Dane-Elec Corp. v. Bodokh
248 Cal. Rptr. 3d 163
| Cal. Ct. App. 5th | 2019Background
- Dane-Elec Corp. (Dane Corp.) sued former CEO Nessim Bodokh on a promissory note; Bodokh cross-complained for unpaid wages and penalties under the Labor Code.
- Bodokh was treated as an independent contractor (resident of France, not on payroll, no tax withholdings) and signed agreements trimming his compensation during company restructuring.
- Trial court entered judgment for Dane Corp. on the note and against Bodokh on the wage claims; Bodokh did not show he was a salaried employee entitled to retroactive pay.
- The Second Renewed Promissory Note contains a prevailing-party attorney-fees clause; Dane Corp. sought contractual fees under Civil Code §1717 and related provisions.
- Trial court awarded Dane Corp. most requested fees but excluded fees incurred solely for the wage claim (finds wage claim not brought in bad faith) and nevertheless awarded fees for work it found "inextricably intertwined" with the contract claim.
- On appeal, the core dispute became whether Labor Code §218.5(a) (which limits fee awards to nonemployee prevailing parties unless the wage claim was brought in bad faith) bars recovery of contractual fees that are inextricably intertwined with wage claims.
Issues
| Issue | Plaintiff's Argument (Bodokh) | Defendant's Argument (Dane Corp.) | Held |
|---|---|---|---|
| Whether §218.5(a) bars an employer from recovering contractual attorney fees for work that is "inextricably intertwined" with defended wage claims when the court found the wage claim not brought in bad faith | §218.5 prevents Dane Corp. from recovering any fees related to the wage claim, so intertwined fees should be disallowed | Contractual fee clause and general fee statutes allow recovery for all fees on overlapping issues; Reynolds-style nonapportionment permits full recovery | Held for Bodokh: §218.5(a) bars recovery as a matter of law of attorney fees for defending wage claims that overlap or are inextricably intertwined with contract claims unless the wage claim was found to be brought in bad faith; remand to recalculate fees strictly for contract-only work |
| Whether substantial evidence supports rejection of Bodokh's wage claims (employee status; gross vs. net compensation) | Bodokh argued he was a salaried employee and entitled to retroactive/gross pay | Dane Corp. argued he was an independent contractor and the compensation was gross per the Conciliation Agreement | Held for Dane Corp.: substantial evidence supports findings that Bodokh was not a salaried employee and his $6,700 compensation was gross, so wage recovery fails |
| Whether trial court erred by denying a statement of decision after a short bench trial | Bodokh argued the court should have issued a statement of decision | Dane Corp. argued trial was under eight hours so court properly declined | Held for Dane Corp.: no error; denial permissible and findings supported |
| Remedy/appeal fees — whether appellate fees and costs should be awarded | Bodokh sought to limit fees; Bodokh opposed costs on appeal | Dane Corp. requested appellate fees under the contract clause | Held: remand for trial court to recalculate trial and appellate contractual fees limited to contract-claim work; no party may recover costs on appeal |
Key Cases Cited
- Reynolds Metals Co. v. Alperson, 25 Cal.3d 124 (recognizes no apportionment required when attorney fees are incurred for issues common to compensable and noncompensable claims)
- Carver v. Chevron U.S.A., Inc., 119 Cal.App.4th 498 (fee-shifting statute with unilateral plaintiff recovery controls to preclude overlapping defendant fee recovery)
- Turner v. Association of American Medical Colleges, 193 Cal.App.4th 1047 (statutory policy can carve out exception preventing prevailing defendants from recovering fees intertwined with claims subject to unilateral fee statutes)
- Roman v. BRE Properties, Inc., 237 Cal.App.4th 1040 (a specific statutory cost-shifting scheme controls over general cost statutes when necessary to vindicate legislative policy)
- Calvo Fisher & Jacob LLP v. Lujan, 234 Cal.App.4th 608 (discusses impracticability of apportioning attorney time where claims are inextricably intertwined)