UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
April 30, 2009
MIRNA E. PEREIRA, INDIVIDUALLY AND ON BEHALF OF OTHER PERSONS SIMILARLY SITUATED, PLAINTIFF,
GATE GOURMET, INC. DEFENDANT.
The opinion of the court was delivered by: Margaret M. Morrow, United States District Judge
ORDER REMANDING ACTION TO LOS ANGELES SUPERIOR COURT FOR LACK OF SUBJECT MATTER JURISDICTION
I. FACTUAL BACKGROUND
Mirna Pereira filed this putative class action in Los Angeles Superior Court on October 8, 2008.*fn1 The complaint pleads two causes of action: (1) failure to pay wages in a timely fashion following termination in violation of California Labor Code §§ 201 and 202 and (2) unfair competition in violation of California Business and Professions Code § 17200. Defendant Gate Gourmet, Inc., removed the action to federal court on November 12, 2008,*fn2 invoking diversity jurisdiction under 28 U.S.C. §§ 1332, 1441, 1446, and 1453.*fn3
On December 8, 2008, the court issued an order to show cause why the action should not be remanded to state court for lack of subject matter jurisdiction, citing deficiencies in Gate Gourmet's notice of removal regarding the alleged amount in controversy ("December 2008 OSC").*fn4 Gate Gourmet filed a brief on December 15, 2008.*fn5 Pereira responded on December 22, 2008.*fn6
On January 26, 2009, the court issued a second order to show cause why the action should not be remanded to state court for lack of subject matter jurisdiction, citing deficiencies in Gate Gourmet's response to the first order to show cause ("January 2009 OSC").*fn7 Gate Gourmet filed a brief on February 4, 2009.*fn8 Pereira responded on February 11, 2009.*fn9
A. Legal Standard Governing Removal Jurisdiction Under the Class Action Fairness Act
The December 2008 OSC set forth the legal standard governing removal jurisdiction under the Class Action Fairness Act ("CAFA"); that discussion is incorporated in this order by reference. In the December order, the court explained that the Ninth Circuit "strictly construe[s] the removal statute against removal jurisdiction," and thus that "[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citing Boggs v. Lewis, 863 F.2d 662, 663 (9th Cir. 1988), Takeda v. Northwestern Nat'l Life Ins. Co., 765 F.2d 815, 818 (9th Cir. 1985), and Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1992)). "The 'strong presumption' against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper." Id. (citing Nishimoto v. Federman-Bachrach & Assocs., 903 F.2d 709, 712 n. 3 (9th Cir. 1990) and Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988)). CAFA does not disturb the traditional rule that the burden of establishing that removal is
proper is on the proponent of federal jurisdiction. Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 685 (9th Cir. 2006) ("We . . . hold that under CAFA the burden of establishing removal jurisdiction remains, as before, on the proponent of federal jurisdiction").
Where, as here, a complaint does not specify the amount in controversy, the removing defendant must prove, by a preponderance of the evidence, that the jurisdictional amount is met. See, e.g., Korn v. Polo Ralph Lauren Corp., 536 F.Supp.2d 1199, 1205 (E.D. Cal. 2008) ("In addition to the contents of the removal petition, the court considers 'summary-judgment-type evidence relevant to the amount in controversy at the time of removal,' such as affidavits or declarations. Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1117 (9th Cir. 2004) (internal quotations omitted). . .").*fn10
B. Whether Defendant Has Established That Removal is Proper
1. Defendant's Notice of Removal
Under California Labor Code § 203, when an employee is discharged or resigns, an employer who fails to timely pay wages owed to that individual is liable for a penalty amounting to one day of pay for each day the wages are late, up to a maximum of 30 days. See CAL. LAB.
CODE § 203 ("If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.5, 202, and 205.5, 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; but the wages shall not continue for more than 30 days"). The complaint alleges violations of Labor Code §§ 201-202*fn11 and requests damages in the form of waiting time penalties pursuant to § 203.*fn12
In its notice of removal, Gate Gourmet multiplied the class members' average hourly wage amount in controversy is met, Defendants have the burden to prove, by a preponderance of the evidence, that the amount exceeds $5 million [citing Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003) ("Where it is not facially evident from the complaint that more than $75,000 is in controversy, the removing party must prove, by a preponderance of the evidence, that the amount in controversy meets the jurisdictional threshold")]"); Sanchez v. Wal-Mart Stores, Inc., Civ. S-06-cv-2573 DFL KJM, 2007 WL 1345706, *1 (E.D. Cal. May 8, 2007) ("In her complaint, Sanchez does not allege a specific amount of damages. Therefore, this court has jurisdiction only if defendants establish by a preponderance of the evidence that potential damages exceed $5,000,000"); Davis v. Chase Bank U.S.A., N.A., 453 F.Supp.2d 1205, 1208 (C.D. Cal. 2006) ("Where the complaint does not specify the amount of damages sought, the removing defendant must prove by a preponderance of the evidence that the amount in controversy requirement has been met. . . . Under this standard, the defendant must provide evidence that it is more likely than not that the amount in controversy satisfies the federal diversity jurisdictional amount requirement. . . . In its discretion, a district court may accept certain post-removal admissions as determinative of the amount in controversy" (citations and quotation marks omitted)). of $10.17*fn13 by an eight (8) hour work day,*fn14 for 30 days of waiting time.*fn15 It then multiplied this number by 3,716, the number of individuals it believes are in the putative class.*fn16 Based on this calculation, Gate Gourmet alleged that the amount in controversy is approximately $9,070,012.*fn17
2. The Court's December 2008 Order to Show Cause
In its December 2008 order to show cause, the court noted that Gate Gourmet assumed that each class member would be entitled to waiting time penalties for the entire thirty-day statutory period. Because Pereira's complaint alleged that defendant "paid all former employees in the class for their last day of work . . . on the Friday of the week following the week in which they stopped working,"*fn18 the court noted that it appeared individual class members would be eligible at most for ten days of statutory penalties under § 203.*fn19 Even if every member of the class were entitled to recover ten days of waiting time penalties, the court observed, the amount in controversy would be only $3,023,337.60.*fn20 Because CAFA requires that the amount in controversy be at least $5,000,000, the court expressed doubt as to whether it had subject matter jurisdiction to hear the action.
In its response to the December 2008 OSC, Gate Gourmet asserted that Pereira's complaint contained "inconsistent allegations."*fn21 Although acknowledging that Pereira alleged that it paid former employees "on the Friday of the week following the week in which they stopped working,"*fn22 Gate Gourmet noted that the complaint also asserted that"Plaintiff and members of the Class are entitled to one day of pay for each day wages paid to them, post-termination, were late, from the day their earned and unpaid wages were due until paid, up to a maximum of 30 days."*fn23 Gate Gourmet argued that the two allegations "le[d] to two different calculations as to the amount in controversy," and that, since the amount in controversy "is to be estimated [ ] on the assumption that a jury would return a full verdict for the plaintiff class on all claims made in the complaint," it was entitled to assume that the amount in controversy exceeds $9 million.*fn24 See Korn, 536 F.Supp.2d at 1205 ("In measuring the amount in controversy, the court must assume that the allegations of the complaint are true and that a jury will return a verdict for the plaintiff on all claims made in the complaint"). Gate Gourmet asserted that this conclusion was further supported by Pereira's refusal to stipulate that she sought a maximum of ten days' penalties per class member.*fn25 Taken together, it contended that the facts sufficiently established subject matter jurisdiction under Korn.
3. The Court's January 2009 Order to Show Cause
As detailed in its January 2009 OSC, the court found these arguments unpersuasive. First, it found Korn factually and legally distinguishable, as it involved a statute that set forth a maximum statutory penalty amount. By contrast, this case involves a statute that sets forth a maximum statutory time period over which penalties may accrue; the total amount of such penalties is contingent both on each plaintiff's daily wage and on the number of days payment was delayed.*fn26
Second, the court observed that, in light of plaintiff's allegation that "as a matter of custom and practice, Gate Gourmet paid employees who resigned or were terminated the week following their separation from the company . . . ," Gate Gourmet, as the proponent of federal jurisdiction, had to adduce evidence that it was "more likely than not that a sufficient number of putative class members [were] entitled to recover more than ten days of waiting time penalties" to show that the amount in controversy was at least $5,000,000.*fn27
Finally, the court reiterated the standard of proof governing CAFA removals. While acknowledging Gate Gourmet's argument that it need not "research, state, and prove the plaintiff's claims for damages" to satisfy the preponderance of the evidence standard, the court noted that "a court 'cannot base [its] jurisdiction on a [d]efendant's speculation and conjecture.'" Korn, 536 F.Supp.2d at 1204-05 (citing McCraw v. Lyons, 863 F.Supp. 430, 434 (W.D. Ky. 1994)); id. at 1205 (quoting Lowdermilk v. United States Bank Nat'l Ass'n, 479 F.3d 994, 1002 (9th Cir. 2007)). Rather, a removing defendant "must set forth the underlying facts supporting its assertion that the amount in controversy exceeds the statutory minimum." Id. (citing Gaus, 980 F.2d at 567). Because Gate Gourmet relied exclusively on a calculation that assumed all class members would be entitled to penalties for the maximum statutory period*fn28 -- without adducing evidence to establish that this was more likely than not -- the court concluded that it had not carried its burden of proof with respect to subject matter jurisdiction.
4. Defendant's Response to the January 2009 OSC
The only new argument Gate Gourmet advances in its response to the court's January 2009 OSC is the assertion that Pereira's allegation that Gate Gourmet "paid all former employees in the class for their last day of work . . . on the Friday of the week following the week in which they stopped working" is untrue.*fn29 In support of this contention, Gate Gourmet proffers the declaration of Joe Navarro, director of human resources for the company's western region.*fn30 Navarro states that Gate Gourmet "does not currently have, and over the last five years has not had, a policy, practice, or custom of paying its former employees for their last day of work on the Friday of the week following the week in which they stopped working."*fn31 Gate Gourmet argues that "[o]nce Plaintiff's unsupported and untrue allegation concerning Gate Gourmet's final pay practices is disregarded, the only relevant allegation as to the aggregate amount in controversy is Paragraph 17 of the Complaint, which alleges that 'Plaintiff and members of the Class are entitled to one day of pay for each day wages paid to them, post-termination, were late, from the day their earned and unpaid wages were due until paid, up to a maximum of 30 days.'"*fn32 On this basis, Gate Gourmet once again calculated the amount in controversy by assuming that all class members did not receive the wages to which they were entitled for at least thirty days after they stopped working.*fn33
This argument is unavailing. In evaluating diversity jurisdiction, "[t]he critical inquiry is the amount placed in controversy by the allegations in plaintiff's complaint."*fn34 Korn, 536 F.Supp.2d at 1206 n. 4. Accordingly, Gate Gourmet needed to produce enough evidence to show, by a preponderance, that a sufficient number of class members were entitled to more than ten days' worth of statutory penalties under § 203 to surpass the $5 million amount-in-controversy threshold. In its response to the January 2009 OSC, it has once again failed to do so.
Gate Gourmet's reliance on Navarro v. Servisair, LLC, No. C 08-02716 MHP, 2008 WL 3842984 (N.D. Cal. Aug. 14, 2008) is similarly misplaced.*fn35 There, the district court permitted the removing defendant to calculate § 203 waiting time penalties for the full thirty day period because plaintiff alleged that putative class members' wages remained unpaid. Id. at 8-9. Here, by contrast, plaintiff's proposed class includes individuals whose wages were paid, albeit late.*fn36
The full thirty-day penalty period did not necessarily run for any, much less all, putative class members.*fn37
It is of course true that a removing defendant is not responsible for "conduct[ing] a fact- specific inquiry into whether the rights of each and every potential class member were violated," answering "the ultimate question the litigation presents," or "try[ing] the case [itself] for the purposes of establishing jurisdiction." Bryan v. Wal-Mart Stores, Inc., No. C 08-5221 SI, 2009 WL 440485, *3 (N.D. Cal. Feb. 23, 2009). Nonetheless, in evaluating whether a party has met its burden of proof with respect to jurisdiction, several circuits have held that it is proper for district courts to consider which party has access to or control over the records and information required to determine whether the amount in controversy requirement is met. See, e.g., Amoche v. Guarantee Trust Life Insurance Co., 556 F.3d 41, 51 (1st Cir. 2009) ("[D]eciding whether a defendant has shown a reasonable probability that the amount in controversy exceeds $5 million may well require analysis of what both parties have shown. . . . In the course of that evaluation, a federal court may consider which party has better access to the relevant information. See Evans v. Walter Indus., Inc., 449 F.3d 1159, 1164 n. 3 (11th Cir. 2006) ('Defendants have better access to information about conduct by defendants, but plaintiffs have better access to information about which plaintiffs are injured and their relationship to various defendants')"); Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 447-48 (7th Cir. 2005) ("That the proponent of jurisdiction bears the risk of non-persuasion is well established. . . . Whichever side chooses federal court must establish jurisdiction; it is not enough to file a pleading and leave it to the court or the adverse party to negate jurisdiction. . . . And the rule makes practical sense. If the burden rested with the proponent of remand, then Countrywide could have removed without making any effort to calculate its maximum exposure, and without conceding that it had faxed thousands of ads. That would have thrown on Brill the burden of showing that Countrywide could not possibly have sent more than 3,333 junk faxes. . . . Brill would have no way to show this early in the litigation, and plaintiffs in other kinds of suits would encounter similar difficulty. When the defendant has vital knowledge that the plaintiff may lack, a burden that induces the removing party to come forward with the information -- so that the choice between state and federal court may be made accurately -- is much to be desired").
Here, Gate Gourmet is the party best positioned to adduce evidence regarding its conduct.
In support of its notice of removal, Gate Gourmet could have proffered evidence regarding its actual policies or practices in order to counteract Pereira's allegations. It could have conducted a sampling or other analysis demonstrating that it was more likely than not that a sufficient number of class members were not paid for thirty days after the date wages were due that more than $5,000,000 was at issue. Adducing such evidence would not have required that Gate Gourmet prove Pereira's case or answer the "ultimate question" presented by this litigation. Despite two opportunities to do so, however, Gate Gourmet failed to do any of these things. Consequently, the court must conclude that it has not carried its burden of proof regarding subject matter jurisdiction. As a result, remand is appropriate. Cf. Miedema v. Maytag Corp., 450 F.3d 1322, 1330-32 (11th Cir. 2006) ("In order to establish the amount in controversy, Maytag's notice of removal relied upon Jodi Jarrett's declaration that 'a total of 6,279 of the models of ranges/ovens identified in paragraph 22 of the Complaint were sold in Florida,' and '[t]he total value of those ranges/ovens is $5,931,971.' . . . As the district court pointed out, Jarrett's declaration offered no explanation as to how she arrived at the conclusion that the 6,729 range/oven units had a 'total value' of $5,931,971. It appears from Jarrett's deposition that she was provided with the most recent manufacturer's suggested retail price ('MSRP') for each model type at issue, but it is unclear whether those MSRPs would in any way reflect the compensatory damages, interest, and costs that Miedema seeks. Furthermore, Jarrett's statement that 6,729 of the range/oven models at issue were 'sold' in Florida is not based on actual sales data. As Jarrett's deposition reveals, that figure is merely a guess based on (1) Maytag's receipt of a total of 2,943 product registrations from Florida customers for the range/oven models at issue, and (2) Maytag's estimate that, nationwide, only about 43.6% of the units it manufactures are registered by consumers. Even if we assume that this kind of estimation is reliable, it presumes that the rate of registration by Florida consumers closely parallels Maytag's national average. Given the particular facts and circumstances of the instant case the district court did not err when it found that 'great uncertainty' remained about the amount in controversy, resolved that uncertainty in favor of remand, and concluded that Maytag had not established, by a preponderance of the evidence, that the amount in controversy exceeded $5,000,000. Accordingly, remand for lack of subject matter jurisdiction was appropriate" (footnote omitted)); Chochorowski v. Home Depot USA, 585 F.Supp.2d 1085, 1093 (E.D. Mo. 2008) ("As a threshold matter, the Court interprets the petition to seek damages only for Missouri residents who rented a tool or equipment from Home Depot and paid the 'Damage Waiver' prior to Home Depot's amendment of the rental agreement. The petition defines the 'Damage Waiver' as [an] automatic up-charge of ten percent on a rental that was not part of 'applicable sales and rental taxes' and that Home Depot did not disclose as a[n] optional charge. Paragraphs 37 through 42 of the petition assert that as a result of this litigation, Home Depot changed its business practices relating to Damages Waivers during 2005 or 2006, and now uses a new version of the rental agreement which offers 'optional' 'Damage Protection' that is no longer automatically imposed on customers. The petition specifically limits the scope of its claims [to claims based on the prior Damage Waiver practice]. . . . It is clear to the Court that plaintiff does not seek damages with respect to the new rental agreement or 'Damage Protection' coverage. As a result, defendant's calculation of plaintiff's compensatory damages from 1999 to the present is over-inclusive and cannot be accepted. Although Home Depot had the opportunity to provide the Court with actual revenue figures based on its sale of Damage Waivers, it did not do so. Thus, Home Depot fails to provide evidence to support its calculation of compensatory damages. . . . Defendant's compensatory damage calculation therefore lacks the necessary detail required to establish the $5 million jurisdictional requirement, as it is based on vague and conclusory assertions that do not satisfy the preponderance of the evidence standard" (citations omitted)).*fn38
For the reasons stated, the court remands this case to Los Angeles Superior Court forthwith.