Opinion
No. CV 06-865-PHX-JAT.
March 19, 2007
ORDER
Pending before the Court is Plaintiff's Motion for Partial Summary Judgment (Doc. # 16). Also pending before the Court is Defendant's Motion for Summary Judgment (Doc. # 19) and Defendant's Motion to Dismiss Plaintiff's Amended Complaint (Doc. # 28).
Plaintiff also filed a document entitled Response to Defendant's Motion to Dismiss Plaintiff's Amended Complaint and Plaintiff's Renewed Motion for Summary Judgment (Doc. # 29), but the document was not docketed as a motion. Nonetheless, in ruling on Plaintiff's Motion for Partial Summary Judgment (Doc. # 16), the Court also will rule on Plaintiff's Renewed Motion for Summary Judgment (Doc. # 29).
I. Background
Plaintiff, Robin Heine, was employed by Defendant, Sagebrush Solutions, L.L.C., in 2002 as a sales representative. Defendant is in the business of providing auditing services for healthcare payors such as managed care companies. As a result of the auditing process, Defendant seeks to identify overpayments that the healthcare payors made to third parties. If any overpayments are identified, then Defendant undertakes efforts to recover such payments on behalf of the healthcare payors. Defendant's compensation is in the form of service revenues based on the amount of overpayments recovered for each client. As part of Plaintiff's agreement with Defendant concerning her terms of employment, Plaintiff was to receive a bonus of five percent (5%) of the service revenues received by Defendant on any client contract executed primarily as a result of Plaintiff's sales and marketing efforts.
On or about April 29, 2003, Plaintiff filed a Complaint in Maricopa County Superior Court against Defendant (the "State Action"). In the State Action, Plaintiff alleged that a contract with Oxford Health Plans ("Oxford") was executed primarily as a result of her sales and marketing efforts. Plaintiff also alleged that Defendant breached the employment contract by failing to pay her the five percent (5%) bonus on the service revenues that Defendant received under the Oxford contract. The matter was tried to a jury. On April 22, 2005, during jury deliberations, the parties stipulated to the following:
Plaintiff shall have judgment for a base amount of the actual number that is calculated of the bonus that would be due to the Plaintiff through April 22, 2005 without prejudice to, at a later time, the Plaintiff arguing that the ultimate judgment amount should include an amount for future revenues paid to the Defendant from which a bonus can be calculated, and without prejudice to the Defendant arguing that the number is the number through April 22, 2005, and no additional amounts. Also, to be determined in the future will be the issue of whether damages are trebled and whether or not the Plaintiff recovers attorneys' fees, and if so, the amount.
The jury returned a verdict in favor of Plaintiff in the amount of $65,000.00. Pursuant to the stipulation, judgment was rendered on July 20, 2005 for "damages" in the amount of $49,664.88, which amount represents the bonus on the Oxford contract owed Plaintiff through April 22, 2005. The judgment awarded Plaintiff no treble damages under A.R.S. § 23-350 et seq. and specifically provided that "the parties preserve the right to all claims and defenses as to any breach of contract arising after April 22, 2005, the final date of the trial of this matter." Although Defendant filed a motion for a new trial, which motion was denied on September 1, 2005, no appeal was taken from the judgment in the State Action.
On February 1, 2006, Plaintiff filed another Complaint in Maricopa County Superior Court against Defendant. In the Complaint, Plaintiff asserts a breach of contract claim against Defendant for the bonus owed to her on the additional service revenues received under the Oxford contract after April 22, 2005. Plaintiff also asserts a treble damages claim on the bonus owed on the additional service revenues and on the amount of the state court judgment, which remains unpaid. On October 19, 2006, after Defendant removed the matter to federal court, Plaintiff filed an Amended Complaint to clarify that she is seeking, in addition to other claims, treble damages under A.R.S. § 23-360 for Defendant's failure to pay the amount of the state court judgment within ten days of the judgment becoming final.
II. Plaintiff's Claim for Additional Amounts Owed After April 22, 2005
Plaintiff claims that the doctrine of res judicata entitles her to a bonus on the additional service revenues that Defendant received under the Oxford contract after April 22, 2005. Plaintiff's argument is based on the determination in the State Action that the Oxford contract was executed primarily as a result of Plaintiff's sales and marketing efforts. Plaintiff also claims she is entitled to treble wage damages on the bonus, under A.R.S. § 23-355, because there is no longer a good faith dispute that the bonus is owed.
In contrast, Defendant argues that the doctrine of res judicata bars Plaintiff's claim. Specifically, Defendant argues that Plaintiff failed to seek compensation for the bonus on the additional service revenues in the State Action despite Plaintiff's claim that Defendant committed an anticipatory breach of the employment agreement, which claim involves both past and future bonuses under Arizona law. See Healey v. Coury, 783 P.2d 795, 802 (Ariz.Ct.App. 1989). Similarly, Defendant argues that Plaintiff is barred from seeking treble damages on her claim for the bonus because the state court considered but did not award treble damages.
A. Application of Res Judicata
The doctrine of res judicata protects "litigants from the burden of relitigating an identical issue" and promotes "judicial economy by preventing needless litigation." Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 (1979). Under the doctrine, "a final judgment, entered on the merits in a prior suit involving the same parties or their privies, bars a second suit on the same cause of action and is conclusive as to facts which actually were or could have been decided." Hall v. Lalli, 952 P.2d 748, 750 (Ariz.Ct.App. 1997).
As Defendant argues, Plaintiff's State Action complaint alleged an anticipatory breach of contract claim, which claim normally involves both past and future bonuses. However, Plaintiff failed to seek compensation for any future bonus during the State Action trial. While the doctrine of res judicata typically would bar Plaintiff from asserting the claim for the bonus in the present action, numerous events occurred in the State Action that warrant a departure from the application of res judicata in favor of Defendant.
First, the jury instruction concerning the measure of damages provided, in part, that the jury should consider "[t]he amount of bonus that would have been due plaintiff under the terms of the letter agreement based on the service revenues from the defendant's contract with Oxford Health Plans." This instruction, at best, is ambiguous as to whether or not the jury was instructed to consider future bonuses. Second, during jury deliberations, the parties stipulated, in part, that "Plaintiff shall have judgment for a base amount of the actual number that is calculated of the bonus that would be due to the Plaintiff through April 22, 2005. . . ." Finally, and most importantly, the state court judgment provides that "the parties preserve the right to all claims and defenses as to any breach of contract arising after April 22, 2005, the final date of the trial of this matter."
Considering the foregoing, it is clear to the Court that even if future bonuses were at issue in the State Action, the issue was removed from the jury's consideration and was to be determined by the state court under the stipulation. Thereafter, the issue was never determined by the state court; instead, the state court, in the judgment, explicitly reserved in favor of the parties the rights to all claims and defenses as to any breach of contract arising after April 22, 2005. As the Restatement (Second) of Judgments § 26 (1982) provides, in part: "When any of the following circumstances exist . . . part or all of the claim subsists as a possible basis for a second action by plaintiff against the defendant: (a) The parties have agreed in terms or in effect that the plaintiff may split his claim, or the defendant has acquiesced therein; or (b) The court in the first action has expressly reserved the plaintiff's right to maintain the second action." Considering the ambiguous jury instruction, the parties' stipulation, and the reservation language in the state court judgment, the enumerated exceptions in § 26 are applicable and the doctrine of res judicata does not bar Plaintiff from asserting a claim for the bonus on service revenues that Defendant received under the Oxford contract after April 22, 2005.
Defendant argues that the reservation language in the state court judgment reserved to it the defense of res judicata in the event Plaintiff filed suit for breach of contract concerning any bonus on the service revenues that Defendant received after April 22, 2005. The Court disagrees. All judgments inherently have some res judicata effect, which effect is not dependent on any reservation of rights language in the judgment. At issue herein is a state court judgment that reserved the parties' rights to all claims and defenses as to any breach of contract arising after April 22, 2005. While this language appears broad enough to encompass the defense of res judicata, to conclude that it reserved such a defense is inconsistent with the reservation of Plaintiff's rights. Accordingly, because Plaintiff's right to assert a subsequent claim for breach of contract was explicitly reserved in the state court judgment, the Court will not interpret the judgment as reserving to Defendant the defense of res judicata against the breach of contract claim.
Further, the Court finds that the doctrine of res judicata applies insofar as the prior State Action determined that the Oxford contract was executed primarily as a result of Plaintiff's sales and marketing efforts. Accordingly, the prior state court judgment is conclusive and Plaintiff is entitled to an additional amount representing the bonus on service revenues that Defendant received under the Oxford contract after April 22, 2005. As represented by Plaintiff, after April 22, 2005, the amount of service revenues received by Defendant under the Oxford contract is $280,020.00. Because Plaintiff's entitlement to a bonus equal to five percent (5%) of the service revenues already has been established in the State Action, Plaintiff's bonus based on the service revenues received by Defendant under the Oxford contract after April 22, 2005, is $14,001.00.
B. Treble Damages
Plaintiff claims she is entitled to treble wage damages on the $14,001.00, under A.R.S. § 23-352 and A.R.S. § 23-355, because there is no longer a good faith dispute that the additional amount is owed. In opposition, Defendant argues that the doctrine of res judicata bars Plaintiff from seeking treble damages on her claim because, just like the breach of contract claim, Plaintiff could have sought in the State Action treble damages for any additional bonus that would have accrued after April 22, 2005. Defendant also argues that just because the jury found for Plaintiff in the State Action does not mean Defendant lacked a good faith belief that Plaintiff is not entitled to any additional bonus.
Regarding Defendant's argument that res judicata bars Plaintiff from seeking treble damages, it fails for the same reasons the Court expressed in response to Defendant's res judicata defense against the breach of contract claim. Regarding Defendant's argument that the prior finding that the Oxford contract was executed primarily as a result of Plaintiff's sales and marketing efforts does not obviate Defendant's good faith belief that Plaintiff is not entitle to any additional bonus, it also fails.
Under Arizona law, a court should not award an employee treble damages if the employer withheld wages because of a good faith dispute. Schade v. Diethrich, 760 P.2d 1050, 1062 (Ariz. 1988). While Defendant successfully argued in the State Action that there was a good faith dispute concerning the execution of the Oxford contract, the same cannot be found for Defendant's present argument that there is a good faith dispute concerning Plaintiff's entitlement to an additional bonus. First, the State Action adjudicated the issues surrounding the execution of the Oxford contract in favor of Plaintiff; thus, there is no good faith dispute concerning Plaintiff's entitlement to a bonus based on the service revenues generated under that contract. Second, as the Court already has discussed, Defendant's defense of res judicata to the present breach of contract claim fails because the state court judgment clearly reserves to Plaintiff all rights to claims as to any breach of contract arising after April 22, 2005; thus, there is no good faith dispute concerning Defendant's obligation to pay an additional bonus to Plaintiff based on the service revenues received under the Oxford contract after April 22, 2005. Accordingly, under A.R.S. § 23-352 and A.R.S. § 23-355, the Court will award Plaintiff $42,003.00, representing the trebling of the $14,001.00 owed to Plaintiff as the additional bonus on the service revenues received under the Oxford contract after April 22, 2005.
III. Treble Damages on the State Court Judgment
Plaintiff, citing A.R.S. § 23-360, also claims she is entitled to treble damages on $49,664.88, the amount of the state court judgment, because the judgment was not paid within ten days of becoming final. In opposition, Defendant argues that Plaintiff is not entitled to treble damages because the judgment, which refers to "damages," does not constitute "wages" under Arizona law.
Under A.R.S. § 23-360, "[a]n employer who has been ordered by . . . a court to pay wages due an employee and who fails to do so within ten days after the order becomes final is liable to pay the employee an amount which is equal to treble the amount of the unpaid wages and which shall be subject to interest at the legal rate." Under A.R.S. § 23-350(5), "wages" are defined as "nondiscretionary compensation due an employee in return for labor or services rendered by an employee for which the employee has a reasonable expectation to be paid whether determined by a time, task, piece, commission or other method of calculation." Significantly, "wages" include "commissions, bonuses and other amounts promised when the employer has a policy or a practice of making such payments." See A.R.S. § 23-350(5).
While only one case interpreting A.R.S. § 23-360 could be located, see Pima County v. Klein, 644 P.2d 289 (Ariz.Ct.App. 1982), the Court finds the statute clearly supports Plaintiff's claim for treble damages on the unpaid state court judgment. As Plaintiff correctly argues, the $49,664.88 awarded to her in the state court judgment comprises only the bonus due under the Oxford contract through April 22, 2005. In contrast, Defendant's argument that the state court judgment does not constitute "wages" because the judgment refers to the award as "damages" is misguided because it places form above substance. Regardless of how the award in the state court judgment is classified, it is undeniable that the award comprises the bonus that Defendant owed to Plaintiff pursuant to the terms of employment and as a result of the execution of the Oxford contract. Accordingly, pursuant to A.R.S. § 23-350(5) and § 23-360, Defendant's failure to pay the bonus within ten days after the judgment became final renders it liable for an amount that is equal to treble the amount of the unpaid bonus, which amount is subject to interest at the legal rate under Arizona law. However, because this Order will not supersede the state court judgment or otherwise render it unenforceable, the Court will only award Plaintiff a sum that is double the state court judgment, i.e., $99,329.76, which, when added to the state court judgment, is treble the amount of the state court judgment.
Accordingly,
IT IS ORDERED that Plaintiff's Motion for Partial Summary Judgment (Doc. # 16) and Renewed Motion for Summary Judgment (Doc. # 29) are GRANTED;
Plaintiff moved for partial summary judgment because, at the time, the amount of additional service revenues received under the Oxford contract and the corresponding bonus owed to Plaintiff were unknown. However, in the Reply on Plaintiff's Renewed Motion for Summary Judgment (Doc. # 36), Plaintiff identifies the amount of additional service revenues and the bonus owed to her. Accordingly, the Court treated Plaintiff's motion for partial summary judgment as a motion for summary judgment on all issues.
IT IS FURTHER ORDERED that Defendant's Motion for Summary Judgment (Doc. # 19) is DENIED;
IT IS FURTHER ORDERED that Defendant's Motion to Dismiss Plaintiff's Amended Complaint (Doc. # 28) is DENIED;
IT IS FURTHER ORDERED that Plaintiff is awarded $42,003.00, plus interest at the applicable federal rate from the date of judgment until paid; IT IS FURTHER ORDERED that Plaintiff is awarded $99,329.76, plus prejudgment interest thereon at the applicable state rate of 10% per annum from July 20, 2005 to the date of this judgment, plus interest at the applicable federal rate from the date of this judgment until paid;
IT IS FURTHER ORDERED that the Clerk of Court shall enter judgment in favor of Plaintiff in accordance with this Order.