No. 51337-1-IThe Court of Appeals of Washington, Division One.
Filed: July 14, 2003 DO NOT CITE. SEE RAP 10.4(h). UNPUBLISHED OPINION
Appeal from Superior Court of King County Docket No: 01-2-12924-4 Judgment or order under review Date filed: 10/15/2002
Counsel for Appellant(s), Noah Christian Davis, In Pacta PLLC, P.O. Box 2042, Seattle, WA 98111-2042.
Counsel for Defendant(s), Russell B. Jr Juckett, Attorney at Law, Counselor At Law, 3119 Oakes Ave, Everett, WA 98201-4405.
Counsel for Respondent(s), Kelby Dahmer Fletcher, Peterson Young Putra ET AL, 1501 4th Ave Ste 2800, Seattle, WA 98101-1609.
COLEMAN, J.
Heather Lowenthal sued her former employer, Steeplechase Media, Inc. (SMI), and several SMI shareholders/officers for unpaid wages. The trial court granted Lowenthal’s motion for summary judgment after finding that SMI had waived its right to arbitration and had willfully and wrongfully withheld wages. SMI contends on appeal that the trial court erred when it denied its motion to compel arbitration, denied its motion for a fact-finding hearing, and granted Lowenthal’s motion for summary judgment. We conclude that there was no error and affirm.
FACTS AND PROCEDURAL HISTORY
In July 2000, Heather Lowenthal began working for SMI, a closely-held corporation based in Santa Monica, California. Lowenthal entered into an employment agreement with SMI that promised her a $100,000 salary and contained an arbitration provision. The arbitration provision states:
“Any claim or controversy that arises out of or relates to this Agreement, or the breach of it, will be settled by arbitration in accordance with the rules of the American Arbitration Association. . . .” SMI’s Chief Executive Officer (CEO), President, and largest shareholder, Larry Namer, signed the agreement on behalf of SMI. SMI paid Lowenthal on a bi-weekly basis.
In September and October 2000, SMI issued Lowenthal three paychecks that bounced. SMI failed to issue any paychecks to Lowenthal for the next two pay periods. As a result of SMI’s failure to pay her wages, Lowenthal quit. When Lowenthal demanded her overdue wages, SMI responded by making two wire transfers of $5,000 and $5,500 to her in December 2000 and January 2001. SMI then informed Lowenthal that it had prepared a final check in the amount of $3,431.82 to cover outstanding net wages from the period September 1, 2000, until Lowenthal’s termination date of November 10, 2000. Lowenthal did not pick up that check, however, because she had demanded payment by wire transfer or cashiers check only. SMI then sent Lowenthal an e-mail with an attachment showing SMI’s calculation of outstanding net wages owed for that time period of $3,431.82. Lowenthal replied to that e-mail by confirming that, “[t]he Net numbers match my earnings calculations.” But within hours of receiving SMI’s attachment, Lowenthal informed SMI that net wages were insufficient because there was no proof that SMI had paid taxes on her behalf.[1] In the absence of proof of taxes paid, Lowenthal demanded her gross wages. SMI made no further payments to Lowenthal.
On May 4, 2001, Lowenthal filed suit against SMI, Larry Namer, Chief Financial Officer Natalya Scherbakova, and her primary SMI contact in Washington, Rick Portin, a shareholder and Vice President of Production. Trial was set for September 30, 2002. Counsel for SMI answered the complaint in June 2001, but did not raise arbitration as an affirmative defense. That attorney withdrew on January 28, 2002, but before doing so, he responded to Lowenthal’s written requests for production. SMI’s discovery responses included a copy of the employment agreement, but SMI produced no evidence responding to Lowenthal’s request for documentation showing that taxes had been paid on the wire transfers. Lowenthal therefore sought in her summary judgment motion, filed on July 10, 2002, to recover wages of $9,321.58, based upon the gross amount of wages owed for the period September 1, 2000, until November 10, 2000, ($19,821.58), minus the $10,500 paid by wire transfer.
On September 6, 2002, new counsel appeared for SMI, Namer, and Scherbakova (Portin was represented by other counsel). Counsel responded to the summary judgment motion on September 23, 2002, under a “reservation of rights” and claimed that there were bona fide factual disputes as to the amount owed and SMI’s willfulness. SMI then moved to compel arbitration.
The court denied SMI’s motion to compel arbitration and granted summary judgment to Lowenthal. Judgment was entered against SMI, Namer, and Scherbakova in the amount of double damages based upon the gross salary owed, plus reasonable attorney fees and costs under RCW 49.52.070. SMI and Namer appeal from that judgment.
DISCUSSION
SMI’s first contention on appeal is that the trial court erred when it denied its motion to compel arbitration.[2] SMI’s motion to compel arbitration was based upon the arbitration provision contained in the employment agreement SMI and Lowenthal had signed. The trial court stated, “[t]he relief sought by this defendant was waived by its failure timely to assert an alleged entitlement to arbitration.” According to SMI, this finding is contrary to jurisprudence and the strong public policy favoring arbitration.
The federal Arbitration Act governs enforceability of arbitration agreements. Kinsey v. Bradley, 53 Wn. App. 167, 765 P.2d 1329 (1989). Arbitration agreements are viewed favorably, and there is a strong presumption that they are binding and enforceable, but a contractual right to demand arbitration can be waived. Lake Wash. Sch. Dist. 414 v. Mobile Modules N.W., Inc., 28 Wn. App. 59, 62, 621 P.2d 791 (1980). The standard of review for determining whether a party waived its right to arbitration is de novo. Steele v. Lundgren, 85 Wn. App. 845, 850, 935 P.2d 671 (1997).
In Kinsey, this court held that to show waiver under federal law “the party opposing arbitration must demonstrate (1) knowledge of an existing right to compel arbitration, (2) acts inconsistent with that right, and (3) prejudice.” Kinsey, 53 Wn. App. at 169. The Kinsey court also noted the following principles of waiver:
Waiver is ordinarily an intentional relinquishment of a known right. Waiver of a contractual right to arbitration is not favored. An examination of whether the right to compel arbitration has been waived must be conducted in light of a strong federal policy favoring arbitration as a method of dispute resolution. Any doubts concerning the scope of arbitrable issues, construction of the contract, or a defense of delay, waiver or the like should be resolved in favor of arbitration. Because waiver of the right to arbitration is not favored, the party opposing it bears a heavy burden of proof. However, when a party fails to demand arbitration during pretrial proceedings, and in the meantime engages in pretrial activity inconsistent with an intent to arbitrate, the party opposing a motion to compel arbitration may more easily show its position has been compromised, i.e. prejudiced.
Kinsey, 53 Wn. App. at 170 (citations omitted).
The primary issue on appeal is whether SMI’s acts were inconsistent with an intent to pursue arbitration — the second prong of the Kinsey test. The first prong — knowledge of the right to arbitrate — is demonstrated by the fact that a named defendant, Larry Namer, signed the employment contract on SMI’s behalf and is presumed to know and understand the contents of the document that he signed. See Kinsey, 53 Wn. App. at 171.
The following facts pertinent to the second prong are not disputed.
The lawsuit was filed in May 2001, and SMI’s original attorney answered soon afterwards without raising arbitration as a defense. The trial date was set for September 30, 2002. SMI took no action in the lawsuit until Lowenthal propounded discovery requests to which SMI responded by producing a copy of the employment contract between SMI and Lowenthal.
On July 10, 2002, Lowenthal filed and served a motion for summary judgment. SMI did not participate in a pretrial conference held on July 25, 2002, nor did it conduct any discovery before the August 12 discovery cutoff date. SMI did not raise arbitration as an issue to the court or plaintiff until September 6, 2002. On September 25, 2002, SMI moved to compel arbitration. Also, the record shows that SMI took no affirmative steps with regard to defending the claims or complying with the case schedule by filing required reports, witness disclosures, or attending status conferences.
Application of the Kinsey waiver test is very fact specific. Steele, 85 Wn. App. at 853. Ultimate determination is based upon “`the totality of the circumstances,'” as opposed to a bright line rule. Steele, 85 Wn. App. at 853 (quoting SH Contractors, Inc. v. A.J. Taft Coal Co., 906 F.2d 1507, 1514 (11th Cir. 1990)). In Steele, the defendant engaged in aggressive, contentious discovery during pretrial litigation and failed to assert the right to arbitration until almost a year after suit was commenced and after the plaintiff had filed a motion for summary judgment. Steele, 85 Wn. App. at 855. This court concluded that, with the exception of engaging in mediation, the defendant’s acts were inconsistent with an intent to pursue arbitration and constituted a waiver of the right to arbitration. Steele, 85 Wn. App. at 856. By comparison, a 9-month delay and participation in informal dispute resolution did not constitute waiver in B D Leasing Co. v. Ager, 50 Wn. App. 299, 748 P.2d 652 (1988). And in Lake Washington School District, the court held that the defendant’s 3-month delay, limited use of discovery, and assertion of a counterclaim were not inconsistent with an intent to arbitrate. Lake Wash. Sch. Dist., 28 Wn. App. at 64.
SMI claims that its minimal participation in litigation distinguishes this case from Steele. SMI also argues that under Steele, it was not permitted to participate in discovery without jeopardizing its right to arbitration. We disagree. To the extent that certain evidence can be used in both forums or is relevant to the waiver issue, conducting discovery is not necessarily inconsistent with an intent to arbitrate. Lake Wash. Sch. Dist., 28 Wn. App. at 64. And Steele does not require a finding of no waiver when a party fails to conduct discovery. To the contrary, the court in Steele based its waiver determination on the defendant’s failure to timely assert arbitration, stating:
“[T]here can be no doubt that, by failing to assert arbitration at the outset and by passing up several obvious opportunities to move for arbitration, Lundgren effectively chose to litigate in superior court, which is inconsistent with arbitration. . . .” Steele, 85 Wn. App. at 855. Just as in Steele, the record here indicates that several critical opportunities passed when SMI could have and should have asserted its right to arbitration: in its answer, in the joint status report, at the pretrial conference, and in a dispositive motion before the applicable deadline had passed. We conclude that SMI’s actions were inconsistent with an intent to arbitrate. By ignoring the proceedings until judgment was imminent, SMI effectively chose to remain in the judicial forum, just as the defendant in Steele did.
Under federal law, a party opposing arbitration must show prejudice — the third Kinsey prong. Kinsey, 53 Wn. App. at 172. Prejudice can be found where there is unnecessary delay and expense. Steele, 85 Wn. App. at 859. Here, Lowenthal filed suit, conducted discovery, and filed a summary judgment motion to obtain her unpaid wages. Almost two years after Lowenthal’s employment ended, SMI attempted to negate those actions by demanding arbitration. SMI has offered no excuse for its delay in raising the arbitration provision, other than its claim that its first attorney was unaware of its existence. Kinsey has squarely rejected this excuse as inadequate. Kinsey, 53 Wn. App. at 171. While Lowenthal’s litigation expenses awarded in the judgment were not large, they were proportionate to the amount of her claim and reflected the value of work necessary to conduct discovery and move for summary judgment once she had assembled sufficient evidence to support her claim. The evidence she gathered likely would have been pertinent to arbitration proceedings; however, the expense of preparing a summary judgment motion is one that could have been avoided if SMI had timely moved to compel arbitration. Whatever the reason for the failure to raise its right to arbitration, SMI’s delay was not reasonably necessary. Furthermore, the expenses Lowenthal incurred as a result of SMI’s delay must be considered.
Chapter 49.52 RCW is a remedial statute intended to be construed liberally to provide employees with compensation they are owed. Allstot v. Edwards, 114 Wn. App. 625, 633, 60 P.2d 601 (2002). Despite the preference for enforcing arbitration agreements and the heavy burden on the party opposing arbitration, it would be contrary to the purposes of this statute to permit employers to invoke such agreements on the eve of trial and thereby cause employees further delay and expense in obtaining unpaid wages. We affirm the trial court’s determination that under these facts, SMI waived its right to arbitration.
We also reject SMI’s suggestion asserted on appeal that its failure to timely raise the arbitration provision is somehow related to Lowenthal’s alleged breach of that provision. SMI cites no authority for its contention that Lowenthal breached her employment contract when she filed this lawsuit and is therefore equitably estopped from enforcing it. Chapter 7.04 RCW, the same statutory scheme that SMI relies upon for its claim that the trial court erred in denying its motion to compel arbitration, provides this court with jurisdiction to decide whether an arbitration agreement is enforceable. Mendez v. Palm Harbor Homes, Inc., 111 Wn. App. 446, 45 P.3d 594 (2002). If a defendant believes that claims against it are subject to arbitration, the proper remedy is to make a motion to stay proceedings under RCW 7.04.030.[3]
SMI next contends that the trial court was required under Steele and RCW 7.04.040(4) to conduct a fact-finding hearing or “mini-trial” to determine the waiver issue. SMI’s reliance on Steele is misplaced.
In Steele, upon receiving the defendant’s motion to compel arbitration, the trial court requested the parties to supply additional briefing on the waiver issue. Steele, 85 Wn. App. at 849. Based upon the parties’ briefing and the trial court record, the trial court determined that the right to arbitration had been waived. Steele, 85 Wn. App. at 850.
There was no “mini-trial” or evidentiary hearing and, contrary to SMI’s position, Steele does not stand for the proposition that one is required.
RCW 7.04.040 provides a mechanism for courts to address motions to compel arbitration. Subsection (1) of RCW 7.04.040 provides that the trial court shall order the parties to arbitration if it finds that no substantial issue as to the validity of the arbitration agreement exists. If there is a substantial issue, then subsection (2) directs the trial court to proceed to the trial of that issue. But RCW 7.04.040 does not prevent a trial court from determining, as it did here, that there is no substantial issue that the agreement is unenforceable. As we noted in Lake Washington School District, “[c]ertain conduct has been held as a matter of law to constitute either waiver or preservation of the right to demand arbitration.” Lake Wash. Sch. Dist., 28 Wn. App. at 63. Additionally, in Steele, we affirmed a trial court determination that, as a matter of law, the defendant had waived his right to arbitration. Steele, 85 Wn. App. at 859-60.[4] It makes little sense to require trial courts to conduct fact-finding hearings on the issue of waiver where the pertinent facts are not in dispute, especially in light of trial courts’ authority to resolve cases where the facts are not in dispute. See CR 56; Jacobsen v. State, 89 Wn.2d 104, 108, 569 P.2d 1152
(1977) (“The purpose of the summary judgment procedure is to avoid an unnecessary trial when there is no genuine issue of material fact.”). Indeed, SMI does not identify how conducting a fact- finding hearing would expose any new facts relevant to the question of waiver. We therefore conclude that the trial court did not err in denying SMI’s motion for a fact-finding hearing.
Lastly, SMI and Namer argue that material disputed facts regarding willfulness and the amount owed precluded summary judgment on Lowenthal’s claim for unpaid gross wages. Lowenthal moved for summary judgment against SMI and its agents, Namer, Scherbakova, and Portin, seeking double damages and attorney fees under RCW 49.52.050 and RCW 49.52.070. RCW 49.52.050 makes it a misdemeanor to willfully deprive an employee of wages, except for deductions authorized by law, and describes several proscribed practices. RCW 49.52.070 provides a civil remedy against employers and their agents and principals who have willfully and wrongfully withheld wages in violation of RCW 49.52.050. In entering judgment in favor of Lowenthal, the trial court found that there was no conflict with respect to a material fact and that SMI, Namer, and Scherbakova had willfully underpaid Lowenthal by $9,321.58, in violation of RCW 49.52.050.
Summary judgment is proper if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Scott Galvanizing, Inc. v. N.W. EnviroServices, Inc., 120 Wn.2d 573, 580, 844 P.2d 428 (1993); CR 56(c). When reviewing an order granting summary judgment, this court engages in the same inquiry as the trial court, considering all facts and reasonable inferences in the light most favorable to the non-moving party. Bates v. City of Richland, 112 Wn. App. 919, 926-27, 51 P.3d 816 (2002). Bare assertions that factual issues remain are not sufficient to defeat summary judgment in the absence of specific facts rebutting the plaintiff’s contentions. White v. State, 131 Wn.2d 1, 9, 929 P.2d 396 (1997).
SMI contends that summary judgment was improperly granted because there were material disputed facts regarding the wages owed Lowenthal and SMI’s willfulness in withholding her wages. SMI also asserts that Lowenthal was entitled only to net wages and that she refused a check for that amount, thereby assenting to the withholding. Furthermore, SMI claims that its financial difficulties caused the NSF checks, not willfulness, and SMI rectified the problem by sending two wire transfers. SMI also offers two legal arguments for why summary judgment was improper. First, it asserts that as a professional employee, exempt from the Minimum Wage Act, chapter 49.48 RCW, Lowenthal was not covered by the wrongful withholding statute, which applies only to wage claims, not contract claims. Second, it claims that civil liability against individuals for withheld wages is unavailable until there is a criminal conviction.
Addressing first SMI’s legal contentions, nothing in chapter 49.52 RCW exempts professional and managerial employees from its provisions. RCW 49.52.070 permits employees to sue any employer for unpaid wages without limitation as to the type of employee. See Schilling v Radio Holdings, Inc., 136 Wn.2d 152, 961 P.2d 371 (1998) (affirming judgment in favor of managerial employees). And a criminal conviction is not a condition of proceeding with a civil action against an employer. RCW 49.52.070.
Next SMI claims that a bona fide dispute existed as to the amount of wages owed and the time that Lowenthal worked. SMI relies heavily upon an e-mail from Lowenthal to SMI acknowledging that the amount owed was based upon net earnings. SMI misreads Lowenthal’s e-mail. She merely agreed that SMI’s net earnings calculations were correct based upon the dates for which she had not been paid, but she still asserted her right to gross wages in the absence of proof of taxes paid. This document is not sufficient to create a disputed material fact, because SMI has never provided any evidence of deductions made, which Lowenthal repeatedly requested. This information is solely in SMI’s possession, and we disagree with SMI’s contention that in its absence, Lowenthal was obliged to move to compel discovery. SMI has never provided specific facts to respond to the allegation that it did not pay those taxes; therefore, it has failed to demonstrate that there was a material disputed fact regarding the amount owed Lowenthal. In light of SMI’s obligation under RCW 49.52.060 to maintain records of deductions and taxes paid, SMI’s evidence was insufficient to support its contention that only net wages were owed.
SMI also relies heavily upon an Employment Security Department document, which lists Lowenthal’s termination date as October 10, 2000. SMI’s own contemporaneous internal records, however, comport with Lowenthal’s representations that she worked until November 10, 2000, and was not paid fully for the period beginning September 1, 2000, to November 10, 2000. Because SMI’s own records indicate that Lowenthal worked until November 10, 2000, unverified third-party documents have little bearing on whether there is a disputed fact between SMI and Lowenthal as to her termination date. Again, SMI did not present admissible evidence showing a material disputed fact and it failed to explain or refute its own records specifically showing that Lowenthal’s last day was November 10, 2000.
SMI and Namer also claim that disputed material facts existed as to the relationship of the individual defendants to Lowenthal, but the record shows that the trial court had sufficient evidence to determine that CEO Namer had financial control over SMI and could be held liable as a “vice principal” under RCW 49.52.070. With regard to Portin, he denied having financial control, and the trial court later found that he was not liable under the financial control test for individual liability set forth in Ellerman v. Centerpoint PrePress, Inc., 143 Wn.2d 514, 521, 22 P.3d 795
(2001). Therefore, the trial court did not err in entering individual liability against Namer under RCW 49.52.070.
Regarding the willfulness of the wrongful withholding, our Supreme Court has already rejected the argument that an employer’s wrongful withholding of wages is not willful when the withholding is due to financial difficulties. Schilling, 136 Wn.2d at 164. Schilling declined to engraft a “financial difficulties” exception onto the wage withholding statute, holding that as long as there was some evidence of cash flow, an employer’s failure to pay employees due to financial difficulties could be considered willful, not careless or inadvertent. Schilling, 136 Wn.2d at 164-65. Here, there was evidence of cash flow in the form of wire payments to Lowenthal. SMI further supplemented this evidence in its motion for reconsideration with bank statements showing disbursements in the tens of thousands of dollars at the time that Lowenthal demanded payment.
SMI also claims that the only evidence of willfulness relied upon by the trial court were the three NSF checks, but the evidence of intent goes beyond these three checks. SMI wired two payments to Lowenthal, but made no explanation for why it did not wire the last payment or send a cashiers check as Lowenthal had requested. Instead of complying with Lowenthal’s demands, SMI asked Lowenthal to pick up a check that she understandably believed would not clear and would subject her to additional bank charges.
In its e-mail correspondence to Lowenthal, SMI conceded that the wire transfers did not satisfy all of the wages it owed her. The only reasonable inference from these facts is that SMI willfully and wrongfully withheld Lowenthal’s wages. The trial court properly granted summary judgment to Lowenthal.
Lowenthal requests attorney fees on appeal under RCW 49.52.070. That statute states:
Any employer and any officer, vice principal or agent of any employer who shall violate any of the provisions of subdivisions (1) and (2) of RCW 49.52.050
shall be liable in a civil action by the aggrieved employee or his assignee to judgment for twice the amount of the wages unlawfully rebated or withheld by way of exemplary damages, together with costs of suit and a reasonable sum for attorney’s fees . . . .
RCW 49.52.070. Under this statute, an employer shall be liable for reasonable attorney fees for a violation of RCW 49.52.050; therefore, Lowenthal is entitled to reasonable attorney fees against SMI and Namer.
We affirm.
ELLINGTON and SCHINDLER, JJ., concur.