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applying the Ibarra analysis to claims for failure to timely pay minimum wage and failure to provide meal and rest periods
Summary of this case from Freeman v. Mercy Servs. Corp.Opinion
CIV. NO. 2:16-00050 WBS CKD
03-07-2016
RUBEN AMAYA, individually, and on behalf of other members of the general public similarly situated, and on behalf of aggrieved employees pursuant to the Private Attorneys General Act, Plaintiff, v. APEX MERCHANT GROUP, LLC, dba EXPRESS PROCESSING, an unknown entity; FIRST AMERICAN PAYMENT SYSTEMS, an unknown entity; and DOES 1-100, inclusive, Defendants.
MEMORANDUM AND ORDER RE: MOTION TO REMAND
Plaintiff Ruben Amaya initiated this class action against defendants Apex Merchant Group, LLC ("Apex") and First American Payment Systems ("First American"), alleging various violations of the California Labor and Business and Professions Codes. Defendant First American removed this action from Sacramento County Superior Court pursuant to the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d). (Notice of Removal ("Notice") (Docket No. 1).) Plaintiff now moves to remand pursuant to 28 U.S.C. § 1447, contending that defendant has not established that the amount in controversy exceeds $5,000,000. (Mot. to Remand (Docket No. 8).) Defendant opposes. (Opp'n (Docket No. 9).)
I. Background
Plaintiff seeks to represent a class of current and former California-based exempt independent contractors with the job title "sales consultants" or those that performed similar duties who were employed by defendants from November 12, 2011 to the date of final judgment. (Notice, Nelson Decl. Ex. C ("Compl.") ¶¶ 14, 18-26.) Plaintiff was employed by defendants for approximately one month in July 2015 and alleges that he and the other sales consultants were misclassified as exempt employees. (Id. ¶ 19.)
Plaintiff asserts nine causes of action under California law: (1) failure to pay overtime wages, Cal. Labor Code §§ 510, 1198; (2) failure to provide meal periods and pay the meal period premium, id. §§ 226.7, 512(a); (3) failure to provide rest periods and pay the rest period premium, id. § 226.6; (4) failure to pay minimum wage, id. §§ 1994, 1197, 1197.1; (5) failure to pay owed wages at the time of discharge, id. §§ 201, 202; (6) failure to provide complete and accurate wage statements, id. § 226(a); (7) failure to reimburse necessary business-related expenses and costs, id. §§ 2800, 2802; (8) Private Attorney General Act of 2004 ("PAGA") violations warranting a civil penalty, id. §§ 2698 et seq.; (9) unlawful business acts and professions, Cal. Bus. & Professions Code §§ 17200-17210. (Id. ¶¶ 54-128.)
The Complaint does not allege a specific amount of damages. The Complaint merely states that the amount in controversy for the named plaintiff, including but not limited to claims for compensatory damages, restitution, penalties, wages, premium pay, and pro rata share of attorney's fees, is less than $75,000. (Id. ¶ 1.) Further, the Complaint does not allege the frequency of the alleged violations, stating only that violations occurred "[a]t all material times set forth herein." (Id. ¶¶ 19, 26, 38-45.)
II. Discussion
"[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district . . . where such action is pending." 28 U.S.C. § 1441(a). Under the Class Action Fairness Act ("CAFA"), federal courts have original jurisdiction over civil class action cases in which the amount in controversy exceeds $5,000,000, the parties are minimally diverse, and the proposed class has at least 100 members. 28 U.S.C. § 1332(d). There is no anti-removal presumption in CAFA cases. Dart Cherokee Basin Operating Co. v. Owens, 135 S. Ct. 547, 554 (2014).
A defendant seeking to remove a case to federal court must file a notice of removal containing a "short and plain statement" setting forth "a plausible allegation that the amount in controversy exceeds the jurisdictional threshold." Id.; see also 28 U.S.C. § 1446(a). If the plaintiff's complaint demands monetary relief of a stated sum, that stated sum, if asserted in good faith, is deemed to be the amount in controversy. Dart, 135 S. Ct. at 551. When the plaintiff's complaint does not state the amount, the defendant's notice of removal may do so. Id.; 28 U.S.C. § 1446(c)(2)(A). The defendant's alleged amount in controversy should be accepted if it is not contested by the plaintiff or questioned by the court. Dart, 135 S. Ct. at 553.
Where the plaintiff contests the amount in controversy alleged by the removing defendant, "both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied." Id. at 554. Where the complaint does not specify a particular amount of damages, as in this case, "the removing defendant bears the burden of establishing, by a preponderance of the evidence, that the amount in controversy exceeds $[5,000,000]." Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996). "Under this burden, the defendant must provide evidence establishing that it is 'more likely than not' that the amount in controversy exceeds that amount." Id.
The amount in controversy includes general and special damages (excluding costs and interests), attorney's fees if recoverable by statute or contract, and punitive damages, if recoverable as a matter of law. Chambers v. Penske Truck Leasing Corp., Civ. No. 1:11-00381 LJO GSA, 2011 WL 1459155, at *2 (E.D. Cal. Apr. 15, 2011).
If "it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c). If, under the preponderance of evidence standard, the evidence submitted by both sides is balanced, "the scales tips against federal-court jurisdiction." Ibarra v. Manheim Invs., Inc., 775 F.3d 1193, 1199 (9th Cir. 2015).
Plaintiff does not dispute class numerosity or that he is a citizen of California and is therefore diverse from defendant First American, a limited partnership headquartered in Texas and incorporated in Delaware. (Mot. to Remand at 1; Notice ¶¶ 9-11.) The sole issue is whether defendant established that it is more likely than not that the amount in controversy exceeds $5,000,000.
A. Defendant's Calculations of the Amount in Controversy
The only evidence defendant submitted is a declaration by Paul Novelli, the custodian of records at Apex. (Opp'n Novelli Decl. (Docket No. 9-1).) Novelli states that he reviewed the Apex database of business records and determined that, between November 11, 2011 and November 12, 2015, Apex had a contractual relationship with more than 1,750 sales consultants in California. (Id. ¶ 6.) Of the 1,750 sales consultants, contractual relationships with 1,737 were terminated before November 12, 2015. (Id. ¶ 7.) Based on this information, defendant calculated that the amount in controversy exceeds $5,000,000 based on causes of action two, four, and five alone. (Notice ¶¶ 21-24.)
Under cause of action four, plaintiff seeks penalties under California Labor Code section 1197.1 for failure to timely pay each class member minimum wages. (Compl. ¶ 86.) Section 1197.1 provides penalties of $100 for the initial violation and $250 for each subsequent violation. Cal. Labor Code § 1197.1. Defendant assumed that the class members were employed for a two-month period, or 7.4 pay periods, based on the fact that plaintiff was employed for about a month and claims to be representative of the putative class members. (Opp'n at 8.) Defendant also assumed a 100% violation rate of the minimum wage requirements during those 7.4 pay periods. Thus, defendant concluded the amount in controversy for this claim was $3,412,500. (Notice ¶ 21.)
(1,750*$100)+(1,750*250*7.4)=$3,412,500
Under cause of action five, plaintiff requests penalties under California Labor Code section 203, which provides that if an employer willfully fails to pay wages owed at the time of discharge, the wages of the employee shall continue as a penalty from the due date until paid or an action is commenced, but for no more than thirty days. (Compl. ¶ 92.) Defendant assumed the 1,737 sales consultants whose contracts were terminated before November 12, 2015 were entitled to no less than the 2008 California minimum wage of $8 per hour for the full thirty day maximum. (Notice ¶ 22.) Defendant reasoned that it was making a "conservative assumption" by using the 2008 minimum wage of $8, rather than the 2014 minimum wage of $9 per hour or the 2016 rate of $10 per hour. (Id.) Defendant concluded that the amount in controversy for the unpaid wages claim was $3,335,040. (Id.)
($8*8 hours)*30 days*1,737=$3,335,040
Lastly, under cause of action two, plaintiff requests penalties under California Labor Code section 226.7, which provides that if an employer fails to provide meal or rest periods it shall pay the employee one additional hour of pay at the employee's regular rate of compensation for each workday that the meal or rest period is not provided. (Compl. ¶ 73.) Defendant again assumed 1,750 class members all fell within the waiting time penalties statute of limitations, were paid the 2008 minimum wage of $8 per hour, and worked a full eight hour day and were therefore entitled to meal and rest periods every workday during the two-month time period. Using these numbers, defendant concluded the amount in controversy for this cause of action was $1,212,400. (Notice ¶ 24.) Defendant therefore argues the amount in controversy is at least $7,959,940, not including the remaining causes of action.
($8*43.3 work days in a two-month period)*1,750*2 for meal and rest breaks=$1,212,400
B. Amount in Controversy in Class Action Fairness Act Cases
CAFA's "primary objective" is to ensure "[f]ederal court consideration of interstate cases of national importance." Standard Fire Ins . Co . v . Knowles, 133 S. Ct. 1345, 1350 (2013) (citation omitted). The amount in controversy requirement under CAFA is "to be tested by consideration of real evidence and the reality of what is at stake in the litigation." Ibarra, 775 F.3d at 1199. "[W]hen the defendant relies on a chain of reasoning that includes assumptions to satisfy its burden to prove by a preponderance of the evidence that the amount in controversy exceeds $5 million, the chain of reasoning and its underlying assumptions must be reasonable." LaCross v . Knight Transp . Inc ., 775 F.3d 1200, 1201 (9th Cir. 2015).
"Courts have been skeptical of high CAFA estimates that rely solely on declarations with non-specific human resource data." Page v . Luxottica Retail N . Am . Inc ., Civ. No. 2:13-01333 MCE KJN, 2015 WL 966201, at *11 (E.D. Cal. Mar. 4, 2015). For example, in Ibarra, the Ninth Circuit found that the defendant's assumption that the class members were denied one meal break and one rest break on each and every shift based on plaintiff's allegation that there was a "pattern and practice" of labor law violations at the place of employment was unreasonable. Id . at 1198-99. The court found that "a 'pattern and practice' of doing something does not necessarily mean always doing something" and since the complaint did not allege universal violations, defendant bore the burden of showing it relied on reasonable assumptions.
Similarly, in Garibay v. Archstone Cmtys. LLC, the Ninth Circuit found defendants failed to meet their burden when the only evidence they proffered in support of their amount in controversy calculations was a declaration by the supervisor of payroll setting forth the number of employees, number of pay periods, and general information about hourly wages. 539 F. App'x 763, 764 (9th Cir. 2013). The court found that defendants unreasonably assumed, based on this declaration alone, wage statement violations for every pay period, maximum penalties for failure to timely pay wages for every employee, and denials of meal or rest periods twice each week. Id.
In Page, the court found defendants' calculation of the amount in controversy to be "based entirely on assumptions and speculative calculations." 2015 WL 966201, at *7. The only evidence defendants submitted in support of their estimates was a declaration from the director of human resources with information on the periods of employment, rates of pay, and shift lengths during the alleged class period. Id . at *3. This was insufficient to support defendants' assumption that each employee worked five shifts per work week and 100% of the meal and rest breaks were at issue, even though plaintiff only alleged that the missed breaks were a peripheral result of understaffing at defendants' stores. Id . at *7-9. Because there was no "allegation of a widespread policy" of preventing employees from taking breaks, the court found defendants overestimated the amount in controversy. Id . at *9-10. There was also insufficient "underlying evidence" to assume each employee was entitled to recover the full thirty-day maximum penalty for failure to timely pay wages. Id . at *14-15.
In contrast, in LaCross, the Ninth Circuit found the defendant had produced sufficient evidence to establish the amount in controversy for a reimbursement claim by extrapolating fuel costs based on the actual invoiced fuel costs in the first quarter and the actual number of drivers who signed the independent contractor agreements during the class period. 775 F.3d at 1203.
Defendant's calculations in this case are largely based on unsupported assumptions. As discussed above, the only evidence defendant submitted was a declaration from Paul Novelli, the custodian of records at Apex, with data on the number of sales consultants employed and terminated in California during the relevant time period. At the hearing on March 7, 2016, defense counsel argued that defendant does not have access to more detailed records because it is not the direct employer--its co-defendant, Apex, is an independent contractor and the employer of the sales consultants. However, even if defendant is not the direct employer, the court is not persuaded that more detailed information is unavailable to defendant. The fact that defendant was able to secure a declaration from the custodian of records at Apex demonstrates that defendant does indeed have access to the Apex database of business records and submitted limited evidence only because it requested limited information.
For example, instead of consulting Apex's records to determine what the actual hire and termination dates were for its employees, defendant assumed a two-month employment period. Defendant claims that it elected two months to reflect plaintiff's time of employment but plaintiff was only a sales consultant for one month. (Opp'n at 8.)
Further, defendant assumed a 100% violation rate of meal and rest periods and minimum wage requirements even though the Complaint makes no allegations with respect to the frequency of these violations and instead only alleges violations occurred "[a]t all material times set forth herein." (Id. ¶¶ 19, 26, 38-45.) Just as "pattern and practice" did not necessarily mean violations each and every time in Ibarra, "all material times" cannot be read in such a fashion without any further evidence from defendant. Defendant also speculated that every class member worked a full eight hour day, and was therefore entitled to these benefits, rather than consulting payroll records. Defendant counters that it did not assume a 100% violation rate because it only looked at a two-month time period rather than the entire period between November 2011 and November 2015. (Opp'n at 8.) However, "the fact [defendant] could have assumed a higher amount does not make [its] estimate any less speculative." Page, 2015 WL 966201, at *13.
Lastly, defendant assumed without any explanation that all class members are entitled to recover the full thirty-day maximum penalty for failure to pay wages owed at the time of discharge. Plaintiff's Complaint did not allege every employee was entitled to the full thirty days but rather that the "other class members are entitled to recover from Defendants the statutory penalty wages for each day they were not paid, up to a thirty (30) day maximum." As in Garibay and Page, it is unreasonable to assume the maximum penalty without any supporting evidence.
Based on the evidence submitted by defendant, the court cannot conclude that it is more likely than not that the amount in controversy exceeds $5,000,000. While plaintiff did not submit any evidence contradicting defendant's calculations--such as information regarding the named plaintiff's own missed meal and rest periods or overtime hours--the burden is on the removing defendant to establish the amount in controversy. Accordingly, the court will provide defendant with an opportunity to provide more specific information establishing that the amount in controversy exceeds $5,000,000. Plaintiff may also submit additional evidence if it so desires.
IT IS THEREFORE ORDERED that the parties have thirty days from the date this Order is signed to submit more specific evidence regarding the amount in controversy in this case. The court will rule on plaintiff's motion to remand after reviewing any submitted evidence. Dated: March 7, 2016
/s/_________
WILLIAM B. SHUBB
UNITED STATES DISTRICT JUDGE