale of an existing business enterprise, “there is no requirement that the sale include every business in which a corporation is engaged. Moreover, by using the term ‘include’ the definition is not necessarily limited to the inclusions. (People v. Arnold (2006) 145 Cal.App.4th 1408, 1414, citing Flanagan v. Flanagan (2002) 27 Cal.4th 766, 774.) The plain language of the statute, therefore, does not support Salazar’s contention that nothing short of the transfer of all the stock or assets of AT&T, or of one of its subsidiaries or divisions, could constitute the sale of a business opportunity.” (Salazar, at p. 1037.)

Further, the court said, the transfer of a business opportunity as defined in section 10030 includes the transfer of those assets so essential that a business cannot continue without them and the transfer of future patronage or customers. It found undisputed proof of those attributes in the transaction between AT&T and Interland. (Salazar, supra, 152 Cal.App.4th at p. 1038.) The court concluded: “Given that AT&T, Interland and Salazar all characterize the transaction as the transfer of a business and a business opportunity, it is immaterial that the transaction involved less than 2 percent of AT&T’s total base of its small business customers, or that AT&T continued to provide Web-hosting services to large clients, or that AT&T continued to provide other types of services to the small and medium clients. AT&T sold and Interland purchased the customer contracts, supporting equipment and pledge of nonsolicitation for six months that comprised AT&T’s Web-hosting business for small to medium-sized clients. The undisputed evidence supports the conclusion that the transaction constituted the sale of a business opportunity.” (Id. at p. 1040.)

Finally, the court rejected Salazar’s contention that he was not seeking a commission for the transaction between Interland and AT&T but rather his share of the monthly fees paid by each customer as he is entitled to under his contract with Interland. “The statute prohibits ‘the collection of compensation’ for acting as an unlicensed business opportunity broker regardless of how that compensation is characterized. (§ 10136; see also § 10131 regardless of the form or time of payment . . . .’.)” (Salazar, supra, 152 Cal.App.4th at p. 1041.)

STANDARD OF REVIEW

The standard of review for summary judgment is well established. “A defendant may move for summary judgment ‘if it is contended that the action has no merit . . . .’ (Code Civ. Proc. § 437c, subd. (a).) ‘A defendant . . . has met his or her burden of showing that a cause of action has no merit if that party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to that cause of action. Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.’ (Code Civ. Proc. § 437c, subd. (p)(2).) ‘The motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ (Code Civ. Proc. § 437c, subd. (c).)” (McGarry v. Sax (2008) 158 Cal.App.4th 983, 993.)

“On appeal, we review the trial court’s decision to grant or deny the summary judgment motion de novo, on the basis of an examination of the evidence before the trial court and our independent determination of its effect as a matter of law. Citations. We are not bound by the trial court’s stated reasons or rationale. Instead, we review the summary judgment without deference to the trial court’s determination of questions of law.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 163.)

DISCUSSION

I. There Are Triable Issues of Fact as to Whether Plaintiff Is Precluded From Recovering a Commission Because He Was Not a Licensed Business Opportunity Broker

Defendant’s principal argument in support of summary judgment is that plaintiff is precluded from recovering a commission on the AT&T transaction because he was not a licensed business opportunity broker as defined by sections 10131 and 10136. These sections provide that no person “engaged in the business or acting in the capacity of” a real estate or business opportunity broker may “bring or maintain any action in the courts of this State for the collection of compensation for the performance of any of the acts mentioned in this article” without alleging and proving that he or she was a duly licensed real estate or business opportunity broker at the time the alleged cause of action arose. Because it is undisputed that plaintiff was not a licensed broker at the time he allegedly participated in the AT&T transaction, defendant contends that he cannot recover a commission for that participation.

Plaintiff disagrees. He contends that: (1) he acted as a “finder,” not a broker; (2) sections 10131 and 10136 should not apply to employees acting within the scope of their employment; (3) the AT&T transaction was not the sale of a “business opportunity” within the meaning of the statute; and (4) plaintiff did not “solicit prospective sellers or purchasers of” a business opportunity within the meaning of sections 10131 and 10136.

We begin by considering whether plaintiff is collaterally estopped by the Court of Appeal’s opinion in Salazar from litigating whether the AT&T transaction constituted the sale of a business opportunity. We then consider on the merits whether sections 10131 and 10136 bar plaintiff’s recovery.

A. Plaintiff Is Not Collaterally Estopped by the Court of Appeal’s Opinion in Salazar From Litigating Whether the AT&T Transaction Constituted the Sale of a Business Opportunity

Defendant asserts that plaintiff is collaterally estopped by the Court of Appeal’s opinion in Salazar from litigating whether the AT&T transaction constituted the sale of a business opportunity within the meaning of section 10030. For the reasons that follow, we disagree.

“Issue preclusion by collateral estoppel ‘prevents “relitigation of issues argued and decided in prior proceedings.” Citation.’ (Castillo v. City of Los Angeles (2001) 92 Cal.App.4th 477, 481; see also Bob Baker Enterprises, Inc. v. Chrysler Corp. (1994) 30 Cal.App.4th 678, 686.) The doctrine ‘rests upon the ground that the party to be affected, or some other with whom he is in privity, has litigated, or had an opportunity to litigate the same matter in a former action in a court of competent jurisdiction, and should not be permitted to litigate it again to the harassment and vexation of his opponent. Public policy and the interest of litigants alike require that there be an end to litigation.’ (Panos v. Great Western Packing Co. (1943) 21 Cal.2d 636, 637; see also Citizens for Open Access etc. Tide, Inc. v. Seadrift Assn. (1998) 60 Cal.App.4th 1053, 1065.)” (Rodgers v. Sargent Controls & Aerospace (2006) 136 Cal.App.4th 82, 89-90 (Rodgers).)

“‘“Traditionally, collateral estoppel has been found to bar relitigation of an issue decided at a previous proceeding ‘if (1) the issue necessarily decided at the previous proceeding is identical to the one which is sought to be relitigated; (2) the previous proceeding resulted in a final judgment on the merits; and (3) the party against whom collateral estoppel is asserted was a party or in privity with a party at the prior proceeding.’ . . .” Citations.’ (People v. Carter (2005) 36 Cal.4th 1215, 1240; see also Lyons v. Security Pacific Nat. Bank (1995) 40 Cal.App.4th 1001, 1015.) ‘In addition to these factors, . . . the courts consider whether the party against whom the earlier decision is asserted had a “full and fair” opportunity to litigate the issue.’ (Roos v. Red (2005) 130 Cal.App.4th 870, 880.) Collateral estoppel will not be applied ‘if injustice would result or if the public interest requires that relitigation not be foreclosed.’ (Consumers Lobby Against Monopolies v. Public Utilities Com. (1979) 25 Cal.3d 891, 902.)” (Rodgers, supra, 136 Cal.App.4th at p. 90.)

“‘The concept of privity for the purposes of . . . collateral estoppel refers “to a mutual or successive relationship to the same rights of property, or to such an identification in interest of one person with another as to represent the same legal rights citations and, more recently, to a relationship between the party to be estopped and the unsuccessful party in the prior litigation which is ‘sufficiently close’ so as to justify application of the doctrine of collateral estoppel. Citations.” Citations. “‘This requirement of identity of parties or privity is a requirement of due process of law.’ Citation. . . .” Citations.’ (Citizens for Open Access etc. Tide, Inc. v. Seadrift Assn., supra, 60 Cal.App.4th 1053, 1069-1070; see also Dawson v. Toledano (2003) 109 Cal.App.4th 387, 399.)” (Rodgers, supra, 136 Cal.App.4th at pp. 90-91.)

We have no quarrel with the proposition that plaintiff and Salazar had a common interest in establishing that the AT&T transaction was not the sale of a business opportunity. Further, that common interest seems to have been represented adequately in the Salazar case. However, “‘“collateral estoppel may be applied only if due process requirements are satisfied. Citations. In the context of collateral estoppel, due process requires that the party to be estopped must have had an identity or community of interest with, and adequate representation by, the losing party in the first action as well as that the circumstances must have been such that the party to be estopped should reasonably have expected to be bound by the prior adjudication.”’ (Sutton v. Golden Gate Bridge, Highway & Transportation Dist. (1998) 68 Cal.App.4th 1149, 1155 . . . ; see also George F. Hillenbrand, Inc. v. Insurance Co. of North America (2002) 104 Cal.App.4th 784, 826.) ‘“The ‘reasonable expectation’ requirement is satisfied if the party to be estopped had a proprietary interest in and control of the prior action, or if the unsuccessful party in the first action might fairly be treated as acting in a representative capacity for the party to be estopped. Citations. Furthermore, due process requires that the party to be estopped must have had a fair opportunity to pursue his claim the first time. Citation.” Citation.’ (Old Republic Ins. Co. v. Superior Court (1998) 66 Cal.App.4th 128, 154.) ‘In deciding whether to apply collateral estoppel, the court must balance the rights of the party to be estopped against the need to minimize repetitive litigation and prevent inconsistent judgments.’ (Children’s Hospital v. Sedgwick (1996) 45 Cal.App.4th 1780, 1788; see also Sutton v. Golden Gate Bridge, Highway & Transportation Dist., supra, at p. 1155.)” (Rodgers, supra, 136 Cal.App.4th at p. 92.)

In Rodgers, the Court of Appeal applied these principles to conclude that the plaintiff, who alleged that he had been exposed to asbestos in the course of his employment, was not collaterally estopped from litigating issues decided adversely to other workers in asbestos litigation against the same defendant. Specifically, the court found that plaintiff was not bound by findings against workers in prior cases that defendant Sargent was not the successor-in-interest to other named defendants, even though those workers and the current plaintiff were represented by the same counsel. (136 Cal.App.4th at p. 86.) The court explained: “Appellant did not have any proprietary interest in the prior cases. While he had a theoretical ‘interest’ in the resolution of the successor liability issue in the prior cases—in that an outcome favorable to the plaintiffs would have been binding upon Sargent—he had neither incentive to intervene in those actions nor reason to expect he would be bound by decisions in which he did not participate. (Old Republic Ins. Co. v. Superior Court, supra, 66 Cal.App.4th 128, 154-155; Lynch v. Glass (1975) 44 Cal.App.3d 943, 949-950.) ‘“A nonparty should reasonably be expected to be bound if he had in reality contested the prior action even if he did not make a formal appearance,” for example, by controlling it. Citations. Furthermore, privity appertains “against one who did not actually appear in the prior action . . . where the unsuccessful party in the first action might fairly be treated as acting in a representative capacity for a nonparty.” Citation.’ (Victa v. Merle Norman Cosmetics, Inc. (1993) 19 Cal.App.4th 454, 464.) The plaintiffs in the prior cases did not act as appellant’s representatives, and appellant certainly had no control over or even impact upon the litigation that produced the decisions in favor of respondent. (Old Republic Ins. Co. v. Superior Court, supra, at p. 155; Aronow v. LaCroix (1990) 219 Cal.App.3d 1039, 1052.) Although appellant, at least through his attorney, must have been aware of the prior litigation, he did not stand in a close relationship with the other two plaintiffs, had no control over the proceedings in the other cases, and cannot be charged with notice that he avoided the prior proceedings at his peril. (Lynch v. Glass, supra, at pp. 949-950.)” (Rodgers, at pp. 92-93.)

We reach the same conclusion here. There is no evidence that plaintiff had a proprietary interest in the Salazar litigation. While he may have had a theoretical interest in the resolution of common issues, he did not have an incentive to intervene in that action or a reason to expect that he would be bound by the decision there. There is no evidence that Salazar acted as plaintiff’s representative or that plaintiff had any control over the Salazar litigation. Accordingly, plaintiff cannot be bound by the decision in Salazar.

B. There Are Triable Issues Regarding Whether Plaintiff Was Required to Have a Broker’s License to Receive Commissions

As we have said, section 10136 provides that no person “engaged in the business or acting in the capacity of” a real estate broker may “bring or maintain any action in the courts of this State for the collection of compensation for the performance of any of the acts mentioned in this article” without alleging and proving that he or she was a duly licensed real estate broker at the time the alleged cause of action arose. Pursuant to section 10131, subdivision (a), a “real estate broker” includes a person who “sells or offers to sell, buys or offers to buy, solicits prospective sellers or purchasers of, solicits or obtains listings of, or negotiates the purchase, sale or exchange of . . . a business opportunity.”

The Salazar court concluded that Salazar could not recover a commission as a matter of law because the AT&T transaction indisputably was the sale of a business opportunity. In other words, in determining whether sections 10131 and 10136 barred Salazar’s recovery, the court focused on the nature of the transaction, rather than on Salazar’s role in that transaction. (E.g., Salazar, supra, 152 Cal.App.4th at pp. 1033-1034 Salazar was required to be licensed as a broker in order to recover compensation for arranging the sale or acquisition of this business.”.) The trial court’s analysis in the present case was similar. According to the court, “the analysis is straightforward: (1) a license is required to solicit prospective sellers of business opportunities; (2) the AT&T deal was a business opportunity; (3) Plaintiff solicited the AT&T deal; (4) Plaintiff did not have a license. Thus, Plaintiff’s entire action for commission is barred under Bus. & Prof. Code §§ 10131 and 10136.”

We read the statute somewhat differently. In our view, the relevant question is not whether the transaction met the statutory definition of a business opportunity, but rather whether plaintiff “bought or offered to buy,” “solicited prospective sellers . . . of,” or “negotiated the purchase . . . of” a business opportunity. In other words, the focus of the inquiry should be plaintiff’s actions in attempting to create a business relationship, not the form that the business relationship ultimately took. Under this analysis, plaintiff would come within the statute only if he “solicited” or “negotiated” the purchase or sale of a business opportunity. If, on the other hand, he “solicited” or “negotiated” a different kind of transaction, he would not come within the statute—even if the transaction ultimately was consummated as the purchase or sale of a business opportunity, rather than in the form plaintiff proposed.

In the present case, there was evidence that plaintiff solicited only the sale of defendant’s web-hosting services to AT&T, not the purchase of customer accounts from AT&T. Plaintiff testified that the initial concept he brought to AT&T was an “outsourcing relationship whereby HostPro would provide web hosting services to AT&T’s small and medium business customers.” The idea was “for HostPro to manage these accounts for AT&T . . . versus them managing it themselves and having all the overhead expenses.” Plaintiff testified that after he made the initial contact with Vince Salazar, he was involved in two meetings with AT&T personnel. During the first meeting, “I just remember everyone sitting at our big conference table, and going around the room, introducing ourselves, and talking about — more about HostPro’s services, and introducing them to the concept of, ‘Hey, we would love to be the company that manages and maintains and hosts and provides the service to your customers. . . . Our purpose was to build the relationship, create the excitement of allowing AT&T to see the vision of bringing their stuff to us versus them managing all of it themselves.” The second meeting “was pretty much the same as the first meeting, but they got more serious about talking about the acquisition of their servers over to our servers. And I think it was more of a technical meeting. And it was a meeting that allowed HostPro to understand what AT&T’s needs were. And we made it more clear what our goal was and what services and love and support we could offer them in the process.” The discussion still was “for an outsourcing relationship.”

Plaintiff also testified that in his dealings with AT&T, he never heard that AT&T was interested in selling its small and medium-sized accounts:

“Q In the various meetings and teleconferences that you participated in between AT&T and HostPro, did the parties ever discuss AT&T putting their customer accounts up for bid?

“A No, I never — that’s what was surprising when I saw the headlines, I never heard that at all.

“Q Did you ever hear that AT&T was interested in selling all those customer accounts?

“A That was a surprise to me, as well.

“Q So that’s not something that was discussed in these meetings or conference calls?

“A Not in the preliminary meetings, no.

“Q Not in any of the meetings, correct?

“A Not in any of the meetings I was in, no.

“. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

“Q The concept was for AT&T to keep their customers and for HostPro —

“A Yeah, that was the understanding, sure.”

Plaintiff’s testimony, although disputed by defendant, is sufficient to create a triable issue as to whether plaintiff “offered to buy,” “solicited prospective sellers . . . of,” or “negiotiated the purchase . . . of” a business opportunity within the meaning of section 10131. On the basis of this testimony, a trier of fact reasonably could conclude that although the deal ultimately struck between defendant and AT&T was the purchase and sale of a business opportunity, that was not the deal plaintiff solicited or negotiated. Accordingly, the trial court erred by concluding that plaintiff’s failure to procure a broker’s license barred his recovery as a matter of law.

II. There Are No Triable Issues of Fact as to the First Cause of Action for Breach of Contract

The first cause of action asserts breach of the employment agreement. Defendant asserts that it is entitled to judgment on this cause of action as a matter of law because: (1) the employment agreement provided that plaintiff was entitled to a commission only while he was employed by the company, and it is undisputed that plaintiff’s employment was terminated before defendant and AT&T finalized the asset purchase agreement; (2) by its plain language, the agreement did not entitle plaintiff to a commission when the company acquired new customers through an asset purchase agreement, rather than through the direct sale of the company’s web-hosting services; and (3) the breach of contract claim is barred by the statute of limitation. Plaintiff disputes defendant’s interpretation of the employment agreement and asserts that his claim is not time-barred.

We begin by considering whether, as a matter of law, plaintiff’s claims are barred because the AT&T transaction on which he bases his claim for additional commissions was consummated after plaintiff’s termination. Defendant relies in support of this contention on the language of the parties’ October 4, 1999 employment agreement. That agreement provided that plaintiff would receive a commission “with respect to all direct initial sales for which Employee is responsible.” It further provided that plaintiff “will be eligible for commission pay . . . so long as he remains employed with the Company as a Sales Representative.” (Italics added.)

We agree with defendant that, on its face, the italicized language is reasonably susceptible to only one interpretation—that once plaintiff ceased to be employed by defendant, he would no longer be eligible for commission pay. While plaintiff could have relied on extrinsic evidence (if there were such evidence) to suggest an alternative meaning of this provision, he did not do so. (Compare Wolf v. Superior Court (2004) 114 Cal.App.4th 1343, 1358 “This extrinsic evidence of trade usage exposed a latent ambiguity in the contract language and presented an alternative interpretation to which the term ‘gross receipts’ was reasonably susceptible in the circumstances.”.) Accordingly, we conclude as a matter of law that the written employment agreement precludes plaintiff from collecting additional commissions post-termination.

We also reject plaintiff’s contention that summary judgment must be denied because there are triable issues as to the existence of an April 2001 oral employment agreement that did not include a termination clause. In support, plaintiff relies on his own declaration, in which he states that “subsequent to the initial Employment Agreement that I signed with HostPro, Inc., in 1999 for a four percent (4%) commission, I was promoted to Channel Manager and given a new agreement for ‘20% of the up front costs’ revenues on all accounts brought in by me or through my contacts or efforts. . . . The 4% commission agreement was not amended. During the month of April 2001, a new agreement was entered into when I was promoted to Channel Manager and I was provided a new commission agreement of 20%, new office, other amenities and new salary of $75,000.00.” Further, plaintiff says, “Regarding the employment agreement and during the Premier Partner Program, it was never discussed or detailed by the Defendants in any of the meetings or bulletins that an earned commission would not be paid by terminating the employee.”

Plaintiff’s declaration arguably raises a triable issue as to the existence of an oral employment agreement. However, it is well established that “the pleadings set the boundaries of the issues to be resolved at summary judgment.” (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 648.) Accordingly, “a ‘plaintiff cannot bring up new, unpleaded issues in his or her opposing papers. Citation.’ Citations. A summary judgment or summary adjudication motion that is otherwise sufficient ‘cannot be successfully resisted by counterdeclarations which create immaterial factual conflicts outside the scope of the pleadings; counterdeclarations are no substitute for amended pleadings.’ Citation. Thus, a plaintiff wishing ‘to rely upon unpleaded theories to defeat summary judgment’ must move to amend the complaint before the hearing.” (Ibid.)

In the present case, plaintiff’s summary judgment contention that he and defendant entered an oral employment agreement in April 2001 was beyond the scope of the pleadings. Nowhere in the operative second amended complaint does plaintiff allege that the terms of his employment relationship with defendant were dictated by an oral agreement. To the contrary, plaintiff specifically alleges that modifications to his employment agreement were made in April 2001 in an addendum that was “written.” Moreover, while plaintiff could have sought to amend his pleading to conform to proof even as late as the date of the summary judgment hearing, he never did so. (E.g., Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1257 “If a plaintiff wishes to introduce issues not encompassed in the original pleadings.) Accordingly, he may not avoid summary judgment by raising triable issues as to an oral employment agreement. (See, e.g., Lackner v. North (2006) 135 Cal.App.4th 1188, 1201, fn. 5 “For the first time on appeal; Oakland Raiders v. National Football League, supra, 131 Cal.App.4th at pp. 648-649 “The Additional Claims were beyond the scope of the second cause of action of the complaint. . . . Therefore.)

III. There Are No Triable Issues of Fact as to the Second Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing

The second cause of action alleges breach of the implied covenant of good faith and fair dealing. Although this cause of action is not entirely clear, we understand plaintiff to allege that defendant breached the implied covenant by failing to pay commissions due him as a result of the AT&T transaction.

There are no triable issues of fact with regard to this cause of action. The implied covenant “is designed to effectuate the intentions and reasonable expectations of parties reflected by mutual promises within the contract.” (Slivinsky v. Watkins-Johnson Co. (1990) 221 Cal.App.3d 799, 806, citing Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 683-684.) For this reason, it is well established that an implied covenant cannot create an obligation inconsistent with an express term of the agreement. (Exxon Corp. v. Superior Court (1997) 51 Cal.App.4th 1672, 1688; Slivinsky v. Watkins-Johnson Co., at pp. 806-807.) We have already concluded that the express terms of the written employment agreement barred plaintiff from recovering commissions after his termination as a matter of law. Because the express terms of the agreement thus permitted defendant to deny plaintiff further commissions after his termination, doing so cannot violate the implied covenant.

Plaintiff also contends that defendant violated the implied covenant by “stringing him along for years” and “in a classic bait and switch conditioning any payment on a resolution of Salazar’s lawsuit.” As we have concluded that failing to pay plaintiff additional commissions did not violate the express or implied terms of the employment contract, failing promptly to tell plaintiff that it would not do also does not violate the implied covenant.

At oral argument, plaintiff asserted that defendant terminated him in order to avoid paying his commission and argued this act frustrated the purpose of the contract. Because plaintiff neither alleged an unlawful basis for his termination nor advanced such an argument in the trial court, we do not address his claim.

IV. There Are No Triable Issues of Fact as to the Third Cause of Action for Labor Code Violations

The third cause of action alleges that defendant’s failure to pay plaintiff additional commissions due him violates provisions of the Labor Code. Specifically, plaintiff alleges that “By refusing and/or neglecting to pay Plaintiff Nein the owed wages, defendants are in violation of Labor Code Section 2926 which provides that ‘An employee who is not employed for a specified term and who is dismissed by his employer is entitled to compensation for services rendered up to the time of such dismissal.’” Plaintiff further alleges that “Defendants have continued to refuse to pay Plaintiff Nein the monies owed that are not in dispute, in violation of Labor Code Section 206(a) which provides inter alia that ‘In case of a dispute over wages, the employer shall pay, without condition and within the time set by this article, all wages, or parts thereof, conceded by him to be due, leaving to the employee all remedies he might otherwise be entitled to as to any balance claimed.’” (Emphasis omitted.)

It is undisputed that commissions are “wages,” and thus that plaintiff’s claim for commissions falls within the terms of Labor Code sections 2926 and 206. (Lab. Code, § 200, subd. (a) task; Steinhebel v. Los Angeles Times Communications, LLC (2005) 126 Cal.App.4th 696, 705 “commissions are ‘wages’”.) However, for purposes of enforcing the provisions of the Labor Code, “the right of a salesperson or any other person to a commission depends on the terms of the contract for compensation.” (Koehl v. Verio, Inc. (2006) 142 Cal.App.4th 1313, 1330; see also Steinhebel, at p. 705 “contractual terms must be met before an employee is entitled to a commission”.) Accordingly, plaintiff’s right to commissions “must be governed by the provisions of the employment agreement.” (Steinhebel, at p. 705.) We have already concluded that, pursuant to the plain language of the written employment agreement, plaintiff was not entitled to any further commissions after he was terminated. Accordingly, defendant’s failure to pay such commissions cannot constitute a violation of the Labor Code.

Plaintiff asserts that even if he was not entitled to a commission under the terms of his contract, he has a valid quantum meruit claim. However, the sole case he cites in support, Willson v. Turner Resilient Floors (1949) 89 Cal.App.2d 589, does not address quantum meruit at all. It thus does not support his contention.

V. There Are No Triable Issues of Fact as to the Fourth Cause of Action for Unfair Business Practices

The fourth cause of action alleges that defendant engaged in unfair business practices in violation of section 17200. Like the other causes of action, it too is based on defendant’s conceded failure to pay him a commission in connection with the AT&T transaction. Because we have concluded that no commission was owed as a matter of law, defendant’s failure to pay a commission cannot constitute an unfair business practice. (E.g., Byars v. SCME Mortgage Bankers, Inc. (2003) 109 Cal.App.4th 1134, 1147 “A business practice that might otherwise be considered unfair or deceptive cannot be the basis of a section 17200 cause of action if the conduct has been deemed lawful.”.)

Plaintiff also asserts that defendant violated section 17200 through its “practice of terminating its employees in order to avoid the payment of earned commission.” However, because plaintiff did not assert that claim in his complaint, it cannot form the basis for a denial of summary judgment. (Oakland Raiders v. National Football League, supra, 131 Cal.App.4th at p. 648 “A summary judgment or summary adjudication motion that is otherwise sufficient ‘cannot be successfully resisted by counterdeclarations which create immaterial factual conflicts outside the scope of the pleadings; counterdeclarations are no substitute for amended pleadings.’”.)

VI. The Trial Court Did Not Abuse Its Discretion by Awarding Attorney Fees to Defendant

Plaintiff contends that because the grant of summary judgment was erroneous, the award of attorney fees was an abuse of discretion. We have concluded that the trial court did not err in granting summary judgment, and thus the award of attorney fees is not subject to reversal on this basis.

Plaintiff also contends that the amount of the award should be significantly reduced as a matter of fairness. However, plaintiff fails to make a legal argument or to cite any legal authority in support of this contention. Therefore, it is forfeited on appeal. (Berger v. California Ins. Guarantee Assn. (2005) 128 Cal.App.4th 989, 1007 argument forfeited where parties “failed to make a coherent argument or cite any authority to support their contention”; Interinsurance Exchange v. Collins (1994) 30 Cal.App.4th 1445, 1448 “Parties are required to include argument and citation to authority in their briefs contentions as waived.”].)

DISPOSITION

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

CERTIFIED FOR PUBLICATION

SUZUKAWA, J.

We concur:

EPSTEIN, P.J.

WILLHITE, J.

Tags: defending people, Mark Bennett, Published