Heaps and Sykes v. Nuriche , 345 P.3d 655 ( 2015 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2015 UT 26IN THE
S UPREME C OURT OF THE S TATE OF U TAH
RON HEAPS and PHILLIP SYKES,
Appellants,
v.
NURICHE, LLC, DAVID HEAPS , LAVORN SPARKS, NORM CLYDE ,
BRAD HOLIDAY, and DAVID PARKER,
Appellees.
No. 20130132
Filed January 30, 2015
Third District, Salt Lake
The Honorable Kate A. Toomey
No. 110909892
Attorneys:
Robert H. Wilde, Bruce M. Franson, Michael S. Wilde,
Salt Lake City, for appellants
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 for unpaid wages on all employers. On
summary judgment, the district court found that LLC managers
qualify as employers under the UPWA, but nevertheless held that
they are not liable for unpaid wages. We affirm the district court’s
ruling on the alternative ground that LLC managers do not qualify
as employers under the UPWA.
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
HEAPS v. NURICHE, LLC
Opinion of the Court
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
1
In addition to being a member of the board of managers, David
Parker was also a member and officer of Nuriche.
2
Initially, David Parker did not join the other managers’ motion
for summary judgment, presumably because he was the manager
who extended the employment offer to Employees. The other
managers were simply members of the board of managers, which
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Cite as: 2015 UT 26Opinion of the Court
Because there were additional claims pending, Employees sought
and obtained rule 54(b) certification of both summary judgment
rulings and filed a timely notice of appeal. We have jurisdiction
pursuant to Utah Code section 78A-3-102(3)(j).
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.” UTAH R. CIV . P. 56(c). In this
case, the issue before the district court on summary judgment was
a matter of statutory interpretation, which presents a legal question.
State v. Bluff, 2002 UT 66, ¶ 37, 52 P.3d 1210. We therefore review the
district court’s decision for correctness. Basic Research, LLC v. Admiral
Ins. Co., 2013 UT 6, ¶ 5, 297 P.3d 578.
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
because Nuriche is a Nevada LLC and that, under Nevada law, LLC
managers are not personally liable for unpaid wages. And if Utah
law applies, Managers argue that the UPWA should not be read to
impose personal liability on them because the statute does not evince
an express legislative intent to override long-standing principles of
corporate law. We address these arguments in turn.
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.”
UTAH CODE § 48-3a-901(1) (emphasis added). Managers argue that
unpaid wages are like any other debt, obligation, or liability of an
LLC. Therefore, because Nuriche was formed in Nevada, the
URULLCA requires that we apply Nevada law in determining
whether Managers are personally liable for unpaid wages.
2
(...continued)
was not in existence at the time Employees were hired.
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HEAPS v. NURICHE, LLC
Opinion of the Court
¶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.” UTAH CODE
§ 48-3a-901(3). Because a foreign LLC employing individuals in Utah
is required to follow Utah wage law, any claim of illegal wage
practices filed by a Utah employee will be governed by Utah wage
law. Accordingly, the question of Managers’ liability for unpaid
wages is governed by Utah law.
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.” UTAH CODE § 34-28-5(1)(a) (emphasis
added). And “[a]ny employer who shall violate, or fail to comply with
any of the provisions of this chapter shall be guilty of a
misdemeanor.” Id. § 34-28-12(1). In short, the UPWA renders
employers both civilly and criminally liable for unpaid wages.
¶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-
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mentioned classes, employing any person in this state.
Id. § 34-28-2(1)(c) (emphasis added). Employees argue that
Managers, as agents or officers of Nuriche, are employers under the
statute and as such are personally liable for unpaid wages. But
Managers argue that they do not qualify as employers under the
plain language of the statute. They further argue that Employees’
proposed construction of the statute conflicts with other provisions
of Utah law that limit the liability of LLC and corporate officers. We
agree with Managers.
¶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.” UTAH CODE
§ 34-28-2(1)(c) (emphasis added). While the phrase “agent or officer
of any of the above-mentioned classes” encompasses a large group
of individuals, that phrase is narrowed by the last clause of the
definition. The last clause—“employing any person in this
state”—modifies each of the terms in the preceding list. Thus, the
statute limits the definition of employer to one who employs. We
must therefore determine the identity of Employees’ employer
under the facts of this case.
¶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 the
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
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omitted).3 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.” UTAH CODE
§ 31A-27a-504(11)(a) (emphasis added). Similarly, the Alcoholic
Beverage Control Act provides that “a manager or member of [a]
limited liability company in charge of the premises in which [a
violation of the Act] is committed is . . . personally liable.” Id. § 32B-4-
302(2)(a) (emphasis added). In each of these contexts, when the
Legislature has imposed personal liability on corporate officers and
agents, it has done so expressly. We are therefore reluctant to read
personal liability into the UPWA, which contains no such express
language. Had the Legislature intended to impose personal liability
in contravention of long-standing principles of corporate law, it
would have done so expressly as it has in other sections of the code.4
¶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 (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(internal quotation marks omitted).
¶18 In summary, we hold that Managers are not personally
liable under the UPWA because they did not personally employ
Employees. Instead, Managers were acting as agents of Nuriche.
III. ALTERNATE READINGS OF THE UPWA ARE
UNSUPPORTED BY THE STATUTORY LANGUAGE
¶19 Employees raise two alternative constructions of the
3
See also UTAH CODE § 48-2c-601 (explaining that under the
URLLCA, “no organizer, member, manager, or employee of a
[limited liability] company is personally liable . . . for a debt,
obligation, or liability of the company”).
4
The Supreme Court of the State of Colorado expressed similar
concerns when it held that the similarly-worded Colorado Wage
Claim Act did not impose personal civil liability. Leonard v.
McMorris, 63 P.3d 323, 333 (Colo. 2003).
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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.” UTAH CODE § 34-28-2(1)(c) (emphasis added).
Employees assert that the UPWA renders Managers liable for their
unpaid wages simply because Managers are agents and officers of
Nuriche.
¶21 Not only does Employees’ proposed construction ignore the
modifying language limiting an employer to one “employing any
person in this state,” Id. § 34-28-2(1)(c), it would lead to absurd
results. Under traditional principal-agent theory, all employees are
considered agents of their employer. RESTATEMENT (THIRD ) OF
AGENCY § 1.01 cmt. c (2006). Thus, under Employees’ proposed
interpretation, the UPWA would impose strict liability for unpaid
wages on all employees of a company—be they executive-level
employees, administrative assistants, or custodial staff. And all
employees would likewise be subject to criminal liability for their
employer’s failure to pay wages when due. See UTAH CODE § 34-28-
12(1) (“Any employer who shall violate, or fail to comply with any
of the provisions of this chapter shall be guilty of a misdemeanor.”).
Indeed, this proposed construction would even render Employees
themselves criminally liable for Nuriche’s failure to pay their own
wages. But such an interpretation is contrary to basic notions of
agency law under which “a principal is liable for the acts of his agent
within the scope of the agent’s authority,” and not the other way
around. Garland v. Fleischmann, 831 P.2d 107, 110 (Utah 1992); see also
RESTATEMENT (SECOND ) OF AGENCY § 140 (1958). And such a result
is so absurd that it could not possibly have been the intent of our
Legislature. See Tschaggeny v. Millbank Ins. Co., 2007 UT 37, ¶ 28,
163 P.3d 615; Savage v. Utah Youth Vill., 2004 UT 102, ¶ 18, 104 P.3d
1242.
¶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
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Opinion of the Court
decision-making authority to “separate[] an employee from the
employer’s payroll,” UTAH CODE § 34-28-5(1)(a), could be held
personally liable for unpaid wages. This interpretation would
absolve any officers or agents without control from personal
liability.
¶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, the Superior Court of
Pennsylvania held that individual officers and agents qualified as
employers and thus could be personally liable for unpaid wages.
568 A.2d 682, 683 (Pa. Super. Ct. 1990), aff'd, 604 A.2d 1021 (Pa. 1992).
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) (internal quotation marks 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. (internal quotation marks omitted). Relying on public
policy support in its analysis, the court reasoned that imposing
liability on those “involved in the policy-making decisions” would
encourage struggling companies to reduce their workforce while
they are “still capable of meeting [their] obligations to [their]
employees” and would encourage insolvent companies to use their
“limited funds. . . . to pay wages.” Id. (internal quotation marks
omitted); see also Belcufine v. Aloe, 112 F.3d 633, 639 (3d Cir. 1997).
Courts in South Carolina and Washington have also adopted this
approach when interpreting similar statutes. See Dumas v. InfoSafe
Corp., 463 S.E.2d 641, 645 (S.C. Ct. App. 1995); Ellerman v. Centerpoint
Prepress, Inc., 22 P.3d 795, 799–800 (Wash. 2001).
¶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
5
43 PA . STAT. ANN . § 260.2a (defining employer as “every person,
firm, partnership, association, corporation . . . and any agent or
officer of any of the above-mentioned classes employing any person
in this Commonwealth”).
6
We acknowledge that the Pennsylvania approach addresses the
possible criticism that our interpretation introduces some redun-
dancy into the UPWA’s definition of employer. Indeed, because
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Cite as: 2015 UT 26Opinion of the Court
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
statue.
CONCLUSION
¶26 We affirm the ruling of the district court. The individual
managers of Nuriche cannot be held personally liable for the unpaid
6
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business entities, by their very nature, can only act through their
officers and agents, the inclusion of the phrase “officers and agents”
seems to give no additional meaning to the definition of employer
that would not have existed had the phrase been left out. But we
recognize that some redundancy in statutory language is a reality.
See Richard A. Posner, Statutory Interpretation—in the Classroom and
in the Courtroom, 50 U. CHI. L. REV . 800, 812 (1983) (“There is no
evidence for this improbable proposition [of no redundancy]; what
evidence we have, much of it from the statutes themselves, is to the
contrary.”). And although we generally attempt to interpret statutes
to avoid surplus language and to give every word in the statute
meaning, we recognize that in some instances, the legislature utilizes
statutory redundancies to emphasize a point or to “repeat[] itself out
of an abundance of caution.” In re Estate of Nash, 220 S.W.3d 914, 918
(Tex. 2007) (internal quotation marks omitted); see also Sabre, Inc. v.
Dep’t of Transp., 429 F.3d 1113, 1122 (D.C. Cir. 2005) (“Legislative
drafters often use apparently redundant language in order to
emphasize that a broad delegation may not [be] evaded so as to
frustrate a statute’s purpose.”).
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Opinion of the Court
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.
10