Stephen Clegg et al v. Bob's Discount Furniture, LLC

Filing 19

MINUTE ORDER GRANTING MOTION TO REMAND by Judge Stanley Blumenfeld, Jr.: Defendant's exhibits contain parts of Plaintiff's social security numbers that were not redacted as required by Rule 5.2(a). Accordingly, the Court has instructed the clerk to seal Dkt. No. 17-1, and Defendant within three days after entry of this Order shall file a properly redacted copy for the record. The Court finds that Defendant has not met its burden to show by a preponderance of the evidence that the requirements of 28 U.S.C. Section 1332 are satisfied such that this Court has diversity jurisdiction. Plaintiffs' Motion to Remand #13 is therefore GRANTED, and this case is remanded to the Superior Court of Los Angeles County, Case No. 21STCV15281. ( MD JS-6. Case Terminated. ) Court Reporter: N/A. (gk)

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JS-6

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Defendant asserts that diversity is complete because Plaintiffs are California
citizens and Defendant is a Massachusetts corporation with its principal place of
business in Connecticut. Plaintiffs dispute that Defendant has adequately
established Plaintiffs’ citizenship. This appears to be a disingenuous argument:
Defendant produces evidence that both Plaintiffs have current addresses in
California, Dkt. No. 17-1 at 30, 431; and Plaintiffs themselves allege in their
Complaint that each of them “[a]t all relevant times . . . was a resident of the State
of California,” Dkt. No. 1-1 at 10 of 51. Thus, a preponderance of the evidence
(indeed, all the evidence) indicates that Plaintiffs are California citizens for
diversity purposes. 2 However, neither party adequately addresses the citizenship
of Defendant, which is alleged to be—and from its name appears to be—a limited
liability company rather than a corporation. “A limited liability company ‘is a
citizen of every state of which its owners/members are citizens,’ not the state in
which it was formed or does business.” NewGen, LLC v. Safe Cig, LLC, 840 F.3d
606, 612 (9th Cir. 2016) (citation omitted). Because Defendant relies solely on the
citizenship standard for corporations, it has not adequately established its own
citizenship so as to show that diversity is complete.
Although under these circumstances the Court ordinarily would give
Defendant an opportunity to demonstrate that diversity is complete before
remanding, remand is required here in any event because Defendant has not met its
burden to establish the amount in controversy. “Where, as here, it is unclear or
ambiguous from the face of a state-court complaint whether the requisite amount in
controversy is pled, the removing defendant bears the burden of establishing, by a
preponderance of the evidence, that the amount in controversy exceeds the
jurisdictional threshold.” Fritsch v. Swift Transportation Co. of Arizona, LLC, 899
F.3d 785, 793 (9th Cir. 2018) (citation omitted).

Defendant’s exhibits contain parts of Plaintiff’s social security numbers that were
not redacted as required by Rule 5.2(a). Accordingly, the Court has instructed the
clerk to seal Dkt. No. 17-1, and Defendant within three days after entry of this
Order shall file a properly redacted copy for the record.
1

Plaintiffs in connection with their reply raise a host of evidentiary objections to
all four of the exhibits filed by Defendant. Dkt. No. 18-3. Because Defendant has
not met its burden to establish federal jurisdiction even if all of its evidence is
considered, it is unnecessary to rule on Plaintiffs’ objections.
2

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It is not evident from the Complaint—which does not seek a particular sum
of damages—that the amount in controversy exceeds $75,000. This suit is a
proposed representative action under the Private Attorney’s General Act of 2004
(PAGA), in which Plaintiffs allege that Defendant failed to pay them and other
employees for all hours worked, failed to pay all sick leave wages, and failed to
reimburse them for various costs and expenses. Defendant in its Notice of
Removal calculated that based on the civil penalties available for the alleged
violations of the California Labor Code within the applicable statute of limitations,
Plaintiff Clegg seeks $14,100 in PAGA penalties and Plaintiff Emmens seeks
$8,250 in PAGA penalties, for a total claim amount of $22,350. Dkt. No. 1 at 6-7.
Plaintiffs persuasively argue that this figure implausibly and without foundation
assumes that the alleged violations occurred in every pay period during the statute
of limitations, including pay periods in which Plaintiffs were not working because
they were furloughed, and also that it applies higher penalties for some violations
than are statutorily permitted. Moreover, because 75% of the civil penalties
recovered in a PAGA case must be paid to the Labor and Workforce Development
Agency, see Cal. Labor Code § 2699(j), “the weight of opinion is that only 25% of
the civil penalties sought in a PAGA action, the amount that accrues to employees
rather than the LWDA, should be counted toward the amount in controversy.”
Prestwood v. Marriott Ownership Resorts, Inc., No. SACV1900766AGSSX, 2019
WL 2522674, at *3 (C.D. Cal. June 18, 2019) (collecting cases). Here, even
accepting Defendant’s dubious assumptions that the maximum possible number of
violations occurred and that the highest penalty amounts apply, Plaintiffs’ share of
the recovery will be at most $5,587.50.
Not all courts agree with the approach in Prestwood, and Defendant cites
cases adopting the minority position and finding that the entire civil penalties sum
counts toward the amount in controversy. E.g., Patel v. Nike Retail Servs., Inc., 58
F. Supp. 3d 1032 (N.D. Cal. 2014). Under this approach, the amount of penalties
is at most $22,350, still far less than the $75,000 threshold required for diversity
jurisdiction under § 1332. And, as explained above, that maximum sum depends
on speculative and implausible assumptions by Defendant.
Defendant’s principal argument is that none of these problems with its
calculation of PAGA penalties matter because Plaintiffs’ attorney’s fees alone—
which are authorized by statute—will exceed $75,000. See Galt G/S v. JSS
Scandinavia, 142 F.3d 1150, 1156 (9th Cir. 1998) (“We hold that where an
underlying statute authorizes an award of attorneys’ fees, either with mandatory or
discretionary language, such fees may be included in the amount in controversy.”).
Defendant produces evidence that Plaintiffs’ lead counsel, Michael Singer, listed
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his hourly rate as $875 in another case decided this year, and that Plaintiffs’ other
counsel, Jason Hill, charged an hourly rate of $450 in 2015. Dkt. No. 17-1 at 21,
28. Defendant then estimates that Plaintiffs’ counsel will each need to spend at
least 20-30 hours in trial (based on the parties’ 2-3 day trial estimate), resulting in
$26,500 - $39,750 in attorney’s fees, and that a total of 31.5 hours for depositions,
20 hours to oppose a motion for judgment on the pleadings, 25 hours to oppose a
summary judgment motion, and at least another 10 hours for discovery will be
required, which at a blended hourly rate of $662.50 would result in another
$57,306.25, bringing the total attorney’s fees to more than $75,000.
Defendant does not produce any evidence of the actual fee arrangement
between Plaintiffs and their counsel in this case. As Plaintiffs point out, both of
the cases on which Defendant relies as evidence of Plaintiffs’ counsel’s fees were
class actions, undermining any inference that the same fee structure applies here.
Given that the maximum penalties Plaintiffs could recover in this case—even
making all of the implausible assumptions Defendant urges—is only $5,587.50, the
Court is unpersuaded that Defendant has shown Plaintiffs are likely to incur (or be
awarded) more than thirteen times that amount in attorney’s fees. See Diaz v.
Carmax Auto Superstores California, LLC, No. 1:15-CV-00523-AWI, 2015 WL
3756369, at *7 (E.D. Cal. June 16, 2015) (“The Court finds Defendant’s claim that
Plaintiff is likely to incur $78,400 in attorney’s fees—over four times the value of
the car at issue—to be facially implausible.”), report and recommendation adopted,
2015 WL 4138995 (E.D. Cal. July 8, 2015). 3
Particularly in light of the rule that any doubts about the propriety of
removal must be resolved in favor of remand, Gaus, 980 F.2d at 566, the Court
finds that Defendant has not met its burden to show by a preponderance of the
evidence that the requirements of § 1332 are satisfied such that this Court has
diversity jurisdiction. Plaintiffs’ Motion to Remand is therefore GRANTED, and
this case is remanded to the Superior Court of Los Angeles County.

Nor is it likely that Plaintiffs reasonably would incur more than $52,650 in
attorney’s fees to pursue their claim, so as to raise the amount in controversy above
$75,000, even assuming that the entirety of the $22,350 in possible penalties
(accepting all of Defendant’s dubious assumptions) may be considered in
determining the amount in controversy.
3

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