LARRY CHAPMAN, INDIVIDUALLY, AND D/B/A FARM BOY FOOD MART v. CLAYTON FARRIS
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RENDERED: JUNE 18, 2004; 2:00 p.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2002-CA-000573-MR
LARRY CHAPMAN, INDIVIDUALLY,
AND D/B/A FARM BOY FOOD MART
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE THOMAS J. KNOPF, JUDGE
ACTION NO. 01-CI-004583
v.
CLAYTON FARRIS
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
BARBER, McANULTY, AND TACKETT, JUDGES.
McANULTY, JUDGE:
Larry Chapman, individually, and d/b/a Farm
Boy Food Mart, (Chapman) appeals from the Jefferson Circuit
Court’s order granting partial summary judgment in favor of
Clayton Farris (Farris) in a wage and hour enforcement action.
In his appeal, Chapman argues that the circuit court erroneously
allowed the offensive use of issue preclusion to bar any defense
by Chapman in the underlying suit filed by Farris to recover
unpaid wages as determined by the Kentucky Labor Cabinet in an
administrative proceeding.
Having concluded that the doctrine
of issue preclusion was applicable in this case, we affirm.
From October of 1981, through March of 1998, Farris
worked as a store manager for Farm Boy Food Mart, a small
grocery store owned by Chapman.
Ultimately, in mid-March of
1998, Farris voluntarily resigned from his employment at Farm
Boy Food Mart.
In April of 1998, Farris filed a wage and hour
complaint with the Kentucky Labor Cabinet (Labor Cabinet),
Division of Employment Standards Apprenticeship and Training
(the Division).
In his complaint, Farris alleged that Chapman
owed Farris the following compensation under KRS 337.055:
(1)
his final two weeks salary; (2) bonuses for the second, third
and fourth quarters of 1997 and the first quarter of 1998; and
(3) vacation pay for one week of vacation that Farris actually
took and one week of unused vacation.
The Division launched an investigation into Farris’s
complaint.
Prior to the conclusion of the investigation,
however, Chapman paid Farris his final two weeks salary, so the
only remaining claims addressed by the Division pertained to the
bonuses and vacation pay.
As to those claims, on March 17,
2000, the Division issued its Tentative Findings of Fact.
In
pertinent part, the Division found that Chapman violated KRS
337.055 and owed Farris gross wages totaling $19,238.79.
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Moreover, for being in violation of KRS 337.055, the Division
assessed a civil penalty of $200 against Chapman.
Chapman appealed the Division’s Tentative Findings and
requested a fact-finding hearing.
In response, the Labor
Cabinet held an administrative hearing under KRS Chapter 13B
before an administrative law judge (ALJ) on October 23, 2000.
Although Chapman had had counsel at various times during the
investigative process, he chose not to have counsel at the
administrative hearing.
The ALJ issued Recommended Findings of Fact,
Conclusions of Law and Recommended Order on January 17, 2001, to
which no exceptions were filed.
The ALJ recommended that the
tentative findings of the Division be affirmed and that Chapman
be ordered to make restitution of $19,238.79 to Farris for
unpaid wages and pay a $200 penalty to the Labor Cabinet.
On April 6, 2001, the Secretary of Labor adopted the
ALJ’s Recommended Findings of Fact, Conclusions of Law and Order
dated January 17, 2001, as the Final Order of the Labor Cabinet.
In the Final Order, the Secretary of Labor informed Chapman of
his right to appeal.
Chapman did not appeal the Labor Cabinet’s
Final Order, nor did he pay Farris the ordered restitution of
$19,238.79.
On July 3, 2001, Farris filed the action underlying
this appeal to enforce the Labor Cabinet’s Final Order.
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In
addition, under KRS 337.385, Farris also sought liquidated
damages and a reasonable attorney’s fee.
On September 28, 2001,
Farris filed a motion for partial summary judgment on the issue
of the $19,238.79 in unpaid wages that had been awarded to him
in the administrative action before the Labor Cabinet.
The
trial court granted Farris’s motion for partial summary
judgment, precipitating this appeal.
On appeal, Chapman’s sole argument is that issue
preclusion is not applicable in this case to bar any challenge
by Chapman that he owed $19,268.79 in wages to Farris.
Issue
preclusion is not applicable, according to Chapman, because
Chapman was not represented by counsel during the hearing.
Moreover, there is a vast difference in the nature and
importance of the issues previously addressed at the
administrative level and those raised in the trial court
proceeding.
In support, Chapman asserts that the case of Bd. of
Educ. of Covington v. Gray, Ky. App., 806 S.W.2d 400 (1991), is
on point.
To begin our analysis, we set out the following
terminology.
Issue preclusion refers to the effect of a
judgment in foreclosing relitigation of a
matter that has been litigated and decided.
This effect also is referred to as direct or
collateral estoppel. Claim preclusion
refers to the effect of a judgment in
foreclosing litigation of a matter that
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never has been litigated, because of a
determination that it should have been
advanced in an earlier suit. Claim
preclusion therefore encompasses the law of
merger and bar.
Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 77
n.1, 104 S. Ct. 892, 79 L. Ed. 2d 56 (1984) (internal citations
omitted).
In this case, we are dealing with the doctrine of
issue preclusion, not claim preclusion.
To be consistent, we
will use the term “issue preclusion” instead of the terms
“collateral estoppel” or “res judicata.”
Kentucky recognizes the use of non-mutual issue
preclusion, which is “applicable when at least the party to be
bound is the same party in the prior action.”
Moore v.
Commonwealth, Ky., 954 S.W.2d 317, 319 (1997).
As the parties
in the administrative proceedings were the Division and Chapman,
Farris is not prevented from asserting issue preclusion as long
as he establishes the following essential elements:
(1) identity of issues;
(2) a final decision or judgment on the merits;
(3) a necessary issue with the estopped party given a
full and fair opportunity to litigate;
(4) a prior losing litigant.
Id. (citing Sedley v. City of West Beuchel, Ky., 461 S.W.2d 556,
559 (1970)).
In this case, we begin with the first essential
element listed above -- identity of issues.
Contrary to
Chapman’s assertion in this appeal that the Labor Cabinet’s
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intent in the administrative hearing was to determine the
propriety of the decision to assess a civil penalty against
Chapman, the issue decided, as framed by the Labor Cabinet, was
“whether Chapman violated KRS 337.055 by failing to pay his
employee, Clayton Farris, for bonuses due and vacation leave
accrued at the time of Farris’s termination.”
See Findings of
Fact, Conclusions of Law and Recommended Order issued January
17, 2001, and entered January 18, 2001.
This is the precise
issue on which the trial court granted partial summary judgment.
Farris’s primary reason for filing the circuit court action was
to enforce the award of the Labor Cabinet for unpaid wages.
In
other words, Farris’s objective in both the administrative and
circuit court proceedings is to seek reimbursement for Chapman’s
wrongful retention of wages owed to Farris.
The Labor Cabinet
clearly determined that Chapman had violated KRS 337.055 by
failing to pay Farris for bonuses due and vacation leave accrued
at the time of Farris’s termination.
We move to the second and third essential elements of
issue preclusion, the discussion of which we believe is
intertwined -- a final decision or judgment on the merits and a
necessary issue with the estopped party given a full and fair
opportunity to litigate.
As mentioned in the statement of
Chapman’s argument above, Chapman relies on the case of Bd. of
Educ. of Covington v. Gray, 806 S.W.2d 400, for the proposition
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that preclusion based on administrative proceedings may be
inappropriate in some circumstances because of the profound
differences between administrative proceedings and those found
in a court of law.
Gray is in line with Moore, however, in that
it cites Sedley and specifies that a party intending to apply
issue preclusion must meet several stringent requirements, those
See Gray,
requirements including the four we have listed above.
806 S.W.2d at 402.
Chapman focuses on the following language in Gray in
urging that the use of issue preclusion was inequitable in this
case:
“[I]n Parklane, the United States Supreme Court listed
factors which it believed might limit use of the doctrine
[collateral estoppel], including the bound party’s lack of
incentive to litigate in the prior action, as well as any other
unspecified reason which might work an inequity on the losing
party.”
Id. (citing Parklane Hosiery Co. v. Shore, 439 U.S.
322, 331-32, 99 S. Ct. 645, 58 L. Ed. 2d 552 (1979)).
Chapman asserts that he had no incentive to litigate
in the administrative proceedings because civil penalties were
the focus of the Division’s inquiry on Farris’s allegations of
nonpayment, and now Farris seeks substantially greater damages.
We find this assertion unconvincing for two reasons.
First, as
discussed at length above, the focus of the Division’s
investigation was whether Chapman unlawfully failed to provide
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Farris any outstanding wages.
Ultimately, the Labor Cabinet
determined that Chapman had and issued a final order in which it
ordered Chapman to pay $19,238.79 to Farris.
Second, the final
order of the Secretary of Labor finally disposed of Farris’s
wage complaint and served as an adjudication of Farris’s legal
right to payment of wages and Chapman’s legal duty to pay to
wages.
See KRS 13B.010(2),(6).
Returning to our discussion of elements two and three,
it is now well accepted that the decisions of administrative
agencies acting in a judicial capacity are entitled to the same
preclusive effect as judgments of a court.
See Goodbye v. Univ.
Hosp., Ky. App., 975 S.W.2d 104, 105 (1998) (quoting Barnes v.
McDowell, 647 F.Supp. 1307, 1310 (E.D.Ky. 1986)).
“An agency
acts in a judicial capacity when it hears evidence, gives
parties an opportunity to brief and argue their versions of the
facts, and gives parties an opportunity to seek court review of
these findings.”
Presbyterian Child Welfare Agency of Buckhorn,
Kentucky, Inc. v. Nelson County Bd. of Adjustment, 185 F.Supp.
2d 716, 722 (W.D.Ky. 2001).
There can be no dispute that the
Labor Cabinet acted in a judicial capacity in this case.
Simply, it heard evidence, it gave the parties an opportunity to
brief and argue their versions of the facts, and gave the
parties an opportunity to seek court review of these findings.
That Chapman did not utilize the opportunities afforded him
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under KRS Chapter 13B in the administrative proceedings to
defend his nonpayment cannot be used in his favor to relitigate
the same issue in the circuit court.
In conclusion, we hold the final order entered by the
Secretary of Labor to be a final judgment on the merits of the
case.
Moreover, Chapman’s unlawful withholding of wages was the
sole issue decided in the administrative proceedings before the
Labor Cabinet.
Consequently, it was a necessary issue which
Chapman had a full and fair opportunity to litigate.
Chapman is
precluded from relitigating the wage issue.
For the foregoing reasons, the Jefferson Circuit
Court’s order granting partial summary judgment in favor of
Farris is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
H. Kevin Eddins
Tilford Dobbins Alexander
Buckaway & Black, LLP
Louisville, Kentucky
Kenneth C. Plotnik
David T. Green
The Law Offices of Kenneth C.
Plotnik
Louisville, Kentucky
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