Juan Manuel Perez Reyes et al v. National Distribution Centers, LLC et al

Filing 26

MINUTES (IN CHAMBERS) Order (1) GRANTING Plaintiff's Motion to Remand [Dkt. No. 17]; (2) REMANDING the Case; and (3) VACATING the February 5, 2018 Hearing [IN CHAMBERS] by Judge Jesus G. Bernal: The established amount in controversy, $2,883 ,930, does not exceed the jurisdictional minimum. Accordingly, the Court does not have subject matter jurisdiction over Plaintiffs claims. The Court GRANTS Plaintiffs Motion and REMANDS the action to state court. See document for further information. MD JS-6. Case Terminated. (lwag)

JS-6

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

EDCV 17-2434 JGB (SPx)

Date February 1, 2018

Title Juan Manuel Perez Reyes, et al. v. National Distribution Centers, LLC, et al.
Present: The Honorable

JESUS G. BERNAL, UNITED STATES DISTRICT JUDGE

MAYNOR GALVEZ

Not Reported

Deputy Clerk

Court Reporter

Attorney(s) Present for Plaintiff(s):

Attorney(s) Present for Defendant(s):

None Present

None Present

Proceedings:

Order (1) GRANTING Plaintiffs’ Motion to Remand (Dkt. No. 17); (2)
REMANDING the Case; and (3) VACATING the February 5, 2018
Hearing (IN CHAMBERS)

Before the Court is Plaintiffs Juan Manuel Perez-Reyes and Myra Perez-Reyes’s Motion to
remand. (Dkt. No. 17.) The Court determines the Motion is appropriate for resolution without a
hearing. See Fed. R. Civ. 78; L.R. 7-15. After considering the papers filed in support of, and in
opposition to the Motion, the Court GRANTS the Motion and REMANDS the case to state
court. The February 5, 2018 hearing is VACATED.
I. BACKGROUND
On May 3, 2017, Plaintiffs filed a putative class action complaint against Defendant National
Distribution Center (“Defendant” or “NDC”) in Superior Court for the County of San
Bernardino. (“Complaint,” Dkt. No. 1-1.) Plaintiffs bring this action on behalf of themselves
and similarly situated employees who worked for NDC in California as receiving
clerks/administrative assistants, material handlers, and other like positions. (Compl. ¶ 1.)
Plaintiffs allege nine causes of action under California law: (1) failure to pay minimum wages, (2)
failure to pay overtime wages, (3) failure to provide meal periods, (4) failure to provide rest
periods, (5) failure to reimburse for necessary expenditures, (6) failure to keep accurate payroll
records, (7) failure to pay wages upon ending employment, (8) violation of California Business
and Professions Code §§ 17200, et seq., and (9) violation of California’s Private Attorney
General Act. (See Compl.)

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Defendant removed the action on December 4, 2017. (“Notice of Removal (‘NOR’),” Dkt.
No. 1.) Defendant asserts the Court has jurisdiction pursuant to the Class Action Fairness Act
(“CAFA”), 28 U.S.C. § 1332(d). (NOR ¶ 1.) Plaintiff filed the Motion on January 3, 2018.
(“Motion,” Dkt. No. 17.) Defendant opposed the Motion on January 12, 2018. (“Opposition,”
Dkt. No. 19.) Plaintiffs replied on January 22, 2018. (“Reply,” Dkt. No. 22.)
II. LEGAL STANDARD
Federal courts have original jurisdiction under CAFA where the number of proposed
plaintiffs is greater than 100, there is a diversity of citizenship between any member of the class
and any defendant, and the amount in controversy is more than $5,000,000, exclusive of
interests and costs. 28 U.S.C. § 1332(d); Ibarra v. Manheim Investments, Inc., 775 F.3d 1193,
1195 (9th Cir. 2015). In determining the amount in controversy, courts first look to the
complaint. Ibarra, 775 F.3d at 1197. Where damages are unstated in a complaint, the defendant
bears the burden of proving the amount in controversy is met. Id.
Though a notice of removal need only include a plausible allegation that the amount in
controversy exceeds the jurisdictional threshold, when the amount in controversy is contested,
“both sides submit proof and the court decides, by a preponderance of the evidence, whether the
amount-in-controversy requirement has been satisfied.” Dart Cherokee Basin Operating Co.,
LLC v. Owens, 135 S.Ct. 547, 550 (2014).
Generally, courts must “strictly construe the removal statute against removal jurisdiction.”
Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). However, no anti-removal presumption
exists in cases invoking CAFA. Dart Cherokee, 135 S.Ct. at 554.
III. DISCUSSION
The parties do not dispute Plaintiffs allege claims on behalf of more than 100 putative class
members. Plaintiffs move to remand on the grounds that NDC failed to establish CAFA’s
jurisdictional requirements of minimum diversity and that the amount of controversy exceeds $5
million. (Mot. at 5.)
A. Minimum Diversity
Plaintiffs assert Defendant is an unincorporated entity, and there remains “an open
question” as to whether the trusts who are partners of NFI, LP, its owning entity, are citizens of
California. (Mot. at 15-16.) Plaintiffs are both citizens of California. (Compl. ¶¶ 7-8.)
CAFA requires a defendant show that “at least one plaintiff is diverse from at least one
defendant.” Luther v. Countrywide Home Loans Servicing LP, 533 F.2d 1031, 1034 (9th Cir.
2008). The citizenship of a limited liability company (“LLC”) for purposes of diversity
jurisdiction is that of each of its members. Johnson v. Columbia Properties Anchorage, LP, 437

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F.3d 894, 899 (9th Cir. 2000). If any member of an LLC is itself a partnership or association, the
citizenship of each submember must also be known. Id.
NDC submitted a declaration by Sarah Pontoski, the Associate General Counsel of NFI
Management Services, a position in which she provides legal services to Defendant. (Pontoski
Decl. ¶ 1, Dkt. No. 5.) Pontoski avers NDC is an LLC wholly owned by NFI, LP, a limited
partnership. (Id. ¶ 3.) NFI, LP is a limited partnership consisting of three partners and six
trusts: (1) Sidney Brown, a resident of Pennsylvania, (2) Ike Brown, a resident of Texas, (3)
Jeffrey Brown, a resident of New Jersey, and six traditional trusts, the trustees of which are
citizens of Pennsylvania, Texas, and New Jersey. (Id. ¶ 4.) Therefore, for purposes of diversity
jurisdiction, Defendant is a citizen of Pennsylvania, Texas, and New Jersey. As Plaintiffs are
citizens of California, there is minimal diversity between the parties. 1
B. Amount in Controversy
In its NOR, Defendant asserts the amount of controversy is met through the penalties of just
two of Plaintiffs’ causes of action. (NOR ¶ 23.) Plaintiffs argue Defendant relies on a series of
unsupported assumptions in calculating the amount in controversy. (Mot. at 9-10.) Among
them, Defendant’s reliance on the assumptions that all 1,227 of the putative class members
worked eight hours a day, earned at least $13.71 per hour, and there was a 100% violation rate for
the approximately 1,227 putative class members. (Id.) Principally, Plaintiffs contend
Defendant’s proffered declaration by Martha Michel is insufficient to sustain Defendant’s
calculations.2 (Id. at 11.)
In support of its NOR, Defendant submitted Michel’s declaration. (“Michel Decl.,” Dkt.
No. 4.) Michel is employed by BFI Management Services, LLC and reviews employment data
for NDC as part of her job. (Michel Decl. ¶¶ 1-2.) Michel avers NDC employs over 1,544 full
1

The Court also notes the Fourth Circuit analyzes the citizenship of an LLC for purposes
of CAFA is like that of a corporation, by assessing its principal place of business and place of
incorporation. See Ferrell v. Express Check Advance of S.C., LLC, 591 F.3d 698, 705 (4th Cir.
2010.) Pontoski also declares NDC is a Delaware LLC with its executive and administrative
functions housed in its headquarters in New Jersey. (Pontoski Decl. ¶ 3; Supp. Pontoski Decl.
¶ 3, Dkt. No. 19-3.) As stated above, Plaintiffs are citizens of California, and therefore, even
under either analysis, there is minimal diversity between the parties.
2

Plaintiffs object to Michel’s declaration that she lacks the personal knowledge and
competency to testify on specific matters under Federal Rule of Evidence (“FRE”) 602. (Dkt.
No. 17-1.) FRE 602 provides “[a] witness may testify to a matter only if evidence is introduced
sufficient to support a finding that the witness has personal knowledge of the matter.” Fed. R.
Evid. 602. Michel declares she reviews NDC’s employment data as part of her job and reviewed
data and records pertaining to the putative class in Plaintiffs’ Complaint. (Michel Decl. ¶ 2.)
The Court finds she has personal knowledge of NDC’s employment records to support the
statements in her declarations. Plaintiffs’ objection is OVERRULED.
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time non-exempt employees that work in California “at any given time,” and since May 3, 2014,
over 1,227 non-exempt California employees have been separated from Defendant. (Id. ¶¶ 4, 6.)
Michel also declares the average hourly compensation of NDC’s non-exempt California
employees from May 3, 2013 to July 2017 was $13.71. (Id. ¶ 7.)
1. Wage Statement Claim
Under California Labor Code § 226, employers are required to furnish their employees an
“accurate itemized statement in writing” of their wages. Cal. Lab. Code § 226. The statutory
penalty for failing to furnish the wage statement is $50 for each pay period in which a violation
occurs, up to $4,000. Cal. Lab. Code § 226. Defendant argues that in Plaintiffs’ Complaint, they
have alleged a 100% violation rate such that every class member would be entitled to wage
statement penalties. (NOR ¶24.) Therefore, since Defendant has had 40 pay periods since May
3, 2016, Defendant calculates Plaintiffs’ statutory penalties under their sixth cause of action to be
$3,088,000.3 (NOR ¶ 26.) Plaintiffs’ main argument is that the assumed 100% violation rate is
without evidentiary support. (Mot. at 11.)
The Complaint alleges Defendant “knowingly and intentionally failed to provide timely,
accurate itemized wage statements” to the putative class members. (Compl. ¶ 64.) Additionally,
Plaintiffs claim “[d]uring all relevant time periods,” Defendant failed to provide the putative
class members who worked more than five consecutive hours with a meal break, and Defendant
“failed to implement a policy or practice” to allow the putative class to receive rest periods.
(Compl. ¶¶ 49, 55.) Plaintiffs also allege numerous instances from October 2013 to June 2016
where their wage statements failed to accurately clock the minutes they worked. (Compl. ¶ 20.)
Finally, Plaintiffs allege that due to NDC’s “rounding policy” employees were required to clock
in “at least seven minutes” before their scheduled time and clock out at “least seven minutes”
after their scheduled shift but were not paid for this time. (Id.) Defendant argues these
statements, among others, demonstrate Plaintiffs allege a 100% violation rate, allowing it to
estimate each employee would have had a wage statement violation in each pay period. (Opp’n
at 12.)
In Ibarra, the Ninth Circuit held that alleging a “pattern and practice” of doing something
“does not necessarily mean always doing something.” 775 F.3d at 1198-199. The court held the
plaintiff’s allegation the defendant maintained “an institutionalized unwritten policy” also did
not mean such violations occurred in each and every shift. Id. at 1199. Plaintiffs’ statements
regarding the absence of the rest/meal periods are insufficient to establish a 100% violation rate.
While Defendant may not have allowed the potential class members breaks as required, there is
no indication of the frequency of the violations. Nevertheless, the Court finds Defendant’s
violation rate assumption reasonable based on the language of the complaint regarding the
rounding policy. Plaintiffs allege each shift resulted in time for which they were not
compensated. Plaintiffs cannot now doubt the assumption that each pay period resulted in an
inaccurate wage statement. See Salcido v. Evolution Fresh, Inc., 2016 WL 79381, at *7 (C.D.
3

Calculated as 1,544 full time employees x 40 pay periods x $50/pay period.

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Cal. Jan 6, 2016) (finding defendant established the wage statement penalties by a preponderance
of the evidence using a 100% violation rate for the putative class members where the plaintiff’s
complaint and deposition alleged “a uniform policy and systematic scheme of wage abuse” and
off-the-clock work on a daily basis).
The Court finds Defendant’s assertion of the number of employees “at any given time” too
speculative to result in a reasonable estimate. In its Opposition, Defendant attempts to remedy
this deficiency by averring the number of wage statements it issued to the putative class members
and claiming the number of pay periods is 43, placing $2,832,550 in controversy. (Opp’n at 13.)
Nonetheless, Defendant does not clarify the number of employees who worked during the
relevant time period and the Court cannot guess from the number of wage statements. However,
Plaintiff does not contest Defendant’s calculation in its Opposition. Therefore, the Court finds
Defendant has established by a preponderance of evidence that $2,832,550 is in controversy
regarding wage statement claims.
2. Waiting-Time Penalties Claim
Under California Labor Code § 203, the statutory penalty is one day’s wages for each day an
employee who has separated from their employer is not paid all wages owed, up to a total of thirty
days of wages. Cal. Lab. Code § 203. Defendant asserts Plaintiffs’ Complaint alleges a 100%
violation rate, therefore each putative class member is entitled to compensation. (NOR ¶ 27.)
Consequently, Defendant calculates Plaintiffs’ statutory penalties under their seventh cause of
action to be $4,037,320.80. 4 (NOR ¶ 29.) Plaintiffs dispute the reasonableness of the
assumptions that the employees worked eight hours per day, the hourly rate of those workers, or
the amount of days the wages went unpaid after separation. (Mot. at 12-13.)
Plaintiffs allege, “Defendant willfully refused and/or failed to promptly compensate Plaintiffs
and Plaintiff Class for all wages owed.” (Compl. ¶ 73.) Plaintiff also alleges Defendant
scheduled the employees in a way that caused them “to work in excess of eight hours per day
and/or forty hours per week.” (Id. ¶ 43.) Nevertheless, the Court agrees the Michel declaration
does not provide support for Defendant’s assumption the putative class members worked eight
hours per day. Michel does not provide any information regarding the average length of workday
the putative class members worked during the relevant time period. Cf. Quintana v. Claire’s
Stores, Inc., 2013 WL 1736671, at *6 (N.D. Cal. Apr. 22, 2013) (finding defendants’ calculation
for waiting-time penalties reasonable where defendants proffered a declaration that the putative
class members were “regularly scheduled to work eight hour days,” and defendant estimated the
minimum penalties using a 7-hour work day). In addition, Michel avers only the hourly
compensation for NDC’s non-exempt California employees, a group broader than the putative
class. Even if the assumption that each potential class member suffered a 30-day violation
penalty is reasonable, the Court cannot credit Defendant’s calculation of the waiting-time
penalties as reasonably estimated.
4

Calculated as 1,227 separated class members x $13.71/hour x 8 hours/day x 30 days.

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In its Opposition, Defendant provides new declarations and calculations to assert at least
$3,510,012.805 is in controversy for waiting-time penalties. (Opp’n at 15-16.) Relying on these
new declarations, Defendant asserts NDC has a policy of requiring each full-time employee to
work a minimum of 30 hours per week. (Ritondaro Decl. ¶ 3, Dkt. No. 19-4.) In addition,
Defendant proffers a declaration and exhibit detailing the hourly pay rate of full-time employees
separated from NDC since May 3, 2014. (Behrens Decl., Ex. A, Dkt. No. 19-1.)6 According to
Exhibit A, there were 2,163 employees separated from NDC in the relevant time period. (Id.) As
Plaintiffs highlight, this new figure is vastly different from Defendant’s previous declaration
asserting 1,227 California employees were separated from Defendant in the relevant time period.
(Michel Decl. ¶ 6.) Moreover, the Michel declaration does not identify whether the 1,227
California separated employees were full-time or part-time workers, whereas the Behrens
declaration asserts Exhibit A, identifying 2,163 separated employees, is a report of only the fulltime California employees separated. (Behrens Decl. ¶ 3.)
Exhibit A also contains the hourly rate for each employee multiplied by 7.5 hours/day or 4.3
hours/day times 30 days. Due to NDC’s averred policy of requiring a minimum of 30 hours per
week, the Court finds the assumption the potential class members worked 30 hours per seven
days more reasonable than working 30 hours per four days. However, due to the contradictory
figures offered by Defendant as to the number of putative class members separated from NDC,
the Court cannot credit Defendant’s calculations as to the total amount in controversy for the
waiting-time penalties.
Plaintiffs do not offer any of their own evidence to challenge that of Defendants. Instead,
Plaintiffs make their own unsupported assumptions and attempt to pick and choose different
figures in Defendant’s calculations to create their own estimate of $1,337,588.73 in controversy.
5

Calculated as each of the 2,163 employees x (individual hourly rates) x 4.3 hours/day x

30 days.
6

Plaintiffs object to Exhibit A attached to the declaration of Jeremy Behrens on the
grounds that he lacks personal knowledge of the subject matter, and the exhibit is a non-original
writing offered to prove the truth of its contents in violation of FRE 1002. (Dkt. No. 24.) FRE
1002 ordinarily requires the proponent, when attempting to prove the content of a document or
writing to produce the original. Fed. R. Evid. 1002. FRE 1006 provides an exception to this rule
and permits the admission of summaries of voluminous writings. Fed. R. Evid. 1006. Exhibit A
includes a chart of data from NDC’s personnel records database, along with calculations
conducted by Defendant. FRE 1006 requires the proponent establish the underlying documents
are admissible for evidence. United States v. Johnson, 594 F.2d 1253, 1256 (9th Cir. 1979). Here,
the underlying records are admissible as business records under FRE 803(6). The personnel
records were kept in the course of NDC’s regularly conducted business activity, and Behrens, a
Human Resources analyst, was qualified to testify as to this information. See United States v.
Smith, 609 F.2d 1294, 1302 (9th Cir. 1979) (“The witness must only be in a position to attest to
[the evidence’s] authenticity.”) (citation and internal quotations omitted). Accordingly,
Plaintiffs’ objection is OVERRULED.
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(Reply at 5.) The Court finds particularly troubling Plaintiffs’ attempt to use the numbers in the
Michel declaration after objecting to it in its entirety. In Ibarra, the Ninth Circuit held that
although the defendant’s assumption about alleged labor law violations were “not grounded in
real evidence,” the plaintiff’s lack of evidence to assert an alternative violation rate mandated
remand to allow “both sides to submit proof related to the disputed amount in controversy.” 775
F.3d at 1199 (citing Dart, 135 S.Ct. at 553-54). Plaintiffs’ efforts, relying on Defendant’s figures
they dispute, are wholly insufficient to establish their claimed amount in controversy. See id.
(“[A] damages assessment may require a chain of reasoning that includes assumptions. When
that is so, those assumptions cannot be pulled from thin air but needs some reasonable ground
underlying them.”) Therefore, the Court finds neither party has established by a preponderance
of evidence any amount in controversy for the waiting-time penalties.
3. Attorneys’ Fees
In Defendant’s Opposition, he asserts a benchmark of 25% of the amount recoverable should
be added to the amount in controversy as attorneys’ fees. (Opp’n at 16.) This Court takes the
position that when calculating attorneys’ fees to establish jurisdiction, “the only fees that can be
considered are those incurred as of the date of removal.” See Faulkner v. Astro-Med, Inc., 1999
WL 820198, at *9 (N.D. Cal. Oct. 4, 1999) (citing Miranti v. Lee, 3 F.3d 925, 928 (5th Cir.
1993)).
Defendant calculates Plaintiffs’ attorneys’ fees through trial to be 25% of the total estimated
damages, approximately $1,585,640.70. (Opp’n at 18.) However, this Court calculates
attorneys’ fees through the time of removal. Along with their Reply, Plaintiffs filed a declaration
attesting their attorneys’ fees through the time of removal to be $51,380. (Mahoney Decl. ¶ 3,
Dkt. No. 23-1.) Therefore, the Court finds the amount in controversy for attorneys’ fees
established by a preponderance of the evidence is $51,380.
4. Total
In sum, the Court finds the established amount in controversy is approximately $2,883,930.7
This amount is below the CAFA jurisdictional requirement of exceeding $5 million. While
Defendant chose only to offer sums for two of Plaintiffs’ nine claims, the Court cannot assume
without any evidence Plaintiffs’ other seven claims involve amounts in controversy sufficient to
meet or exceed the jurisdictional threshold.
IV.

CONCLUSION

The established amount in controversy, $2,883,930, does not exceed the jurisdictional
minimum. Accordingly, the Court does not have subject matter jurisdiction over Plaintiffs’
claims. The Court GRANTS Plaintiffs’ Motion and REMANDS the action to state court.
IT IS SO ORDERED.
7

Calculated as $2,832,550 in wage statement claims and $51,380 in attorney’s fees.

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