# Petition for Writ of Certiorari — Morgan Buildings & Spas, Inc. v. Becht

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386015_1868%3A1

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2003
- **Citation:** 540 U.S. 878

## Text

~ Supreme Court,
{| FILE® *

“08 126.U 22 2003
No.
OFFICE OF THE CLERK

In The
Supreme Court of the Anited States

+

MORGAN BUILDINGS & SPAS, INC.,

Petitioner,

V.

BRIAN R. BECHT,

Respondent.

, %
v

On Petition For Writ Of Certiorari
To The Supreme Court Of Louisiana

@
Vv

PETITION FOR A WRIT OF CERTIORARI

&
Vv

DAVID J. SCHENCK

Counsel of Record
CHRISTOPHER D. KRATOVIL
STUART BUCK

HUGHES & LUCE, L.L.P.

1717 Main Street, Suite 2800
Dallas, TX 75201

(214) 939-5500

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964
OR CALL COLLECT (402) 342-2831

Lynainierinia mma 430

QUESTION PRESENTED

Whether a statute that imposes mandatory punitive
damages without any requirement of bad faith or malice,
without a heightened burden of proof, and without judicial
review violates the Due Process Clause in a case where the
punitive damages award is 215 times the actual damages?

ii

CORPORATE DISCLOSURE STATEMENT

Petitioner Morgan Buildings and Spas, Inc., is a
wholly-owned subsidiary of GHM Corporation, a privately
held company. No publicly held company owns 10% or
more of Petitioner’s stock.

TABLE OF CONTENTS
Page
QUESTION PRESENTED ................ccccccsscscssssccesseces i
CORPORATE DISCLOSURE STATEMENT............. ii
TABLES OF CORN TEIN vescccsesccsscccescvessevessnesscossscceses ili
TAs OF AU THORIE LIBS o.cercescoscccnssvessesaccsccsscessees v
Cee BRIE TY sexevessvsccressveyersnvsseccerscenesecseses Ne
JURISDICTION OF THIS COURT........ ......:.ccceeeeees 1
STATEMENT OF RULE 29(C) NOTIFICATION ...... 1
STATUTORY PROVISIONS INVOLVED.................. 2
STATEMENT OF THE CASB.................cecccscccsssseeeees 3
REASONS FOR GRANTING THE WRIT ................. 5

1. Punitive Damages, Whether Assessed By A
Jury Or Legislature, Are Penal In Nature
And Must Therefore Be Subject To Close
Scrutiny....... iid cc sechiAinakleh ea bien aliadaneeieeunmeibannatintes 9

2. As Illustrated By Louisiana Revised Statute
23:632, Statutory Punitive Damages That
Are Not Tailored To Actual Harm, That Do
Not Correlate To Culpability Of Conduct,
And Which Are Not Subject To Meaningful
Judicial Review, Create Problems Identical

To Those Stemming From Unlimited Jury-

Determined Punitive Damages...................00++ 12

A. Degree Cf Reprehensibility ..............0:00+ 13

B. Disparity Between Actual Harm Suffered
And Punitive Damages Awarded ............. 14

C. Civil Penalties Imposed In Comparable

iv

TABLE OF CONTENTS - Continued
Page

D. Louisiana’s Punitive Damage Scheme Is
Devoid Of Meaningful Procedural Pro-
CIID cs vncesndscndsscdescidcondbioneeniensenmenesitinnsone 17

CONCLUSION .........c.cccccccccrcccesccccvsccccccssssvoccseeeosoness 18

Vv

TABLE OF AUTHORITIES
Page
FEDERAL CASES
BM‘. of North Am., Inc. v. Gore, 517 U.S. 559
CR vasecesnvivnntcnsecvsnnsvessoninsstenttamieneiainannninnnntnunecn passim
Beard Air Line Railway v. Seegers, 207 U.S. 73
CF hicicecescisntsitanstinisvnnsnciisabsiciniadcuseselalaaiaaaanasiliiiial 10
Browning-Ferris Indus. v. Kelco, 492 U.S. 257
CI since wrivicsctosnsicic stint abiaicasaaniaansiiilaaiaaaiaainintibeibas 6
Buchanan v. Angelone, 522 U.S. 269 (1998)............cceeee 13
Cooper Indus., Inc. v. Leatherman Tool Group, Inc.,
SOD Ee, GG Ca wiicendscitiicnsinieninvacenneits 5, 7, 10, 11, 19

Honda Motor Co. Ltd. v. Oberg, 512 U.S. 415 (1994)..9, 17, 18
Native Am. Arts, Inc. v. Bundy-Howard, Inc., 168

F. Supp. 24 906 (ND. TEL. 2007) ....ccercccocosvrescccvecesecscosveeee 7
Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1

CROs. ccicicsctinshscnnctccltinniitiinidnndianrainadedinnaiiiiaines 6, 15,17
Parker v. Time Warner Entm’t Co., L.P., 331 F.3d 13

CR Cle: BD iscccncctisnstinsnnsivitsicnsesitninsneatensinncniiancdiiniena 8
Roberts v. Louisiana, 428 U.S. 325 (1976)............ssscceeeeeees 13
San Huan New Materials High Tech, Inc. v. Intl ~*

Trade Comm’n, 161 F.3d 1347 (Fed. Cir. 1998).............. 7
Seaboard Air Line R. Co. v..Seegers, 207 U.S. 73

CSTD sccenciivsecnccticcecdinsssnsntesitnibensnatensinaeaieesenimeaeinmebananiaanta 6
Siddiqui v. United States, 217 F. Supp. 2d 985 (D.

BER, FD wricccsentiedsitcctvenrnsnnttcchitinreninnicienicisivinmneninatatnntiveins 7
Southwestern Telegraph & Telephone Co. v. Dana-

Ker, SOB CFB 4EB CIGD) secescacovvecereissorecesenennsens 6, 7, 10, 11

St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63.

TO EE EE EE

vi

TABLE OF AUTHORITIES — Continued

Page
State Farm Mut. Auto. Ins. Co. v. Campbell, 123

BS. CR. BREE Ca acevccescsccensssessismincnesetensennnhsanendeoenes passim
TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S.

GD Ciitesintsneescussesenheiiaaaaiannie 8,11, 15
Tull v. United States, 481 U.S. 412 (1987) ............eeeeeeee 11
United States v. Koch Indus., Inc., 57 F, Supp. 2d

LESH CCE. CUD, BP cceiccoccssescisncincsntnncssuncnsetaneneaiaasenin 7
Waters-Pierce Oil Co. v. Texas (No. 1), 212 U.S. 86

(BD vin cnssscnnsecsoncestanvionsiniianateniatanteanssnaninaialaaaasaaii 5, 11
Woodson v. North Carolina, 428 U.S. 280 (1976).............. 13
STATE CASES
Beard v. Summit Inst. of Pulmonary Med. & Re-

hab., 707 So. 2d 1233 (La. 1998).............ccccsssrrsrcescsssees 8
Becht v. Morgan Bldgs. & Spas, Inc., 843 So. 2d

RIGO Cie. Bcc catscinnsnstoncennensiceianinniaiiznioniaabaseiaiasaiiaias 4
Carriere v. Pee Wee’s Equipment Co., 364 So. 2d 555

(Et. DTG Fo ..cvcnsstoescsnisiaisieheneechianenipiciennnladaniabdmeianandaannaiiin 12
Landry v. Pauli’s, Inc., 496 So. 2d 431 (La. Ct. App.

ROE D ..ncacasestnecsrnsinoncesasnnnsinistebssnpanseiaaeanitagesdnaiemnaaamne 12
Lysinger v. Sec. Indus. Ins. Co., 488 So. 2d 353 (La.

OR. Big, Wy iserscccscsnysnseviesencisrennineintinameianaaaaa 8
Powell v. Flotation Servs. Inc., 413 So. 2d 276 (La.

0, Fe: Ba snevenssecensuccivecscsisinnnahicinncsapineiaaadinananas 8
STATUTES
BE TARGA: © Di nisrnsceresossinstisincsaoseneiinciiieealiaemanaiiaemaanan 16
BITTE... © 206 a cnccicineiessininscnsscsssetentanenintieidinananmaiamacns 16

Vii

TABLE OF AUTHORITIES — Continued

Page
19 U.S.C. § 1337(f)................ jsistilneiensiasiaabaisaaniinhiinisacladogintniial 7
ee ee i iatcrnnccinmiventeinpeciniamenntiininiian 7
Eee Ee caiictrnctictentcccenciniennennninnpinnmnnnnnnnnon 1
Se airs Ee tetcnetntesirintaniccnattanineenintintninnenntiainin 1
La. Raw Beak. § SRS IGAKU) .ncccrcccrecvesescecescovessccccccccceccece 2

is Se TE en casntnieennicticctsnintsinneinsneniatenind passim

1

PETITION FOR A WRIT OF CERTIORARI

Petitioner Morgan Buildings & Spas, Inc. (“Morgan”)
respectfully prays that a Writ of Certiorari issue to review
the decision of the Supreme Court of Louisiana, entered in
the above-entitled proceeding on April 23, 2003.

+

OPINIONS BELOW

The opinion of the Supreme Court of Louisiana is
reported at 843 So. 2d 1109 and is reproduced in the
Appendix to the Petition (“Pet. App.”) at Pet. App. A. The
opinion of the Louisiana Court of Appeals is published at
822 So. 2d 56 and is attached hereto at Pet. App. B. The
judgment of the Louisiana trial court is unpublished and
is reprinted at Pet. App. C.

+

JURISDICTION OF THIS COURT

The Louisiana Supreme Court entered the judgment
below on April 23, 2003. This Court's certiorari jurisdiction
is invoked pursuant to 28 U.S.C. § 1254(1).

be
vv

STATEMENT OF RULE 29(c) NOTIFICATION

The constitutionality of a Louisiana state statute is
drawn into question by this Petition for Certiorari. The
State of Louisiana, its agencies, officers and employees are
not parties to this proceeding. Therefore, 28 U.S.C.
§ 2403(b) may apply and Petitioner has served a copy of

2

this petition on the Attorney General of the State of
Louisiana.

4
v

STATUTORY PROVISIONS INVOLVED

This case implicates the Due Process guarantee of
the Fourteenth Amendment to the United States Consti-
tution. Also implicated are Louisiana Revised Statutes
23:631(A)(1)(b) and 23:632. La. Rev. Stat. § 23:631(A)(1)(b)
creates liability for an employer who fails to timely pay
wages owed to an employee after the employee leaves
employment:

Upon the resignation of any laborer or other em-
ployee of any kind whatever, it shall be the duty
of the person employing such laborer or other
employee to pay the amount then due under the
terms of employment, whether the employment
is by the hour, day, week, or month, on or before
the next regular payday or no later than fifteen
days following the date of resignation, whichever
occurs first.

La. Rev. Stat. § 23:632 awards punitive damages for such a
violation:

Any employer who fails or refuses to comply with |
the provisions of La. Rev. Stat. § 23:631 shall be
liable to the employee either for ninety days i
wages at the employee’s daily rate of pay, or else
for full wages from the time the employee’s de-
mand for payment is made until the employer
shall pay or tender the amount of unpaid wages |
due to such employee, whichever is the lesser |
amount of penalty wages. Reasonable attorney
fees shall be allowed the laborer or employee by

3

the court which shall be taxed as costs to be paid
by the employer, in the event a well-founded suit
for any unpaid wages whatsoever be filed by the
laborer or employee after three days shall have
elapsed from the time of making the first de-
mand following discharge or resignation.

Both Louisiana statutes are reproduced in full in the
Appendix to the Petition.

4
v

STATEMENT OF THE CASE

The facts of this case are simple and are not in dis-
pute. Morgan sells modular buildings, hot tubs, spas,
gazebos and greenhouses. Brian R. Becht (“Becht”) was
employed by Morgan as a salesman and was paid on
commission. Upon Becht’s voluntary departure from the
company, Morgan failed to pay Becht an outstanding
commission of $41.15, through, at worst, ordinary negli-
gence.

There is no evidence in the record that Morgan’s
failure to pay the $41.15 commission to Becht was moti-
vated by bad faith, and the record instead reflects that in
the wake of Becht’s departure Morgan promptly paid him
several other, substantially larger, commissions. Because
Morgan neglected to pay the $41.15 commission to Becht
within the limited time frame established by La. Rev. Stat.
§ 23:631, the punitive damage provision of La. Rev. Stat.
§ 23:632 automatically activated and required Morgan to
pay Becht “90 days penalty wages.” At Becht’s stipulated
daily rate of $99.04, the statutory punitive damages
totaled $8,913.60, a figure that is 215 times the $41.15
owed to Becht. This sanction was imposed without any

a i

4

regard to the underlying culpability of Morgan’s conduct,
the size of Becht’s actual damages, or Morgan’s financial
status. Nor was there required any showing that Morgan
had previously engaged in such wrongful conduct or was
likely to do so in the future. The Louisiana courts have no
statutory authority to alter the size of the automatic
punitive damage award mandated by La. Rev. Stat.
§ 23:632.

Morgan explicitly raised the issue of the “grossly
excessive” nature of the punitive damages award before
the Louisiana Supreme Court, arguing that it violated the
Due Process Clause of the Fourteenth Amendment. Mor-
gan’s third “Issue Presented for Review” before that Court
was, “Whether an award of punitive damages 215 times
the wages ultimately found to be due represents a grossly
excessive award in violation of the Due Process Clause of
the Fourteenth Amendment of the United States Constitu-
tion... .” Respondent Becht argued that, under Louisiana
state procedure, Morgan had waived this federal constitu-
tional argument by failing to raise it in the trial court. |

Becht simultaneously argued that the punitive damages
award was not constitutionally excessive. Thus, the
federal issue was fully briefed at the state level by both

sides.

The Louisiana Supreme Court chose to ignore Mor- |
gan’s Due Process complaints, though without applying or

relying on a procedural bar or waiver. Becht v. Morgan
Bldgs. & Spas, Inc., 843 So. 2d 1109 (La. 2003). Rather,
the court held that in order to recover punitive damages
under La. Rev. Stat. § 23:632, it is merely necessary to
show that (1) wages were due; (2) demand for payment
was made where the employee was customarily paid; and
(3) the employer did not pay upon demand. Jd. In other

5

words, merely because Morgan had stipulated that it owed
Becht $41.15, the court thought it mandatory to apply
punitive damages under Section 23:632. By treating the
application of punitive damages as automatic, the Louisi-
ana court impliedly, but necessarily, denied the existence
of any Due Process Clause violation. Thus, in spite of the
disparity between the punitive damages award and the
amount of actual damages, the Louisiana Supreme Court
evidently did not deem the award excessive.

&
v

REASONS FOR GRANTING THE WRIT

In recent terms, this Court has repeatedly recognized
a substantive Due Process “outer limit” on jury awards of
punitive damages.’ Decades before, the Court explicitly
acknowledged that Due Process similarly constrains
awards of punitive damages made pursuant to statute. See
Waters-Pierce Oil Co. v. Texas (No. 1), 212 U.S. 86, 111
(1909) (acknowledging that a state statute may not impose
fines “so grossly excessive as to amount to a deprivation of

* See State Farm Mut. Auto. Ins. Co. v. Campbell, 123 S. Ct. 1513,
1520 (2003) (“While States possess discretion over the imposition of
punitive damages, it is well established that there are procedural and
~ substantive constitutional limitations on these awards.... To the
extent an award is grossly excessive it furthers no legitimate purpose
and constitutes an arbitrary deprivation of property.”); Cooper Indus.,
Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 434 (2001) (“The Due
Process Clause of its own force also prohibits the States from imposing
‘grossly excessive’ punishments on tortfeasors.”); BMW_of North Am.,
Inc. v. Gore, 517 U.S. 559, 568 (1996) (“Only when an award can fairly
be categorized as ‘grossly excessive’ in relation to these [State] interests
does it enter the zone of arbitrariness that violates the Due Process
Clause of the Fourteenth Amendment.”).

6

property without Due Process of law.”); Southwestern
Telegraph & Telephone Co. v. Danaher, 238 U.S. 482, 491
(1915) (setting aside statutory penalty imposed on a
telephone company on the grounds that it was so “plainly
arbitrary and oppressive” as to violate the Due Process
clause).”

Yet, in this case, the Supreme Court of Louisiana
approved a statutory scheme that imposes punitive dam-
ages that can exceed actual damages by a factor of hun-
dreds, even though there was no showing of culpability
and no possibility of judicial scrutiny of the punitive
damages award for reasonableness. Nor does the statute
in question feature any heightened burden of proof; on a
simple preponderance of the evidence showing a debt of
$41.15 La. Rev. Stat. § 23:632 imposed 215 times that sum
in punitive damages.’ BMW v. Gore established a clear
three-part test for evaluating the constitutionality of jury-
imposed punitive damages, but it is not clear whether or
how this test applies to statutorily-imposed punitive

* See also Browning-Ferris Indus. v. Kelco, 492 U.S. 257, 276 (1989)
(noting “[tJhere is some authority in our opinions for the view that the
Due Process Clause places outer limits on the size of a civil damages
award made pursuant to a statutory scheme... .”); St. Louis, ILM. & S.
Ry. Co. v. Williams, 251 U.S. 63, 66-67 (1919) (noting that the Four-
teenth Amendment “places a limitation upon the power of the States to
prescribe penalties for violations of their laws ... where the penalty
prescribed is so severe and oppressive as to be wholly disproportionate
to the offense and obviously unreasonable.”); Seaboard Air Line R. Co.
v. Seegers, 207 U.S. 73, 78 (1907) (“We know there are limits beyond
which penalties may not go. .. .”).

* See Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 21 n.11 (1991)
(declining to require a heightened burden of proof for punitive damages
where state law provided other significant procedural and substantive

safeguards).

7

damages or other statutory civil penalties, because thus
far this Court has explicitly applied the BMW “guideposts”
only in the context of jury-determined punitive damages,‘
and the Court’s early 20th-century cases recognizing the
Due Process limit on statutory punitive damages do not
announce any specific test for identifying “grossly exces-
sive” statutory fines.’

Unsurprisingly, lower courts are confused on whether
to apply the BMW analysis to statutory civil penalties or
statutory punitive damages. Compare San Huan New
Materials High Tech, Inc. v. Int’l Trade Comm’n, 161 F.3d
1347, 1363-64 (Fed. Cir. 1998) (affirming application of
BMW uv. Gore test to statutory civil penalty under 19
U.S.C. § 1337(f)); Siddiqui v. United States, 217 F. Supp.
2d 985, 991 (D. Ariz. 2002) (applying BMW v. Gore to claim
involving statutory punitive damages under 26 U.S.C.
§ 7431); United States v. Koch Indus., Inc., 57 F. Supp. 2d
1122, 1145 (N.D. Okla. 1999) (holding that if a civil pen-
alty “statute, as interpreted and applied to a particular set
of facts, produces an unconstitutionally excessive fine, the
amount of the penalty can then be remitted to prevent an
unconstitutional result”); with Native Am. Arts, Inc. uv.
Bundy-Howard, Inc., 168 F. Supp. 2d 905, 914-15 (N.D. Il.
2001) (holding that a “statutory damage provision” is not
subject to the BMW v. Gore test).

* See BMW, 517 U.S. at 575; State Farm, 123 S. Ct. at 1520; Cooper
Indus., 532 U.S. at 424.

* See Danaher, 238 U.S. at 491 (striking down a statutory fine on a
phone company as “arbitrary and oppressive” without articulating a
specific test for arbitrariness or oppressiveness).

8

Yet it seems clear that a grossly excessive award of
punitive damages made pursuant to statute can offend the
Due Process Clause as much as a similarly dispropor-
tioned award of pun ‘ve damages made by a jury.’ The
Louisiana statutes at issue yield absurd and troubling
results in this case, magnifying $41.15 in actual (“compen-
satory”) damages into $8,913.60 of punitive damages, in
addition to attorney’s fees. It is thus undeniable that
Becht, like others before him,’ reaped a dramatic windfall
through La. Rev. Stat. § 23:632. It is disturbing enough
that the punitive damages here are 215 times greater than
the underlying actual damages. Worse, the imposition of

* As the Second Circuit has noted, statutory damages in class
action cases might reach “so far beyond the actual damages suffered
that the statutory damages come to resemble punitive damages — yet
ones that are awarded as a matter of strict liability, rather than for the
egregious conduct typically necessary to support a punitive damages
award.” Parker v. Time Warner Entm't Co., L P., 331 F.3d 13, 26 (2d Cir.
2003).

" Multiple reported cases under La. Rev. Stat. § 23:632 reflect a
substantial — in some instances radical — disparity between minor
damages actually suffered and the substantial punitive award man-
dated by the statute. See, e.g., Beard v. Summit Inst. of Pulmonary
Med. & Rehab., 707 So. 2d 1233, 1238 (La. 1998) (awarding $432.00 in
compensatory damages and $9,720.00 or 22.5 times that amount in
statutory penalties); Lysinger v. Sec. Indus. Ins. Co., 488 So. 2d 353, 354
(La. Ct. App. 1986) (awarding $78.92 in compensatory damages and
$1,169.50 or nearly 15 times that amount in statutory penalties);
Powell v. Flotation Servs. Inc., 413 So. 2d 276, 278, 281 (La. Ct. App.
1982) (awarding $120.18 in compensatory damages and $9,000.00 or
nearly 75 times that amount in statutory penalties). To the best of
Petitioner’s Counsel’s ability to determine, Petitioner is the first to
challenge the validity of this problematic statute on constitutional Due
Process grounds. By way of contrast, this Court has noted that a
punitive damages award four times greater than actual damages “may
be close to the line of Constitutional permissibility.” TXO Prod. Corp. v.
Alliance Res. Corp., 509 U.S. 443, 459 (1993).

9

such an excessive punitive damage award under La. Rev.
Stat. § 23:632 was made with no showing of bad faith,
willfulness or intent, without a heightened burden of
proof, and without any meaningful opportunity to obtain
state judicial review of the size of the penalty.

Thus, this case presents the Court with the opportu-
nity to clarify how to determine when punitive damages
that are automatically awarded pursuant to statute,
rather than at the discretion of a jury, constitute a viola-
tion of the Due Process Clause.

1. Punitive Damages, Whether Assessed By A
Jury Or Legislature, Are Penal In Nature And
Must Therefore Be Subject To Close Scrutiny.

This Court has recognized that “punitive damages
may properly be imposed to further a State’s legitimate
interests in punishing unlawful conduct and deterring its
repetition.” Hence, punitive damages “serve the same
purpose as criminal penalties.” Because “defendants
subjected to punitive damages in civil cases have not been
accorded the protections applicable in a criminal proceed-
ing,” this Court has repeatedly expressed “concerns over
the imprecise manner in which punitive damages systems
are administered.”” Indeed, this Court has admonished
that “punitive damages pose an acute danger of depriva-
tion of property.”” Nearly a century earlier, the Court

© BMW,517 U.S. at 568.
* State Farm, 123 S. Ct. at 1520.
10 Id.
" Id. (citing Honda Motor Co. v. Oberg, 512 U.S. 415, 432 (1994)).

10

recognized that punitive civil penalties imposed by statute
require Due Process scrutiny. See Beard Air Line Railway
v. Seegers, 207 U.S. 73 (1907). Further, statutory punitive
damages imposed without “recklessness” or “intentional
wrongdoing” were found in 1915 to be unconstitutionally
“arbitrary” and “oppressive.” Danaher, 238 U.S. at 490.

The Court’s well-founded “concerns” over punitive
damages determined by juries culminated in the an-
nouncement of the three “guideposts” that must now be
considered: (1) the degree of reprehensibility of the defen-
dant’s misconduct; (2) the disparity between the actual
harm suffered by the plaintiff and the punitive damages
award; and (3) the difference between punitive damages
awarded by the jury and the civil penalties authorized or
imposed in comparable cases.” The importance of these
three guideposts is so high that this Court has mandated
that appellate courts conduct de novo review of a trial
court’s application of them to the jury’s punitive damage
award.” Further, as part of an evident effort to restore
order to the puritive damages award process, the Court
has reiterated these guideposts three times in just six
years.“

As this Court has recognized in decades past,” the
danger of “arbitrary deprivation of property” stemming

* BMW, “17 U.S. at 575; State Farm, 123 S. Ct. at 1520; —
Indus., 532 U.2. at 424.

* Cooper Indus., 532 U.S. at 424.

* BMW, 517 U.S. at 575; State Farm, 123 S. Ct. at 1520; Cooper
Indus. , 532 U.S. at 424.

* See footnote 2, supra.

11

from statutory punitive damages is no less “acute” than in
the context of jury-determined punitive damages. Both
types of punitive damages are penal in nature; as this
Court has recognized, “the remedy of civil penalties is
similar to the remedy of punitive damages.” Tull v. United
States, 481 U.S. 412, 423 n.7 (1987). In neither instance is
the defendant afforded the same procedural protections as
in a criminal trial. Both types of punitive damages may, in
any given case, be excessively and disproportionately
larger than the actual damages, or for the penalty imposed
to vastly exceed that in comparable cases. Indeed, BMW v.
Gore implicitly recognized that jury-determined punitive
damages are analytically similar to statutory punitive
damages, notwithstanding the long-recognized Due Proc-
ess limits on such awards. Modern cases dealing with
jury-determined punitive damages have regularly and
favorably invoked cases from the early part of last century
recognizing a constitutional cap on statutory punitive
damages. See, e.g., BMW, 517 U.S. at 575 (citing Williams,
251 U.S. at 66-67); TXO, 509 U.S. at 454 (citing Waters-
Pierce, 212 U.S. at 111; Danaher, 238 U.S. at 491; and
Williams, 251 U.S. at 66-67).

Despite the similarity between statutory punitive
damages and their jury-determined cousins, the three
critical guideposts announced in BMW and reiterated in
Cooper Industries and State Farm have so far been applied
by this Court only to jury-determined punitive awards.
And while this Court’s earlier jurisprudence undeniably
acknowledged the existence of a Due Process limit to the

* See BMW, 517 U.S. at 601 (Scalia, J., dissenting) (expressing
concern at the connection between jury and statutory awards).

12

size of statutory punitive damages, those older cases do
not provide a formula for determining when that limit is
reached. Thus, even as jury-determined punitive damages
have been constitutionally reigned in, statutory punitive
damages have remained unregulated and unreformed,
thereby creating a substantial gap in this Court’s punitive
damage jurisprudence.

2. As Illustrated By Louisiana Revised Statute
23:632, Statutory Punitive Damages That Are
Not Tailored To Actual Harm, That Do Not
Correlate To Culpability Of Conduct, And
Which Are Not Subject To Meaningful Judi-
cial Review, Create Problems Identical To
Those Stemming From Unlimited Jury-
Determined Punitive Damages.

A statute that automatically awards a fixed amount of
punitive damages without regard to culpability of conduct
or the size of the actual damages is inherently arbitrary.
This arbitrariness is compounded where, as here, the
statute forecloses any judicial modification of the size
of the punitive damages award.” Thus, the same Due

” Louisiana courts have recognized certain “equitable defenses” as
a total bar to punitive damages under La. Rev. Stat. § 23:632. See
Landry v. Pauli’s, Inc., 496 So. 2d 431, 434 (La. Ct. App. 1986) (collect-
ing cases and finding that courts generally recognize an equitable
defense in four common cases where: (1) there is a question regarding
the number of hours worked; (2) the employer is entitled to offsets from
the employee; (3) the employer made wage advances to the employee;
(4) the employee allegedly retained property of the employer). See also
Carriere v. Pee Wee’s Equipment Co., 364 So. 2d 555, 557 (La. 1978) (“A
good-faith non-arbitrary defense to liability for unpaid wages, i.e., a
reasonable basis for resisting liability, still permit{s] the court to excuse

(Continued on following page)

ETAL

13

Process concerns that plague punitive damages awards
made by juries also apply to statutory punitive damages: a
statute that awards punitive damages using a formula
utterly unrelated to actual damages may lead to results
every bit as arbitrary as awards made by a “runaway”
jury. 18

The “grossly excessive” punitive damage award
mandated in the instant case by La. Rev. Stat. § 23:632 is
illustrative of the danger of permitting statutory punitive
damages to remain without BMW-type guideposts. If the
result in this case dictated by La. Rev. Stat. § 23:632 were
to be examined using the BMW factors, it would badly fail

on all counts.

A. Degree Of Reprehensibility.

BMW ‘eaches that “the most important indicium of
the reasonableness of a punitive damages award? is the
degree of reprehensibility of the defendant’s conduct.””
This emphasis on culpability is equally important in a
statutory context, as many statutes mandate double,

the employer from the imposition of additional penalty wages.”).
Critically, however, even there “equitable defenses” do not vest the
courts with the discretion to reduce or limit an award of punitive
damages under La. Rev. Stat. § 23:632.

* By analogy, the Court’s death penalty jurisprudence makes clear
that excessive arbitrariness can result both where juries are given too
much discretion, see, e.g., Buchanan v. Angelone, 522 U.S. 269, 275-76
(1998) and where they are given too little (i.e., where the death penalty
was imposed mandatorily), see, e.g., Woodson v. North Carolina, 428
U.S. 280 (1976); Roberts v. Louisiana, 428 U.S. 325 (1976).

* BMW, 517 USS. at 575.

14

treble or quadruple damages to punish willful or inten-
tional bad conduct.” By contrast, the punitive damage
provision of La. Rev. Stat. § 23:632 utterly fails to take
into account the reprehensibility — or lack thereof — of the
defendant’s conduct. All conduct, from the merely negli-
gent to the intentionally malicious, is treated identically
by La. Rev. Stat. § 23:632, with punitive damages calcu-
lated using a single universal formula. Notably, there is no
evidence in the record that Morgan’s failure to pay Becht
$41.15 promptly was anything other than ordinary negli-
gence, yet Morgan now finds itself liable for the same
amount of punitive damages ($8,913.60) as would an
employer who had actively and maliciously plotted against
Becht.

B. Disparity Between Actual Harm Suffered
And Punitive Damages Awarded.

The second BMW guidepost evaluates the disparity
between the size of the actual or potential harm suffered
and the punitive damages awarded. This Court has
recently noted that “in practice, few awards exceeding a
single-digit ratio between punitive and compensatory
damages will, to a significant degree, satisfy due proc-
ess.” “Single-digit multipliers are more likely to comport
with Due Process, while still achieving the State’s goals of
deterrence and retribution, than awards with ratios in

* Id. at 581 (“Some 65 different enactments during the peviod
between 1275 and 1753 provided for double, treble, or quadruple

damages.”).
" State Farm, 123 S. Ct. at 1524

seieicenienDanieiiiitia iii

15

range of 500 to 1, or, in this case, of 145 to 1.”” Indeed, this
Court has previously indicated that a punitive damages
award four times greater than actual damages “‘may be
close to the line’ of Constitutional permissibility.”"” Thus,
the 215 to 1 ratio imposed by La. Rev. Stat. § 23:632 in this
case does not appear to comport with Due Process.

Worse still, La. Rev. Stat. § 23:632 does not even
attempt to correlate the size of the punitive damages to
the degree of actual harm suffered. The formula for calcu-
lating damages is based entirely on the former employee’s
rate of pay, not the amount of money that he is actually
owed. This Court has noted that the “most commonly cited
indicium of an unreasonable or excessive punitive dam-
ages award is its ratio to the actual harm inflicted on the
plaintiff. Because it does not link actual damages to
punitive damages, La. Rev. Stat. § 23:632 permits absurd
and arbitrary scenarios where a former employee who had
a high daily rate of pay but was owed a trivial amount of
money could receive greater punitive damages than an
employee who was owed a large sum of money but had a
low rate of pay. La. Rev. Stat. § 23:632’s failure to make
even a nominal effort to relate punitive damages to actual
damages reveals the arbitrary nature of the statute.

™ Id.

* TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 459 (1993)
(citing Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 23 (1991)).

* BMW, 517 U.S. at 580-81 (also noting that “[tJhe principle that
exemplary damages must bear a ‘reasonable relationship’ to compensa-
tory damages has a long pedigree.”).

16

C. Civil Penalties Imposed In Comparable
Cases.

The third BMW guidepost focuses on the disparity
between a punitive damages award and “civil penalties
authorized or imposed in comparable cases.”” This Court
has recently “referenced a long legislative history, dating
back over 700 years and going forward to today, providing
for sanctions of double, treble or quadruple damages to
deter and punish.™ Needless to say, nowhere in that
legislative history are found statutes in which punitive
damages are set hundreds of times higher than actual
damages. In contrast, La. Rev. Stat. § 23:632 imposes a
penalty radically harsher than even quasi-criminal stat-
utes such as the Clayton Act” or RICO.” Stated simply,
the excessive and arbitrary punitive damages mandated
by La. Rev. Stat. § 23:632 are not consistent with those of
past or present Anglo-American statutes. However, absent
guidance from this Court, La. Rev. Stat. § 23:632 and other
similarly arbitrary punitive damages statutes will be
allowed to stand for lack of a standard by which to evalu-
ate them.

* Id. at 575.

* State Farm, 123 S. Ct. at 1524.
* 15 U.S.C. § 15.

* 18 U.S.C. § 1964.

17

D. Louisiana’s Punitive Damage Scheme Is
Devoid Of Meaningful Procedural Protec-
tion.

In addition to offering the guidance of the three the
BMW factors, this Court has noted that “[jludicial review
of the size of punitive damages awards has been a safe-
guard against excessive verdicts for as long as punitive
damages have been awarded.” Honda Motor Co. Ltd. v.
Oberg, 512 U.S. 415, 421 (1994). More explicitly, “denial of
judicial review of the size of punitive damages awards
violates the Due Process Clause of the Fourteenth
Amendment.” Jd. at, 432. Likewise, the Court has consid-
ered whether a heightened burden of proof should be
required for punitive damages.” It declined to do so only
because the punitive damages scheme at issue, unlike this
one, included substantial procedural protections against
arbitrary deprivations of property.”

By treating the imposition of punitive damages as
automatic under La. Rev. Stat. § 23:632, the Louisiana
Supreme Court confirmed what the statute itself already
mandates; the punitive award is mandatory wherever a
preponderance of the evidence shows an outstanding debt
and Louisiana courts are without discretion to alter the
size of a punitive damages award made pursuant to La.
Rev. Stat. § 23:632. Punitive damages awarded under La.
Rev. Stat. § 23:632 are calculated pursuant to the statute’s
inflexible formula, and neither the statute itself nor
Louisiana case law indicates that the courts are free to

* Haslip, 499 U.S. at 21n.11.
7 a .

18

deviate from that formula.” As such, no meaningful
judicial review of the size of punitive damages awards
made under La. Rev. Stat. § 23:632 can take place.

Judicial review of punitive damages imposed by
statute is no less critical than judicial review of jury-
determined punitive damages. In both instances, judicial
review of the amount awarded provides a key procedural
safeguard against the arbitrary deprivation of property.
The absence of that review only compounds the risk of
arbitrary deprivation. Therefore, Petitioner prays that this
Court will make it clear that Oberg’s requirement that
judges review the size of punitive damages awards™
applies equally in the context of statutory punitive dam-
ages.

4
v

CONCLUSION

The punitive damages dictated by La. Rev. Stat.
§ 23:632 in this case are “grossly excessive” in every sense
of the term, as they vastly exceed actual damages, bear no
relationship to Petitioner’s real culpability, and are not
subject to any meaningful state judicial review. Indeed, it

* As noted above, Louisiana case law does permit certain total
“equitable defenses” to the imposition of punitive damages under La.
Rev. Stat. § 23:632. However, these “equitable defenses” attempt to
prevent the imposition of punitive damages altogether, and do not
permit the court to reduce the size of the punitive damages award. In
other words, these “equitable” defenses are an “all or nothing” proposi-
tion that do not increase the discretion of the court or allow it to tailor
the award of punitive damages.

* Oberg, 512 U.S. at 432.

19

is hard to conceive of a more arbitrary formula for award-
ing punitive damages than that in La. Rev. Stat. § 23:632.
However, no coherent legal standard presently exists for
evaluating the excessiveness of statutory awards of puni-
tive damages. Petitioner prays that the Court will draw on
BMW, Cooper Industries and State Farm to craft a test to
determine when a statutory award of punitive damages
exceeds the boundaries of Due Process. By doing so this
Court would close a serious potential “loophole” in its
BMW jurisprudence and would prevent any attempt at a
legislative “end run” around the constitutional limits on
punitive damages that it has now repeatedly recognized.

Respectfully submitted,

DAVID J. SCHENCK
CHRISTOPHER D. KRATOVIL
STUART BUCK

HUGHES & LUCE, L.L.P.

1717 Main Street, Suite 2800
Dallas, Texas-75201
214-939-5500

214-939-6100 — fax

Attorneys for Petitioner
Morgan Buildings & Spas, Inc.

July 22, 2003

APPENDIX TABLE OF CONTENTS

Page

. Becht v. Morgan Bldgs. & Spas, 843 So. 2d 1109
CF, BI visvecccsvisieasssasbsctiescincrsancveecinveervionninnens App. 1

. Becht v. Morgan Bldgs. & Spas, 822 So. 2d 56
(La. Ct. App. 2002) ........ccccccsssrccesrccssessssensecssoees App. 8

. La. City Court of Baton Rouge - Trial Court
Judgment (Not Published).............:ssssesseeeeeeees App. 15
. United States Constitution, Amendment XIV ...App. 17
Ba. Row. Skat. Anum. § ZOGL vecccssesccvecccccesesessvesees App. 19
. La. Rev. Stat. Ann. § 23:682 .............cccecesecesseeeees App. 22

App. 1

BRIAN R. BECHT versus
MORGAN BUILDING & SPAS, INC.

No. 2002-C-2047
SUPREME COURT OF LOUISIANA

2002-2047 (La. 04/23/03);
843 So. 2d 1109; 2003 La. LEXIS 1115

April 28, 2003, Decided
PRIOR HISTORY:

ON WRIT OF CERTIORARI TO THE COURT OF AP- .
PEAL, FIRST CIRCUIT, PARISH OF EAST BATON
ROUGE.

JUDGES:
KNOLL, Justice.
OPINION BY:
KNOLL
OPINION:
KNOLL, Justice

Louisiana Revised Statutes 23:631(A)(1)(b) imposes the
duty upon an employer to pay any amount due under the
terms of employment to an employee, upon his or her
resignation, on or before the next regular payday or no
later than fifteen days following the date of resignation,
whichever occurs first. We granted this writ for the sole
reason of evaluating the correctness of the court of appeal’s
finding that an extension of this statutorily imposed time
period by an employment contract is contrary to public
policy. However, after granting the writ we learned that
prior to trial, the parties had entered into a stipulation of

App. 2

facts which prevents us from reaching the issue for which
we granted the writ. We find the court of appeal unneces-
sarily reached this legal issue because all of the elements
necessary to establish a violation of La. R.S. 23:631 are
present in the stipulation. Accordingly, we pretermit the
issues raised in the court of appeal opinion and affirm, as
the result is correct.

FACTS AND PROCEDURAL HISTORY

Plaintiff was employed by defendant on February 23,
1998, as a salesman of portable or modular buildings,
portable spas, hot tubs, gazebos and greenhouses. In
connection with his hiring, plaintiff signed a Standard
Employment/Non-Competition Agreement which set out
the terms of his employment. Pursuant to the agreement,
plaintiff was employed on a full-time basis, earning
straight commission. Upon termination, the agreement
specified that a sales person who made a sale “will receive
his or her 75% share of the Store’s Commissions on those
sales made prior to termination if the product has been
DELIVERED, ACCEPTED, by the customer AND the
account has been PAID IN FULL prior to the end of the
last business day during which he or she was at work. The
final commissions, if any, will be paid within forty-five (45)
days of the end of the month during which the salesperson
terminated.”

On September 7, 1998, plaintiff voluntarily resigned
from his sales position and, on October 7, he made a
demand for unpaid wages. On November 23, 1998, 47 days
past demand, plaintiff received a paycheck in the amount
of $386.47 representing commissions arising from con-
tracts on which plaintiff was identified as the salesman and

Se rae

—_—

ee

App. 3

which had been delivered and completely funded on the
date plaintiff left his employment. Nevertheless, on March
4, 1999, plaintiff brought suit alleging he had not been
paid in full in accordance with La. R.S. 23:631 and sought
penalties and attorney's fees pursuant to La. R.S. 23:632.
Before trial in the city court of Baton Rouge, the parties
submitted the case on briefs pursuant to a stipulation of
facts entered into on May 8, 2000. In particular, the
parties agreed to the following:

6.

On October 7, 1998, Becht made a demand for pay-
ment through Lee Pace, an employee of Morgan

* * * *

Contract number 446736, in the name of Jeff Pollard,
was delivered on August 27, 1998 and completely funded
on August 24, 1998. Becht was identified as the salesman
on this contract and has not been paid a commission on
said contract. The commission due is $41.15.

* * * *

13.

For purposes of calculation of average daily wage, the
parties have agreed to average Becht’s wages over the
course of his employment. Thus, Becht’s average daily
wage is $99.04. 7

On August 4, 2000, the trial court rendered judgment
in favor of plaintiff. In its reasons for judgment, the court
stated that under La. R.S. 23:632, plaintiff was entitled to
90 days penalty wages, totaling $8,913.60, based on the

App. 4

neglect of defendant to pay plaintiff the commission of
$41.15. The court further found La. R.S. 23:632 entitled
plaintiff to $4,247.48 in attorney's fees.

On appeal, the First Circuit affirmed the trial court’s
award. In so doing, the court of appeal rejected defendant’s
argument that the matter was governed by the terms of
the employment contract which provided “final commis-
sions, if any, will be paid within forty-five (45) days of the
end of the month during which the salesperson termi-
nated,” rather than La. R.S. 23:631, which strictly requires
the payment of wages not later than fifteen days following
discharge or resignation. The court found that the main
purpose of La. R.S. 23:631 and 23:632 was to compel an
employer to pay the earned wages of an employee
promptly after his dismissal or resignation. Because the
provisions were intended to protect the public interest, the
court found that defendant could not rely on a contract
term in direct violation of this well-established Louisiana
law. Accordingly, the court of appeal held that penalty
wages provided under La. R.S. 23:632 were properly
awarded due to defendant’s failure to pay plaintiff his
earned wages within fifteen days of resignation.’

DISCUSSION

Louisiana Revised Statutes 23:631(A)(1\b) creates
liability for an employer who fails to timely pay wages
owed to an employee after the employee voluntarily leaves
employment:

* The court also awarded plaintiff an additional sum of $1000.00 in
attorney’s fees for the appeal.

App. 5

Upon the resignation of any laborer or other em-
ployee of any kind whatever, it shall be the duty
of the person employing such laborer or other
employee to pay the amount then due under the
terms of employment, whether the employment
is by the hour, day, week, or month, on or before
the next regular payday or no later than fifteen
days following the date of resignation, whichever
occurs first.

In addition, La. R.S. 23:632 specifies that penalty wages
and attorney’s fees may be awarded for such a violation:

Any employer who fails or refuses to comply with
the provisions of K.S. 23:631 shall be liable to the
employee either for ninety days wages at the
employee's daily rate of pay, or else for full wages
from the time the employee’s demand for pay-
ment is made until the employer shall pay or
tender the amount of unpaid wages due to such
employee, whichever is the lesser amount of pen-
alty wages: Reasonable attorney fees shall be al-
lowed the laborer or employee by the court which
shall be taxed as costs to be paid by the em-
ployer, in the event a well-founded suit for any
unpaid wages whatsoever be filed by the laborer
or employee after three days shall have elapsed
from the time of making the first demand follow-
ing discharge or resignation.

In order to recover penalty wages and attorney’s fees
under La. R.S. 23:632, the claimant must show that (1)
wages were due and owing; (2) demand for payment was
made where the employee was customarily paid; and (3)
the employer did not pay upon demand. Miller v. Heidi’s
Inc. of Baton Rouge, 818 So. Zi 959, 963 (La.App. 1
Cir.2002); Cleary v. LEC Unwired, L.L.C., 804 So. 2d 916,
923 (La. App. 1 Cir. 2001); Harvey v. Bass Haven Resort,

App. 6

Inc., 758 So. 2d 264, 268 (La.App. 3 Cir. 2000); Richard v.
Vidrine Automotive Services, Inc., 729 So. 2d 1174, 1177
(La.App. 1 Cir. 1999); Hebert v. Insurance Center, Inc., 706
So. 2d 1007, 1013 (La.App. 3 Cir. 1998); Pokey v. Five L
Investments, Inc., 681 So. 2d 489, 492 (La.App. 1 Cir.
1996).

Defendant asserts that, pursuant to the employment
contract, it was not obligated to provide a final accounting
of commissions until November 14, 1998 — 45 days from
the end of the month plaintiff’s employment was termi-
nated. Defendant further claims that it did not receive a
waybill documenting that contract 446736 had been
delivered to the customer until November 19, 1998. As a
result, defendant contends that plaintiff’s demand for
payment on October 7, 1998 was premature, and there-
fore, without effect.

Defendant’s argument is without merit. Contrary to |
the court of appoal, however, we find that an analysis of
the public policy implication arising from an employment
contract which extends the deadline under La. R.S. 23:631
is unnecessary inthis case. We instead find defendant’s
claims are forestalled by the clear terms of the stipulation |
of facts entered into by the parties on May 8, 2000. As this
Court stated in R.J. D’Hemecourt Petroleum, Inc. v.
McNamara, 444 So. 2d 600 (La. 1983):

A stipulation has the effect of a judicial admis-
sion or confession, which binds all parties and
the court. Stipulations between the parties in a
specific case are binding on the trial court when
not in derogation of law. Such agreements are
the law of the case.

3

i ala

App. 7

444 So. 2d at 601 (citations omitted). Accordingly, we note
with significance that all of the elements necessary to
establish a violation of La. R.S. 23:631 are sufficiently
presented in the stipulation itself. Indeed,-the stipulation
clearly states that plaintiff “made a demand for payment
through Lee Pace, an employee of [defendant]” on October
7, 1998. Furthermore, the stipulation reflects that all of
the conditions entitling plaintiff to a commission under the
employment contrat, i.e., delivery, acceptance, and pay-
ment by the customer, had been satisfied before plaintiff
resigned from employment. Indeed, defendant concedes
that plaintiff was still “due” $41.15 in commissions arising
from a contract number 446736 as of the time of trial —
over a year and a half after he resigned. Therefore, pay-
ment was not timely made under either the fifteen day
period proscribed by La. R.S. 23:631 or the forty-five day
period outlined in the employment contract.

Because we granted this writ solely to evaluate the
court of appeal’s holding regarding the extension of the La.
R.S. 23:631 deadline, we pretermit defendant’s remaining
assignment of errors.

DECREE

For the foregoing reasons, the lower courts’ awards of
penalty wages and attorney’s fees are affirmed.

AFFIRMED.

App. 8

BRIAN R. BECHT VERSUS
MORGAN BUILDINGS & SPAS, INC.

NUMBER 2001 CA 1091

COURT OF APPEAL OF LOUISIANA,
FIRST CIRCUIT

2001 1091 (La.App. 1 Cir, 06/21/02);
822 So. 2d 56; 2002 La. App. LEXIS 2066
June 21, 2002, Rendered
PRIOR HISTORY:

Appealed from the City Court of Baton Rouge, Parish
of East Baton Rouge, Louisiana. Trial Court Number 9903-
02356. Honorable Byron Stringer, Judge.

COUNSEL:

Chad F. Reynolds, Baton’ Rouge, LA, attorney for
Plaintiff-Appellee Brian R. Becht.

Murphy J. Foster, III, Jude C. Bursavich, John T.
Andrishok, Baton Rouge, LA attorneys for Defendant-
Appellant Morgan Buildings & Spas, Inc.

JUDGES:

_ BEFORE: WHIPPLE, FOGG, AND GUIDRY, JJ.
Whipple, J. concurs in part & dissents in part, for reasons
assigned.

OPINION BY:
FOGG
OPINION:
FOGG, J.

App. 9

In this suit for unpaid wages, both the employer and
the former employee appeal, asserting error in the trial
court’s award of penalties and attorney's fees. For the
following reasons, we amend the judgment of the trial
court and affirm, as amended.

On September 7, 1998, Brian R. Becht voluntarily
resigned from his sales position with Morgan Buildings &
Spas, Inc. Subsequently, Becht demanded his unpaid
wages, Morgan failed to remit payment, and Becht filed
suit. Morgan answered the suit, seeking attorney’s fees
pursuant to a contract of employment it had with Becht.
The parties stipulated that $41.15 in commissions re-
mained unpaid and submitte’ the matter. The trial court
awarded Becht $8,913.60 in penalty wages and $4,247.48
in attorney's fees, in accordance with LSA-R.S. 23:631 et
seq. Morgan appealed, and Becht answered the appeal.

Louisiana Revised Statute 23:631 imposes a duty on
an employer, upon discharge or resignation of any em-
ployee, to pay the employee the amount then due, under
the terms of the employment, not later than fifteen days
following the date of discharge or resignation. An employer
who fails or refuses to comply with the provisions of LSA-
R.S. 23:631 shall be liable to the employee either for
ninety days’ wages at the employee’s daily rate of pay, or
full wages from the time of the employee’s demand for
payment until the employer tenders the amount of unpaid
wages due to the employee, whichever is the lesser amount
of penalty wages. LSA-R.S. 23:632.

This statute is penal in nature and, therefore, must be
strictly construed. Equitable defenses are available, and
penalty wages are not to be absolutely imposed. Pace uv.
Parker Drilling Co. and Subsidiaries, 382 So. 2d 988

App. 10

(La.App. 1 Cir.), writ denied, 383 So. 2d 1016 (La. 1980).
Generally, when there is a good faith question of whether
the employer actually owes past due wages, resistance to
payment will not trigger penalty wages. However, when
the employer is arbitrary, sets out procedural pitfalls for
the employee, or is merely negligent in failing to pay past
due wages, penalty wages will be assessed. Pace, 382
So. 2d at 991. A trial court’s findings of fact with regard to
whether the plaintiff is entitled to penalty wages cannot
be reversed on appeal in the absence of manifest error.
Loup v. Louisiana State Sch. for the Deaf, 98-0329
(La.App. 1 Cir. 2/19/99), 729 So. 2d 689.

Initially, Morgan asserts that this matter is governed
by the terms of an employment contract that provided
“final commissions, if any, will be paid within forty-five
(45) days of the end of the month during which the sales-
person terminated,” rather than LSA-R.S. 23:631, which
strictly requires the payment of wages not later than
fifteen days following discharge or resignation. We dis-
agree.

Persons may not by their juridical acts derogate from
laws enacted for the protection of the public interest. Any
act in derogation of such laws is an absolute nullity. LSA-
C.C. art. 7; Morse v. J. Ray McDermott & Co., Inc., 344
So. 2d 1353 (La. 1976). The provisions of LSA-R.S. 23:631
and 632 are for the protection of employees. See Guidry v.
Anderson-Dunham, Inc., 597 So. 2d 1184 (La.App. 1 Cir.
1992). The main purpose of this legislation is to compel an
employer to pay the earned wages of an employee
promptly after his dismissal or resignation. Wilson uv.
Inessa Stewart’s Antiques, Inc., 96-2767 (La.App. 1 Cir
2/20/98), 708 So.2d 1132, writ denied, 98-0777 (La.
5/8/98), 718 So. 2d 435. Even those employed under a

App. 11

collective bargaining agreement are protected by these
statutory provisions. LSA-R.S. 23:640. Clearly, prompt
payment of wages to employees protects the public inter-
est. Therefore, Morgan cannot rely on contract terms in
direct violation of this well-established Louisiana law. See
Beard v. Summit Inst. for Pulmonary Med. and Rehab.,
Inc., 97-1784 (La. 3/4/98), 707 So. 2d 1233.

The failure to pay Becht his earned wages within
fifteen days of resignation exposed Morgan to penalty
wages pursuant to LSA-R.S. 23:632. Morgan has offered
no evidence of a good faith defense. Therefore, the trial
court’s imposition of penalty wages was not manifestly
erroneous.’

Morgan also asserts that the trial court erred in
failing to award it attorney's fees as provided by the
employment contract. It is undisputed that Becht and
Morgan entered into an employment contract that pro-
vided:

In the event the Employee in any manner de-
faults or breaches the terms and conditions of
this Agreement, or threatens to do same, or in
the event it becomes necessary for Morgan to
employ an attorney to enforce any provision of
this Agreement, obtain injunctive relief, or collect
damages on account of a breach or a threatened
breach of this Agreement, Employee shall pay to

* The submission of the case to the trial court on stipulations
rather than live testimony does not alter the manifest error standard of
review. Alexander v. Pellerin Marble & Granite, 93-1698 (La. 1/14/94),
630 So. 2d 706; Virgil v. Am. Guarantee and Liab. Ins. Co., 507 So. 2d
825 (La. 1987).

App. 12

Morgan such disbursements as Morgan may ex-
pend in such proceedings.

Absent from the record is any evidence of “disburse-
ments” by Morgan. Therefore, the trial court did not err in
failing to award Morgan attorney’s fees.

In his answer to the appeal, Becht seeks to increase
the award to include commissions he allegedly earned
prior to resignation, including the sum of $41.15 that
remained unpaid according to the stipulation of the
parties. The employment contract provided that upon
termination, Becht was entitled to “the compensation
earned by him prior to the date of termination computed
in accordance with Exhibit ‘B’ [HOW SALES COMMIS-
SIONS ARE PAID].” Section D of Exhibit B provided:

[a] terminated sales person will not receive any
percentage commissions on sales or deliveries
made by the Store during the pay period in
which the termination occurs. The terminated
salesperson who made the sale will receive his or
her 75% share of the Store’s Commissions on
those sales made prior to termination if the
product has been DELIVERED, ACCEPTED,
[sic] by the customer AND the account has been
PAID IN FULL prior to the end of the last busi-
ness day during which he or she was at work.

The record reveals Becht had ten sales wherein the
product was not delivered or for which full payment was
not received until after his resignation. Based on the
terms of the employment contract, Morgan did not pay
Becht commissions on these sales.

Becht asserts the provision limiting commissions to
sales wherein the product was delivered, accepted by the

App. 13

customer, and paid in full by the day of resignation consti-
tutes a prohibited forfeiture of wages under LSA-R.S.
23:634. That legislation strictly forbids an employer from
requiring an employee to forfeit his wages upon resigna-
tion and provides that the empivoyee shall be entitled to
the wages “actually earned” up to the time of their resig-
nation. :

When commission sales are at issue, the inquiry of
whether a wage was actually earned focuses on what work
associated with the sale remained at the time of resigna-
tion. See Howser v. Carruth Mortgage Corp., 476 So. 2d
830 (La.App. 5 Cir. 1985). In the instant matter, consider-
ing the nature of the sales and the clearly-established
method of determining compensation based on verifiable
post-sale events, we find no error in the trial court’s failure
to award commissions on these contracts.

However, we do find error in the trial court’s failure to
include in the award the sum of $41.15, which pursuant to
the parties’ stipulation remained unpaid. Therefore, we
will amend the trial court’s judgment to include an addi-
tional award of $41.15.

Finally, Becht seeks additional attorneys fees on
appeal, in accordance with LSA-R.S. 23:632. Additional
attorney's fees are usually awarded when a party appeals,
obtains no relief, and the appeal has necessitated addi-
tional work on the opposing party’s counsel. Loup, 98-0329
at pp. 8-9, 729 So. 2d at 694. Accordingly, we award Becht
the additional sum of $1,000.00 in attorney's fees on
appeal.

For the foregoing reasons, the judgment of the trial
court is amended to include additional awards in favor of
Brian R. Becht in the sums of $41.15 in commissions plus

App. 14

$1,000.00 in attorney's fees. In all other respects, the
judgment is affirmed. Costs are assessed against Morgan
Buildings & Spas, Inc.

AFFIRMED, AS AMENDED.
CONCUR BY:
Whipple (In Part)
DISSENT BY:
Whipple (In Part)
DISSENT:

Whipple, J. concurring in part and dissenting in
part.

I agree with the majority in all respects except
the denial of the remaining commissions claimed by
plaintiff. I disagree with the trial court’s (and the
majority’s) failure to make any award for the com-
missions generated by product sales made prior to,
(but with delivery after) plaintiff’s employment
ceased. In my view, the enforcement of this contrac-
tual provision is contra bonos mores, and is statuto-
rily prohibited. See LSA-R.S. 23:634. For these
reasons, I respectfully dissent in part.

|

App. 15

BRIAN R. BECHT : SUIT NO. 9903-02356 DIV. A

VERSUS * CITY COURT

MORGAN BUILDINGS : CITY OF BATON RO'GE

asics vaio : STATE OF LOUISIANA
JUDGMENT

This matter came before court on the 8th day of May,
2000, pursuant to an agreement by all parties to submit
briefs on the legal issues. Brief submitted on behalf of
plaintiff was by Chad Reynolds, Attorney, and for defen-
dant by Tami Tucker York, Attorney.

After consideration of the evidence, the law and the
argument of counsel,

IT IS ORDERED, ADJUDGED, AND DECREED
that there be judgment herein in favor of the plaintiff,
Brian R. Becht, and against the defendant, Morgan
Buildings & Spas, Inc., in the amount of EIGHT THOU-
SAND, NINE HUNDRED THIRTEEN AND 60/100
(8,913.60), together with legal interest thereon from the
date of judicial demand until paid and all costs of these
proceedings, as well as reasonable attorney's fees in the
amount of FOUR THOUSAND, TWO HUNDRED
FORTY SEVEN AND 48/100 ($4,247.48).

4
JUDGMENT READ, RENDERED, AND SIGNED
this 4th day of August, 2000, at Baton Rouge, Louisiana.

/s/ Byron Stringer
JUDGE BATON

ROUGE CITY COURT
Division A

FILED August 4 2000

App. 16

(SIGNED) s/ Carolyn B. Ivy
SENIOR LEGAL
SPECIALIST OF
CITY COURT

A TRUE COPY August 7 2000
(SIGNED) Carolyn B. Ivy

SENIOR LEGAL
SPECIALIST OF
CITY COURT

App. 17

U.S. Const.
Amendment XIV

Section. 1. All persons born or naturalized in the United
States and subject to the jurisdiction thereof, are citizens
of the United States and of the State wherein they reside.
No State shall make or enforce any law which shall
abridge the privileges or immunities of citizens of the
United States; nor shall any State deprive any person of
life, liberty, or property, without due process of law; nor
deny to any person within its jurisdiction the equal protec-
tion of the laws.

Section. 2. Representatives shall be apportioned among
the several States according to their respective numbers,
counting the whole number of persons in each State,
excluding Indians not taxed. But when the right to vote at
any election for the choice of electors for President and
Vice President of the United States, Representatives in
Congress, the Executive and Judicial officers of a State, or
the members of the Legislature thereof, is denied to any of
the male inhabitants of such State, being twenty-one years
of age, and citizens of the United States, or in any way
abridged, except for participation in rebellion, or other
crime, the basis of representation therein shall be reduced
in the proportion which the number of such male citizens
shall bear to the whole number of male citizens twenty-
one years of age in such State.

Section. 3. No person shall be a Senator or Representative
in Congress, or elector of President and Vice President, or
hold any office, civil or military, under the United States,
or under any State, who, having previously taken an oath,
as a member of Congress, or as an officer of the United
States, or as a member of any State legislature, or as an

App. 18

executive or judicial officer of any State to support the
Constitution of the United States, shall have engaged in
insurrection or rebellion against the same, or given aid or
comfort to the enemies thereof. But Congress may by a
vote of two-thirds of each House, remove such disability.

Section. 4. The validity of the public debt of the United
States, authorized by law, including debts incurred for
payment of pensions and bounties for services in suppress-
ing insurrection or rebellion, shall not be questioned. But
neither the United States nor any State shall assume or
pay any debt or obligation incurred in aid of insurrection
or rebellion against the United States, or any claim for the
loss or emancipation of any slave; but all such debts,
obligations and claims shall be held illegal and void.

Section. 5. The Congress shall have power to enforce, by
appropriate legislation, the provisions of this article.

App. 19

La._Rev. Stat. Ann.
CHAPTER 6. PAYMENT OF EMPLOYEES

§631. Discharge or resignation of employees; payment
after termination of employment

A.(1a) Upon the discharge of any laborer or other
employee of any kind whatever, it shall be the duty of the
person employing such laborer or other employee to pay
the amount then due under the terms of employment,
whether the employment is by the hour, day, week, or
month, on or before the next regular payday or no later
than fifteen days following the date of discharge, which-
ever occurs first.

(b) Upon the resignation of any laborer or other employee
of any kind whatever, it shall be the duty of the person
employing such laborer or other employee to pay the
amount then due under the terms of employment, whether
the employment is by the hour, day, week, or month, on or
before the next regular payday or no later than fifteen
days following the date of resignation, whichever occurs
first.

(2) Payment shall be made at the place and in the man-
ner which has been customary during the employment,
except that payment may be made via United States mail
to the laborer or other employee, provided postage has
been prepaid and the envelope properly addressed with
the employee’s or laborer’s current address as shown in
the employer’s records. In the event payment is made by
mail the employer shall be deemed to have made such
payment when it is mailed. The timeliness of the mailing
may be shown by an official United States postmark or

App. 20

other official documentation from the United States Postal
Service.

(3) The provisions of this Subsection shall not apply
when there is a collective bargaining agreement between
the employer and the laborer or other employee which
provides otherwise.

B. In the event of a dispute as to the amount due under
this Section, the employer shall pay the undisputed
portion of the amount due as provided for in Subsection A
of this Section. The employee shall have the right to file an
action to enforce such a wage claim and proceed pursuant
to Code of Civil Procedure Article 2592.

C. With respect to interstate common carriers by rail, a
legal holiday shall not be considered in computing the
fifteen-day period provided for in Subsection A of this
Section.

D.(1) For purposes of this Section, vacation pay will be
considered an amount then due only if, in accordance with
the stated vacation policy of the person employing such
laborer or other employee, both of the following apply:

(a) The laborer or other employee is deemed eligible for
and has accrued the right to take vacation time with pay.

(b) The laborer or other employee has not taken or been
compensated for the vacation time as of the date of the
discharge or resignation.

(2) The provisions of this Subsection shall not be inter-
preted to allow the forfeiture of any vacation pay actually
earned by an employee pursuant to the employer’s policy.

App. 21

Amended by Acts 1977, No. 317, § 1; Acts 1988, No. 602,
§ 1; Acts 1995, No. 325, § 1; Acts 1977, No. 56, § 1; Acts
2001, No. 1171, $1.

App. 22

La. Rev. Stat. Ann.
§632. Liability of employer for failure to pay; attorney fees

Any employer who fails or refuses to comply with the
provisions of R.S. 23:631 shall be liable to the employee
either for ninety days wages at the employee’s daily rate of
pay, or else for full wages from the time the employee’s
demand for payment is made until the employer shall pay
or tender the amount of unpaid wages due to such em-
ployee, whichever is the lesser amount of penalty wages.
Reasonable attorney fees shall be allowed the laborer or
employee by the court which shall be taxed as costs to be
paid by the employer, in the event a well-founded suit for
any unpaid wages whatsoever be filed by the laborer or
employee after three days shall have elapsed from time of
making the first demand following discharge or resignation.

Amended by Acts 1964, No. 422, § 1; Acts 1977, No. 317,
§ 1.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386015_1868%3A1. Public record. Not legal advice.