Avila v. Rue 21, Inc. ( 2020 )

2 3 UNITED STATES DISTRICT COURT 4 FOR THE EASTERN DISTRICT OF CALIFORNIA 5 6 MARIA AVILA, individually, and on behalf of 1:19-cv-01040-LJO-SKO other members of the general public similarly 7 situated and on behalf of other aggrieved CORRECTED1 MEMORANDUM employees pursuant to the California Private DECISION AND ORDER GRANTING 8 Attorneys General Act, DEFENDANT’S MOTION TO REMAND UNDER 28 U.S.C. § 1447. 9 Plaintiff, (ECF NO. 4) 10 v. 11 RUE21, INC., an unknown business entity, and DOES 1-100, inclusive, 12 Defendants. 13 14 I. INTRODUCTION 15 This is a wage and hour putative class action first initiated by Plaintiff Maria Avila (“Plaintiff”) 16 in the Tulare Superior Court. After Plaintiff filed the operative First Amended Complaint (the “FAC”) 17 for herself, as well as on behalf of other members of the general public similarly situated and on behalf 18 of other aggrieved employees pursuant to the California Private Attorneys General Act (“PAGA”), 19 Defendant Rue21, Inc. (“Defendant”) removed the case to this Court pursuant to the Class Action 20 Fairness Act (“CAFA”), 28 U.S.C. § 1332(d), on July 30, 2019. ECF No. 1. “A motion to remand is the 21 proper procedure for challenging removal.” Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 22 23 24 1 It has come to the Court’s attention that the original order, ECF No. 10, contained a mathematical error. This order, which 25 supersedes the or iginal, corrects that error and makes additional changes to address the critical jurisdictional issues. 2 Remand on August 29, 2019, as required by 28 U.S.C. § 1447(c). ECF No. 4. In particular, Plaintiff 3 contends that the removal was untimely and that Defendant has failed to meet its burden of showing by a 4 preponderance of the evidence that the amount in controversy exceeds $5 million as required by CAFA. 5 Id. at i. Defendant filed an Opposition on September 16, and Plaintiff replied on September 23. ECF 6 Nos. 5-6. 7 Pursuant to Local Rule 230(g), the Court finds this matter suitable for a decision on the papers. 8 Having considered all of the arguments raised in the parties’ submissions, relevant law, and record in 9 this case, the Court GRANTS the Motion. 10 II. BACKGROUND 11 Defendant allegedly employed Plaintiff as an hourly-paid, non-exempt employee from 12 approximately October 2013 to November 2018. ECF No. 1, Exh. B (“FAC”) ¶ 25. The FAC asserts 13 eleven causes of action against Defendant. Id., FAC at 1-2. The first nine causes of action are based on 14 violations of various sections of the California Labor Code for unpaid overtime, meal and rest periods, 15 minimum wage, and business expenses; for non-compliant with wage statements; and for failure to keep 16 requisite payroll records and to timely pay wages during employment and final wages. Id. The tenth 17 cause of action is for violation of the California Business & Professions Code §§ 17200, et seq., and the 18 eleventh cause of action is for violation of PAGA. Id. 19 III. LEGAL STANDARD 20 “[A]ny civil action brought in a State court of which the district courts of the United States have 21 original jurisdiction, may be removed by the defendant or the defendants, to the district court of the 22 United States for the district and division embracing the place where such action is pending.” 28 U.S.C. 23 § 1441(a). Under CAFA, “a district court has original jurisdiction over a class action where: (1) there 24 are one-hundred or more putative class members; (2) at least one class member is a citizen of a state 25 different from the state of any defendant; and (3) the aggregated amount in controversy exceeds $5 2 action device which, in the view of CAFA’s proponents, had often been used to litigate multi-state or 3 even national class actions in state courts.” Singh v. Am. Honda Fin. Corp., 925 F.3d 1053, 1067 (9th 4 Cir. 2019) (internal quotation marks and citations omitted.) “[N]o antiremoval presumption attends 5 cases invoking CAFA, which Congress enacted to facilitate adjudication of certain class actions in 6 federal court.” Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 89 (2014). 7 “[T]he plaintiff is ‘master of her complaint’ and can plead to avoid federal jurisdiction.” 8 Guglielmino v. McKee Foods Corp., 506 F.3d 696, 700 (9th Cir. 2007) (internal citation omitted). 9 Nevertheless, “[t]he burden of establishing removal jurisdiction, even in CAFA cases, lies with the 10 defendant seeking removal.” Washington v. Chimei Innolux Corp., 659 F.3d 842, 847 (9th Cir. 2011) 11 (citation omitted). “A defendant seeking removal must file in the district court a notice of removal 12 ‘containing a short and plain statement of the grounds for removal . . . .’” Ibarra v. Manheim 13 Investments, Inc., 775 F.3d 1193, 1197 (9th Cir. 2015) (quoting 28 U.S.C. § 1446(a)). 14 IV. ANALYSIS 15 Plaintiff challenges the instant removal on two grounds. First, she contends that Defendant 16 untimely removed this action after the 30-day time limitation set by 28 U.S.C. §§ 1446(b)(1), (b)(3). 17 ECF No. 4 at 5. Plaintiff also argues that Defendant has failed to prove by a preponderance of the 18 evidence that the amount in controversy exceeds $5 million as required by 28 U.S.C. § 1332(d)(2). Id. 19 at 9-10. 20 A. Timeliness of Removal 21 “Section 1446(b)’s time limit is mandatory [such that] a timely objection to a late petition will 22 defeat removal . . . .” Kuxhausen v. BMW Fin. Servs. NA LLC, 707 F.3d 1136, 1142 n.4 (9th Cir. 2013) 23 (internal quotation marks and citations omitted). Defendant had 30 days after receipt of the initial 24 pleading, summon, “amended pleading, motion, order or other paper” to remove this action. 28 U.S.C. 25 §§ 1446(b)(2)(B), (b)(3). The Summons, Complaint, and FAC were served by substituted service and 2 service is considered complete on the 10th day after mailing under California Code of Civil Procedure § 3 415.20(a), Defendant had, according to Plaintiff, until July 2, 2019 to remove this action. ECF No. 4 at 4 5-6. Because Defendant did not remove this action until August 15, Plaintiff contends that the removal 5 is untimely under Section 1446(b). Id. at 6. The Court is not persuaded. 6 Contrary to Plaintiff’s misinterpretation and misapplication of Section 1446(b), the 30–day 7 period for removal “starts to run from defendant’s receipt of the initial pleading only when that pleading 8 affirmatively reveals on its face the facts necessary for federal court jurisdiction.” Harris v. Bankers 9 Life & Cas. Co., 425 F.3d 689, 690-91 (9th Cir. 2005) (emphasis added) (internal quotation marks and 10 citation omitted). Whether the removability of the FAC is affirmatively revealed on its face is limited to 11 “the four corners of the applicable pleadings, not through subjective knowledge or a duty to make 12 further inquiry.” Id. at 694; see also Kuxhausen, 707 F.3d at 1141 (“Preferring a clear rule, and 13 unwilling to embroil the courts in inquires ‘into the subjective knowledge of [a] defendant,’ [the Ninth 14 Circuit has] declined to hold that materials outside the complaint start the thirty-day clock.” (internal 15 citation omitted)). “[E]ven if a defendant could have discovered grounds for removability through 16 investigation, it does not lose the right to remove because it did not conduct such an investigation and 17 then file a notice of removal within thirty days of receiving the indeterminate document.” Roth v. CHA 18 Hollywood Med. Ctr., L.P., 720 F.3d 1121, 1125 (9th Cir. 2013) (emphasis added). 19 Here, the FAC does not specify the total amount in controversy for the proposed class; Plaintiff 20 only pleads her damages as less than $75,000. ECF No. 1, FAC ¶ 2. Because the FAC does not 21 affirmatively reveal that the aggregated amount in controversy, the 30–day period for removal was never 22 triggered. See, e.g., Rea v. Michaels Stores Inc., 742 F.3d 1234, 1238 (9th Cir. 2014) (“[U]nder the 23 controlling law at the time Michaels received the complaint, it did not ‘affirmatively reveal[ ] on its face 24 the facts necessary for federal court jurisdiction,’ so the initial 30–day removal period was never 25 triggered.” (internal quotation marks and citation omitted)). 2 statute ‘requires a defendant to apply a reasonable amount of intelligence in ascertaining removability.’ 3 Multiplying figures clearly stated in a complaint is an aspect of that duty.” Kuxhausen, 707 F.3d at 1140 4 (internal quotation marks and citation omitted). Plaintiff does not explain how multiplying the figures 5 clearly stated in the FAC would affirmatively show that the amount in controversy exceeds $5 million, 6 thereby triggering the 30-day period for removal. ECF No. 4 at 8-9. Nevertheless, the Court notes that 7 Plaintiff alleges her damages are less than $75,000 and the proposed class is estimated to be greater than 8 50 individuals. ECF No. 1, FAC ¶¶ 1, 15. Multiplying $74,999 with 51 individuals equal to 9 approximately $3.82 million damages. This shows that even if Defendant multiplied the stated figures 10 in the FAC, it would not be affirmatively clear that the amount in controversy exceeds $5 million. 11 Defendant has no obligation “to supply information which [Plaintiff] had omitted” from the FAC or 12 consult “its business records to identify a representative valuation.” Kuxhausen, 707 F.3d at 1141. The 13 Court therefore finds that the FAC fails to affirmatively reveal enough information such that it was 14 obvious, when a reasonable amount of intelligence is applied, for Defendant to ascertain the existence of 15 removability. Accordingly, the 30-day period to remove this action under Section 1446(b) has not been 16 triggered. 17 As the Ninth Circuit explained in Roth, “[i]f plaintiffs think that their action may be removable 18 and think, further, that the defendant might delay filing a notice of removal until a strategically 19 advantageous moment, they need only provide to the defendant a document from which removability 20 may be ascertained. Such a document will trigger the thirty-day removal period, during which 21 defendant must either file a notice of removal or lose the right to remove.” Roth, 720 F.3d at 1126 22 (citation omitted). Plaintiff has failed to provide Defendant with any such document here beyond the 23 FAC for Defendant ascertain the removability of this action. See Levanoff v. SoCal Wings LLC, 22015 24 WL 248338, at *1-2 (C.D. Cal. Jan. 16, 2015) (holding that the Statement of Damages providing that a 25 total of $8.16 million in damages for the proposed class triggered the 30-day period). The Court, 2 may be ascertained and [sought] removal only when it becomes strategically advantageous for it to do 3 so.” Roth, 720 F.3d at 1125. Defendant’s removal of this action is, for the above reasons, timely. 4 B. Establishing that the Amount in Controversy Exceeds $5 Million 5 Furthermore, Plaintiff argues that Defendant has failed to show by a preponderance of the 6 evidence that the amount in controversy exceeds $5 million as required by Section 1332(d)(2). ECF No. 7 4 at 9-10. Section 1332(d)(6) specifies that “[i]n any class action, the claims of the individual class 8 members shall be aggregated to determine whether the matter in controversy exceeds the sum or value 9 of $5,000,000, exclusive of interest and costs.” 28 U.S.C. § 1332(d)(6). Plaintiff contends that 10 “Defendant is required to produce ‘summary-judgment-type evidence’ of the amount in controversy if 11 . . . it is indeterminate from the face of the complaint that the jurisdictional threshold is met.” ECF No. 12 6 at 3; see also ECF No. 4 at 1. But Defendant disputes that this is the correct burden for a removing 13 party and insists that “a defendant’s notice of removal need include only a plausible allegation that the 14 amount in controversy exceeds the jurisdictional threshold.” ECF No. 5 (internal quotation marks 15 omitted) (quoting Dart Cherokee, 135 S. Ct. at 554)). 16 “The amount in controversy is simply an estimate of the total amount in dispute, not a 17 prospective assessment of defendant’s liability.” Arias v. Residence Inn by Marriott, 936 F.3d 920, 927 18 (9th Cir. 2019) (internal quotation marks and citation omitted). “[W]hen a defendant seeks federal-court 19 adjudication, the defendant’s amount-in-controversy allegation should be accepted when not contested 20 by the plaintiff or questioned by the court. [A] defendant’s notice of removal need include only a 21 plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” Id. at 924-25 22 (emphasis added). “Yet, when the defendant’s assertion of the amount in controversy is challenged by 23 plaintiffs in a motion to remand, the Supreme Court has said that both sides submit proof and the court 24 then decides where the preponderance lies. Under this system, CAFA’s requirements are to be tested by 25 consideration of real evidence and the reality of what is at stake in the litigation, using reasonable 2 (emphasis added). 3 Having reviewed the FAC and Notice of Removal, ECF No. 1, the Court finds that Defendant 4 has provided plausible allegations showing that the amount in controversy exceeds the jurisdictional 5 threshold. The Notice of Removal alleges that the average hourly and overtime rates of non-exempt 6 employees in California similar to Plaintiff are $11.12 and $16.68, respectively. ECF No. 1 (“Notice of 7 Removal”) ¶ 29. Plaintiff proposes a class of all former and current hourly-paid or non-exempt 8 employees of Defendant in California from February 6, 2015 to final judgment. Id., FAC ¶ 13. 9 Defendant claims that 2,660 of its employees in at least 28 stores in California fall within the proposed 10 class. Id. (“Notice of Removal” ) ¶ 30. Based on these numbers, Defendant calculates Plaintiff’s 11 maximum potential liability as follows: 12 Claims Estimated Amounts in Controversy Beginning 13 from February 6, 2015 to Final Judgment 14 Unpaid Overtime Claim (1st Claim) 28 stores x $16.68 in overtime hourly rate x 2,118 15 unpaid overtime hours = $989,190.72 16 Id. ¶ 29 17 Unpaid Meal Period Claim (2nd Claim) 28 stores x $11.12 in average hourly rate x 2,118 18 shifts where meal periods were not provided = 19 $659,460.48 20 Id. ¶ 33 21 Unpaid Rest Period Claim (3rd Claim) 28 stores x $11.12 in average hourly rate x 3,177 22 shifts where rest periods were not provided = 23 $989,190.72 24 Id. ¶ 35 25 2 hours where minimum wage was not paid = 3 $533,736 4 Id. ¶ 37 5 Statutory Penalty Claim for Failure to Pay 2,660 employees x ($100 for the initial failure to 6 Minimum Wage (4th Claim) timely pay minimum wage + $250 for a 7 subsequent failure to pay each employee 8 minimum wage)2 = $931,000 9 Id. ¶ 38 10 Statutory Penalty Claim for Failure to Pay Final 1,459 employees x $2,668.80 ($11.12 in average 11 Wages that Were Earned but Unpaid Within 72 hourly rate x 8 hours/day x 30 days maximum) = 12 Hours of Leaving Defendant’s Employment (5th $3,893,779.20 13 Claim) Id. ¶ 40 14 TOTAL $7,996,357.12 (exclusive of attorneys’ fees) 15 16 Accepting the allegations as true for purposes of removal, the Court is persuaded that Defendant 17 has provided a “plausible assertion of the [required] amount in controversy in its notice of removal.” 18 Ibarra, 775 F.3d at 1197-98 (internal citation omitted). Defendant, therefore, is not required to produce 19 proof to demonstrate by the preponderance of the evidence that greater than $5 million in damages is 20 recoverable, unless Plaintiff asserts that the amount in controversy is $5 million or less. As far as the 21 Court can discern, Plaintiff fails to clearly admit that the amount in controversy is $5 million or less in 22 23 2 Plaintiff alleges that under the California Labor Code § 1197.1, Defendant is liable for a penalty of $100 for the initial 24 failure to timely pay minimum wage, then $250 for each subsequent failure to pay each same employee minimum wage. 25 ECF No. 1, FAC ¶ 87. 2 Plaintiff’s intent to challenge the Court’s jurisdiction under CAFA, the Court construes Plaintiff’s 3 position as claiming that the amount in controversy is $5 million or less. See Arias, 936 F.3d at 927 4 (“Where a removing defendant has shown potential recovery ‘could exceed $5 million and the [p]laintiff 5 has neither acknowledged nor sought to establish that the class recovery is potentially any less,’ the 6 defendant ‘has borne its burden to show the amount in controversy exceeds $5 million.’” (emphasis 7 added) (internal citation omitted)). 8 Turning to the legal burdens, “[t]he parties may submit evidence outside the complaint, including 9 affidavits or declarations, or other ‘summary-judgment-type evidence relevant to the amount in 10 controversy at the time of removal.’ Under this system, a defendant cannot establish removal 11 jurisdiction by mere speculation and conjecture, with unreasonable assumptions.” Ibarra, 775 F.3d at 12 1197. However, “evidence combined with reasonable deductions, reasonable inferences, or other 13 reasonable extrapolations[,][t]hat kind of reasoning is not akin to conjecture, speculation, or star 14 gazing.” Id. (emphasis added) (internal quotation marks and citation omitted) (quoting Pretka v. Kolter 15 City Plaza II, Inc., 608 F.3d 744, 754, 771-72 (11th Cir. 2010)). To be clear, “the amount in controversy 16 17 3 In reply, Plaintiff asserts that she is “specifically challeng[ing] the accuracy of Defendant’s calculations.” ECF No. 6 at 3 18 (emphasis added). This phrasing does not make clear that Plaintiff is admitting that the amount in controversy is less than $5 19 million. If Plaintiff, for instance, is disputing that the amount in controversy is $5.1 million instead of $7.99 million, that is 20 not the kind of challenge that would trigger Defendant’s burden to produce evidence. Plaintiff must challenge the Court’s jurisdiction under CAFA by admitting that the amount in controversy is $5 million or less. 21 Moreover, the other kinds of jurisdictional challenges raised by Plaintiff, such as timeliness of the removal and what burden 22 Defendant must bear to succeed on removal, are not challenges to the amount in controversy and, therefore, do not trigger 23 Defendant’s burden to produce evidence. Ibarra, 775 F.3d at 1195 (requiring the defendant to produce evidence to show that 24 the amount in controversy exceeds $5 million because “plaintiffs sued in state court alleging that damages do not exceed $5 25 million”). 2 added). In sum, Defendant is only required to show that it is more likely than not that Plaintiff’s 3 maximum recovery reasonably could be over $5 million. This burden is not daunting as “a removing 4 defendant is not obligated to ‘research, state, and prove the plaintiff’s claims for damages.’” Korn v. 5 Polo Ralph Lauren Corp., 536 F. Supp. 2d 1199, 1204-05 (E.D. Cal. 2008) (internal citation omitted); 6 see also Muniz v. Pilot Travel Centers LLC, 2007 WL 1302504, at *5 (E.D. Cal. May 1, 2007) (holding 7 that a removing defendant is not obligated “to support removal with production of extensive business 8 records to prove or disprove liability and/or damages with respect to plaintiff or the putative class 9 members at this premature (pre-certification) stage of the litigation.”). Removing “defendants cannot be 10 expected to try the case themselves for purposes of establishing jurisdiction, and then admit to the 11 opposing party and to the Court that a certain number of wage and hour violations did indeed occur.” 12 Bryant v. Serv. Corp. Int’l, 2008 WL 2002515 at *6 (N.D. Cal. May 7, 2008) 13 Only Defendant has submitted evidence, namely the declaration of Edgar Emmerling 14 (“Emmerling”), its Associate Director of the Operational Finance Department, to establish the amount in 15 controversy. ECF No. 5, Emmerling Decl. In addition to Emmerling’s declaration, Defendant “is 16 permitted to rely on a chain of reasoning that includes assumptions” to establish the amount in 17 controversy—though, “[s]uch assumptions cannot be pulled from thin air but need some reasonable 18 ground” based on allegations made in the FAC. Arias, 936 F.3d at 925 (internal citations omitted). 19 Beginning with the FAC, Plaintiff alleges a proposed class of hourly-paid or non-exempt 20 employees who worked for Defendant in California from February 6, 2015 to final judgment. ECF No. 21 1, FAC ¶ 13. Plaintiff admits that “[t]he membership of the entire class is unknown to [her] at this time; 22 however, the class is estimated to be greater than fifty (50) individuals . . . .” Id. at ¶ 15a. In 23 challenging the Court’s jurisdiction under CAFA, Plaintiff’s contentions are directed mostly at the 24 insufficiency of Emmerling’s declaration in establishing the amount in controversy. ECF No. 4 at 9-20. 25 1. Whether Emmerling’s Declaration is Per Se Deficient 2 business records. ECF No. 5, Emmerling Decl. ¶¶ 1-2. He further declares that Defendant operated 28 3 stores in California, where at least two non-exempt employees each day were scheduled for a shift of at 4 least 8 hours each. Id., Emmerling Decl. ¶ 3. Additionally, Defendant employed at least 2,660 non- 5 exempt employees around February 6, 2015, but 1,459 of them left Defendant’s employment a year 6 later. Id., Emmerling Decl. ¶ 5. After February 2015, those non-exempt employees in California, 7 including Plaintiff, were earning an average hourly rate of $11.12. Id., Emmerling Decl. ¶¶ 4-5. 8 Plaintiff contends, however, that a declaration alone, such Emmerling’s declaration here, is per 9 se insufficient to establish the amount in controversy because it lacks foundation and corroborating 10 documents such as payroll records. ECF No. 4 at 10-11. The Court disagrees: there is no such bright- 11 line rule. For instance, in Lewis v. Verizon Commc’ns, Inc., 627 F.3d 395, 398 (9th Cir. 2010), the Ninth 12 Circuit reversed the district court’s denial of a motion to remand and held that the defendant’s 13 declaration had sufficiently shown by the preponderance of the evidence that the amount in controversy 14 exceeded $5 million because, as here, the plaintiff had presented no evidence to the contrary. Lewis, 15 627 F.3d at 398, 401-02. Similarly, district courts have held that declarations without more were 16 sufficient evidence in light of allegations made in the complaints. Cavada v. Inter-Cont’l Hotels Grp., 17 Inc., 2019 WL 5677846, at *2-9 (S.D. Cal. Nov. 1, 2019) (finding that declarations of the director of 18 human resources, along with allegations in the complaint, to be sufficient to demonstrate the amount in 19 controversy exceeds $5 million); Andrade v. Beacon Sales Acquisition, Inc., 2019 WL 4855997, at *4 20 (C.D. Cal. Oct. 1, 2019) (holding “a declaration from a knowledgeable employee based on her analysis 21 of regularly kept and created business records” to be sufficient); Alvarez v. Office Depot, Inc., 2017 WL 22 5952181, at *3 (C.D. Cal. Nov. 30, 2017) (holding “that the evidence Defendant provides through 23 Diebold’s declaration is acceptable for purposes of determining the CAFA amount in controversy.”). 24 Thus, a declaration from a knowledgeable person, such as Emmerling, who is an associate director of 25 operational finance, can be sufficient depending on the nature of the allegations in the FAC. With a 2 2. Claim for Waiting Time Penalties (5th Cause of Action) 3 Plaintiff’ fifth cause of action asserts that Defendant violated California Labor Code § 203, ECF 4 No. 1, FAC ¶ 93, which states in relevant part: “If an employer willfully fails to pay, without abatement 5 or reduction . . . any wages of an employee who is discharged or who quits, the wages of the employee 6 shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor 7 is commenced; but the wages shall not continue for more than 30 days.” Cal. Lab. Code § 203. Plaintiff 8 claims that “[d]uring the relevant time period, Defendants intentionally and willfully failed to pay 9 Plaintiff and the other class members who are no longer employed by Defendants their wages, earned 10 and unpaid, within seventy-two (72) hours of their leaving Defendants’ employ[ment].” Id., FAC ¶ 91. 11 Defendant calculates that Plaintiff’s fifth cause of action could reasonably reach the maximum 12 damages of $3,893,779.20 as follows: average hourly rate of $11.12 x 8 hours/day [$88.96/day] x 30 13 days maximum penalty x 1,459 former employees. Id., FAC ¶¶ 39-40. Defendant contends that “[t]his 14 calculation is entirely reasonable given that some putative class members, including Plaintiff, did work 15 shifts lasting 8 hours or more a day.” ECF No. 5 at 20. There are four assumptions underlying this 16 calculation that the Court must determine separately whether they are reasonably inferred from the FAC 17 or sufficiently supported by Emmerling’s declaration. 18 First is the average hourly rate of $11.12, which Plaintiff does not dispute in her Motion and 19 Reply. ECF No. 4 at 17-20; ECF No. 6. This assumption is attested to by Emmerling, ECF No. 5, 20 Emmerling Decl. ¶ 5, and the Court finds it to be supported by the preponderance of the evidence. 21 Plaintiff, however, questions the validity of the second assumption as to the 8-hour average work day, 22 the third assumption as to the maximum 30 days penalty, and fourth assumption of 100% violation rate. 23 ECF No. 4 at 17-19. The Court addresses each one in turn. 24 As Plaintiff contends, Defendant has presented no evidence to show that its non-exempt 25 employees normally had an 8-hour shift per day. Id. at 17. Indeed, Emmerling declares that 2 No. 5, Emmerling Decl. ¶ 3. Defendant’s second assumption is thus contradicted by its own evidence, 3 and the Court hereby reduces the average work hours per day to 5.95 for purposes of waiting time 4 penalty calculation since it is a reasonable median number between 5.6 and 6.3. See, e.g., Kastler v. Oh 5 My Green, Inc., 2019 WL 5536198, at *5-6 (N.D. Cal. Oct. 25, 2019) (reducing defendant’s calculations 6 of the amount in controversy for the overtime, minimum wage, meal and rest break claims because the 7 calculations were not supported by the evidence). 8 Citing to Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 F.3d 994, 1004 (9th Cir. 2007), and Garibay 9 v. Archstone Communities LLC, 539 F. App’x 763, 764 (9th Cir. 2013)4, Plaintiff further contends that 10 Defendant has presented no evidence to support the assumption of maximum 30 days penalty. ECF No. 11 4 at 18-19. Significantly, however, Plaintiff admits that the “legal certainty” standard that the Ninth 12 Circuit applied in Lowdermilk and Garibay to determine whether the evidence sufficiently supported the 13 maximum statutory penalty is no longer applicable to CAFA cases. Id. at 18 n.18; see also Franz v. 14 Beiersdorf, Inc., 745 F. App’x 47, 48 (9th Cir. 2018) (recognizing that the legal certainty standard used 15 in Lowdermilk has been overruled). Regardless of the applicable legal standard, what is even more 16 significant here is that Plaintiff pleads in the FAC that she and other class members are entitled to 17 recover “up to a thirty (30) day maximum [penalty] pursuant to California Labor Code section 203.” 18 ECF No. 1, FAC ¶ 94. Because Plaintiff is asking for a maximum statutory penalty of 30 days, 19 Defendant need not produce evidence, and it is reasonable to assume based on the FAC that Plaintiff 20 could obtain statutory penalty of maximum 30 days. Kastler, 2019 WL 5536198, at *6 (“Because 21 Plaintiff alleges that Defendant failed to pay overtime and minimum wage and meal and rest break 22 23 4 It should be noted that Garibay is an unpublished opinion. “Unpublished dispositions and orders of [the Ninth Circuit] are 24 not precedent, except when relevant under the doctrine of law of the case or rules of claim preclusion or issue preclusion.” 25 CTA9 Rule 36-3 (emphasis added). 2 Capital Bank, 2019 WL 5304924, at *5 (E.D. Cal. Oct. 21, 2019) (holding that the court may consider 3 maximum statutory penalty because the plaintiff has specified and asked for the statutory maximum in 4 the pleading); Nunes v. Home Depot U.S.A., Inc., 2019 WL 4316903, at *3 (E.D. Cal. Sept. 12, 2019) 5 (same); Garza v. Brinderson Constructors, Inc., 178 F. Supp. 3d 906, 912 (N.D. Cal. 2016) (holding that 6 Garibay is distinguishable and defendant need not produce evidence when allegations in the complaint 7 support the maximum statutory penalty). 8 In addition to Lowdermilk and Garibay, Plaintiff also cites Longmire v. HMS Host USA, Inc., 9 2012 WL 5928485, at *7 (S.D. Cal. Nov. 26, 2012), Dupre v. Gen. Motors, 2010 WL 3447082, at *4 10 (C.D. Cal. Aug. 27, 2010), and Rhoades v. Progressive Cas. Ins. Co., 2010 U.S. Dist. LEXIS 111026, at 11 *14 (E.D. Cal. Oct. 7, 2010), to argue that Defendant’s use of the maximum statutory penalty must be 12 supported by evidence. 5 Plaintiff seems to misunderstand the holdings of those cases, which are 13 distinguishable both in law and fact from this case. Whereas this Court has found that Defendant’s 14 assumption of the maximum statutory penalty is reasonably supported by the FAC, the district courts in 15 those three cases found, under the legal certainty standard, that neither the allegations in the complaints 16 nor evidence supported the maximum statutory penalty assumption. Longmire, 2012 WL 5928485, at 17 *7 (holding that “Defendants’ assumption that each employee is entitled to recover the full thirty-day 18 maximum penalty has no basis in the allegations of the Complaint or the proof submitted by 19 Defendants.”); Dupre, 2010 WL 3447082, at *2, *4 (“no allegations are made that every class member 20 21 5 It is worth pointing out that these three cases predate Rodriguez v. AT & T Mobility Servs. LLC, 728 F.3d 975, 977 (9th Cir. 22 2013), where the Ninth Circuit recognized that “Lowdermilk has been effectively overruled” by “the Supreme Court’s 23 reasoning in [Standard Fire Ins. Co. v. Knowles, 568 U.S. 588],” and that the proper burden of proof imposed upon a 24 defendant to establish the amount in controversy is the preponderance of the evidence standard rather than the legal certainty 25 standard. 2 U.S. Dist. LEXIS 111026, at *14 (finding that defendant has failed to provide evidence to show under 3 the legal certainty standard that the plaintiff is entitled to the maximum statutory penalty). Longmire, 4 Dupre, and Rhoades are therefore not applicable here. 5 Turning to the fourth assumption, Emmerling attests that Defendant had 2,660 employees around 6 February 6, 2015, but a year later, 1,459 of them left their employment with Defendant. ECF No. 5, 7 Emmerling Decl. ¶ 5. The calculation assumes that Defendant failed to pay all of its former employees 8 their final wages in a timely manner as required by the California Labor Code. But as Plaintiff correctly 9 points out, there is neither evidence nor allegations in the FAC to support this assumption. ECF No. 4 at 10 19. While the FAC has alleged that all class members are entitled to the maximum statutory penalty, it 11 does not allege that Defendant failed to timely pay all its former employees their final wages. Likewise, 12 Emmerling’s declaration reveals no facts to support the fourth assumption. 13 What is significant, however, is Plaintiff’s allegation that Defendant had “a pattern and practice” 14 of not paying its employees their regular and overtime wages and requiring employees to working 15 through their meal and rest periods without pay. ECF No. 1, FAC ¶¶ 32, 121. From this, it is reasonable 16 to assume that some former employees’ wages were not fully paid within a reasonable time after their 17 termination or discharge. The question rather is how to induce the allegations into a finite number of 18 former employees who did not receive their full final wages from Defendant. In Ibarra, the Ninth 19 Circuit affirmed that because there was “a ‘pattern and practice’ of doing something does not necessarily 20 mean always doing something,” so without more, the assumption of a 100% violation rate was not 21 reasonable. Ibarra, 775 F.3d at 1199. District courts have found, however, that violation rates of 25% 22 to 60% can be reasonably assumed as a matter of law based on “pattern and practice” or “policy and 23 practice” allegation. See Olson v. Becton, Dickinson & Co., 2019 WL 4673329, at *4 (S.D. Cal. Sept. 24 25, 2019) (finding 25% violation rate to be appropriate based on the plaintiff’s “pattern and practice” 25 allegation); Elizarraz v. United Rentals, Inc., 2019 WL 1553664, at *3-4 (C.D. Cal. Apr. 9, 2019) (same: 2 Corp., 284 F. Supp. 3d 1147, 1151 (S.D. Cal. 2018) (same: 60% violation rate for the meal period claim 3 and 30% violation rate for rest period claim); Alvarez v. Office Depot, Inc., 2017 WL 5952181, at *3 4 (C.D. Cal. Nov. 30, 2017) (same: 60% violation rate); Oda v. Gucci Am., Inc., 2015 WL 93335, at *4 5 (C.D. Cal. Jan. 7, 2015) (same: 50% violation rate); cf. Mendoza v. Savage Servs. Corp., 2019 WL 6 1260629, at *2 (C.D. Cal. Mar. 19, 2019) (“When a defendant’s calculation lacks factual support, courts 7 in [the Central District of California] routinely apply a 20% violation rate”). In light of these cases and 8 Plaintiff’s “pattern and practice” allegation, the Court finds a violation rate of 40%—a median between 9 25% and 60%—to be reasonable, which is 584 former employees. Arias, 936 F.3d at 927 (removing 10 defendant need not prove that it “actually violated the law at the assumed rate.”). “[W]hile not required, 11 Plaintiff has not offered any better estimate of the alleged violation rate, despite the fact that she most 12 likely knows at least roughly how often she was not afforded the required meal breaks.” Lopez v. Adesa, 13 Inc., 2019 WL 4235201, at *3 (C.D. Cal. Sept. 6, 2019). For the above reasons, the maximum damages 14 Plaintiff and other class members could reasonably obtain for their waiting time penalty claim should be 15 calculated as follows: (average hourly rate of $11.12 x 5.95 hours/day [$66.16/day]) x 30 days 16 maximum penalty x 584 former employees = $1,159,123.20—which is far lower than the $3.8 million in 17 damages Defendant suggests. 18 3. Statutory Penalty Claim for Failure to Pay Minimum Wage (4th Cause of Action) 19 In California, any employer who pays or causes to be paid to any employee a wage less than the 20 minimum shall be subject to a civil penalty payable to the employee as follows: “one hundred dollars 21 ($100) for each underpaid employee for each pay period for which the employee is underpaid” and 22 “[f]or each subsequent violation for the same specific offense, two hundred fifty dollars ($250) for each 23 underpaid employee for each pay period for which the employee is underpaid . . . .” Cal. Labor Code. § 24 1197.1(a)(1)-(2). Plaintiff’s fourth claim is premised on the allegation that she and “the other class 25 members are entitled to recover a penalty of $100 for the initial failure to timely pay each employee 2 1, FAC ¶ 87. 3 Defendant’s calculation of the statutory penalty for failure to pay minimum wage is as follows: 4 2,660 employees x ($100 for the initial failure to timely pay minimum wage + $250 for each subsequent 5 failure to pay each employee minimum wage [$350 total]) = $931,000. ECF No. 1 (“Notice of 6 Removal”) ¶ 38. This calculation assumes that all of Defendant’s 2,660 non-exempt employees in 7 California were not paid their minimum wage not once but twice. Again, Defendant does not explain 8 how it arrived at a 100% rate of violation for the initial non-payment, let alone for a subsequent non- 9 payment, so Plaintiff contests such calculation, ECF No. 4 at 16-17. 10 The lack of explanation is not fatal, however. As the Court has explained in Section IV.B.3 11 above, the central issue is how to reasonably induce Plaintiff’s “pattern and practice” allegation of 12 Defendant not paying its employees their minimum wage to a finite number for purposes of calculating 13 the amount in controversy. ECF No. 1, FAC ¶¶ 13, 32, 121. For the same reasons stated in Section 14 IV.B.3, the Court finds a violation rate of 40% for the initial failure to pay minimum wage and 20% for 15 the second failure to be reasonable. The calculation for the unpaid minimum wage claim, accordingly, 16 should be: (2,660 employees x 40% x $100) + (2,660 employees x 20% x $250) = $239,400. 17 4. Claims for Unpaid Overtime, Meal and Rest Periods, and Minimum Wage (1st to 4th Causes of Action 18 Defendant’s calculations of the amount in controversy for the first to fourth claims are as follows: 19 1. First Claim for Unpaid Overtime: 28 stores x $16.68 in overtime hourly rate x 2,118 unpaid 20 overtime hours = $989,190.72; 21 2. Second Claim for Unpaid Meal Period: 28 stores x $11.12 in average hourly rate x 2,118 shifts 22 where meal periods were not provided = $659,460.48; 23 3. Third Claim for Unpaid Rest Period: 28 stores x $11.12 in average hourly rate x 3,177 shifts 24 where rest periods were not provided = $989,190.72; 25 2 hours where minimum wage was not paid = $533,736. 3 Based on Plaintiff’s proposed class of all former and current non-exempt employees from the 4 past four years plus, ECF No. 1, FAC ¶ 13, there could be as many as 2,660 members according to 5 Emmerling, ECF No. 5, Emmerling’s Decl. ¶ 5. Plaintiff contends again that there is no evidentiary 6 basis for the above calculations. ECF No. 4 at 11-19. The Court again disagrees. Based on Plaintiff’s 7 “pattern and practice” allegation and Emmerling’s declaration, the use of 2,118 and 3,177 shifts for the 8 four claims are not unreasonable—and there is no evidence from Plaintiff to suggest otherwise. 9 If, between February 7, 2015 to February 6, 2016, there were 2,660 non-exempt employees 10 working on average 5.6 to 6.3 hours, then there were 4.6 to 6.1 million hours of unpaid work that could 11 be at issue here. Plus, from February 6, 2016 to February 5, 20196 when there were only around 1,201 12 non-exempt employees, the number of potentially unpaid work hours rose to 7.3 and 8.28 million. 13 Based on the “pattern and practice” allegation that Defendant was not paying its employees overtime 14 and minimum wage, Defendant used only 4,236 (2,118 + 2,118) hours out of those millions of hours 15 (less than 0.1%) to calculate the maximum potential damages for Plaintiff’s unpaid overtime and 16 minimum wage claims. 17 Similarly, if Defendant’s 28 stores in California were staffed daily with five to six employees, 18 ECF No. 5, Emmerling’s Decl. ¶ 3, then there were around 204,400 to 245,280 shifts between February 19 7, 2015 to February 6, 20197. Instead of using all the hundreds of thousands of shifts, Defendant used 20 only 5,295 (3,177 + 2,118) shifts (less than 2.6%) to calculate the maximum potential damages for 21 Plaintiff’s unpaid rest and meal periods claims. “Notably, Plaintiff fails to assert any different rate of 22 23 6 Although Plaintiff’s proposed class is made up of non-exempt employees from February 6, 2015 to final judgment, the 24 Court conservatively uses the end date of February 5, 2019 to simplify the calculation. 25 7 As stated in foo tnote 5 above, the Court conservatively uses the end date of February 6, 2019 to simplify the calculation. 2 submit her own declaration stating that she experienced less frequent rates of violation than those 3 asserted by Defendants.” Unutoa v. Interstate Hotels & Resorts, Inc., 2015 WL 898512, at *3 (C.D. 4 Cal. 2015). For these reasons, the Court cannot say Defendant’s assumptions underlying calculations of 5 maximum damages for the first to fourth claims to be unreasonable. 6 5. Attorneys’ Fees 7 “[A] court must include future attorneys’ fees recoverable by statute or contract when assessing 8 whether the amount-in-controversy requirement is met. The defendant retains the burden, however, of 9 proving the amount of future attorneys’ fees by a preponderance of the evidence.” Arias, 936 F.3d at 10 927 (emphasis added) (internal quotation marks and citations omitted). If the plaintiff is legally entitled 11 to future attorneys’ fees if the action succeeds, “then there is no question that future [attorneys’ fees] are 12 ‘at stake’ in the litigation.” Fritsch, LLC, 899 F.3d at 794. However, “[a] district court may reject the 13 defendant’s attempts to include future attorneys’ fees in the amount in controversy if the defendant fails 14 to satisfy [its] burden of proof.” Id. at 795. 15 Here, Defendant asks the Court to use the percentage-of-recovery method to calculate the 16 attorneys’ fees in controversy at the rate of 25%. ECF No. 5 at 23-24. “Where a settlement produces a 17 common fund for the benefit of the entire class, courts have discretion to employ either the lodestar 18 method or the percentage-of-recovery method.” In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d 19 935, 942 (9th Cir. 2011) (emphasis added) (internal citation omitted). In Vizcaino v. Microsoft Corp., 20 290 F.3d 1043, 1047 (9th Cir. 2002), the Ninth Circuit held “that [i]n common fund cases, the 21 benchmark award is 25 percent of the recovery obtained, with 20–30% as the usual range”—though, the 22 benchmark is only “a starting point” of the analysis, and its application “may be inappropriate in some 23 cases.” Vizcaino, 290 F.3d at 1047; see also Hanlon v. Chrysler Corp., 150 F.3d 1011, 1029 (9th Cir. 24 1998) (“This circuit has established 25% of the common fund as a benchmark award for attorney fees.” 25 (citing Six (6) Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1311 (9th Cir.1990)). In 2 rule [of 25% benchmark] is inapplicable” when it came to calculating attorneys’ fees in controversy at 3 the removal stage. Fritsch, LLC, 899 F.3d at 796. 8 4 Prior to Fritsch, there was “a split among district courts[, mainly in California,] as to the 5 appropriate method for [attorneys’ fees] calculation in wage and hour class actions at the removal 6 stage.” Lucas v. Michael Kors (USA), Inc., 2018 WL 2146403, at *11 (C.D. Cal. May 9, 2018). 7 Compare Scott v. Credico (USA) LLC, 2017 WL 4210994, at *3 (N.D. Cal. Sept. 22, 2017) (“It is true 8 that the Ninth Circuit uses a 25% benchmark to estimate what portion of a common fund may be 9 recovered by attorneys whose efforts successfully secure the fund, but that is not the correct method for 10 estimating attorneys’ fees when determining whether a jurisdictional amount-in-controversy threshold is 11 satisfied.”) with Fong v. Regis Corp., 2014 WL 26996, at *7 (N.D. Cal. Jan. 2, 2014) (“Courts in this 12 circuit have held that, for purposes of calculating the amount in controversy in a wage-and-hour class 13 action, removing defendants can reasonably assume that plaintiffs are entitled to attorney fees valued at 14 approximately twenty-five percent of the projected damages.”). Even after Fritsch, that split remains. 15 Recognizing the application of Fritsch, one district court nonetheless held that: 16 While the Court acknowledges the 25% benchmark does not automatically apply in all 17 cases, the benchmark need only be adjusted “when special circumstances indicate that the 18 19 20 8 It should be noted that in Six (6) Mexican Workers, the Ninth Circuit qualified that the 25% benchmark “should be adjusted, or replaced by a lodestar calculation, when special circumstances indicate that the percentage recovery would be either too 21 small or too large in light of the hours devoted to the case or other relevant factors.” Six (6) Mexican Workers, 904 F.2d at 22 1311. Given that the Fritsch Court declined to extend the 25% benchmark rule from Hanlon, which was relying on Six (6) 23 Mexican Workers for the benchmark, it seems logical that the “per se equitable rule” the Fritsch Court rejected incorporates 24 the adjustment feature mentioned in Six (6) Mexican Workers. Neither Vizcaino nor Hanlon stands for the proposition that 25 the application of the 25% benchmark is unqualified. 2 the case or other relevant factors.” Six (6) Mexican Workers v. Ariz. Citrus Growers, 904 3 F.2d 1301, 1311 (9th Cir. 1990). Plaintiff does not raise any factors counseling against 4 the application of the 25% benchmark, nor does the record before the Court reflect that a 5 departure from this benchmark is warranted. In the Court’s experience, this appears to be 6 a typical wage and hour class action to which courts in this Circuit would likely apply the 7 25% benchmark rate. 8 Cortez v. United Nat. Foods, Inc., 2019 WL 955001, at *7 (N.D. Cal. Feb. 27, 2019); see also 9 Kastler, 2019 WL 5536198, at *7 (“Although Defendant provide[d] very little to support a 25% fee 10 calculation,” the court, relying “on its own knowledge of customary rates and [its] experience 11 concerning reasonable and proper fees,” found that it was reasonable); Ramirez v. Benihana Nat’l Corp., 12 2019 WL 131843, at *2 (N.D. Cal. Jan. 8, 2019) (applying the 25% benchmark as a starting point in 13 calculating the attorneys’ fees portion of the amount in controversy). Other district courts have held, 14 however, that Fritsch mandated them to not even apply the 25% benchmark as the starting point of 15 analysis when defendants provided no evidence. Zamarripa v. Superior Talent Res., Inc., 2019 WL 16 3246502, at *6 (C.D. Cal. July 19, 2019) (holding that “simply ask[ing] the Court to adopt the 25 17 percent benchmark” without providing any evidence is insufficient to meet the defendant’s burden); 18 Akana v. Estee Lauder Inc., 2019 WL 2225231, at *7 (C.D. Cal. May 23, 2019) (holding the defendant’s 19 conclusory assertion that the plaintiff is entitled to 25% attorneys’ fees of the total recovery without 20 evidence is insufficient); Gonzalez v. Hub Int’l Midwest Ltd., 2019 WL 2076378, at *6 (C.D. Cal. May 21 10, 2019) (“Defendant’s mere reference to the 25% benchmark, without more, fails to establish the 22 amount of attorneys’ fees in controversy.”); Salazar v. PODS Enterprises, LLC, 2019 WL 2023726, at 23 *9 (C.D. Cal. May 8, 2019) (holding that, in light of Fritsch, applying the 25% benchmark without 24 evidence is inappropriate); Snow v. Watkins & Shepard Trucking, Inc., 2019 WL 1254571, at *4 (C.D. 25 Cal. Mar. 18, 2019) (“In light of Fritsch, Defendant’s reliance on Hanlon and Six (6) Mexican Workers 2 preponderance of the evidence its contention that the putative class would recover $798,120.56 in 3 attorneys’ fees.”). 4 Notwithstanding the existing split, Fritsch is clear on this point: “the defendant must prove the 5 amount of attorneys’ fees at stake by a preponderance of the evidence; we may not relieve the defendant 6 of its evidentiary burden by adopting a per se rule for one element of the amount at stake in the 7 underlying litigation.” Fritsch, LLC, 899 F.3d at 796 (emphasis added). Defendant fails to present any 8 evidence to establish how the proposed 25% attorneys’ fees calculation for the instant case is 9 reasonable; it may well be that a lesser percentage in attorneys’ fees would be reasonable here. There is 10 also no evidence to establish a reasonable amount of attorneys’ fees using the lodestar method. For 11 these reasons, the Court cannot find for any amount of attorneys’ fees in controversy.9 See Arias, 936 12 F.3d at 928 (declining to calculate attorneys’ fees at the rate of 25% of recovery because, “[a]lthough 13 such an estimate might be reasonable, we have declined to adopt” such a per se rule, leaving it up to the 14 district to decide attorneys’ fees on remand. (citing Fritsch, 899 F.3d at 796)); cf. Gonzalez, 2019 WL 15 5304925, at *10-11 (relying on the defendant’s affidavit of hourly rate and the court’s own knowledge 16 of customary rates and of awards in comparable cases pursuant to Fritsch, the court determined the 17 reasonable amount of attorneys’ fees); Reyes v. Staples Office Superstore, LLC, 2019 WL 4187847, at 18 19 20 9 Fritsch made clear that it did “not hold that a percentage-based method is never relevant when estimating the amount of attorneys’ fees included in the amount in controversy, only that a per se rule is inappropriate,” noting that “[t]he amount of 21 damages a plaintiff recovers is certainly relevant,” but it is “only one of many factors that a court should consider in 22 calculating an award of attorney’s fees.” Fritsch, LLC, 899 F.3d at 796 n.6. Fritsch, however, did not explain how the 23 amount of damages a plaintiff recovers should factor into the calculation of attorneys’ fees in controversy. Moreover, if it is 24 not always appropriate to apply the 25% benchmark as the starting point of analysis, then when, if ever, would it be 25 appropriate? Mo re clarification from the Ninth Circuit is necessary to resolve the district court split. 2 admission of his hourly rate, together with the court’s knowledge of customary rates that employment 3 cases in the Central District tend to take between 100 and 300 hours to litigate through trial, was 4 sufficient to determine the amount of attorneys’ fees in controversy). Without the incorporation of 5 attorneys’ fees, the amount in controversy as established by Defendant above is less than $5 million.10 6 The Court, therefore, has no jurisdiction over this case under CAFA. 7 V. CONCLUSION AND ORDER 8 For the foregoing reasons, Plaintiff’s Motion to Remand is GRANTED—this action is hereby 9 REMANDED to the Tulare Superior Court. 10 IT IS SO ORDERED. 11 Dated: January 13, 2020 /s/ Lawrence J. O’Neill _____ UNITED STATES DISTRICT JUDGE 12 13 14 15 16 17 18 19 10 The calculation is as follows: Claims The Court’s Estimated Amount in Controversy Based 20 on the Evidence Presented by Defendant and Plaintiff’s Allegations 21 Unpaid Overtime Claim (1st Claim) $989,190.72 Unpaid Meal Period Claim (2nd Claim) $659,460.48 22 Unpaid Rest Period Claim (3rd Claim) $989,190.72 Unpaid Minimum Wage Claim (4th Claim) $533,736 Statutory Penalty Claim for Failure to Pay Minimum Wage $239,400 23 (4th Claim) Statutory Penalty Claim for Failure to Pay Final Wages (5th $1,159,123.20 24 Claim) TOTAL $4,570,101.12 25