First District, Division 3 Applies Analogous Civil Code Section 1717 Principles.
Labor Code section 218.5 allows for recovery of attorney’s fees by the prevailing party in certain wage/hour/benefits disputes. However, what happens if a plaintiff sues a corporate owner as an alter ego and loses? Does the winning individual defendant get fees?
You bet, said the First District, Division 3 in Wymore v. Minto, Case No. A125476 (1st Dist., Div. 3 Sept. 22, 2010) (unpublished).
Here are the facts of this case. Employer sued three employees, who then sued corporate employer and defendant Minto (alleging Minto was the employer’s alter ego). Eventually, employees settled their Labor Code wage claims with employer for $400,000, each side bearing their own fees and costs. However, employees proceeded with their alter ego claim against Minto (so that he would be responsible for the judgment against employer personally), but received an adverse ruling in favor of Minto. The trial court awarded Minto $6,577.50 in attorney’s fees under section 218.5.
In rejecting employees’ appeal of the fee award, the appellate court found that analogous reciprocity principles from Civil Code section 1717 were appropriately applied in the Labor Code section 218.5 context. Because Minto would have been liable for fees if he lost, then section 218.5 as a matter of parity allowed him to recover fees when he prevailed. (Abdallah v. United Savings Bank, 43 Cal.App.4th 1101, 1111 (1996) [Civ. Code, § 1717 decision].)