Letuligasenoa v. International Paper Company et al, No. 5:2013cv05272 - Document 37 (N.D. Cal. 2014)
Court Description: ORDER granting 19 Motion to Remand. The Court has found that Defendants have not met their burden of establishing by a preponderance of the evidence that the amount in controversy in this case exceeds $5,000,000. Accordingly, the court GRAN TS Plaintiff's Motion to Remand. The Clerk shall remand this action to Santa Clara Superior Court and CLOSE this file. Signed by Judge Edward J. Davila on May 20, 2014. (ejdlc4S, COURT STAFF) (Filed on 5/20/2014) Modified on text 5/20/2014 (ecg, COURT STAFF).
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Letuligasenoa v. International Paper Company et al Doc. 37 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 10 United States District Court For the Northern District of California 9 NORTHERN DISTRICT OF CALIFORNIA 11 SAN JOSE DIVISION 12 13 14 15 16 17 18 19 20 21 MELVYN LETULIGASENOA, Individually ) and on behalf of similarly situated and aggrieved ) employees of Defendants in the State of ) California ) ) Plaintiffs, ) ) v. ) ) INTERNATIONAL PAPER COMPANY; TIN, ) INC., which will do business in California as ) TEMPLE-INLAND, INC., and DOES 1 through ) 50, Inclusive, ) ) ) Defendants. ) Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND [Re: Docket No. 19] Presently before the court is Plaintiff Melvyn Letuligasenoa’s (“Plaintiff”) motion to 22 remand this case to Santa Clara County Superior Court. Docket Item No. 19. Plaintiff filed this 23 putative class action in that court against Defendants International Paper Company (“IP”) and Tin, 24 Inc., doing business as Temple-Inland, Inc. (“TIN”) (collectively, “Defendants”) alleging 25 violations of various wage and hour provisions of the California Labor Code, representative claims 26 under the Private Attorneys General Act (“PAGA”) and violation of the California Business and 27 Professions Code. Defendants removed the case to this court under the Class Action Fairness Act 28 (“CAFA”). Through the instant motion, Plaintiff seeks remand on the basis that Defendants have 1 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND Dockets.Justia.com 1 not made a sufficient showing that there is more than $5,000,000 in controversy as required by 2 CAFA. The court found this matter suitable for decision without oral argument pursuant to Civil 3 Local Rule 7-1(b) and previously vacated the hearing. Having carefully reviewed the parties’ 4 briefing, and for the following reasons, the court GRANTS Plaintiff’s Motion to Remand. 5 6 I. FACTUAL AND PROCEDURAL BACKGROUND Defendant IP and Defendant TIN are in the paper and packaging industry. Decl. of Alice S. Wang in Supp. of Removal (“Wang Decl.”) Ex. A ¶ 7, Docket Item No. 5. Defendant TIN was 8 acquired by Defendant IP on February 13, 2012. Id. ¶ 16. The acquisition included Defendant 9 TIN’s California employees. Decl. of Kathleen McJunkin in Supp. of Removal (“McJunkin Decl.”) 10 United States District Court For the Northern District of California 7 ¶ 10, Docket Item No. 2. The acquisition also included at least two TIN facilities in California: the 11 Gilroy Bay Sheets facility and the Gilroy Container facility. Id. Plaintiff worked as a non-exempt 12 employee at the Gilroy Bay Sheets facility. See id. ¶ 7. 13 On October 4, 2013, Plaintiff filed this case in Santa Clara County Superior Court, alleging 14 that Defendants, collectively, engaged in a systematic pattern of wage and hour violations under 15 the Labor Code and the Industrial Labor Commission Wage Orders (“IWC”) in order to “increase 16 their level of productivity.” Wang Decl. Ex. A ¶ 3, Dkt. No. 5. Specifically, Plaintiff alleges the 17 following claims: (1) failure to provide mandated meal periods in violation of Labor Code §§ 18 226.7, 512, 1198 and the “Meal Periods” Section of the IWC Wage Order; (2) failure to provide 19 mandated meal periods in violation of Labor Code §§ 226.7, 1198 and the “Rest Period” Section 20 of the IWC Order; (3) failure to pay minimum and regular wages in violation of Labor Code §§ 21 1197, 1198 and the “Minimum Wages” Section of the IWC Wage Order; (4) failure to pay 22 overtime wages in violation of Labor Code §§ 510, 1198 and the “Days and Hours Worked” 23 Section of the IWC Wage Order; (5) failure to pay vested vacation wages in violation of Labor 24 Code § 227.3; (6) failure to timely pay all wages due upon separation of employment in violation 25 of Labor Code §§ 201, 202, 1198 and the “Minimum Wages” Section of the IWC Wage Order; (7) 26 failure to maintain and provide accurate itemized wage statements in violation of Labor Code §§ 27 226, 1198, and the “Records” Section of the IWC Wage Order; (8) failure to maintain and provide 28 accurate records in violation of Labor Code §§ 1174, 1198 and the “Records” Section of the IWC 2 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 Wage Order; (9) representative claims under PAGA; and (10) violation of California Business and 2 Professions Code § 17200, et. seq. Id. ¶¶ 51-162. Plaintiff brings these claims on behalf of himself and eleven putative classes of similarly 3 situated current and former exempt and non-exempt employees of Defendants. Id. Plaintiff 5 identifies the putative classes as: (a) the Temple-Inland Vacation Class; (b) the International Paper 6 Vacation Class; (c) the Temple-Inland Meal Period Class; (d) the International Paper Meal Period 7 Class; (e) the Temple-Inland Rest Period Class; (f) the International Paper Rest Period Class; (g) 8 the Temple-Inland Off-the-Clock Class; (h) the International Paper Off-the-Clock Class; (i) the 9 Temple-Inland Wage Statement Class; (j) the International Paper Wage Statement Class; and (k) 10 United States District Court For the Northern District of California 4 the Temple-Inland and/or International Paper Final Paycheck Class. Id. ¶ 47. Additional details of 11 each class are provided below where relevant to the analysis. Defendants removed the case to this court on November 13, 2013 under CAFA. Notice of 12 13 Removal (“Removal”), Docket Item No. 1. Plaintiff filed the instant Motion to Remand on 14 December 13, 2013. Docket Item No. 19. Defendants filed an Opposition to Plaintiff’s Motion to 15 Remand on December 27, 2013. Docket Item No. 24. Plaintiff filed a Reply on January 1, 2014. 16 Docket Item No. 28. The parties do not dispute that CAFA’s minimal diversity and minimal class 17 size requirements are met. Rather, Plaintiff seeks remand solely on the ground that Defendants 18 have not made a sufficient showing that there is more than $5,000,000 in controversy as required to 19 establish federal jurisdiction under CAFA. 20 II. LEGAL STANDARD 21 A defendant may remove a civil action filed in state court to a federal district court so long 22 as the district court could have exercised original jurisdiction over the matter. 28 U.S.C. § 1441(a). 23 The federal removal statute provides that if, at any time before judgment, it appears that the district 24 court lacks subject matter jurisdiction over a case previously removed from state court, the case 25 must be remanded. 28 U.S.C. § 1447(c). The Ninth Circuit “strictly construe[s] the removal statute 26 against removal jurisdiction.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992); see also 27 Ethridge v. Harbor House Rest., 861 F.2d 1389, 1393 (9th Cir. 1988). “Federal jurisdiction must be 28 rejected if there is any doubt as to the right of removal in the first instance.” Id. “The ‘strong 3 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 presumption’ against removal jurisdiction means that the defendant always has the burden of 2 establishing that removal is proper.” Id. 3 4 III. DISCUSSION Under CAFA, a federal district court may exercise jurisdiction over a class action where (1) 5 the amount in controversy exceeds $5,000,000; (2) any member of the plaintiff class is a citizen of 6 a different state from any defendant; (3) the primary defendants are not states, state officials or 7 other government entities against whom the district court may be foreclosed from ordering relief; 8 and (4) the class has at least 100 members. 28 U.S.C. §§ 1332(d)(2), (d)(5). “[U]nder § 1332(d)(6), 9 the claims of class members are aggregated to determine whether the amount in controversy United States District Court For the Northern District of California 10 exceeds $5,000,000.” Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 684 (9th Cir. 2006). Here, 11 the parties only dispute whether CAFA’s first requirement—an amount in controversy exceeding 12 $5,000,000—is met. 13 To ascertain the amount in controversy, a court must first look to the complaint. Lewis v. 14 Verizon Commc’ns, Inc., 627 F.3d 395, 399 (9th Cir. 2010). When, in the context of removal, the 15 amount in controversy is contested and it is unclear or ambiguous from the face of the complaint 16 whether the requisite amount in controversy has been pled, the removing defendant must establish 17 by a preponderance of the evidence that the amount in controversy exceeds $5,000,000. 18 Guglielmino v. McKee Foods Corp., 506 F.3d 696, 699 (9th Cir. 2007); see also Lowdermilk v. 19 U.S. Bank Nat’l Ass’n, 479 F.3d 994, 998 (9th Cir. 2007) (“[W]hen the plaintiff fails to plead a 20 specific amount of damages, the defendant seeking removal ‘must prove by a preponderance of the 21 evidence that the amount in controversy requirement has been met.’”), overruled on other grounds. 22 CAFA’s amount in controversy requirement cannot be met through “speculation and conjecture.” 23 Lowdermilk, 479 F. 3d at 1002. Rather, the removing defendant must proffer “summary-judgment- 24 type evidence relevant to the amount in controversy at the time of removal.” Abrego Abrego, 443 25 F.3d at 690 (quoting Singer v. State Farm Mut. Auto Ins. Co., 116 F. 3d 373, 377 (9th Cir. 1997)). 26 “A defendant must set forth the underlying facts supporting its assertion that the amount in 27 controversy exceeds the statutory minimum.” Roth v. Comerica Bank, 799 F. Supp. 2d 1107, 1126 28 (C.D. Cal. 2010) (citations omitted). “In measuring the amount in controversy, a court must assume 4 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 that the allegations of the complaint are true and that a jury will return a verdict for the plaintiff on 2 all claims made in the complaint.” Kenneth Rothschild Trust v. Morgan Stanley Dean Witter, 199 3 F. Supp. 2d 993, 1001 (C.D. Cal. 2002) (internal quotations and citation omitted). Courts should 4 resolve any doubts as to removability in favor of remanding the case to state court. Gaus, 980 F. 2d 5 at 566. 6 Here, Plaintiff does not allege a specific amount in controversy in his complaint. 7 Therefore, the court must determine whether Defendants have established by a preponderance of 8 the evidence that the amount in controversy exceeds $5,000,000. The court will do so by analyzing 9 the scope of the allegations in the Plaintiff’s complaint, addressing the manner in which United States District Court For the Northern District of California 10 Defendants estimate the categories of potential damages, examining the reasonableness of the 11 variables used, and addressing Defendants’ argument that the ultimate amount in controversy 12 would actually be much higher than the calculations below. 1 13 a. Defendants’ Estimate of Potential Damages 14 In support of their Notice of Removal, Defendants provide the declaration of Human 15 Resources Specialist Kathleen McJunkin. See Dkt. No. 2. In her declaration, Ms. McJunkin reports 16 about the number of exempt and non-exempt employees during the relevant time period from the 17 Gilroy Bay Sheets facility. Id. ¶ 11. Based on these single-facility numbers, Defendants estimated 18 the amount in controversy to be: $1,474,834.80 for meal period penalties; $1,474,834.80 for rest 19 period penalties; $245,805.80 for unpaid wages; $471,000 for minimum wage civil penalties; 20 $122,902.90 for unpaid overtime premium; $184,354.35 of liquidated damages for unpaid wages; 21 $92,177.18 of liquidated damages for unpaid overtime premium; $195,000 for Section 558 22 penalties; $421,574.40 for waiting time penalties for non-exempt employees; $133,872 for waiting 23 time penalties for exempt employees; $189,000 for pay stub penalties; $204,000 for PAGA 24 penalties; and $1,302,339 for attorneys’ fees. Decl. of Christopher C. Hoffman in Supp. Of 25 Removal (“Hoffman Decl.”) ¶ 49, Docket Item No. 3. Thus, according to Defendants’ calculations 26 27 28 1 The court acknowledges Defendants’ Evidentiary Objections to the Declaration of Marta Manus in Support of Plaintiff’s Motion to Remand to State Court (“Manus Decl.”), Docket Item No. 25. The court did not rely on this declaration in analyzing this motion and thus declines to rule on this motion. 5 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 at the time of removal, the total amount in controversy just with respect to the Gilroy Bay Sheets 2 facility was $6,511,695.28. Id. 3 Defendants modified their amount-in-controversy estimate in response to information 4 contained in Plaintiff’s Motion to Remand. Particularly, Defendants expanded the waiting-time 5 penalties class from 10 exempt and 78 non-exempt employees at Gilroy Bay Sheets facility to 316 6 former employees from across all TIN facilities. Opp’n at 7:6-16, Dkt. No. 24. As a result, the 7 waiting time penalties calculation increased from $421,574.40 to $1,707,916.80. Id. at 7:10-16. 8 Defendants also reduced their calculation of the meal period class and rest period class damages 9 based on Plaintiff’s argument that the meal period class was limited to employees in the United States District Court For the Northern District of California 10 “production department.” Id. at 3:6-8. Defendants estimated the modified amount in controversy to 11 be: $1,403,671.60 for meal period penalties; $1,403,671.60 for rest period penalties; $233,945.27 12 for unpaid wages; $447,450 for minimum wage civil penalties; $116,972.63 for unpaid overtime 13 premium; $175,458.95 of liquidated damages for unpaid wages; $87,729.48 of liquidated damages 14 for unpaid overtime premium; $185,250 for Section 558 penalties; $1,707,916.80 for waiting time 15 penalties for non-exempt employees; $133,872 for waiting time penalties for exempt employees; 16 $179,550 for pay stub penalties; $48,450 for PAGA penalties; and $1,530,984.58 for attorneys’ 17 fees. Supplemental Declaration of Christopher C. Hoffman in Supp. of Def. Opp’n (“Hoffman 18 Supp. Decl.”) ¶ 51, Dkt. No. 24-3. The total amount in controversy under this revised estimate is 19 $7,654,922.91. Id. 20 In its analysis, the court will refer to Defendants’ original amount in controversy estimates 21 because the key underlying assumptions and calculations are essentially the same in the original 22 and revised amounts and, as discussed below, these assumptions do not suffice to meet Defendants’ 23 burden. However, because there is a substantial discrepancy between the original and revised 24 amounts of the non-exempt waiting time penalties, the court will address both estimates only for 25 this category. To determine the scope of the allegations, the court will only consider Plaintiff’s 26 complaint and not the class limits Plaintiff asserts in his Motion to Remand. See Harris v. Bankers 27 Life & Cas. Co., 425 F.3d 689, 694 (9th Cir. 2005) (“removability under § 1446(b) is determined 28 through examination of the four corners of the applicable pleadings, not through subjective 6 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 knowledge or a duty to make a further inquiry”); see also St. Paul Mercury Indem. Co. v. Red Cab 2 Co., 303 U.S. 283, 294 (1938) (“If the plaintiff could, no matter how bona fide his original claim in 3 the state court, reduce the amount of his demand to defeat federal jurisdiction the defendant’s 4 supposed statutory right of removal would be subject to the plaintiff’s caprice.”). i. 5 1. Meal Period Calculations 6 7 Individual Class Estimates Plaintiff alleges that Defendants failed to provide mandated meal periods for the members of the “Meal Period Classes” in violation of Labor Code §§ 226.7, 512, 1198 and the “Meal 9 Period” section of the IWC Wage Order. Wang Decl. Ex. A ¶ 58, Dkt. No. 5. “An employer may 10 United States District Court For the Northern District of California 8 not employ an employee for a work period of more than five hours per day without providing the 11 employee with a meal period of not less than 30 minutes.” Cal. Lab. Code § 512(a). Under the 12 Labor Code, “[a]n employer shall not require an employee to work during a meal or rest… period 13 mandated pursuant to an… order of the Industrial Welfare Commission…” Cal. Lab. Code § 14 226.7(b). Additionally, “[i]f an employer fails to provide an employee a meal or rest…period…the 15 employer shall pay the employee one additional hour of pay at the employee’s regular rate of 16 compensation for each workday that the meal or rest… period is not provided.” Cal. Lab. Code § 17 226.7(c). 18 Plaintiff defines the meal period classes as: 19 All non-exempt California employees of [TIN and IP] who at any time since the four years 20 preceding the filing of the complaint through the date of certification worked on at least one 21 occasion more than five hours and who according to [TIN records and IP records] were not 22 provided with a duty-free meal period of at least 30 minutes in length. 23 24 Wang Decl. Ex. A ¶¶ 47(c)-(d), Dkt. No. 5. Defendants claim that “[d]uring the relevant time period, all non-exempt employees were 25 regularly scheduled to work an eight (8) hour day.” McJunkin Decl. ¶ 26, Dkt. No. 2. Thus, in 26 calculating the estimate of $1,474,834.80 for the meal period penalties, Defendants assume that 27 “Plaintiff seeks a class representing all California employees of Defendants.” See Hoffman Decl. ¶ 28 2, Dkt. No. 3. Defendants used this assumption to calculate the average number of all full-time 7 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 equivalent employees (“FTEs”) during each year of the class period. 2 Id. ¶ 4. Defendants also 2 assume that there are 50 workweeks per year and 202 actual workweeks in the class period. 3 Id. 3 Defendants multiply the number of FTEs employed during each year of the class period by the 4 actual number of workweeks per year to arrive at a total of 13,098 workweeks in the class period. 4 5 Id. ¶ 5. Defendants further assume that the meal period violation occurred on a daily basis to each 6 FTE during the class period. Hoffman Decl. ¶ 22, Dkt. No. 3. Since Plaintiff seeks “an award of 7 one additional hour of pay at the regular rate of compensation pursuant to Labor Code § 227.6(b) 8 [per violation],” Defendants assume all class members can recover one hour of wages per violation. 9 Id. ¶ 21. Defendants multiply 13,098 weeks by 5 violations (based on five days per week) by an United States District Court For the Northern District of California 10 average hourly wage of $22.52 to arrive at a total meal period class estimate of $1,474,834.80. Id. ¶ 11 23. Defendants’ calculations are flawed for two reasons. First, the assumption that all non- 12 13 exempt employees are included in the class is not supported by the complaint. The “Meal Period 14 Class” members include those non-exempt employees who “worked on at least one occasion more 15 than five hours.” Considering that, according to Defendants, all non-exempt employees were 16 scheduled to work eight-hour days, it would be reasonable to assume that all non-exempt 17 employees worked “more than five hours,” in satisfaction of that portion of the class definition. 18 However, by its own terms, the “Meal Period Class” is further limited only to those non-exempt 19 employees “who according to the Defendants’ records were not provided with a duty-free meal 20 period of at least 30 minutes.” Therefore, the class only encompasses those non-exempt employees 21 who were actually denied a meal period. Plaintiff’s allegations in the complaint do not facially 22 suggest that 100% of non-exempt employees were denied a meal break. Therefore, Defendants’ 23 assumption that the class includes all non-exempt employees is overly broad. Second, the assumption that every class member was denied a meal break every single day 24 25 is speculative. As discussed above, Defendants account for one meal period violation per employee 26 2 27 28 Defendants estimate 66, 66, 69, 63, and 60 FTEs, respectively, for each year of the class period. Defendants estimate 13, 50, 50, 50, and 39 workweeks, respectively, for each year of the class period. 4 Defendants used the following calculations: 66 FTEs x 13 weeks = 858; 66 FTEs x 50 weeks = 3300; 69 FTEs x 50 weeks = 3450; 63 FTEs x 50 weeks = 3150; and 60 FTEs x 39 weeks = 2340. 3 8 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 per workday for the entire relevant class period. However, there is no evidence or allegations upon 2 which one can adduce a 100% violation rate, i.e. that 100% of the class members were denied a 3 meal period 100% of the time. The complaint does not appear to specifically claim that Defendants 4 committed meal period violations against every class member on a daily basis. Nor do Defendants 5 provide their own evidence or analysis of the application of the relevant policies. The violation 6 frequency proposed by Defendants is thus unsupported by the record. See Roth 799 F. Supp. 2d at 7 1129 (concluding that cases allowing defendants to rely on unsupported assumptions of 100% 8 violation rates “improperly shift the burden to plaintiff to refute speculative assertions of 9 jurisdiction and establish that there is no jurisdiction”). United States District Court For the Northern District of California 10 The court acknowledges that a removing defendant is not responsible for conducting “a 11 fact-specific inquiry into whether the rights of each and every potential class member were 12 violated” that results in answering “the ultimate question the litigation presents.” Bryan v. Wal- 13 Mart Stores, Inc., No. 08-CV-5221 SI, 2009 WL 440485, *3 (N.D. Cal. Feb. 23, 2009). However, 14 in evaluating whether a removing defendant has met its burden, it is proper for courts to consider 15 which party has access to or control over the records and information required to determine 16 whether the amount in controversy requirement is met. Id. at 1129. Here, Defendants “are in the 17 best position to adduce evidence regarding the working hours and wages” of their employees. Roth, 18 799 F. Supp. 2d at 1130. The 100% class inclusion and the 100% violation rates are simply too 19 broad given the information in Defendants’ control. While the court does not expect Defendants 20 here to resolve actual liability at this stage, it does expect them to put forth a more specific effort 21 towards establishing jurisdiction. As suggested by the court in Roth, Defendants in this case could 22 have proffered, for example, evidence regarding their actual policies or provided a sampling 23 showing that it is more likely than not that there was a 100% violation rate. Id. at 1130. 24 2. Rest Period Calculations 25 Plaintiff alleges Defendants failed to provide mandated rest periods for the members of the 26 “Rest Period Classes” in violation of Labor Code §§ 226.7, 1198 and the “Rest Periods” section of 27 the IWC Wage Order. Wang Decl. Ex. A ¶¶ 71-73, Dkt. No. 5. Plaintiff defines the rest period 28 classes specifically as: 9 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 All non-exempt California employees of [TIN and IP] who at any time since the four (4) 2 years preceding the filing of the complaint through the date of certification worked on at 3 least one occasion at least 3.5 hours and who were not authorized and permitted a duty-free 4 rest period of at least 10 minutes in length. 5 6 Wang Decl. Ex. A ¶¶ 47(e)-(f), Dkt. No. 5. In calculating the estimate of $1,474,834.80 for the rest period penalties, Defendants again presume that all non-exempt employees are class members and that they were all denied rest breaks 8 every workday. Hoffman Decl. ¶¶ 25-26, Dkt. No. 3. These assumptions are flawed and 9 unsupported by the record for the same reasons as set forth in the previous section. Moreover, 10 United States District Court For the Northern District of California 7 Defendants err in separately calculating estimates for the meal and rest period classes because 11 Labor Code § 226.7 limits employees denied meal periods, rest periods, or both to a single 12 recovery of an additional hour’s wages per day. Cal. Labor Code § 226.7; Roth, 799 F. Supp. 2d at 13 1120; see also Lyon v. W.W. Grainger, Inc., No. 10-CV-00884-WHA, 2010 WL 1753194, *4 14 (N.D. Cal. Apr. 29, 2010) (holding that the defendant’s calculation of the amount in controversy 15 with respect to missed meal and rest breaks was too high because, inter alia, it assumed “recovery 16 for each violation instead of one recovery per day”). 17 3. Unpaid Wages, Overtime Wages and Liquidated Damages Calculations 18 Plaintiff alleges that Defendants failed to pay minimum wages for the members of the “Off- 19 the-Clock Class” in violation of Labor Code §§1197, 1198 and the “Minimum Wages” section of 20 the IWC Wage Order. Wang Decl. Ex. A ¶¶ 81-84, Dkt No. 5. Under California law, the 21 “minimum wage for employees fixed by the commission is the minimum wage to be paid to 22 employees, and the payment of a less wage than minimum wage so fixed is unlawful.” Cal. Lab. 23 Code § 1197. Plaintiff also alleges Defendants failed to pay overtime wages for the members of the 24 “Off-the-Clock Class” in violation of Labor Code §§510, 1198 and the “Days and Hours Worked” 25 section of the IWC Wage Order. Wang Decl. Ex. A ¶ 98. Under California law, “[a]ny work in 26 excess of eight hours in one workday and any work in excess of 40 hours in any one workweek and 27 the first eight hours worked on the seventh day of work in any one workweek shall be compensated 28 at the rate of no less than one and one-half times the regular rate of pay for an employee.” Cal. Lab. 10 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 Code §510. Plaintiff further seeks recovery of liquidated damages under Labor Code § 1194.2. 2 Wang Decl. Ex. A ¶ 89, Dkt. No. 5. Under California law, “[i]n any action under Section…1194 to 3 recover wages because of the payment of a wage less than the minimum wage fixed by an order of 4 the commission or by statute, an employee shall be entitled to recover liquidated damages in an 5 amount equal to the wages unlawfully unpaid and interest thereon.” Cal. Labor Code § 1194.2(a). 6 Since all of these claims are built upon the unpaid wages calculations, the court will analyze them 7 together. 8 In calculating the estimate of $245,805.80 for unpaid wages, Defendants assume that all non-exempt employees worked a total of fifty unpaid minutes per week based on ten minutes per 10 United States District Court For the Northern District of California 9 day of unpaid wages during the class period. Hoffman Decl. ¶¶ 7-8, Dkt. No. 3. Defendants do not 11 explain the basis for this assumption or submit evidence to support it other than by stating: 12 “Conservatively, we estimate that Plaintiff and members of the putative class worked a total of 10 13 minutes per day unpaid between these meal breaks (30 minute meal period plus two 10-minute rest 14 breaks).” Id. ¶ 7. Moreover, Defendants again make a 100% inclusion and 100% violation 15 assumption, although Plaintiff defines the off-the-clock classes as non-exempt employees who 16 “were suffered or permitted to work and who were not paid for all time worked.” Wang Decl. Ex. 17 A ¶¶ 47 (g)-(h), Dkt. No. 5. These assumptions are unsupported by the record for the same reasons 18 as set forth in previous sections. 19 In calculating the estimate of $122,902.90 for overtime wages, Defendants assume that any 20 additional wages sought by Plaintiff are “necessarily overtime wages” because all non-exempt 21 employees worked forty hours per week and eight hours per day. Hoffman Decl. ¶¶ 11-12, Dkt. 22 No. 3. Defendants also state that 90% of non-exempt employees worked overtime. McJunkin Decl. 23 ¶ 27, Dkt. No. 2. Defendants assume overtime wages were denied on a daily basis and use the 24 unpaid wages previously detailed to calculate the overtime premium payments. Hoffman Decl. ¶¶ 25 10, 12, Dkt. No. 3. Defendants’ assumptions on overtime wages are insufficient for three reasons. 26 First, the overtime calculations are based on the flawed unpaid wages estimate. Second, Defendants 27 employ a 100% inclusion rate, despite the fact that Ms. McJunkin stated that 90% of employees 28 worked overtime. Third, Defendants again assume a 100% violation rate. 11 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 As to Defendants’ liquidated damages calculation, such damages are based on the “amount 2 equal to wages unlawfully paid.” Cal. Lab. Code § 1194.2. Since Defendants’ liquidated damages 3 calculation is based on the amount equal to Defendants’ unpaid and overtime wage calculations, 4 the liquidated damages calculation is also flawed. 4. Waiting Time Penalty Calculations 5 6 Plaintiff claims Defendants failed to timely pay all wages due upon separation for the members of the “Final Paycheck Class” in violation of Labor Code §§ 201-02, 1198 and the 8 “Minimum Wages” section of the IWC Wage Order. Wang Decl. Ex. A ¶¶ 112, 115-116, Dkt No. 9 5. Under California law, employers must pay all wages owed within seventy-two hours of when an 10 United States District Court For the Northern District of California 7 employee resigns, and immediately when the employee is discharged or laid off. Cal. Lab. Code §§ 11 201-202. When an employer willfully fails to pay wages upon separation in a timely fashion, the 12 employee is entitled to normal wages for every day the wages are late, up to a maximum of thirty 13 days. Cal. Lab. Code § 203. Plaintiff defines the “Final Paycheck Class” specifically as: 14 All California employees of [TIN and IP] who at any time since the three (3) years 15 preceding the filing of the complaint through the date of certification: 16 (i) were discharged from their employment and who were not paid immediately all of 17 their wages earned and unpaid at the time of their discharge including vacation 18 wages 19 (ii) did not have a written contract for a definite period and quit their employment with 20 at least 72 hours previous notice of their intention to quit, and who were not paid all 21 of their wages at the time of quitting including vacation wages, and/or 22 (iii) did not have a written contract for a definite period and quit their employment 23 without at least 72 hours previous notice of their intention to quit, and who were not 24 paid all of their wages, including vacation wages, not later than 72 hours after 25 quitting and who were not paid waiting time penalties under California Labor Code 26 section 203, for each day the wages went unpaid from the due date until paid or 27 until an action is commenced, to a maximum of 30 calendar days. 28 Wang Decl. Ex. A at 11 ¶ 47(k), Dkt. No. 5. 12 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 Defendants contend that Plaintiff seeks waiting time penalties for both exempt and non- 2 exempt employees. Hoffman Decl. ¶ 18, Dkt. No. 3. For exempt employees, Defendants state there 3 were ten exempt employees who were getting paid an average of $55.78 per hour for eight hours at 4 the time of IP’s acquisition of TIN. Hoffman Decl. ¶ 19(a), Dkt. No. 3. Defendants multiplied these 5 numbers by the Labor Code’s maximum recovery of thirty days to arrive at an amount of $133,872 6 for waiting time penalties of exempt employees. Id. ¶¶ 19(a)-(c). Similarly, Defendants state that 7 there were seventy-eight non-exempt employees who were getting paid an average of $22.52 per 8 hour for eight hours a day during the time of the acquisition. Id. ¶¶ 20(a)-(b). They again multiplied 9 these numbers by thirty days and estimated an amount of $421,574 for waiting time penalties of United States District Court For the Northern District of California 10 non-exempt employees. Id. ¶ 20(d). 11 Because Defendants substantially changed the waiting time penalties amount—from 12 $421,574 to $1,707,916.80—in their Opposition, the court will briefly address the new non-exempt 13 waiting time penalties calculation. See Cohn v. Petsmart, Inc., 281 F.3d 837, 840 n. 1 (9th Cir. 14 2002) (explaining that a court may properly consider evidence the removing party submits in its 15 opposition to remand, even if this evidence was not submitted with the original removal petition). 16 In their Opposition, Defendants assert there are actually 316 terminated non-exempt employees 17 instead of 78 as in their original estimate. Hoffman Supp. Decl. ¶ 20(a), Dkt. No. 24-3. They based 18 this number on the total number of TIN employees terminated across all of TIN’s former California 19 facilities during the relevant class period, instead of limiting themselves to the Gilroy Bay Sheets 20 facility as they did for all other calculations. See id. Multiplying the 316 employees by $22.52 per 21 hour for eight hours a day for thirty days, Defendants calculated the new $1,707,916.80 amount. Id. 22 Regardless of which calculation is considered, it is flawed for the same reasons as discussed 23 in previous sections. Whether considering just the Gilroy Bay Sheets facility exempt and non- 24 exempt employees or all terminated TIN employees, Defendants assume that each employee would 25 be able to recover the maximum thirty days of penalties. Defendants have pointed to no statements 26 by Plaintiff nor evidence in their own possession to support these assumptions. As such, it is 27 unreasonable to assume the 100% violation rate proposed by Defendants. 28 13 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 5. Labor Code §§ 558, 1197.1, 226 and PAGA Penalty Calculations 2 In his complaint, Plaintiff invokes the statutory penalties available under Labor Code §§ 3 558, 1197.1, 226 and PAGA in connection with his claims. Defendants use identical underlying 4 variables in calculating the statutory penalty estimates pursuant to Labor Code §§ 558, 1197.1, 226 5 and PAGA. Therefore, the court will analyze these claims together. 6 Labor Code § 558 provides for an initial civil penalty in the amount of “fifty dollars ($50) 7 for each underpaid employee for each pay period for which the employee is underpaid” and 8 subsequent penalties in the sum of “one hundred dollars ($100) for each underpaid employee for 9 each pay period for which the employee is underpaid.” Cal. Lab. Code § 558(a)(1)-(2). Labor Code United States District Court For the Northern District of California 10 § 1197.1 provides for an initial civil penalty of “one hundred dollars ($100) for each underpaid 11 employee for each pay period for which the employee is underpaid” and subsequent penalties in 12 the sum of “two hundred fifty dollars ($250) for each underpaid employee for each pay period for 13 which the employee is underpaid.” Cal. Lab. Code § 1197.1(a)(1)-(2). Labor Code § 226 permits 14 penalties in the amount of “fifty dollars ($50) for the initial pay period in which a violation occurs 15 and one hundred dollars ($100) per employee for each violation in a subsequent pay period.” Cal. 16 Lab. Code § 226(e)(1). PAGA provides for an initial civil penalty in the amount of one hundred 17 dollars ($100) for each “aggrieved” employee for each pay period for which the employee 18 experienced a violation of the Labor Code and subsequent penalties of two hundred dollars ($200) 19 for each aggrieved employee for each pay period for which the employee experienced a violation 20 of the Labor Code. Cal. Lab. Code § 2699(f)(2). 21 In calculating statutory penalties, Defendants limit the time period to one year due to the 22 statute of limitations. Hoffman Decl. ¶¶ 28, 33, Dkt. No. 3. Defendants estimate there were sixty 23 FTEs during this one-year period and calculate thirty-two pay periods during the same year. Id. ¶¶ 24 28, 30, 33, 35. Defendants include all FTEs in the respective classes and assume that every 25 employee would receive the initial violation amount. Defendants further assume that every 26 employee would receive the subsequent violation amount for all thirty-two pay periods. Based on 27 these assumptions, Defendants calculate each respective statutory penalty: $195,000 for Section 28 558 penalties, $471,000 for Section 1197.1 penalties, $189,000 for Section 226 penalties, and 14 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 $204,000 for PAGA penalties. Hoffman Decl. ¶¶ 31, 36, 40, 44, Dkt. No. 3. Defendants’ 2 assumptions as to these statutory penalties are unsupported by the record for the same reasons 3 identified by the court in previous sections, i.e. that there was a 100% violation rate. 5 6. Attorneys’ Fees Calculations 4 Defendants ask the court to consider the attorneys’ fees sought by Plaintiff in calculating 5 6 the amount in controversy. Attorneys’ fees may be included in the calculation of the amount in 7 controversy supporting CAFA jurisdiction. See Galt G/S v. JSS Scandinavia, 142 F. 3d 1150, 1156 8 (9th Cir. 1998) (holding that “where an underlying statute authorizes an award of attorney’s fees, 9 either with mandatory or discretionary language, such fees may be included in the amount in United States District Court For the Northern District of California 10 controversy”). Considering that several statutes invoked by Plaintiff authorize the award of 11 attorneys’ fees, Defendants’ inclusion of the fees is reasonable. See, e.g., Cal. Lab. Code § 218.5 12 (“[I]n any action brought for the nonpayment of wages, fringe benefits, or health and welfare or 13 pension fund contributions, the court shall award reasonable attorney’s fees and costs to the 14 prevailing party if any party to the action requests attorney’s fees and costs upon the initiation of 15 the action”). However, as Defendants’ attorneys’ fees are based on a benchmark percentage of 16 Defendants’ unsupported amount in controversy estimate, the attorneys’ fees calculations are 17 similarly unreliable. See Hoffman Decl. ¶ 49, Dkt. No. 3. 18 b. Defendants’ “Ultimate Amount in Controversy” 19 Given that Defendants have failed to show any reasonable individual class estimate by a 20 preponderance of the evidence, the court cannot find that Defendants have shown by a 21 preponderance of the evidence that these class estimates, cumulatively, exceed $5,000,000. In an 22 attempt to avoid this conclusion, Defendants argue that “the Complaint applies to all of 23 Defendants’ California facilities, yet Defendants based their calculations on only one facility… 24 [t]herefore, the amounts calculated by Defendants in support of removal are only the ‘tip of the 25 iceberg’ relative to the entire amount put into controversy by Plaintiffs.” Opp’n at 3:21-25, Dkt. 26 5 27 28 Because the court finds that the assumptions used to calculate the statutory penalties to be flawed, it need not address the parties’ dispute as to whether the full value of the PAGA claims can be considered for purposes of determining the amount in controversy for CAFA jurisdiction. 15 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND 1 No. 24. Indeed, Defendants argue that “logic dictates the ultimate amount in controversy for all 2 California employees… at all of Defendants’ California facilities would be much higher.” Hoffman 3 Decl. ¶ 2, Dkt. No. 3. While Defendants’ “tip of the iceberg” argument is an attractive one, they fail to provide 5 even basic pieces of information from which the court could find that, under this expanded view, 6 the amount-in-controversy likely exceeds $5,000,000. For instance, Defendants do not specify how 7 many facilities exist in California. Defendants state in their Opposition, without evidence from 8 their proffered declarations, that there are seven TIN facilities in California; however they do not 9 provide the total number of California IP facilities. Opp’n at 3:23, Dkt. No. 24. Further, Defendants 10 United States District Court For the Northern District of California 4 do not provide the number of employees in all California IP and TIN facilities, despite the fact that 11 they contend the classes encompasses “‘[a]ll California employees,’ including employees at IP 12 sites that were not previously owned by TIN.” Opp’n at 7:20-21, Dkt. No. 24. Nor do they explain 13 whether the Gilroy Bay Sheets facility, on which they based most of their calculations, is typical of 14 their other California facilities in terms of total size, number of non-exempt and exempt employees, 15 and operating procedures. Such information is squarely within Defendants’ control. See Roth, 799 16 F. Supp. 2d at 1130. Absent such information, the court has no basis on which to find the amount- 17 in-controversy requirement is satisfied. Furthermore, as explained in detail in this Order, where 18 Defendants did provide numbers and calculations, they failed to adequately tailor that data to the 19 scope of Plaintiff’s class definitions. It would thus be inappropriate for the court to extrapolate 20 these estimates out to the entire class. See Pham v. JPMorgan Chase Bank, N.A., No. 12-CV- 21 06579, 2013 WL 1501505, at *3 (N.D. Cal. Apr. 10, 2013) (remanding action where defendants’ 22 amount in controversy calculation, which extrapolated from three class representatives to the entire 23 class, was unsupported by the record); see also Altamirano v. Shaw Indus., Inc., No. 13-CV-0939, 24 2013 WL 2950600, at *7 (N.D. Cal. June 14, 2013) (explaining that the “Court will evaluate the 25 reasonableness of any assumed [wage and hour] violation rate based on the evidence submitted and 26 the allegations contained in the complaint”). 27 28 16 Case No.: 5:13-CV-05272-EJD ORDER GRANTING PLAINTIFF’S MOTION TO REMAND
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