AUDREY B. COLLINS, District Judge.
Pending before the Court is Plaintiff Bradford Coleman's Motion for Order Remanding Matter to State Court, filed on April 23, 2010. Defendants Estes Express Lines, Inc. ("Estes Express"), and Estes West d/b/a G.I. Trucking Co. (collectively "Defendants"), opposed on May 24, 2010,
Plaintiff was employed by Estes Express and Estes West (dba G.I. Trucking) as a "Pickup & Delivery Driver" (or "P & D" Driver) from approximately October 2004 through September 10, 2009. (First Amended Compl. ("FAC") ¶ 22.) Plaintiff filed his First Amended Complaint in Los Angeles Superior Court on February 25, 2010, styled as a class action. Plaintiffs two proposed classes are an "unpaid wage" subclass comprised of "[a]ll non-exempt or hourly paid employees who worked for Defendants in California within four years prior to the filing" of the complaint, and a "non-compliant wage statement" subclass comprised of "[a]ll non-exempt or hourly paid employees of Defendants who worked in California and received a wage statement within one year prior to the filing" of the complaint. (FAC ¶ 17.)
In his original complaint, Plaintiff had named only Estes Express as a defendant, but on March 10, 2010, he filed a notice with the Superior Court that he was replacing one of his Doe Defendants in the First Amended Complaint with Estes West. In the amended complaint, Plaintiff alleged that both Estes Express and Estes West violated myriad California wage and hour statutes, including: California Labor Code sections 510 and 1198 (unpaid overtime); Labor Code sections 226.7 and 512(a) (unpaid meal period premiums); Labor Code section 226.7 (unpaid rest break premiums); Labor Code sections 201 and 202 (untimely payment of wages upon termination); Labor Code section 204 (untimely payment of wages during employment); Labor Code § 226(a) (noncompliant wage statements); California Business and Professions Code section 17200; and the Private Attorneys General Act (California Labor Code sections 2698 et seq.). Specifically, Plaintiff alleged:
The complaint does not limit the number of violations and provides only that the time frame to assess violations is the four-year period for the unpaid wages sub-class and one-year period for the non-compliant wage statements sub-class provided in the class definitions. Nor did Plaintiff limit the amount of damages he is seeking for the class, other than to allege that "[t]he amount in controversy for each class representative, including claims for compensatory damages and pro rata share of attorney's fees, is less than $75,000." (Id. ¶ 1.)
According to Defendants, Estes Express acquired G.I. Trucking in 2005. (2d Gerczak Decl. ¶ 3.) Before that time, G.I. Trucking was registered as a corporation with the state of California. (Plaintiffs 1st Request for Judicial Notice, Ex. A.). After the acquisition, G.I. Trucking became Estes West, dba G.I. Trucking, and it assumed the identity of a "wholly-owned subsidiary" of Estes Express, although it operated as an "internal regional division" of
Since the acquisition, Estes Express has owned 100% of Estes West. (2d Gerczak Decl. ¶ 3.) As Estes Express's Director of Human Resources explains, Estes Express exercises significant control over the employment-related policies and practices of Estes West. For example, Estes Express directs "every aspect of the payroll function in California, including establishing pay periods, pay days and pay rates for all employees in California and elsewhere in the Estes West region." (Id.) Estes Express decides whether Estes West employees are exempt or non-exempt, based on job functions determined by Estes Express. (Id.) Estes Express also sets policies and determines and controls the procedures for Estes West employees to take meal and rest breaks. (Id.) It determines the content and form of paychecks and the timing of final paychecks upon termination. (Id.)
Since the acquisition, Estes Express laid off all but one former G.I. Trucking employee and there is currently one payroll employee in California, who reports directly to Estes Express management and has no authority to determine pay practices or to vary from policy and practices set by Estes Express. (Id.) Instead, the Payroll Manager and the Human Resources Department for Estes Express in Virginia have the exclusive responsibility for enforcing payroll policy and ensuring payroll obligations are met for Estes West employees. (Id.) Paychecks for Estes West employees are drafted by Estes Express. (Id.) In the end, Estes West "has no ability to independently set policy, make payroll decisions, to vary from decisions and policy set by Estes Express or even to cut payroll checks for California employees." (Id.)
Moreover, Estes West's employee policies are controlled by Estes Express, such as the content of Estes West's employee handbook and selection of benefits and the administration of benefit plans. (Id. ¶ 4.) Estes Express decides all benefit plan amendments, elimination of benefits, and the nature and scope of benefits, such as vacation, sick leave, and holiday pay. (Id.) The Estes West job descriptions are set by Estes Express, and when layoffs at Estes West were necessary, Estes Express decided all selection criteria, selected the positions to be eliminated, and set all severance benefits. (Id.) Although Estes West has no independent human resources or benefits department, it has a "regional human resources manager" who reports to Estes Express's Director of Human Resources. (Id.) And while "Estes Express possesses and maintains complete control over every significant term of employment for every Estes employee in the State of California," local managers of Estes West "give day to day instructions to employees, but such instructions are given strictly within the operating rules and guidelines established by" Estes Express. (Id.)
Defendants claim that Estes West could not satisfy a judgment obtained by Plaintiff and the proposed classes. Estes West maintains a bank account in California for payroll purposes as required by California law, which is funded by weekly deposits from Estes Express.
Estes West does have one functioning officer: a Regional Vice President, although that position is on Estes Express's payroll and reports to various executives of Estes Express. (Id. ¶ 8.) That officer cannot set policy or make company-wide decisions without approval of Estes Express. (Id.)
Defendants filed a notice of removal on March 26, 2010, claiming that the case met the requirements for diversity jurisdiction under the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d) and § 1446. Plaintiff has moved to remand the case, arguing that Defendants have failed to establish the required minimum amount in controversy, and, even if they did, the "Local Controversy" exception to CAFA removal jurisdiction applies.
Defendants removed this case pursuant to 28 U.S.C. § 1441, invoking the Court's jurisdiction under CAFA. Generally, removal statutes are strictly construed against removal jurisdiction. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). "Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Id.
CAFA altered preexisting rules for federal diversity jurisdiction over statelaw class actions, providing now that federal courts may exercise jurisdiction when the "matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs," and when "any member of a class of plaintiffs is a citizen of a State different from any defendant." § 1332(d)(2). As before CAFA, "the burden of establishing removal jurisdiction remains... on the proponent of federal jurisdiction." Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 685 (9th Cir. 2006). CAFA provides exceptions to jurisdiction, see § 1332(d)(4)(A), (B), however, and once the removing party meets the burden to establish CAFA jurisdiction, the non-removing party invoking an exception bears the burden to prove its application. See Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1024 (9th Cir.2007).
The parties do not dispute that Plaintiffs class is larger than 100 and that the parties are minimally diverse as required by § 1332(d)(2). Thus, only two issues are presented by Plaintiff's motion: whether Defendants have demonstrated that Plaintiff is seeking more than $5,000,000; and, if so, whether Plaintiff has demonstrated that the Local Controversy exception nevertheless defeats jurisdiction under CAFA. Although Defendants prevail on the former issue, Plaintiff has demonstrated that the Local Controversy exception applies, and the Court must therefore remand this case to state court.
Although "the plaintiff is `master of her complaint' and can plead to avoid federal jurisdiction," Lowdermilk v. U.S. Bank National Ass'n, 479 F.3d 994, 998-99 (9th Cir.2007), the parties agree that Plaintiff has not alleged a specific amount of damages to avoid CAFA jurisdiction. "Where the complaint does not specify the amount of damages sought, the removing defendant must prove by a preponderance of the evidence that the amount in controversy requirement has been met." Abrego, 443 F.3d at 683. Therefore, a removing defendant must show "`that it is "more likely than not" that the amount in controversy exceeds'" $5,000,000.00. Muniz v. Pilot Travel Centers LLC, No. S-07-0325 FCD EFB, 2007 WL 1302504, at *2, 2007 U.S. Dist. LEXIS 31515, at *7 (E.D.Cal. April 30, 2007) (emphasis in original). The burden is not "daunting," and "a removing defendant is not obligated to `research, state, and prove the plaintiff's claims for damages.'" Id. (emphasis in original). But the defendant cannot speculate; it must "set forth the underlying facts supporting its assertion that the amount in controversy exceeds the statutory minimum." Korn v. Polo Ralph Lauren Corp., 536 F.Supp.2d 1199, 1205 (E.D.Cal.2008). In deciding the amount in controversy, the Court looks to what the plaintiff has alleged, not what the defendants will owe, but the Court may also consider summary-judgment type evidence to assess the amount in controversy. Id.
Defendants have offered evidence that Plaintiff's aggregate alleged damages far exceed $5,000,000. First, Defendants calculated the possible penalties for Plaintiffs sixth cause of action, the non-compliant wage statements, at $2,276,000. That calculation was based upon research of employee records and computer databases to determine that 569 employees in the class worked for the entire 12-month period prior to the filing of the complaint.
Next, Defendants calculated $705,739.37 in damages for Plaintiffs fourth cause of action for waiting-time penalties under California Labor Code section 203, which are capped at thirty days of wages. Defendants limited their calculations to claims of P & D Drivers like Plaintiff whose employment ended during the three-year period prior to the filing of the complaint. Gerczak determined the number of P & D drivers whose employment ended in each relevant year (57 in 2007, 51 in 2008, and 40 in 2009). (1st Gerczak Decl. ¶ 11.) Gerczak then calculated the average hourly rate for P & D Drivers as $21.61 and the average number of hours worked per day in each year (7.49 hours/ day in 2007, 7.57 hours/day in 2008, and 6.89 hours/day in 2009). (Id.) That resulted in the following calculations:
Thus, Defendants calculated a total of $705,739.37 in damages for Plaintiff's waiting-time penalties claim. (Id.)
Finally, Defendants calculated $11,967,618 in damages for the second and third causes of action for missed meal and rest periods. Pursuant to the applicable
The yearly amounts were then added to determine a total violation of $5,983,809. (Id.) Since the calculation was identical for rest period violations, that amount was doubled, for a total of $11,967,618 in alleged penalties for the meal and rest period claims. (Id.)
Thus, for these claims alone, Defendants calculate that Plaintiff has put at least $14,949,357.37 in controversy ($2,276,000 for non-compliant wage statements + $705,739.37 for waiting time violations + $11,967,618 for missed meal and rest periods), well above the $5,000,000 requirement. And these calculations do not account for Plaintiffs claim for unpaid overtime, for Plaintiffs claim under Business and Professions Code section 17200, for any additional penalties under California Labor Code section 2699, or for attorney's fees.
Plaintiff does not quibble with Defendants' math, but claims that the calculations rest on two flawed assumptions. First, Plaintiff argues that Defendants cannot meet their burden of proof by assuming a 100% violation rate. However, courts have assumed a 100% violation rate in calculating the amount in controversy when the complaint does not allege a more precise calculation. See, e.g., Korn, 536 F.Supp.2d at 1205 ("Where a statutory maximum is specified, courts may consider the maximum statutory penalty available in determining whether the jurisdictional amount in controversy requirement is met."); Alvarez v. Ltd. Express, LLC, No. 07CV1051 IEG (NLS), 2007 WL 2317125, at *3-4, 2007 U.S. Dist. LEXIS 58148, at *8-9 (S.D.Cal. Aug. 8, 2007); Muniz, 2007 WL 1302504, at *3-4, 2007 U.S. Dist. LEXIS 31515, at *10-11. For example, in Alvarez, the plaintiff broadly alleged meal and rest period violations based on an "`extreme workload' that made it `virtually impossible' for defendant's employees to take meal periods and rest breaks" and a "`company culture' that discouraged meal periods and rest breaks." 2007 WL 2317125, at *3-4, 2007 U.S. Dist. LEXIS 58148, at *9. Assuming the allegations in the complaint were true, the court concluded that the plaintiff's complaint could support a 100% violation rate. Id.
Similarly, in Muniz, the plaintiff did not allege "facts specific to the circumstances of her or the class members['] allegedly missed meal and/or rest periods"; "[i]nstead, plaintiff allege[d] a common course of conduct in violation of the law resulting in injury to herself and every other hourly employee employed by defendant in the State of California in the four years preceding the filing of the Complaint." 2007 WL 1302504 at *3-4, 2007 U.S. Dist. LEIS 31515 at *11-12. The court permitted the defendant to use a 100% violation rate to determine the maximum penalties, since
As in both Muniz and Alvarez, Plaintiff only broadly alleges his wage-and-hour violations. For example, he alleges that class members "consistently worked in excess of eight (8) hours in a day, in excess of twelve (12) hours in a day, and/or in excess of forty (40) hours in a week" (FAC ¶ 43); that class members "were required to work for periods longer than five (5) hours without an uninterrupted meal period of not less than thirty (30) minutes" (id. ¶ 53) and for "periods longer than ten (10) hours without a second uninterrupted meal period of not less than thirty (30) minutes" (id. ¶ 56); that class members were required to "work four (4) or more hours without ... a ten (10) minute rest period per each four (4) hour period worked" (id. ¶ 66); and that, "Defendants willfully failed to pay Plaintiff and class members who are no longer employed by Defendants their wages, earned and unpaid, either at the time of discharge, or within seventy-two (72) hours of their leaving Defendants' employ" (id. ¶ 74). Plaintiff included no limitation on the number of violations, and, taking his complaint as true, Defendants could properly calculate the amount in controversy based on a 100% violation rate.
Plaintiff further argues that limiting the average hourly rate to the high-paid P & D Drivers improperly inflated the average; had Defendants included lower-paid hourly dockworkers and clerical staff, some of whom apparently earn minimum wage, the average would have been lower. (Reply 2.) In other words, according to Plaintiff, P & D Drivers make up only 46% of the class and the average hourly rate of $21.61 for P & D Drivers was far higher than the average wage would have been, had Defendants accounted for the other 54% of class members who made lower hourly rates.
Plaintiff is correct that it is "preferable for defendants to calculate the average hourly wage based on the average wage of all class members." Helm v. Alderwoods Group, Inc., No. C 08-01184 SI, 2008 WL 2002511, at *4 n. 3 (N.D.Cal. May 7, 2008). However, even taking Plaintiffs argument to the extreme and assuming that the appropriate average hourly rate is California's minimum wage of $8.00/hour, see Cal. Labor Code § 1182.13, Plaintiffs position does not defeat jurisdiction.
First, because the Court has concluded that a 100% violation rate is appropriate, Defendants have already established at least $2,276,000 is in controversy for Plaintiff's claim for non-compliant wage statements, and that calculation did not depend on an average hourly rate for the class.
Finally, even if there was some doubt about the precision of Defendants' calculations, Defendants also did not account for any overtime violations, other penalties, or attorney's fees, which may be considered in calculating the amount in controversy. See Lowdermilk, 479 F.3d at 1000. Thus, the Court is satisfied that Defendants have demonstrated by a preponderance of evidence an amount in controversy greater than $5,000,000.
Plaintiff argues that, even if the amount in controversy is satisfied, this case must be remanded based on CAFA's "Local Controversy" exception. As previously noted, Plaintiff bears the burden to demonstrate an exception under CAFA defeats federal jurisdiction. See Serrano, 478 F.3d at 1024. As relevant here, CAFA provides the Court "shall decline to exercise jurisdiction under paragraph (2)—
There is no dispute that, for the purposes of the local controversy exception, more than two-thirds of Plaintiffs class are citizens of California, that the principal injuries occurred in California, and that Defendants have not been sued in a wageand-hour class action in the previous three-year period. There is also no dispute that Estes Express is a citizen of Virginia (and not California) for diversity purposes. The parties' dispute centers on the exception's second requirement: whether Estes West can be considered a "citizen of the State in which the action was originally filed," i.e., California, and whether Estes West is a defendant "from whom significant relief is sought" and "whose alleged conduct forms a significant basis for the claims asserted" by the class.
Because Estes Express is undisputedly a citizen of Virginia, in order for the local controversy exception to apply, Estes West must be a citizen of California. Although Plaintiff does not allege Estes West's citizenship specifically, Defendants do not deny that it is a citizen of California: they identify Estes West as a "whollyowned subsidiary of Estes Express" that operates in California and Plaintiff has produced a registration for G.I. Trucking as a California corporation. Therefore, the Court does not doubt that Estes West is a citizen of California for CAFA purposes.
To defeat the citizenship requirement in the Local Controversy exception, Defendants argue that Estes West's corporate citizenship must be disregarded because it is merely an alter ego of its parent, Estes Express. Because Estes Express is a citizen of Virginia, imputing its citizenship to Estes West would render Estes West nonlocal and would alone defeat the Local Controversy exception. In support of this claim and as discussed in detail supra, Defendants have presented evidence to demonstrate that Estes Express exercises significant control over the operations of Estes West.
However persuasive their factual showing is, Defendants' argument must fail as a matter of both law and equity. Normally, "`in a suit involving a subsidiary corporation, the court looks to the state of incorporation and principal place of business of the subsidiary, and not its parent.'" Danjaq, S.A. v. Pathe Commc'ns Corp., 979 F.2d 772, 775 (9th Cir.1992). This rule stems from the "general principle of corporate law deeply `ingrained in our economic and legal systems' that a parent corporation ... is not liable for the acts of its subsidiaries." United States v. Bestfoods, 524 U.S. 51, 61, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998).
"The only recognized exception to this rule"—invoked by Defendants here— "is where the subsidiary is the alter ego of the parent corporation," which permits the court to "view the formal separateness between the two corporations as merely a legal fiction." Danjaq, 979 F.2d at 775. Yet, the exception has no application
In this case, Defendants maintained Estes West as a separate legal entity in California after acquiring G.I. Trucking, and continued conducting business in California under that formal structure. Regardless of Estes Express's control of Estes West, Defendants cannot now cast aside their chosen corporate structure in order to gain a significant jurisdictional benefit: the right to defend themselves in federal court against purely state-law wage and hour claims brought by a solely California class of employees. Even though Estes Express has not otherwise taken advantage of Estes West's separate corporate structure to seek to dismiss the class claims in this case, the rule is not so limited. Having done business as separate entities, Defendants "`must assume the burdens thereof as well as the privileges.'" Communist Party, 35 Cal.App.4th at 994, 41 Cal.Rptr.2d 618. Because "`[t]he alter ego doctrine is applied to avoid inequitable results[,] not to eliminate the consequences of corporate operations,'" id., the Court finds that Estes West must be treated as a citizen of California and the citizenship requirement for the Local Controversy exception is satisfied.
The Local Controversy exception further requires that the instate defendant be one "from whom significant relief is sought by members of the plaintiff class." § 1332(d)(4)(A)(i)(II)(aa). Defendants claim this requirement cannot be met because its evidence demonstrates that any relief obtained by Plaintiff would come from Estes Express, not Estes West, since Estes West has no source of revenue and no funds to satisfy a judgment. (2d Gerczak Decl. ¶ 5.) In contrast, Plaintiff argues that the class has pled all claims against both Defendants equally, so that under CAFA Estes West is, in fact, an in-state defendant "from whom significant relief is sought by members of the plaintiff class," and Estes West's ability to pay any judgment at some later date is irrelevant. A conflict exists in the case law on whether the ability of the local defendant to pay a judgment may be considered under this requirement, and the parties submitted supplemental briefing on the issue.
The Eleventh Circuit has stated that "significant relief" is sought against a local defendant if the "relief sought against that defendant is a significant portion of the entire relief sought by the class." Evans, 449 F.3d at 1167 (citing Robinson v. Cheetah Transp., No. 06-0005, 2006 WL 468820, at *3-4, 2006 U.S. Dist. LEXIS 10129, at *12 (W.D.La. Feb. 27, 2006);
Robinson was the first decision to suggest that a local defendant's actual ability to pay could be relevant under the Local Controversy exception. In that case, the entirely in-state class sued an in-state individual truck driver, his out-of-state corporate employer, and other out-of-state corporate defendants for injuries sustained from an accident. 2006 WL 468820, at *2, 2006 U.S. Dist. LEXIS 10129, at *6. Relying on a Senate Judiciary Committee Report on CAFA, the court concluded that the in-state driver was not a defendant from whom "significant relief" was sought because any relief sought against him was "just small change" compared to the outof-state corporate defendants. Id. at *3-4, 2006 U.S. Dist. LEXIS 10129 at *12-13. The court's reasoning rested primarily on a products liability hypothetical situation in the Senate Report in which a class sued a manufacturer and local automobile dealers for defective automobiles; the Report stated that, "`[e]ven if the plaintiffs are truly seeking relief from the dealers, the relief is just small change compared to what they are seeking from the manufacturers.'" Id. at *3-4, 2006 U.S. Dist. LEXIS 10129 at *12 (quoting S. Rep. 109-14 at 41 (2005)). Based on this sentence, the court conducted "not only an assessment of how many members of the class were harmed by the defendant's actions, but also a comparison of the relief sought between all defendants and each defendant's ability to pay a potential judgment." Id.
The court in Green applied this comment to a case in which the alleged local subsidiary was insolvent and unable to satisfy any judgment. 2010 WL 419964, at *3-4, 2010 U.S. Dist. LEXIS 7456, at *9-11. In that case, the defendants offered evidence that the local subsidiary was not profitable and was almost entirely dependent on its out-of-state parent for its "continued viability." Id. at *3, 2010 U.S. Dist. LEXIS 7456 at *10. Based on this evidence, the court concluded that it was "unlikely" that the subsidiary "could satisfy a judgment rendered against it if Plaintiffs prevailed," and because the "lion's share of any putative judgment would likely be borne by" the parent, the plaintiffs were not seeking significant relief from the local defendant. Id.
The Tenth Circuit, in contrast, has squarely addressed and rejected consideration of a local defendant's ability to pay to determine whether "significant relief" is sought by the class. Coffey v. Freeport McMoran Copper & Gold, 581 F.3d 1240, 1245 (10th Cir.2009) (per curiam). In Coffey, the purely in-state class brought only state-law claims involving local environmental contamination, naming the in-state former owner of the polluting property, as well as several out-of-state corporate owners of the in-state defendant. Id. at 1241-43. The court held that the "significant relief" requirement had been satisfied because (1) all class members had claims
Citing Robinson, the defendants argued that the local defendant had no assets to satisfy any potential judgment, so its inability to pay a judgment demonstrated that significant relief was not sought against it. Id. at 1244. The court squarely rejected this contention based on the plain language of the statute. Id. at 1245. "The statutory language is unambiguous, and a `defendant from whom significant relief is sought' does not mean a `defendant from whom significant relief may be obtained.'" Id. "There is nothing in the language of the statute that indicates Congress intended district courts to wade into the factual swamp of assessing the financial viability of a defendant as part of this preliminary consideration, which is one of six issues for the court to consider when deciding whether the `local controversy exception' is met." Id.
Defendants urge the Court to reject Coffey and follow Robinson and Green to conclude that a local defendant's ability to pay is relevant to whether "significant relief is sought" by the class. The Court declines Defendants' invitation for two reasons. First, the Court agrees with Coffey that the statutory language unambiguously prohibits consideration of a local defendant's ability to pay any potential judgment. In arguing that the statute is ambiguous and resort to legislative history is necessary,
Even though Defendants offer evidence that Estes West could not satisfy a judgment, the Court declines to "wade into the factual swamp of assessing financial viability of a defendant as part of this preliminary consideration." Id.
Second, even assuming the statutory language were ambiguous and resort to CAFA's legislative history were necessary, the Court is not persuaded that Congress intended a different result, as the courts in Robinson and Green concluded. The Senate Judiciary Committee Report on which Robinson, Green, and later cases relied provided several applications of the Local Controversy exception, but never directly
S.Rep. No. 109-14, at 41 (2005) (emphasis added); see also Green, 2010 WL 419964, at *3-4, 2010 U.S. Dist. LEXIS 7456, at *10-11; Robinson, 2006 WL 468820, at *4, 2006 U.S. Dist. LEXIS 10129, at *13.
The Report's comment belies an interpretation that a fact-based inquiry into a defendant's ability to pay is permissible. The passage uses the word "seeking" twice to describe the class's relief, calling for a comparison of the "small change" the plaintiffs are "seeking" from the local dealers and the significant relief they are "seeking" from the manufacturer. There is no hint that the local dealer's solvency is relevant to that question.
The Report does, however, include a hypothetical situation very close to the instant case:
S.Rep. No. 109-14 at 41. As in this scenario, the class in this case is 100% instate, alleging purely state-law claims against a local defendant and its supervising parent, and California has a strong
Thus, consistent with the plain language of the statute and Coffey, the Court finds that Estes West is a local defendant "from whom significant relief is sought by members of the plaintiff class." See Coffey, 581 F.3d at 1244-45.
The significant basis requirement is fulfilled "[i]f the local defendant's alleged conduct is a significant part of the alleged conduct of all the Defendants." Kaufman v. Allstate New Jersey Ins. Co., 561 F.3d 144, 156 (3d Cir.2009). "The plain text of this provision relates the alleged conduct of the local defendant, on one hand, to all the claims asserted in the action, on the other" and "calls for comparing the local defendant's alleged conduct to the alleged conduct of all the Defendants." Id. at 155-56. Under this provision, "significant" means "important, notable," and "[t]he local defendant's alleged conduct must be an important ground for the asserted claims in view of the alleged conduct of all the Defendants." Id. at 157 (emphasis in original).
As with the "significant relief" requirement, the Court asked the parties to submit supplemental briefing on whether the Court may consider Defendants' actual conduct or is limited to the conduct alleged in the complaint to determine whether the local defendant's "alleged conduct formed a significant basis" of the class claims. Like the "significant relief" requirement, the case law is in tension on this question. Compare Evans, 449 F.3d at 1167 (considering evidence to determine whether local defendant's conduct formed a "significant basis" of property contamination claims) with Kaufman, 561 F.3d at 157 (stating that, consistent with the plain language of the statute, "the District Court's focus here must be on the alleged conduct") and Anderson v. Hackett, 646 F.Supp.2d 1041, 1048 (S.D.Ill.2009) (focusing solely on allegations in complaint because "the Court must determine if [the local defendant's] `alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class'" (emphasis in original)).
If the Court were to follow Kaufman and Anderson in this case and rely only on Defendants' alleged conduct, Estes West's alleged conduct would form a significant basis of the class claims. As already stated, the class pleads all claims against both Estes Express and Estes West jointly and alleges the two entities were acting as agents for and ratified the conduct of one another. (FAC ¶¶ 12-13.) Whether Estes West will ultimately be held liable is immaterial at this stage. See Anderson, 646 F.Supp.2d at 1048. Instead, "the allegations against [Estes West] would, if proven, establish a right to relief for most, if not all, of the proposed plaintiff class." Id. at 1049. "In other words, had Plaintiffs brought this action only against [Estes West], the classes proposed by Plaintiffs and the relief sought ... would remain almost unchanged." Id.
As Defendants point out, however, limiting this inquiry to the face of the complaint is in tension with the general rule that a court may consider extrinsic evidence submitted by a party implicating the Court's subject-matter jurisdiction. See, e.g., Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir.1987). Of course, Congress
The court in Kaufman outlined several factors to consider in determining whether a local defendant's "alleged conduct" forms a "significant basis" of the class claims:
Kaufman, 561 F.3d at 157 n. 13. Again, most of these factors are satisfied by Plaintiffs complaint: all of the wage and hour claims are alleged against Defendants equally; Defendants are intimately related to one another as parent and subsidiary; and every member of the 569-member class pleads claims against Estes West.
Defendants offer evidence that Estes Express set nearly all of Estes West's personnel policies and practices. Yet, Defendants' own evidence suggests that Estes West had a role in enforcing those policies: it had a separate payroll analyst, a Regional Vice President, a human resources manager, and, critically, other managers who "give day to day instructions to employees." (2d Gerczak Decl. ¶¶ 4, 8.) Plaintiff does not limit his claims to the policies promulgated by Estes Express, and his claims could be reasonably interpreted to cover the lack of proper enforcement of those policies by Estes West's local "day to day" managers. (See, e.g., FAC 1157 (alleging only that "Defendants willfully required Plaintiff and class members to work during meal periods"), ¶ 67 (alleging only that "Defendants willfully required Plaintiff and class members to work during rest periods").) Thus, even considering Estes Express's evidentiary submission, Estes West's alleged conduct forms a "significant basis" for the claims alleged in the complaint.
While Defendants have demonstrated that more than $5,000,000 is in controversy under CAFA, Plaintiff has demonstrated that CAFA's Local Controversy exception applies in this case. Therefore, the Court must decline to exercise jurisdiction. See Serrano, 478 F.3d at 1022. Plaintiff's motion
Both parties objected to certain evidence. As to Plaintiff's objections, to the extent the Court relies on Gerczak's declarations in this opinion, Plaintiff's objections to that evidence are OVERRULED. As to Defendants' objections, Plaintiff's application submitted to the California Department of Motor Vehicles is a judicially noticeable public record, so Defendants' objection to it is OVERRULED. See United States v. Ritchie, 342 F.3d 903, 908 (9th Cir.2003) ("Courts may only take judicial notice of adjudicative facts that are `not subject to reasonable dispute.'"). However, Defendants' objection to Plaintiff's request for judicial notice of his paystub is well-taken and the Court has not considered it in reaching the conclusions herein.
