The opinion of the court was delivered by: Sheila K. Oberto United States Magistrate Judge
FINDINGS AND RECOMMENDATIONS REGARDING PLAINTIFF'S MOTION FOR REMAND
Before the Court is Plaintiff Dorrenda Thomas' motion for remand in Thomas v. Aetna Health of California, et al. ("Thomas"), No. 1:10-cv-01906-AWI-SKO. Plaintiff seeks an award of civil penalties under the California Private Attorneys General Act of 2004 ("PAGA"), codified at Cal. Lab. Code § 2699 (2010), against Defendants Aetna Health of California ("AHC"), Aetna Life Insurance Company ("ALIC"), and Aetna, Inc. ("Aetna") for various Labor Code violations.
The Thomas action is related to Gong-Chun v. Aetna Life Insurance Co., et al. ("GongChun"), 1:09-cv--01995-AWI-SKO, an earlier filed wage and hour class action brought on behalf of non-exempt current and former employees of ALIC. (See Thomas, No. 1:10-cv-01906-AWISKO, Doc. 27.)As Aetna and ALIC were both named as defendants in the Gong-Chun and Thomas actions and both cases involved the same or similar groups of plaintiffs, the two matters were related by order of the Court.
For the reasons set forth below, the Court recommends that Plaintiff's claim for PAGA penalties asserted against AHC be DISMISSED and Plaintiff's motion for remand be DENIED.
In light of the relationship between Gong-Chun and Thomas, the procedural background of each case is summarized below.
A. Gong-Chun v. Aetna Life Insurance Co., et al., 1:09-cv--01995-AWI-SKO
On September 17, 2009, Plaintiff Michael Gong-Chun filed a class action complaint against ALIC and Aetna claiming substantive Labor Code violations for (1) unpaid meal breaks under Labor Code sections 226.7 and 512(a); (2) wages not paid upon termination under Labor Code sections 201 and 202; (3) wages not timely paid during employment under Labor Code section 204; and (4) violation of the California Business & Professions Code § 17200. ALIC and Aetna removed Gong Chun to this Court on November 12, 2009. The Gong Chun class action does not state a claim for PAGA civil penalties. While Plaintiff Dorenda Thomas is not the class representative in the Gong Chun action, she is a putative class member.
On April 2, 2010, ALIC filed a motion to stay all further proceedings pending the outcome of the California Supreme Court's review of Brinker Restaurant Corp. v Superior Court, 80 Cal. Rptr. 3d 781 (2008), petition for review granted, 85 Cal. Rptr. 3d 688. ALIC's motion was granted on May 17, 2010. (See 1:09-cv-01995-AWI-SKO, Doc. 23.) Although Brinker Rest. Corp. v. Sup. Ct. was fully briefed as of May 17, 2010, several other meal break cases have been granted review by the California Supreme Court, including Brinkley v. Pub. Storage, 167 Cal. App. 4th 1278, review granted on January 14, 2009; Bradley v. Networkers Int'l LLC, No. D052365, 2009 WL 265531 (Cal. Ct. App. Feb. 5, 2009), review granted on May 13, 2009; Faulkinbury v. Boyd & Assocs. Inc., 185 Cal. App. 4th 1363 (2010), review granted on October 13, 2010; Brookler v. Radioshack Corp., No. B212893, 2010 WL 3341816 (Cal. Ct. App. Aug. 26, 2010), review granted on November 17, 2010; and Hernandez v. Chipotle Mexican Grill Inc., 189 Cal. App. 4th 751 (2010), review granted on January 26, 2011. The Supreme Court has ordered that the briefing in these cases be held pending Brinker; however, oral argument in Brinker has not yet been scheduled.
B. Thomas v. Aetna Health of California, et al., No. 1:10-cv-01906-AWI-SKO
On September 2, 2010, Plaintiff Dorrenda Thomas filed a complaint for violation of Labor Code §§ 2698 et seq. pursuant to the California Labor Code Private Attorneys General Act of 2004 ("PAGA") in Fresno County Superior Court against Defendants AHC, Aetna, and ALIC. The action was filed by Plaintiff individually and on behalf of other members of the general public similarly situated, and as an aggrieved employee pursuant to the PAGA.*fn1
According to the complaint, Defendants employed Plaintiff as a "Small Group Sales Support Broker Liaison/Renewal Consultant," a non-exempt (hourly) paid position at Defendants' Fresno County business location. (Doc. 1-1 (Complaint), ¶ 19.) Plaintiff contends that Defendants violated various California Labor Code provisions by failing to (1) pay overtime wages, (2) provide meal periods, (3) provide rest periods, (4) pay minimum wage, (5) timely pay wages upon termination, (6) timely pay wages during employment, and (6) provide complete and accurate wage statements. (Doc. 1-1, ¶¶ 41-47.) *fn2
On October 12, 2010, Defendants filed a notice of removal, claiming diversity of citizenship pursuant to 28 U.S.C. § 1332(a) as the jurisdictional predicate. Defendants ALIC and Aetna are citizens of the state of Connecticut while AHC is a citizen of California.*fn3 Plaintiff is also a citizen of California. Defendants argue, however, that AHC never employed Plaintiff, is a sham/fraudulent defendant, and AHC's citizenship must be disregarded for purposes of diversity and jurisdiction. Defendants also assert that more than $75,000 is placed into controversy by virtue of Plaintiff's complaint for PAGA penalties, and thus removal jurisdiction is properly asserted.
On November 10, 2010, Plaintiff filed a motion for remand asserting that AHC is not a fraudulent/sham defendant, and AHC's presence in the litigation destroys diversity. Plaintiff also asserts that her individual stake in the PAGA penalties is not more than $75,000, which she specifically pled in her complaint, and Defendants have not proven to a legal certainty that her portion of the PAGA penalties exceeds the jurisdictional threshold.
The motion for remand was initially scheduled for hearing before District Judge Wanger on January 31, 2011. Judge Wanger determined that reassignment to Chief District Judge Ishii and Magistrate Judge Oberto was appropriate because of the similarity of the instant action with the Gong-Chun class action currently assigned to Chief Judge Ishii. (Doc. 27.) On February 7, 2011, the motion to remand was referred to Magistrate Judge Oberto. On February 16, 2011, Defendants filed a motion to consolidate this matter with the Gong-Chun action, asserting the following:
After the Gong-Chun wage and hour class action was stayed by this Court on May 15, 2010, the Gong-Chun lawyers ([Initiative Legal Group]) filed the Thomas PAGA penalties action in state court on September 2, 2010. Aetna thereafter removed Thomas (and notified the court of the related nature of the actions). Both plaintiffs purported to represent Aetna non-exempt employees in California who allegedly were denied meal periods and other timely wages. The Gong-Chun complaint seeks alleged unpaid wages, interest, related penalties, attorneys' fees and costs. See Prayer for Relief. The Thomas complaint seeks PAGA penalties based on alleged unpaid wages, attorneys' fees and costs. See Prayer for Relief. Plaintiff Thomas is a putative class member in Gong-Chun.
Although counsel never objected to Aetna's removal of the Gong-Chun action to this Court, a motion to remand the related Thomas action was filed on November 10, 2010 and is scheduled for hearing concurrently with this consolidation motion on March 16, 2011. This is simply counsel's attempt to circumvent the Gong-Chun stay. (Doc. 30, 2:14-3:2.)
The Court determined that the motion to consolidate could be potentially rendered moot by the Court's decision regarding the motion for remand. Therefore, the Court vacated the March 16, 2011, hearing date with regard to Defendants' motion to consolidate and currently holds it in abeyance until a final decision is issued with regard to Plaintiff's motion for remand. (Doc. 34.) On April 27, 2011, a hearing was held with regard to Plaintiff's motion for remand. (Doc. 36.) Leslie Abbott, Esq. and Philippe Lebel, Esq. appeared on behalf of Defendants. Netta Roshanian, Esq. appeared on behalf of Plaintiff.*fn4
C. Representation of Plaintiffs in Gong-Chun and Thomas
Plaintiff Michael Gong-Chun is represented by Miriam Schimmel, Payan Shahian, Sang J. Park, and Orlando J. Arellano, of Initiative Legal Group, LLP ("ILG"). ILG also represented Plaintiff Dorrenda Thomas at the time her complaint was filed in Fresno County Superior Court. Thomas is now represented by the Law Offices of Mark Yablonovich. Mr. Yablonovich was once employed by ILG, but he has since started his own practice, and his firm now represents Ms. Thomas. (See Doc. 16; Doc. 32-1, ¶ 9.)
"A defendant may remove an action to federal court based on federal question jurisdiction or diversity jurisdiction." Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009) (citing 28 U.S.C. § 1441). It is presumed, however, "that a cause lies outside [the] limited jurisdiction [of the federal courts] and the burden of establishing the contrary rests upon the party asserting jurisdiction." Id. (internal quotation marks omitted).
"Federal 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) (per curiam). The removing party always bears the burden of establishing that removal is proper, and the court "resolves all ambiguity in favor of remand." Hunter, 582 F.3d at 1042.
The propriety of removal requires the consideration of whether the district court has original jurisdiction of the action, i.e., whether the case could have originally been filed in federal court based on a federal question, diversity of citizenship, or another statutory grant of jurisdiction. See Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). If the case is within the original jurisdiction of the district court, removal is proper so long as the defendant complied with the procedural requirements set forth in 28 U.S.C. § 1446. If the case is not within the original jurisdiction of the district court, removal is improper. The absence of subject matter jurisdiction is not waivable by the parties. See Am. Fire & Cas. Co. v. Finn, 341 U.S. 6 (1951).
Federal district courts have original jurisdiction over cases where there is complete diversity of citizenship, i.e., between citizens of different states. See 28 U.S.C. § 1332(a). Further, a defendant may remove an action to federal court under Section 1332 provided no defendant is a citizen of the same state in which the action was brought. See id. § 1441(a), (b). An exception to the requirement for complete diversity exists, however, when a non-diverse defendant has been fraudulently joined for the purpose of defeating diversity jurisdiction. McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). In that case, the district court may disregard a non-diverse party named in the state court complaint and retain jurisdiction if joinder of the non-diverse party is a sham or fraudulent.
B. Contentions of the Parties
Plaintiff contends that the Court lacks subject matter jurisdiction over this action. Plaintiff asserts that she is seeking relief for one cause of action only: civil penalties pursuant to PAGA. She contends that her complaint clearly and specifically pleads that monetary civil penalties under PAGA attributable to her are less than $75,000. For purposes of the amount in controversy, Plaintiff argues that only the potential civil penalties based on Labor Code violations she personally suffered may be calculated to reach the jurisdictional threshold. Moreover, because she has specifically alleged that the amount of penalties attributable to her individually is less than $75,000, Defendants may only invoke the Court's subject matter jurisdiction if they can prove to a legal certainty that the amount of potential civil penalties attributable to Plaintiff individually equals more than $75,000. Plaintiff also contends that AHC was her employer for purposes of her PAGA claim, AHC is not a sham defendant, and the matter must be remanded because complete diversity is absent.
Defendants argue that calculating the amount in controversy requires that all potential civil penalties as to each aggrieved employee be aggregated and that the civil penalties with regard to the entire group of aggrieved employees exceeds $75,000. Defendants also maintain that AHC is a sham defendant because it never controlled the conditions of Plaintiff's employment; rather, ALIC is Plaintiff's sole employer.
C. The Court Has Subject Matter Jurisdiction Over This Action
1. Diversity Exists As AHC is Fraudulently Joined
a. Legal Standard -- Fraudulent Joinder
"Fraudulent joinder is a term of art" and does not require an ill motive. McCabe, 811 F.3d at 1339; Lewis v. Time Inc., 83 F.R.D. 455, 460 (E.D. Cal. 1979), aff'd, 710 F.2d 549 (9th Cir. 1983). Joinder will be deemed fraudulent where the plaintiff fails to state a cause of action against the resident defendant, and the failure is obvious according to the settled rules of the state. Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998); McCabe, 811 F.2d at 1339. In determining whether a cause of action is stated, typically courts "'look only to a plaintiff's pleadings to determine removability.'" Ritchey,139 F.3d at 1318 (quoting Gould Mut. Life Ins. Co. of N.Y., 790 F.2d 769, 773 (9th Cir. 1986)). Yet, where fraudulent joinder is an issue, the Ninth Circuit has directed that courts may go "somewhat further" by allowing a defendant to present facts showing that joinder is fraudulent. Id. The review of the complaint, however, is constrained to the facts actually alleged therein; it does not extend to facts or causes of action that could be alleged via an amended complaint. Kruso v. Int'l Tel. & Tel. Corp., 872 F.2d 1416, 1426 n.12 (9th Cir. 1989) (affirming district court's refusal to consider allegations made in plaintiffs' unfiled, proposed amended complaint submitted as an attachment to a motion for reconsideration to determine whether valid claims had been stated for fraudulent joinder purposes (citing C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure: Jurisdiction § 3739 at 580-81 (2d ed. 1985))); Smith v. City of Picayune, 795 F.2d 482, 485 (5th Cir. 1986) ("Generally, the right of removal is determined by the pleadings as they stand when the petition for removal is filed.").
In ruling on a motion for remand where fraudulent joinder is alleged, a court must evaluate the factual allegations in the light most favorable to the plaintiff, resolving all contested issues of fact in favor of the plaintiff. Travis v. Irby, 326 F.3d 644, 649 (5th Cir. 2003); see also Albi v. St. & Smith Publ'ns, 140 F.2d 310, 312 (9th Cir. 1944) ("In borderline situations, where it is doubtful whether the complaint states a cause of action against the resident defendant, the doubt is ordinarily resolved in favor of the retention of the cause in the state court."). Federal courts in this circuit apply the fraudulent-joinder rule in cases only where it is indisputably clear that the plaintiff states no cause of action against the non-diverse defendant. See Dominick's Finer Foods v. Nat'l Constr. Servs., Inc., No. CV10-00836-SVW (PWJx), 2010 WL 891321, at *2 (C.D. Cal. Mar. 9, 2010) (citing Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067-68 (9th Cir. 2001); Kruso, 872 F.2d at 1427; McCabe, 811 F.2d at 1339; Maffei v. Allstate Cal. Ins. Co., 412 F. Supp. 2d 1049, 1053 (E.D. Cal. 2006)).
The standard for assessing whether a defendant is fraudulently joined is similar to the analysis undertaken in considering a motion to dismiss under Fed. R. Civ. P. 12(b)(6):
[B]ecause the expressed standard for fraudulent joinder is whether there is any possibility that a claim can be stated against the allegedly 'sham' defendants, the standard is necessarily similar ...