Gary Rachner et al v. Network Funding, L.P., et al

Filing 20

MINUTES (IN CHAMBERS) ORDER by Judge Josephine L. Staton denying #12 MOTION to Remand. Accordingly, the hearing set for November 17, 2017, at 2:30 p.m., is VACATED. Having read and considered the parties' briefs, the Court DENIES Plaintiffs' Motion. (see document for details). (dro)

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.: 8:17-cv-01399-JLS-DFM
Title: Gary Rachner et al v. Network Funding, L.P., et al

Date: November 16, 2017

Present: Honorable JOSEPHINE L. STATON, UNITED STATES DISTRICT JUDGE

Terry Guerrero
Deputy Clerk
ATTORNEYS PRESENT FOR PLAINTIFF:
Not Present

N/A
Court Reporter
ATTORNEYS PRESENT FOR DEFENDANT:
Not Present

PROCEEDINGS: (IN CHAMBERS) ORDER DENYING PLAINTIFFS’
MOTION TO REMAND (Doc. 12)
Before the Court is a Motion to Remand filed by Plaintiffs Gary Rachner and Nick
Green. (Mot., Doc. 12.)1 Defendant Network Funding, L.P. opposed the Motion, and
Plaintiff did not file a reply. (Opp., Doc. 16.) The Court finds this matter appropriate for
decision without oral argument. Fed. R. Civ. P. 78(b); C.D. Cal. R. 7-15. Accordingly,
the hearing set for November 17, 2017, at 2:30 p.m., is VACATED. Having read and
considered the parties’ briefs, the Court DENIES Plaintiffs’ Motion.
I.

BACKGROUND

1

Prior to filing this motion, Plaintiffs failed to satisfy their meet and confer obligations
under Local Rule 7-3 and this Court’s Initial Standing Order. C.D. Cal. R. 7-3.; ISO ¶
8(b), Doc. 9. Because this Court has the obligation to inquire into its own subject matter
jurisdiction, it decides this Motion on the merits. However, the Court notes that if the
parties had met and conferred, Defendant could have pointed out the computational errors
in Plaintiffs’ damages spreadsheet, and both Defendant and the Court would not have had
to spend needless time addressing this issue. Any future failure to meet and confer in
accordance with the Local Rule 7-3 may result in the imposition of sanctions on the noncompliant party.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.: 8:17-cv-01399-JLS-DFM
Title: Gary Rachner et al v. Network Funding, L.P., et al

A.

Date: November 16, 2017

Allegations in the First Amended Complaint

Whether removal is proper is determined solely on the basis of the pleadings filed
in state court, and any post-removal amendments to the pleadings do not affect whether a
case was removable. Williams v. Costco Wholesale Corp., 471 F.3d 975, 976 (9th Cir.
2006) (per curiam). Accordingly, the following factual allegations are taken from the
first amended complaint (“FAC”) filed in state court. (FAC, Doc. 1-5.)
Plaintiffs seek to represent a class of individuals employed by Defendant Network
Funding during the four years prior to the filing of the instant Complaint. (Id. ¶¶ 4, 8.)
Plaintiffs and the proposed class were non-exempt employees entitled to minimum wage
and overtime compensation under the Industrial Welfare Commission Order and the
California Labor Code. (Id. ¶¶ 18–20.) Defendant failed to pay Plaintiffs and the
proposed class the minimum wage for all hours worked and overtime wages by “(a)
failing to use the correct ‘regular rate of pay’ to calculate the applicable overtime
premium due each Plaintiff and [class] members; (b) failing to record and pay Plaintiff
and [class] members for all mandatory off the clock work time spent responding to emails
and telephone calls on their personal cell phones; and (c) failing to record and pay each
Plaintiff and [class] members for all hours worked in the office.” (Id. ¶ 24.)
On May 9, 2017, Plaintiffs filed the instant action in Orange County Superior
Court against Defendant. (Compl., Doc. 1-3.) On June 19, 2017, Plaintiffs filed the FAC
alleging (1) failure to pay overtime wages in violation of California Labor Code sections
510 and 1194; (2) failure to reimburse expenses in violation of Labor Code section 2802;
(3) failure to pay waiting time penalties in violation of Labor Code sections 201 and 202;
(4) failure to provide accurate itemized wage statements in violation of Labor Code
section 226(a); (5) failure to pay minimum wage in violation of Labor Code section 1197;
and (6) violation of the California Unfair Competition Law (UCL). (Id. ¶¶ 17–53.)
Neither the original Complaint nor the FAC stated the amount of damages sought. On
August 14, 2017, Defendant removed the action to this Court on the grounds of diversity
jurisdiction. (Notice of Removal, Doc. 1.)
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.: 8:17-cv-01399-JLS-DFM
Title: Gary Rachner et al v. Network Funding, L.P., et al

Date: November 16, 2017

Plaintiffs now move to remand to state court.
B.

Defendant’s Calculations in the Notice of Removal

In its Notice of Removal, Defendant stated that the amount-in-controversy for at
least one of the named Plaintiffs exceeds the jurisdictional minimum. (Notice of
Removal ¶ 28.) This determination was based on communications between the parties in
preparation for a mediation that was scheduled to take place on August 4, 2017.2 (Id. ¶¶
31–33.) Specifically, Plaintiffs’ Counsel sent a spreadsheet to Defendant’s Counsel
stating the amount of damages claimed by each of the named Plaintiffs. (Hart Decl. Ex.
A, Doc. 16-1.) Plaintiffs’ Counsel also sent a later email in response to Defendant’s
Counsel’s inquiry, estimating that Plaintiffs’ attorneys’ “fees from inception to get
through mediation and class approval” were approximately $150,000 “without any
Lodestar multiplier.” (Baker Decl. Ex. A, Doc. 12-2.) The email further estimated that
fees through trial “could be up to $500,000.” (Id.)
Plaintiffs’ spreadsheet calculated Plaintiff Rachner’s compensatory damages as
follows: 1) unpaid overtime wages at $35,969.853; 2) unreimbursed business expenses at

2

Notwithstanding the evidentiary privilege that typically applies to offers of settlement,
“a settlement letter is relevant evidence of the amount in controversy if it appears to
reflect a reasonable estimate of the plaintiff’s claim.” Cohn v. Petsmart, Inc., 281 F.3d
837, 840, n.3 (9th Cir. 2002); see also Wilson v. Belin, 20 F.3d 644, 651 n. 8 (5th Cir.
1994) (considering a letter that plaintiff’s counsel sent to the defendants stating the
amount in controversy). Although the emails and spreadsheets may not alone be
determinative of the amount in controversy, these communications may be considered to
determine whether removal is proper. Surber v. Reliance Nat. Indem. Co., 110 F. Supp.
2d 1227, 1231 (N.D. Cal. 2000).
3
The spreadsheet has a computation error. Plaintiff Rachner’s “Overtime Pay” for 2016
totals to $12,024, but Plaintiffs miscalculated the total as $3,840. (Hart Decl. Ex. A at 7.)
When the correct figure of $12,024 is used to calculate unpaid overtime wages, they total
to $35,969.85. (Id. at 5.)
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____________________________________________________________________________
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.: 8:17-cv-01399-JLS-DFM
Title: Gary Rachner et al v. Network Funding, L.P., et al

Date: November 16, 2017

$1,040; 3) waiting time penalties at $22,168.39; and 4) wage statement penalties at
$1,600. (Id.) In the Notice of Removal, Defendant calculated that Rachner would be
entitled to additional liquidated damages in the amount of $8,460 for unpaid minimum
wages based on his alleged 864 hours of unpaid overtime. (Notice of Removal ¶ 39.)
Plaintiffs did not contest Defendant’s calculation of the liquidated damages in their
Memorandum. (Mem., Doc. 12-1.) Thus, Defendant calculates Plaintiff Rachner’s total
damages, exclusive of attorneys’ fees, at $69,238.24.4 (Opp. at 21–22.)
Based on the calculations and estimates in these communications, Defendant
removed the case to this Court. (Notice of Removal ¶ 32.)
II. LEGAL STANDARD
Generally, subject matter jurisdiction is based on the presence of a federal
question, see 28 U.S.C. § 1331, or complete diversity between the parties, see 28 U.S.C.
§ 1332. Thus, “[a] defendant may remove an action to federal court based on federal
question jurisdiction or diversity jurisdiction.” Hunter v. Philip Morris USA, 582 F.3d
1039, 1042 (9th Cir. 2009). A federal court has diversity jurisdiction under 28 U.S.C. §
1332 if the amount in controversy exceeds $75,000 and the parties to the action are
citizens of different states. See 28 U.S.C. § 1332(a). Section 1332 “requires complete

4

In its Opposition, but not in the Notice of Removal, Defendant adds $30,090 to Plaintiff
Rachner’s compensatory damages for minimum wage for all draws against commission,
which are contemplated (but not calculated) in Plaintiffs’ spreadsheet. (Opp. at 17.) To
arrive at $30,090, Defendant used the total number of hours that Plaintiff Rachner
worked and multiplied it by the minimum wage of $10/hour. (Id.) However, Defendant
does not provide any support for the assumption that Plaintiff Rachner would be entitled
to these damages for all of the 3,009 hours he worked. Therefore, it is not clear that this
estimate is reasonable for purposes of satisfying the jurisdictional minimum, and the
Court disregards it. See Ibarra v. Manheim Investments, Inc., 775 F.3d 1193, 1197 (9th
Cir. 2015).  
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____________________________________________________________________________
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.: 8:17-cv-01399-JLS-DFM
Title: Gary Rachner et al v. Network Funding, L.P., et al

Date: November 16, 2017

diversity of citizenship; each of the plaintiffs must be a citizen of a different state than
each of the defendants.” Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir.
2001).
Whether removal is proper is determined solely on the basis of the pleadings filed
in state court, and any post-removal amendments to the pleadings do not affect whether a
case was removable. Williams, 471 F.3d at 976. Once a case has been properly removed,
the district court has jurisdiction over it on all grounds apparent from the complaint, not
just those cited in the removal notice. Id. at 977.
However, “[i]t is to be presumed that a cause lies outside the limited jurisdiction
of the federal courts and the burden of establishing the contrary rests upon the party
asserting jurisdiction.” Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir.
2009) (quoting Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 684 (9th Cir. 2006)
(quotation marks omitted)). Courts “strictly construe the removal statute against removal
jurisdiction,” and “the defendant always has the burden of establishing that removal is
proper.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). Where removal is on the
basis of diversity jurisdiction and “the complaint does not demand a dollar amount, the
removing defendant bears the burden of proving by a preponderance of evidence that the
amount in controversy exceeds $[75],000.” Kroske v. U.S. Bank Corp., 432 F.3d 976,
980 (9th Cir. 2005) (quoting Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 376
(9th Cir. 1997) (quotation marks omitted)); see also 28 U.S.C. § 1446(c)(2)(B).
Conclusory allegations as to the amount in controversy are insufficient. Matheson v.
Progressive Specialty Ins. Co., 319 F.3d 1089, 1091 (9th Cir. 2003). Nor can a defendant
establish the amount in controversy by “mere speculation and conjecture.” Ibarra v.
Manheim Investments, Inc., 775 F.3d 1193, 1197 (9th Cir. 2015). Rather, the defendant
should “submit evidence outside the complaint, including affidavits or declarations, or
other summary-judgment-type evidence relevant to the amount in controversy at the time
of removal.” See id. (quoting Singer, 116 F.3d at 377) (quotation marks omitted).
III. DISCUSSION

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____________________________________________________________________________
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.: 8:17-cv-01399-JLS-DFM
Title: Gary Rachner et al v. Network Funding, L.P., et al

Date: November 16, 2017

The parties disagree about whether the amount-in-controversy requirement is met
for purposes of diversity jurisdiction.5 Specifically, they dispute whether and in what
amount attorneys’ fees should be included in the amount-in-controversy for the named
Plaintiffs’ claims.
A.

Aggregation of Claims

“Multiple plaintiffs who assert separate and distinct claims are precluded from
aggregating them to satisfy the amount in controversy requirement.” Urbino v. Orkin
Servs. of California, Inc., 726 F.3d 1118, 1122 (9th Cir. 2013). “Only where the claims
can strictly ‘be asserted by pluralistic entities as such,’ or, stated differently, the
defendant ‘owes an obligation to the group of plaintiffs as a group and not to the
individuals severally,’ will a common and undivided interest exist.” Id. Moreover, only
the claims of named class members are examined for purposes of the amount-incontroversy requirement. Gibson v. Chrysler Corp., 261 F.3d 927, 940 (9th Cir. 2001),
holding modified by Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546 (2005).
However, federal courts do have supplemental jurisdiction “over the jurisdictionally
insufficient claims of unnamed class members if the named plaintiffs in the action have
claims that satisfy the amount-in-controversy requirement.” Id. at 943.
In the instant case, Plaintiffs have asserted claims “to vindicate their employers’
breaches of California’s Labor Code.” Urbino, 726 F.3d at 1122. These rights are held
individually because each employee has suffered a unique injury that “can be redressed
without the involvement of other employees.” Id. Accordingly, Plaintiffs may not
aggregate their claims to satisfy the jurisdictional threshold. At least one of the named
Plaintiffs, Rachner or Green, must assert claims for which the amount-in-controversy

5

The parties do not contest complete diversity of citizenship. The named Plaintiffs are
citizens of the state of California, and Defendant is a limited partnership organized in the
state of Texas. (FAC ¶¶ 1–2.) Defendant’s partners are all citizens of Texas. (Notice of
Removal at ¶ 5.)
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.: 8:17-cv-01399-JLS-DFM
Title: Gary Rachner et al v. Network Funding, L.P., et al

Date: November 16, 2017

exceeds $75,000 in order for this Court to exercise subject matter jurisdiction over this
case. Because the parties agree that the value of Plaintiff Rachner’s compensatory claims
is higher than that of Plaintiff Green’s, the Court focuses exclusively on Plaintiff
Rachner’s claims.
B.

Attorneys’ Fees

“[W]here 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.” Galt G/S v. JSS Scandinavia, 142 F.3d 1150, 1156 (9th Cir. 1998).
“[C]ourts are split as to whether only attorneys’ fees that have accrued at the time of
removal should be considered in calculating the amount in controversy, or whether the
calculation should take into account fees likely to accrue over the life of the case.”
Hernandez v. Towne Park, Ltd., 2012 WL 2373372, at *19 (C.D. Cal. June 22, 2012).
Compare Simmons v. PCR Tech., 209 F.Supp.2d 1029, 1034–35 (N.D. Cal. 2002) (“Such
fees necessarily accrue until the action is resolved. Thus, the Ninth Circuit must have
anticipated that district courts would project fees beyond removal.”), Sasso v. Noble Utah
Long Beach, LLC, 2015 WL 898468, at *5 (C.D. Cal. Mar. 3, 2015) (“The Court believes
that, when authorized by an underlying statute, the better view is to consider postremoval attorneys’ fees because they are part of the total ‘amount at stake.’”), and Brady
v. Mercedes-Benz USA, Inc., 243 F. Supp. 2d 1004, 1011 (N.D. Cal. 2002) with Faulkner
v. Astro–Med, Inc., 1999 WL 820198, *4 (N.D. Cal. Oct. 4, 1999) (“When estimating
attorney’s fees for the purposes of establishing jurisdiction, the only fees that can be
considered are those incurred as of the date of removal.”); Gardynski-Leschuck v. Ford
Motor Co., 142 F.3d 955, 958 (7th Cir. 1998).
The statutes on which Plaintiffs’ claims are based provide for the recovery of
attorneys’ fees, see Cal Lab. C. §§ 218.5(a), 1194(a), and Plaintiffs seek an award of
reasonable attorneys’ fees (FAC Prayer for Relief ¶¶ C, D, F). Thus, it is clear that
attorneys’ fees may be included in the amount-in-controversy. See Galt G/S, 142 F.3d at
1156. As discussed above, Defendant has produced evidence that Plaintiff Rachner’s
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.: 8:17-cv-01399-JLS-DFM
Title: Gary Rachner et al v. Network Funding, L.P., et al

Date: November 16, 2017

compensatory claims reasonably could total $69,238.24. Thus, whether or not this Court
considers prospective attorneys’ fees in calculating the amount-in-controversy, Plaintiff
Rachner’s claims can satisfy the jurisdictional minimum if, at the time of removal, his
attorneys’ fees exceeded $5,761.76. It is not unreasonable to attribute to Plaintiff
Rachner’s claims $5,761.76 of fees accrued by August 14, 2017. By that point,
Plaintiffs’ Counsel had, inter alia, drafted and filed the original Complaint, amended the
Complaint and filed a First Amended Complaint, and prepared for and attended
mediation. Indeed, $5,761.76 in attorneys’ fees would amount to only an 8.3%
contingency of the value of these claims. Accordingly, Defendant has shown by a
preponderance of the evidence that the amount-in-controversy for Plaintiff Rachner’s
claims is likely to exceed $75,000.
V.

CONCLUSION
For the foregoing reasons, Plaintiffs’ Motion to Remand is DENIED.

Initials of Preparer: tg

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