Eagle Systems, Inc., Resp/cross-app v. Employment Security, App/cross-resp

• Court: Court of Appeals of Washington
• Decided: May 28, 2014
• Docket: 44635-9
• Status: Published

Opinion

FILED CGURT OP APPEALS DIVISION H

2014 JUN - 3 AM 8: 314 IN THE COURT OF APPEALS OF THE STATE 05, FAVIME9jj DIVISION II BY DE

EAGLE SYSTEMS, INC., a Washington No. 44635- 9- II corporation; GORDON TRUCKING, INC., a

Washington corporation; HANEY TRUCK LINE, INC., a Washington corporation;

JASPER TRUCKING, INC., a Washington corporation; KNIGHT TRANSPORTATION, INC., an Arizona corporation; PSFL LEASING, INC., a Washington corporation; and SYSTEM- TWT TRANSPORT, a

Washington corporation, ORDER CORRECTING CAPTION Respondents/ Cross- Appellants,

v.

STATE OF WASHINGTON EMPLOYMENT SECURITY DEPARTMENT,

Appellant/Cross-Respondent.

On May 28, 2014, this court issued its published opinion inthe above matter. The caption contained atypographica1 error in a respondent' s/ cross- appellant' s name. It is hereby '

ORDERED that said respondent' s/ cross appellant' s name is changed to:

SYSTEM-TWT TRANSPORT, a Washington corporation.

Dated this 3t,4 day of 0,4,,, t_e 2014.

Presiding fudge FILED COOT OF APPEALS DIVISION 1I

2014 MAY 28 API 8: 31 IN THE COURT OF APPEALS OF THE STATE OF WAS

DIVISION II

EAGLE SYSTEMS, INC., a Washington No. 44635 -9 -II corporation; GORDON TRUCKING, INC., a

Washington corporation; HANEY TRUCK LINE, INC., a Washington corporation;

JASPER TRUCKING, INC., a Washington corporation; KNIGHT TRANSPORTATION, INC., an Arizona corporation; PSFL LEASING, INC., a Washington corporation; and TWIT SYSTEM - TRANSPORT, a

Washington corporation, PUBLISHED OPINION Respondents /Cross - Appellants,

Appellant /Cross- Respondent.

MELNICK, J. — The Department of Employment Security ( Department) appeals the

superior court' s finding that e -mails between the parties were sufficient to form a settlement

agreement. The Department assessed unpaid unemployment insurance taxes against eight

Carriers), which are involved in this appeal. The Carriers trucking carriers ( seven of

appealed the assessments to an Administrative Law Judge ( ALJ) and administratively

commenced settlement negotiations with the Department. The Carriers believed they had

reached. an agreement to settle the matter, but negotiations broke down before the parties could

execute a formal agreement. The Carriers filed a motion to enforce the agreement, but the ALJ

concluded that he did not have that authority. With a hearing pending before the ALJ, the

Carriers obtained an ex parte show cause order in superior court to enforce the agreement. 44635 -9 -11

The Department argues that ( 1) the superior court lacked personal jurisdiction to hear the

matter and ( 2) no settlement agreement existed. The Carriers cross appeal, contending that the

superior court should have imposed sanctions on the Department and that this appeal is frivolous.

Because the superior court lacked personal jurisdiction, we reverse its ruling enforcing the

settlement agreement. We further affirm the superior court' s denial of sanctions against the

Department because the court lacked jurisdiction, and we deny the Carrier' s request for fees on

appeal.

FACTS

The Department assessed unpaid unemployment insurance taxes against the Carriers, .

asserting that the owner /operator truck drivers working for the Carriers were employees under the Employment Security Act, title 50 RCW. The Carriers administratively appealed the

assessments and moved for summary judgment, arguing that federal law preempts the

Employment Security Act in these cases. The ALJ denied the Carriers' summary judgment

motion, but remanded the cases to the Department to review and reconsider the assessments.

The ALJ also ordered the parties to attempt settlement negotiations.

Over the net few months, counsel exchanged drafts of an agreement. A dispute arose as

to whether the parties agreed to a settlement. The parties met for a prehearing conference in

December 2012, during which the ALJ set a February 20 -21, 2013 hearing date for the first of the Carriers' cases. That same day, the Carriers filed a motion with the ALJ to enforce the terms

of what they believed to be an agreement. The ALJ concluded that he did not have authority to enforce the agreement and denied the motion.

With an administrative hearing set one month away, the Carriers obtained an ex parte

show cause order from the Pierce County Superior Court directing the Department to show cause 2 why the court should not enforce the settlement agreement. The Carriers also sought sanctions

against the Department for bad faith conduct, arguing that the Department failed to follow the

ALJ' s order to issue revised assessments. The Carriers neither filed nor served the summons and

complaint. The Department learned of the show cause hearing from the Carriers' counsel, who

sent e -mails attaching the show cause order and memorandum in support of enforcing the

agreement. In its written response to the Carriers' motion to enforce the agreement and during

oral argument at the show cause hearing,' the.Department argued that the superior court lacked

personal jurisdiction because the Carriers did not properly commence a lawsuit. The Department

alternatively argued that the alleged settlement agreement was not enforceable.

After a hearing, the superior court concluded that it had jurisdiction " pursuant to its general jurisdiction to hear cases and controversies relating to contracts and pursuant to the

to [ it] to RCW 34. 05. 510( 2)." Clerk' s Papers ( CP) at ancillary jurisdiction provided pursuant

441. It also concluded that a show cause proceeding was appropriate because the ALJ had ruled

that he did not have authority to consider a motion to enforce the settlement agreement and

because both parties had an opportunity to brief and argue the issues. The superior court then

found that the parties had reached an agreement and entered an order enforcing it. The superior

court denied the Carriers' request for sanctions. The Department appeals.

ANALYSIS

I. JURISDICTION

The Department contends that the superior court lacked personal jurisdiction because the

Carriers improperly initiated this action through an ex parte show cause motion. Because show cause proceedings are not independent actions and the Carriers did not properly commence a

lawsuit in the superior court, we agree.

3 44635 -9 -II

Due process requires that a Washington court may not assert personal jurisdiction over a

defendant unless the defendant is given adequate notice and opportunity to be heard. Wichert v.

Cardwell, 117 Wn.2d 148, 151, 812 P. 2d 858 ( 1991) ( " The fundamental requisite of due process

of law is the opportunity to be heard(,]" which, in turn, depends on notice the suit is being

commenced) ( citations omitted). When the trial court lacks personal jurisdiction, any judgment

entered is void. Prof'l Marine Co. v. Those Certain Underwriters at Lloyd's, 118 Wn. App. 694, 703, 77 P. 3d 658 ( 2003).

The commencement of a civil action is governed by court rule. " Except as provided in

rrale 4:1- ;-a. civil-action is commenced by service of a copy of a summons together with._ copy, of a.

a complaint, as provided in rule 4 or by filing a complaint." CR 3( a). Here, the Carriers sought

to enforce a contract, i.e., a settlement agreement, but they failed to comply with CR 3. Rather

than serving the Department or the attorney general with a summons and complaint or filing a complaint with the court, the Carriers e- mailed the Department . a show cause order.

Accordingly, the superior court lacked personal jurisdiction to proceed.

Despite their failure to serve the Department and file a complaint, the Carriers claim that

the superior court can obtain personal jurisdiction through an ex parte show cause proceeding.

RCW 2. 28. 150 their need for an expedited decision on the merits'. RCW They rely on and

2. 28. 150 does' not confer jurisdiction on the superior court. It specifically states that when the

court has jurisdiction. but "the course of proceeding is not specifically pointed out by statute, any

suitable process or mode of proceeding may be adopted which may appear most conformable to

the spirit of the laws." RCW 2.28. 150. Thus, the statute presupposes personal jurisdiction,

1 At oral argument the Carriers stated the only reason for expedition was the upcoming hearing date. 4 44635 -9 -II

which the superior court did not have here. Additionally, there are statutes prescribing the

procedures for filing a contract claim: so the situation here is not one in which " the course of

proceeding is not specifically pointed out by statute." RCW 2. 28. 150; See also CR 3; RCW

4. 28. 020.

The Carriers also rely on Minnesota ex rel. Burleigh v. Johnson, 31 Wn. App. 704, 644

P. 2d 732 ( 1982), and argue that a party may commence an action through a show cause hearing.

Burleigh is distinguishable from the present case. In Burleigh, the defendant' s ex - wife obtained

a child support order against the defendant in a Minnesota court and sought to enforce it through 2. - the Uniform Reciprocal Enforcement. of Support Act ( URESA). 31. Wn.. App _ .at 705. The

Minnesota court forwarded the order to the state of Washington, which served the defendant with

an order to appear and show cause why a child support order should not be entered against him.

Burleigh, 31 Wn. App. at 706. The defendant moved to dismiss, arguing that " the State could

not acquire jurisdiction by means of a show cause order instead of by summons and petition." Burleigh, 31 Wn. App. at 706. The superior court denied the motion to dismiss and the appellate court affirmed. Burleigh, 31 Wn. App. at 706, 710.

In Burleigh, the superior court had jurisdiction pursuant to the URESA action because a

valid court order from Minnesota existed, but procedures for its enforcement were not specified.

31 Wn. App. at 707. A URESA action required the State to "' take all action necessary in

accordance with the laws of this state. [ including arrest] to give the court jurisdiction of the

Burleigh, 31 Wn. 707 ( quoting former RCW 26. 21. 110). In the absence respondent.'" App. at

of statutory procedures and pursuant to RCW 2.28. 150, the superior court is authorized to use any suitable process or mode of proceeding to exercise its existing jurisdiction if the course of 2 Former ch. 26.21 RCW ( 1963), repealed by LAWS OF 1993, ch. 318, § 907. 5 44635 -9 -II

in the Burleigh, 31 Wn. App. 707. The proceeding is not pointed out statute. at specifically

appellate court reasoned that a show cause hearing " complements URESA' s statutory

requirements" and offers a quick way of resolving support obligation disputes while still

comporting with due process. Burleigh, 31 Wn. App. at 708 -09.

Burleigh is unlike the present case. In Burleigh, the superior court already had

jurisdiction based on URESA and a valid Minnesota court order. Here, the superior court did not

have jurisdiction because a lawsuit for enforcement or breach of a contract had not been properly

filed; therefore, RCW 2. 28. 150 is inapplicable. The Carriers improperly sought a show cause

order in the abs.ence.of an existing superior court . ction. ._ -:... a

Because the superior court lacked personal jurisdiction, we reverse. Thus, we need not

address whether or not a valid contract ( i.e., a settlement agreement) existed. .

II. CARRIERS' CROSS APPEAL

The Carriers cross appeal and argue that the superior court erred when it failed to

sanction the Department for procedural bad faith. Because the superior court did not have

personal jurisdiction to hear this matter, any judgment regarding sanctions would be void.

Therefore, the Carrier' s cross appeal fails. .

III. ATTORNEY FEES

The Carriers request fees on appeal under RAP 18. 9( a), arguing that this appeal was

frivolous. An appeal is frivolous if it presents no debatable issues upon which reasonable minds

could differ and is so lacking in merit that there is no possibility of reversal. In re Marriage of

Foley, 84 Wn. App. 839, 847, 930 P. 2d 929 ( 1997). Here, the Department successfully argued

that the superior court lacked jurisdiction. This appeal was not lacking in merit or filed for an

improper purpose; therefore, we deny the Carriers' sanctions request. 6 44635- 9- 11

We reverse the superior court' s determination that it had personaljurisdiction to consider

the Carriers' show cause request and its order enforcing the purported settlement agreement. We

further affirm the superior court' s denial of sanctions against the Department because the court

lacked jurisdiction, and we deny the Carrier' s request for fees on appeal.

We concur: