Escobar v. Capstone Logistics, LLC ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 IVAN ESCOBAR, as an individual No. 2:20-cv-02501-WBS-JDP and on behalf of all others 13 similarly situated, 14 Plaintiffs, MEMORANDUM AND ORDER RE: PLAINTIFF’S MOTION TO REMAND 15 v. 16 CAPSTONE LOGISTICS, LLC, a Delaware limited liability 17 company; and DOES 1 through 50, inclusive 18 Defendants. 19 20 ----oo0oo---- 21 Plaintiff Ivan Escobar (“plaintiff”) brought this 22 action against Capstone Logistics, LLC (“Capstone”) and Does 1 23 through 50, asserting violations of California Labor Code § 24 226(a) and California Labor Code § 2698, and purporting to sue on 25 behalf of himself and “[a]ll current and former employees of 26 Capstone in the state of California who were paid “Premium” wages 27 at any time between May 13, 2019, through the present.” (See 28 1 Compl.) (Docket No. 1, at Ex. 1.) 2 Defendant Capstone removed the case to this court 3 asserting diversity jurisdiction under 28 U.S.C. § 1332(d)(2), 4 the Class Action Fairness Act of 2005 (“CAFA”). However, after 5 reviewing his arbitration agreement with defendant, which would 6 effectively bar any class claims, plaintiff filed a First Amended 7 Complaint (“FAC”) which eliminated the class action claims and 8 solely asserts claims under the Private Attorneys General Act 9 (“PAGA”), California Labor Code § 2968, et seq. (See generally 10 First Am. Compl.) (Docket No. 12.) Before the court now is 11 plaintiff’s Motion to Remand. (See Mot. to Remand.) (Docket No. 12 7.) 13 I. Factual and Procedural Background 14 Plaintiff Ivan Escobar was hired by Capstone on or 15 about April 13, 2020 as a Material Handler, and worked as an 16 hourly non-exempt employee. (See First Am. Compl. at ¶ 7.) 17 Capstone is a Delaware limited liability company that provides 18 supply chain management services, including transportation, 19 warehousing, and fulfillment services, to businesses throughout 20 the United States and California. (Id. at ¶ 9.) Plaintiff 21 contends that Capstone uniformly administered a corporate policy 22 and practice of failing to provide proper payroll records in 23 violation of California Labor Code § 226. (Id. at ¶ 16.) 24 Plaintiff states that when “premium” wages were paid, the wage 25 statements failed to identify the correct rates of pay and/or 26 hours worked. (Id. at ¶ 17.) He seeks penalties on behalf of 27 all aggrieved hourly employees who were paid “premium” wages from 28 May 13, 2019 through the present for Capstone’s violations of 1 California Labor Code § 226(a). (Id. at ¶ 22.) 2 II. Discussion 3 Plaintiff does not dispute that there is complete 4 diversity between himself and the defendant. Although California 5 may be a real party in interest to a PAGA action because most of 6 the penalties recovered in a PAGA action ultimately accrue to the 7 California Labor Workforce & Development Agency, this does not 8 convert California into an actual party to all PAGA litigation. 9 See Archila v. KFC U.S. Props., Inc., 420 F. App’x 667, 668 (9th 10 Cir. 2011). However, plaintiff argues that the court lacks 11 diversity jurisdiction under 28 U.S.C. § 1332 because after the 12 dismissal of his class claims the amount in controversy does not 13 exceed $75,000, exclusive of interests and costs.1 14 The amount in controversy includes “all relief claimed 15 at the time of removal to which the plaintiff would be entitled 16 if [he] prevails.” See Chavez. v. JPMorgan Chase & Co., 888 F.3d 17 413, 418 (9th Cir. 2018). To determine the amount in 18 controversy, courts must first look to the face of the pleadings. 19 See St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 20 289–90 (1938). 21 Where, as here, it is unclear from the face of the 22 complaint whether the amount in controversy exceeds $75,000, “the 23 removing defendant bears the burden of establishing, by a 24 preponderance of the evidence, that the amount in controversy 25 26 1 Although defendant did not address this issue at the hearing on this motion, and seemed to concede that the court had 27 only supplemental jurisdiction over plaintiff’s PAGA claims, this issue was mentioned at length in the parties’ motions and will 28 accordingly be addressed here. 1 exceeds the jurisdictional threshold.” See Urbino v. Orkin 2 Servs. of Cal., Inc., 726 F.3d 1118, 1121-22 (9th Cir. 2013). 3 The amount in controversy may include “damages (compensatory, 4 punitive, or otherwise) and the cost of complying with an 5 injunction, as well as attorneys’ fees under fee shifting 6 statutes.” See Gonzalez v. CarMax Auto Superstores, LLC, 840 7 F.3d 644, 648 (9th Cir. 2016). Conclusory allegations as to the 8 amount in controversy are insufficient. See Corral v. Select 9 Portfolio Servicing, Inc., 878 F.3d 770, 774 (9th Cir. 2017). In 10 assessing the amount in controversy, the court may consider 11 allegations in the complaint and in the notice of removal, as 12 well as summary-judgment type evidence relevant to the amount in 13 controversy.2 See Chavez, 888 F.3d at 416 (internal citations 14 omitted). 15 Under PAGA, civil penalties recovered by aggrieved 16 employees are distributed as follows: “75 percent to the Labor 17 and Workforce Development Agency [“LWDA”] and 25 percent to the 18 aggrieved employees.” Cal. Lab. Code § 2699(i). In Urbino, the 19 Ninth Circuit made clear that the “amount in controversy” in PAGA 20 2 Defendant has submitted factual allegations regarding the number of “premium” wage statements that were paid to 21 plaintiff, the number of non-exempt employees in California paid 22 “premium” wages, and the number of wage statements issued to those employees which reflected “premium” wages, supported by a 23 declaration from defendant’s payroll manager, Megan Nagel, under penalty of perjury. (See Opp’n to Mot. to Remand at Ex. 2, Decl. 24 of Meghan Nagel in Support of Opp’n to Mot to Remand(“Nagel Decl.”) (Docket No. 11).) This type of evidence has previously 25 been found sufficient to support removal. See Jones v. Tween Brands, Inc., No. 2:14-cv-1631-ODW (PLAx), 2014 WL 1607636 at *3 26 (C.D. Cal. Apr. 22, 2014); Muniz v. Pilot Travel Ctrs. LLC, No. 27 Civ. S-07-0325 FCD EFB, 2007 WL 1302504 at * 5 (E.D. Cal. May, 1, 2007). 28 1 only actions cannot be met by aggregating the penalties 2 recoverable on behalf of all aggrieved employees. See Urbino, 3 726 F.3d at 1122. Thus, the court cannot consider the recovery 4 that other aggrieved employees would receive in assessing the 5 amount in controversy. 6 However, district courts in California have disagreed 7 as to whether the LWDA’s portion of potential PAGA penalties can 8 be aggregated with an individual plaintiff’s portion of the 9 penalties to satisfy the amount in controversy requirement. 10 Compare e.g. Hesselink v. Am. Family Life Assurance Co. of 11 Columbus, Case No. SACV 20-02051-CJC (DFMx), 2020 WL 7768711, 12 (S.D. Cal. Dec. 30, 2020) at *3 (holding that the state’s 75% 13 share cannot be aggregated with the plaintiff’s); Steenhuyse v. 14 UBS Fin. Servs., Inc., 317 F. Supp. 3d 1062, 1069 (N.D. Cal. 15 2018) (same); Willis v. Xerox Bus. Servs. LLC, No. 1:13-cv-01353- 16 LJO-JLT, 2013 WL 6053831 at *8–9 (E.D. Cal. Nov. 15, 2013)(same); 17 Lopez v. Source Interlink Cos., Inc., No. 2:12-cv-00003-JAM-CKD, 18 2012 WL 1131543, *3 (E.D. Cal. Mar. 29, 2012)(same), with e.g., 19 Patel v. Nike Retail Servs., Inc., 58 F. Supp. 3d 1032, 1046 20 (N.D. Cal. 2014) (holding that the state’s 75% share can be 21 aggregated with an individual plaintiff for purposes of 22 satisfying the amount in controversy); Mitchell v. Grubhub Inc., 23 Case No. CV 15-05465-BRO (ASx), 2015 WL 5096420, *5 (C.D. Cal. 24 Aug. 28, 2015)(same). 25 The conflicting conclusions reached by the various 26 district courts are due to differing interpretations of Urbino.3 27 3 Defendant relies extensively on Thomas v. Aetna Health 28 of California, Inc., No. 1:10-cv-01906-AWI-SKO, 2011 WL 2173715, 1 In Urbino, the defendants contended that the interest asserted by 2 the plaintiff was not his individual interest but rather the 3 state’s collective interest in enforcing its labor laws through 4 PAGA. See Urbino, 726 F.3d at 1122–23. The Ninth Circuit 5 responded: 6 To the extent Plaintiff can, and does, assert anything beyond his individual interest, however, 7 we are unpersuaded that such a suit, the primary benefit of which will inure to the state, 8 satisfies the requirements of federal diversity jurisdiction. The state, as the real party in 9 interest, is not a ‘citizen’ for diversity purposes. See Navarro Sav. Ass’n v. Lee, 446 10 U.S. 458, 461 (1980) (courts ‘must disregard nominal or formal parties and rest jurisdiction 11 only upon the citizenship of real parties to the controversy.’). . . 12 13 See id. 14 “This language implies that, whether the state is 15 deemed a nominal party or a real party in interest, its interest 16 is not to be considered.” See Hesselink, 2020 WL at *3. The 17 Urbino court explained that when determining the amount in 18 controversy, aggregation of claims is appropriate “when neither 19 [party] can enforce [the claim] in the absence of the other.” 20 Urbino, 726 F.3d 1122. However, PAGA “permits either the LWDA or 21 the aggrieved employees to act independently to enforce the Labor 22 Code.” See Hesselink, 2020 WL at *3. In addition, the position 23 advocated by defendant here -- that the plaintiff in a PAGA claim 24 pursues a common and undivided claim in his role as a proxy for 25 the state and that the amount in controversy should include the 26 at * 19 (E.D. Cal. Jun. 2, 2011) and Schiller v. David’s Bridal, 27 Inc., 2010 WL 2793650-AWI-SKO, at * 8 (E.D. Cal. July 14, 2010). However, because both cases pre-date Urbino, the court finds them 28 inapposite here. 1 total civil penalties sought in the action -- was asserted 2 forcefully by the Urbino dissent but ultimately not adopted by 3 the panel. Thus, Urbino’s language leads this court to conclude 4 that the LWDA’s penalties should not be aggregated with 5 plaintiff’s penalties to determine the amount in controversy.4 6 Plaintiff received nine wage statements reflecting 7 “Premium” wages during his employment tenure. (See Opp’n to Mot. 8 to Remand at Ex. 2, Nagel Decl. at ¶ 5.) Plaintiff states that 9 the maximum amount of penalties to which he may be entitled is 10 $562.50, assuming a PAGA penalty of $250 per wage statement for 11 “initial violations” and considering the 75% share of penalties 12 that would go to the LWDA. (See Reply in Supp. of Mot. to Remand 13 at 5.) (Docket No. 13.)5 This does not come close to the $75,000 14 amount in controversy requirement for diversity jurisdiction, 15 even if the court were to consider attorney’s fees. Because 16 plaintiff’s claims fall short of satisfying the amount in 17 controversy requirement, the court concludes that there is no 18 traditional diversity jurisdiction under 28 U.S.C. § 1332. 19 Nevertheless, because the court originally had 20 4 Defendant suggests that Sakkab v. Luxottica Retail N. 21 Am., Inc., 803 F.3d 425, 427–440 (9th Cir. 2015) has called into 22 question the continuing validity of Urbino. However, Sakkab never mentioned Urbino in its analysis and dealt with the issue 23 of whether the Federal Arbitration Act preempted the bar on the waiver of representative claims under PAGA. See id. Defendant 24 has cited no case law to support this proposition. Accordingly, the court does not agree that Sakkab has called into question the 25 validity of Urbino. 26 5 Defendant has not contested plaintiff’s calculation of 27 his individual penalties or the idea that there would only be penalties for initial violations. 28 1 diversity jurisdiction over plaintiff’s CAFA claim at the time of 2 removal, defendant asks the court to retain supplemental 3 jurisdiction over plaintiff’s remaining PAGA claim under 28 4 U.S.C. § 1367. See Echevarria v. Aerotek, Inc., 814 F. App’x 5 321, 322 (9th Cir. 2020). Federal courts have “supplemental 6 jurisdiction over all other claims that are so related to claims 7 in the action within such original jurisdiction that they form 8 part of the same case or controversy under Article III of the 9 United States Constitution.” 28 U.S.C. § 1367(a). But a 10 district court “may decline to exercise supplemental jurisdiction 11 . . . [if] the district court has dismissed all claims over which 12 it has original jurisdiction.” 28 U.S.C. § 1367(c); see also 13 Acri v. Varian Assocs., Inc., 114 F.3d 999, 1001 n.3 (9th Cir. 14 1997) (en banc) (explaining that a district court may decide sua 15 sponte to decline to exercise supplemental jurisdiction). 16 The Supreme Court has stated that “in the usual case in 17 which all federal-law claims are eliminated before trial, the 18 balance of factors to be considered under the pendent 19 jurisdiction doctrine--judicial economy, convenience, fairness, 20 and comity--will point toward declining to exercise jurisdiction 21 over the remaining state-law claims.” Carnegie–Mellon Univ. v. 22 Cohill, 484 U.S. 343, 350 n.7 (1988). 23 Here, comity weighs in favor of declining to exercise 24 supplemental jurisdiction over plaintiff’s remaining state law 25 claim because the state court is competent to hear such claims 26 and may have a better understanding of the relevant state law. 27 As for judicial economy, this action was removed to this court 28 only a little over two months ago and is still in its early nen ee een ene OE OE OO EE 1 stages. Judicial economy does not weigh in favor of exercising 2 supplemental jurisdiction. 3 Lastly, convenience and fairness do not weigh in favor 4 of exercising supplemental jurisdiction. The federal and state 5 fora are equally convenient for the parties. There is no reason 6 | to doubt that the state court will provide an equally fair 7 adjudication of the issues. Accordingly, the court declines to 8 exercise supplemental jurisdiction and will remand plaintiff’s 9 remaining state law claim. 10 IT IS THEREFORE ORDERED that this case be, and the same 11 hereby is, REMANDED to the Superior Court of California, in and 12 for the County of San Joaquin. The Clerk of this Court shall 13 forward a copy of this Order to the Clerk of the Superior Court 14 of California, in and for the County of San Joaquin. 15 IT IS SO ORDERED. 16 | Dated: March 9, 2021 bette 2d. □□ 17 WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 25 26 27 28