Martin Esqueda v. Sonic Automotive Inc et al

Filing 23

MINUTES (IN CHAMBERS): ORDER Granting Plaintiff's Motion to Remand 12 and Order Denying Defendants' Motion to Compel Arbitration 13 by Judge James V. Selna: For the foregoing reasons, the Court GRANTS Esqueda's Motion to Remand and DENIES AS MOOT Defendants' Motion to Compel Arbitration. However, in light of Defendants' request at oral argument, the Court stays the effectiveness of the remand for 30 days so that Defendants may attempt to seek relief from the Ninth Circuit Court of Appeals. See document for further details. (lwag)

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

Date

SACV 15-00404 JVS (DFMx)

April 22, 2015

Esqueda v. Sonic Automotive, Inc., et al.

Present: The
Honorable

James V. Selna
Karla J. Tunis

Not Present

Deputy Clerk

Court Reporter

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Not Present

Not Present

Proceedings:

(IN CHAMBERS) Order Granting Plaintiff’s Motion to Remand
and Order Denying Defendants’ Motion to Compel Arbitration

Plaintiff Martin Esqueda (“Esqueda”) moves to remand this case to the Orange
County Superior Court from which it was removed. (Mot. Remand, Docket (“Dkt.”) No.
12.) Defendants Sonic Automotive, Inc. and Sonic Buena Park H, Inc. (collectively,
“Defendants”) oppose (Opp’n Mot. Remand, Dkt. No. 17), and Esqueda has replied.
(Reply Supp. Mot. Remand, Dkt. No. 20.) Also before this Court is Defendants’ Motion
to Compel Arbitration (Dkt. No. 13), to which Esqueda opposes (Not. Errata, Ex. A
(Opp’n Mot. Compel Arbitration), Dkt. No. 16), and Defendants have replied. (Reply
Supp. Mot. Compel Arbitration, Dkt. No. 21.)
For the following reasons, the Court GRANTS Esqueda’s Motion to Remand and
DENIES AS MOOT Defendants’ Motion to Compel Arbitration.
I.

Procedural Background

On October 14, 2014, Esqueda filed a class action suit against Defendants in the
Orange County Superior Court alleging various California Labor Code violations. (See
generally Mot. Remand, Ex. D (Compl.), Dkt. No. 12.) In addition to the class
allegations, Esqueda also sought relief under California’s Private Attorney General Act
(“PAGA”), Cal. Labor Code § 2698 et seq. (Id.) As is required by PAGA, see Cal.
Labor Code § 2699.3(a)(1), Esqueda alleged that he provided written notice to the
California Labor and Workforce Development Agency (“LWDA”) and Sonic
Automotive, Inc. of the alleged Labor Code violations. (Id. at ¶¶ 64–65, Ex. A (PAGA
Letter).) The PAGA letter did not specifically mention Sonic Buena Park H, Inc., nor
does the Complaint allege that it did. (Id.)
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 15-00404 JVS (DFMx)

Title

Date

April 22, 2015

Esqueda v. Sonic Automotive, Inc., et al.

Esqueda filed a First Amended Complaint (“FAC”) on October 27, 2014 (Mot.
Remand, Ex. E (FAC), Dkt. No. 12), and Defendants moved to compel arbitration of the
FAC on December 14, 2014. (Not. Removal, Ex. A 52–67 (State Mot. Compel
Arbitration), Dkt. No. 1-2.) The parties stipulated that Esqueda could file a Second
Amended Complaint (“SAC”) that dropped every cause of action except the PAGA cause
of action (Not. Removal, Ex. A 73–82 (Stipulation Leave File SAC), Dkt. No. 1-2.) The
Superior Court approved the stipulation (Not. Removal, Ex. A 36–37 (Order Granting
Leave), Dkt. No. 1-3), and Esqueda filed the SAC on January 27, 2015. (Not. Removal,
Ex. A 46–51 (SAC), Dkt. No. 1-3.) The Superior Court denied Defendants’ motion to
compel. (Mot. Remand, Rosenthal Decl. ¶ 10, Dkt. No. 12.)
On February 26, 2015, Defendants removed the action to this Court on the basis of
diversity subject matter jurisdiction under 28 U.S.C. § 1332(a)(1). (Not. Removal
¶¶ 15–16.)
II.

Legal Standard1

Under 28 U.S.C. § 1441(a), a defendant may remove a civil action from state court
to federal court so long as original jurisdiction would lie in the court to which the action
is removed. City of Chicago v. Int’l Coll. of Surgeons, 522 U.S. 156, 163 (1997).
According to the Ninth Circuit, courts should “strictly construe the removal statute
against removal jurisdiction.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (per
curiam). Doubts as to removability should be resolved in favor of remanding the case to
the state court. Id. This “‘strong presumption’ against removal jurisdiction means that
the defendant always has the burden of establishing that removal is proper.” Id. (quoting
Nishimoto v. Federman-Bachrach & Assoc., 903 F.2d 709, 712 n.3 (9th Cir. 1990)).
Pursuant to 28 U.S.C. § 1332, federal jurisdiction is proper so long as there is
complete diversity between the parties and an amount in controversy in excess of
$75,000. See, e.g., Orkin v. Taylor, 487 F.3d 734, 738 (9th Cir. 2007).
To satisfy the amount in controversy requirement under § 1332, the plaintiff’s
1

The Court does not address the legal standard for considering a motion to compel arbitration
because Defendants’ Motion is mooted by the Court’s granting of Esqueda’s Motion. See infra Section
III.B.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 15-00404 JVS (DFMx)

Title

Date

April 22, 2015

Esqueda v. Sonic Automotive, Inc., et al.

alleged damages must exceed $75,000. 28 U.S.C. § 1332(a). To measure the amount in
controversy, a court must not only assume that allegations of the complaint are true, but
must also assume that a jury will return a verdict for the plaintiff on all claims made in
the complaint. Kenneth Rothschild Trust v. Morgan Stanley Dean Witter, 199 F. Supp.
2d 993, 1001 (C.D. Cal. 2002). Esqueda did not demand a specific amount of damages in
the SAC he filed in state court. In such a situation, “where it is unclear or ambiguous
from the face of a state-court complaint whether the requisite amount in controversy is
pled . . . . [courts] apply a preponderance of the evidence standard.” Guglielmino v.
McKee Foods Corp., 506 F.3d 696, 699 (9th Cir. 2007) (citing Sanchez v. Monumental
Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996)). Moreover, the “defendant must do
more than point to a state law that might allow recovery above the jurisdictional
minimum,” and “must submit ‘summary-judgment-type evidence’ to establish that the
actual amount in controversy exceeds $75,000.” Kenneth Rothschild Trust, 199 F. Supp.
2d at 1001 (citing Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir.
1997)). The defendant “cannot speculate,” but this burden is “not ‘daunting’” and does
not require that defendant “research, state, and prove the plaintiff’s claims for damages.”
Coleman v. Estes Express Lines, Inc., 730 F. Supp. 2d 1141, 1148 (C.D. Cal. 2010)
(internal quotation marks and citation omitted). The defendant’s evidence must establish
“that it is ‘more likely than not’ that the amount in controversy exceeds that amount.”
Sanchez, 102 F.3d at 404.
If the defendant meets this burden, then the burden shifts to the plaintiff, who must
“show, as a matter of law, that it is certain he will not recover the jurisdictional amount.”
Kenneth Rothschild Trust, 199 F. Supp. 2d at 1001 (citing De Aguilar v. Boeing Co., 47
F.3d 1404, 1411 (5th Cir. 1995)).
“A motion to remand the case on the basis of any defect other than lack of subject
matter jurisdiction must be made within 30 days after the filing of the notice of removal.”
28 U.S.C. § 1447(c); see also Maniar v. FDIC, 979 F.2d 782, 786 (9th Cir. 1992). A
district court lacks power to order a remand in violation of Section 1447(c). Id.
III.

Discussion
A.

Esqueda’s Motion to Remand

Esqueda timely filed the instant Motion within thirty days after Defendants filed
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 15-00404 JVS (DFMx)

Title

Date

April 22, 2015

Esqueda v. Sonic Automotive, Inc., et al.

the Notice of Removal. He argues that removal was improper because it was untimely
and because the amount in controversy is below the $75,000 jurisdictional threshold.
(Mot. Remand 6–8.) The Court need not address the first argument because it agrees
with Esqueda that the amount in controversy is less than $75,000.
1.

Overview of PAGA Claim Aggregation

Esqueda’s only cause of action in his SAC is under the PAGA, which permits
plaintiffs to bring representative claims against his or her employer “on behalf of himself
or herself and other current or former employees” for alleged violations of the California
Labor Code if the LWDA declines to investigate or issue a citation. Cal Labor Code
§ 2698, et seq.; see also Urbino v. Orkin Servs. of Cal., Inc., 726 F.3d 1118, 1121 (9th
Cir. 2013). “If the representative plaintiff prevails, the aggrieved employees are
statutorily entitled to 25% of the civil penalties recovered while the LWDA is entitled to
75%.” Id. (citing Cal. Labor Code § 2699(I)). In Urbino, the Ninth Circuit made clear
that “the penalties recoverable on behalf of all aggrieved employees” may not be
aggregated to meet the amount in controversy requirement. Id. at 1120, 1122–23.
Although aggrieved employees have “a host of claims” available to them, Urbino
reasoned that “these rights are held individually” and thus a defendant’s “obligation to
them is not as a group, but as individuals severally.” Id. at 1122 (internal quotation
marks and citation omitted). In response to the defendants’ argument that a PAGA
plaintiff asserts the “state’s collective interest in enforcing its labor laws through PAGA,”
Urbino concluded that “[t]o the extent Plaintiff can—and does—assert anything but his
individual interest . . . [t]he state, as the real party in interest, is not a ‘citizen’ for
diversity purposes.” Id. at 1122–23.
A year after Urbino, the California Supreme Court issued its decision in Iskanian v.
CLS Transp. L.A., LLC, 59 Cal. 4th 348 (2014). In Iskanian, the court held definitively
that as a matter of California law, an employee’s right to bring a representative PAGA
claim cannot be waived and any purported waiver in an arbitration agreement is
unenforceable as a matter of state law. Id. at 383–84. In reaching this conclusion, the
court relied in part on the PAGA litigant’s “status as ‘the proxy or agent’ of the state” and
“substantive role in enforcing [California] labor laws on behalf of state law enforcement
agencies.” Id. at 388.

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

SACV 15-00404 JVS (DFMx)

Title

Date

April 22, 2015

Esqueda v. Sonic Automotive, Inc., et al.
2.

Application of PAGA Claim Aggregation

Esqueda seeks civil penalties, attorney fees, and costs in his SAC. (SAC Prayer.)
He allegedly was an employee for Defendants from February 2014 through July 14,
2014, but he also seeks to represent aggrieved employees employed by Defendants from
September 10, 2013 to present. (Id. at ¶¶ 7, 17.) Esqueda’s PAGA cause of action is
based on seven alleged California Labor Code violations, including violations of Labor
Code §§ 201, 202, 203, 226, 226.7, 510, and 1194. (Id. at ¶ 22.) PAGA provides for
civil penalties for each Labor Code violation in the amount specifically provided by the
violated statute, or “one hundred dollars ($100) for each aggrieved employee per pay
period for the initial violation and two hundred dollars ($200) for each aggrieved
employee per pay period for each subsequent violation” if no amount is specified in the
violated statute. Cal. Labor Code § 2699(f)(2). Thus, the civil penalties that Esqueda
could recover for each Labor Code violation are: (1) $50 for the initial violation and $100
for each subsequent violation of § 226, Cal. Labor Code § 226(e)(1); (2) $50 for the
initial violation and $100 for each subsequent violation of § 510, Cal. Labor Code § 558;
and (3) the PAGA default penalty of $100 for the initial violation and $200 for each
subsequent violation of the §§ 201, 202, 203, 226.7, 1194, Cal. Labor Code § 2699(f)(2).

Defendants’ Notice of Removal and an attached declaration calculated the amount
in controversy to be “clearly exceed[ing] $75,000” because Esqueda alleges seven Labor
Code violations for himself and 450 aggrieved employees for multiple pay periods over
the course of more than one year. (Not. Removal ¶ 11; Gonzalez Decl. ¶¶ 4–5, Dkt. No.
1-4.) However, Urbino prohibits the aggregation of penalties recoverable on behalf of
Esqueda and all aggrieved employees to meet the $75,000 amount in controversy
requirement. Urbino, 726 F.3d at 1123. Thus, the Court can only consider the penalties
recoverable on behalf of Esqueda. In accordance with the SAC and Defendants’ Notice
of Removal, this amount, without regards to the required apportionment of damages
between the aggrieved employees and the LWDA, would at most be $5,400.2 Even with

2

Defendants allegedly employed Esqueda for five months and his pay period was monthly.
(SAC ¶ 7; Gonzalez Decl. ¶ 4.) For the seven alleged Labor Code violations, the civil penalties from the
first month of employment, or the initial violation, would be the sum of $50 for the § 226 violation, $50
for the § 510 violation, and a total of $500 for the other five violations. This would total $600. The
civil penalties from a single subsequent month, or a single set of subsequent violations, would be the
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 15-00404 JVS (DFMx)

Title

Date

April 22, 2015

Esqueda v. Sonic Automotive, Inc., et al.

the addition of attorney fees and costs, see Cal. Labor Code § 2699(g)(1), this total
amount falls far short of exceeding $75,000.
In light of Iskanian’s holding that a “PAGA action is a dispute between an
employer and the state [LWDA],” 59 Cal. 4th at 384, Defendants urge the Court to “find
that the amount in controversy for diversity purposes is the value of the State of
California, not any individual employee.” (Opp’n Mot. Remand 3:15–17.) The Court
construes this argument as a request for the Court to aggregate the LWDA’s 75 percent
pro rata share of the penalties with Esqueda’s 25 percent pro rata share. Urbino did not
address this issue and California federal district courts have reached different conclusions
on Urbino’s implications regarding this issue. Compare Lopez v. Ace Cash Express, Inc.
No. LA CV11-07116 JAK (JCx), 2015 U.S. Dist. LEXIS 38552 at *9–12 (C.D. Cal. Mar.
24, 2015) (not aggregating LWDA’s pro rata share and the representative plaintiff’s pro
rata share to calculate the amount in controversy) with Patel v. Nike Retail Servs., Inc.,
No. 14-cv-00851-JST, 2014 WL 3611096 at *9–13 (N.D. Cal. July 21, 2014)
(aggregating the LWDA’s pro rata share and the representative plaintiff’s pro rata share
to calculate the amount in controversy). Notwithstanding, the Court need not decide
whether it must or must not aggregate the two pro rata shares. Even if the Court were to
aggregate both pro rata shares, the amount in controversy is at most $5,400 plus attorney
fees and costs. Iskanian does not disturb Urbino’s prohibition on aggregating the
penalties recoverable for all aggrieved employees to calculate the amount in controversy.
However, at oral argument, Defendants attempted to clarify their argument and
urged the Court to read Urbino differently in light of Iskanian. Defendants asserted that
Urbino defined a PAGA claim as an individual claim and that Iskanian represented a
significant shift because it defined such a claim as a representative one. The Court
disagrees that Iskanian represented such a shift or that it added clarity to the definition of
a PAGA claim that Urbino lacked. Urbino referred to the plaintiff as a “representative
plaintiff” and his claim as a “representative PAGA action.” Urbino, 726 F.3d at 1121.
Urbino also had the benefit of and relied upon Arias v. Super. Ct., 46 Cal. 4th 969,
980–87 (2009), which made clear that a PAGA claim is a “representative action” not

sum of $100 for the § 226 violation, $100 for the § 510 violation, and a total of $1,000 for the other five
violations. This would total $1,200, but would be multiplied by four for the four subsequent months of
employment, thus totaling $4,800. Adding the $600 penalty for initial violations plus the $4,800 for the
subsequent violations would result in a total of $5,400.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 15-00404 JVS (DFMx)

Title

Date

April 22, 2015

Esqueda v. Sonic Automotive, Inc., et al.

subject to class action requirements. Iskanian did not stray from or contradict Arias, but
rather quoted large portions of Arias as “background.” See Iskanian, 59 Cal. 4th at
379–82. Because Arias and Urbino both characterized a PAGA claim as a representative
one, Iskanian did not add anything that the Urbino court did not already know.
Neither party addresses this point, but the Court also notes that Esqueda’s pro rata
share is limited to the civil penalties to which he is individually entitled and does not
include a portion of the pro rata share of penalties to which the other aggrieved
employees are entitled. Nothing in PAGA provides that the plaintiff employee is entitled
to a portion of the pro rata share awarded to the other aggrieved employees. It simply
states that 25 percent of the penalties will be distributed “to the aggrieved employees,”
which are defined as “any person who was employed by the alleged violator and against
whom one or more of the alleged violations was committed.” Cal. Labor Code
§§ 2699(c), (i). Additionally, an employee plaintiff like Esqueda is “an individual litigant
is stepping into the role of the state attorney general on behalf of the State, to recover
civil penalties for the State.” Sample v. Big Lots Stores, Inc., No. C 10-03276 SBA,
2010 WL 4939992 at *5 (C.D. Cal. Nov. 30, 2010). He “neither represent[s] the rights of
a class . . . nor intends to accomplish the goals of a class action.” Cardenas v. McLane
Foodservice, Inc., No. SACV 10-473 DOC (FFMx), 2011 WL 379413 at *3 (C.D. Cal.
Jan. 31, 2011). Thus, Esqueda is not seeking nor is he entitled to an amount beyond the
civil penalties assessed for California Labor Code violations personal to him.
Therefore, Defendants have failed to meet their burden and the Court concludes
that removal was improper.3 The Court GRANTS Esqueda’s Motion to Remand.

3

Because the Court concludes that the amount in controversy threshold was not met, the Court
does not address whether there was complete diversity of citizenship. See Morris v. Princess Cruises,
Inc., 236 F.3d 1061, 1067 (9th Cir. 2001) (“Section 1332 requires complete diversity of citizenship;
each of the plaintiffs must be a citizen of a different state than each of the defendants.”) (citation
omitted). Esqueda does not argue that complete diversity does not exist, but the Court notes that
Esqueda is a citizen of California and Sonic Automotive, Inc. is a citizen of North Carolina, but Sonic
Buena Park H, Inc. is a citizen of California. (Not. Removal ¶¶ 4–6.) Defendants argue that because
Sonic Buena Park H, Inc. was not listed in the PAGA Letter and thus not notified pursuant to Cal. Labor
Code § 2699.3(a)(1), it was “fraudulently joined” and thus its “presence in the lawsuit is ignored for
purposes of determining diversity.” Morris, 236 F.3d at 1067; Opp’n Mot. Remand 6:13–24.) This
issue is mooted by Defendants’ failure to show the amount in controversy requirement is met.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

SACV 15-00404 JVS (DFMx)

Title

Date

April 22, 2015

Esqueda v. Sonic Automotive, Inc., et al.
3.

Attorney Fees

“[T]he standard for awarding fees [upon proof of a motion to remand] should turn
on the reasonableness of the removal.” Martin v. Franklin Capital Corp., 546 U.S. 132,
141 (2005). “Absent unusual circumstances, courts may award attorney’s fees under §
1447(c) only where the removing party lacked an objectively reasonable basis for seeking
removal.” Id.
Because Esqueda’s counsel discussed Urbino with Defendants’ counsel prior to
filing the Motion for Remand, Esqueda argues that Defendants unwillingness to stipulate
to a remand was unreasonable behavior warranting the award of attorney fees. (Mot.
Remand 9:18–10:14.) Although Urbino clearly forecloses Defendants’ arguments in this
Motion, Urbino was decided before Iskanian. Defendants’ reliance on Iskanian was not
objectively unreasonable given the Ninth Circuit’s silence on the issue since Iskanian.
Thus, the Court denies Esqueda’s request for attorney fees.
B.

Defendants’ Motion to Compel Arbitration

Defendants move to compel arbitration of this action pursuant to the Federal
Arbitration Act. (Mot. Compel Arbitration 4–6.) Because the case must be remanded for
lack of diversity subject matter jurisdiction, the Court lacks jurisdiction to act on the
Motion to Compel Arbitration. Therefore, the Court DENIES AS MOOT this Motion.
See, e.g., Lopez, 2015 U.S. Dist. LEXIS 38552 at *14.
IV.

Conclusion

For the foregoing reasons, the Court GRANTS Esqueda’s Motion to Remand and
DENIES AS MOOT Defendants’ Motion to Compel Arbitration. However, in light of
Defendants’s request at oral argument, the Court stays the effectiveness of the remand for
30 days so that Defendants may attempt to seek relief from the Ninth Circuit Court of
Appeals.

Esqueda requests judicial notice of two documents that allegedly explain why he did not include
Sonic Buena Park H, Inc. in his PAGA Letter. (RJN Supp. Reply Supp. Mot. Remand, Dkt. No. 20-2.)
Because the diversity of citizenship issue is mooted, so is the need for the Court to consider these
documents. Thus, the Court denies the request.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

Case No.

SACV 15-00404 JVS (DFMx)

Title

April 22, 2015

Esqueda v. Sonic Automotive, Inc., et al.
IT IS SO ORDERED.

Counsel for plaintiff shall prepare, serve and submit, within seven days, a
proposed order for remand.

:
Initials of Preparer

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00

kjt

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