Morgan v. Kingen

169 P.3d 487
CourtCourt of Appeals of Washington
DecidedOctober 8, 2007
Docket57938-0-I
StatusPublished
Cited by18 cases

This text of 169 P.3d 487 (Morgan v. Kingen) is published on Counsel Stack Legal Research, covering Court of Appeals of Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Morgan v. Kingen, 169 P.3d 487 (Wash. Ct. App. 2007).

Opinion

169 P.3d 487 (2007)

Eufemia "Emma" MORGAN, Nancy Pitchford, and Daniel McGillivray, individually and on behalf of all the members of the class of persons similarly situated, Respondents,
v.
Gerald KINGEN and Jane Doe Kingen, husband and wife and the marital community comprised thereof, and Scott Switzer and Jane Doe Switzer, husband and wife and the marital community comprised thereof, Appellants.

No. 57938-0-I.

Court of Appeals of Washington, Division 1.

October 8, 2007.

*490 William Keller McInerney Jr., WK McInerney PLLC, Seattle, WA, for Appellants.

Claudia Kilbreath, Short Cressman & Burgess PLLC, Seattle, WA, for Respondents.

COX, J.

¶ 1 A critical test in an action for unpaid wages under RCW 49.52.070 is whether the employer's failure to pay wages is "willful."[1] Whether the failure to pay wages is "willful" turns on whether the employer's refusal to pay is volitional: whether "the [employer] knows what he is doing, intends to do what he is doing, and is a free agent."[2] A failure to pay wages for financial reasons is not recognized as a basis to show a lack of willfulness under RCW 49.52.070.[3]

¶ 2 Here, Gerald Kingen and Scott Switzer were both officers of Funsters Grand Casino, Inc., a company they operated before and after it filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The trial court correctly granted summary judgment to Funsters' employees because their earned wages were not paid either by the company or by Kingen and Switzer. Moreover, the measure of exemplary damages in this case — the doubling of total wages without deductions — was correct. Finally, the trial court did not abuse its discretion in deciding the amount of attorney fees awarded to the successful employees in this suit. However, the absence of findings and conclusions for a portion of the fee award prevents our review of that portion of the award. We affirm the summary judgment order and remand to the trial court with directions concerning the award of attorney fees below and on appeal.

¶ 3 In the summer of 2001, Kingen and Switzer established Funsters Grand Casino, Inc., a mini-casino in SeaTac, Washington. Kingen owned a 31 percent ownership interest in Funsters, and Switzer held a 7 percent ownership interest.

¶ 4 As CFO, Switzer managed the casino's finances. He also acted as the company's general manager. As CEO and president, Kingen set compensation for senior employees and had authority to hire and fire employees. Both Kingen and Switzer controlled the payment of employees. They also had authority to prioritize the payment of wages and the other obligations of the company.

¶ 5 Funsters opened for business in August 2001 in poor financial condition. Renovation costs exceeded its estimates. Soon after the opening, the company experienced further losses from severe reduction in air traffic and hotel occupancy in the SeaTac area due to the 9/11 terrorist attacks. More specifically, payroll checks were being returned by the company's bank to employees due to insufficient funds. Kingen, Switzer, and other owners of Funsters made capital *491 contributions to the company in order to allow it to meet its obligations.

¶ 6 In August 2002, Funsters filed for protection under Chapter 11 of the Bankruptcy Code. While the company operated under Chapter 11, Kingen and Switzer hoped that the casino would turn a profit. This was based, in part, on the hope that the Washington Legislature would allow non-tribal casinos to have slot machines. This never materialized, business continued to decline, and the U.S Trustee in the bankruptcy proceeding moved to convert or dismiss the Chapter 11 proceeding. During a hearing on the motion, the owners of Funsters were unwilling to make additional capital contributions to the company, and the bankruptcy court converted the case to a Chapter 7 liquidation on April 7, 2003.

¶ 7 As of the time of the conversion, the employees had earned unpaid wages for two pay periods: March 10 to 23, 2003 and March 24 to April 6, 2003. The total unpaid wages for these two periods was then estimated to be over $179,000.[4] When the bankruptcy trustee seized the assets of Funsters on April 7, the date the bankruptcy court converted the case to a Chapter 7 liquidation, there was only $85,823.23 in cash. This amount was insufficient to pay the earned wages of the employees. And the bankruptcy court was unwilling to allow the distribution of any of the seized funds to pay wages in view of the Bankruptcy Code's specification of administrative priorities.[5]

¶ 8 Eufemia Morgan, Nancy Pitchford, and Daniel McGillivray (collectively "Morgan") filed this class action on behalf of themselves and over 180 other former employees to recover their unpaid wages. Based on RCW 49.52.050 and RCW 49.52.070, they sought personal liability for exemplary damages for the unpaid wage claims against Kingen and Switzer, the officers of Funsters. The trial court granted summary judgment to Morgan as to liability. Thereafter, following submission of additional evidence regarding exemplary damages, prejudgment interest, fees, and costs, the court entered an amended judgment against Kingen and Switzer.

¶ 9 Kingen and Switzer appeal. Morgan cross-appeals the award of attorney fees.

WAGE CLAIM

¶ 10 Kingen and Switzer argue that the trial court erred in granting Morgan's motion for summary judgment, concluding that they are personally liable for the employees' unpaid wages under RCW 49.52.070. Specifically, they argue that Morgan never established that they violated RCW 49.52.050 by "willfully and with intent to deprive" failing to pay wages. We disagree.

¶ 11 A motion for summary judgment may be granted when there is "no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law."[6] A material fact is one on which the outcome of the litigation depends.[7]

¶ 12 The state legislature has shown a strong policy in favor of ensuring payment of wages by enacting criminal and civil penalties for the willful failure to pay employees the wages they have earned.[8] In a proper case, the officers, vice principals, and agents of an employer are personally liable for exemplary damages and attorney fees for the employer's failure to pay earned wages.[9]

¶ 13 The purpose of these statutes is to see that employees realize the full amount of the wages to which they are entitled.[10] The cases also establish that these statutes must be liberally construed to advance the legislature's intent to protect employee wages and assure payment.[11]

¶ 14 "The critical determination in a case under RCW 49.52.070 for double damages *492 is whether the employer's failure to pay wages was `willful.'"[12]

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Bluebook (online)
169 P.3d 487, Counsel Stack Legal Research, https://law.counselstack.com/opinion/morgan-v-kingen-washctapp-2007.