SUZUKAWA, J. —
Defendant RWA Trucking Company, Inc. (RWA), appeals from the trial court's judgment that it violated the unfair competition law, Business and Professions Code section 17200 (UCL or section 17200), by charging its drivers for automobile liability insurance, physical damage insurance, cargo insurance, and workers' compensation insurance from 1993 to 2011. RWA contends that the UCL causes of action and the state laws on which they are based are preempted by federal law. We affirm in part, reverse in part, and remand the matter to the trial court.
RWA is an interstate trucking company registered as a "for-hire interstate motor carrier" with the Federal Motor Carrier Safety Administration (FMCSA). At all relevant times, RWA conducted its trucking business from
RWA contracted with plaintiff Salvador Rodriguez and other drivers who owned their own tractors (drivers) under written lease agreements (Agreements). Under the Agreements, RWA leased the tractors from the drivers and dispatched the drivers to transport cargo. The Agreements characterized the drivers as independent contractors.
The Agreements required each driver to carry automobile liability insurance, physical damage insurance, and cargo insurance (collectively, liability insurance), and it gave the drivers the option either to obtain their own policies or elect coverage under RWA's fleet policies. If the drivers elected coverage under RWA's fleet policies, RWA deducted from the drivers' earnings (or "charged back" from his or her compensation) the costs of the insurance. RWA also deducted from the drivers' earnings the cost of workers' compensation insurance. The chargebacks were reflected on weekly settlement statements given to each driver.
The Agreements authorized RWA to charge an administrative fee for arranging insurance for the drivers. An administrative fee for that purpose of at least 1 percent was deducted from the drivers' compensation during some years.
RWA deducted the following amounts from the drivers for workers' compensation: December 12, 1993, to December 31, 1994: $71,688.60; December 31, 1994, to December 31, 1995: $71,688.60.
During the years 1993 to 1995, RWA collected from its drivers a 1 percent administration fee for automobile liability insurance, physical damage insurance, and cargo insurance. During the years 1996 to 2002, RWA collected significantly less from its drivers than it paid in insurance premiums, ranging from $2,611.48 in 2002 to $244,269.55 in 1997. During the years 2003 to 2009, RWA deducted more from its drivers than it paid in insurance premiums.
Plaintiff filed the present action in Los Angeles Superior Court in 1997. The complaint alleged (1) plaintiff was an employee, not an independent contractor, but was denied employee benefits; (2) defendants failed to comply with federal truth-in-leasing regulations, thereby breaching fiduciary duties to
Plaintiff filed the operative fourth amended complaint on May 12, 2009. The first cause of action alleged RWA "transacted insurance" within the meaning of Insurance Code section 1631 by "selling insurance to Plaintiff for compensation" and "charging Plaintiff an administrative fee of at least 1% on the aforementioned insurance that Defendant sold to Plaintiff." Such transactions were unlawful, plaintiff alleged, because RWA was not licensed to transact insurance in California. Further, RWA "failed to properly disclose the total premium it charged Plaintiff and each Class Member by failing to properly disclose the at least 1% commission Defendants earned, violating California Insurance Code § 381(f)." These Insurance Code violations were alleged to be unlawful and to constitute unfair business practices in violation of the UCL. The second cause of action alleged RWA violated section 17200 by charging plaintiff for workers' compensation insurance, in violation of Labor Code section 3751 (section 3751) and Albillo v. Intermodal Container Services, Inc. (2003) 114 Cal.App.4th 190 [8 Cal.Rptr.3d 350] (Albillo).
The court granted plaintiff's motion for class certification and, on June 9, 2011, it issued an order certifying the following class: "All persons and entities in California that provided trucking services, including the transport of cargo and freight, for RWA Trucking Co., Inc., from December 12, 1993 through the present, who had money deducted from their earnings by RWA Trucking Co., Inc. to pay for Liability Insurance Coverage, Property Damage Insurance Coverage, Cargo Loss Insurance Coverage, or Workers' Compensation Insurance Coverage."
The case went to trial on stipulated facts. On December 6, 2011, the court filed a statement of decision. Following is a summary.
Prior to trial, the court found that RWA was transacting insurance and receiving compensation for doing so within the meaning of the Insurance Code. The court explained: "It is undisputed that RWA received compensation in connection with obtaining insurance for Rodriguez. Accordingly, RWA
Following trial, the court further found that RWA did not comply with the Insurance Code's disclosure requirements: "RWA stipulated that it did not comply with Insurance Code § 381.... RWA did not give any class member an insurance policy or certificate of insurance, nor any of the items listed in Insurance Code Section 381, i.e., nothing was given to the class members that showed the insurance premium, rates, or criteria used to determine how much to charge the truck driver for insurance.
"... RWA stipulated in Fact Nos. 38, 47 and 48, just as Farmers did in the Troyk case, that it charged Plaintiff an `administrative fee' for providing insurance to Plaintiff. Troyk [v. Farmers Group, Inc. (2009)] 171 Cal.App.4th [1305,] 1324-1325 [90 Cal.Rptr.3d 589]. RWA, like Farmers, did not comply with the disclosure requirement in Insurance Code § 381(f). Following Troyk, RWA violated Insurance Code § 381(f) and Plaintiff has established through Stipulated Fact No. 48 that Plaintiff and each class member has standing to sue RWA under California's Unfair Competition Laws for RWA's violation of Insurance Code § 381(f). [¶] ... [¶]
"... The Court also rejects RWA's argument that its practice of violating Insurance Code § 381 is permitted by the `Truth-in-Leasing' regulation in 49 C.F.R. § 376.12(j).[
Based on these findings, the court found that RWA violated the "unlawful" prong of section 17200, and it ordered restitution in the amount of "the difference for each class member between the premium for each such insurance and the amount of money deducted by RWA from each class member for such insurance," or $502,636.32, plus prejudgment interest of $377,490.33.
Prior to trial, the court granted plaintiffs' motion for summary adjudication of the second cause of action. The court found that under Albillo, RWA was
"The Albillo Court explained, `While it is correct that an election under Labor Code section 4150 does not make a person an employee for all purposes, it does expressly subject him or her to the compensation provisions of division 4 of the Act. Labor Code section 3751 is one of those provisions. [Citation.] Accordingly, we hold that by deducting amounts from appellants' compensation to secure workers' compensation coverage, respondents violated Labor Code section 3751.' [Citation.]"
Following trial, the court applied its summary adjudication holding to the entire plaintiff class and ordered RWA to "restore to Plaintiff and the Class all funds RWA retained by means of the unfair and unlawful business acts and practices alleged herein." It awarded the plaintiff class "the principal amount of $143,377.20, and prejudgment interest through September 26, 2011 in the amount of $233,360."
In concluding that plaintiffs were entitled to compensation for RWA's violations of California law, the court determined that these laws were not preempted by federal law, namely, the Federal Aviation Administration Authorization Act of 1994 (FAAAA), title 49 United States Code section 14501 et seq., or the truth-in-leasing act. It explained: "There is no California case that says that the UCL is preempted in a FAAA[A] case. [¶] ... [¶] ... Equally important, the U.S. District Court for the Central District of California already rejected the precise preemption arguments raised by RWA; holding that Plaintiff's claims here are not preempted by 49 U.S.C. § 14501(c). See Renteria v. K & R Transportation, Inc. (C.D.Cal. 1999) 1999 WL 33268638.... Furthermore, the McCarran-Ferguson Act, 15 U.S.C. § 1012, prevents the Court from interpreting 49 U.S.C. § 14501(c) so as to preempt Plaintiff's claims that are based upon California insurance laws. Here, Congress expressly reiterated State authority to regulate insurance when enacting 49 U.S.C. § 14501(c)(2). Renteria, 1999 WL 33268638 at *2. The Renteria Court held that `[t]he aim of the regulation [49 C.F.R. § 376.12(j)(1)] is to compel disclosure of the contract terms between the
The court entered judgment on May 22, 2012. The judgment awarded plaintiffs "as and for restitution for the first cause of action the sum of $502,636.32 principal, plus prejudgment interest through May 17, 2012 in the amount of $409,716.08 and for the second cause of action, $143,377.20 principal plus prejudgment interest in the amount of $231,845.50 through May 17, 2012 for a total of $1,287,575.10."
Notice of entry of judgment was served on May 25, 2012. RWA timely appealed from the judgment, and plaintiffs timely cross-appealed.
RWA contends (1) RWA did not engage in the sale of insurance under California law; if it did violate California insurance law, that law is preempted by federal law; (2) California law, which prohibits an employer from charging an independent contractor the costs of his or her workers' compensation insurance, is preempted by the FAAAA; and (3) the trial court erred in awarding plaintiffs prejudgment interest. Because RWA's appeal presents solely issues of law on stipulated facts, our review is de novo. (Weingarten Realty Investors v. Chiang (2012) 212 Cal.App.4th 163, 167 [150 Cal.Rptr.3d 813].)
During all the years relevant to this action, RWA required each of its drivers to maintain automobile liability insurance, physical damage insurance,
Plaintiffs allege that these deductions or "chargebacks" constitute the "transacting" of insurance without a license in violation of the Insurance Code. RWA disagrees, contending that the chargebacks at issue do not violate the Insurance Code; in the alternative, RWA urges that if the chargebacks do violate California law, that law is preempted by federal law. We address these issues below and conclude that because the claim for unlawfully transacting insurance is preempted by federal law, the award of restitution and prejudgment interest as to the first cause of action must be reversed.
Insurance Code section 1631 provides that unless exempt by the provisions of this article, a person "shall not solicit, negotiate, or effect contracts of insurance, or act in any of the capacities defined in Article 1 (commencing with Section 1621)" unless the person holds a valid insurance license. The capacities defined in article 1 of the code include acting as an insurance broker — i.e., "for compensation and on behalf of another person, transact[ing] insurance ... with, but not on behalf of, an admitted insurer." (Ins. Code, § 1623, subd. (a), italics added.)
"Transacting insurance" under section 35 of the Insurance Code includes all of the following:
Insurance Code section 1635, subdivision (h) provides that an individual need not hold a license to complete or deliver a declaration or certificate of coverage "under a running inland marine insurance contract evidencing coverage thereunder and including only those negotiations as are necessary to the completion or delivery if the person performing those acts or his or her employer has an insurable interest in the risk covered by the certificate or
Plaintiffs contend that by purchasing insurance for its drivers and charging the drivers an administrative fee, RWA "transacted insurance" for compensation within the meaning of the Insurance Code. Further, plaintiffs urge that RWA does not come within the exemption of Insurance Code section 1635, subdivision (h), because not all the insurance coverage RWA provided its drivers was cargo insurance, and RWA recovered a commission for transacting insurance for its drivers.
For the reasons that follow, we believe that California insurance law, if interpreted as plaintiffs suggest, is preempted by federal law. We therefore assume for the sake of argument that RWA's activities did violate California law and address the preemption issue below.
As federal cases have recognized, motor carriers frequently prepay the costs of certain goods for which drivers ultimately may be responsible. The cost of these items then is deducted from drivers' compensation in a process known as "chargebacks." Chargebacks are noted along with compensation on drivers' weekly pay stubs, also known as settlement sheets or statements. (Owner-Operator Independent Drivers Assn., Inc. v. Swift Transportation Co., Inc. (9th Cir. 2011) 632 F.3d 1111 (Swift).)
The United States Department of Transportation is authorized to regulate the relationships between drivers and motor carriers, including required terms of their leases. The federal truth-in-leasing regulations, 49 C.F.R. part 376, set forth specific requirements with regard to chargebacks. (Swift, supra, 632 F.3d at p. 1113, citing Owner-Operator Independent Drivers Assn. v. Swift Transportation Co. (9th Cir. 2004) 367 F.3d 1108, 1110.)
Section 13906 of title 49 of the United States Code requires federal motor carriers to carry specified levels of liability insurance, as follows: "LIABILITY INSURANCE REQUIREMENT. — The Secretary [of Transportation] may register a motor carrier under section 13902 only if the registrant files with the Secretary a bond, insurance policy, or other type of security approved by the
The truth-in-leasing regulations, 49 C.F.R. part 376.12(j), provide for the allocation of these insurance costs between motor carriers and drivers as follows:
The Seventh Circuit Court of Appeals considered whether section 376.12 permits motor carriers to lawfully charge back to drivers the costs of liability insurance in Owner-Operator Independent Drivers Assn., Inc. v. Mayflower Transit, LLC (7th Cir. 2010) 615 F.3d 790 (Mayflower). There, defendant Mayflower paid its truck drivers a negotiated price per mile, reduced by the cost of insurance in the form of a chargeback. Some of the truckers sued,
The Seventh Circuit disagreed. It explained: "Plaintiffs treat the chargeback as a sale of insurance by Mayflower. Yet it is not an insurer. It is not authorized to underwrite risks. The regulation requires motor carriers to purchase insurance underwritten by real insurers, so that persons injured by a motor carrier's operations may find a source of compensation more reliable than the motor carrier itself, which often is thinly capitalized. Mayflower is a large and solvent firm that has been in business for decades; it can pay for its own casualties (and will do so indirectly because its insurer will set an experience-rated premium that covers the costs of indemnity, plus a loading charge for the insurer's administrative overhead). But many other motor carriers are small, and some would take too few precautions against accidents if they anticipated that a major loss would lead them to declare bankruptcy. Then the owners would reap profits as they came in, and use the corporate shield of limited investors' liability to protect themselves against tort judgments. The insurance requirement prevents that. And the regulation places on the motor carrier under whose certificate the service is rendered the obligation to secure insurance; that makes enforcement much easier than placing a separate mandatory-insurance obligation on the many owner-operators who own and lease a single truck. Yet nothing in this rationale for mandatory insurance implies that lessors need not pay for the coverage secured through the motor carrier; as we've observed already, they will pay indirectly (through lower rates per mile) if they do not pay through a chargeback." (Mayflower, supra, 615 F.3d at p. 793.)
The court continued: "If this were not clear from the text of § 376.12(i) and the fact that Mayflower is not an insurer (so it can't be selling insurance to the lessors), it is made clear by comparing § 376.12(i) with § 376.12(j)(1), which speaks to the topic. This subsection, captioned `Insurance,' reads: [¶] `The lease shall clearly specify the legal obligation of the authorized carrier to maintain insurance coverage for the protection of the public pursuant to FMCSA regulations under 49 U.S.C. 13906. The lease shall further specify who is responsible for providing any other insurance coverage for the operation of the leased equipment, such as bobtail insurance. If the authorized carrier will make a charge back to the lessor for any of this insurance, the lease shall specify the amount which will be charged-back to the lessor.' [¶] The reference to chargebacks in the third sentence is incompatible with the
"Plaintiffs want us to read the third sentence, which speaks of chargebacks, as limited to the second, which deals with `other insurance coverage ... such as bobtail insurance.' But the third sentence refers to `any' of `this' insurance, and that construction is best understood as including the insurance mentioned in the whole subsection. It would have been easy to write: `If the authorized carrier will make a charge back to the lessor for any of [the other] insurance [mentioned in the previous sentence], the lease shall specify the amount which will be charged-back to the lessor.' But that's not what the third sentence says. Section 376.12(j)(1) confirms our understanding of § 376.12(i): A chargeback for the cost of insurance is not a sale of insurance." (Mayflower, supra, 615 F.3d at pp. 793-794.)
The Eighth Circuit Court of Appeals reached a similar result in Owner-Operator Independent Drivers Assn. v. United Van Lines, LLC (8th Cir. 2009) 556 F.3d 690 (United). There, individual truckers who leased trucks to United Van Lines, a federally registered motor carrier, alleged that United improperly charged back the cost of federally mandated public liability and property damage (PL/PD) insurance. The court disagreed: "The first sentence [of § 376.12(j)(1)] establishes that all carriers must maintain public liability and property damage insurance. The second sentence provides that carriers and drivers may decide who is responsible for maintaining other insurance, such as bobtail insurance. The third sentence permits the carrier to charge back to the driver `any of this insurance.' The inclusion of the word `any' and the exclusion of the word `other' signify that `this insurance' [in the third sentence] refers to all insurance referenced in the paragraph, not just to the insurance discussed in the previous sentence." (Id. at p. 697.) The court also rejected the truckers' contention that construing 49 C.F.R. part 376.12(j)(1) to permit chargebacks conflicted with federal motor carrier financial responsibility statutes, which the truckers urged reflected Congress's intent to bar insurance chargebacks so as to improve carriers' level of care. The court explained: "Without question, Congress requires that motor carriers maintain adequate levels of PL/PD insurance to protect the public and to encourage safer motor carrier operations. See 49 C.F.R. § 387.1. But the statutes requiring insurance and minimum levels of financial responsibility — 49 U.S.C. §§ 13906(a) and 31139 — do not specify which party to a motor carrier lease must bear the cost of that insurance. Thus, the legislation `neither grants nor denies the [Secretary] power to regulate compensation paid under lease arrangements.' ... In these circumstances, we must apply the plain language of § 376.12(j)(1) reflecting the Secretary's decision not to dictate how these
In Swift, supra, 632 F.3d 1111, the Ninth Circuit considered the claim of independent drivers that motor carriers violated federal law by marking up chargebacks. The court concluded that federal law permitted motor carriers to mark up chargebacks, as long as the markups were not excessive. The court explained: "[49 C.F.R § 376.12] intended to curb excessive markups by motor carriers and level the playing field with regard to information about how charge-backs are computed. See Final Rule, 47 Fed.Reg. 51136, 51139, 1982 WL 146684 (Nov. 12, 1982). However, [drivers] seem to erroneously equate `excessive' with `any' mark-ups in this instance. See DC Opinion & Order, 2007 WL 2808997, at *2. The district court, and virtually every court that has addressed the issue, has correctly concluded that profiting from charge-backs is not per se unlawful. Id.; see also, e.g., [Owner-Operator Independent Drivers Assn. v. Landstar System, Inc. (11th Cir. 2010)], 622 F.3d [1307,] 1319; OOIDA v. C.R. England, Inc., 508 F.Supp.2d 972, 981 (D.Utah 2007) (`[C]harge-backs that include profits and fees are not per se unlawful under § 376.12(h)....'). Thus, to ascribe to the regulations a purpose of eliminating carriers' profits is unsustainable." (Swift, supra, at p. 1117, fn. omitted.)
The Supreme Court has recognized "`four species of federal preemption: express, conflict, obstacle, and field.' (Viva! International, supra, 41 Cal.4th at p. 935.) `First, express preemption arises when Congress "define[s] explicitly the extent to which its enactments pre-empt state law. [Citation.]...." [Citations.] Second, conflict preemption will be found when simultaneous compliance with both state and federal directives is impossible. [Citations.] Third, obstacle preemption arises when "`under the circumstances of [a] particular case, [the challenged state law] stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'" [Citations.] Finally, field preemption, i.e., "Congress' intent to pre-empt all state law in a particular area," applies "where the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that Congress `left no room' for supplementary state regulation." [Citation.]' (Id. at p. 936; accord, Bronco Wine Co. v. Jolly (2004) 33 Cal.4th 943, 955 [17 Cal.Rptr.3d 180, 95 P.3d 422]; see also Barnett Bank, supra, 517 U.S. at p. 31.)" (Parks, supra, 54 Cal.4th at p. 383.)
The Supreme Court held that the plaintiff's claims under Business and Professions Code section 17200 and Civil Code section 1748.9 were preempted by the NBA. (Parks, supra, 54 Cal.4th at pp. 386-387.) The court explained that the broad power granted by the NBA to national banks to exercise "`all such incidental powers as shall be necessary to carry on the business of banking'" expressly included the power to loan money on personal security. (54 Cal.4th at pp. 386-387.) The disclosure requirements in section 1748.9 purported to impose a condition on that federally granted power, providing that it could be exercised only if national banks offered credit through convenience checks containing specific disclosures. Further, "[t]he specific disclosure obligations imposed by section 1748.9 exceed any requirements in federal law. The requirement in section 1748.9 that disclosures appear `on the front of an attachment that is affixed by perforation or other means to the preprinted check or draft' has no counterpart in federal law. The same is true of section 1748.9's requirement that precise language (`"use of the attached check or draft will constitute a charge against your credit account"') appear on each check. (§ 1748.9, subd. (a)(1).) In addition, although federal regulations require certain disclosures when the terms of using a convenience check differ from the terms of the customer's credit
The court continued: "In characterizing the disclosure requirements of section 1748.9, the Court of Appeal said that the statute `does not forbid the exercise of a banking power authorized by the NBA. Section 1748.9 does not bar national banks from loaning money on personal security through convenience checks.' It is true that section 1748.9 ... does not outlaw a category of banking activity. However, to say that MBNA may offer convenience checks so long as it complies with section 1748.9 is equivalent to saying that MBNA may not offer convenience checks unless it complies with section 1748.9. Whether phrased as a conditional permission or as a contingent prohibition, the effect of section 1748.9 is to forbid national banks from offering credit in the form of convenience checks unless they comply with state law. As demonstrated by the instant lawsuit brought under California's unfair competition law (Bus. & Prof. Code, § 17200 et seq.), a national bank may be subject to monetary liability, and its convenience check offers may be enjoined, if it does not comply." (Parks, supra, 54 Cal.4th at pp. 387-388.) Such a requirement, the court concluded, "`significantly impair[s] the exercise of authority' granted to national banks by the NBA." (Id. at p. 388.)
Further, the court said, although the disclosures required by California law were not themselves onerous, "our preemption analysis must consider the burden of disclosure `regimes imposed not just by [California], but by all States in which the banks operate.' (Watters [v. Wachovia Bank, N. A. (2007)] 550 U.S. [1,] 13 [167 L.Ed.2d 389, 127 S.Ct. 1559].) If disclosure requirements such as those in section 1748.9 were allowed to stand, national banks operating in multiple states would face the prospect of `"limitations and restrictions as various and as numerous as the States." [Citation.]' (550 U.S. at p. 14.) National banks would have to monitor requirements as to the content, language, manner, and format of disclosures for each of the 50 states (and possibly municipalities as well), and continually adjust their convenience check offers to comply with the prescriptions of each local jurisdiction. Such `[d]iverse and duplicative [regulation] of national banks' engagement in the business of banking ... is precisely what the NBA was designed to prevent.' (Id. at pp. 13-14.)" (Parks, supra, 54 Cal.4th at pp. 388-389.)
As in Parks, there is no indication here that Congress intended to subject the rights granted by federal regulation to state or local restriction. (Parks, supra, 54 Cal.4th at p. 387.) And, as in Parks, if the present state law is enforceable against federal motor carriers, motor carriers may be subject to monetary liability if they do not comply with state law. Thus, as in Parks, requiring compliance with state insurance regulation as a condition of charging back insurance costs to drivers under the federal Motor Carrier Act would "`significantly impair[] the exercise of authority' granted" under federal law. (54 Cal.4th at p. 388.) Further, if the state insurance law at issue is allowed to stand, motor carriers operating in multiple states would face the prospect of "`"limitations and restrictions as various and as numerous as the States." [Citation.]' [Citation.]" (Ibid.) Federal motor carriers would have to monitor chargeback requirements for each of the 50 states and continually adjust their leases with drivers to comply with the prescriptions of each local jurisdiction. "Such `[d]iverse and duplicative [regulation] ... is precisely what the [FAAAA] was designed to prevent.' [Citation.]" (Id. at pp. 388-389.)
In the present case, the controlling federal statutes and rules clearly "relate to" the business of insurance. Title 49 United States Code section 13903 requires motor carriers to file a bond or insurance policy; section 31139(b)(1) authorizes the Secretary of Transportation to "prescribe regulations to require minimum levels of financial responsibility sufficient to satisfy liability amounts established by the Secretary covering public liability, property damage, and environmental restoration for the transportation of property by motor carrier"; and section 14102(a)(3) authorizes the Secretary of Transportation to require motor carriers using motor vehicles owned by others to "obtain liability and cargo insurance on them." These powers are implemented through 49 C.F.R. part 376.12(j), which is entitled "Insurance" and requires that leases between motor carriers and drivers shall "clearly specify the legal obligation of the authorized carrier to maintain insurance coverage for the protection of the public pursuant to FMCSA regulations under 49 U.S.C. 13906" and shall "further specify who is responsible for providing any other insurance coverage for the operation of the leased equipment, such as bobtail insurance." (Italics added.)
Plaintiffs contend, finally, that even if RWA did not violate the Insurance Code, it violated 49 C.F.R. part 376.12 because it did not provide its drivers with certificates of insurance that specified the cost to the drivers of each kind of insurance coverage. Whatever the merits of this argument, it was neither pled in the operative complaint nor litigated in the trial court, and thus we do not reach it.
The workers' compensation law (Lab. Code, § 3200 et seq.) "is a comprehensive statutory scheme that governs the compensation provided to California employees for injuries occurring during the course and scope of their employment. (Charles J. Vacanti, M.D., Inc. v. State Comp. Ins. Fund (2001) 24 Cal.4th 800, 810 [102 Cal.Rptr.2d 562, 14 P.3d 234]....) ... `The underlying premise behind this statutorily created system of workers' compensation is the "`compensation bargain.'" [Citation.] Pursuant to this presumed bargain, "the employer assumes liability for industrial personal injury or death without regard to fault in exchange for limitations on the amount of that liability. The employee is afforded relatively swift and certain payment of benefits to cure or relieve the effects of industrial injury without having to prove fault but, in exchange, gives up the wider range of damages potentially available in tort." [Citation.]' (Id. at p. 811.)" (Albillo, supra, 114 Cal.App.4th at p. 199.)
The parties agree that under California law — specifically, section 3751 and Albillo — RWA could not lawfully have charged the plaintiff class for the cost of workers' compensation insurance. RWA contends, however, that the FAAAA expressly preempts California law in this area and, therefore, charging plaintiffs for workers' compensation insurance was not unlawful. Plaintiffs disagree, contending that section 3751 and Albillo are not preempted by the FAAAA.
In 1978, Congress "`determin[ed] that "maximum reliance on competitive market forces"' would favor lower airline fares and better airline service, and it enacted the Airline Deregulation Act. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 378 [119 L.Ed.2d 157, 112 S.Ct. 2031] (1992) (quoting 49 U. S. C. App. § 1302(a)(4) (1988 ed.)); see 92 Stat. 1705. In order to `ensure that the States would not undo federal deregulation with regulation of their own,' that Act `included a pre-emption provision' that said `no State ... shall enact or enforce any law ... relating to rates, routes, or services of any air carrier.' Morales, supra, at 378; 49 U. S. C. App. § 1305(a)(1) (1988 ed.)." (Rowe v. New Hampshire Motor Transp. Assn. (2008) 552 U.S. 364, 367-368 [169 L.Ed.2d 933, 128 S.Ct. 989] (Rowe).)
In 1980, Congress deregulated trucking. (See Motor Carrier Act of 1980, Pub.L. No. 96-296 (July 1, 1980) 94 Stat. 793.) In 1994, Congress similarly sought to preempt state trucking regulation through the FAAAA. In doing so, it modeled its preemption provision on the Airline Deregulation Act of 1978 (ADA; Pub.L. No. 95-504 (Oct. 24, 1978) 92 Stat. 1705) as follows: "[A] State ... may not enact or enforce a law ... related to a price, route, or service of any motor carrier ... with respect to the transportation of property." (49 U.S.C. § 14501(c)(1); see Rowe, supra, 552 U.S. at pp. 367-368.)
Because the relevant preemption language of the ADA and FAAAA are so closely related, the United States Supreme Court has relied on its ADA jurisprudence to interpret the scope of FAAAA preemption. (Rowe, supra, 552 U.S. at p. 370.)
The United States Supreme Court first considered the scope of ADA preemption in Morales v. Trans World Airlines, Inc., supra, 504 U.S. 374 (Morales). There, the issue before the court was whether the ADA preempted "Air Travel Industry Enforcement Guidelines" (guidelines) adopted by state attorneys general that "contain[ed] detailed standards governing the content and format of airline advertising, the awarding of premiums to regular customers (so-called `frequent flyers'), and the payment of compensation to passengers who voluntarily yield their seats on overbooked flights." (504 U.S. at p. 379.) These guidelines purported not to "`create any new laws or regulations,'" but instead claimed to "`explain in detail how existing state laws apply to air fare advertising and frequent flyer programs.'" (504 U.S. at p. 379.)
The court concluded that the guidelines were preempted by the ADA. It explained that the ordinary meaning of "relating to" is broad — "`to stand in some relation; to have bearing or concern; to pertain; refer; to bring into association with or connection with,' Black's Law Dictionary 1158 (5th ed. 1979) — and the words thus express a broad pre-emptive purpose." (Morales, supra, 504 U.S. at p. 383.) Accordingly, "[s]tate enforcement actions having a connection with (or reference to) airline `rates, routes, or services' are pre-empted under 49 U.S.C. App. § 1305(a)(1)." (Morales, supra, at p. 384, italics added.) Applying this standard, the court concluded that the guidelines "quite obviously" related to fares. (Morales, supra, 504 U.S. at p. 387.) It explained: "One cannot avoid the conclusion that ... the guidelines `relate to' airline rates. In its terms, every one of the guidelines enumerated above bears a `reference to' airfares. [Citation.] And, collectively, the guidelines establish binding requirements as to how tickets may be marketed if they are to be sold at given prices." (Id. at p. 388.) Moreover, "beyond the guidelines' express reference to fares, it is clear as an economic matter that state restrictions on fare advertising have the forbidden significant effect upon fares" because "[a]dvertising `serves to inform the public of the ... prices of products and services, and thus performs an indispensable role in the allocation of resources.'" (Id. at p. 388.) Thus, the court held the fare advertising provisions of the guidelines were preempted by the ADA. (504 U.S. at p. 391.)
The Supreme Court applied its preemptions analysis to the FAAAA in Rowe, supra, 552 U.S. 364, 368. There, it considered whether the FAAAA preempted two provisions of Maine law that regulated the delivery of tobacco to customers within the state. (552 U.S. at p. 367.) The court noted that in Morales, it had described Congress's goal in enacting the ADA as "helping
The court held that the Maine tobacco law was preempted by the FAAAA because it "has a `significant' and adverse `impact' in respect to the federal Act's ability to achieve its pre-emption-related objectives." (Rowe, supra, 552 U.S. at pp. 371-372.) It explained: "The Solicitor General and the carrier associations claim (and Maine does not deny) that the law will require carriers to offer a system of services that the market does not now provide (and which the carriers would prefer not to offer). And even were that not so, the law would freeze into place services that carriers might prefer to discontinue in the future. The Maine law thereby produces the very effect that the federal law sought to avoid, namely, a State's direct substitution of its own governmental commands for `competitive market forces' in determining (to a significant degree) the services that motor carriers will provide." (Id. at p. 372.)
The court concluded: "The provision ... requires the carrier to check each shipment for certain markings and to compare it against the Maine attorney general's list of proscribed shippers. And it thereby directly regulates a significant aspect of the motor carrier's package pickup and delivery service. In this way it creates the kind of state-mandated regulation that the federal Act pre-empts. [¶] ... [T]o interpret the federal law to permit these, and similar, state requirements could easily lead to a patchwork of state service-determining laws, rules, and regulations. That state regulatory patchwork is inconsistent with Congress' major legislative effort to leave such decisions, where federally unregulated, to the competitive marketplace." (Rowe, supra, 552 U.S. at p. 373.)
The Supreme Court considered whether state labor laws were preempted by the federal Employee Retirement Income Security Act of 1974 (ERISA; 29 U.S.C. § 1001 et seq.) in California Div. of Labor Standards Enforcement v. Dillingham Constr., N. A., Inc. (1997) 519 U.S. 316 [136 L.Ed.2d 791, 117 S.Ct. 832] (Dillingham). There, a California law required contractors on public works projects to pay their workers the prevailing wage in the projects' locales. An exception to that requirement permitted a contractor to pay lower wages to workers participating in approved apprenticeship programs. Before the court in Dillingham was whether ERISA's preemption provision — which provided that ERISA shall supersede state laws "insofar as they ... relate[d] to any employee benefit plan" (29 U.S.C. § 1144(a)) — preempted California's prevailing wage law to the extent that the wage law prohibited paying an apprentice wage to an apprentice trained in an unapproved program.
The court said that a law "`"relate[s] to"'" a covered benefit plan for purposes of section 514, subdivision (a) "`"`if it [1] has a connection with or [2] reference to such a plan.'"'" (Dillingham, supra, 519 U.S. at p. 324.) It explained that where a State's law "acts immediately and exclusively upon ERISA plans, ... or where the existence of ERISA plans is essential to the law's operation, ... that `reference' will result in pre-emption." (Id. at p. 325.) Further, a law that does not refer to ERISA plans "may yet be pre-empted if it has a `connection with' ERISA plans." (519 U.S. at p. 325.) "[T]o determine whether a state law has the forbidden connection, we look both to `the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive,' [citation], as well as to the nature of the effect of the state law on ERISA plans, [citation]." (Ibid.) In doing so, "[a]s is always the case in our pre-emption jurisprudence, where `federal law is said to bar state action in fields of traditional state regulation,... we have worked on the "assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress."' [Citation.]" (Ibid.)
The court concluded that the prevailing wage law did not explicitly "make reference to" ERISA plans, and thus it was not barred by the second prong of the test. (See Dillingham, supra, 519 U.S. at p. 325.) The law also did not "ha[ve] a `connection with'" ERISA plans, and thus was not barred by the first prong of the test, because it had only an "`indirect economic influence'" on such plans. (519 U.S. at p. 329.) The court explained: "The wages to be paid on public works projects and the substantive standards to be applied to apprenticeship training programs are ... quite remote from the areas with which ERISA is expressly concerned — `reporting, disclosure, fiduciary responsibility, and the like.' [New York State Conference of Blue Cross & Blue
The court continued: "[T]he apprenticeship portion of the prevailing wage statute does not bind ERISA plans to anything. No apprenticeship program is required by California law to meet California's standards. See Southern Cal. [Ch. of Associated Builders etc. Com. v. California Apprenticeship Council (1992)] 4 Cal.4th [422,] 428 [14 Cal.Rptr.2d 491, 841 P.2d 1011]. If a contractor chooses to hire apprentices for a public works project, it need not hire them from an approved program (although if it does not, it must pay these apprentices journeyman wages). So, apprenticeship programs that have not gained [California Apprenticeship Council] approval may still supply public works contractors with apprentices. Unapproved apprenticeship programs also may supply apprentices to private contractors. The effect of § 1777.5 on ERISA apprenticeship programs, therefore, is merely to provide some measure of economic incentive to comport with the State's requirements, at least to the extent that those programs seek to provide apprentices who can work on public works projects at a lower wage. [¶] ... It cannot be gainsaid that § 1777.5 has the effect of encouraging apprenticeship programs — including ERISA plans — to meet the standards set out by California, but it has not been demonstrated here that the added inducement created by the wage break available on state public works projects is tantamount to a compulsion upon apprenticeship programs." (Dillingham, supra, 519 U.S. at pp. 332-333, fns. omitted.)
The court concluded: "The prevailing wage statute alters the incentives, but does not dictate the choices, facing ERISA plans. In this regard, it is `no different from myriad state laws in areas traditionally subject to local regulation, which Congress could not possibly have intended to eliminate.' Travelers, 514 U.S., at 668. We could not hold pre-empted a state law in an area of traditional state regulation based on so tenuous a relation without doing grave violence to our presumption that Congress intended nothing of the sort. We thus conclude that California's prevailing wage laws and apprenticeship standards do not have a `connection with,' and therefore do not `relate to,' ERISA plans." (Dillingham, supra, 519 U.S. at p. 334.)
Following Morales, Rowe, and Dillingham, the lower federal courts have struggled with the scope of FAAAA preemption, particularly as applied to
The Ninth Circuit held that the FAAAA did not preempt the CPWL. It began by noting that state laws dealing with matters traditionally within a state's police powers, such as prevailing wage laws, should not be found to be preempted unless Congress's intent to do so was clear. (Mendonca, supra, 152 F.3d at p. 1187.) Here, Congress had expressed no such clear intent. The court explained: "While CPWL in a certain sense is `related to' [the plaintiff's] prices, routes and services, we hold that the effect is no more than indirect, remote, and tenuous. See Dillingham, 117 S.Ct. at 842. We do not believe that CPWL frustrates the purpose of deregulation by acutely interfering with the forces of competition. See Travelers, 514 U.S. at 668. Nor can it be said, borrowing from Justice Scalia's concurrence in Dillingham, that CPWL falls into the `field of laws' regulating prices, routes, or services. See Dillingham, 117 S.Ct. at 843. Accordingly, we hold that CPWL is not `related to' [the plaintiff's] prices, routes, and services within the meaning of the FAAA Act's preemption clause." (Mendonca, supra, at p. 1189, fn. omitted.)
The court reached a similar conclusion in Air Transport Assn. of America v. City & County of San Francisco (9th Cir. 2001) 266 F.3d 1064 (Air Transport). There, a provision of San Francisco's administrative code required city contractors to provide employee benefits to the domestic partners of employees, whether married or registered with a government entity. Plaintiffs United Airlines, Federal Express, and others (airlines) urged that the city ordinance was preempted by the ADA. (266 F.3d at p. 1068.) Specifically, the airlines urged that there was a forbidden connection with routes and services because if they did not comply with the ordinance, they would be unable to lease property at San Francisco International Airport (SFO). The court disagreed: "What the Airlines are truly complaining about are free market forces and their own competitive decisions. Whatever leverage the
"Indeed, the costs of providing the domestic partner employment benefits at issue here — the only costs the Airlines complained about — are a small, if not inconsequential, fraction of the Airlines' costs of flying through SFO.... The Airlines could comply with the Ordinance's requirements by reducing or eliminating these benefits altogether, thereby avoiding any additional costs. Moreover, some of the plaintiffs have actually begun extending employment benefits to their employees' domestic partners on a nationwide basis during the pendency of this appeal, even though they were not obligated to do so under the Ordinance. This further evidences that the costs of providing these benefits are not enough to compel the Airlines to change their routes and services. [Citation.] Hypothetically, there might be some contract term the City could demand whose costs would be so high that it would compel the Airlines to change their prices, routes or services. [Citation.] The nondiscrimination provisions at issue here, however, do not approach that level." (Air Transport, supra, 266 F.3d at pp. 1074-1075, fn. omitted.)
The court reached a contrary result in Dilts v. Penske Logistics, LLC (S.D.Cal. 2011) 819 F.Supp.2d 1109 (Dilts). There, defendant Penske hired hourly employees to provide warehouse and warehouse management services to Whirlpool Corporation in California. Penske employees received customer orders, caused appliances to be manufactured outside California and then delivered to Whirlpool warehouses, inventoried the appliances, loaded appliances onto trucks, and then delivered appliances to customers. (Id. at pp. 1111-1112.) Because Penske "expected" employees to take meal breaks, it automatically deducted 30 minutes from its employees' work time "`without inquiry into whether the employee was actually provided with a timely 30-minute uninterrupted and duty-free meal period.'" (Id. at p. 1112.) Plaintiffs, hourly appliance delivery drivers and installers assigned to Penske's Whirlpool account, sued, alleging violations of several provisions of the
The district court granted summary judgment, finding that the plaintiffs' claims were preempted by the FAAAA. It explained that although state law need not directly regulate motor carriers to be preempted, a law will be preempted if its effect is such that motor carriers "would have to offer different services than what the market would otherwise dictate or `freeze into place services that carriers might prefer to discontinue in the future.' See Rowe, 552 U.S. at 371-72 (`the effect of the regulation is that carriers will have to offer tobacco delivery services that differ significantly from those that, in the absence of the regulation, the market might dictate')." (Dilts, supra, 819 F.Supp.2d at p. 1118.) The court noted, however, that neither Morales nor Rowe indicate "exactly where, or how, it would be appropriate to draw the line between a significant impact and a tenuous effect because neither of the state laws at issue in those cases presented a `borderline question.' Morales, 504 U.S. at 390; Rowe, 552 U.S. at 371, 375-76." (Dilts, supra, at p. 1118.)
The court continued: "In a very recent decision, the Ninth Circuit examined a `borderline case' of federal preemption under the FAAA Act. See Am. Trucking Assoc., Inc. v. City of Los Angeles, 660 F.3d 384 (9th Cir. 2011). American Trucking acknowledged that `[t]he waters are murkier ... when a State does not directly regulate (or even specifically reference) rates, routes, or services.' Id. at 396. Recognizing that preemption by the FAAA Act may occur even when the effect on rates, routes, and services is only indirect, American Trucking sets out the proper inquiry in `borderline cases' where the effect on prices, routes, and services may be close to merely tenuous or remote: `the proper inquiry is whether the provision, directly or indirectly, "binds the ... carrier to a particular price, route or service and thereby interferes with competitive market forces within the ... industry."' Id. (citing Air Transport Ass'n of Am. v. City & Cnty. of San Francisco, 266 F.3d 1064, 1071 (9th Cir. 2001)). Air Transport considered whether a city ordinance relating to equal protection of domestic partners had an effect on the routes of airlines, finding that the ordinance was not preempted because it `cannot be said to compel or bind the Airlines to a particular route or service,' even though it might require airlines to increase their rates or cease operating at San Francisco Airport. Air Transport, 266 F.3d at 1072-74. In spite of the ordinance, air carriers could still `make their own decisions about where to fly and how many resources to devote to each route and service.' Id. at 1074.
"Thus, American Trucking and Air Transport make clear that the Court's task here is to determine whether these laws, which do not directly target the
"Penske argues these M & RB [(meal and rest break)] laws have a significant effect on the routes of a motor carrier. The fairly rigid meal and break requirements impact the types and lengths of routes that are feasible. `The five stops Plaintiffs insist Penske should have ensured at specified times in a 12-hour workday would thus have necessarily forced drivers to alter their routes daily while searching out an appropriate place to exit the highway, [and] locating stopping places that safely and lawfully accommodate their vehicles.' [Citation.] While the laws do not strictly bind Penske's drivers to one particular route, they have the same effect by depriving them of the ability to take any route that does not offer adequate locations for stopping, or by forcing them to take shorter or fewer routes. In essence, the laws bind motor carriers to a smaller set of possible routes.
"Additionally, the M & RB laws have a significant impact on Penske's services. The parties both agree that `scheduling off-duty meal periods for drivers "would require one or two less deliveries per day" per driver.' [Citation.] Penske states further that the mandated duty-free 10-minute rest periods every four hours (preferably in the middle of the four-hour period) and duty-free 30-minute meal breaks every five hours reduce driver flexibility, interfere with customer service, and, `by virtue of simple mathematics,' reduce the amount of on-duty work time allowable to drivers and thus reduce the amount and level of service Penske can offer its customers without increasing its workforce and investment in equipment. [Citation.] Plaintiffs do not contest these facts. [¶] ... [¶]
"Here, the length and timing of meal and rest breaks seems directly and significantly related to such things as the frequency and scheduling of transportation. Both parties agree that the M & RB laws impact the number of routes each driver/installer may go on each day, and Plaintiffs do not oppose Penske's argument that the laws impact the types of roads their drivers/installers may take and the amount of time it takes them to reach their destination from the warehouse. The connection to `schedules, origins, ... and destinations' is far from tenuous. While Penske has not shown that the M & RB laws would prevent them from serving certain markets, the laws bind Penske to a schedule and frequency of routes that ensures many off-duty breaks at specific times throughout the workday in such a way that would `interfere with competitive market forces within the ... industry.' [¶] ... [¶]
"[T]o allow California to insist exactly when and for exactly how long carriers provide breaks for their employees would allow other States to do the
Division Six of this district considered the effect of ADA preemption on state wage and hour laws in Fitz-Gerald v. SkyWest Airlines, Inc. (2007) 155 Cal.App.4th 411 [65 Cal.Rptr.3d 913] (Fitz-Gerald). There, the plaintiffs were flight attendants who sued their employer for unpaid minimum wages, unpaid meal and rest breaks, overtime, waiting time penalties, and violations of the UCL. (155 Cal.App.4th at p. 415.) In the main portion of the opinion, the court concluded that plaintiffs' claims were preempted by the federal Railway Labor Act (45 U.S.C. § 151 et seq.). In the alternative, the court considered whether plaintiffs' claims were also preempted by the ADA. The court held that the ADA did not preempt plaintiffs' causes of action for violations of state labor law, explaining: "SkyWest ... cites no authority that the ADA preempts actions to enforce state minimum wage laws or state laws governing meal/rest breaks. Although the ADA has been broadly interpreted as preempting state `enforcement actions having a connection with, or reference to, airline "rates, routes, or services,"' it has its limits. (Morales[, supra,] 504 U.S. at p. 384.) If the rule was otherwise, `any string of contingencies is sufficient to establish a connection with price, route or service, [and] there will be no end to ADA preemption. [Citation.]' (Air Transport v. City and County of San Francisco (N.D.Cal. 1998) 992 F.Supp. 1149, 1183.)" (Fitz-Gerald, supra, at p. 423.) The court reached a different result, however, with regard to plaintiffs' UCL cause of action, which apparently was based on the underlying Labor Code violations. In that regard, it concluded without analysis that "[b]ased on [Morales and American Airlines, Inc. v. Wolens (1995) 513 U.S. 219 [130 L.Ed.2d 715, 115 S.Ct. 817]], we conclude that the ADA bars the fifth cause of action for relief under the California Unfair Business Practices Act." (Fitz-Gerald, supra, at p. 423.)
Here, both plaintiffs and RWA appear to agree that the California laws at issue do not "reference" motor carrier prices, routes, or services within the meaning of Morales, Rowe, and Dillingham. That is plainly true — section 3751 is a law of general application that does not apply exclusively to motor carriers. The law therefore does not "act[] immediately and exclusively upon" motor carriers. Further, "the existence of" motor carriers is not "essential to the law's operation." (Dillingham, supra, 519 U.S. at p. 325.) Therefore, section 3751 does not "reference" motor carrier prices, routes, or services.
We turn therefore to the second part of the analysis — whether section 3751 and Albillo have a "connection with" motor carrier prices, routes, or services within the meaning of Morales, Rowe, and Dillingham. For the following reasons, they do not.
Moreover, as in Dillingham — and as distinct from Morales and Rowe — the workers' compensation laws at issue have only an indirect economic influence on motor carriers. That is, unlike the statutes at issue in Morales and
RWA urges that section 3751 has a direct connection with prices because it transfers "an operating expense from the contract trucker to the motor carrier, ... necessarily undermin[ing] the pricing decision the motor carrier made when determining what to charge its customers." This has the effect, RWA contends, of "substituting a governmental policy for the forces of free market competition" and, thus, is preempted by the FAAAA. We do not agree. The crux of RWA's preemption argument is that the effect of California law, as interpreted by Albillo, is to increase its operating expenses and, thus, decrease its profitability. As we have said, however, California law does not require RWA to purchase workers' compensation insurance for its independent contractors. To the extent that motor carriers incur workers' compensation insurance expenses on behalf of their independent contractors, it is because they choose to purchase workers' compensation insurance — not because state law mandates that they do so.
Moreover, on the present record there is no evidence that section 3751 increases RWA's operating expenses. Under California law, employers such as RWA may choose to forgo workers' compensation insurance for their independent contractors — thus exposing themselves to "`"the wider range of damages potentially available in tort"'" (Albillo, supra, 114 Cal.App.4th at p. 199) — or they may purchase workers' compensation insurance, which eliminates a worker's tort recovery in most cases. There is before us no evidence that purchasing workers' compensation insurance increased RWA's operating expenses over what they would have been had RWA chosen not to purchase that insurance. Indeed, RWA presumably chose to purchase workers' compensation insurance because it believed that doing so would decrease, not increase, its expenses.
RWA also contends that Albillo affects RWA's services because RWA "may or may not be a less attractive place for a contract trucker to work" and "[t]he
For all of these reasons, we conclude that section 3751, as interpreted by Albillo, is not preempted by the FAAAA. The trial court did not err in so concluding.
The trial court granted plaintiffs prejudgment interest for the period December 12, 1993, through May 2012. RWA contends that the trial court did not exercise its discretionary power in making this award, but rather awarded prejudgment interest on the basis of Civil Code section 3287 and Labor Code section 3751. RWA contends this was error; citing M&F Fishing, Inc. v. Sea-Pac Ins. Managers, Inc. (2012) 202 Cal.App.4th 1509 [136 Cal.Rptr.3d 788], RWA urges that because a monetary award under the UCL is restitution, not damages, it does not support prejudgment interest.
Plaintiffs disagree. They assert that the trial court awarded prejudgment interest under its equitable powers; alternatively, they urge that a restitution award supports an award of prejudgment interest under Civil Code section 3287.
For the reasons stated below, we conclude Civil Code section 3287 does not authorize prejudgment interest on an award of restitution under the UCL.
The trial court awarded plaintiffs prejudgment interest as to the second cause of action, as follows: "As to Plaintiff's Second Cause of Action, the Court previously held that RWA is liable under Plaintiffs' Second Cause of Action related to the workers' compensation insurance coverage charges .... [¶] ... The Court finds that Restitution should be Ordered as the harm to Plaintiff and the certified class outweighs any utility of RWA's policies and practices in unlawfully deducting the cost of workers' compensation insurance coverage from the compensation of Plaintiff and the certified class members. [Citation.] Pursuant to Business and Professions Code §§ 17200, 17203, 17535 and pursuant to the equitable powers of this Court, RWA is Ordered to restore to Plaintiff and the Class all funds RWA retained by means of the unfair and unlawful business acts and practices alleged herein....
"The parties argued whether prejudgment interest should be awarded. [¶] RWA argues that prejudgment interest should not be awarded on the amount of money RWA unlawfully withheld from Plaintiff and the Class for workers' compensation insurance coverage until, at least, the date on which the Albillo case was published. The Court finds that Albillo does not indicate that its decision should not be applied retroactively and Albillo did not create new law, but only interpreted workers' compensation laws that have existed for many years prior to the decision being rendered.
"The trial Court awards Plaintiff and the certified class members prejudgment interest at 10% [per] annum. The trial court is authorized to award prejudgment interest under California Civil Code § 3287, based upon RWA's violation of Business and Professions Code §§ 17200, et seq., using as a predicate RWA's violation of California Labor Code § 3751. Civil Code § 3287(a) states: `Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day[.]' The California Supreme Court long ago held that Civil Code § 3287 provides for prejudgment interest. See, e.g., Mass v. Board of Education (1964) 61 Cal.2d 612 [39 Cal.Rptr. 739, 394 P.2d 579].
"Prejudgment interest under Civil Code § 3287 is awardable when a defendant violates a statute. See, Tripp v. Swoap (1976) 17 Cal.3d 671, 681-682 [131 Cal.Rptr. 789, 552 P.2d 749] (overruled on other grounds in
"The courts have explained that prejudgment interest is intended to put a plaintiff back in the same position the plaintiff was in before money was unlawfully taken from the plaintiff. [Citation.] If plaintiff is not put in the same position as before having money unlawfully taken, then the wrongdoer `"benefits from denying liability and continuing to litigate, while he retains the use of money to which the plaintiff is entitled, and the plaintiff is deprived of the benefit he should have derived from an immediate recovery."' [Citation.] This could not be more true than in the case at bar, that has been litigated for over 10 years, all while RWA benefited from the use of the money that it unlawfully took from Plaintiff and the certified class members.
"... Plaintiff and each class member is entitled to interest on the amount of money unlawfully deducted from their compensation for the cost of workers' compensation insurance coverage and all amounts of restitution in this case pursuant to Business & Professions Code § 17203. See, Ballard v. Equifax Check Servs., Inc. (E.D.Cal. 2001) 158 F.Supp.2d 1163, 1176-1177; Irwin v. Mascott (N.D.Cal. 2000) 112 F.Supp.2d 937, 956.)
"The parties stipulated that the interest calculated on the total deduction set forth ... above up to the date of September 26, 2011 is $233,360. The parties agree that the total deductions from the class members' compensation for workers' compensation insurance coverage is $143,377.20, plus interest, in the total amount of $366,737.20. [¶] ... [¶]
"Defendant is ordered to restore to the Plaintiff and the Class, pursuant to this and further orders regarding restitution procedures, on Plaintiff's Second Cause of Action for unlawfully charging the Plaintiff and the Class the cost of workers' compensation insurance in violation of Labor Code § 3751, the principal amount of $143,377.20, and prejudgment interest through September 26, 2011 in the amount of $233,360. Prejudgment interest on the principal amount continues to accrue at the rate of 10% simple interest until [the] entry of judgment...." (Paragraph numbering & internal record citation omitted.)
Civil Code section 3287 provides: "(a) Every person who is entitled to recover damages certain, or capable of being made certain by calculation,
We are not persuaded by plaintiffs' argument that the trial court in the present case awarded prejudgment interest pursuant to both section 3287 and its equitable powers. To the contrary, the statement of decision suggests that the award of prejudgment interest on the second cause of action was based solely on section 3287. We therefore remand the matter for the trial court to exercise its discretion with regard to an award of prejudgment interest on the second cause of action.
Plaintiffs contend in their cross-appeal that the trial court should have ordered RWA to restore to the drivers all of the money it collected for liability insurance, not merely the additional administrative fee RWA charged. According to plaintiffs, RWA "offset its own insurance costs by unlawfully taking money from the truck drivers. RWA should be disgorged of all money it unlawfully took from the truck drivers for liability, physical damage, and cargo insurance, pursuant to RWA's unlawful scheme of transacting insurance without a license under Insurance Code § 1623 and failing to properly disclose premiums in policy documents under Insurance Code § 381. Otherwise, RWA benefits from its unlawful acts."
For the reasons discussed above, RWA did not violate the law by charging plaintiffs for the costs of liability insurance. Accordingly, the trial court correctly declined to order RWA to disgorge the money charged plaintiffs for that insurance.
We reverse the trial court's award of restitution and prejudgment interest as to the first cause of action for unlawfully transacting insurance in violation of the Insurance Code. We affirm the trial court's award of restitution as to the second cause of action for unlawful reimbursement of workers' compensation insurance, and we remand the matter for the trial court to exercise its discretion with regard to prejudgment interest in accordance with the views expressed in this opinion. The parties are to bear their own costs on appeal.
Epstein, P. J., and Manella, J., concurred.
