Opinion
C 24-02997 WHA
08-15-2024
YESENIA SOTO, Plaintiff, v. THERMO FISHER SCIENTIFIC (ASHEVILLE LLC), BENJAMIN CORREA, AND DOES 1 THROUGH 100, Defendants.
ORDER DENYING PLAINTIFF'S MOTION TO REMAND AND ORDER TO SHOW CAUSE
WILLIAM ALSUP, UNITED STATES DISTRICT JUDGE
INTRODUCTION
In this wage-and-hour individual suit, plaintiff ex-employee moves to remand the action to state court for lack of removal jurisdiction. Defendant employer and individual supervisor oppose, arguing that the latter has been fraudulently joined. For the following reasons, plaintiff's motion to remand is DENIED.
STATEMENT
Plaintiff Yesenia Soto, an ex-employee of defendant Thermo Fisher Scientific, Inc., brought this individual action in the County of Sonoma Superior Court against defendants Thermo Fisher, plaintiff's former supervisor Benjamin Correa, and Does 1-100. Plaintiff began working for Thermo Fisher in March of 2019 as a non-exempt employee. Plaintiff alleges that she was required to work over 40 hours per week without overtime, coerced into taking shorter meal breaks than those to which she was entitled, and denied a copy of her personnel file. Defendant Correa, meanwhile, began working as a “Quality Supervisor” at Thermo Fisher's Petaluma facility in March 2020. He was promoted to “Quality Control Manager” in July 2022. He became one of at least three individuals who supervised plaintiff during her employment with Thermo Fisher.
Plaintiff asserts several claims for relief against defendants, including (1) failure to pay wages, (2) failure to pay minimum wage, (3) failure to pay overtime wages, (4) failure to pay wages due upon termination, (5) failure to issue accurate itemized wage statements, (6) unlawful/unfair business practice, and (7) failure to deliver personnel file. All agree that plaintiff and Correa are citizens of California while defendant Thermo Fisher is a citizen of Delaware. Defendants removed this action on the ground that Correa is a sham defendant fraudulently joined for the purpose of defeating diversity. Plaintiff now moves to remand to state court, arguing that defendants have failed to establish removal jurisdiction.
This order follows full briefing and oral argument (at which only defense counsel appeared).
ANALYSIS
The federal court is one of limited jurisdiction. See Gould v. Mutual Life Ins. Co. v. New York, 790 F.2d 769, 774 (9th Cir. 1986). As such, a defendant may remove an action to federal court only if that court would have had original jurisdiction over the suit. 28 U.S.C. § 1441. To establish diversity jurisdiction, removing defendants must show (1) complete diversity between the parties and (2) that the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a).
The fraudulent joinder doctrine allows a non-diverse defendant's citizenship to be ignored for purposes of determining diversity “[i]f the plaintiff failed[ed] to state a cause of action against [the] resident defendant, and the failure is obvious according to settled rules of the state.” McCabe v. Gen. Goods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987) (citation omitted); Grancare, LLC v. Thrower by and through Mills, 889 F.3d 543, 549 (9th Cir. 2018) (defendants must “show the absence of any possibility of recovery”) (internal quotation marks omitted). In considering whether a defendant has been fraudulently joined, “courts must resolve ‘all disputed questions of fact and all ambiguities in the controlling state law in favor of the non-removing party.'” Plute v. Roadway Package Sys., Inc., 141 F.Supp.2d 1005, 1008 (N.D. Cal. 2001) (Judge Susan Illston) (quoting Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42-43 (9th Cir. 1992)).
Plaintiff argues that defendant Correa is personally liable under California Labor Code Section 558.1, which provides that “[a]ny employer or other person acting on behalf of an employer . . . may be held liable as the employer for [relevant] violation[s].” Cal. Lab. Code § 558.1(a) (emphasis added). “[T]he term ‘other person acting on behalf of an employer' is limited to a natural person who is an owner, director, officer, or managing agent of the employer.” Id. at § 558.1(b). Defendant Correa is not an owner, director, or officer of Thermo Fisher. The parties contest whether defendant Correa is a managing agent such that he is individually liability under Section 558.1.
The California Supreme Court has held that “the Legislature intended the term ‘managing agent' to include only those corporate employees who exercise substantial independent authority and judgment in their corporate decisionmaking so that their decisions ultimately determine corporate policy.” White v. Ultramar, Inc., 21 Cal.4th 563, 566-67 (1999). A later decision clarified that Ultramar was “referring to formal policies that affect a substantial portion of the company and that are [of] the type likely to come to the attention of corporate leadership . . . [such that they] justif[y] punishing an entire company for an otherwise isolated act of oppression, fraud, or malice.” Roby v. McKesson Corp., 47 Cal.4th 686, 715 (2009).
“The key inquiry in the determination of whether an employee is a managing agent is ‘the degree of discretion the employees possess in making decisions that will ultimately determine corporate policy.'” Glovatorium, Inc. v. NCR Corp., 684 F.2d 658, 661 (9th Cir. 1982) (quoting Egan v. Mutual Omaha Insurance Co., 24 Cal.3d 809, 822-23 (1979)). “The scope of a corporate employee's discretion and authority under [this] test is . . . a question of fact for decision on a case-by-case basis.” Ultramar, 21 Cal.4th at 567.
Under the law, defendant Correa is not a managing agent. Thermo Fisher has provided declarations from Ernest Law, “Director, HR Compliance” at Thermo Fisher, and defendant Correa himself (Dkt. No. 1-4, 1-5). Director Law states that Thermo Fisher employs more than 50,000 individuals in the United States, and that all relevant policies are “set at the corporate level” (Dkt. No. 1-4 at 2). Correa, meanwhile, is employed as a “Quality Control Manager” at Thermo Fisher's Petaluma facility (ibid.). “There are 13 [salary] bands total, with Bands 11, 12 and 13 held by executive level employees” (id. at 2). Director Law swears that, “as a Band 7 employee, Mr. Correa does not have the authority or discretion to exercise any actual or discretionary authority or judgment over decisions that ultimately determine Company policy” (ibid.). The relevant policies “are set at the corporate level, and Mr. Correa has no authority for setting these corporate policies” (ibid.).
Defendant Correa's declaration similarly swears that he is not, and has never been, an owner, director, or officer of Thermo Fisher, that “Thermo Fisher sets corporate-wide policies and procedures for non-exempt employees, including policies as to how time is recorded, the provision of meal periods and rest breaks, employee compensation . . . and other wage and hour matters,” and that “as an employee, [he is] told what the policies are, and [is] instructed to follow them” (Dkt. No. 1-5 at 2).
Defendants' declarations stand uncontested. See West America Corp. v. Vaughan-Bassett Furniture Co., Inc., 765 F.2d 932, 936 (9th Cir. 1985) (affirming dismissal of a sham defendant on the basis of uncontroverted affidavits); Rodriguez v. Residence Inn By Marriott, LLC, 2023 WL 8234643, at *4 (S.D. Cal., 2023) (Judge John Houston). Plaintiff's complaint alleges no facts describing defendant Correa's authority to establish or alter corporate policy, only the conclusion, found in the complaint's recital of the parties, that “Defendant BENJAMIN CORREA was responsible for various Labor Code violations” (Dkt. No. 1-1 at 4). The complaint does not otherwise acknowledge defendant Correa in an individual capacity (id. at 5-16). Plaintiff's briefing likewise rests on mere ipse dixit conclusions that defendant “Correa is clearly a managing agent,” absent any factual support (Dkt. No. 16 at 3) (emphasis added). While disputed questions of fact must be resolved in plaintiff's favor, mere legal conclusions do not create such a dispute. Plute, 141 F.Supp.2d 1005, 1008.
Instead, plaintiff's counsel offers his own more convenient definition of “managing agent,” arguing that defendant Correa “is a managing agent under the definition, if he directed daily activities of employees and committed the wage and hour violations he is personally liable [sic]” (Dkt. No. 16 at 2) (emphasis added). “The definition,” provided without citation, disregards Ultramar: “a managing agent [is] more than a mere supervisory employee. The managing agent must be someone who exercises substantial discretionary authority over decisions that ultimately determine corporate policy.” Ultramar, 21 Cal.4th at 573 (emphasis added); see also CRST, Inc. v. Superior Ct. of L.A. Cnty., 11 Cal.App.5th 1257, 1273 (2017) (“The fact that an employee has a supervisory position . . . does not, by itself, render the employee a managing agent . . .”). Counsel's repeated assertions that defendant Correa was a “supervisor[] and manager[],” “Plaintiff's direct supervisor,” “Plaintiff's former supervisor,” and “a supervisor and managing agent” all fail for the same reason.
This order now turns to plaintiff's case law.
First, much of it is unrelated to the issue at hand. Barsell v. Urban Outfitters, Inc., described by counsel as “directly on point,” is illustrative (Dkt. No. 16 at 2). 2009 WL 1916495 (C.D. Cal., 2009) (Judge Margaret Morrow). In counsel's words, “the [Barsell] plaintiff asserted a claim for IIED against a supervisor” and the district court remanded because there was a “non-fanciful possibility” that a state court would conclude that the complaint properly stated an IIED claim (ibid.). Counsel also quotes at length from Judge Marilyn Patel's decision in Calero v. Unisys Corp., again regarding conduct justifying IIED claims. 271 F.Supp.2d 1172 (N.D. Cal., 2003). Trouble is, our case involves no IIED claim. Those decisions are inapplicable.
As it turns out, this irrelevant portion of plaintiff's motion was lifted wholesale from plaintiff's counsel's briefing in another litigation in the Eastern District of California, where that plaintiff did bring an IIED claim. Estrada v. KAG West, LLC, 1:24-cv-00257-KES-CDB (Dkt. No. 10 at 3) (March 26, 2024).
Second, much of the remainder of counsel's motion and reply consist of repeated and redundant articulations of, and citations to, uncontested standards for removal, diversity, and so forth (see, e.g., Dkt. No. 13 at 3, 4; Dkt. No. 16 at 2, 3) (stating the presumption against removal four times, defendants' burden four times, and so on).
Third, the sole relevant decision cited by counsel does plaintiff more harm than good. Mazik v. GEICO Gen. Ins., 35 Cal.App.5th 455, 465-466 (2019). InMazik, an insured motorist brought an action against their insurer for the bad faith breach of an insurance contract. The individual supervisor at issue in Mazik was the insurer's regional liability administrator, who “had wide regional authority over the settlement of claims . . . [and] typically [had] 18 to 20 meetings per day with claims adjusters seeking his approval or direction for handling particular claims.” Id. at 465-466 (emphasis added). The Mazik court found this sufficient to render the supervisor a managing agent. Id. at 465. Counsel cites Mazik for the proposition that “an employee may be a managing agent even if the decisionmaking authority only informally sets corporate policy” (Dkt. No. 16 at 3) (emphasis added). In Mazik, however, the regional liability administrator exercised exactly the kind of “substantial discretionary authority” required by Ultramar, and that is exactly what is missing here.
Defendant Correa is not a “managing agent” and cannot be held liable under Labor Code Section 558.1. Plaintiff provides no other grounds for his liability. There is therefore no possibility that plaintiff will be able to state a claim against defendant Correa, and his citizenship is properly disregarded for the purposes of diversity jurisdiction. The citizenship of Does 1 - 100 must also be disregarded for the purposes of determining diversity jurisdiction. 28 U.S.C. § 1441(b)(1) (“In determining whether a civil action is removable on the basis of the jurisdiction under section 1332(a) of this title, the citizenship of defendants sued under fictitious names shall be disregarded.”). So with respect to the parties that count, there is complete diversity.
* * *
This order now turns to the amount in controversy requirement.
“Among other items, the amount in controversy includes damages (compensatory, punitive, or otherwise), the costs of complying with an injunction, and attorney's fees awarded under fee-shifting statutes or contract.” Fritsch v. Swift Transp. Co. of Az., LLC, 899 F.3d 785, 794 (9th Cir. 2018). “Generally, the sum claimed by the plaintiff controls if the claim is apparently made in good faith.” Ibarra v. Manheim Investments, Inc., 775 F.3d 1193, 1197 (9th Cir. 2015) (internal quotation marks omitted). Where, as here, the plaintiff fails to make a good faith demand in the initial pleading, “a defendant's notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 88-89 (2014). While attorney's fees are excluded from amount in controversy calculations in California state court, estimates of attorney's fees are properly considered in our circuit where, as here, a statute authorizes an award of attorney's fees. Fritsch, 899 F.3d at 794-95; Galt G/S v. JSS Scandinavia, 142 F.3d 1150, 1155-56 (9th Cir. 2016).
Defendants have met their burden.
Defendants' notice of removal contained a thorough, reasonable calculation of an amount in controversy in excess of the jurisdictional threshold (laid out in the table below) (Dkt. No. 15 at 6-7). Some of defendants' figures came directly from plaintiff (see, e.g., id. at 6 (estimating damages for the alleged Section 226 violation at $4,000 because “Plaintiff allege[d] they are due a maximum of $4,000 for the alleged violation”)). Defendants' calculations present generally conservative damages estimates (see, e.g., id. at 6-7 (calculating the alleged failure to provide meal and rest periods at $10,280 with “[e]ven a mere one meal and rest break violation per week” and attorney's fees at an associate rate, “excluding the hourly rate that the more senior attorney on the case, Jonathan Roven might have”)). When possible, defendants' estimates made use of information provided by plaintiff (see, e.g., id. at 6 (“Relying on Plaintiff's allegations, Defendant calculated the potential unpaid overtime at a mere 2 hours unpaid overtime per week....”)).
Plaintiff's brief states that “[t]he entirety of the evidence in support of Defendant's claim is that they try to do math that adds up to more than $75,000,” that “there is zero evidence to support Plaintiff [sic] estimates [defense's calculations] to be the reasonable estimate of her claim,” and that “[t]he damages [calculated by defendants] are based on false speculation. The damages are much more limited then [sic] what Defendant purports them to be” (Dkt. No. 13 at 4) (emphasis added). Counsel continued: defendants “stretch[ed] the numbers as far out as they can,” and “this is a small wage and hour case that will not make it passed [sic] $75,000 any time soon” (Dkt. No. 16 at 3-4) (emphasis added). “Defendant[s] had to work super hard to barely get over $75,000 in their calucations [sic]” (id. at 2), and “attempt[ed] to makeup [sic] how many hours have been spent on this case so far” (id. at 4). And again: “[t]his is a small value case never meant to be in federal court” (ibid.).
These representations to the Court cannot be squared with what plaintiff's counsel said to defense counsel. On July 19, 2024, 22 days after counsel filed their reply, Attorney Jonathan Roven sent a settlement demand to defense counsel, wherein he “calculated Plaintiff's damages, exclusive of interest and attorney's fees, at $62,063.08,” estimated that “it would take between 200-300 hours to fully litigate the case through trial,” and demanded $150,000 in settlement (Dkt. No. 20 at 2). Damages inclusive of interest stood at $87,578.12 (Dkt No. 20-1 at 5). The demand was supported by a fourteen-page spreadsheet breaking down hours worked, overtime owed, liquidated damages on overtime owed, interest on overtime owed, second meal breaks, liquidated damages on second meal breaks, and interest on those breaks by the day (Dkt. No. 20-1). This demand cuts against counsel's representation to the Court that “this is a small wage and hour case that will not make it passed [sic] $75,000 any time soon” (Dkt. No. 16 at 4) (emphasis added).
As to attorney's fees, the demand forecasted $140,000 - $210,000 in fees (200 - 300 hours at an hourly rate of $700) (Dkt. No. 20-1 at 6). In plaintiff's remand briefing, meanwhile, Attorney Britanie Crippen estimated that the drafting of plaintiff's remand motion (four pages) and attendance of the remand hearing generated $3,210 in attorney's fees (seven hours at an hourly rate of $450) (Dkt. No. 13 at 7). The drafting of the reply in support of that motion (also about four pages long) is not captured by that estimate. The settlement offer appears to exclude Attorney Crippen's work, or, alternatively, presumes that that work will be billed at Attorney Roven's higher rate, despite Attorney Crippen's sworn declaration.
Our court of appeals has held that “[a] settlement letter is relevant evidence of the amount in controversy if it appears to reflect a reasonable estimate of the plaintiff's claim.” Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (2002). Cohn held that a settlement letter, where it was not disavowed as “inflated” or otherwise inaccurate, was sufficient to establish that the amount-in-controversy requirement. So too here.
The following chart says it all:
AMOUNT IN CONTROVERSY
Defendants' Estimate (Dkt. No. 15 at 6-7)
Plaintiff's Demand (Dkt. No. 20-1)
Overtime
$15,420
$15,774.66
Liquidated Damages
$5,200
$15,774.66
Overtime Interest
Not calculated
$5,676.69
2nd Meal Break
$10,280
$15,774.66
Liquidated Damages
Not calculated
$15,774.66
Break Interest
Not calculated
$3,973.69
Itemized Wage Statements
$4,000
$4,000
Waiting Time Penalties
$6,168
$9,329.10
Personnel File
Not calculated
$1,500
DAMAGES:
$41,068
$87,578.12
ATTORNEY'S FEES:
$34,200
$140,000-210,000
AMOUNT IN CONTROVERSY:
$75,268
$227,578.12-297,578.12
In light of plaintiff's own demand, how could counsel have represented to the Court that defendants “had to work super hard to barely get over $75,000 in their calucations [sic] which are clearly exaggerated,” and that “the damages are much more limited then [sic] what Defendant purports them to be” (Dkt. No. 13 at 4; 16 at 2)?
Counsel provides no explanation for this contradiction. The only reasonable conclusion is that counsel, under the mistaken belief that his “confidential settlement communications” would remain beyond the view of the Court, sought to play a double game. This contradiction shows bad faith, and this order finds Attorney Jonathan Roven has conducted this aspect of the litigation in bad faith.
After defense counsel provided the settlement information on sur-reply, plaintiff's counsel for the first time came clean and put these figures totaling $87,000+ in the later joint case management statement (Dkt. No. 22).
There is complete diversity between the parties and the amount in controversy exceeds $75,000. Federal jurisdiction is therefore proper, and defendants' removal stands. 28 U.S.C. § 1332(a). Plaintiff's motion to remand is DENIED.
* * *
The Court is disappointed in Attorney Roven's fast-and-loose irreverence for truthful facts in our case, a disappointment compounded by his conduct in another of his cases, the Estrada case, which came to light because of his citation to Barsell.
In Estrada, the plaintiff, a California resident represented by Attorney Roven, filed suit in state court against his former employer, an Ohio-based corporation, an individual supervisor, also a California resident, and Does 1-100. The plaintiff brought only one claim for relief, intentional infliction of emotional distress, against the individual supervisor. The Estrada defendants removed to the Eastern District of California, arguing that the individual supervisor was fraudulently joined. In June of 2023, Judge Baker remanded the matter for lack of complete diversity, holding that, although the complaint “likely fail[ed] to state a plausible claim for IIED,” the defect could potentially be remedied by amendment. Estrada v. KAG West LLC, 2023 WL 4174135, at *1 (E.D.Cal., 2023) (Judge Christopher Baker). Back in state court, Attorney Roven voluntarily dismissed the individual supervisor, revealing the gimmick that had been played, evidently and incorrectly thinking a second removal would be barred by the 30-day time limit. The defendant did remove, however, and this time it stuck. Estrada v. KAG West, LLC, 1:24-cv-00257-KES-CDB (Dkt. No. 17) (June 6, 2024). It appears that Attorney Roven has a pattern of fraudulently joining supervisors as a gimmick to avoid removal.
By AUGUST 29 AT 11:00 AM, Attorney Jonathan Roven is ordered to show cause, under oath, why he and his firm should not be:
1. Referred to the District's Standing Committee on Professional Conduct;
2. Required to provide a copy of this order to every federal judge before whom he or his firm moves for remand;
3. Required to pay a monetary sanction in an amount sufficient to pay the defense fees and costs in this motion.
A hearing on the order to show cause will be held on SEPTEMBER 5 AT 11:00 AM. The under-oath submission is due five court days before.
CONCLUSION
For the foregoing reasons, plaintiff's motion to remand and request for attorney's fees are Denied. The order to show cause will be heard on September 5 at 11:00 am. Even if this case is dismissed voluntarily, this Court retains jurisdiction to adjudicate the order to show cause.
IT IS SO ORDERED.