Dane-Elec Corp. v. Bodokh

248 Cal. Rptr. 3d 163, 35 Cal. App. 5th 761
CourtCalifornia Court of Appeal, 5th District
DecidedMay 24, 2019
DocketG055312; Consol. with G055784
StatusPublished
Cited by13 cases

This text of 248 Cal. Rptr. 3d 163 (Dane-Elec Corp. v. Bodokh) is published on Counsel Stack Legal Research, covering California Court of Appeal, 5th District primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dane-Elec Corp. v. Bodokh, 248 Cal. Rptr. 3d 163, 35 Cal. App. 5th 761 (Cal. Ct. App. 2019).

Opinion

FYBEL, ACTING P. J.

*764INTRODUCTION

Labor Code section 218.5, an attorney fee-shifting statute in actions for nonpayment of wages, prohibits a prevailing party employer from recovering attorney fees unless the trial court finds the employee brought the wage claim in bad faith. This appeal presents an issue regarding the effect of Labor Code section 218.5 on a prevailing party employer's right to recover contract-based attorney fees from an employee. Specifically, we address whether an employer may recover attorney fees incurred in successfully defending a wage claim, found not to have been brought in bad faith, when the wage claim was inextricably intertwined with a contract claim for which the employer would otherwise be contractually entitled to recover attorney fees. We partially publish our opinion to address this issue of first impression.

We hold that unless the trial court finds the wage claim was brought in bad faith, Labor Code section 218.5, subdivision (a) ( section 218.5(a) ) prohibits, as a matter of law, an award of attorney fees to a nonemployee prevailing party for successfully defending a wage claim that is inextricably *165intertwined with a claim subject to a contractual prevailing party attorney fees provision. To the extent the wage claim and the contract claim are inextricably intertwined, section 218.5(a)'s prohibition on recovering attorney fees controls over the contractual attorney fees provision.

In this case, Dane-Elec Corporation USA (Dane Corp.) prevailed against Nessim Bodokh, its former chief executive officer, on a complaint to recover on a promissory note and defeated Bodokh's cross-complaint to recover allegedly unpaid wages. The trial court granted Dane Corp.'s motion to recover attorney fees based on an attorney fees provision in the promissory note. The court found that Bodokh had not brought the wage claim in bad faith and declined to award Dane Corp. attorney fees incurred solely in connection with the wage claim. But the court awarded Dane Corp. attorney fees incurred in defending Bodokh's wage claim that were inextricably intertwined with the contract claim. Bodokh appealed from the judgment and the order granting Dane Corp.'s motion for attorney fees.

We reverse the order granting Dane Corp.'s motion for attorney fees and remand. Based on our holding, we conclude that under section 218.5(a) Dane Corp. may not recover attorney fees to the extent the wage claim and the breach of contract claim were inextricably intertwined. We remand for the trial court to recalculate the amount of attorney fees to be awarded to Dane Corp.

*765For reasons explained in the unpublished portions of the opinion, we affirm the judgment in favor of Dane Corp. The trial court did not err by denying Bodokh's request for a statement of decision and substantial evidence supported findings necessary to uphold the judgment.

FACTS

I.

Background

In the 1980's, Bodokh and David Haccoun founded Dane-Elec Memory (Dane Memory), a business that produced and sold computer memory and data storage. Bodokh and Haccoun later formed Dane Corp., which is a Delaware corporation based in Irvine. Before June 18, 2013, Dane Memory wholly owned Dane Corp. Bodokh and Haccoun jointly owned more than 50 percent of Dane Memory's outstanding shares. Bodokh served as Dane Memory's chief executive officer, and Bodokh and Haccoun constituted Dane Memory's board of directors.

Bodokh is a citizen of, and resides in, France. He did not have a United States work visa. Bodokh was not on Dane Corp.'s payroll; instead, Dane Corp. treated him as an independent contractor and paid him "executive compensation" by wire transfer directly to his personal business account. Nothing was withheld from his compensation for federal, state, or French income taxes.

II.

The Promissory Notes

Sometime in late 2007 or early 2008, Bodokh learned of an investment opportunity in a financial institution called Cross River Bank. The investment called for Bodokh and Haccoun each to purchase $ 500,000 in shares of Cross River Bank stock. Jeffrey Jacobs, Dane Corp.'s corporate counsel, looked into "the best way" for Bodokh and Haccoun to make the investment. Jacobs considered, and ultimately recommended, that Dane Corp. make corporate loans to Bodokh and Haccoun and to document the loans with promissory notes.

*166On January 12, 2008, Dane Corp.'s board of directors (which was Bodokh and Haccoun) approved making loans of $ 500,000 each to Bodokh and Haccoun. The minutes of the board of directors meeting includes a resolution *766authorizing the loans. On January 16, 2008, Bodokh signed a promissory note for $ 500,000 in favor of Dane Corp. (the Promissory Note). The Promissory Note had an interest rate of 5 percent annually and required repayment in monthly installments of $ 10,000 for 50 consecutive months beginning on February 1, 2009. The Promissory Note had a term stating the note may be amended, discharged, modified, changed or terminated only by an instrument in writing signed by both parties.

The Promissory Note was maintained in Dane Corp.'s financial records as a personal loan to Bodokh from Dane Corp. Bodokh used the $ 500,000 in loan proceeds to purchase common stock in Cross River Bank. The value of the shares at the time of trial was $ 3.5 million. In May 2009, the Promissory Note was amended to extend the time for repayment to October 1, 2009.

In December 2009, Dane Corp. received an initial distribution of over $ 13.9 million from settlement in a class action called In re Dynamic Random Access Memory (DRAM) Antitrust Litigation (DRAM Settlement). At a meeting on December 28, 2009, the Dane Corp. board of directors agreed to compensate Bodokh with a one-time bonus of $ 1 million, from which $ 400,000 was used to pay down the Promissory Note. The minutes of the meeting state: "Mr. Bodokh and Mr. Haccoun have agreed to respectively repay the amount of $ 400,000.00 US dollars to [Dane] Corp[.] for each respective promissory note[ ], leaving a remaining balance of $ 100,000.00 US dollars. It has been agreed that the remaining balance of $ 100,000.00 US dollars will be reflected in an amendment to the written promissory notes that will be executed by Mr. Bodokh and Mr. Haccoun. It is further agreed that Mr. Bodokh and Mr. Haccoun will be required to repay the remaining $ 100,000.00 balance starting on the 1st day of September 2010 in equal monthly installments of $ 5,000.00 US dollars for a total of forty consecutive months."

Bodokh made none of the payments toward the balance remaining on the Promissory Note. On April 25, 2012, a renewed promissory note (the Renewed Promissory Note) was made to reflect the $ 100,000 balance owed by Bodokh. The Renewed Promissory Note extended the due date to January 1, 2013 and required Bodokh to pay $ 2,500 for 36 consecutive months and the remaining balance on the 37th month.

Bodokh made none of the payments required under the Renewed Promissory Note.

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Cite This Page — Counsel Stack

Bluebook (online)
248 Cal. Rptr. 3d 163, 35 Cal. App. 5th 761, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dane-elec-corp-v-bodokh-calctapp5d-2019.