Adriana Lopez v. Ace Cash Express Inc et al

Filing 84

ORDER REMANDING ACTION TO LOS ANGLES COUNTY SUPERIOR COURT AND DENYING DEFENDANT'S MOTION TO COMPEL ARBITRATION (DKTS. 17, 19, 83) (JS-S) by Judge John A. Kronstadt. For the reasons stated in this Order, this action is REMANDED to the Los Angeles Superior Court at its Stanley Mosk courthouse. Case number BC466415 (bp)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-07116 JAK (JCx)

Title

Adriana Lopez v. Ace Cash Express, Inc. et al.

Present: The Honorable

Date

March 24, 2015

JOHN A. KRONSTADT, UNITED STATES DISTRICT JUDGE

Andrea Keifer

Not Reported

Deputy Clerk

Court Reporter / Recorder

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Not Present

Not Present

Proceedings:

I.

(IN CHAMBERS) ORDER REMANDING ACTION TO LOS ANGELES
COUNTY SUPERIOR COURT AND DENYING DEFENDANT’S MOTION TO
COMPEL ARBITRATION (DKTS. 17, 19, 83) (JS-6)

Factual and Procedural Background

In 2011, Adriana Lopez (“Plaintiff”) brought two actions against her employer, Ace Cash Express, Inc.
(“Defendant”), in the Los Angeles Superior Court. The first, Lopez v. Ace Cash Express, Inc., LA
CV11-04611 (“Lopez I”) was a putative class action asserting wage-and-hour violations under the
California Labor Code. Lopez I, Dkt. 1. Defendant removed Lopez I pursuant to the Class Action Fairness
Act (“CAFA”), 28 U.S.C. § 1332(d); Plaintiff’s motion to remand was denied. Id.; Dkt. 21.
The second action, Lopez v. Ace Cash Express, Inc., LA CV11-07116 (“Lopez II”), which is the subject of
this Order, was brought pursuant to the California Private Attorney General Act of 2004 (“PAGA”), Cal.
Lab. Code § 2698 et seq., based on similar alleged violations of the California Labor Code. Lopez II, Dkt.
1-1. It is a representative action “on behalf of [Plaintiff] and other current or former employees” of
Defendant. Id. ¶ 16. It was alleged that Plaintiff’s “pro rata share of penalties and pro rata share of
attorneys’ fees[] is less than $75,000.” Id. ¶ 4. Notwithstanding this allegation as to the amount in
controversy, Lopez II was removed pursuant to 28 U.S.C. § 1332(a) on the basis of diversity jurisdiction.
Dkt. 1. Defendant claimed that Plaintiff’s “pro rata share of penalties and attorneys’ fees is not
determinative of the calculation of the amount in controversy,” and that, when the shares of other
employees and of the state of California were considered, the aggregate amount in controversy would
exceed the jurisdictional amount of $75,000. Id. ¶¶ 14-22.
On May 4, 2012, an order was issued with respect to several motions brought in these two actions. Dkt.
52. Defendant’s motion to consolidate Lopez I and Lopez II, and Plaintiff’s motion to remand Lopez II,
were denied. Id. at 13. Defendant’s motion to compel bilateral arbitration in Lopez I was granted. Id.
Defendant’s motion to compel arbitration in Lopez II was stayed pending the outcome of arbitration in
Lopez I. Id.
Page 1 of 7

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-07116 JAK (JCx)

Title

Date

March 24, 2015

Adriana Lopez v. Ace Cash Express, Inc. et al.

On September 23, 2013, the parties’ stipulation to dismiss Lopez I pursuant to settlement was granted.
Lopez I, Dkt. 73. Pursuant to this stipulation, the parties agreed to stay Lopez II “pending final
determination of Urbino v. Orkin Services of California, Inc., Nos. 11-56944, 57002 (9th Cir. filed Nov. 3,
2011) and/or Iskanian (Arshavir) v. CLS Transportation of Los Angeles LLC, No. S204032, 2012 Cal.
LEXIS 8925 (Cal. Sept. 19, 2012).” Id. at 2. On August 13, 2013, the Ninth Circuit decided Urbino, which
concerned claim aggregation under PAGA. 726 F.3d 1118 (9th Cir. 2013). It was Plaintiff’s position that
“this Court likely no longer possesses subject matter jurisdiction” following this decision; however, the
parties agreed that the action should remain stayed pending final disposition of Iskanian, which was “a
critical element of the parties’ agreement to settle Lopez I.” Dkt. 78 at 2-3. On June 23, 2014, the
California Supreme Court issued its opinion in Iskanian, which concerned, inter alia, the enforceability of
agreements to waive and compel arbitration of representative PAGA claims. Iskanian v. CLS Transp. Los
Angeles, LLC, 59 Cal. 4th 348, 383 (2014). The United States Supreme Court denied certiorari on
January 20, 2015. 135 S. Ct. 1155 (2015).
On February 10, 2015, the parties submitted a 10-page joint status report expressing their respective
positions as to whether remand or reinstatement of Lopez II to this Court’s active calendar was
appropriate in light of the Urbino and Iskanian decisions. Dkt. 83. Plaintiff contends that immediate
remand is appropriate under Urbino, because it held that only Plaintiff’s pro rata share could be
considered for purposes of determining the amount in controversy. Id. at 2-4. Defendant disagrees for
two reasons. First, California’s 75% share of recovery may be aggregated with Plaintiff’s. Second, even if
there were a change in law between removal and the present, because jurisdiction existed at the time of
removal, it continues. Id. at 4-9.
The joint status report sufficiently presents the positions of each party such that neither further briefing
nor -- pursuant to Local Rule 7-15 -- a hearing is required.1 For the reasons stated in this Order, due to
the recent appellate decisions, the Court reconsiders its May 4, 2012 ruling denying Plaintiff’s Motion to
Remand, and GRANTS that Motion. Dkts. 17, 52. Defendant’s Motion to Compel Arbitration is DENIED
AS MOOT.

1

Because no further briefing will be submitted, Plaintiff’s request that the Court “concurrently schedule briefing
regarding Plaintiff’s entitlement to attorney’s fees and the amount of said fees” is DENIED. Dkt. 83 at 4. Plaintiff is
not entitled to attorney’s fees under 28 U.S.C. § 1447(c) because Defendant had “an objectively reasonable basis
for removal” at that time, and no unusual circumstances have been shown. Martin v. Franklin Capital Corp., 546
U.S. 132, 135-36 (2005).
Page 2 of 7

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-07116 JAK (JCx)

Title

Adriana Lopez v. Ace Cash Express, Inc. et al.

II.

Date

March 24, 2015

Analysis
A.

Motion to Remand
1.

Legal Standard

Federal courts are ones of limited jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377 (1994). Therefore, a determination of subject matter jurisdiction must be made before the merits
of a case can be addressed. Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94 (1998). If at any time
before final judgment the court determines that it is without subject matter jurisdiction, a removed action
must be remanded to the state court in which it was originally filed. 28 U.S.C. § 1447(c). The party
removing an action bears the burden of establishing federal jurisdiction. Gaus v. Miles, Inc., 980 F.2d
564, 566 (9th Cir. 1992). “Where doubt regarding the right to removal exists, a case should be remanded
to state court,” because “it is well established that the plaintiff is master of her complaint and can plead to
avoid federal jurisdiction.” Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir.
2003).
When a case does not arise under federal law, original jurisdiction generally exists only where there is
“diversity of citizenship.” 28 U.S.C. § 1332. Complete diversity of citizenship is required: “the citizenship
of each plaintiff [must be] different from that of each defendant.” Hunter v. Philip Morris USA, 582 F.3d
1039, 1043 (9th Cir. 2009). An action may be filed in federal court based on diversity jurisdiction only
where the civil action is between citizens of different states, and the amount in controversy exceeds
$75,000. Id. The claims of multiple plaintiffs may be aggregated for this purpose only where they “unite to
enforce a single title or right in which they have a common and undivided interest.” Snyder v. Harris, 394
U.S. 332, 335 (1969).
2.

Application
a)

Whether Defendant Meets Its Burden to Show Diversity Jurisdiction2
(1)
The Joint Report Is Deemed a Motion for Reconsideration and
Opposition

As noted, the May 4, 2012 Order denied Plaintiff’s Motion to Remand. Dkt. 52 at 13; Dkt. 17. In the
February 10, 2015 Joint Report, Plaintiff requests reconsideration of this ruling and Defendant argues
that this ruling was correct and should not be revisited. Dkt. 83. The Joint Report sets forth the respective
positions of the parties on this issue with citations to authority. It supplements the briefs originally filed in
connection with Plaintiff’s motion to remand.
Ordinarily, under the doctrine of the law of the case, “when a court decides upon a rule of law, that
2

Because the parties are of diverse citizenship, only the amount in controversy is at issue. Compl., Dkt. 1-1,
¶¶ 9-10; Dkt. 1, ¶¶ 7-8. Plaintiff is a citizen of California; Defendant is a citizen of Texas.
Page 3 of 7

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-07116 JAK (JCx)

Title

Date

March 24, 2015

Adriana Lopez v. Ace Cash Express, Inc. et al.

decision should continue to govern the same issues in subsequent stages in the same case.”
Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 816 (1988). However, under Local Rule 7-18,
a motion for reconsideration of such a decision may be brought on one of three grounds:
(a) a material difference in fact or law from that presented to the Court before such
decision that in the exercise of reasonable diligence could not have been known to the
party moving for reconsideration at the time of such decision, or (b) the emergence of new
material facts or a change of law occurring after the time of such decision, or (c) a manifest
showing of a failure to consider material facts presented to the Court before such decision.
No motion for reconsideration shall in any manner repeat any oral or written argument
made in support of or in opposition to the original motion.
L.R. 7-18.
Urbino, a binding decision which abrogated a number of the district court cases relied on by the Court in
its ruling on the motion to remand, is a significant change of law that occurred after the prior ruling. It is
therefore appropriate to treat Plaintiff’s position as set forth in the Joint Report as a Motion for
Reconsideration, although it is not so titled, and to treat Defendant’s position as its opposition to such a
motion.
(2)

The Effect of the Urbino Decision on PAGA Claim Aggregation

Under the statutory scheme of PAGA, an “aggrieved employee” may sue an employer “on behalf of
himself or herself and other current or former employees.” Cal. Lab. Code § 2699(a). The California
Labor and Workforce Development Agency (“LWDA”) receives 75% of the plaintiff’s recovery, and the
aggrieved employees receive 25%. Id. § 2699(i).
Prior to Urbino, there was a split among district courts in California with respect to whether the claims of
other aggrieved employees on whose behalf a plaintiff brought PAGA claims could be aggregated as a
“common and undivided interest” for purposes of determining whether the amount in controversy
necessary to support diversity jurisdiction was established. Dkt. 52 at 4-6 (citing cases). The May 4, 2012
Order, which followed one line of authority, determined that “all the aggrieved employees’ claims may be
aggregated to meet the jurisdictional threshold.” Id. at 6. Urbino held to the contrary, and thereby
abrogated the line of authority on which the May 4, 2012 Order was based.
Urbino reasoned that “[a]ggrieved employees have a host of claims available to them—e.g., wage and
hour, discrimination, interference with pension and health coverage—to vindicate their employers'
breaches of California's Labor Code. But all of these rights are held individually. Each employee suffers a
unique injury—an injury that can be redressed without the involvement of other employees.” 726 F.3d
1118, 1122 (9th Cir. 2013). Thus, it concluded that “Defendants' obligation to them is not as a group, but
as individuals severally,” and “diversity jurisdiction does not lie because their claims cannot be
aggregated.” Id. (internal citations and quotation marks omitted).
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-07116 JAK (JCx)

Title

Date

March 24, 2015

Adriana Lopez v. Ace Cash Express, Inc. et al.

(3)
Whether California’s Pro Rata Share May Be Aggregated with
Plaintiff’s to Determine the Amount in Controversy
Defendant argues that, although Urbino forecloses aggregation of Plaintiff’s pro rata share with that of
other “aggrieved employees” for purposes of determining the amount in controversy, it leaves open the
possibility that Plaintiff’s share may be aggregated with that of the LWDA. Dkt. 83 at 6-7. Thus, although
the Complaint alleges that Plaintiff’s “pro rata share of penalties and pro rata share of attorneys’ fees[] is
less than $75,000,” Compl., Dkt. 1-1, ¶ 4, Defendant contends that, if this 25% share is aggregated with
the 75% share of the LWDA, the amount in controversy will continue to exceed $75,000. For this reason,
Defendant contends that jurisdiction remains.
Urbino did not expressly rule on this issue. Following Urbino, at least one district court has adopted
Defendant’s position. Patel v. Nike Retail Servs., Inc., 2014 WL 3611096, at *11 (N.D. Cal. July 21, 2014);
see also Madison v. U.S. Bancorp, 2015 WL 355984, at *3 n.4 (N.D. Cal. Jan. 27, 2015) (noting that “[t]he
Ninth Circuit has not ruled on this issue” and supporting the analysis of Patel, but declining to address it).
Patel reasoned that, under PAGA the state is either a “nominal or formal party,” in which case its 75%
recovery is to be attributed to the plaintiff, or “if it does hold any such interest, the interest is held in
common with the individual workers.” Patel, 2014 WL 3611096 at *10, *13 (citing Navarro Sav. Ass'n v.
Lee, 446 U.S. 458, 461, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980)). Iskanian provides some support for this
position when it concludes that “a PAGA litigant's status as ‘the proxy or agent’ of the state is not merely
semantic; it reflects a PAGA litigant's substantive role in enforcing our labor laws on behalf of state law
enforcement agencies.” Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348, 388 (2014) cert.
denied, 135 S. Ct. 1155 (2015) (citation omitted).
Other courts have taken a different course with which this Court agrees. Thus, the more persuasive
reading of Urbino is that neither the share of other workers nor the share of the state is to be considered.
The following language in the decision offers substantial support for this outcome:
Defendants contend however that the interest Urbino asserts is not his individual interest
but rather the state's collective interest in enforcing its labor laws through PAGA. . . . To
the extent Plaintiff can—and does—assert anything but his individual interest, however,
we are unpersuaded that such a suit, the primary benefit of which will inure to the state,
satisfies the requirements of federal diversity jurisdiction. The state, as the real party in
interest, is not a “citizen” for diversity purposes. See Navarro Sav. Ass'n v. Lee, 446 U.S.
458, 461, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980) (courts “must disregard nominal or
formal parties and rest jurisdiction only upon the citizenship of real parties to the
controversy.”); Mo., Kan. & Tex. Ry. Co. v. Hickman, 183 U.S. 53, 59, 22 S.Ct. 18, 46
L.Ed. 78 (1901); see also Moor v. Cnty. of Alameda, 411 U.S. 693, 717, 93 S.Ct. 1785, 36
L.Ed.2d 596 (1973) (explaining that “a State is not a ‘citizen’ for purposes of the diversity
jurisdiction”). Accordingly, the federal courts lack subject matter jurisdiction over this
quintessential California dispute.
Page 5 of 7

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-07116 JAK (JCx)

Date

Title

March 24, 2015

Adriana Lopez v. Ace Cash Express, Inc. et al.

Urbino v. Orkin Servs. of California, Inc., 726 F.3d 1118, 1122-23 (9th Cir. 2013).
This language implies that, whether the state is deemed a nominal party or a real party in interest, its
interest is not to be considered. A contrary reading would also conflict with the reasoning that underlies
the holding in Urbino’s. An inconsistent analysis would be required if a district court, which is not to
consider the claims of other represented workers to be “common and undivided” with those of a PAGA
litigant, were to take a contrary approach by considering the state’s “collective interest,” vindicated by the
litigation of these claims, to be such a common and undivided interest. Several other district courts have
reached this conclusion, i.e., that the approach best supported by Urbino is that the share of the LWDA is
not to be included in determining the amount in controversy. See Garrett v. Bank of Am., N.A., 2014 WL
1648759, at *6 (N.D. Cal. Apr. 24, 2014); Pagel v. Dairy Farmers of Am., Inc., 986 F. Supp. 2d 1151, 1155
(C.D. Cal. 2013); Willis v. Xerox Bus. Servs., LLC, 2013 WL 6053831, at *9 (E.D. Cal. Nov. 15, 2013)
(“the Court finds no logical support that Defendant, while precluded from relying upon the total amounts
awardable under PAGA when evaluating the amount in controversy, may rely upon the 75% of the total
amount payable to the LWDA, to demonstrate the $75,000 threshold.”); Main v. Dolgen California, LLC,
2013 WL 5799019, at *3 (E.D. Cal. Oct. 28, 2013), leave to appeal denied (Apr. 10, 2014).
For these reasons, the 75% share of any PAGA recovery that would be awarded to the LWDA may not be
aggregated with Plaintiff’s 25% share to determine the amount in controversy in this action.
b)
Whether the Required Amount in Controversy Existed at the Time This
Action Was Filed
Defendant argues that, even its position regarding aggregation is rejected, the change in law effected by
Urbino “does not change the fact that jurisdiction existed at the time of removal – which is the only
relevant time of inquiry as a matter of law.” Dkt. 83 at 6. This argument is unpersuasive. Generally, “if
jurisdiction exists at the time an action is commenced, such jurisdiction may not be divested by
subsequent events.” Freeport-McMoRan, Inc. v. K N Energy, Inc., 498 U.S. 426, 428 (1991). However,
this rule does not apply. Instead, the following principle governs: “new judicial decisions interpreting old
statutes … have long been applied retroactively to all cases open on direct review.” Morales-Izquierdo v.
Dep't of Homeland Sec., 600 F.3d 1076, 1090 (9th Cir. 2010). The rationale for this rule is that “when a
court interprets a statute, even an ambiguous one, and even when that interpretation conflicts with the
court's own prior interpretation, the new interpretation is treated as the statute's one-and-only meaning.”
Id. Here, Defendant claims that the “subsequent event” is the “subsequent change in the law” as stated in
Urbino. Dkt. 83 at 6. However, Urbino interpreted two statutes, PAGA and 28 U.S.C. § 1332(a).
Therefore, its holding extends retroactively, including to the time this action was filed. For this reason, the
amount in controversy at that time did not meet the statutory minimum.

*

*

*
Page 6 of 7

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-07116 JAK (JCx)

Date

Title

March 24, 2015

Adriana Lopez v. Ace Cash Express, Inc. et al.

For these reasons, Defendant has not met its burden to show that subject matter jurisdiction over this
action existed at the time of removal. Plaintiff’s Motion to Reconsider and her Motion to Remand are
GRANTED.
B.

Motion to Compel Arbitration

Once a court has determined that it is without jurisdiction, it must dismiss or remand the action, and may
not rule on the merits of the case. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998) (citing Ex
parte McCardle, 7 Wall. 506, 514 (1868)). To do so would be to issue a “hypothetical judgment,”
equivalent to an “advisory opinion,” which federal courts are without jurisdiction to do. Id. at 101.
Defendant’s Motion to Compel Arbitration is brought pursuant to the Federal Arbitration Act (“FAA”). Dkt.
19 at 6. The FAA “provides for an order compelling arbitration only when the federal district court would
have jurisdiction over a suit on the underlying dispute; hence, there must be diversity of citizenship or
some other independent basis for federal jurisdiction before the order can issue.” Moses H. Cone
Memorial Hosp. v. Mercury Const., 460 U.S. 1, 25 n. 32 (1983). Because the action must be remanded
for lack of jurisdiction, there is no jurisdiction to act on the Motion to Compel Arbitration. Therefore, this
Motion is DENIED AS MOOT.
III.

Conclusion

For the reasons stated in this Order, this action is REMANDED to the Los Angeles Superior Court at its
Stanley Mosk courthouse.
IT IS SO ORDERED.

:
Initials of Preparer

ak

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