Appeal Sanctions, Employment, Judgment Enforcement, Undertaking: Employer Fails In Multiple Attempts To Reduce Fee Award, CEO Is Properly Denied Fees Following Successful Alter Ego Challenge, And Attorney Sanctioned $7,765 For Meritless Challenge

The Fees Award Against Employer Had Been Affirmed By The Sixth District Three Years Prior, The CEO Could Not Prove Employee’s Alter Ego Claims Were Frivolous, But Employer’s Motion To Release Surety Bond So Frivolous It Warranted 6^th District’s Issuance Of Sanctions On Its Own Motion.

            We originally posted on Khanna v. Sonasoft Corp. on July 13, 2016.  Now, more than three years later, we post again on the same case.

            Our previous post pertained to the attorneys’ fees issue resolved on appeal – whether silence in the settlement agreement as to fees precluded postjudgment entitlement.  It did not where, as here, postjudgment fee recovery was allowable under a fee-shifting statute.  We now revisit that 2016 appeal as it impacts the current appeal in Khanna v. Sonafoft Corp., Case No. H044374 (6^th Dist., Sept. 27, 2019) (unpublished)

            An employee had sued his employer and its CEO for failure to promptly and fully pay his wages.  His complaint included alter ego allegations with respect to the employer and CEO.  Judgment was entered against employer pursuant to the parties’ judicially supervised confidential agreement providing a money judgment of $173,000 (adjusted from $227,000 after credit of some payments)., and later amended to include trial court awarded costs of $12,554.65, attorney fees of $153,840, and postjudgment interest of $26,794.54.  A second amended judgment was also entered to add CEO as additional judgment debtor based on the alter ego theory.

            In the 2016 appeal, employer challenged the postjudgment awards of attorney fees, costs and interest to no avail.  However, CEO successfully challenged the amendment adding him as judgment debtor. 

            Upon return to the trial court, CEO unsuccessfully moved for an award of attorney fees incurred on appeal, employer failed in its motion to have the judgment amended to reduce the fees/costs/interest awards by one-half because “equal efforts were directed to each defendant,” and employee’s motion to add surety bond issuer as judgment debtor was granted with the trial court’s finding that the requirements had been satisfied for adding the surety bond under Code Civ. Proc. section 996.440. 

            The 6^th District affirmed.

            CEO was not entitled to his fees as he failed to demonstrate that employee had brought the action against him in bad faith as required by Labor Code section 218.5(a). 

            Employer’s motion to reduce the fees/costs/interest effectively sought to relitigate issues that could no longer be raised.  It ignored the effect of the 6^th District’s affirmance of the awards in the 2016 appeal, and provided no authority empowering the trial court to amend the judgment after the 6^th District affirmed it without qualification.  

            Finally, employer’s motion to release the surety bond was filed with no supporting evidence as required by Rules of Court for motions based on matters outside the record on appeal.  Employer also failed to inform the 6^th District that it had unsuccessfully brought a similar motion in the trial court – to which it had also filed an unsuccessful motion for reconsideration.  Additionally – while acknowledging it still owed employee the awarded postjudgment interest – employer argued that it was “entitled to an automatic stay of proceedings without an undertaking” because Code Civ. Proc. section 917.1(d) provides that an undertaking is not required solely for awarded costs.  The 6^th District concluded the motion to be frivolous and completely without merit – imposing sanctions against employer’s appellate attorney on its own motion.