2005-4

Labor Commissioner Appeal May be Heard as Part of an Existing Superior Court Action

Yoo v. Robi (1), 2005 DJDAR 1863 (Cal.App. 2nd Dist, February 9, 2005).

This case arises out of the activities of the old R & B group, the Platters. In the mid-eighties, Robi (one of the Platters) entered into a contract with Jango Records to record a Platters album. The record was made, but never released. At the same time, Robi also had a contract with Wolf under which Wolf was to "advise and counsel [Robi] in the selection of literary and artistic material; advise and counsel in any and all matters pertaining to public relations; advise and counsel with relation to the adoption of proper formats for presentation of [Robi's] artistic talents [and] in the determination of proper style, mood, setting, business and characterization in keeping with [Robi's] talents; advise and counsel the selection of artistic talent to assist, accompany or embellish [Robi's] artistic presentation; advise and counsel with regard to general practices in the entertainment industry and with respect to such matters of which [Wolf] may have knowledge concerning compensation and privileges extended for similar artistic values." Wolf was to receive 10% of the gross of all sums paid to Robi. Significantly, the contract acknowledged that Wolf was not a licensed talent agent under the Labor Code, and would be serving solely as Robi's personal manager.

Following Robi's death, his widow and successor in interest licensed two record albums utilizing songs that had been recorded for Jango records by Robi and the Platters. Wolf filed suit, claiming he was owed 10% of the gross compensation received from the licensing of the two albums. Robi's Answer included several affirmative defenses, but did not raise a defense that the contract was void because Wolf was not a licensed talent agent under the Labor Code. (2)

Though the affirmative defense was not raised in the litigation, the invalidity of the contract was raised during a Petition to Determine Controversy filed with the Labor Commissioner filed by Robi pursuant to Labor Code ? 1700.44.(3) The petition alleged that for a period of five years, Wolf was serving as an unlicensed talent agent, and thus his contract with Robi was void as a matter of law. The Labor Commissioner ruled in Robi's favor. All of this occurred during the pendency of Wolf's Superior Court lawsuit, which was stayed pending the Labor Commissioner's determination. Upon receiving the Labor Commissioner's decision, Wolf filed a timely appeal to Superior Court as part of his Superior Court lawsuit, seeking a trial de novo on the issues raised at the Labor Commissioner hearing.

The trial court found that Wolf had, indeed, acted as an unlicensed agent for Robi during the years at issue, and ruled that the contracts between them were void. An appeal followed. At issue in the appeal were two questions: (a) Did the Superior Court have jurisdiction to conduct a trial de novo on the Labor Commissioner decision as part of the existing action, and (b) did the evidence support the finding that Wolf was an unlicensed talent agent?

As to whether the Court had jurisdiction to hear the Labor Commissioner appeal as part of the existing lawsuit, the cases cited by Robi in support of his position that a separate action was required were unavailing, the Court found, but it also found there were no cases that said the trial de novo could be heard as part of the existing action. The Court ultimately held that Section 1700.44 only required an appeal to the Superior Court, but not necessarily as a separate action (though a separate action would be permissible).

In so ruling, the Court held there was "nothing wrong" with the appeal being heard as part of the existing action, and that having it heard in that fashion "conserves the time and resources of the parties and the court..." The Court also held, "when the issues in the proceedings before the Labor Commissioner and in the pending Superior Court action are the same, requiring a separate, independent action be filed to effectuate an appeal from the Labor Commissioner's determination generally would not benefit either party but only result in additional costs, delay and more paperwork for the court staff."

As to whether Wolf was serving as an unlicensed talent agent, and therefore the contracts between him and Robi were void, the Court found substantial evidence that he served as an unlicensed talent agent for the five year period at issue. The Court pointed out that Wolf negotiated the contracts with Jango, and therefore was more than just a spokesperson for Robi. Wolf argued that Robi failed to raise his unlicensed status as an affirmative defense, and therefore the defense was waived. The Court found that there is a well-settled rule that a defense of illegality based upon public policy is not waived by a failure to include it as an affirmative defense. "When the evidence shows that the plaintiff in substance seeks to enforce an illegal contract or recover compensation for an illegal act, the court has both the power and duty to ascertain the true facts in order that it may not unwittingly lend its assistance to the consummation or encouragement of what public policy forbids."

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ERISA Claim May Not be Brought Against Claims Administrator of Plan

Ford v. MCI Communications Corp. Health and Welfare Plan and ITT Hartford Insurance Group, 2005 DJDAR 2328 (9th Circuit, February 28, 2005)

Plaintiff Ford was an employee of MCI (and its successor, Worldcom) and a member of its Long Term Disability Plan. MCI was listed on the plan's documents as the "Plan Administrator/Plan Sponsor." Defendant ITT Hartford was the claims administrator, but was not listed as a plan administrator.

Ford became ill, and applied for LTD benefits. Her claim was denied, and she sued MCI and ITT. ITT moved for summary judgment on the basis that it was not a proper party against whom plaintiff could recover ERISA benefits. The District Court granted the motion on the basis that ITT was neither the Plan nor the Plan Administrator, and therefore not a proper party to the action. Plaintiff appealed.

ERISA authorizes recovery by a participant or beneficiary of an ERISA plan against the Plan, as an entity (29 U.S.C. ? 1132(d)(1)), or against the Plan's administrator (29 U.S.C. ? 1132(a)(1)(B)). A Plan's administrator is defined as "the person specifically so designated by the terms of the instrument under which the plan is opened." 29 U.S.C. ? 1002(16)(A)(I). In this matter, MCI was designated as the Plan administrator, and ITT was the claims administrator. Plaintiff argued that since MCI had delegated to ITT the discretion and authority to approve or deny claims, ITT was the de facto Plan Administrator. The Court rejected plaintiff's argument, holding that ERISA's explicit terms limit suits to actions against the Plan and its designated administrator. Since ITT was neither, summary judgment in its favor was appropriate.

The Court also rejected plaintiff's argument that ITT had mishandled her claim, and therefore had breached its fiduciary duties. In so ruling, the Court held that the alleged mishandling of an individual claim is not a fiduciary breach.

Finally, the Court held, ERISA's catch-all provision (29 U.S.C. ? 1132(a)(3)) that provides equitable relief for ERISA violations not specifically set forth in the Act did not save plaintiff's claims. The basis for the Court's ruling was that plaintiff's other two allegations were specifically covered by ERISA and rejected by the Court, and therefore the catch-all section did not provide her additional relief.

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Internal Complaint for Overtime is a Protected Activity Under the FLSA

Chennisi v. Communications Construction Group, LLC, E.D. Pa., No. 04-4826, February 17, 2005.

A terminated employee's internal complaint about overtime compensation qualifies as "protected activity" under the Fair Labor Standards Act's anti-retaliation provisions.

Plaintiff Chennisi complained to his employer about an alleged failure to pay him overtime. The parties entered into a settlement agreement, and he was paid $8,500 in exchange for a full release of all claims. Three months later he was terminated.

Plaintiff sued the company in state court, alleging that it fired him in retaliation for his internal complaint seeking back overtime, thereby violating the FLSA. The employer removed the case to federal court, and filed a Motion to Dismiss under FRCP 12(B)(6).

Under the FLSA, an employer is barred from retaliating against an employee who has "filed any complaint or instituted or caused to be instituted any proceeding" under the Act. 29 U.S.C. ? 215(a)(3). The employer argued in its Motion that an internal complaint did not meet the provisions of this section because such a complaint was not a formal complaint, and therefore plaintiff had not instituted a "proceeding."

The Court held that the Third Circuit has found that one of the purposes of the FLSA is to prevent employee fear of retaliation for complaining about workplace issues. Therefore, it held, a broad reading of the FLSA leads to the conclusion that an internal complaint falls within the Act's anti-retaliation provisions. "Holding otherwise would be contrary to the provision's purpose or preventing fear of economic retaliation and encouraging employees to raise concerns about violation of the FLSA." Therefore, the Court held, the filing of a formal complaint of the institution of a formal proceeding is not necessary, and complaining internally is sufficient to invoke the Act's anti-retaliation provisions.

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1. Neither of the parties to this case were principals to the underlying agreement that is the subject of the litigation. Yoo is the bankruptcy trustee for Wolf, and defendant Robi is the widow of one of original Platters. For purposes of this discussion, references to "Wolf" or "plaintiff" shall refer to Howard Wolf, a party to the contract, and references to "Robi" or "defendant" shall refer to Paul Robi, also a party to the underlying agreement.

2. Labor Code ? 1700.4 defines a talent agent as one who "engages in the occupation of procuring, offering, promising, or attempting to procure employment or engagements for an artist or artists . . ." Labor Code ? 1700.5 provides that no person shall serve as a talent agent "without first procuring a license . . . from the Labor Commissioner."

3. Section 1700.44 provides that the Labor Commissioner shall determine disputes between talent agents and clients arising under the Labor Code, subject to an appeal to Superior Court.