Opinion
Case No. EDCV 19-1669 JGB (SHKx)
12-02-2019
Norma LOPEZ, et al. v. FIRST STUDENT, INC., et al.
Randolph Hunter Pyle, Hunter Pyle Law, Oakland, CA, for Norma Lopez, et al. Matthew Bryan Riley, David J. Dow, Littler Mendelson PC, San Diego, CA, for First Student, Inc., et al.
Randolph Hunter Pyle, Hunter Pyle Law, Oakland, CA, for Norma Lopez, et al.
Matthew Bryan Riley, David J. Dow, Littler Mendelson PC, San Diego, CA, for First Student, Inc., et al.
Proceedings: Order DENYING Plaintiffs' Motion to Remand (Dkt. No. 8)
The Honorable JESUS G. BERNAL, UNITED STATES DISTRICT JUDGE Before the Court is Plaintiffs Norma Lopez, Cindy Mitchell, and Vada Neice's (collectively, "Plaintiffs") motion to remand the case to San Bernardino County Superior Court. ("Motion," Dkt. No. 8.) After considering papers filed in support of and in opposition to the Motion and the arguments presented by counsel at the hearing, the Court DENIES the Motion.
I. BACKGROUND
This case commenced on July 11, 2019, when Plaintiffs Lopez, Mitchell, and Neice filed a class action complaint against Defendants First Student, Inc., First Student Management, LLC, and FirstGroup America, Inc. ("Defendants" or "First Student") in San Bernardino County Superior Court. ("Complaint," Dkt. No. 1-1.) Plaintiffs allege three causes of action: (1) failure to pay split shift wages under California Labor Code §§ 1197, 1994, 1194.2 and Wage Order 9-2001; (2) failure to provide adequate wage statements under California Labor Code § 226 ; and (3) unlawful business practices under California Business & Professions Code § 17200, et seq. (Id. ) On August 30, 2019, Defendants removed the matter. ("Notice of Removal" or "NOR," Dkt. No. 1.)
On October 21, 2019, Plaintiffs moved to remand. ("Motion," Dkt. No. 8.) In support of the Motion, Plaintiffs filed declarations from Hunter Pyle ("Pyle Declaration," Dkt. No. 8-1), Lopez ("Lopez Declaration," Dkt. No. 8-2), Mitchell ("Mitchell Declaration," Dkt. No. 8-3), and Neice ("Neice Declaration," Dkt. No. 8-4). On October 28, 2019, Defendants opposed the Motion ("Opposition," Dkt. No. 9) and made evidentiary objections to Plaintiffs' Declarations ("Objections," Dkt. No. 9-1). On November 18, 2019, Plaintiffs replied. ("Reply," Dkt. No. 12.)
The admissibility of the Declarations is assumed for purposes of resolving the Motion. Because the Court denies the Motion, Defendants' Objections are OVERRULED.
Defendants accurately point out that Plaintiffs misrepresented quotations and holdings from two cases in the Motion. (Opposition at 8); (Motion at 10–11). Plaintiffs offered no justification for these misrepresentations, and instead withdrew both citations in the Reply. (Reply at 7–8.) Plaintiffs' misrepresentations are particularly egregious because both quotations, if true, would have offered strong legal support. (See Motion at 10 (fictitiously quoting a district court that "it is well-settled that a defendant may not assume the maximum penalty when invoking CAFA jurisdiction")); (see also id. at 11 (misquoting and misciting a case for the false proposition that it "follow[ed] [the] Ninth Circuit and reject[ed] defendants' ‘assumption of a maximum statutory penalty’ for [a] waiting time claim").) The Court is unsure if Plaintiffs misrepresented cases intentionally or negligently. Both possibilities are intolerable. While the Court will overlook Plaintiffs' misrepresentations on this occasion, it will not do so again. In the future, any failure by Plaintiffs to cite the law accurately and in good faith will result in the imposition of sanctions.
II. LEGAL STANDARD
"Federal courts are courts of limited jurisdiction, possessing only that power authorized by the Constitution and statute." Gunn v. Minton, 568 U.S. 251, 133 S. Ct. 1059, 1064, 185 L.Ed.2d 72 (2013). The Class Action Fairness Act ("CAFA") vests federal courts with original jurisdiction over class actions involving at least 100 class members, minimal diversity, and an amount in controversy ("AIC") that exceeds $5,000,000. 28 U.S.C. § 1332(d).
Generally, courts must "strictly construe the removal statute against removal jurisdiction." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). "However, ‘no anti-removal presumption attends cases invoking CAFA...’ " Garcia v. Wal-Mart Stores, Inc., 2016 WL 6068104, at *3 (C.D. Cal. Oct. 14, 2016) (quoting Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 135 S. Ct. 547, 553, 190 L.Ed.2d 495 (2014) ). Instead, Congress intended CAFA to be interpreted expansively. Ibarra v. Manheim Investments, Inc., 775 F. 3d 1193, 1197 (9th Cir. 2015).
A defendant seeking removal of an action to federal district court need only offer a "short and plain statement of the grounds for removal" in its notice of removal. 28 U.S.C § 1446(a). To meet CAFA's diversity requirement, a removing defendant must show "any member of a class of plaintiffs is a citizen of a State different from any defendant." 28 U.S.C. § 1332(d)(2)(A). "Thus, under CAFA complete diversity is not required; ‘minimal diversity’ suffices." Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1021 (9th Cir. 2007) (citations omitted).
To satisfy CAFA's amount-in-controversy requirement, "a removing defendant must plausibly assert that the amount in controversy exceeds $5,000,000." Garcia, 2016 WL 6068104, at *3 (citing Ibarra, 775 F. 3d at 1197 ). A removing "defendant's amount-in-controversy allegation should be accepted when not contested by the plaintiff or questioned by the court." Dart Cherokee, 135 S. Ct. at 553. Where a plaintiff questions the AIC asserted, further evidence establishing that the amount alleged meets the jurisdictional minimum is required. Id. at 554. "In such a case, 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 parties may submit evidence outside the complaint, 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) ). "Under this system, 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." Id. at 1198.
III. DISCUSSION
A. Summary of Argument
In seeking remand, Plaintiffs contend that the AIC fails to satisfy the $5,000,000 jurisdictional minimum under CAFA. In the NOR, Defendants calculated an AIC of at least $7,182,985. (NOR ¶ 61.) Defendants calculated this amount by examining the period from July 11, 2015 to August 4, 2019, the time when the alleged wage violations in dispute occurred. (Id. ¶ 42.) Defendants then added Plaintiffs' alleged split shift wages, wage statement penalties, and waiting time penalties. (Id. ¶¶ 39–52.) This sum was then multiplied by the number of workweeks worked by the total number of potential Class Members. (Id. ) Finally, attorneys' fees of 25% the aggregate damages were added to arrive at a final AIC of $7,182,985. (Id. ¶¶ 53–56.) Defendants assumed a split shift violation rate of 100%, with each violation resulting in Plaintiffs and Class Members being owed the maximum split shift wage in addition to liquidated damages that double recovery. (Id. ¶¶ 39–45.) Defendants also assumed a 100% violation rate and maximum recovery for the wage statement and waiting time penalties. (Id. ¶¶ 47, 49.)
"Split shifts" are work schedules interrupted by non-paid non-working periods established by the employer, other than bona fide rest or meal periods. (Motion at 6.)
When appropriate, Defendants limited their calculation to claims within the statutes of limitations. (See NOR ¶¶ 48, 51.)
In contrast, Plaintiffs calculate the AIC to be as low as $2,073,379.73 exclusive of waiting time penalties and $2,756,470.98 inclusive of them. (Motion at 13–14.) Plaintiffs contend that Defendants' calculation of the AIC is inflated for several reasons. First, Plaintiffs assert that it is unreasonable to assume that 100% of Class Members suffered a split shift violation in every shift worked. (Id. at 7.) Instead, Plaintiffs submit that an 80% violation rate is more reasonable. (Id. at 10.) Second, Plaintiffs argue that it is unreasonable to assume each Class Member will be entitled to the maximum split shift wages recoverable for each violation. In support of this argument, Plaintiffs provide declarations from all three named Plaintiffs that establish they were owed below the maximum split shift wages per shift for each year worked. (Id. at 11.) Named Plaintiffs extrapolate the split shift wages they are owed and conclude that the split shift wages owed to the entire Class are only $636,627.36 with a 100% violation rate or $509,301.89 with an 80% violation rate. (Id. at 11–12.) Plaintiffs contend that even after liquidated damages are assumed, their split shift claims could only result in a recovery of $1,273,254.72 or $1,018,603.78 — an amount about one-quarter of what Defendants calculated. (Id. ); (see NOR ¶ 45 (detailing Defendants' calculation of unpaid split shift wages and liquidated damages of $4,559,815).) Third, Plaintiffs argue that the AIC should exclude waiting time penalties because Plaintiffs did not include a cause of action or prayer for relief for such penalties in the complaint. (Motion at 13 n.5.) Furthermore, Plaintiffs argue that they were still employed by First Student at the time of removal, and thus could not have recovered waiting time penalties. (Id. ) Last, Plaintiffs contend that Defendants' assumption of attorneys' fees of 25% the aggregate damages is excessive and unreasonable. (Id. 12–13.)
As Plaintiffs explain, California law permits workers only to recover the difference between what split shift wages should have been paid and what the worker was actually paid, up to a maximum recovery of one hour at the minimum wage per shift. (Motion at 6–7.) If split shift wages owed are less than what a worker was actually paid for a shift, then a split shift violation does not result in recoverable damages. (Id. at 7.)
B. Analysis
Plaintiffs put forth several arguments as to why the AIC is below the threshold required by CAFA. The Court disagrees with Plaintiffs, and finds Defendants have shown the AIC satisfies CAFA's $5,000,000 amount in controversy requirement.
1. Split Shift Wages Owed
First, Plaintiffs claim Defendants' calculation of split shift wages is inflated because both Defendants' violation rate of 100% and their assumption of maximum recovery per violation is unreasonable. (Motion at 7–12.) In calculating the AIC, a removing defendant is "permitted to rely on ‘a chain of reasoning that includes assumptions.’ " Arias v. Residence Inn by Marriott, 936 F.3d 920, 925 (9th Cir. 2019) (quoting Ibarra, 775 F.3d at 1199 (9th Cir. 2015) ). While these assumptions cannot be pulled from thin air, they need not be proven, and only need some reasonable ground underlying them. Id. at 925, 927. "An assumption may be reasonable if it is founded on the allegations of the complaint." Id. at 925.
In the NOR, Defendants premised their split shift wages calculation on various allegations in the Complaint. The Complaint alleges that "[d]uring the Class Period FIRST STUDENT has failed to pay split shift wages to its Attendants in California." (Complaint ¶ 27.) The Complaint further alleges that "through common practices, policies and/or schemes, FIRST STUDENT failed to pay split shift wages to Plaintiffs and Class Members as required under California law." (Id. ¶ 21.) Both allegations fail to limit the amount of split shift wages owed by First Student and suggest that the failure to pay split shift wages was by design, not isolated mistake.
Plaintiffs' allegations are made in terms "as general and expansive as possible, presumably for the purpose[s] of alleging as large a class of individuals as possible [and maximizing recovery]." Muniz v. Pilot Travel Centers LLC, 2007 WL 1302504, at *3 (E.D. Cal. May 1, 2007). Plaintiffs' failure to limit their allegations in any meaningful way — and indeed, the allegations suggest the systematic and expansive nature of the split shift wage violations — justifies Defendants' assumptions of a 100% split shift violation rate and maximum recovery. See id. at *4 ("[P]laintiff includes no fact-specific allegations that would result in a putative class or violation rate that is discernibly smaller than 100%, used by defendant in its calculations."); see also Andrade v. Beacon Sales Acquisition, Inc., 2019 WL 4855997, at *4 (C.D. Cal. Oct. 1, 2019) (holding that allegations that defendants committed wage violations "as [a] matter[ ] of policy and/or practice" justified assumption of maximum violation rate and wages owed when calculating AIC). As the party who worded the Complaint, Plaintiffs were fully capable of narrowing the scope and breadth of their claims to omit the possibility of a maximum violation rate and recovery. See Muniz, 2007 WL 1302504, at *4 ("Plaintiff[s] [are] the "master of [their] claim[s]," and if [they] wanted to avoid removal, [they] could have alleged facts specific to [their] claims which would narrow the scope of the putative class or the damages sought. [They] did not.") (quoting Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987) (internal quotations and citations omitted)); see also Andrade, 2019 WL 4855997, at *4 ("Plaintiff could have, but did not, make more specific allegations to narrow the scale or scope of this controversy."). Furthermore, Defendants need not prove that they actually violated the law at the established rate or actually owe the maximum split shift wages to justify removal. Arias, 936 F.3d at 927 ; see also Olson v. Becton, Dickinson & Co., 2019 WL 4673329, at *4 (S.D. Cal. Sept. 25, 2019) ("[A] defendant need not prove it actually violated the law at the assumed rate.... The amount in controversy is simply an estimate of the total amount in dispute, not a prospective assessment of defendant's liability.") (emphasis in original) (internal quotations and citations omitted). While Defendants bear the burden of establishing removal was proper, they need not prove Plaintiffs' case to do so. Defendants' reliance on allegations in the Complaint is sufficient to show that their provided AIC was reasonable.
Plaintiffs urge that assumptions of a violation rate of 100% and the maximum recovery per violation are unreasonable because named Plaintiffs themselves did not suffer split shift violations at a 100% rate, and when they did suffer violations they were not owed the maximum recoverable wage. (Motion at 9–11.) But named Plaintiffs fail to explain why evidence that they did not suffer the maximum split shift violation at a rate of 100% establishes the same for all Class Members. In fact, Plaintiffs offer no evidence at all of what the violation rates or split shift wages might be for Class Members. Instead, Plaintiffs merely extrapolate the frequency and amount of their split shift violations and wages to the remainder of Class Members. This is inadequate to overcome Defendants' reasonable assumptions based on language in the Complaint. See Korn v. Polo Ralph Lauren Corp., 536 F. Supp. 2d 1199, 1206 n.4 (E.D. Cal. 2008) ("Plaintiff[s] cannot avoid satisfaction of the amount in controversy by arguing that the class [P]laintiffs may be awarded less than the [ ] maximum [recovery]. The critical inquiry is the amount placed in controversy by the allegations in [P]laintiff[s'] complaint."); see also Arias, 936 F.3d at 927 ("Where a removing defendant has shown potential recovery could exceed $5 million and the [p]laintiff has... no[t] sought to establish that the class recovery is potentially any less, the defendant has borne its burden[ ].") (citing Lewis v. Verizon Commc'ns, Inc., 627 F.3d 395, 401 (9th Cir. 2010) ) (emphasis in original) (internal quotations omitted).
Plaintiffs rely heavily on two cases to support the argument that Defendants are not entitled to assume a 100% violation rate and maximum recovery: Garibay v. Archstone Communities LLC, 539 F. App'x 763 (9th Cir. 2013) and Ibarra, 775 F.3d at 1193. Plaintiffs' reliance on both cases is misplaced. Garibay is an unpublished opinion and carries no precedential value. See Ninth Circuit Rule 36–3(a). Equally as important, Garibay indicated that defendants in that case made a number of arbitrary and speculative assumptions in order to arrive at an inflated AIC. Garibay, 539 F. App'x at 764. Unlike Defendants in this case, the defendants in Garibay failed to explain where in the complaint they derived their assumptions from, or how they derived their assumptions at all. Id. In Ibarra, the court found that the defendant's assumption of a 100% violation rate was unreasonable because allegations in the complaint were worded narrowly to exclude that possibility. See Ibarra, 775 F.3d at 1199 ("[T]he named plaintiff Ibarra alleged that he worked overtime hours without compensation on ‘multiple occasions during his employment,’ suggesting that Manheim's practices occurred several times but not on each and every shift."). Here, Plaintiffs did not draft allegations in the Complaint narrowly. Furthermore, Defendants in Ibarra later enlarged the initial violation rate in the NOR to 100% without explanation in order to meet the AIC threshold. Id. at n.3. In contrast, First Student has not changed their assumption of a 100% violation rate since removal. Thus, both Garibay and Ibarra are distinguishable.
In assuming a 100% violation rate and maximum split shift wages per violation, Defendants relied on Plaintiffs' allegations. While named Plaintiffs may have shown that their potential recovery differs from the rates and wages provided by Defendants, they have not shown the same for other Class Members. Thus, Defendants' assumption of a 100% violation rate and maximum split shift wages amongst Class Members is reasonable. See Andrade, 2019 WL 4855997, at *4.
2. Waiting Time Penalties
Plaintiffs briefly argue that the AIC should exclude waiting time penalties for two reasons: (1) Plaintiffs did not allege waiting time penalties as a separate cause of action or demand them in their prayer for relief; and (2) Plaintiffs could not have recovered waiting time penalties at time of removal because they were still employed by First Student. (Motion at 13 n.5); (Reply at 5.) The first contention does not survive the slightest scrutiny: the Complaint, while not listing a separate cause of action, plainly alleges that Plaintiffs are owed compensation for waiting time penalties. (See Complaint ¶ 27 ("[A] direct, foreseeable, and proximate result of FIRST STUDENT'S conduct, Plaintiffs and similarly situated Attendants are owed, among other things... waiting time penalties under Labor Code section 203 [ ].") (emphasis added).) Regardless of how it was styled, Plaintiffs' allegation that Defendants owe waiting time penalties justifies Defendants' reasonable assumption that such penalties should be included in the AIC. See Arias, 936 F.3d at 925 ("An assumption may be reasonable if it is founded on the allegations of the complaint.").
Unlike with split shift wages, Plaintiffs do not contest Defendants' methodology for calculating waiting time penalties.
Plaintiffs' second argument fares no better. Plaintiffs argue that they were still employees of First Student at time of removal and were thus incapable of recovering waiting time penalties when Defendants removed the matter. (Motion at 13 n.5); see also Cal. Lab. Code § 203 ("If an employer willfully fails to pay... any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced.") (emphasis added). But Plaintiffs' argument ignores allegations in the Complaint that Class Members included both "current and former" employees of First Student. (Complaint ¶ 2.) Thus, Defendants reasonably assumed that Class Members included former employees who could recover waiting time penalties. Arias, 936 F.3d at 925 ; (see also NOR ¶ 52 (only calculating waiting time penalties for former employees who were terminated during the time alleged in the Complaint).) Moreover, in light of such allegations, named Plaintiffs' evidence that they could not recover waiting time penalties is insufficient to establish the same for all Class Members. Accordingly, the Court finds that Defendants' AIC properly includes waiting time penalties.
3. Attorneys' Fees
Last, Plaintiffs protest that Defendants' assumption of 25% of aggregate damages for attorneys' fees is excessive. (Motion at 12–13.) Attorneys' fees are properly included in an AIC when, like here, "an underlying statute authorizes an award of attorneys' fees[ ]." Galt G/S v. JSS Scandinavia, 142 F.3d 1150, 1156 (9th Cir. 1998). Plaintiffs do not explain why Defendants' 25% figure is unreasonable or cite any authority to support their assertion that "First Student [must actually] prove the amount of attorneys' fees at stake." (Id. at 13.) Plaintiffs also provide no evidence to establish actual attorneys' fees. In contrast, Defendants point out that the Ninth Circuit has established 25% as a benchmark award for attorneys' fees. (See Opposition at 10 (citing Hanlon v. Chrysler Corp., 150 F.3d 1011, 1029 (9th Cir 1998) ).) Defendants also note that Plaintiffs' Counsel was recently awarded 25% of total recovery in another wage and hour class action. (Id. at 10–11 (citing Austin v. Foodliner, Inc., 2019 WL 2077851, at *6–7 (N.D. Cal. May 10, 2019) ).) Plaintiffs fail to respond to Defendants or address the issue in the Reply. Accordingly, and in light of evidence showing 25% to be the rate previously imposed by Plaintiffs' Counsel in a similar case, the Court finds that Defendants' NOR properly included attorneys' fees of 25% the aggregate damages.
In sum, Defendants have met their burden of demonstrating an AIC greater than $5,000,000. Defendants based their calculations on reasonable assumptions founded in the Complaint. Evidence of reduced split shift wages owed to named Plaintiffs does not dispel Defendants' assumption that Class Members at large have suffered maximum damages at the maximum rate. Moreover, Defendants properly included waiting time penalties in the AIC based on allegations in the Complaint. Finally, Defendants have shown that 25% of recovery is a reasonable figure for attorneys' fees. Thus, Defendants' calculation of an AIC of at least $7,182,985 is reasonable and satisfies CAFA's $5,000,000 threshold.
All three named Plaintiffs did provide sufficient evidence to establish that they cannot actually recover waiting time penalties and maximum split shift wages at a 100% rate. However, given the potential Class numbers near a thousand members, the resulting reduction in total recovery is de minimis and the AIC remains well above $5,000,000.
IV. CONCLUSION
For the reasons described above, the Court DENIES Plaintiffs' Motion to Remand.