J. Watson v. FWP

2023 MT 239

Opinion

12/12/2023

DA 23-0057 Case Number: DA 23-0057

IN THE SUPREME COURT OF THE STATE OF MONTANA 2023 MT 239

JAY WATSON,

Petitioner and Appellee,

v.

MONTANA DEPARTMENT OF FISH, WILDLIFE AND PARKS,

Respondent and Appellant.

APPEAL FROM: District Court of the Thirteenth Judicial District, In and For the County of Yellowstone, Cause No. DV-20-1128 Honorable Jessica T. Fehr, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Jaime MacNaughton, Sarah Clerget, Fish, Wildlife and Parks, Helena, Montana

For Appellee:

Justin Oliveira, Patten, Peterman, Bekkedahl & Green, PLLC, Billings, Montana

Submitted on Briefs: August 16, 2023

Decided: December 12, 2023

Filed:

ir,-6ta•--if __________________________________________ Clerk Justice Jim Rice delivered the Opinion of the Court.

¶1 The Montana Department of Fish, Wildlife and Parks (FWP or agency) appeals a

December 14, 2022 judgment in favor of Jay Watson (Watson) on his grievance against

the agency for backpay, entered by the Thirteenth Judicial District Court, Yellowstone

County, which reversed the Final Agency Decision entered by the Board of Personnel

Appeals (BOPA or Board). FWP also challenges the District Court’s award of attorney

fees to Watson. We restate the issues presented as follows:

1. Whether the District Court erred by reversing BOPA’s Final Agency Decision.

2. Whether the District Court erred by awarding attorney fees to Watson.

¶2 We affirm on Issue 1 and reverse and remand on Issue 2.

FACTUAL AND PROCEDURAL BACKGROUND

¶3 In 2011, FWP adopted a new “one rate” pay system for the agency in an effort to

address recruitment struggles and alleviate the effects of an extended state employee pay

freeze. This system defined a non-negotiable salary for each position at FWP and provided

that all employees holding the same position code were paid the same rate of

compensation.1 At the time of the plan’s implementation, Watson was employed for FWP

as a Biology Research Specialist. However, Watson was not initially paid a rate of pay

equal to the highest paid employee in his job code. This disparity was not recognized until

1 Section 2-18-302, MCA (2011), provided that “no changes in personnel or salary status may be authorized that will cause an agency to exceed its appropriation or that will result in a deficiency or supplemental appropriation request to the legislature.” There is no dispute here regarding the adoption or validity of the subject FWP pay plan itself.

2 July 2018, at which time the base rate for Watson and other Biology Research Specialists

was increased to the level that the highest-paid Biology Research Specialist was earning.

¶4 In August 2018, Watson filed a grievance with the Board of Personnel Appeals

seeking payment of the differential between his pay rate and the highest pay rate for his

position from the time the agency’s new pay system was implemented in 2012 until his pay

was corrected in July 2018. Watson sought relief pursuant to the statutory grievance

procedure specific to FWP, set forth in § 87-1-205, MCA (2017), which provided:

An employee of the department[2] who is aggrieved by a serious matter of employment based upon work conditions, supervision, or the result of an administrative action and who has exhausted all administrative remedies within the department is entitled to a hearing before the board of personnel appeals provided for in 2-15-1705 and subject to the provisions of 2-18-1011 through 2-18-1013. Any order of the board is binding upon the department.[3]

¶5 In September 2018, the FWP Director acknowledged and apologized for the

payment error in a letter to Watson and explained that Watson would receive three years

of backpay with interest. FWP paid this amount, but Watson continued his grievance

because he was seeking backpay for the entire six years he claimed to be underpaid. In

February 2019, a BOPA Investigator issued a Preliminary Decision dismissing the

grievance. The Investigator referenced the 30-day statutory cap on retroactive pay awarded

2 “Department” was defined as “the department of fish, wildlife, and parks . . . .” Section 87-1-101(3), MCA (2017). 3 This statute, providing an FWP-specific grievance procedure to BOPA, was subsequently repealed effective March 8, 2021. 2021 Mont. Laws ch. 56, § 2. A saving clause within the repealing legislation provided, “[This act] does not affect the rights and duties that matured, penalties that were incurred, or grievance proceedings that were subject to the provisions repealed by this act and that were begun before [the effective date of this act].” 2021 Mont. Laws ch. 56, § 3.

3 in grievance appeals, set forth in § 2-18-203(3), MCA, but noted that, in a previous

grievance proceeding involving the pay of another FWP employee, the O’Rourke case, a

hearing officer had ruled the statutory 30-day cap applied only to pay band allocation

grievances, not compensation grievances, consistent with the plain language of the statute.

See § 2-18-203(3), MCA (2015) (“The period of time for which retroactive pay for a pay

band allocation appeal may be awarded . . . may not extend beyond 30 days prior to the

date on which the appeal was filed.”) (emphasis added). Consequently, the Investigator

reasoned the 30-day cap did not apply to Watson’s claim, but that, “[u]nder the Wage

Payment Act, Title 39, Part 3 of the Montana Code Annotated, an employee can recover at

most three years of retroactive pay.” Because Watson had already received pay for the

three years prior to his claim, the Investigator dismissed the grievance.4

¶6 Watson pursued the next grievance step by requesting an evidentiary hearing with

Office of Administrative Hearings (OAH). See Admin. R. M. 24.26.403(3) (2017). After

conducting a hearing on October 8, 2019, on March 13, 2020, the Hearing Officer issued

4 In the referenced case, O’Rourke v. State Personnel Division, Department of Administration, Montana Fish, Wildlife and Parks, OAH Case No. 641-2017 (June 16, 2017), a FWP female employee sought six years of differential backpay for being paid less than a male counterpart. In that matter, the hearing officer rejected FWP’s argument that retroactive pay awards were limited to 30 days under § 2-18-203(3), MCA, because “this is not a pay band allocation appeal.” O’Rourke, pp. 14. However, after the O’Rourke decision, § 2-18-203(3), MCA, was amended by the Legislature to broadly apply the 30-day cap to retroactive pay awarded within all “compensation and classification appeal[s],” deleting the prior language that applied only to “pay band allocation appeals.” 2017 Mont. Laws, ch. 430, § 3. The amendment was effective July 1, 2017, prior to the filing of Watson’s claim. Notably, O’Rourke received a retroactive award for the entire six-year period, and the Investigator surmised that the three-year limit under the Montana Wage Payment Act (MWPA or the Act), see § 39-3-207(3), MCA, which the Investigator applied here against Watson’s claim, was not enforced in the O’Rourke case because, “[p]resumably,” FWP had not raised the issue. BOPA Preliminary Decision, Case 450-2019 (Feb. 11, 2019).

4 its Findings of Fact, Conclusions of Law, and Recommended Order. The Hearing Officer

held the three-year limitation under the MWPA, referenced by the BOPA Investigator, did

not apply. The Hearing Officer further determined the 30-day limitation on retroactive pay

under § 2-18-203(3), MCA, did not apply to Watson’s claim because it was “not a pay

band allocation appeal,” but did not reference the Legislature’s 2017 revision to that statute.

Having concluded the limitations upon a retroactive award under MWPA and the federal

Fair Labor Standards Act (FLSA) were inapplicable, the Hearing Officer recommended

that Watson be awarded compensation for differential wages earned for the full six years

from 2012 to 2018, less the three years for which he had already been paid.

¶7 FWP filed objections to the OAH decision with the Board.5 FWP first challenged

the merits of the pay issue itself, i.e., that Watson had not been incorrectly paid under the

agency’s “one rate” pay system, a position FWP explained it was “now” taking, despite its

earlier position that Watson had been underpaid.6 Secondly, FWP challenged OAH’s

conclusion that the three-year limitation on pay awards under the MWPA did not apply,

and argued, “[i]f damages are awarded, a three-year compensatory damage cap must

5 Watson also filed objections, asserting his retroactive pay award had been incorrectly calculated, an issue that is not before us in this appeal. 6 FWP argued in its objection that “Watson was, in fact, paid according to FWP’s pay plan in effect at each relevant time. Neither the grievant, nor the Order could substantiate a requirement that all biologists be paid the same as the highest paid Biology Research Specialist in Job Code 191215. Therefore, any conclusion that requires FWP pay Mr. Watson the same as any other higher paid biologist is wrong as a matter of law. At the hearing, Watson had the burden of showing that his pay was incorrect. He did not meet that burden.” However, FWP took the position that it would not seek repayment from Watson of the three years of differential pay it had previously paid to him.

5 apply.” Notably, FWP did not object to or address the Hearing Officer’s conclusion that

the 30-day cap under § 2-18-203(3), MCA, did not apply to Watson’s claim.

¶8 Given the framing of the case by FWP’s objections, BOPA focused on the

applicability of the MWPA, and reversed the Hearing Officer on that issue, concluding “[a]

wage claimant is not entitled to back pay beyond the three-year lookback in the Wage

Payment Act of Title 39, and the Hearing Officer failed to cite any binding authority to

justify a different award of damages.” Noting that Watson had already received payment

for three years of backpay, BOPA issued a Final Agency Decision dismissing his

grievance.

¶9 In August 2020, Watson filed a Petition for Review of a Final Agency Decision with

the Thirteenth Judicial District Court pursuant to § 2-4-702, MCA. Watson argued BOPA

had erred by limiting his award to three years under the MWPA, and that he should receive

the entire six-year backpay awarded by the Hearing Officer. He also claimed attorney fees,

which he had claimed before the OAH. FWP did not cross-petition on its merits defense,

but only defended against Watson’s petition by arguing BOPA had broad discretion to

fashion an appropriate remedy and that BOPA’s use of the MWPA for guidance in

fashioning the appropriate remedy for Watson was not an abuse of discretion. Again, FWP

made no argument that the Hearing Officer or BOPA had erred by not applying the 30-day

cap on retroactive awards under the 2017 amendment to § 2-18-203(3), MCA.

¶10 The District Court entered an Order in May 2021 that reversed the Final Agency

Decision entered by BOPA and reinstated the backpay award recommended by the Hearing

Officer. The District Court reasoned that Watson “never asserted a claim for backpay

6 under the [MWPA],” and that BOPA “incorrectly concluded that it was bound under the

statutory terms of the MWPA” rather than “FWP’s statutorily authorized grievance

policy.” The District Court also awarded attorney fees. In an Order entered in December

2022, the District Court reasoned, without citation to authority, that “district courts, such

as this Court, have the broad discretionary authority to award attorney fees on a case by

case basis,” and awarded attorney fees to Watson.

¶11 FWP appeals, challenging the District Court’s reversal of BOPA and its granting of

attorney fees.

STANDARD OF REVIEW

¶12 We review a district court order reviewing an agency action by employing the same

standards that the district court used to review the agency decision. Ostergren v. Dep’t of

Revenue, 2004 MT 30, ¶ 11, 319 Mont. 405, 85 P.3d 738. The district court reviews an

agency’s interpretations and applications of law to determine whether they are correct.

Knowles v. State ex rel. Lindeen, 2009 MT 415, ¶ 22, 353 Mont. 507, 222 P.3d 5. In

reviewing an administrative agency’s findings of fact, the standard of judicial review for

the District Court and this Court is whether the findings are “clearly erroneous in view of

the reliable, probative and substantial evidence in the whole record.” Section 2-4-

704(2)(a)(v), MCA; State Pers. Div. of Dep’t of Admin. v. BOPA, 255 Mont. 507, 511, 844

P.2d 68, 71 (1992).

¶13 “This Court reviews for correctness a district court’s decision as to whether legal

authority exists to award attorney fees.” Hughes v. Ahlgren, 2011 MT 189, ¶ 10, 361 Mont.

319, 258 P.3d 439. If legal authority exists to award attorney fees, “[w]e review a court’s

7 order granting attorney fees for an abuse of discretion.” JRN Holdings, Ltd. Liab. Co. v.

Dearborn Meadows Land Owners Ass’n, 2021 MT 204, ¶ 18, 405 Mont. 200, 493 P.3d

340. “The test for an abuse of discretion is ‘whether the trial court acted arbitrarily, without

employment of conscientious judgment, or exceeded the bounds of reason resulting in

substantial injustice.’” In re A.S., 2006 MT 281, ¶ 24, 334 Mont. 280, 146 P.3d 778

(quoting In re Custody and Parental Rights of C.J.K., 2005 MT 67, ¶ 13, 326 Mont. 289,

109 P.3d 232).

DISCUSSION

¶14 1. Whether the District Court erred by reversing BOPA’s Final Agency Decision.

¶15 FWP argues the District Court’s reversal of BOPA’s decision and reinstatement of

the Hearing Officer’s decision was in error “where BOPA’s authority, and hence

discretion, to remedy Watson’s grievance was limited by the 30-day lookback provided for

in § 2-18-203(3), MCA.” FWP also offers that, even though BOPA “was statutorily limited

to a 30-day backpay remedy for compensation claims,” it nonetheless properly acted within

its broad discretion to fashion remedies by relying on the three-year lookback provision of

the MWPA “so FWP’s resolution would stand to compensate Mr. Watson.” In this way,

FWP’s payment of three years of backpay to Watson would provide a proper remedy and

his grievance would be dismissed.

¶16 In response, Watson argues that FWP should be estopped from raising the 30-day

limitation in § 2-18-203(3), MCA, because “FWP did not make this argument during the

proceedings before the BOPA or to the District Court,” and that neither the Final Agency

Decision nor the District Court’s decision made any reference to this issue. Watson notes

8 that FWP attempts to justify raising the issue anew on appeal by arguing it is merely

“bolster[ing] [its] preserved issues with additional legal authority,” citing State v.

Montgomery, 2010 MT 193, ¶ 12, 357 Mont. 348, 239 P.3d 1012, but Watson urges that

this is a completely new issue that was not preserved.

¶17 “The general rule in Montana is that this Court will not address either an issue raised

for the first time on appeal or a party’s change in legal theory.” Tai Tam, LLC v. Missoula

County, 2022 MT 229, ¶ 21, 410 Mont. 465, 520 P.3d 312 (citing Unified Indus., Inc. v.

Easley, 1998 MT 145, ¶ 15, 289 Mont. 255, 961 P.2d 100). It is “fundamentally unfair to

fault the trial court for failing to rule correctly on an issue it was never given the opportunity

to consider.” Gateway Hosp. Grp. Inc. v. Phila. Indem. Ins. Co., 2020 MT 125, ¶ 15, 400

Mont. 80, 464 P.3d 44. Further, in the administrative law context, we have explained that

“[u]nder MAPA, a party cannot raise an issue for judicial review that was not raised before

the agency . . . unless good cause for failure to raise the issue is shown.” In re Transfer

Terr. from Poplar Elem. Sch. Dist. No. 9 to Froid Elem. Sch. Dist. No. 65, 2015 MT 278,

¶ 15, 381 Mont. 145, 364 P.3d 1222. Under the common law, a party cannot raise an issue

for the first time on appeal unless the court accepts plain error review. Paulson v. Flathead

Conservation Dist., 2004 MT 136, ¶ 40, 321 Mont. 364, 91 P.3d 569.

¶18 FWP offers no good cause, § 2-4-702(1)(b), MCA, for failure to raise the issue

below, and we agree with Watson that the possible application of § 2-18-203(3), MCA,

was not properly preserved in the litigation. Neither BOPA nor the District Court ruled

upon the issue. We therefore conclude the issue was waived.

9 ¶19 That leaves FWP’s argument that, in any event, BOPA properly exercised its

discretion to fashion a remedy for Watson by reference to the three-year limitation within

the MWPA in recognition that Watson’s claim “could have been brought as a MWPA

claim.” FWP reasons that BOPA’s use of the MWPA properly “harmonized BOPA’s

authority with other provisions that might be available” to Watson. Therefore, FWP urges

that the District Court erred by reversing BOPA.

¶20 Throughout this multi-stage proceeding, the parties and arbiters have struggled with

the interrelation between Watson’s pay grievance and the MWPA. We conclude upon

review of the statutes, and of the claim at issue, that they are separate proceedings, the

MWPA does not govern here, and that the District Court correctly so ruled. Watson filed

a grievance pursuant to FWP’s grievance process, alleging a “serious matter of

employment based upon work conditions.” Section 87-1-205, MCA (2017); see also

§ 2-18-1011(1), MCA (“An employee or the employee’s representative affected by the

implementation of parts 1 through 3 of this chapter [classification and compensation] is

entitled to file a complaint with the board of personnel appeals . . . .”). BOPA exercises

authority over agency grievances pursuant to § 2-18-1012, MCA. The step-by-step

grievance process is detailed within Admin. R. M. 24.26.403. The Legislature has imposed

a 30-day limitation upon retroactive pay awarded in the grievance process, including all

“compensation or classification” matters. Section 2-18-203(3), MCA (2017). No one has

asserted that Watson did not appropriately pursue his payment claim through this grievance

process.

10 ¶21 In contrast, under the MWPA, § 39-3-201, et seq., MCA, an employee who is not

paid “may recover all wages and penalties provided for” under the MWPA “by filing a

complaint within 180 days of default or delay in the payment of wages.” Section

39-3-207(1), MCA. The Commissioner of Labor “shall inquire diligently for any

violations of this part and institute actions for the collection of unpaid wages and for the

penalties provided for in this part . . . .” Section 39-3-209, MCA. The Commissioner may

“take an assignment of the claim in trust for the employee and may maintain any

proceeding appropriate to enforce the claim, including liquidated damages pursuant to this

part.” Section 39-3-211, MCA. A decision of a hearings officer on wages due, or the entry

of a default, “may be enforced by application by the commissioner to a district court for an

order or judgment enforcing the decision.” Section 39-3-212(1), MCA. For a repeated

violation, “an employee may recover wages and penalties for a period of 3 years . . . .”

Section 39-3-207(3), MCA. Notably, “[a] penalty must also be assessed against and paid

by the employer to the employee in an amount not to exceed 110% of the wages due and

unpaid.” Section 39-3-206(1), MCA. Further, a wage judgment “must include all costs

reasonably incurred in connection with the proceeding, including attorney fees.” Section

39-3-214(2), MCA. An employer who violates the MWPA is guilty of a misdemeanor,

and county attorneys are authorized to prosecute the matter. Sections 39-3-206, -215,

MCA. FWP offers that Watson “could have brought” an MWPA claim. Whether that is

correct is an issue we need not reach here, because it is clear Watson appropriately sought

relief for his underpayment of wages under FWP’s pay plan through the forum of the

agency grievance process. What is also clear is that the MWPA provides a process

11 independent from the agency grievance process, and neither the restrictions nor benefits of

the separate MWPA are applicable here.

¶22 While FWP correctly argues that BOPA had broad or “full discretion,” Hutchin v.

State, 213 Mont. 15, 19, 688 P.2d 1257, 1260 (1984), to craft a resolution of Watson’s

grievance, such discretion does not extend to applying the incorrect authority to the

grievance, which is an error of law. BOPA did so by applying the MWPA to Watson’s

grievance, which was pursued under the agency grievance process, and was subject to the

separate statutes governing that process. Consequently, the MWPA’s three-year limitation

does not apply to Watson’s claim, and we affirm the District Court’s reinstatement of the

Hearing Officer’s pay determination.

¶23 2. Whether the District Court erred by awarding attorney fees to Watson.

¶24 FWP challenges the District Court’s attorney fee award to Watson. In its Order, the

District Court reasoned that Montana caselaw provides district courts with “broad

discretionary authority to award attorney fees on a case by case basis.” However, a district

court’s discretion must be exercised within the parameters of our precedent governing the

awarding of attorney fees.

¶25 Montana follows the “American Rule” regarding fee awards, which provides that

“absent statutory or contractual authority, attorney’s fees will not be awarded to the

prevailing party in a lawsuit.” Slauson v. Marozzo Plumbing & Heating, 2009 MT 333,

¶ 27, 353 Mont. 75, 219 P.3d 509. This Court has recognized an exception to this general

rule by “reserv[ing] the power to grant complete relief under its equity power,” including

attorney fees. Foy v. Anderson, 176 Mont. 507, 511, 580 P.2d 114, 116 (1978). However,

12 of necessity, “[t]he Foy exception is narrowly drawn and ‘is applicable only where the

action into which the prevailing party has been forced is utterly without merit or frivolous,

and only in cases with particularly limited facts.’” McCann v. McCann, 2018 MT 207,

¶ 25, 392 Mont. 385, 425 P.3d 682 (quoting Erker v. Kester, 1999 MT 231, ¶ 44, 296 Mont.

123, 988 P.2d 1221). “[I]t is not automatically presumed that an award of attorney fees is

necessary and proper . . . . If such were the case, an award of fees to the prevailing party

would be warranted in every garden variety declaratory judgment action and the American

Rule on attorney fees would be eviscerated. This Court has upheld the American Rule in

the face of similar concerns.” Mungas v. Great Falls Clinic, LLP, 2009 MT 426, ¶ 44, 354

Mont. 50, 221 P.3d 1230.

¶26 As FWP correctly argues, there is no contractual or statutory authority providing for

attorney fee awards for prevailing parties here, including within the statutes governing the

FWP grievance process. In contrast, recovery of attorney fees is provided by the MWPA

for claims brought pursuant to that separate process. Section 39-3-214(2), MCA. As we

have noted, this case was burdened with uncertainty over what statutes governed the

process and the available relief, evident by reversal of the prior decision at every level of

the process, and it was clearly not frivolous litigation or litigated inappropriately by FWP.

McCann, ¶ 25 (“The Foy exception is narrowly drawn and ‘is applicable only where the

action into which the prevailing party has been forced is utterly without merit or frivolous,

and only in cases with particularly limited facts.’”) (citation omitted). Under these

circumstances, an exception to the generally applicable American Rule is not established.

13 We therefore reverse the attorney fee award and remand for entry of an amended judgment

consistent herewith.7

¶27 Affirmed in part, and reversed and remanded in part.

/S/ JIM RICE

We concur:

/S/ BETH BAKER /S/ JAMES JEREMIAH SHEA /S/ INGRID GUSTAFSON /S/ DIRK M. SANDEFUR

7 FWP also raises the limitations upon attorney fee awards against state agencies, including wage claims. See Talon Plumbing & Heating, Inc. v. State Dep’t of Labor & Indus., 2008 MT 376, ¶ 24, 346 Mont. 499, 198 P.3d 213. Our decision here moots these arguments.