Opinion
G059079
06-29-2021
ADA VICTORIA CERVANTES-KUTAS et al., Plaintiffs and Respondents, v. DAWN TUCKER et al., Defendants and Appellants.
Khouri Law Firm, Michael J. Khouri and Michael Tran for Defendants and Appellants. Robinson Employment Law, Michael C. Robinson and Lakesha L. Robinson for Plaintiffs and Respondents.
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County, No. 30-2015-00822545 Theodore R. Howard, Judge. Reversed and remanded with directions.
Khouri Law Firm, Michael J. Khouri and Michael Tran for Defendants and Appellants.
Robinson Employment Law, Michael C. Robinson and Lakesha L. Robinson for Plaintiffs and Respondents.
OPINION
THOMPSON, J.
Defendants Dawn Tucker (Dawn) and Kent Walter Virgill (Virgill) appeal from a default judgment in the amount of $578,926.32, which was entered against them as a terminating sanction for their violation of various discovery orders. Defendants raise three arguments on appeal. First, they contend the complaint's allegations do not support a judgment against them. Second, they claim the default judgment exceeds the amounts specified in the complaint and therefore is void under Code of Civil Procedure section 580. Finally, they argue the court abused its discretion by imposing terminating sanctions because they substantially complied with their discovery obligations. We agree with defendants' second contention but not the others. We accordingly reverse the judgment. On remand, plaintiffs are given the option to either: (1) proceed on the currently operative complaint and reapply for a default judgment for the reduced amount specified in the complaint and consistent with this opinion; or (2) amend the complaint to seek the greater amount claimed (which would open the default allowing defendants to file a responsive pleading to the amended complaint).
Because Dawn's husband, Todd Tucker, is discussed in this appeal, we refer to the Tuckers by their first names to avoid confusion. No disrespect is intended.
To clarify, “opening” the default would essentially vacate the default and allow defendants to proceed to litigate the action as if no default had been entered.
FACTS
The Third Amended Complaint
In 2018, plaintiffs Erik Kutas and Ada Victoria Cervantes-Kutas filed the operative third amended complaint against Dawn and Virgill along with three other defendants who are not parties to this appeal, Todd Tucker (together with Dawn Tucker, the Tuckers), Rehab Fitness, Inc. (Rehab Fitness), and OC Fitness Academy, Inc. (OC Fitness). According to the complaint, plaintiffs worked for Rehab Fitness and the Tuckers, but they were denied appropriate wages, expense reimbursement, and documentation.
The complaint also alleged plaintiffs were supposed to “receive a percentage of [company] shares... as compensation for their work.... ” In support of this allegation, the complaint attached a November 2012 agreement that is central to this appeal (the Agreement). The Agreement indicated Todd was the sole shareholder of Rehab Fitness and would transfer 40 percent of the company's stock to plaintiffs after a certain condition precedent was satisfied. Among other things, the Agreement indicated the stock would be transferred “to induce [plaintiffs] to continue to work for [Rehab Fitness].” The Agreement was signed by Todd and plaintiffs. Dawn also signed the agreement below the following statement: “I have reviewed and agree to the terms of this agreement.”
Plaintiffs ultimately left their jobs, and Rehab Fitness later filed for chapter 7 bankruptcy. With respect to Virgill, the complaint alleged he appeared at Rehab Fitness' bankruptcy proceedings and informed the bankruptcy trustee that he and OC Fitness would pay $50,000 to Todd for ownership of Rehab Fitness. The bankruptcy trustee notified the parties that Rehab Fitness was to cease operations due to its bankruptcy status and Todd's ownership interest could not be sold. Virgill and OC Fitness later purchased certain gym equipment identified in Rehab Fitness' bankruptcy filings for $20,000. According to the complaint, Rehab Fitness and the Tuckers further conveyed “all or substantially all” of Rehab Fitness' assets to Virgill and OC Fitness for inadequate consideration. Virgill purportedly continued Rehab Fitness' operations under a fictitious business name. Given this transfer of assets to Virgill, the complaint alleged plaintiffs could not recover their earned wages if granted an award for lost wages.
Finally, the complaint alleged the Tuckers were alter egos of Rehab Fitness and Virgill was liable as a successor of the business. The complaint accordingly alleged claims for unpaid wages, unpaid expenses, failure to pay minimum wage, overtime and double time wages, waiting time penalties, failure to provide accurate wage statements, failure to produce employment documents, fraud and deceit, conversion, unfair business practices, wrongful constructive discharge, breach of contract, breach of the implied covenant of good faith and fair dealing, and fraudulent transfer.
Defendants' Discovery Violations
In 2018 and 2019, plaintiffs filed numerous motions to compel seeking initial and further responses to their written discovery requests. Most of these motions concerned interrogatories, form interrogatories, and requests for production of documents that plaintiffs served in December 2018. After Dawn and Virgill failed to serve responses and ignored plaintiffs' meet and confer efforts, plaintiffs filed motions to compel in January 2019. An earlier motion detailed how defendants had changed their counsel and one of the new attorneys involved in the case eventually left the law firm. This appears to have resulted in different attorneys handling the matter and failing to keep up with the case due to their other work obligations. In February 2019, the court granted plaintiffs' motions to compel and ordered Dawn and Virgill to provide written responses to the outstanding discovery requests.
Plaintiffs later filed eight additional motions to compel discovery, which do not appear to be included in the record on appeal. The court found the parties “abdicated their obligation to work through discovery issues in good faith” and referred the matter to a discovery referee. In July 2019, the discovery referee reviewed plaintiffs' eight motions and recommended the court “strike the cross-complaint of Todd Tucker and Dawn Tucker, and... strike all served defendants' answers to the complaint and then... enter a judgment by default against all served defendants.” The discovery referee detailed several reasons for his recommendation. With respect to Dawn, she still had not complied with a January 2019 supplemental request for production. She also had not complied with a January 2019 court order requiring her to provide further responses to form interrogatories and to pay monetary sanctions. With respect to Virgill, the discovery referee noted he had not complied with a February 2019 court order requiring him to respond to form interrogatories, special interrogatories, and requests for admission. While the discovery referee acknowledged defendants' counsel claimed they were “‘swamped' with these 22 pieces of discovery from plaintiffs and... [were] appearing on this case pro bona, ” he found “so much of the discovery requested was for the same information” and defendants were given generous extensions of time to respond. Finally, the discovery referee noted the court had continued the trial date on two prior occasions due to defendants' lack of discovery responses.
Based on our review of the superior court docket, it appears plaintiffs filed several discovery motions in April 2019. Some of those were motions to compel while others were motions for sanctions. Given that the eight motions at issue in this appeal are not easily identifiable from the superior court docket, we do not augment the record.
Default Judgment
In August 2019, defendants' counsel submitted a declaration indicating defendants had now responded to the outstanding discovery with the exception of two requests. The court ultimately adopted the discovery referee's recommendation and struck the Tuckers' cross-complaint. The court further struck all of the defendants' answers to the complaint and entered a default judgment against all defendants.
Plaintiffs then filed an application for default judgment along with their declarations, attorney declarations, and a motion for attorney fees. After considering plaintiffs' default package, the court entered a default judgment in the amount of $578,926.32 as follows: (1) $458,502.73 in damages; (2) $52,214.82 in prejudgment interest at the annual rate of 10 percent; (3) $40,000 in attorney fees; (4) $9,648.77 in costs; and (5) $18,560 in statutory penalties.
DISCUSSION
Defendants contend the court erred by entering a default judgment because the complaint fails to state a cause of action against them. They also claim the default judgment is void for awarding damages in excess of the amount demanded in the complaint. Finally, they argue the court abused its discretion by imposing terminating sanctions because they substantially complied with plaintiffs' discovery requests. We agree the default judgment is void for exceeding the amounts demanded in the complaint, but we disagree with defendants' remaining contentions. We accordingly reverse the default judgment for its violation of Code of Civil Procedure section 580.
The complaint states causes of action against defendants.
Defendants attack almost every aspect of the complaint and argue the allegations do not state any claims against them. “[I]f the well-pleaded allegations of the complaint do not state any proper cause of action, the default judgment in the plaintiff's favor cannot stand. On appeal from the default judgment, ‘[a]n objection that the complaint failed to state facts sufficient to constitute a cause of action may be considered.'” (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 282.) For the reasons below, the court could enter a default judgment against defendants because the complaint stated cognizable causes of action against them.
A. Alter Ego Liability Regarding Dawn
Defendants contend the complaint's alter ego allegations are deficient and do not establish liability against Dawn. “Two requirements must be met to invoke the alter ego doctrine: (1) ‘[T]here must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist'; and (2) ‘there must be an inequitable result if the acts in question are treated as those of the corporation alone.'” (Turman v. Superior Court (2017) 17 Cal.App.5th 969, 980-981.)
Here, the complaint alleged both required elements. As to the first element, plaintiffs alleged Rehab Fitness' entire stock was owned by the Tuckers who failed to observe corporate formalities or adequately capitalize the corporation. They claimed the corporation was inadequately capitalized “to deny plaintiffs payment of their earned wages.” They further alleged Todd commingled assets by transferring money from Rehab Fitness' account to the Tuckers' family trust while transferring other assets to Virgill. According to the complaint, Rehab Fitness became insolvent and filed for bankruptcy because the Tuckers removed these valuable assets. As to the second element, plaintiffs alleged “adherence to the fiction of the separate corporate existence of [Rehab Fitness] would, under the circumstances, sanction a fraud and promote injustice in that [plaintiffs] would be unable to realize upon any judgment in their favor.” They further claimed the Tuckers inadequately capitalized Rehab Fitness and transferred its assets to avoid paying plaintiffs' their earned wages.
These allegations adequately set forth both required elements for alter ego liability against Dawn. Plaintiffs were only required to state “‘ultimate rather than evidentiary facts'” (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 236) and allegations “adequate to apprise [Dawn] that [she] was being held accountable as an alter ego....” (Leek v. Cooper (2011) 194 Cal.App.4th 399, 412). And, as the court explained in an order finding the alter ego allegations in the first amended complaint were sufficient, “there is no requirement that the facts supporting alter ego be pled with specificity, particularly when the objecting party is in the best position to know its own involvement.”
Defendants argue the Agreement attached to the complaint contradicts the complaint's allegations regarding Dawn's control over Rehab Fitness. Although the complaint alleged Dawn controlled and operated Rehab Fitness and further owned all of its stock, defendants contend the Agreement shows “control of Rehab [Fitness] was limited to Todd Tucker and [plaintiffs].” They accordingly claim the complaint failed to allege the first element - a unity of interest between Dawn and Rehab Fitness.
We first summarize the pertinent provisions of the Agreement. The Agreement indicates “Todd Tucker is the sole shareholder of [Rehab Fitness]” and that certain stock would be transferred to plaintiffs “to induce them to continue to work for” the company. The Agreement further states the parties' spouses “may have a community property interest in the corporate shares and income” but “only Todd Tucker [and plaintiffs] have control over [Rehab Fitness].” Todd and plaintiffs signed the Agreement in 2012. Dawn also signed the Agreement following this statement: “I have reviewed and agree to [the] terms of this agreement.”
While the Agreement raises some concerns regarding Dawn's ownership of Rehab Fitness' stock and the extent of her involvement with the company, ownership of stock is not a prerequisite for the application of the alter ego doctrine. (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538 (Sonora) [“[T]he courts will ignore the corporate entity and deem the corporation's acts to be those of the persons or organizations actually controlling the corporation, in most instances the equitable owners”].) In any event, the Agreement acknowledges Dawn had a community property interest in the corporate shares, and some courts have found a community property interest may be sufficient under the alter ego doctrine. (Firstmark Capital Corp. v. Hempel Financial Corp. (9th Cir. 1988) 859 F.2d 92, 94 [finding a wife who owned no stock in a corporation but had a community property interest in her husband's shares satisfied the alter ego doctrine; Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1011 [“For purposes of the demurrer... plaintiff's alleged community property interest... potentially renders her a beneficial shareholder”].) We need not decide the issue because ownership of stock is only one relevant factor, and the complaint leaves open the possibility that Dawn still exercised control over the company. As explained ante, the complaint alleged both Todd and Dawn failed to observe corporate formalities or adequately capitalize Rehab Fitness to avoid paying plaintiffs' their earned wages. The complaint further alleged corporate assets were commingled with the Tuckers' family trust.
Ignoring these allegations in favor of the Agreement would be problematic because there are too many factual issues to be fleshed out at trial if the case had proceeded to that stage. For example, it is not clear who drafted the Agreement or whether plaintiffs had personal knowledge that Todd was the only stockholder or person who exercised control over the company. Plaintiffs presumably entered into the Agreement because they wanted their compensation, but this does not forever commit them to representations about the company that they may not have even known about. Finally, we note the Tuckers relied on the Agreement in their cross-complaint to assert a breach of contract claim on behalf of both Todd and Dawn. The cross-complaint indicates plaintiffs “entered into a written contract with Todd Tucker and Dawn Tucker....” (Italics added.) It accordingly appears contradictory for Dawn to argue the Agreement defeats the complaint's allegations that she was plaintiffs' employer when she sued plaintiffs under the same Agreement.
Citing Sonora, supra, 83 Cal.App.4th 523, defendants next argue the complaint does not adequately allege the second element for alter ego liability - an inequitable result - because “‘[d]ifficulty in enforcing a judgment or collecting a debt does not satisfy this standard.'” While Sonora noted “[t]he alter ego doctrine does not guard every unsatisfied creditor of a corporation, ” it also explained the doctrine “affords protection where some conduct amounting to bad faith makes it inequitable for the corporate owner to hide behind the corporate form.” (Sonora, at p. 539.) Here, the complaint alleged conduct amounting to bad faith by alleging the Tuckers removed money and assets from Rehab Fitness to avoid paying plaintiffs' their earned wages.
The complaint accordingly asserted sufficient allegations of alter ego liability against Dawn. We likewise reject defendants' related argument that the complaint fails to state a cause of action against Dawn under the Labor Code because she was not plaintiffs' employer. In support of this assertion, defendants point to the Agreement and again argue Dawn had no control over Rehab Fitness or plaintiffs' wages. But the complaint alleged plaintiffs worked for Rehab Fitness and the Tuckers who were both alter egos of the company. For the same reasons discussed ante, we cannot ignore these allegations in favor of the Agreement given the various factual issues it raises.
B. Successor Liability Regarding Virgill
Defendants next argue the complaint fails to adequately allege successor liability with respect to OC Fitness and Virgill. Where a corporation purchases or otherwise acquires the assets of another corporation, the acquiring corporation generally is not liable for the predecessor's actions. (Fischer v. Allis-Chalmers Corp. Product Liability Trust (2002) 95 Cal.App.4th 1182, 1188.) “This general rule does not apply if ‘(1) there is an express or implied agreement of assumption, (2) the transaction amounts to a consolidation or merger of the two corporations, (3) the purchasing corporation is a mere continuation of the seller, or (4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller's debts.'” (Ibid.)
Here, the complaint adequately asserted the third exception. Plaintiffs alleged OC Fitness and Virgill “continued the business operations of [Rehab Fitness] including sharing the same vendors and customers, as well as the same management, business, fixtures, business equipment, and personnel” while using Rehab Fitness' fictitious business name. They further alleged most of Rehab Fitness' assets were transferred to Virgill outside of the bankruptcy proceedings without adequate consideration for those assets. They claimed adequate consideration was not provided because only $20,000 was paid through the bankruptcy for certain gym equipment. But no consideration was provided for other assets “such as the goodwill, customer lists, business equipment, vendor contacts, and employees.” While not determinative, the complaint also interestingly alleged OC Fitness filed its articles of incorporation in September 2016 - only a few months before Rehab Fitness filed for bankruptcy in February 2017.
Defendants contend plaintiffs failed to allege facts showing the $20,000 was inadequate consideration for the gym equipment or that the other transferred assets had any value. This level of detail was not necessary because the complaint stated no consideration was provided for various itemized assets. And, in any event, the complaint does suggest the corporate assets had value by stating “[a]t least some portion of the... assets, including equipment, monies collected in membership dues, and proceeds from contests, fundraisers, and events would have been available to satisfy [plaintiff's] claims had there been no conveyance or transfer of assets.”
In their reply brief, defendants argue Virgill is not liable as an alter ego of OC Fitness regardless of that company's liability as a successor entity. They claim the complaint merely alleged Virgill was a shareholder, director, or officer of OC Fitness. Arguments raised for the first time in an appellant's reply brief are deemed forfeited. (Chicago Title Ins. Co. v. AMZ Ins. Services, Inc. (2010) 188 Cal.App.4th 401, 427.) Even if we considered the issue, we are not persuaded by defendants' argument. The complaint's allegations suggest Virgill was largely in control of OC Fitness as he used the entity to purchase almost all of Rehab Fitness' assets. Defendants also acknowledge “Virgill was the sole shareholder” of OC Fitness. We accordingly find the complaint makes sufficient allegations of alter ego and successor liability against Virgill.
C. Unpaid Wages and Waiting Time Penalties
Defendants next argue the complaint cannot state a claim for unpaid wages (first cause of action) or waiting time penalties (fifth cause of action) because it does not allege how much plaintiffs were owed, when their employment ended, their rate of compensation, or the number of days for which they were not paid. We disagree. The complaint alleged plaintiffs' pay rate as the minimum wage rate and detailed the amounts outstanding. For example, the complaint alleged: “[Plaintiff Eric Kutas] estimates that he is owed $74,294 in earned minimum wages and $65,872 in earned overtime wages....” Likewise, the complaint stated: “[Plaintiff Ada-Victoria Cervantes-Kutas] estimates that she is owed $63,200 in earned minimum wages and $60,429 in earned overtime wages.... ” The complaint also alleged plaintiffs had not been paid since they left their employment. The complaint accordingly stated a claim for unpaid wages and waiting time penalties. (CACI Nos. 2700 [elements of nonpayment of wages], 2704 [elements of waiting time penalties].)
D. Unpaid Business Expenses
With respect to the second cause of action for unpaid expenses, defendants claim the complaint fails to state “what business expenses were incurred on behalf of Rehab Fitness.” Labor Code section 2802 provides in pertinent part: “An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties....” The elements of a section 2802 claim are: “‘(1) the employee made expenditures or incurred losses; (2) the expenditures or losses were incurred in direct consequence of the employee's discharge of his or her duties, or obedience to the directions of the employer; and (3) the expenditures or losses were necessary.'” (Nicholas Laboratories, LLC v. Chen (2011) 199 Cal.App.4th 1240, 1249.)
All further statutory references are to the Labor Code unless otherwise stated.
Here, the complaint alleged plaintiffs incurred necessary business expenses for which they were not reimbursed but does not indicate the nature or type of expenses. Federal cases have found similar complaints failed to state a claim where they merely alleged a failure to reimburse unspecified work-related expenses. (Tan v. GrubHub, Inc. (N.D. Cal. 2016) 171 F.Supp.3d 998, 1005 [summarizing federal cases].) The parties do not cite to any cases addressing the issue. While we are not bound by the federal cases, we find them persuasive. Because the complaint merely alleged a failure to reimburse unidentified business expenses, it failed to state a claim pursuant to section 2802.
E. Section 1194 Claims and Failure to Produce Wage Statements and Employment Documents
Relying on Martinez v. Combs (2010) 49 Cal.4th 35 (Martinez), defendants argue the complaint fails to state claims for unpaid minimum and overtime wages under section 1194 (third & fourth causes of action) or claims for failure to produce wage statements and employment documents (sixth & seventh causes of action). In Martinez, our Supreme Court held the definition of employer contained in the Industrial Welfare Commission (IWC) wage orders applies to actions seeking unpaid minimum wages under section 1194. (Martinez, at p. 64.) The court explained: “To employ, then, under the IWC's definition, has three alternative definitions. It means: (a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship.” (Ibid.) This definition of the employment relationship accordingly determines who may be liable in an action to recover unpaid minimum wages. (Ibid.)
Defendants claim the complaint does not allege any employment contract or that Rehab Fitness had control over plaintiffs' wages, hours, or working conditions. Citing the Agreement, they contend “the working relationship resemble[d] that of a partnership” and plaintiffs' wages could not be modified without their consent. But the Agreement merely stated plaintiffs would become shareholders of Rehab Fitness after a certain condition precedent was satisfied. This does not negate the complaint's allegations that plaintiffs were employees of the company. Indeed, the Agreement states Todd would transfer stock to plaintiffs “in order to induce them to continue to work for [Rehab Fitness].” Likewise, the complaint alleged plaintiffs were supposed to “receive a percentage of shares... as [part of their] compensation for their work....” The complaint further alleged plaintiffs “received some wages with withholding statements and W-2 forms from [Rehab Fitness] during their employment.” Given these allegations, the complaint sufficiently pleaded an employment relationship.
F. Remaining Causes of Action
Defendants attack six remaining causes of actions for conversion, unfair business practices, wrongful constructive discharge in violation of public policy, common count for services rendered, fraudulent transfer, and constructive fraudulent transfer. But the conversion claim and common count for services rendered are not even at issue because plaintiffs dismissed those claims. For the reasons discussed below, we also need not address the four other claims because the default judgment is void to the extent it exceeds the amounts demanded in the complaint, which specified amounts for different claims.
The default judgment is void under Code of Civil Procedure section 580.
Defendants next contend the default judgment is void to the extent that it exceeds the jurisdictional amount of $25,000 alleged in the complaint. Plaintiffs claim the complaint “stated specific amounts of damages to sustain... most of the damages in the judgment.” (Italics added.) We agree the default judgment is void because it exceeds the amounts demanded in the complaint.
“The relief granted to the plaintiff, if there is no answer, cannot exceed that demanded in the complaint....” (Code Civ. Proc., § 580, subd. (a).) A default judgment is accordingly “void when the damages awarded are in excess of what is specified in the complaint.” (Heidary v. Yadollahi (2002) 99 Cal.App.4th 857, 864.) This rule applies even if the default is entered as a result of discovery sanctions rather than a failure to respond to the complaint. (Greenup v. Rodman (1986) 42 Cal.3d 822, 829-830.) A prayer for “damages according to proof” is sufficient to support a default judgment “if a specific amount of damages is alleged in the body of the complaint.” (Becker v. S.P.V. Construction Co. (1980) 27 Cal.3d 489, 494.)
Here, the court entered a default judgment in the amount of $578,926.32 as follows: (1) $458,502.73 in damages; (2) $52,214.82 in prejudgment interest at the annual rate of 10 percent; (3) $40,000 in attorney fees; (4) $9,648.77 in costs; and (5) $18,560 in statutory penalties. On appeal, we need only address the $458,502.73 in damages and $18,560 in statutory penalties because “the operative complaint must allege the amount of ‘relief' sought for damages, but not prejudgment interest, attorney fees, or costs.” (Sass v. Cohen (2019) 32 Cal.App.5th 1032, 1040; see also Simke, Chodos, Silberfeld & Anteau, Inc. v. Athans (2011) 195 Cal.App.4th 1275, 1290.) The latter three amounts are accordingly recoverable even though specific amounts are not demanded in the complaint.
A. Damages
Applying the above principles to the $458,502.73 in damages, it is apparent the default judgment exceeds the $401,289 amount specified in the complaint. The complaint's prayer for relief seeks damages according to proof, but the body of the complaint states: “[Plaintiff Eric Kutas] estimates that he is owed $74,294 in earned minimum wages and $65,872 in earned overtime wages....” Likewise, the complaint states: “[Plaintiff Ada-Victoria Cervantes-Kutas] estimates that she is owed $63,200 in earned minimum wages and $60,429 in earned overtime wages....” Defendants accordingly had notice of at least $263,795 in claimed monetary relief.
The complaint further sought “liquidated damages and any penalties for failure to pay minimum wages.” Although the complaint did not summarize the relevant law regarding liquidated damages, it indicated plaintiffs sought those damages under section 1194.2. Section 1194.2, subdivision (a) allows an employee “to recover liquidated damages in an amount equal to the wages unlawfully unpaid and interest thereon.” Defendants accordingly had notice of $137,494 in liquidated damages ($74,294 for plaintiff Kutas + $63,000 for plaintiff Cervantes-Kutas).
Plaintiffs note the complaint alleged the amount in controversy exceeded $25,000 exclusive of interest and costs. They then appear to add $25,000 to the total claimed monetary relief. But this allegation is not an indication of plaintiffs' additional damages. Instead, plaintiffs would have been limited to this $25,000 jurisdictional ceiling if the complaint had not included any other allegations regarding damages. We accordingly do not add $25,000 to the $401,289 in claimed monetary relief specified in the complaint.
B. Statutory Penalties
With respect to the $18,560 in statutory penalties, the default judgment again exceeds the amount specified in the complaint. The complaint does not detail the amount of statutory penalties but generally indicates plaintiffs sought waiting time penalties, penalties for failure to provide accurate wage statements, and penalties for failure to produce employment documents. For the reasons below, the complaint supported a default judgment in the amount of $15,320 in statutory penalties ($4,320 in waiting time penalties + $8,000 in wage statement penalties + $3,000 in employment document penalties).
If a complaint does not provide a specific dollar amount for certain damages, the calculation of the amount alleged must be clearly set forth to give the defendant “fair warning” of that exposure. (People ex rel. Lockyer v. Brar (2005) 134 Cal.App.4th 659, 668.) For example, in Brar, a panel of this court held a defendant had fair notice of a $1.7 million default judgment where this amount could be calculated from the complaint's allegations. (Ibid.) The prayer sought damages in an amount of “‘no less than'” $1 million. (Id. at p. 666.) The body of the complaint further alleged: “Pursuant to Business and Professions Code section 17206, that defendants... be assessed a civil penalty of $2,500.00 for each violation... as proven at trial....” (Id. at p. 667.) Because the complaint alleged at least 1, 500 incidents of violations, the court found the defendant was on notice of at least $3.75 million in penalties (1, 500 x $2,500). (Ibid.)
In the instant case, the calculation of statutory penalties is more complex than in Brar and requires a more careful analysis of the complaint. Regardless, the calculation of those penalties can still be determined from the complaint's allegations. First, the complaint sought waiting time penalties and alleged plaintiffs were “entitled to a penalty of their daily rate multiplied by 30 days” pursuant to section 203. As to plaintiffs' daily rate, the complaint indicated plaintiffs received minimum wage and worked more than eight hours a day. While the complaint does not indicate the specific minimum wage when plaintiffs left their employment in June 2015, that amount was set at nine dollars per hour by statute. (§ 1182.12, subd. (a).) Defendants accordingly had notice of $4,320 in waiting time penalties for both plaintiffs (8 hours x $9 x 30 days x 2 plaintiffs).
Second, the complaint sought penalties for defendants' failure to provide accurate wage statements “for every pay period in which [plaintiffs] worked, ” which was for 30 months from November 2012 to June 2015. The complaint did not detail the specific penalty amounts but generally referred to section 226. Section 226, subdivision (e)(1) allows statutory penalties of $50 for the initial pay period violation and $100 for each violation in a subsequent pay period. These penalties are assessed on a per employee basis with a cap of $4,000 for each employee. (§ 226, subd. (e)(1).) The complaint does not indicate how often plaintiffs were paid, but an employer generally must pay an employee twice each month. (§ 204, subd. (a).) Assuming 60 pay periods (2 payments x 30 months) along with a $50 penalty for the first pay period and a $100 penalty for the remaining 59 pay periods, the complaint alleged the statutory maximum of $4,000 for each plaintiff.
Finally, the complaint sought penalties for defendants' failure to produce employment documents. Again, the complaint did not detail the specific penalty amounts but generally referred to sections 226 and 1198.5. Those statutes allow an employee to recover $750 penalties for the employer's failure to provide requested payroll or personnel records. (§§ 226, subd. (f), 1198.5, subd. (k).) The complaint alleged plaintiffs sent a written request for documents pursuant to sections 226 and 1198.5, which defendants did not produce. Defendants accordingly had fair notice of $3,000 in penalties ($750 x 2 employment records x 2 plaintiffs).
In sum, defendants had notice of $401,289 in claimed monetary relief and $15,320 in statutory penalties ($4,320 in waiting time penalties + $8,000 in wage statement penalties + $3,000 in employment document penalties). This is less than the $458,502.73 in damages and $18,560 in statutory penalties awarded in the default judgment. For the foregoing reasons, the default judgment was in excess of the amounts demanded in the complaint. The default judgment accordingly is void pursuant to Code of Civil Procedure section 580. But it also appears plaintiffs presented evidence which might entitle them to greater relief than what was pleaded under the complaint. “In the interest of fairness, plaintiffs should have the option of either proceeding with the new default prove-up with the [existing] damage limitation, or amending the complaint to state the full amount of damages they seek. [Citation.] If plaintiffs select the latter option, the default will be vacated, entitling defendant to either attack the pleadings, or answer the amended complaint.” (Electronic Funds Solutions, LLC v. Murphy (2005) 134 Cal.App.4th 1161, 1177.)
The court did not abuse its discretion by imposing terminating sanctions.
Finally, defendants argue the court abused its discretion by issuing terminating sanctions “without considering [defendants'] substantial compliance in [their] responses to discovery, despite [plaintiffs'] oppressive tactics.” They emphasize the voluminous nature of plaintiffs' discovery requests and claim their counsel was “struggling to respond to discovery requests when accounting for attorney staffing changes.” They further note they “responded to all but two requests” after the discovery referee recommended terminating sanctions. We disagree with defendants' contentions.
Code of Civil Procedure section 2023.030 authorizes a trial court to impose terminating sanctions against “anyone engaging in conduct that is a misuse of the discovery process.” On appeal, “‘our task is not to supplant our own judgment for that of the trial court, but to ascertain whether the trial court abused its discretion by imposing a terminating sanction.' [Citations.] The question ‘is not whether the trial court should have imposed a lesser sanction; rather, the question is whether the trial court abused its discretion by imposing the sanction it chose.'” (Osborne v. Todd Farm Service (2016) 247 Cal.App.4th 43, 54.) “Sanction orders are ‘subject to reversal only for arbitrary, capricious or whimsical action.'” (Liberty Mutual Fire Ins. Co. v. LcL Administrators, Inc. (2008) 163 Cal.App.4th 1093, 1102.) “‘“‘Only two facts are absolutely prerequisite to imposition of the sanction: (1) there must be a failure to comply... and (2) the failure must be willful.'”'” (Ibid.)
Here, the record provides ample support for terminating sanctions. Plaintiffs were forced to file numerous motions to compel on various discovery requests, which resulted in court orders requiring defendants to comply and pay monetary sanctions in January and February 2019. The court also continued the trial on two occasions due to defendants' lack of discovery responses. Defendants then failed to comply with the court's discovery orders despite having over five months to fulfill their obligations. As of August 2019, defendants still had not complied with the court's discovery orders. While defendants claim they substantially complied with plaintiffs' discovery requests, they point to no evidence in the record to support this assertion. The only evidence in the record is that they responded to some (but still not all) of the discovery requests after the discovery referee recommended terminating sanctions and the trial had been delayed on several occasions. We also are not persuaded by defendants' contention that plaintiffs' requests were voluminous because defendants had several months to respond and an opportunity to negotiate with plaintiffs through various meet and confers. The court accordingly did not abuse its discretion by imposing terminating sanctions.
DISPOSITION
The judgment is reversed, and the case is remanded to the court with directions to vacate the award of damages. On remand, plaintiffs will have the option to either: (1) proceed on the currently operative complaint and reapply for a default judgment seeking damages limited to the amounts prayed in the operative complaint and consistent with this opinion; or (2) file an amended complaint seeking to increase the amount of damages sought, at which point defendants' default will be opened allowing them to file a responsive pleading to further litigate the action. Defendants shall recover costs on appeal.
WE CONCUR: BEDSWORTH, ACTING P. J., MOORE, J.