Ali Fahed v. Fayz Ayesh

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

16-748
ALI FAHED, ET AL.
VERSUS
FAYZ AYESH, ET AL.
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APPEAL FROM THE

NINTH JUDICAL DISTRICT COURT
PARISH OF RAPIDES, NO. 253,944
HONORABLE GREG BEARD, DISTRICT JUDGE

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VAN H. KYZAR
JUDGE

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Court composed of Marc T. Amy, David Kent Savoie, and Van H. Kyzar, Judges.

AFFIRMED.

Jonathan D. Stokes

Max S. Antony

Gold, Weems, Bruser, Sues & Rundell

P. O. Box 6118

Alexandria, LA 71307-6118

(318) 445-6471

COUNSEL FOR PLAINTIFF/APPELLANT:
ALI FAHED

Howard B. Gist, II

The Gist Firm, A Professional Law Corporation

P. O. Box 13705

Alexandria, LA 71315

(318) 473-2501

COUNSEL FOR DEFENDANT/APPELLEE:
ASM Food, Inc.

KYZAR, J.

The plaintiff, Ali Fahed, appeals from a trial court judgment awarding him
$11,000.00 in unpaid wages, denying his claim for penalties, and awarding him
$1,500.00 in attorney fees. For the following reasons, we affirm the judgment.

DISCUSSION OF THE RECORD

Fahed and his wife, Amena Safi, filed suit against the defendants, ASM
Food, Inc. (ASM) and Fayz Ayesh, alleging causes of action under the Louisiana
Wage Payment Act, the Fair Labor and Standards Act, the Louisiana Unfair Trade
Practices and Consumer Protection Law, and for causes of action sounding in
contract and tort. However, the appeal before us is limited to Fahed’s claims under
the Louisiana Wage Payment Act, which was tried by the trial court separately via
summary proceedings.

Fahed’s claims arise from an agreement between himself and Ayesh to
incorporate ASM for the purpose of operating a fast-food restaurant, PoBoy
Express, in Pineville, Louisiana. The two parties were brothers-in-law, as Fahed
was married to Ayesh’s sister. Fahed claimed that Ayesh promised that he would
be a co-owner of ASM and manager of PoBoy Express, for which he would earn
$8,000.00 per month, plus a percentage of the net profits. He further claimed that
Ayesh promised that his job duties would only be supervisory in nature and that he
would work no more than forty hours per week.

In October 2014, ASM was incorporated, and the corporation assumed
ownership of PoBoy Express. Fahed started working at the restaurant in
November 2014, and within a couple of weeks, he claimed he was working fifty to
sixty hours per week and his work duties had expanded to run the gambit of food
preparation, shopping, cleaning, making deposits, and closing the registers each

night. He further claimed that he received only $250.00 per week in wages. When

he failed to receive the amount promised him by Ayesh, Fahed terminated his
employment with ASM on March 31, 2015.

On July 13, 2015, Fahed mailed a written demand to ASM and Ayesh,
stating that Ayesh promised that in exchange for his involvement in the enterprise,
his monthly salary would be $8,000.00, plus a percentage of the net profits. He
said that during his five months’ employment, he only received $5,000.00 of the
$40,000.00 he should have received; thus, he claimed that ASM and Ayesh owed
him $35,000.00 in unpaid wages and his share of the net profits for the five
months.

At the start of the February 17, 2016 trial on the wage issue, the parties
stipulated that Fahed’s claim for wages was solely against ASM. After taking the
matter under advisement, the trial court rendered written reasons for judgment on
March 15, 2016, awarding Fahed $11,000.00 in unpaid wages and $1,500.00 in
attorney fees, but denying his request for penalty wages. Judgment was rendered
on March 22, 2016. Thereafter, Fahed filed a motion for new trial or, in the
alternative, a motion for reconsideration. Following a May 9, 2016 hearing, the
trial court denied Fahed’s motion for new trial on the penalty and attorney fee
issues, but granted it to designate the March 22, 2016 judgment as a final
judgment. The trial court then ordered the parties to resubmit a judgment
containing the final judgment language. The resubmitted judgment was rendered
by the trial court on May 16, 2016. It is from this judgment that Fahed has
appealed.

Fahed raises two assignments of error on appeal:

1. The Trial Court clearly erred when it declined to award Fahed
penalty wages.

2. The Trial Court clearly erred when it awarded Fahed only
$1,500.00 in attorneys fees without permitting him the

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opportunity to introduced [sic] evidence to show that he was
entitled to $27,112.00 in attorneys fees.

OPINION
Under the Louisiana Wage Payment Act, an employer must pay the wages
owed a terminated or resigned employee either on or before the next payday or
within fifteen days of his resignation, whichever occurs first. La.R.S. 23:631(A).
That statute further provides, in part:

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.

La.R.S. 23:631(B).

Failure to comply with the provisions of La.R.S. 23:631 subjects an
employer to possible penalties and the assessment of reasonable attorney fees
pursuant to La.R.S. 23:632, which provides:

A. Except as provided for in Subsection B of this Section, 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 employee,
whichever is the lesser amount of penalty wages.

B. When the court finds that an employer’s dispute over the
amount of wages due was in good faith, but the employer is
subsequently found by the court to owe the amount in dispute, the
employer shall be liable only for the amount of wages in dispute plus
judicial interest incurred from the date that the suit is filed. If the
court determines that the employer’s failure or refusal to pay the
amount of wages owed was not in good faith, then the employer shall
be subject to the penalty provided for in Subsection A of this Section.

C. 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.

In Winkle v. Advance Products & Systems, Inc., 98-694, pp. 14-15 (La.App.
3 Cir. 10/28/98), 721 So.2d 983, 990-91, this court stated the following with
regards to the award of penalties pursuant to La.R.S. 23:632:

Under the provisions of La.R.S. 23:632, to recover penalty
wages, the claimant must show that “(1) wages were due and owing;
(2) demand for payment thereof was made where the employee was
customarily paid; and (3) the employer did not pay upon demand.”
Hebert [v. Ins.Ctr., Inc.|, 97-298, p. 9 [(La.App. 3 Cir. 1/7/98]; 706
So.2d [1007,] 1013. Although equitable defenses are not expressly
provided for in the statute, the Louisiana Supreme Court has
interpreted the statute as a “coercive means” to compel an employer to
pay an employee within the time limits set forth in La.R.S. 23:631.
Beard [v. Summit Inst. for Pulmonary Med. & Rehab., Inc.|, 97-1784,
p. 7 [(La. 3/4/98)]; 707 So.2d [1233,] 1236. Accordingly, the court
has held “that the penalty must be strictly construed and may yield to
equitable defenses.” Jd. If there is “‘a good-faith non-arbitrary
defense to liability for unpaid wages, i.e., a reasonable basis for
resisting liability’, the court may refrain from imposing penalty
wages upon the employer. Jd. quoting Carriere v. Pee Wee's
Equipment Co., 364 So.2d 555, 557 (La.1978). “Reliance on an
unlawful company policy does not constitute a good faith non-
arbitrary defense to liability for unpaid wages.” Beard, 97-1784, p. 9;
707 So.2d at 1237. “‘Where there is a bona fide dispute over the
amount of wages due, courts will not consider failure to pay as
arbitrary refusal and generally will refuse to award penalties.”
Hebert, 97-298, p. 9; 706 So.2d at 1013 (quoting Barrilleaux v.
Franklin Found. Hosp., 96-0343 (La.App. 1 Cir. 11/8/96); 683 So.2d
348, writ denied, 96-2885 (La.1/24/97); 686 So.2d 864). The issue of
{the employer’s] bad faith is a question of fact. Accordingly, it is
subject to the manifest error standard of review. Hebert, 97-298; 706
So.2d 1007; Domite v. Imperial Trading Co., Inc., 94-16 (La.App. 3
Cir. 8/3/94); 641 So.2d 715.

PENALTY WAGES
In his first assignment of error, Fahed argues that the trial court clearly erred
in denying his request for penalty wages because it found that although ASM
admitted he was owed $750.00 per week, it only proved that he was paid $250.00
per week. It is noted that Fahed does not appeal the $11,000.00 awarded by the
trial court as opposed to his demand of over $35,000.00, including profits from the
business. Thus, this portion of the trial court’s judgment remains in force and

undisturbed.

Other than his claim regarding the promised salary of $8,000.00 per month,
which he admits was an oral agreement not reduced to writing, Fahed testified that
he only received $250.00 per week the entire time he worked at PoBoy Express.
He stated that he was paid in cash, except for the last month of his employment,
when he was paid by check. No written receipts were produced by either party
during the trial as to any of the cash payments. Fahed testified that his 2014 W-2
reports that he received $1,500.00 in wages for November and December 2014,
and his 2015 W-2 reports that he received $3,150.00 for January, February, and
March 2015. Although admitted into evidence, he stated that he never received the
IRS Form 1099s from ASM for the years 2014 and 2015, reporting that it paid him
$4,000.00 and $6,000.00, respectively, in non-employment compensation. Fahed
did, however, admit that both he and his wife signed off on their joint 2014 income
tax return, which included the $4,000.00 as business income received by them. He
further stated that he had not yet filed his 2015 income tax return due to this
litigation.

Ayesh admitted that Fahed was paid $750.00 per week during his
employment at PoBoy Express, but denied that he promised to pay him the claimed
$8,000.00 monthly salary plus profits. He testified that Fahed was paid by both
cash and check each week: $500.00 in cash and a $250.00 check for a total of
$750.00. Ayesh stated that the weekly cash payments of $500.00 equaled the
$4,000.00 and $6,000.00 amounts shown on Fahed’s 2014 and 2015 1099s.
Although he admitted that he could not prove the weekly $500.00 cash payments
to Fahed, he claimed that Patricia Terrell, PoBoy Express’s manager, knew and
could verify the payments. Ayesh further admitted that a check listed in ASM’s
December payroll journal, showing that Fahed was paid $1,500.00 on December

31, 2014, was made up by his accountant on his instructions, to represent the
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weekly $250.00 paid to Fahed by check. Ayesh also admitted that in his verified
answers to interrogatories, this check was paid to Fahed on December 31, 2014.
Moreover, he admitted that by paying its employees both cash and checks, ASM
knowingly and willingly underreported their incomes to the federal and state
governments.

Ayesh further testified that it was not possible that Fahed received only
$250.00 per week in wages. He explained that when Fahed filed his 2014 tax
return, he called to complain that his income tax was so low that he would not
receive a refund. Ayesh said that he told Fahed that because he had paid him the
$4,000.00 in 2014, he would give him a 1099. Again, Fahed claimed the
$4,000.00 sum in his 2014 income tax filing with the IRS. According to Ayesh,
this boosted Fahed’s 2014 refund to approximately $1,500.00.

Patricia Terrell testified that she handled PoBoy Express’s payroll.
However, she stated that she did not handle Fahed’s wages nor had she ever been
involved in or observed the manner in which Fahed was paid.

Alfred Huthnance, an Alexandria, Louisiana accountant, testified that he has
prepared all of ASM’s tax documents and weekly payroll since its incorporation,
but he admitted that he has no independent knowledge of its operation. He stated
that all of the information he utilizes in keeping its books and in the preparation of
its tax documents is provided by Ayesh. Although he was initially approached by
both Fahed and Ayesh about incorporating ASM, he said that once it was
incorporated he dealt strictly with Ayesh.

Huthnance testified that the total reported wages paid by ASM in 2014
amounted to $12,724.00, as reported in its 2014 federal tax return, its 2014 annual
federal unemployment tax return, its fourth quarter 2014 federal tax return, and its

2014 W-3 transmittal of wage and tax statements to the Social Security
6

Administration. In regards to Fahed, he stated that ASM’s payroll journal
indicates that he was paid wages of $1,500.00 on December 31, 2014, by Check
1090, which amount was included in its $12,724.00 total wage amount for 2014.
However, Huthnance admitted that he created Check 1090 to account for the cash
payment of wages Ayesh reported to him as having been paid to Fahed, but that he
had no check stub to document the payment.

Huthnance also testified that ASM’s 2015 payroll journal shows that Fahed
received six checks in 2015: Check 1129 for $1,200.00 on January 31, 2015;
Check 1185 for $800.00 on February 28, 2015; Check 5007 for $300.00 on March
2, 2015; Check 5011 for $300.00 on March 9, 2015; Check 5014 for $300.00 on
March 16, 2015; and Check 5019 for $250.00 on March 23, 2015. As he also did
for 2014, he stated that the first two checks were made up because the amounts
were based on statements made by Ayesh about cash payments to Fahed for wages.

Huthnance testified that Fahed also received 1099s from ASM in 2014 and
2015, indicating that he received non-employment compensation from it in the
amounts of $4,000.00 and $6,000.00 respectively. He stated that these amounts
were based solely on statements by Ayesh, and he had no proof that these amounts
were actually paid to Fahed. Huthnance explained that the compensation listed on
a 1099-Miscellaneous Income Tax Form differs from that shown on a W-2 because
it has no taxes deducted from its amount. He agreed that an employer is required
to report any income an employee earns through the performance of services on a
W-2, whereas non-employment compensation is reported on a 1099. Additionally,
he stated that an employer would not include any amounts paid via a 1099 in its
reported amount of paid salaries and wages on its corporate tax return. Rather, he

said that it would be listed as a deduction, such as for business expenses or contract

labor. Huthnance admitted that Fahed’s $4,000.00 1099 income was not reported
7

on ASM’s 2014 corporate tax return; however, he said that it should have been
included and that the failure to do so lay with his office and was not the fault of
Ayesh.

Huthnance testified that his office also prepared Fahed and his wife’s 2014
joint personal tax return. He stated that the return was prepared based on
information received from the couple and included both Fahed’s W-2 wages and

the $4,000.00 1099 income he received from ASM. He said that Fahed and his
wife both signed and received a copy of the tax return, but neither questioned him
about the reported 1099 income. Huthnance testified that the $4,000.00 from the
1099 was reported as business profit or loss on Schedule C, based on information
he received from both Fahed and Ayesh. The form, which lists “delivery” as
Fahed’s principal business or profession, reports the $4,000.00 as gross income. It
further lists $1,600.00 in expenses: $400.00 for repair and maintenance and
$1,200.00 as other expenses. Huthnance said that he assumed, based on the nature
of Fahed’s business, that the $400.00 repair and maintenance expense was related
to his vehicle and that the $1,200.00 other expense was for fuel. Finally, he stated
that due to this litigation, his office had not yet prepared the 2015 income tax
return for Fahed and his wife and that Fahed was issued a 1099 from ASM, which
reported non-employment compensation in the amount of $6,000.00.

Huthnance agreed that it was common for employers in the restaurant field
to pay their employees both cash and checks. He further agreed that although he
cautions them against paying wages in cash, the decision ultimately rests with his
clients. He stated that Ayesh reported to him that Fahed’s wages were paid both in
cash and check, and he assumed that ASM was paying some of its employees in
cash.

In its reasons for judgment, the trial court held that Ayesh admitted that
8

ASM owed Fahed weekly wages of $750.00 during the approximately twenty-two
weeks he was employed. In finding that ASM failed to prove that it actually paid

Fahed $750.00 per week, the trial court stated:

ASM failed to provide documentation showing proof of paying
Fahed $750 a week (cancelled checks, etc.). Their claim is
unsupported by the amount of wages reported on ASM’s tax
documents. The W-2s issued by ASM to Fahed show only that he
was paid $1,500 for “wages, tips, and other compensation” for about
nine weeks of work in 2014 and $3,150 for “wages, tips, and other
compensation” for about thirteen weeks of work in 2015. Likewise,
ASM’s W-3s, its income tax return, its payroll records, and the
testimony of its accountant, A.H. Huthnance, all support the same
amount in wages reported on ASM’s W-2s issued to Fahed and do not
support ASM’s claim that it paid Fahed $750 a week. The evidence
of the amounts ASM paid to Fahed for his employment services is the
tax documents filed with the IRS and the Louisiana Department of
Revenue. Given the fact that ASM Food only offered evidence that
Fahed was paid $250 a week, this means that ASM still owes Fahed
$11,000 in past due wages.

(Footnote omitted.)
However, in denying Fahed’s claim for penalty wages, the trial court stated:

The burden of proof rests upon plaintiff to establish by a
preponderance of the evidence the facts upon which he relies to
support his claim for an award of penalties under La.R.S. 23:632.
Two of these essential elements of proof are that wages actually are
owed to plaintiff and that such wages have not been paid. Harrison v.
First Nat. Funeral Homes, Inc., 244 So.2d 102 (La. Ct. App.1971). A
good-faith non-arbitrary defense to liability for unpaid wages, i.e., a
reasonable basis for resisting liability permits a court to decline to
impose penalty wages on an employer.

Here, there are clear disputes as to the oral agreement between
Fahed and Ayesh and Fahed failed to meet his burden of proof
regarding the terms of their oral agreement. The Court finds this
enough to justify ASM Food resisting the demands of Fahed and
declines to award any penalty wages.
Pursuant to La.R.S. 23:631, ASM was obligated to pay Fahed any
undisputed wages owed to him by the next payday or within fifteen days of his

resignation, whichever occurred first. In this instance, the amount disputed

between the parties was the $8,000.00 monthly salary plus profits claimed by

9

Fahed. Ayesh acknowledged that ASM agreed to pay Fahed $750.00 per week.
This court notes that this admission by Ayesh is the only evidence upon which the
trial court could have concluded that Fahed was owed that amount in weekly
wages. After accepting that Fahed’s weekly wages were $750.00, but further
finding that he was only paid $250.00 per week, the trial court concluded that he
was owed $11,000.00 in unpaid wages by ASM. However, based on Fahed’s
claim that he was owed $8,000.00 per month rather than $750.00 per week, the
trial court held that there was a bona fide dispute regarding the amount of wages
owed him; thus, it denied his request for penalty wages.

Based on our review of the record, we find that the trial court was not
clearly wrong in denying Fahed’s request for penalty wages. The trial court
concluded, as a matter of fact, that a bona fide dispute existed between the parties
as to the amount of wages owed and refused to award penalty wages. Fahed
offered no written proof of the agreement for the $8,000.00 per month salary plus
profits from the business. This amount differs significantly from the $750.00 per
week wage the trial court concluded was owed based on Ayesh’s admission.
Indeed, the evidence at trial revealed a secretive and disorganized relationship
between Fahed, Ayesh, and ASM due to the manner in which they chose to
conduct business. No receipts were created or demanded for cash payments, while
other written documents, such as check entries and 1099s, were created after the
fact in an attempt to document prior cash payments. The trial court was presented
with a situation remarkably similar to that presented in a wage and penalty claim
under a precursor to La.R.S. 23:631 and 23:632' in Bridges v. McClenaghan, 14
So.2d 652 (La.App. 2 Cir. 1943). Therein, the second circuit noted the difficulty

experienced by the trial court in making its factual determinations by stating, “The

' 1936 La. Acts No. 138, § 1.
10

true facts of this case are most difficult to determine, due to the unbusiness-like
method—if there was any method at all—in which plaintiff and defendant
conducted their relations.” Jd. at 653. In upholding the trial court’s denial of
penalty wages and attorney fees, the court stated, “The loose, haphazard manner in
which plaintiff and defendant kept the records of their affairs is such as to always
end in litigation. Plaintiff had no record or knowledge of what amount was due
him when he resigned on September 20, 1941, and defendant was in no better
position than he was.” Jd. at 654. The trial court in this matter was in an equally
difficult situation, and it cannot be concluded that it was clearly wrong in denying
penalty wages given the relative difficulty it had in determining the actual wages
owed to Fahed at the time of his resignation. As in Bridges, there was indeed a
bona fide dispute as to the amount ASM owed Fahed, such that this litigation was
inevitable.

This court further notes that there was evidence to support Ayesh’s claim
that ASM paid Fahed more than the claimed $250.00 per week, as evidenced by
the $4,000.00 reported in his 2014 1099, which Fahed acknowledged in his tax
return that year. The evidence supports the trial court’s decision to deny penalty
wages pursuant to La.R.S. 23:631, which decision is not to be disturbed absent a
showing of manifest error. Accordingly, we find no error in the trial court’s denial
of Fahed’s request for penalty wages, and the judgment of the trial court is
affirmed on this issue.

ATTORNEY FEES

In his second assignment of error, Fahed argues that the trial court erred by
awarding him only $1,500.00 in attorney fees. We disagree.

Louisiana Revised Statutes 23:632 provides that an employee, who brings a

well-founded suit for unpaid wages, is entitled to reasonable attorney fees. A well-
11

founded suit is one in which the employee prevails in the award of unpaid wages.
Beard v. Summit Inst. for Pulmonary Med. & Rehab., Inc., 97-1784 (La. 3/4/98),
707 So.2d 1233. In Stanley v. Crowell & Owens, LLC, 15-395, pp. 3-4 (La.App. 3
Cir. 10/7/15), 175 So.3d 1204, 1207-08, writ denied, 15-2035 (La. 1/8/16), 184
So.3d 694, this court reviewed the law regarding appellate review of an attorney

fee award:

This court reviews the trial court’s award of attorney fees under
the abuse of discretion standard. Covington v. McNeese State Univ.,
12-2182 (La.5/7/13), 118 So.3d 343. In Covington, the supreme court
stated that in applying that standard, “the role of the reviewing court is
not to determine what it considers to be an appropriate award, but
rather it is to review the exercise of discretion by the trier of fact.” Id.
at 351. Still, we review the trial court’s factual findings in reaching
the award at issue pursuant to the manifest error/clearly wrong
standard. Stobart v. State, Dep’t of Trans. & Dev., 617 So.2d 880
(La.1993); Cottonport Bank v. Keller Prop. Mgmt., LLC, 13-649
(La.App. 3 Cir. 12/11/13), 128 So.3d 668.

Additionally, the trial court has discretion in determining the
amount of an attorney fee based upon its own knowledge, the
evidence, and its observation of the case and the record. Custom-Bilt
Cabinet & Supply, Inc. v. Quality Built Cabinets, Inc., 32,441
(La.App. 2 Cir. 12/8/99), 748 So.2d 594. In fact, a court does not
have to hear evidence concerning the time spent or hourly rates
charged in order to make an award since the record will reflect much
of the services rendered. Burford v. Burford, 95-2318 (La.App. 1 Cir.
06/28/96), 677 So.2d 722. When the nature and extent of the services
of an attorney are shown by the record, it is the duty of the court to
bring to bear its knowledge of the value of the services of counsel and
to fix the value even in the absence of expert testimony. Mitchell v.
Turner, 588 So.2d 1305 (La.App. 2 Cir.1991).

The factors to be considered in determining the reasonableness of an
attorney fee award on appeal include:

(1) the ultimate result obtained; (2) the responsibility incurred; (3) the

importance of the litigation; (4) amount of money involved; (5) extent

and character of the work performed; (6) legal knowledge, attainment,

and skill of the attorneys; (7) number of appearances made; (8)

intricacies of the facts involved; (9) diligence and skill of counsel; and
(10) the court’s own knowledge.

State, Dep’t of Transp. & Dev. v. Williamson, 597 So.2d 439, 442 (La.1992).

12

In awarding Fahed attorney fees, the trial court was not required to set a
hearing in order to determine what amount would be reasonable. In making such
determinations, the trial court is entitled to much discretion, and a review of the
record reveals, as noted by the trial court in its reasons for judgment, that the wage
claim was part and parcel of the much broader claims alleged by Fahed in his
petition. This particular aspect of his claim was separated from the others and tried
summarily, leaving the remaining claims to be litigated at a later date. The issue in
this part of the dispute was not difficult, and while the amount set may be on the
low side, based on the outcome obtained, we do not find that it was an abuse of the
trial court’s discretion. Accordingly, the judgment of the trial court is affirmed.

DISPOSITION

Based on the foregoing, we affirm the trial court’s denial of Ali Fahed’s
claim for penalty wages against ASM Food, Inc. and the award of $1,500.00 in
attorney fees. The costs of appeal are assessed to Ali Fahed.

AFFIRMED.

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