Opinion
LA CV21-06117 JAK (RAOx)
06-06-2023
Arthur Gutierrez v. Anning-Johnson Company, et al.
HONORABLE JOHN A. KRONSTADT, UNITED STATES DISTRICT JUDGE
CIVIL MINUTES - GENERAL
Proceedings: (IN CHAMBERS) ORDER RE PLAINTIFF'S MOTION TO REMAND ACTION TO STATE COURT (DKT. 16) AND DEFENDANT ANNING-JOHNSON COMPANY'S MOTION TO DISMISS COMPLAINT OR, IN THE ALTERNATIVE, COMPEL ARBITRATION AND STAY PROCEEDINGS (DKT. 18)
JS-6: Case Dismissed
I. Introduction
On June 15, 2021, Plaintiff Arthur Gutierrez (“Plaintiff”) filed this putative class action against Anning-Johnson Company and numerous Doe defendants in the Los Angeles County Superior Court. Dkt. 1-1, at 17 (“Complaint”). The Complaint advances the following eight causes of action:
1. Unfair competition in violation of Cal. Bus. & Prof. Code § 17200 et seq.;
2. Failure to pay minimum wages in violation of Cal. Lab. Code §§ 1194, 1197, 1197.1;
3. Failure to pay overtime wages in violation of Cal. Lab. Code §§ 510, et seq.;
4. Failure to provide required meal periods in violation of Cal. Lab. Code §§ 226.7, 512, and the applicable IWC Wage Order;
5. Failure to provide required rest periods in violation of Cal. Lab. Code §§ 226.7, 512, and the applicable IWC Wage Order;
6. Failure to provide accurate itemized statements in violation of Cal. Lab. Code §§ 226, 226.2; 7. Failure to reimburse employees for required expenses in violation of Cal. Lab. Code § 2802; 8. Failure to provide wages when due in violation of Cal. Lab. Code §§ 201, 202, 203.Dkt. 1-1, at 17.
On July 29, 2021, Defendant Anning-Johnson Company (“Defendant”) removed the case pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d) (“CAFA”). Dkt. 1. On August 26, 2021, Plaintiff filed a Motion to Remand the Action to State Court (the “Motion to Remand” (Dkt. 16)). On September 2, 2021, Defendant filed a Motion to Dismiss the Complaint or, in the Alternative, Compel Arbitration and Stay Proceedings (the “Motion to Dismiss” (Dkt. 18)). On October 11, 2021, Defendant filed an Opposition to Plaintiff's Motion to Remand to State Court (the “Opposition to Motion to Remand” (Dkt. 24)) as well as a Request for Judicial Notice (Dkt. 25). On October 25, 2021, Plaintiff filed a reply in support of the Motion to Remand (“Reply in Support of Motion to Remand” (Dkt. 32)) as well as Evidentiary Objections to Defendant's Request for Judicial Notice (Dkt. 33).
On October 12, 2021, Plaintiff filed an Opposition to Defendant's Motion to Dismiss (the “Opposition to Motion to Dismiss” (Dkt. 27)) as well as Objections to Evidence in Support of Defendant's Motion to Dismiss (Dkt. 28). On October 25, 2021, Defendant filed a Reply in Support of the Motion to Dismiss (the “Reply in Support of Motion to Dismiss” (Dkt. 30)) as well as a Response to Plaintiff's Objections (Dkt. 31).
A hearing on the Motion to Remand and the Motion to Dismiss took place on February 28, 2022. For the reasons provided in this Order, the Motion to Remand is DENIED, and the Motion to Dismiss is GRANTED.
II. Background
A. Parties
It is alleged that Plaintiff was employed by Defendant “as a non-exempt employee entitled to minimum wages, overtime pay and meal and rest periods from 2011 to January of 2021.” Complaint ¶ 3. It is also alleged that Defendant is a corporation that at all relevant times conducted “substantial and regular business throughout California.” Id. ¶ 1. It is alleged that Defendant operates a construction business that “provides services such as metal decking, wall and ceiling systems, fireproofing, and roofing services to their clients throughout California, including the Los Angeles, California location where PLAINTIFF worked.” Id. ¶ 2.
B. Allegations in the Complaint
1. Alleged Classes
The Complaint presents two potential, putative classes. First, it alleges a “California Class” that includes “all individuals who are or previously were employed by Defendant Anning-Johnson in California and classified as non-exempt employees . . . at any time during the period beginning four (4) years prior to the filing of the original Complaint and ending on the date as determined by the Court ....” Id. ¶ 24. The First Cause of Action is brought on behalf of the California Class.
Second, the Complaint alleges a “California Labor Sub-Class” that includes all members of the California Class who were “classified as non-exempt employees . . . at any time during the period three (3) years prior to the filing of the original complaint and ending on the date as determined by the Court ....” Id. ¶ 34. The Second, Third, Fourth, Fifth, Sixth, Seventh, and Eighth Causes of Action are brought on behalf of this sub-class. Id.
2. Factual Allegations
The Complaint alleges numerous wage and hour violations against Defendant. It is alleged that Defendant failed to pay California Class members “for all their time worked.” Id. ¶ 8. It alleges that, for example, Plaintiff and other California Class members were required to submit to Covid-19 screenings before beginning their shifts, which sometimes required the employees to “show up for work between five to thirty minutes early.” Id. It is also alleged that Plaintiff and other California Class members were provided compensation through a non-discretionary incentive program, which Defendant “failed to include . . . into the ‘regular rate of pay' for purposes of calculating overtime pay.” Id. ¶ 10.
It is alleged that Plaintiff and other California Class members were at times interrupted during their off-duty meal breaks to complete tasks for Defendant, were required to perform work for more than five hours without receiving an off-duty meal break and were not given a second off-duty meal period when they worked ten hours in one workday. Id. ¶ 11. It is alleged that Plaintiff and other California Class members were denied the appropriate number of 10-minute rest periods based on the number of hours worked during each shift. Id. ¶ 12. It is also alleged that Defendant failed to compensate Plaintiff and other California Class members for time spent working while off-the-clock, in violation of the California minimum wage laws. Id. ¶ 13.
It is further alleged that Defendant's violations of the California Labor Code and the Industrial Welfare Commission (“IWC”) Wage Order were a matter of company policy and practice, and that Defendant intentionally and knowingly failed to compensate Plaintiff and the class members for all time worked. Id. ¶ 14. It is alleged that Defendant failed to provide Plaintiff and the California Class members with accurate and itemized wage statements, failed to reimburse and indemnify Plaintiff and the others for business expenses, and committed acts of unfair competition in violation of California law. Id. ¶¶ 15-20.
It is also alleged that Plaintiff was required to work for more than five hours in a shift without receiving an off-duty meal break, was required to work ten hours in a shift without a second off-duty meal period, and was required to remain “on the premises, on-duty and on-call, for [his] rest break[s].” Id. ¶ 21. It is alleged that Plaintiff “therefore forfeited meal and rest breaks without additional compensation,” and received pay stubs that failed to accurately display his wages and hours worked. Id. It is alleged that Defendant has not paid Plaintiff either the overtime compensation or penalty wages owed to him. Id.
C. Relevant Provisions in the Collective Bargaining Agreement (“CBA”)
Copies of the relevant collective bargaining agreements are attached to the Declaration of Jim Maras (“Maras Decl.”), Dkt. 18-2 at 9, and the Declaration of Greg McClelland (“McClelland Decl.”), Dkt. 18-2 at 259. Maras declares that the May 6, 2021 agreement, which is marked Exhibit 8 to the Maras Declaration, retained the substantive terms of the July 1, 2017 collective bargaining agreement (“July 2017 CBA”), with certain amendments as stated in the May 6, 2021 agreement (“May 2021 Amendment”). Maras Decl. ¶ 7. McClelland makes the same declaration. McClelland Decl. ¶ 6.
Section 8 of the May 2021 Amendment provides for arbitration of claims arising under the California Labor Code:
Pursuant to California Labor Code Section 2699.6, the Parties hereby expressly and unambiguously waive the provisions of the California Private Attorneys General Act (PAGA), Labor Code Section 2698, et seq., and agree that none of the provisions of that statute apply to any of the employees covered by this Agreement. The parties further agree that this Agreement prohibits any and all violations of the California Labor Code
sections identified in Labor Code 2699.5 and 2699(f) as well as any others that would be redressable by PAGA, and that such claims shall be resolved exclusively through the Grievance-Arbitration procedure contained in this Agreement and shall not be brought in a court of law or before any administrative agency such as the California Labor Commissioner.
An arbitrator presiding over an arbitration conducted pursuant to the Grievance Procedure shall have the authority to make an award of any and all remedies otherwise available under the California Labor Code, except for an award of penalties that would be payable to the Labor and Workforce Development Agency.
All claims or disputes involving alleged violations of the Industrial Welfare Commission Wage Order 16, the California Labor Code, and the Fair Labor Standards Act, and all derivative claims under Cal. Business & Professions Code section 17200, et. seq., as well as for associated penalties, not otherwise covered by the this Agreement, shall be subject to final and binding arbitration pursuant to Section 28 of this Agreement, To the extent permitted by law, all such claims or disputes shall be brought by or on behalf of the employee in their individual capacity only and not as a member of any purported class, collective or representative proceeding, any Arbitrator shall not have the authority to fashion a proceeding as a class, collective or representative action or to award relief to a group or class of employees in one arbitration proceeding. Nothing herein shall prohibit the parties from entering into an agreement to consolidate grievances before the Board of Adjustment hearing.Dkt. 18-2 at 505-06.
Section 28 of the July 2017 CBA provides the grievance procedure. It states, in relevant part:
Boards of Adjustment shall be created for the settlement of disputes, except jurisdictional disputes, which shall be composed of two (2) representatives selected by the Union and two (2) representatives selected by the Employers.... Said Board shall organize within three (3) working days or as soon as practical and shall elect a Chairman and a Secretary and shall adopt rules of procedure which shall bind the contracting parties. Said Board shall have the power to adjust any differences that may arise regarding the meaning and enforcement of this Agreement. Within fifteen (15) days of the time any dispute is referred to it by either party, said Board shall meet to consider such dispute. If the Board cannot agree on any matter referred to it, the members thereof within three (3) days shall choose a fifth member who shall have no business or financial connection with either party. The decisions of said Boards shall be determined by a majority of their members and, pending such decisions, work shall be continued in accordance with the provisions of this Agreement.... No proceeding hereunder based on any dispute, complaint or grievance herein provided for, shall be recognized unless called to the attention of the individual employer or the Local Union involved in writing within fifteen (15) days after the alleged violation is committed.Dkt. 18-2 at 88-89.
D. Allegations in the Notice of Removal and Supporting Evidence
1. Notice of Removal
In the Notice of Removal, Defendant states that it is a citizen of Delaware and Illinois. Dkt. 1 at 9. The declaration of Kathy Tomaska proffers evidence in support of this statement. See Declaration of Kathy Tomaska (“Tomaska Decl.”), Dkt. 1-1 ¶ 3. Defendant also states that, based on employment records for Plaintiff, Plaintiff is a citizen of California. Dkt. 1 at 9. The declaration of Kevin Price proffers evidence in support of this statement. Declaration of Kevin Price (“Price Decl.”), Dkt. 1-2 ¶ 6. Based on the foregoing, Defendant contends the minimal diversity requirement of 28 U.S.C. § 1332(d) is satisfied.
Defendant also contends there are more than 100 potential class members. Defendant states that Plaintiff's alleged California Labor sub-class would include “at least 2,598 individuals.” Defendant's statement is supported by evidence proffered in the Tomaska Declaration. Dkt. 1-1 ¶¶ 11-12.
Finally, Defendant states that the amount in controversy exceeds $5 million. In support of this statement, Defendant provides the following estimates of Plaintiff's claims, as well as a claim for attorney's fees of at least 25% of any recovery:
Claim
Asserted Amount in Controversy
Overtime Claim
$1,779,155
Meal and Rest Period Claims
$4,082,383
Wage Statement Claim
$2,456,900
Waiting Time Penalties Claim
$17,613,084
Attorney's Fees
$1,059,013
Total
$26,990,536
To support these calculations, Defendant relies on the Tomaska Declaration. Dkt. 1-1. Tomaska declares that she is the Chief Financial Officer for Defendant and is responsible for the administration of Defendant's “payroll and accounting functions.” Id. ¶¶ 1, 6. Tomaska also declares that she has access to Defendant's business records, including “those pertaining to current and former employees,” and has “knowledge of how they are maintained.” Id. Tomaska then declares that, from 1997 to April 4, 2021, Defendant “utilized Computer Guidance Corporation's eCMS system for payroll and accounting data collection and processing for non-exempt construction employees.” Id. ¶ 9. Tomaska then declares that the system includes data on the “identity and number of employees, rates of pay, work days, and hours worked.” Id.
Tomaska declares that she can compile reports summarizing data from the system. Id. Tomaska declares that, since April 5, 2021, Defendant has “utilized Coins Construction Software for payroll and accounting data collection and processing for non-exempt construction employees.” Id. That system collects the same information and can also be queried and with data compiled into reports. Id. Tomaska declares that data is input into the two systems contemporaneously as employees work, and that the records are maintained in the regular course of business. Id.
Tomaska further declares that she segregated data for Defendant's “California non-exempt construction employees . . . and ran reports exclusively from the data for that group of employees.” Id. ¶ 10. During the three-year period prior to the filing of the Complaint, Tomaska declares that Defendant employed 2598 non-exempt employees. Id. ¶ 12.
As to the overtime claim, Tomaska declares that she determined there were 29,359 discrete work weeks during the three-year period prior to the filing of the Complaint when a non-exempt employee worked at least 40 hours. Id. ¶ 14. Tomaska determined the average hourly rate of pay during the three-year period was $40.40. Id. ¶ 15. Then, assuming one additional hour of work was allegedly unpaid at the 1.5 times the overtime rate, Tomaska declares that she calculated the total amount in controversy to be $1,779,155.40. Id. ¶ 16.
As to the rest and meal period claims, Tomaska declares that she identified 510,545 discrete workdays in which an employee worked 3.5 hours or more. Id. ¶ 18. Tomaska declares that she assumed a 10% violation rate for the rest period claim, and one hour of premium pay for each alleged missed rest period. Id. Based on those assumptions, Tomaska declares that she calculated the amount of the rest period claim as $2,062,601.80. Id. Tomaska declares that she identified 499,946 discrete workdays during which an employee worked greater than five hours, and assumed a 10% violation rate for the meal period claim, with one hour of premium pay as compensation. Id. ¶ 19. Based on those determinations, Tomaska declares that the meal period claim totals $2,019,781.84. Id. Tomaska further declares that the combined amount in controversy for the rest and meal period claims is $4,082,383.64. Id.
As to the inaccurate pay statement claims, Tomaska declares that Defendant pays employees on a weekly basis, leading to 52 sets of pay statements during any 52-week period. Id. ¶ 22. Tomaska declares that during the one-year period preceding the Complaint, the average number of employees working each week was 622, and, consequently, Defendant issued an average of 622 pay statements per week. Id. ¶ 23. Tomaska declares that she understood Plaintiff to be seeking maximum compensation for all wage statements, with a $4000 cap per individual employee. Id. ¶ 24. Tomaska declares that she calculated the amount at issue through the wage statement claim as $2,456,900. Id.
As to the waiting time penalties claim, Tomaska declares that, during the three-year period preceding the Complaint, there were 2095 employees who had a break in service of 30 days or more. Id. ¶ 26. Tomaska declares that she determined the average hourly rate of pay for those employees was $39.03. Id. ¶ 27. Tomaska further declares that she determined those employees worked an average of 7.18 hours per day, which results in an average daily rate of pay $280.24. Id. ¶ 28. Assuming that every employee who had a break in service of at least 30 days during this period was owed wages, and that Defendant never paid them, Tomaska declares that she determined the total amount in controversy through the claim is $17,613,084. Id. ¶ 29.
2. Supplemental Tomaska Declaration
In support of the Opposition to Plaintiff's Motion to Remand, Defendant submitted a Supplemental Declaration of Kathy Tomaska. Dkt. 24 at 34 (“Tomaska Supp. Decl.”). The declaration restates Tomaska's experience and access to Defendant's personnel records. Id. ¶ 1-4. Tomaska also declares that “those records will be made available to Arthur Gutierrez, via his counsel, for examination simultaneously with the filing of this Supplemental Declaration, with redactions of names and social security numbers.” Id. ¶ 4.
In general, the Supplemental Declaration provides the same information as the initial declaration, but includes more details. Tomaska provides statements about the specific workbooks she used and words she queried. Id. ¶¶ 11-13. Tomaska also provides significant detail as to how she calculated the amounts in controversy for certain of Plaintiff's claims.
Tomaska further declares that the initial declaration included one error. Id. ¶ 28. Tomaska declares that the initial declaration identified 2095 employees who had a break in service of 30 days or more during the three years prior to the filing of the Complaint. Id. Tomaska declares that she realized one of the records was a duplicate, and that 60 individuals had returned to the payroll within 30 days. Id. Thus, the number of employees with a break in service of 30 days or more was 2034. Id. Using this revised figure, Tomaska declares that she determined the amount in controversy as to waiting time period claim is $17,246,082.60, rather than the $17,613,084 amount provided in the initial declaration. Id.
III. Plaintiff's Motion to Remand
A. Judicial Notice and Evidentiary Objections
1. Defendant's Request for Judicial Notice (Dkt. 25)
Defendant requests judicial notice of a document in support of Defendant's Opposition to the Motion to Remand. Dkt. 25 (the “RFN”). It is a declaration by Shani O. Zakay, Plaintiff's counsel, that was filed in support of Zakay's motion for attorney's fees in another case. Id. at 2. The declaration was filed on December 11, 2020, in a case in the Marin County Superior Court. Id. In Defendant's Opposition, Defendant argues that the declaration shows that Zakay had participated in 13 wage and hour class settlements “in which his firm was awarded attorneys' fees in the amount of one-third of those settlements between 2015 and 2019.” Dkt. 24 at 29. Defendant seeks to use the document as evidence supporting the viability of the 25% attorney's fees estimate in the Notice of Removal. Id.
Federal Rule of Evidence 201 provides that the Court may take notice of a “fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” The Court may take notice of documents filed in other cases, but “only for the limited purpose of recognizing the ‘judicial act' that the order represents on the subject matter of the litigation.” Neilson v. Union Bank of Cal. N.A., 290 F.Supp.2d 1101, 1113 (C.D. Cal. 2003) (citation omitted).
The Court declines to take judicial notice of the document for the truth of the matter asserted. See Fed.R.Evid. 201(b); Neilson, 290 F.Supp.2d at 1113 (a court “may take judicial notice of a document filed in another court not for the truth of the matters asserted in the litigation, but rather to establish the fact of such litigation and related filings” (citation omitted)). Although the authenticity of the document has not been challenged, to determine that the document supports the use of a 25% contingency rate in the calculation of attorney's fees in this action, would require other evidence to show why the actions are sufficiently similar to warrant that determination. Further, given the amounts in controversy shown by other elements of the matters at issue, an assessment of the potential claim for attorney's fees is unnecessary to reach the necessary threshold. Therefore, the RFN is DENIED.
2. Plaintiff's Evidentiary Objections (Dkts. 17, 33)
First, Plaintiff objects to portions of the Tomaska Declaration, which, as noted, was submitted with the Notice of Removal. Dkt. 17. Plaintiff objects to Tomaska's determinations regarding the relevant personnel data collected by Defendant because on the grounds that she does not have personal knowledge, her statements lack foundation, and are hearsay. Dkt. 17 at 2-7.
Tomaska's declaration is sufficient to show that she has an adequate foundation for her statements as to the number of employees and the data supporting the potential range of claims that are at issue. Tomaska declares that she is the Chief Financial Officer of Defendant, has personal knowledge of the business records at issue, including how they are maintained, and is responsible for the administration of Defendant's payroll and accounting processes. Tomaska Decl. ¶¶ 1, 6. Tomaska explains the software used by Defendant to collect the relevant data, and that her statements throughout her declaration are based on a review of those records. Id. ¶ 9. Tomaska has provided an adequate foundation for her statements. See Gant v. ALDI, Inc., No. LA CV19-03109 JAK (PLAx), 2020 WL 1329909, at *4 (C.D. Cal. Mar. 20, 2020) (a similar declaration from an executive “has an adequate foundational basis for its calculations of the amounts at issue”).
Tomaska's declaration is also sufficient to show personal knowledge. Declarations from human resources personnel and similar administrative managers are routinely accepted as admissible evidence to support the basis for a CAFA removal. See Alvarez v. Office Depot, Inc., No. CV 17-7220 PSG (AFMx), 2017 WL 5952181, at *2 (C.D. Cal. Nov. 30, 2017) (collecting cases). “A declaration from a person with knowledge of the relevant data is clearly an appropriate form of evidence.” Ruano v. Sears Roebuck & Co., No. CV 15-6060 PSG (FFMx), 2015 WL 6758130, at *4 (C.D. Cal. Nov. 5, 2015). “[N]either Ibarra nor Dart Cherokee calls into question the long-standing practice of accepting such declarations in lieu of the underlying records.” Amaya v. Consol. Container Co., LP, No. 2:15-CV-03369-SVW-PLA, 2015 WL 4574909, at *2 (C.D. Cal. July 28, 2015).
Not every such declaration provides admissible, necessary evidence. For example, if the data offered is insufficient or lacks a sufficient foundation to support certain assumptions or calculations, the declaration may be insufficient to establish the amount in controversy. Akana v. Estee Lauder Inc., No. LA CV-19-00806-JAK-PLAx, 2019 WL 2225231, at *5-6 (C.D. Cal. May 23, 2019). Whether certain assumptions by Tomaska are adequately supported by evidence is addressed in the analysis of the amount in controversy below. Plaintiff's hearsay objection is also unpersuasive. See Alvarez, 2017 WL 5952181, at *2 (“A declaration from a person with knowledge of the relevant data is clearly an appropriate form of evidence.” (citation omitted)). For these reasons, Plaintiff's objections to the Declaration of Kathy Tomaska are OVERRULED.
Second, Plaintiff objects to the Defendant's RFN and certain aspects of the Supplemental Declaration of Kathy Tomaska. Dkt. 33. Plaintiff's objection with respect to Defendant's RFN is SUSTAINED, as explained above.
Plaintiff's objections to the Supplemental Declaration of Kathy Tomaska are the same as to her initial declaration, with the added objections of relevance under Rule 401 and unfair prejudice under Rule 403. Id. at 3-6. For the reasons stated above, the objections are unpersuasive. Further, the statements that Plaintiff identifies in the Supplemental Declaration are relevant because they are proffered to provide support for how Defendant's amount-in-controversy figure was calculated, and do not create unfair prejudice. Therefore, Plaintiff's objections to the Supplemental Declaration of Kathy Tomaska are OVERRULED.
B. Analysis
1. CAFA Jurisdiction
“CAFA gives federal district courts original jurisdiction over class actions in which the class members number at least 100, at least one plaintiff is diverse in citizenship from any defendant, and the aggregate amount in controversy exceeds $5 million, exclusive of interest and costs.” Ibarra v. Manheim Investments, Inc., 775 F.3d 1193, 1195 (9th Cir. 2015).
a) Class Size and Minimal Diversity
Plaintiff does not challenge the minimum class size and minimal diversity requirements. See generally Dkt. 16. Therefore, both are satisfied.
b) Amount in Controversy
(1) Legal Standards
“In determining the amount in controversy, courts first look to the complaint. Generally, the sum claimed by the plaintiff controls if the claim is apparently made in good faith.” Ibarra, 775 F.3d at 1197 (internal quotations omitted). “Whether damages are unstated in a complaint, or, in the defendant's view are understated, the defendant seeking removal bears the burden to show by a preponderance of the evidence that the aggregate amount in controversy exceeds $5 million when federal jurisdiction is challenged.” Id.
A defendant is required only to file a notice of removal that includes “a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 88 (2014). However, if a plaintiff contests these allegations, “both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied.” Id. The preponderance of the evidence standard requires that “the defendant must provide evidence establishing that it is more likely than not that the amount in controversy exceeds that amount.” Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996) (internal quotation marks omitted). The parties may submit evidence, including affidavits or declarations, or other ‘“summary-judgment-type evidence relevant to the amount in controversy at the time of removal.'” Ibarra, 775 F.3d at 1197 (quoting Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997)). “[A] defendant cannot establish removal jurisdiction by mere speculation and conjecture, with unreasonable assumptions.” Ibarra, 775 F.3d at 1197.
“CAFA's requirements are to be tested by consideration of real evidence and the reality of what is at stake in the litigation, using reasonable assumptions underlying the defendant's theory of damages exposure.” Ibarra, 775 F.3d at 1198. “As with other important areas of our law, evidence may be direct or circumstantial. In either event, a damages assessment may require a chain of reasoning that includes assumptions. When that is so, those assumptions cannot be pulled from thin air but need some reasonable ground underlying them.” Id. at 1199. “Under the preponderance of the evidence standard, if the evidence submitted by both sides is balanced, in equipoise, the scales tip against federal-court jurisdiction.” Id.
“[T]he amount in controversy reflects the maximum recovery the plaintiff could reasonably recover.” Arias v. Residence Inn by Marriott, 936 F.3d 920, 927 (9th Cir. 2019). Assumptions underlying a defendant's “chain of reasoning need not be proven; they instead must only have ‘some reasonable ground underlying them.'” Id. (quoting Ibarra, 775 F.3d at 1199). Assumptions “may be reasonable if [they are] founded on the allegations of the complaint.” Id. at 925 (quoting Ibarra, 775 F.3d at 1198-99).
Under certain circumstances, attorney's fees may also be included in the amount in controversy. “[I]f the law entitles the plaintiff to future attorneys' fees if the action succeeds, then there is no question that future attorneys' fees are at stake in the litigation, and the defendant may attempt to prove that future attorneys' fees should be included in the amount in controversy.” Fritsch v. Swift Transp. Co. of Ariz., 899 F.3d 785, 794 (9th Cir. 2018) (internal quotation marks, citation and brackets omitted). However, “a court's calculation of future attorneys' fees is limited by the applicable contractual or statutory requirements that allow fee-shifting in the first place.” Id. at 796. For example,
[a] state may adopt the lodestar method for determining reasonable attorneys' fees under certain statutes, see Ketchum v. Moses, 24 Cal.4th 1122, 1131 (2001), or (as in this case) not allow recovery of attorneys' fees for legal work on certain types of claims, see Kirby v. Immoos Fire Prot., Inc., 53 Cal.4th 1244, 1255 (2012) (stating that the attorneys' fees shifting provisions in California Labor Code §§ 218.5 and 1194 do not apply to legal work relating to meal and rest period claims). The court's determination regarding the amount of attorneys' fees at stake must take into account these statutory and contractual restrictions.Fritsch, 899 F.3d at 796. Moreover, “the defendant must prove the amount of attorneys' fees at stake by a preponderance of the evidence.” Id.
As a general rule of interpretation in connection with evaluating the propriety of a removal under CAFA, “Congress and the Supreme Court have instructed us to interpret CAFA's provisions under section 1332 broadly in favor of removal.” Jordan v. Nationstar Mortg. LLC, 781 F.3d 1178, 1184 (9th Cir. 2015). “Congress intended CAFA to be interpreted expansively.” Ibarra, 775 F.3d at 1197.
(2) Analysis
(a) Overtime Claim
The Notice of Removal contends that the overtime claim seeks at least $1,779,155 for the alleged violations. Dkt. 1 at 14-15. The Notice provides that Defendant determined there were “a total of 29,359 discrete work weeks” during the three years prior to the filing of the Complaint in which a non-exempt employee worked greater than or equal to 40 hours. Id. at 15. It also determined that the average hourly rate during that period for non-exempt construction employees was $40.40 per hour. Id. Defendant then estimated one hour per week of off-the-clock work and calculated the amount in controversy to be $1,779,155.40. Id. at 15-16.
Plaintiff contends that Defendant's assumption of a 100% violation rate for each work week is unreasonable and unsupported by evidence. Dkt. 16-1 at 13. Plaintiff argues that the Complaint alleges only that Plaintiff and California Class members were “from time to time” required to submit to Covid-19 screenings before work, which is insufficient to support a reasonable assumption of a 100% violation rate. Id.at 11.
Plaintiff is correct that the Complaint repeatedly alleges that Defendant's overtime violations occurred “from time to time.” For example, the Complaint alleges that “[f]rom time to time,” Defendant required Plaintiff and class members to “work without paying them for all the time they were under [Defendant's] control.” Complaint ¶ 8. It also alleges that, “from time to time,” Plaintiff and the class members were required to undergo Covid-19 screenings before their shifts, and as a result forfeited minimum wage and overtime compensation. Id. The Complaint makes similar allegations with respect to meal breaks when it alleges that Plaintiff and class members were “from time to time” unable to take meal breaks and interrupted during off-duty meal periods. Id. ¶ 11. Those allegations do not reasonably support a 100% violation rate for each week in which an employee worked 40 or more hours.
Defendant contends that the Complaint alleges the failure to pay overtime was “systematic” and that unpaid meal periods were “often” interrupted. Dkt. 24 at 28. Those terms do not imply that such violations were occurring for all class members during each work week. See Melead v. TVI, Inc., No. SACV 20-01224-CJC(ADSx), 2020 WL 5407456, at *3 (C.D. Cal. Sept. 9, 2020) (“The gap between a 100% violation rate and violations ‘from time to time' is immense.”); cf. Gant v. ALDI, Inc., No. LA CV19-03109 JAK (PLAx), 2020 WL 1329909, at *5 (C.D. Cal. March. 20, 2020) (determining that allegations of a “pattern and practice” of meal and rest break violations supported the assumption that one violation occurred per employee, per week). Although the Complaint alleges that Defendant's “uniform policy and practice” was not to pay Plaintiff and class members for all time worked (Complaint ¶ 8), the specific allegations relating to Plaintiff's claims suggest an alleged violation rate of less than 100%.
Based on the allegations in the Complaint, it is unreasonable to assume, without additional evidence, that an overtime violation occurred for each employee, each work week. See Melead, 2020 WL 5407456, at *3; Tomaska Decl. ¶ 16. For the reasons provided below, however, even without including the amounts associated with this aspect of the claims, Defendant has established the amount in controversy is greater than $5 million.
(b) Meal and Rest Break Claims &nb