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Labastida v. McNeil Technologies

November 23, 2010


The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge


Plaintiffs Mariana Labastida, Abraham Cecena, and George Van Hemert bring this action, on behalf of themselves and others similarly situated, against Defendants McNeil Technologies, Inc. and Invizion, Inc. for alleged violations of the California labor code. Defendant Invizion, Inc. removed the action on August 11, 2010 pursuant to the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d). Plaintiffs timely filed a motion seeking remand of the case to state court [Doc. No. 8]. Defendants filed an opposition to the motion, to which Plaintiffs replied [Doc. Nos. 12 & 13]. On October 25, 2010, the Court heard oral argument from defense counsel and thereafter took the motion under submission [Doc. No. 14]. For the following reasons, the Court DENIES Plaintiffs' motion.


On September 10, 2007, Plaintiffs filed the underlying class action complaint against Defendant McNeil Technologies, Inc. in San Diego County Superior Court on behalf of those who are or have been employed by McNeil in any position in the State of California during the class period. McNeil is a contractor that provides professional services to the federal government. Plaintiffs allege over the course of at least four years prior to the filing of this action, McNeil denied the class of employees overtime compensation and meal and rest periods, and failed to comply with California's wage laws. Since the commencement of the litigation, Plaintiffs filed several amended complaints, including a Third Amended Complaint on November 24, 2008 and a Fourth Amended Complaint on September 24, 2009.

The Fourth Amended Complaint is the operative pleading and alleges eight causes of action under California law against Defendant McNeil, including: 1) violation of California Labor Code section 510 and 1194 (failure to pay overtime wages); 2) violation of California Labor code sections 226.7 and 512(a) (failure to provide meal periods or pay meal period premiums); 3) violation of California Labor Code section 226.7(a) (failure to provide rest periods or pay rest period premiums); 4) violation of California Labor Code section 226(a) (failure to provide accurate, itemized wage statements); 5) violation of California Labor Code sections 201, 202, 203 (failure to timely pay wages ate termination); 6) violation of California Business and Professions Code section 17200, et seq. (unfair competition law); and, 7) declaratory relief under Labor Code section 2698 et seq. (Private Attorneys General Act of 2004 ("PAGA")).

On October 20, 2009, Plaintiffs mailed a settlement demand letter to McNeil. The demand letter estimated McNeil's potential exposure at trial to be $10.3 million. The amount reflected the inclusion of prejudgment interest at the rate of ten percent per anum and PAGA penalties at one hundred percent recovery. On March 2, 2010, Plaintiffs' counsel attended a settlement conference with McNeil's counsel. At the meeting, McNeil's counsel informed Plaintiffs' counsel that McNeil believed its maximum exposure was $1,985,876.13. After the settlement conference, Plaintiffs requested McNeil's un-redacted payroll records in order to determine a reasonable counter offer.

In May 2010, while reviewing the payroll records, Plaintiffs discovered that Invizion, Inc. had also paid the wages of class members. Like McNeil, Invizion is a contractor of professional services for the federal government. On June 28, 2010, Plaintiffs filed an amendment substituting Invizion as a Doe defendant. On July 6, 2010, Plaintiffs served Invizion's agent for service of process in California with the Fourth Amended Complaint.*fn1 See Plaintiffs' Motion to Remand, Ex. "A." Plaintiffs served Invizion at its corporate headquarters in Virginia on July 13, 2010. Id., Ex. "D." On August 11, 2010, Invizion filed its Notice of Removal alleging federal subject matter jurisdiction pursuant to the Class Action Fairness Act of 2005 ("CAFA"), 28 U.S.C. §1332(d).


On September 10, 2010, Plaintiffs filed a motion to remand this action to state court, arguing that Invizion's allegations of timeliness in the removal petition are procedurally defective, and that Invizion has failed to establish by a preponderance of the evidence that the amount in controversy requirement under CAFA is satisfied. Remand may be ordered either for lack of subject matter jurisdiction or due to a defect in the removal procedure. Aguon-Schulte v. Guam Election Comm'n, 496 F.3d 1236, 1240 (9th Cir. 2006). Courts strictly construe the removal statutes against federal jurisdiction, and jurisdiction must be rejected if there is any doubt as to the right of removal. Gaus v. Miles Inc., 980 F.2d 564, 566 (9th Cir. 1992). The removing defendant has the burden of showing that it complied with the procedural requirements for removal. See, e.g., Riggs v. Plaid Pantries, Inc., 233 F. Supp. 2d 1260, 1264 (D. Or. 2001).

A. Amount in Controversy

As amended by CAFA, 28 U.S.C. § 1332(d) vests district courts with "original jurisdiction of any civil action in which, inter alia, the amount in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs," and in which the aggregate number of proposed plaintiffs is over 100 or greater, and any member of the plaintiff class is a citizen of a state different from any defendant. 28 U.S.C. § 1332(d) (CAFA). Under CAFA, the party seeking removal bears the burden of establishing removal jurisdiction. See Abrego v. Abrego v. The Dow Chemical Co., 443 F.3d 676, 685 (9th Cir. 2006).

The parties do not dispute numerosity or diversity. Nor do they dispute that Plaintiffs' Fourth Amended Complaint is silent as to the amount in controversy. "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." Abrego Abrego v. The Dow Chem. Co., 443 F.3d 676, 683 (9th Cir. 2006). "Under this burden, the defendant must provide evidence that it is 'more likely than not' that the amount in controversy" satisfies the jurisdictional amount requirement. Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996); see also Guglielmino v. McKee Foods Corp., 506 F.3d 696, 699 (9th Cir. 2007) ("We have since applied the preponderance holding in Sanchez to complaints filed under . . . [CAFA] that do not specify a particular amount in controversy.").

Invizion relies upon Plaintiffs' Third Amended Complaint and the October 2009 settlement demand letter in order to establish that the amount in controversy requirement is met in this case. As Plaintiffs correctly argue, reliance on Plaintiffs' Third Amended Complaint is not proper as a superseded pleading "may not be considered . . . in determining whether the suit was removable." Thiel v. Southern Pac. Co., 126 F.2d 710, 712 (9th Cir. 1942). Rather, "whether [this] suit was removable . . . must 'be determined according to [Plaintiffs'] pleading at the time of the petition for removal.'" Id. (quoting Pullman Co. v. Jenkins, 305 U.S. 534, 537 (1939) (emphasis added)). Thus, although Plaintiffs' Third Amended Complaint stated a specific amount of damages sought, Plaintiffs' Fourth Amended Complaint is silent as to the amount in controversy, giving rise to Invizion's burden to produce evidence that otherwise establishes that the jurisdictional requirement has been met.

Invizion points to Plaintiffs' October 2009 settlement demand, which far exceeded the $5 million amount in controversy requirement. A plaintiff's reasonable settlement demand constitutes evidence sufficient to establish the amount in controversy by a preponderance of the evidence. Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002). In Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002), the court held that a letter stating the amount necessary to settle a case can be relevant evidence of the amount in controversy if it appears to reflect a reasonable estimate of the claim, especially where the plaintiff does not later disavow the demand as inflated or present contrary evidence. Here, Plaintiffs argue that the settlement demand was improperly inflated and therefore cannot be relied upon at this juncture to establish the amount actually in controversy. Plaintiffs assert that the demand included prejudgment interest, which is excludable from the amount in controversy calculation, and the demand calculated recovery under Plaintiffs' PAGA claim at 100% when Plaintiffs are entitled to only 25% of any such recovery (as 75% goes to California's Labor and Workforce Development Agency ("LWDA")). Regarding PAGA recovery, as one court has recently surmised, "the question is not how much Plaintiff or the class will ultimately recover; the amount in controversy is calculated based upon the amount put into controversy by the complaint, regardless of how the recovery is ...

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