MARGARET M. MORROW, District Judge.
On July 15, 2014, Jaime Carranza filed this putative class action against Nordstrom, Inc., ("Nordstrom") and various unnamed defendants in San Bernardino Superior Court.
Pursuant to Rule 78 of the Federal Rules of Civil Procedure and Local Rule 7-15, the court finds this matter appropriate for decision without oral argument. The hearing calendared for December 15, 2014, is therefore vacated, and the matter is taken off calendar.
Carranza was employed by Nordstrom at its fulfillment center in San Bernardino, California, in March and April 2014.
Carranza asserts that the searches are similar to the security screening performed at airports; Nordstrom employees are purportedly required to remove all personal belongings, such as wallets, keys, and belts, and pass through metal detectors before being allowed to leave the fulfillment centers.
Carranza contends that Nordstrom's policy regarding the searches was systematic and continuous, and had a common impact on all Nordstrom employees subject to it, in that they were routinely denied uninterrupted, compliant meal periods and rest periods, and were not compensated for the time they were under Nordstrom's control being screened or waiting to be screened.
Employees purportedly remained under Nordstrom's control during the time they were waiting to be searched and undergoing a search by Nordstrom security officers.
Carranza seeks to represent a class of "[a]ll current and former non-exempt employees employed by Defendants at NORDSTROM Fulfillment Centers in the State of California at any time beginning four years prior to the filing of this Complaint [and up] to the commencement of trial in this action[;] [the class] includes persons paid through third-party staffing agencies."
On behalf of the class and subclasses, Carranza pleads claims for (1) failure to pay hourly wages in violation of California Labor Code §§ 204, 1194 and Industrial Welfare Commission ("IWC") Wage Order 2-2001;
"Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). "If at any time before final judgment[, however,] it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c).
The right to remove a case to federal court is entirely a creature of statute. See Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979). The original removal statute, 28 U.S.C. § 1441, allows defendants to remove when a case originally filed in state court presents a federal question or is between citizens of different states and involves an amount in controversy that exceeds $75,000. See 28 U.S.C. §§ 1441 (a), (b); see also 28 U.S.C. §§ 1331, 1332(a). Only state court actions that could originally have been filed in federal court can be removed. 28 U.S.C. § 1441(a); see Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987); Ethridge v. Harbor House Rest., 861 F.2d 1389. 1393 (9th Cir. 1988).
The Ninth Circuit "strictly construe[s] the removal statute against removal jurisdiction," and "[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citing Boggs v. Lewis, 863 F.2d 662, 663(9th Cir. 1988), Takeda v. Northwestern Nat'l Life Ins. Co., 765 F.2d 815, 818 (9th Cir. 1985), and Libhart, 592 F.2d at 1064). "The `strong presumption' against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper." Id. (citing Nishimoto v. Federman-Bachrach & Assocs., 903 F.2d 709, 712 n. 3 (9th Cir. 1990); Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988)). Doubts as to removability must be resolved in favor of remanding the case to state court. Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003).
Congress enacted the Class Action Fairness Act ("CAFA"), Pub. L. No. 109-2, 119 Stat. 4, in 2005 to enlarge the diversity jurisdiction of the federal courts. CAFA gives district courts original jurisdiction to hear class actions "in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs," and "in which[, inter alia,] any member of a class of plaintiffs is a citizen of a State different from any defendant." 28 U.S.C. § 1332(d)(2); see also Luthis v. Countrywide Homes Loans Servicing LP, 533 F.3d 1031, 1033-34 (9th Cir. 2008) ("The Class Action Fairness Act of 2005 § 4(a), 28 U.S.C. § 1332(d)(2), amended the requirements for diversity jurisdiction by granting district courts original jurisdiction over class actions exceeding $5,000,000 in controversy where at least one plaintiff is diverse from at least one defendant. In other words, complete diversity is not required. CAFA also provided for such class actions to be removable to federal court. See 28 U.S.C. § 1453(b). CAFA was enacted, in part, to `restore the intent of the framers of the United States Constitution by providing for Federal court consideration of interstate cases of national importance under diversity jurisdiction.' Pub. L. No. 109-2, § 2(b)(2), 119 Stat. 4, 5 (codified as a note in 28 U.S.C. § 1711)").
Under CAFA, the number of members of all proposed plaintiff classes must exceed 100 in the aggregate. 28 U.S.C. § 1332(d)(5)(B). See also Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1020-21 (9th Cir. 2007) ("As a threshold matter, CAFA applies to `class action' lawsuits where the aggregate number of members of all proposed plaintiff classes is 100 or more persons and where the primary defendants are not `States, State officials, or other governmental entities against whom the district court may be foreclosed from ordering relief.' § 1332(d)(5). ... Once the prerequisites of § 1332(d)(5) are satisfied, CAFA vests federal courts with `original' diversity jurisdiction over class actions if (1) the aggregate amount in controversy exceeds $5,000,000, and (2) any class member is a citizen of a state different from any defendant. § 1332(d)(2)"); id. at 1021 n. 3 ("The Fifth Circuit characterized § 1332(d)(5) as an `exception' to CAFA jurisdiction conferred under § 1332(d)(2). ... We view § 1332(d)(5)somewhat differently. ... [S]atisfaction of § 1332(d)(5) serves as a prerequisite, rather than an exception, to jurisdiction under § 1332(d)(2). This distinction is important because, as we address later, there are `exceptions' to the statute in which jurisdiction otherwise exists under § 1332(d)(2) but the federal courts either may or must decline to exercise that jurisdiction. See, e.g., § 1332(d)(3)-(4)").
The Ninth Circuit has confirmed that CAFA does not disturb the traditional rule that the burden of establishing removal jurisdiction is on the proponent of federal jurisdiction. Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 685 (9th Cir. 2006) ("We . . . hold that under CAFA the burden of establishing removal jurisdiction remains, as before, on the proponent of federal jurisdiction").
As noted under CAFA, the number of members of all putative classes must exceed 100 in aggregate. 28 U.S.C. § 1332(d)(5)(B). In its notice of removal, Nordstrom proffers the declarations of Janis Walsh, its Vice President of Human Resources Operations, and Kristen Martin, the Vice President of Human Resources for Hautelook, a Nordstrom subsidiary.
In its notice of removal, Nordstrom asserts that the minimal diversity requirement is satisfied because Carranza is a citizen of California and Nordstrom is a citizen of Washington.
While the class is sufficiently numerous, and there is minimal diversity, Carranza contends that Nordstrom has failed to establish that the amount in controversy exceeds $5,000,000.
Here, Carranza's state court complaint affirmatively pleads an amount in controversy less than $5,000,000:
In cases such as this, where the state court complaint affirmatively pleads an amount in controversy below the jurisdictional threshold, courts in the Ninth Circuit previously employed the "legal certainty" standard set forth in Lowdermilk to determine whether the jurisdictional minimum was satisfied. In Lowdermilk, the Ninth Circuit held that when a plaintiff pleads an amount in controversy that is less than the jurisdictional minimum, a defendant seeking to remove the case under CAFA must show to a "legal certainty" that the jurisdictional amount is at issue. Lowdermilk, 479 F.3d at 999. The court identified two principles informing this conclusion: "First, as federal courts, we are courts of limited jurisdiction and we will strictly construe our jurisdiction. Second, it is well-established that the plaintiff is `master of her complaint' and can plead to avoid federal jurisdiction." Id. at 998-99 (citations omitted).
This rule changed after the United States Supreme Court's decision in Standard Fire Insurance Company v. Knowles, 133 S.Ct. 1345 (2013). Knowles filed a class action, alleging that he and the "[c]lass stipulate[d] they [would] seek to recover total aggregate damages of less than [the CAFA jurisdictional threshold of] five million dollars." Defendants removed. Id. at 1348. The district court remanded. It found that although the amount in controversy would have exceeded $5,000,000 in the absence of the stipulation, it could not be met given the stipulation. Id. The Supreme Court held that the district court erred in relying on the stipulation because "a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified." Id. at 1349.
The Ninth Circuit has recognized that Standard Fire overruled Lowdermilk's "legal certainty" standard in CAFA cases where a class action plaintiff alleges that the amount in controversy is less than the jurisdictional minimum. See Rodriguez v. AT&T Mobility Services, LLC, 728 F.3d 975, 977 (9th Cir. 2013) ("Our reasoning . . . for imposing on defendants the burden to prove the amount in controversy to a legal certainty, rather than the ordinary preponderance of the evidence standard, is clearly irreconcilable with the Supreme Court's reasoning in Standard Fire"). The court held that the second principle informing the Lowdermilk rule — to "preserve the plaintiff's prerogative . . . to forgo a potentially larger recovery to remain in state court" — was "directly contradicted by Standard Fire[`s holding that] a plaintiff seeking to represent a putative class [cannot] evade federal jurisdiction by stipulating that the amount in controversy [falls] below the jurisdictional minimum." Id. at 980-81. The court also concluded that Standard Fire had overruled Lowdermilk's directive that district courts "need not look beyond the four corners of the complaint to determine whether the CAFA jurisdictional amount is met," and that § 1332(d) required district courts to evaluate the potential claims of absent class members rather than plaintiff's complaint. Id. at 981.
Because the Lowdermilk "legal certainty" standard no longer applies, Nordstrom must, to invoke federal jurisdiction under CAFA, prove by a preponderance of the evidence that the complaint places more than $5,000,000 in issue. See, e.g., Rodriguez, 728 F.3d at 981 ("A defendant seeking removal of a putative class action must demonstrate, by a preponderance of evidence, that the aggregate amount in controversy exceeds the jurisdictional minimum. This standard conforms with a defendant's burden of proof when the plaintiff does not plead a specific amount in controversy"); Vasquez v. First Student, Inc., No. 2:14-CV-06760 ODW(Ex), 2014 WL 6837279, *3 (C.D. Cal. Dec. 3, 2014) ("Lastly, CAFA requires the `matter in controversy' to exceed `the sum or value of $5,000,000 exclusive of interest and costs.' `The claims of individual class members shall be aggregated to determine whether the matter in controversy exceeds' this amount. Although Plaintiff attempts to cap the putative class' damages at less than $5 million, that allegation cannot defeat removal. Therefore, this court agrees with Defendants that Plaintiff's cap on the amount in controversy should be disregarded and the Court should apply the preponderance of the evidence standard with respect to the amount in controversy"); Emmons v. Quest Diagnostics Clinical Laboratories, Inc., No. 1:13-CV-0474 AWI-BAM, 2014 WL 584393, *2, 4 (E.D. Cal. Feb. 12, 2014) (holding, where the complaint alleged that "the aggregate amount in controversy for the proposed class action, including monetary damages, restitution, penalties, injunctive relief, and attorneys' fees, is less than five millions dollars," that defendant could prove the CAFA jurisdictional minimum was satisfied by a preponderance of the evidence).
Nordstrom's estimate of the amount in controversy is based on six types of relief sought in Carranza's complaint:
In estimating the value of the class claims, Nordstrom has calculated the potential recovery for off the clock work and meal and rest period claims for the four-year class period alleged in the complaint; it has assumed, by contrast, that a one-year statute of limitations applies to claims under Labor Code § 226 and PAGA.
Beyond this problem in calculation, Carranza contends that "Nordstrom overstates the potential damages and relies on inadmissible evidence in an effort to reach the CAFA requirement of $5 million." He disputes each amount Nordstrom calculates in its notice of removal and its opposition to the motion to remand.
In estimating that the class could potentially recover $1,175,448 to $3,526,344 on the unpaid wages claim, Nordstrom assumed that putative class members spent one hour per week undergoing security screening after they clocked out for meal periods or rest breaks and at the end of their shift.
Nordstrom's one hour per day estimate is based on allegations in Carranza's complaint. He alleges that putative class members were not paid for "as much as 15-30 minutes" on a typical day.
Kristen Martin, Hautelook's Vice President of Human Resources, proffers reliable evidence concerning the number of putative class members employed at the Hautelook Fulfillment Center during the class period,
With respect to putative class members working at its other fulfillment centers, Nordstrom proffers competent evidence concerning the number of putative class members during the class period, their average hourly rate of pay, and the total number of workweeks during the class period that they worked. Walsh states that at least 98 putative class members worked a total of 62,504 workweeks during the class period at an average hourly rate of $16.99.
Carranza argues that Nordstrom has failed to meet its burden of showing the amount in controversy on these claims by a preponderance of the evidence.
Nordstrom argues in its notice of removal that the estimate is "well supported" and that it is proper "to assume that Nordstrom Distribution Center employees worked a similar schedule [to that worked by Hautelook employees], particularly because [p]laintiff asserts in his [c]omplaint that all such employees are similarly situated."
Nordstrom contends that requiring it to proffer evidence that supports its assumption that workers employed at its other fulfillment centers worked 4.5 hours a day would necessitate that it "research, state, and prove [] [Carranza's] claims for damages."
Here, as noted, Nordstrom is in the best position to adduce evidence regarding the average number of days employees at its distribution centers worked. Nordstrom could have sampled class members' payroll records, or otherwise analyzed those records to provide some evidentiary support for its assertion that the average number of days worked by employees at the Nordstrom distribution centers is the same as the average number of hours worked by employees at the Hautelook Fulfillment Center. That Nordstrom had the ability to engage in this type of analysis is clear from the reply declaration submitted by Walsh; in it, he recounts a review of payroll records for all facilities, and concludes, based on that review, that the average number of hours worked per day by employees at the Hautelook Fulfillment Center and the Nordstrom distribution centers was 7.995 hours per day.
Indeed, even had Nordstrom adduced evidence concerning the average number of days worked by its distribution center employees, the court would decline to consider its proffered damages number in determining the amount in controversy. As noted, Walsh states that, during the four years preceding the filing of the complaint, Nordstrom employed an average of 98 distribution center employees, and that these 98 employees worked 62,504 workweeks during that period.
Based on the evidence proffered by Nordstrom in its notice of removal and opposition to Carranza's motion to remand, it has demonstrated only that approximately $113,506 is placed in issue as a result of Carranza's unpaid wages claims.
In estimating a combined total of $1,880,718 to $9,403,591 in class damages for missed meal periods and rest breaks, Nordstrom assumes that each class member worked an average of four days per week, and missed both a meal period and a rest break each work day. This is a total of eight violations per work week.
Nordstrom's damages estimate assumes a 100 percent violation rate, i.e., that each class member suffered both a meal period and rest break each day during the class period. Although Carranza does not challenge Nordstrom's assumption of a 100 percent violation rate,
Nordstrom asserts that Carranza's allegations support its use of a 100 percent violation rate. Carranza alleges that Nordstrom had an "overarching, systemic, and uniform company practice" of subjecting employees to security screening. He contends this resulted "in interrupted and shortened meal periods, interrupted or shortened rest periods (or no rest period due to the hassle) and extended time at work under Nordstrom's control to get through the often 20-25 minute line to exit the premises."
Additionally, even if it were to credit Nordstrom's assumption of the 100 percent violation rate, the court could not credit its estimate of class damages on the meal period and rest break claims. This is because it rests on the same unsupported assumption as its calculation of potential damages on the unpaid wages and overtime claims — i.e., that class members employed at Nordstrom distribution centers worked the same 4.5 days per week as employees at the Hautelook Fulfillment Center. As noted, Nordstrom has adduced no evidence supporting this assumption. Thus, the court cannot consider Nordstrom's calculation of the damages class members employed at Nordstrom distribution centers during the class period potentially suffered due to shortened or missed meal periods and rest breaks. See, e.g., De Leon v. NCR Corp., No. C 12-01637 SBA, 2013 WL 503092, *4 (N.D. Cal. Feb. 8, 2013) ("The Court cannot credit Defendant's damages calculation because it is predicated on an assumption that has no basis either in the complaint's plain language or in any `summary-judgment-type' evidence"); Korn v. Polo Ralph Lauren Corp., 536 F.Supp.2d 1199, 1205 (E.D. Cal. 2008) ("[A] defendant must set forth the underlying facts supports its assertion that the amount in controversy exceeds the statutory minimum"); Kenneth Rothschild Trust v. Morgan Stanley Dean Witter, 199 F.Supp.2d 993, 1001 (C.D. Cal. 2002) ("If the amount in controversy is not clear on the face of the complaint, . . . defendant must do more than point to a state law that might allow recovery above the jurisdictional minimum").
When calculations based on this unsupported assumption are removed, the total amount in controversy for Carranza's meal and rest period claims is a range of $181,609.60 to $908,048.00, even crediting Nordstrom's assumption of a 100 percent violation rate.
California Labor Code § 203(a) states in relevant part: "If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.3, 201.5, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days."
In estimating the potential class recovery on Carranza's waiting time penalties claim under § 203, Nordstrom presumes that each of 283 putative class members who separated from Nordstrom during the class period did not receive wages he or she was due for a full thirty days.
Nordstrom also assumes that each of these class members worked an average of five hours per day.
Nordstrom also adduces credible evidence indicating that 114 of the 283 putative class members who separated during the class period were paid an average hourly rate of $10.33 per hour, while the remaining 169 were paid an average hourly rate of $16.99 per hour.
California Labor Code § 226(a) provides that
Section 226(e) provides that "[a]n employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not exceeding an aggregate penalty of four thousand dollars ($4,000)." Id., § 226(e).
In calculating a potential class recovery of $1,081,000 on the inaccurate wage statement claim, Nordstrom assumed that each of the 232 putative class members received an inaccurate wage statement for each of 10,494 pay periods during the year preceding filing of the complaint.
As an initial matter, the court notes that Nordstrom's estimate of 10,494 pay periods during the limitations period, i.e., the one year preceding Carranza's filing of the complaint, is inaccurate. Although Nordstrom does not explain in its notice of removal or in its opposition to Carranza's motion how it arrived at this figure, it appears to be the sum of the number of pay periods worked by Hautelook Fulfillment Center employees between July 15, 2013 and the end of December 2013 reported in Martin's declaration
Walsh's calculation of 8,886 pay periods for putative class members employed at Nordstrom's other distribution centers during the limitations period appears to be significantly overstated. Walsh reports that 98 putative class members were employed at Nordstrom's fulfillment centers during the statutory period and were paid twice monthly. This would mean there were 24 pay periods per employee each year.
The sum of the Hautelook employees' pay periods and Nordstrom distribution center employees' pay periods is 6,166, far below Nordstrom's estimate of 10,494 pay periods. Because it is based on 10,494 pay periods during the year preceding the filing of the action, Nordstrom's calculation of the amount in controversy on the inaccurate wage statement claim is overstated.
Carranza does not dispute Nordstrom's assumption that class members received inaccurate wage statements for each pay period during the year-long limitations period. Rather, he takes issue with Nordstrom's assertion that every pay period except the class member's first pay period during the year was a "subsequent" pay period for purposes of calculating penalties under § 226.
The court is not persuaded that Amaral's analysis of penalties under §§ 210 and 225.5 applies to penalties recoverable under § 226. As noted, the Amaral court addressed the meaning of "initial" and "subsequent" violations only as those terms are used in Labor Code §§ 210 and 225.5. Id. Elsewhere in the opinion, the court explicitly addressed § 226 and noted that penalties under § 226(e) — be they initial or subsequent — are available only upon a showing that the employer "knowing[ly] and intentional[ly]" failed to provide accurate itemized wage statements. The court contrasted this with §§ 210 and 225.5. These statutes, which provide for statutory penalties, do not have a general "knowing and intentional" requirement for recovery of penalties; rather, they require a showing of willfulness only to recover higher statutory penalties for subsequent violations. See id. at 1195 ("When proven, Labor Code violations give rise to civil penalties. Some statutory penalties are imposed only if an employers' violation was `willful' or `knowing.' Relevant to the claims here, section 203 penalizes an employer that `willfully' fails to pay wages due under sections 201 or 202, and section 226, subdivision (e) penalizes an employer's `knowing and intentional' failure to provide itemized wage statements under section 226, subdivision (a) (see also § 226.3 [providing civil penalties for violation of section 226, subdivision (a) but directing Labor Commissioner to consider whether violation was inadvertent]). Two other penalty statutes impose penalties regardless of the employer's mental state but provide for higher penalties if the violation is `willful or intentional.' (Former §§ 210, as amended by Stats. 1983, ch. 1096, § 1, p. 4103 [penalties for violation of section 204], 225.5, as amended by Stats. 1983, ch. 1096, § 2, p. 4103 [penalties for violation of section 223])").
The distinctions between the statutes noted by the Amaral court indicate that its holding concerning the showing that must be made to recover higher penalties under §§ 210 and 225.5 does not apply to § 226. The reference to "willful and intentional" conduct in §§ 210 and 225.5 is found in the penalty provision governing "subsequent" violations; the same language in § 226 applies to all violations — both initial and subsequent. See CAL. LAB. CODE § 210(a)(2) ("For each subsequent violation, or any willful or intentional violation, two hundred dollars ($200) for each failure to pay each employee, plus 25 percent of the amount unlawfully withheld"); id., § 225.5 (same); id., § 226(e) ("An employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period. . ."). The structure of §§ 210 and 225.5 supports the Amaral court's holding that an employer must be aware that its conduct is violating one of those sections before it can be subjected to the $200 penalty. In contrast, § 226 requires a showing of a willful or intentional violation to recover any penalty. In calculating the amount in controversy on Carranza's inaccurate wage statement claim, therefore, so long as he pleads facts demonstrating that Nordstrom's violations of § 226 were "knowing and intentional," Nordstrom can assume a $50 penalty for the first pay period violation per class member and a $100 penalty for each subsequent pay period violation.
The court therefore turns to the meaning of "knowing and intentional" as used in § 226(e). An employer "knowing[ly] and intentional[ly]" fails to comply with § 226 if it knew the facts giving rise to the statutory violation; the employer need not know that its conduct was unlawful. See Willner v. Manpower, Inc., ___ F.Supp.2d ___, 2014 WL 1303495, *11 (N.D. Cal. Mar. 31, 2014) ("[T]he Court concludes that a `knowing and intentional' violation requires a showing that the defendant knew that facts existed that brought its actions or omissions within the provisions of section 226(a) — i.e., that Manpower knew that its wage statements did not contain the inclusive dates of the period for which its employees were paid, and knew that they did not contain Manpower's address. Willner is not required to demonstrate that Manpower knew that this conduct, if otherwise proven, was unlawful"); Perez v. Safety-Kleen Sys., Inc., No. 07-CV-0886 PJH, 2007 WL 1848037, *9 (N.D. Cal. June 27, 2007) (holding that the fact that defendant did not know the illegality of its deficient wage statements was irrelevant in determining whether the knowing and intentional element is satisfied because all that is required to satisfy that element is knowledge that the defendant "knowingly and intentionally provide[d] wage statements containing the incorrect total hours worked").
Read in context, Carranza's allegations plead that Nordstrom acted "knowingly and intentionally" because it provided wage statements to putative class members that did not accurately reflect all hours worked. Consequently, based on the evidence the parties have adduced, the court concludes that Nordstrom was entitled to assume, for purposes of estimating the amount in controversy, that it would be subject to a $100 penalty for all but the first pay period an employee received such a wage statement. Despite this fact, Nordstrom's estimate of potential class damages is overstated because it uses 10,494 pay periods in a one-year period to calculate the potential class recovery. Calculating class damages on the § 226 claim using the 6,166 pay periods calculated by the court, it concludes that $605,000 is in controversy on the § 226 claim.
Finally, Nordstrom estimates that Carranza's complaint places PAGA penalties of $1,049,400 and attorneys' fees of at least $350,000 at issue.
For the reasons stated, the court concludes that Nordstrom has failed to adduce sufficient evidence to demonstrate by a preponderance of the evidence that the amount in controversy exceeds $5,000,000, as required by CAFA. Accordingly, the court lacks subject matter jurisdiction to hear this action and grants Carranza's motion to remand.
For the reasons stated, the court grants Carranza's motion to remand the action to San Bernardino Superior Court, and directs the clerk to remand the action forthwith.
Moreover, by crediting speculative estimates of the amount in controversy, courts that allow defendants to rely on assumed violation rates ignore the "`strong presumption' against removal jurisdiction." Gaus, 980 F.2d at 566 (citing Nishimoto, 903 F.2d at 712 n. 3, and Emrich, 846 F.2d at 1195). See also id. (the Ninth Circuit "strictly construe[s] the removal statute against removal jurisdiction," citing Boggs, 863 F.2d at 663; Takeda, 765 F.2d at 818). "Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance," and "[t]he `strong presumption' against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper." Id. (citing Libhart, 592 F.2d at 1064).
The court notes that the $113,506 figure does not reflect hours worked during the entire statutory period; Martin offers information only for the period from June 2012 to December 2013. (See Walsh Removal Decl., ¶ 5.) Although the class damages alleged were incurred prior to June 2012, and after December 2013, Nordstrom has proffered no competent evidence from which the court could estimate the additional amount at stake for these periods. There is no evidence in the record that Hautelook Fulfillment Center employees were paid an average of $13.30 per hour between July 15, 2010 and June 2012 (or between July 15, 2011, the actual start of the statutory period, and June 2012), that 134 non-exempt hourly employees worked at the fulfillment center during that period or that they worked on average 4.5 days per week. As the party seeking removal, Nordstrom bears the burden of adducing such evidence; it did not, and the court declines to speculate as to the additional damages that Hautelook Fulfillment Center employees may be able to claim absent evidence in the record.
In 2011, the California Court of Appeal, however, held that "it is more reasonable to construe the statute as permitting up to two premium payments per workday — one for failure to provide one or more meal periods, and another for failure to provide one or more rest periods." United Parcel Service, Inc. v. Superior Court, 196 Cal.App.4th 57, 69 (2011). While a single employee may not recover more than two premium payments for a single workday (even if he or she missed more than two meal or rest breaks), the Court of Appeal concluded that this reading was more consistent with the statute's legislative history and remedial purpose. Id. at 69-70. The Ninth Circuit has stated that when applying California law, federal district courts should follow precedential decisions by the California Court of Appeal. See In re Watts, 298 F.3d 1077, 1083 (9th Cir.2002) (suggesting that deference is owed to state appellate courts, and that "the federal courts must follow the decision of the intermediate appellate courts of the state unless there is convincing evidence that the highest court of the state would decide differently"). Consequently, the court concludes that Nordstrom is entitled to assume the need to compensate employees two hours for each day that both a meal period and rest break was missed or interrupted.
Since the Ninth Circuit's decision in Baumann, no court has directly addressed whether PAGA penalties can be included in the amount in controversy when defendant seeks to remove a class action complaint that pleads a PAGA claim. Courts that have considered removals under CAFA, however, have implicitly addressed the question and reached conflicting conclusions. Compare Hughes v. McDonald's Corp., No. C 14-17001 PJH, 2014 WL 3797488, *8-9 (N.D. Cal. July 31, 2014) (remanding an action to state court after concluding that the amount in controversy, including damages on class claims for violations of the California Labor Code and PAGA penalties, did not exceed $5,000,000); Ford v. CEC Entertainment, Inc., No. CV 14-01420 RS, 2014 WL 3377990, *6 (N.D. Cal. July 10, 2014) (concluding that CAFA's amount in controversy requirement was satisfied after including PAGA penalties in the calculation of total class damages) with Sanchez v. Capital Contractors, Inc., No. C 14-2622 MMC, 2014 WL 4773961, *1-3 (N.D. Cal. Sept. 22, 2014) (discharging an order to show cause why a case should not be remanded for lack of subject matter jurisdiction under CAFA because defendant's initial calculation of the amount in controversy was based on PAGA penalties, and finding that the amount in controversy, not including PAGA penalties, exceeded $5,000,000). The court need not reach the issue, because Nordstrom has not shown that the jurisdictional amount is satisfied even if its estimated PAGA penalties are included.
There is another issue regarding Nordstrom's estimate of PAGA penalties. Nordstrom assumes that 100 percent of potential PAGA penalties are properly included in the amount in controversy. This assumption is inconsistent with the decisions of several courts that have concluded that only 25 percent of potential PAGA penalties can be included in the amount in controversy. See CAL. LAB. CODE § 2699(i) ("[C]ivil penalties recovered by aggrieved employees shall be distributed as follows: 75 percent to the Labor and Workforce Development Agency for enforcement of labor laws and education of employers and employees about their rights and responsibilities under this code, to be continuously appropriated to supplement and not supplant the funding to the agency for those purposes; and 25 percent to the aggrieved employees"); see also, e.g., Smith, 2010 WL 1838726 at *2, 5 (including only 25% of the total recovery possible under PAGA in calculating the amount in controversy); Pulera v. F & B, Inc., No. 2:08-cv-00275 MCE DAD, 2008 WL 3863489, *4 (E.D. Cal. Aug. 19, 2008) ("The amounts recoverable by Plaintiff based on her PAGA claims are separate and distinct from the amounts recoverable by the State of California via the LWDA, and therefore these amounts may not be aggregated").
As respects its attorneys' fees calculation, Nordstrom maintains that its estimate is conservative because its constitutes only six percent of the class' estimated recovery when an award of 25 percent is "common . . . in class cases." (Opposition at 16.) The problem with this aspect of Nordstrom's calculation is that it is based on its view of potential amounts recoverable on Carranza's other claims. As noted throughout this order, Nordstrom's calculations of those amounts are based on unsupported assumptions and thus overstated.
Additionally, Nordstrom's calculation of attorneys' fees appears to take into account all fees that will be incurred during the course of the litigation. Nordstrom does not proffer any evidence that Carranza (or it) has incurred $350,000 in attorneys' fees since the filing of the complaint. Carranza argues that the court should not credit Nordstrom's fee estimate because only fees that have accrued as of the time of removal can be included in calculation of the amount in controversy, and it adduces no evidence of fees as of August 15, 2014. (Reply at 5-7.)
Courts in the Ninth Circuit are split as to whether only attorneys' fees that have accrued at the time of removal should be considered in calculating the amount in controversy, or whether the calculation should take into account fees likely to accrue over the life of the case. Compare Brady v. Mercedes-Benz USA, Inc., 243 F.Supp.2d 1004, 1011 n. 4 (N.D. Cal. 2002) ("While an estimate of the amount in controversy must be made based on facts known at the time of removal, that does not imply that items such as future income loss, damages, or attorneys[`] fees likely to be incurred cannot be estimated at the time of removal"); Simmons v. PCR Technology, 209 F.Supp.2d 1029, 1034-35 (N.D. Cal. 2002) ("Such fees necessarily accrue until the action is resolved. Thus, the Ninth Circuit must have anticipated that district courts would project fees beyond removal") with Dukes v. Twin City Fire Ins. Co., No. CV 09-2197 PHX-NVM, 2010 WL 94109, *2 (D. Ariz. Jan. 6, 2010) ("This Court concludes that the better view is that attorneys' fees incurred after the date of removal are not properly included in because the amount in controversy is to be determined as of the date of removal. Future attorneys' fees are entirely speculative, may be avoided, and are therefore not `in controversy' at the time of removal"); Green v. Party City Corp., No. CV 01-09681 CAS (Ex), 2002 WL 553219, *2 & n. 3 (C.D. Cal. Apr. 9, 2002) (calculating attorneys' fees on the basis "only [of] work done by plaintiff's counsel prior to removal"); Faulkner v. Astro-Med, Inc., No. C 99-2562 SI, 1999 WL 820198, *4 (N.D. Cal. Oct. 4, 1999) ("When estimating attorney's fees for the purposes of establishing jurisdiction, the only fees that can be considered are those incurred as of the date of removal," citing Miranti v. Lee, 3 F.3d 925, 928 (5th Cir. 1993)); Conrad Associates v. Hartford Acc. & Indem. Co., 994 F.Supp. 1196, 1200 (declining to consider post-removal events in calculating attorneys' fees for purposes of assessing removal jurisdiction). See also Giordano v. Park Avenue Life Insurance Co., No. CV 09-01405 SJO (FMOx), 2009 WL 1474945, *3 (C.D. Cal. Apr. 7, 2009) ("Where attorneys' fees are to be included in the amount in controversy, `district courts in this circuit have disagreed [as to] whether attorneys' fees incurred after the date of removal are properly included in the amount in controversy:' some courts refuse to consider attorneys' fees incurred after removal whereas others include a `reasonable estimate of attorneys[`] fees likely to be expended,'" quoting Burk v. Medical Savings Insurance Co. 348 F.Supp.2d 1063, 1068-69 (D. Ariz. 2004) (alterations original)); Wastier v. Schwan's Consumer Brands, No. 07CV1594, 2007 WL 4277552, *3 (S.D. Cal. Dec. 5, 2007) ("Defendants' estimate of [p]laintiffs' fees for activities anticipated but not yet performed, even if accurate, may be irrelevant").
The court agrees with Carranza and those courts that have held that only attorneys' fees that have accrued as of the date of removal may be considered in determining whether the jurisdictional amount is at stake. Thus, even if the court were to credit the remainder of Nordstrom's unsupported assumptions, it would find Nordstrom's estimate of attorneys' fees speculative inasmuch as it is not supported by summary-judgment type evidence concerning the fees incurred as of the date of removal.
