Mutchler v. Circle K Stores, Inc. ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 STEPHEN MUTCHLER on behalf of the Case No.: 20cv1239-GPC(BGS) State of California, as a private attorney 12 general, ORDER GRANTING PLAINTIFF’S 13 MOTION TO REMAND TO STATE Plaintiff, COURT 14 v. 15 [Dkt. No. 12] CIRCLE K STORES, INC., a corporation; 16 and DOES 1-50, inclusive, 17 Defendants. 18 19 Pending before the Court is Plaintiff’s motion to remand the case to state court. 20 (Dkt. No. 12.) Defendant filed an opposition and Plaintiff replied. (Dkt. Nos. 14, 17.) 21 Based on the reasoning below, the Court GRANTS Plaintiff’s motion to remand to state 22 court. 23 Background 24 On March 16, 2020, Plaintiff Stephen Mutchler (“Plaintiff’) filed a representative 25 action pursuant to the Private Attorney General Act of 2004 (“PAGA”), California Labor 26 Code section 2698, et seq., seeking statutory civil penalties for violations of Labor Code 27 28 1 section 1198, and Industrial Welfare Commission (“IWC”) Wage Order 7-2001 section 2 14, Cal. Code Regs. tit. 8 § 11070(14),2 against his employer Defendant Circle K Stores, 3 Inc. (“Defendant” or “Circle K”) for failing to provide suitable seating. (Dkt. No. 1-2, 4 Compl.) On July 2, 2020, Defendant removed the case to this Court based on diversity 5 jurisdiction, 28 U.S.C. § 1332(a). (Dkt. No. 1, Not. of Removal.) 6 Plaintiff was employed by Defendant as a customer service representative (“CSR”) 7 from November 2018 to August 2019 at a store located at 10520 Camino Ruiz, San 8 Diego, CA 92126. (Dkt. No. 1-2, Compl. ¶ 6.) He and other CSRs regularly worked 9 behind a sales counter and his job tasks reasonably permitted sitting, and sitting would 10 not have interfered with his job performance. (Id.) Plaintiff alleges that Defendant failed 11 to provide him with a suitable seat. (Id.) Plaintiff brings this representative action on 12 behalf of the State of California with respect to himself and all individuals who worked 13 for Defendant in California and who were not provided with a seat/stool (“aggrieved 14 employees”) during the time period of December 4, 2018 until a date as determined by 15 the Court. (Id. ¶ 7.) 16 Plaintiff filed the instant motion to remand the case to state court challenging 17 Defendant’s notice of removal arguing that Defendant has not shown that the Court has 18 diversity jurisdiction over this case. 19 / / / 20 21 22 1 Section 1198 of the Labor Code provides, “The maximum hours of work and the standard conditions of labor fixed by the commission shall be the maximum hours of work and the standard conditions of 23 labor for employees. The employment of any employee for longer hours than those fixed by the order or under conditions of labor prohibited by the order is unlawful.” Cal. Labor Code § 1198. 24 2 Industrial Welfare Commission (“IWC”) Wage Order 7-2001, § 14 states: 25 (A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats. 26 (B) When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed 27 in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties. 28 1 Discussion 2 A. Legal Standard 3 To remove a case from a state court to a federal court, a defendant must file a 4 notice of removal “containing a short and plain statement of the grounds for removal.” 5 28 U.S.C. § 1446(a). When removal is based on diversity of citizenship, the amount in 6 controversy must exceed $ 75,000, and the parties must be diverse. 28 U.S.C. § 1332. 7 The party invoking the removal statute bears the burden of establishing that federal 8 subject-matter jurisdiction exists. Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 9 (9th Cir. 1988). Moreover, courts “strictly construe the removal statute against removal 10 jurisdiction.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citing Boggs v. 11 Lewis, 863 F.2d 662, 663 (9th Cir. 1988)). Therefore, “[f]ederal jurisdiction must be 12 rejected if there is any doubt as to the right of removal in the first instance.” Gaus, 980 13 F.2d at 566 (citing Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 14 1979)). 15 1. Citizenship of the Parties 16 Plaintiff contends that Defendant has not provided any evidence that the parties are 17 diverse. Defendant responds with a declaration stating that it is incorporated in Texas 18 and maintains its principal place of business in Tempe, Arizona. (Dkt. No. 14-2, Novak 19 Decl. ¶¶ 2, 3.) 20 A “corporation shall be deemed to be a citizen of every State and foreign state by 21 which it has been incorporated and of the State or foreign state where it has its principal 22 place of business.” 28 U.S.C. § 1332(c)(1). Here, Plaintiff is a citizen and resident of 23 California, (see Dkt. No. 1-2, Compl. ¶ 6), and Defendant is a citizen of Texas and 24 Arizona. Thus, Defendant has demonstrated that the parties are diverse. 25 2. Amount in Controversy 26 Plaintiff argues that the notice of removal explaining that the amount in 27 controversy exceeds $75,000 based on the civil penalties and attorneys’ fees is based on 28 unsupported and unreasonable assumptions. Defendant answers that the amount in 1 controversy is satisfied because Plaintiff is the only “aggrieved” employee and with 2 attorneys’ fees the amount in controversy exceeds $75,000. 3 “[W]hen a defendant seeks federal-court adjudication, the defendant’s amount-in- 4 controversy allegation should be accepted when not contested by the plaintiff or 5 questioned by the court.” Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 6 81, 87 (2014). “[A] removing defendant's notice of removal ‘need not contain 7 evidentiary submissions’ but only plausible allegations of the jurisdictional elements” 8 Arias v. Residence Inn by Marriott, 936 F.3d 920, 922 (9th Cir. 2019) (quoting Ibarra v. 9 Manheim Invs., Inc., 775 F.3d 1193, 1197 (9th Cir. 2015)). However, once a plaintiff 10 challenges the defendant’s assertions, the defendant must prove by the preponderance of 11 the evidence that the amount in controversy exceeds the jurisdictional threshold. Dart 12 Cherokee, 574 U.S. at 88. “Conclusory allegations as to the amount in controversy are 13 insufficient.” Matheson v. Progressive Specialty Ins., Co., 319 F.3d 1089, 1090-91 (9th 14 Cir. 2003). “[A] defendant cannot establish removal jurisdiction by mere speculation and 15 conjecture, with unreasonable assumptions.” Ibarra, 775 F.3d at 1197. “Under this 16 burden, the defendant must provide evidence establishing that it is ‘more likely than not’ 17 that the amount in controversy exceeds [$75,000].” Sanchez v. Monumental Life Ins. Co., 18 102 F.3d 398, 404 (9th Cir. 1996). The type of evidence the Court will consider include 19 “the facts presented in the removal petition as well as any ‘summary judgment-type 20 evidence . . . .’” Valdez v. Allstate, Inc., 372 F.3d 1115, 1117 (9th Cir. 2004) (quoting 21 Matheson, 319 F.3d at 1090). “[W]hen a defendant’s assertion of the amount in 22 controversy is challenged . . . both sides submit proof and the court decides, by a 23 preponderance of the evidence, whether the amount-in-controversy requirement has been 24 satisfied.” Dart, 574 U.S. at 88. 25 “The amount in controversy is simply an estimate of the total amount in dispute, 26 not a prospective assessment of defendant’s liability”, Arias, 963 F.3d at 927 (quoting 27 Lewis v. Verizon Commc’ns, Inc., 627 F.3d 395, 400 (9th Cir. 2010)), and reflects the 28 maximum recovery the plaintiff could reasonably recover. See Chavez v. JPMorgan 1 Chase & Co., 888 F.3d 413, 417 (9th Cir. 2018) (explaining that the amount in 2 controversy includes all amounts “at stake” in the litigation at the time of removal, 3 “whatever the likelihood that [the plaintiff] will actually recover them”). 4 In determining the amount in controversy, the Court must assume that the 5 allegations in the complaint are true and that a jury will return a verdict in the plaintiff's 6 favor on all of the claims in the complaint. Kenneth Rothschild Tr. v. Morgan Stanley 7 Dean Witter, 199 F. Supp. 2d 993, 1001 (C.D. Cal. 2002). “The ultimate inquiry is what 8 amount is put ‘in controversy’ by the plaintiff's complaint, not what a defendant will 9 actually owe.” Korn v. Polo Ralph Lauren Corp., 536 F. Supp. 2d 1199, 1205 (E.D. Cal. 10 2008) (emphasis in original); see also Rippee v. Boston Market Corp., 408 F. Supp. 2d 11 982, 986 (S.D. Cal. 2005). 12 Where an underlying statute authorizes an award of attorneys' fees “such future 13 attorneys’ fees are at stake in the litigation and must be included in the amount in 14 controversy.” Fritsch v. Swift Transp. Co. of Arizona, LLC, 899 F.3d 785, 794 (9th Cir. 15 2018). In addition, recently, the Ninth Circuit affirmed its ruling in Urbino v. Orkin 16 Servs. of California, Inc., 726 F.3d 1118 (9th Cir. 2013), and held that PAGA civil 17 penalties, including attorney’s fees, cannot be aggregated for purposes of assessing the 18 amount in controversy. Canela v. Costco Wholesale Corp., -- F.3d --, 2020 WL 19 4920949, at *3 (9th Cir. July 9, 2020) (amended August 21, 2020). 20 In this case, the complaint seeks the recovery of civil penalties under Labor Code 21 section 1198 and an award of attorneys’ fees and costs. (Dkt. No. 1-2, Compl. at p. 11.) 22 As to civil penalties, Defendant claims it employed Plaintiff from December 2, 23 20183 to August 23, 2019; therefore, Plaintiff was employed for 37 weeks during the 24 PAGA Period in which he seeks to recover civil penalties. (Dkt. No. 1, Not. of Removal 25 26 27 3 It appears the Notice of Removal has a typographical error as it states that Defendant employed Plaintiff from October 2, 2018, yet, it also states the 37 weeks of Plaintiff’s employment began on 28 1 ¶¶ 12, 13.) Because Defendant paid Plaintiff on a weekly basis, under Labor Code 2 section 2699(f)(2), Plaintiff is seeking to recover at least $3,700 in civil penalties (37 pay 3 periods x $100 for the initial violation) all of which may be considered towards the 4 amount in controversy. (Id.) 5 Plaintiff responds with documentary evidence that he was paid bi-weekly, not 6 weekly as claimed by Defendant; therefore, his civil penalties amount to about $2000. 7 (See Dkt. No. 12-2, Mukherjee Decl., Ex. 1.) Because Plaintiff provides documentary 8 evidence of his paystubs demonstrating he was paid bi-weekly, the Court relies on the 9 civil penalty calculation of Plaintiff. 10 As to attorneys’ fees, because PAGA provides attorney’s fees for the prevailing 11 party, see Cal. Lab. Code § 2699(g)(1)4, future attorneys’ fees must be included in the 12 amount in controversy. See Fritsch, 899 F.3d at 794. In addition, attorneys’ fees may 13 not be aggregated in calculating the $75,000 amount in controversy. See Canela, 2020 14 WL 4920949, at *3. In Canela, the defendant claimed that 968 employees collectively 15 sought $5,324,000 in civil penalties and it could be liable for $1,064,800 in attorney’s 16 fees but the Ninth Circuit held that because the plaintiff’s pro-rata share of civil penalties 17 and attorney’s fees totaled $6,600 at the time of removal, the amount in controversy was 18 not met. Id. at *4. 19 Defendant argues that based on the allegations in the complaint, it made the 20 reasonable assumption that Plaintiff is the only “aggrieved” employee because the 21 complaint fails to specify the number of employees he seeks to represent.5 (Dkt. No. 14 22 at 5.) First, it summarily argues that the definition of “Aggrieved Employee” is an 23 improper “fail safe” definition. “A fail-safe class is commonly defined as limiting 24 25 4 Under PAGA, “[a]ny employee who prevails in any action shall be entitled to an award of reasonable 26 attorney's fees and costs.” Cal. Lab. Code § 2699(g)(1). 5 It appears that Defendant is claiming that Plaintiff is the only aggrieved employee in order to avoid the 27 aggregation issue in Canela. By alleging that Plaintiff is the only aggrieved employee, the entire amount of the estimated attorneys’ fee of $77,250 would be attributed to Plaintiff and exceed the amount 28 1 membership to plaintiffs described by their theory of liability in the class definition such 2 that the definition presupposes success on the merits.” Melgar v. CSK Auto, Inc., 681 3 Fed. App’x 605, 607 (9th Cir. 2017) (unpublished). However, Defendant fails to explain, 4 and the Court is unable to determine how “the class definition begged the ultimate 5 question underlying the defendant's liability in the case”, William B. Rubenstein, 6 Newberg on Class Actions § 3:6 (5th ed. 2016). Defendant’s fail-safe argument is not 7 persuasive. 8 Second, Defendant avers that it reasonably assumed Plaintiff is the only aggrieved 9 employee because the complaint provides factual allegations relating to his own seating 10 claim and it was not until his motion was filed that he stated there are at least 150 other 11 employees who fall within the group he seeks to represent. Defendant asks the Court to 12 disregard Plaintiff’s assertion because it was not alleged in the complaint. Moreover, 13 based on its own internal investigation, Defendant claims Plaintiff is the only aggrieved 14 employee because it has been providing seating to employees since 2011, (see Dkt. No. 15 1-4, Braham Decl. ¶ 3; Dkt. No. 14-1, Herrera Decl. ¶¶ 2, 3). In reply, Plaintiff argues 16 that because the complaint references “Plaintiff and other “aggrieved employees”, 17 Defendant’s assumption is incorrect. (Id. ¶¶ 11-12.) Moreover, since Defendant has a 18 minimum of 150 Circle K locations in California, Plaintiff claims that Defendant 19 employs no less than 150 non-exempt employees working in California. (Dkt. No. 12-2, 20 Mukherjee Decl. ¶ 3.) 21 First, contrary to Defendant’s request that the Court not consider Plaintiff’s 22 declaration concerning the number of Circle K stores in California, the Supreme Court 23 has stated that both sides may submit evidence to support their position on the amount in 24 controversy. See Dart, 574 U.S. at 88. Therefore, the Court may consider Plaintiff’s 25 evidence. Second, the Court must look to the allegations in the complaint to determine 26 what amount is put in controversy. See Korn, 536 F. Supp. 2d at 1205 (“The ultimate 27 inquiry is what amount is put ‘in controversy’ by the plaintiff's complaint, not what a 28 defendant will actually owe.”). Plaintiff brings a complaint solely based on PAGA which 1 provides that penalties may be recovered “through a civil action brought by an aggrieved 2 employee on behalf of himself or herself and other current or former employees pursuant 3 to the procedures specified in Section 2699.3.” Cal. Labor Code § 2699(a) (emphasis 4 added). A single plaintiff cannot state an individual claim for PAGA penalties. See 5 Machado v. M.A.T. & Sons Landscape, Inc., No. 2:09–cv–00459 JAM JFM, 2009 WL 6 2230788, at *2 (E.D. Cal. July 23, 2009) (“Defendants are correct in asserting that a 7 PAGA claim must be brought as a representative action.”). In this case, because Plaintiff 8 brings a PAGA complaint on behalf of himself and other CSRs in California who were 9 not provided with a seat/stool, it necessarily assumes there is more than one aggrieved 10 employee. (See Dkt. No. 1-2, Compl. ¶ 7.) Defendant’s assumption that Plaintiff is the 11 only aggrieved employee is without merit. 12 Defendant estimates that attorneys’ fees in the case amount to $77,250 and as such, 13 exceeds the amount in controversy. This amount is based on a conservative estimate of 14 100 hours litigating this action and an average hourly rate of $772.50 based on rates that 15 were approved for Plaintiff’s counsel in a class action case of Vikram v. First Student 16 Mgmt., Case No. 17-cv-04656-KAW (N.D. Cal.). 6 (Dkt. No. 1, Not. of Removal ¶¶ 17- 17 18.) Even if the Court were to find that Defendant’s calculation was based on a 18 reasonable assumption, which Plaintiff challenges, the amount in controversy would not 19 be met. Because PAGA civil penalties and attorneys’ fees are not aggregated for 20 purposes of determining the amount in controversy, see Canela, 2020 WL 492094, at *3, 21 and Plaintiff has shown that there are at least 150 Circle K stores or 150 other employees 22 who fall within the group he seeks to represent in California, Plaintiff’s pro-rata share of 23 attorney’s fees amount to $515 ($77,250/150) plus $2000 in civil penalties.7 This amount 24 25 26 6 Mr. Blumenthal’s approved hourly rate of $795 and Mr. Norderehaug’s approved hourly rate of $750 27 per hour divided by 2. (Dkt. No. 1, Not. of Removal 4; id., Ex. 2 at 32.) 7 The Court recognizes that the attorneys’ fees may be higher if Plaintiff brings this action on behalf of 28 1 cannot support the jurisdictional threshold of $75,000. Because Defendant has not met 2 |lits burden,® the Court GRANTS Plaintiffs motion to remand. 3 Conclusion 4 Based on the above, the Court GRANTS Plaintiff’s motion to remand the case to 5 || state court. The hearing set on September 18, 2020 shall be vacated. 6 IT IS SO ORDERED. 7 ||Dated: September 14, 2020 <= 8 Hon. Gonzalo P. Curiel 9 United States District Judge 10 1] 12 13 14 15 16 17 18 19 20 21 22 23 || ——————— 24 IIs In opposition, Defendant provides evidence that according to its internal investigation, it has never 25 ||teceived any complaints about a failure to provide seats to California employees and nobody else falls within the definition of an “aggrieved employee” because Circle K has been providing adequate seats 26 2011. (Dkt. No. 14-1, Herrera Decl. 2, 3.) However, at this stage, the Court declines to consider the merits of Defendant’s liability under the Labor Code. Moreover, in a motion to remand, the 27 |! Court looks at the maximum recover the plaintiff could reasonably cover which is based on the 28 allegations in the complaint and what amount is put in controversy. See Arias 936 F.3d at 927. Thus, the Court declines to consider Defendant’s evidence. oO