Ron HEAPS and Phillip Sykes, Appellants, v. NURICHE, LLC, David Heaps, Lavorn Sparks, Norm Clyde, Brad Holiday, and David Parker, Appellees.
No. 20130132
Supreme Court of Utah
Jan. 30, 2015
2015 UT 26
¶ 30 Finally, Anadarko argues that the Commission‘s calculation violates due process because it imposes a tax on Anadarko that is “based upon the property of other entities.” However, as discussed above, there can be no contention that Anadarko is required to pay a tax on the royalty interests of federal, state, or Indian entities. Anadarko agrees that the royalty interests were properly deducted from its taxable value. For this reason, Hoeper v. Tax Commission provides no support for Anadarko.31 In Hoeper, the United States Supreme Court was called upon to determine whether the property of a married woman could be taxed as belonging to her husband, as at common law, or whether the wife‘s income was her own separate property.32 The Court determined that “the wife‘s income is in the fullest degree her separate property and in no sense that of her husband,” and thus taxing the husband on his wife‘s property violated due process.33 In contrast, Anadarko is not taxed at all on the royalty interests of the exempted entities.34 Moreover, deductions in the tax code “are allowed as a matter of grace.”35 Therefore, where the legislature has chosen to define value as the total value of the gas that Anadarko removed from the Utah soil, the legislature is under no obligation to provide additional deductions to taxpayers. Thus, I would hold that the Commission‘s decision does not violate the United States Constitution or other state and federal statutory provisions.
CONCLUSION
¶ 31
Mark D. Tolman, Paul R. Smith, Salt Lake City, for appellees.
Justice PARRISH authored the opinion of the Court, in which Chief Justice DURRANT, Associate Chief Justice NEHRING, Justice DURHAM, and Justice LEE joined.
Justice PARRISH, opinion of the Court:
INTRODUCTION
¶ 1 This appeal requires us to decide whether the Utah Payment of Wages Act (UPWA) imposes personal liability on the managers of a limited liability company for unpaid wages. The UPWA imposes liability
BACKGROUND
¶ 2 In 2008, Ron Heaps and Phillip Sykes (collectively, Employees), along with others, founded Nuriche, LLC, a now-defunct limited liability company formed in Nevada and registered to do business in Utah. Employees allege that the other founding members promised them compensation and other benefits in connection with their employment by Nuriche, but that Nuriche and the remaining managers refused to provide the promised compensation upon Employees’ termination in 2011.
¶ 3 Shortly after being terminated, Employees filed their complaint in this matter. The complaint alleged that Nuriche and those on its board of managers, David Heaps, Lavorn Sparks, Norm Clyde, Brad Holiday, and David Parker1 (collectively Managers), breached their agreement to pay Employees $150,000 in annual salaries and benefits. Employees also asserted a claim under the UPWA for failure to pay past-due wages following their termination.
¶ 4 Four of the five Managers—David Heaps, Lavorn Sparks, Norm Clyde, and Brad Holiday—sought summary judgment. They argued first that Nevada limited-liability-company law controlled Employees’ claim for unpaid wages and that, under Nevada law, LLC managers could not be held personally liable for unpaid wages. Alternatively, they argued that Utah wage law does not impose personal liability on managers for unpaid wages.
¶ 5 Following a hearing, the district court granted Managers’ motion for summary judgment. The court first undertook a conflict-of-laws analysis and concluded that Utah law applies because, under the most significant relationship test, “the majority of [the relevant] contacts were in Utah.” Applying Utah law, the district court ruled that Managers were employers as defined by the UPWA, but that the UPWA does not extend wage liability to individual managers. The district court explained that “[t]here is simply no indication in the UPWA that it is intended to impose individual liability on officers or agents of a business.” Subsequently, the district court granted summary judgment in favor of Manager David Parker, who served as CEO of Nuriche, reasoning that, like the other managers, Parker could not be held personally liable for unpaid wages.2 Because there were additional claims pending, Employees sought and obtained
STANDARD OF REVIEW
¶ 6 Summary judgment is appropriate only where “there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law.”
ANALYSIS
¶ 7 On appeal, Employees argue that the district court erred in granting Managers’ motions for summary judgment because the UPWA imposes personal liability on LLC managers for unpaid wages. Managers respond that Nevada wage law should apply
I. UTAH WAGE LAW CONTROLS
¶ 8 In arguing that Nevada law applies, Managers rely on the governing law provision of the Utah Revised Uniform Limited Liability Company Act (URULLCA), which provides that “[t]he law of the jurisdiction of formation of a foreign limited liability company governs ... the liability of a member as member and a manager as manager for a debt, obligation, or other liability of the company.”
¶ 9 While it may be the case that Nevada law governs Managers’ liability for the obligations of Nuriche, Employees are not seeking to hold Managers liable for an obligation of Nuriche. Instead, Employees argue that the UPWA imposes direct liability on Managers. Therefore, unlike claims that rely on derivative liability to render individual officers responsible for an obligation of a company, see, e.g., Jones & Trevor Mktg., Inc. v. Lowry, 2012 UT 39, ¶ 13, 284 P.3d 630, Employees’ claims are premised on a theory of direct liability. Because the URULLCA‘s governing law provision limits its applicability to those cases implicating officer liability for the obligations of the company, it does not apply here.
¶ 10 Moreover, the URULLCA provides that “[r]egistration of a foreign limited liability company to do business in this state does not authorize the foreign limited liability company to engage in any activities or affairs or exercise any power that a limited liability company may not engage in or exercise in this state.”
II. THE UPWA DOES NOT IMPOSE CIVIL OR CRIMINAL LIABILITY ON INDIVIDUAL MANAGERS
¶ 11 Having concluded that Utah law applies, we now turn to the language of the UPWA to determine whether it imposes individual liability on Nuriche‘s managers for unpaid wages. To ensure that employees who are discharged receive unpaid wages, the UPWA imposes civil and criminal penalties when employers fail to fulfill their wage obligations. The UPWA provides that an “employer shall pay [unpaid] wages to [an] employee within 24 hours of the time of separation.”
¶ 12 Because the UPWA imposes liability for unpaid wages on employers, we must determine whether Managers qualify as employers. Under the UPWA, the term employer
includes every person, firm, partnership, association, corporation, receiver or other officer of a court of this state, and any agent or officer of any of the above-mentioned classes, employing any person in this state.
¶ 13 “When interpreting statutes, our primary goal is to evince the true intent and purpose of the Legislature.” State v. Watkins, 2013 UT 28, ¶ 18, 309 P.3d 209 (internal quotation marks omitted). The best available evidence of the Legislature‘s intent is the statute‘s plain language. Marion Energy, Inc. v. KFJ Ranch P‘ship, 2011 UT 50, ¶ 14, 267 P.3d 863.
¶ 14 The statutory definition of employer includes “every person, firm, partnership, association, corporation, receiver or other officer of a court of this state, and any agent or officer of any of the above-mentioned classes, employing any person in this state.”
¶ 15 In this case, Employees concede they were employed by Nuriche, not by Managers in their individual capacities. Although Managers may have exercised supervisory power over Employees, any supervisory power arose from their positions as officers and agents of Nuriche—not as direct employers. Because Managers did not personally employ Employees, they are not personally liable for unpaid wages under the statute.
¶ 16 This conclusion is buttressed by long-accepted principles of Utah corporate law. “The general rule is that a corporation is an entity separate and distinct from its officers, shareholders and directors and that they will not be held personally liable for the3 corporation‘s debts and obligations.” Salt Lake City Corp. v. Big Ditch Irr. Co., 2011 UT 33, ¶ 27, 258 P.3d 539 (internal quotation marks omitted). The Legislature has imposed individual liability on business officers and agents in some contexts. But when it has, it has done so expressly. For example, the Insurer Receivership Act explains that any “person acting on behalf of the insurer who” inappropriately gives preference “is personally liable.”
¶ 17 Our conclusion is further buttressed by the fact that the UPWA imposes criminal liability on employers. And “a criminal statute must give fair warning of the conduct that it makes a crime.” Bouie v. City of Columbia, 378 U.S. 347, 350, 84 S.Ct. 1697, 12 L.Ed.2d 894 (1964). For the same reasons that the UPWA is not clear enough to upset generally accepted principles of limited liability for corporate officers and agents, it does not constitute “fair warning” of criminal liability because officers and agents would “be required at peril of life, liberty or property to speculate as to [its] meaning.” Id. at 351, 84 S.Ct. 1697 (internal quotation marks omitted).
¶ 18 In summary, we hold that Managers are not personally liable under the UPWA because they did not personally employ Em-
III. ALTERNATE READINGS OF THE UPWA ARE UNSUPPORTED BY THE STATUTORY LANGUAGE
¶ 19 Employees raise two alternative constructions of the UPWA‘s definition of employer that would render Managers personally liable. While the first has some support in the statutory language, it would dictate an absurd result. While the second alternative construction has an arguable basis in public policy, it finds no support whatsoever in the statutory language.
¶ 20 Employees first argue that the UPWA imposes liability on all officers and agents of a business entity. Under the statute, the term employer includes “every person, firm, partnership, corporation” and “any agent or officer of any of the above-mentioned classes.”
¶ 21 Not only does Employees’ proposed construction ignore the modifying language limiting an employer to one “employing any person in this state,”
¶ 22 Employees also propose a second, more-modest construction of the UPWA that would limit the types of agents and officers who qualify as employers under the statute to those who exercise some control over the payment of wages. Under this proposed interpretation, only those agents and officers who have decision-making authority to “separa[te] an employee from the employer‘s payroll,”
¶ 23 This approach has been endorsed by Pennsylvania courts in interpreting a wage statute that defines employer in a similar manner to the UPWA.5 In Mohney v. McClure, 390 Pa.Super. 338, 568 A.2d 682, 683 (1990), aff‘d, 529 Pa. 430, 604 A.2d 1021 (1992), the Superior Court of Pennsylvania held that individual officers and agents qualified as employers and thus could be personally liable for unpaid wages. But it limited that liability to those officers and agents “who make the decisions as to the manner in which the [company] is managed.” Id. at 685 (emphasis omitted). The court explained that the legislature had “some purpose for including an agent or officer” in the definition of employer and reasoned that “the only apparent purpose was to subject these persons to liability in the event that a corporation or similar entity failed to make wage payments.” Id. Relying
¶ 24 While the Pennsylvania approach is arguably consistent with public policy, it is not consistent with the language of the UPWA.6 And the Pennsylvania approach would require courts to engage in a free-standing public policy analysis to determine precisely which agents of an employer should be held liable for unpaid wages. But determining where to draw such a line is generally the role of the Legislature, not this court. See Jones v. Barlow, 2007 UT 20, ¶ 34, 154 P.3d 808. This is particularly true where the policy determination at issue “requires placing a premium on one societal interest at the expense of another.” Id. (internal quotation marks omitted). Because nothing in the statutory language suggests a basis for distinguishing between those agents who are liable for unpaid wages and those agents who are not, we refuse to create such a distinction out of whole cloth. We therefore reject Employees’ proposed construction.
¶ 25 In summary, we find Employees’ proposed readings of the UPWA unworkable. The first reading absurdly results in civil and criminal liability for all employees. And the second reading requires policy-based line drawing not supported by the language of the statute.
CONCLUSION
¶ 26 We affirm the ruling of the district court. The individual managers of Nuriche cannot be held personally liable for the unpaid wages claimed by Employees under the Utah Payment of Wages Act. This interpretation of the statute is dictated by its language and is consistent both with the pattern set by the Legislature in other statutes and with long-standing notions of limited personal liability under Utah corporate law.
Wade HERLAND, Personal Representative of the estate of Neely Creager, Appellant, v. Travis IZATT, Appellee.
No. 20120586
Supreme Court of Utah
Jan. 30, 2015
2015 UT 30