Emmons et al v. Quest Diagnostics Clinical Laboratories, Inc. et al

Filing 14

FINDINGS and RECOMMENDATIONS Granting Plaintiff's Motion to Remand 7 . Referred to Judge Ishii; Objections to F&R due within 15 days of service of this recommendation. signed by Magistrate Judge Barbara A. McAuliffe on 6/27/2013. (Herman, H)

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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 FOR THE EASTERN DISTRICT OF CALIFORNIA 9 10 DOROTHEA EMMONS and LISA STAPELTON, 11 12 13 14 15 16 Case No. 1:13-cv-0474 AWI-BAM FINDINGS AND RECOMMENDATIONS GRANTING PLAINTIFFS’ MOTION TO REMAND Plaintiffs, v. (Doc. 7) QUEST DIAGNOSTICS CLINICAL LABORATORIES, INC., et al., Defendants. / 17 18 Pending before the Court is Plaintiffs Dorothea Emmons and Lisa Stapelton’s (“Plaintiffs”) 19 Motion to Remand for Lack of Subject Matter Jurisdiction. (Doc. 7). Plaintiffs argue that Defendants 20 Quest Diagnostic Clinical Laboratories, Inc., Quest Diagnostics Incorporated, and Quest Diagnostics 21 Nichols Institute (collectively “Defendants” or “Quest”) have failed to meet their burden of proving 22 that the amount in controversy in this case exceeds $5 million. Defendants filed an opposition (Doc. 9) 23 on May 24, 2013, and Plaintiffs filed a reply on May 31, 2013 (Doc. 10). The motion was referred to 24 this Court pursuant to 28 U.S.C. § 636(b)(1)(B) and Local Rule 302. The Court deemed the matter 25 suitable for decision without oral argument pursuant to Local Rule 230(g), and vacated the hearing 26 27 28 1 1 scheduled for June 21, 2013.1 For the following reasons, Plaintiffs’ Motion to Remand should be 2 GRANTED. FACTUAL AND PROCEDURAL BACKGROUND 3 4 The Complaint alleges that Defendant Quest Diagnostics is the “world’s leading provider of 5 diagnostic testing,” “including blood testing, gene-based and molecular testing, and testing for 6 diseases and cancer.” Pl.’s Complaint (“Compl.”), Doc. 1, at ¶ 6. Defendants employed Plaintiff 7 Dorothea Emmons as a Phlebotomist, trained and certified to draw blood for diagnostic testing, for 8 approximately five years and eight months ending in August 2011. Compl. at ¶ 28. Plaintiff Lisa 9 Stapelton was employed as a Floater Phlebotomist, also certified to draw blood, in various locations in 10 and around Haywood, California from November 2001 to June 2012. Id. at ¶ 29. 11 On February 23, 2013, this class action was filed on behalf of Plaintiffs and others similarly 12 situated in the Stanislaus County Superior Court. Plaintiffs allege nine causes of action including: (1) 13 unpaid overtime wages, in violation of Cal. Lab. Code §§ 510 and 1198; (2) unpaid minimum wages, 14 in violation of Cal. Lab. Code §§ 1194, 1197, and 1197.1; (3) unpaid meal period premiums, in 15 violation of Cal. Lab. Code §§ 226.7 and 512(a); (4) unpaid rest period premiums, in violation of Cal. 16 Lab. Code § 226.7; (5) wages not timely paid upon termination, in violation of Cal. Lab. Code §§ 201 17 and 202; (6) non-compliant wage statements, in violation of Cal. Lab. Code § 226(a); (7) unpaid 18 business related expenses, in violation of Cal. Lab. Code § 2800, 2802; (8) civil penalties under 19 California Labor Code sections 2698, et seq (“PAGA”); and (9) violations of Cal. Bus. & Prof. Code 20 §§ 17200, et seq. 21 Plaintiffs define three classes of similarly situated persons. First, Plaintiffs purport to represent 22 the “Class” defined as “all person who worked as non-Floater Phlebotomists for Defendants in 23 California, within four years prior to the filing of this complaint until the date of certification.” Id. at ¶ 24 19. Second, Plaintiffs purport to represent a subclass of persons referred to as the “Floater Sub-Class” 25 defined as “all persons who worked as Floater Phlebotomists for Defendants in California, from June 26 3, 2011 until the date of certification.” Id. at ¶ 20. Finally, Plaintiffs also represent another subclass 27 1 28 The Court credited the detailed and well-argued briefing in support of its decision to vacate the hearing. (Doc. 13). 2 1 of persons referred to as the “One Year Subclass” consisting of “all persons who worked as non- 2 Floater Phlebotomists or Floater Phlebotomists for Defendants in California, within one year prior to 3 the filing of this complaint until the date of certification.” Id. at ¶ 21. 4 The Complaint further alleges that Plaintiffs and class members: (i) did not receive proper 5 overtime compensation; (ii) did not receive proper minimum wages for off-the-clock work; (iii) did 6 not receive required meal periods or proper compensation in lieu thereof; (iv) did not receive required 7 rest periods or proper compensation in lieu thereof; (v) were not provided with complete and accurate 8 wage statements; and (vi) did not timely receive all payments of wages, both during employment and 9 upon termination. Id. at ¶¶ 26-49. In addition, the Complaint alleges that “the aggregate amount in 10 controversy for the proposed class action, including monetary damages, restitution, penalties, 11 injunctive relief, and attorneys’ fees, is less than five million dollars ($5,000,000), exclusive of interest 12 and costs.” Id. ¶ 1. The Complaint further alleges that “Plaintiffs reserve the right to seek a larger 13 amount based upon new and different information resulting from investigation and discovery.” Id. 14 On April 1, 2013, Defendants filed a Notice of Removal, alleging that the amount in 15 controversy exceeds $5,000,000, and that this Court has jurisdiction pursuant to the Class Action 16 Fairness Act (“CAFA”), 28 U.S.C. § 1332(d). Supporting removal, Defendants attached the 17 declaration of Megan Bassler, the Senior Human Resources Generalist for Quest Diagnostics, 18 Incorporated, in support of their arguments as to the jurisdictional amount. Declaration of Megan 19 Bassler (“Bassler Decl.”), Doc. 1-1. Her declaration states that: (i) at least 2,000 employees worked in 20 California as non-Floater Phlebotomists for Defendants during the four year period preceding the 21 complaint; (ii) 785 of those employees are former employees; (iii) at least 180 employees worked in 22 California as Floater Phlebotomists; and (iv) 30 of those employees are former employees. Id. at 4-5. 23 Based on this information, Defendants indicate that the entire alleged class (including subclasses) 24 consists of at least 2,180 individuals. (Notice of Removal; Doc. 1 at 5). 25 26 Plaintiffs move to remand this action on the grounds that Defendants have failed to meet their burden of establishing that the total amount in controversy exceeds $5,000,000. 27 28 3 REMOVAL STANDARD 1 2 A motion to remand is the proper procedure for challenging removal. See N. Cal. Dist. Council 3 of Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1038 (9th Cir.1995). The removal 4 statute is strictly construed, and any doubt about the right of removal is resolved in favor of remand. 5 See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992); see also Prize Frize, Inc. v. Matrix, Inc., 6 167 F.3d 1261, 1265 (9th Cir.1999). Consequently, if a Plaintiff challenges the Defendant’s removal 7 of a case, the defendant bears the burden of establishing the propriety of the removal. See Gaus, 980 8 F.2d at 566; see also Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996) (citations and quotations 9 omitted) (“Because of the Congressional purpose to restrict the jurisdiction of the federal courts on 10 removal, the statute is strictly construed, and federal jurisdiction must be rejected if there is any doubt 11 as to the right of removal in the first instance.”). 12 “A civil action in state court may be removed to federal district court if the district court has 13 ‘original jurisdiction’ over the matter.” Lowdermilk v. United States Bank Nat’l Ass’n, 479 F.3d 994, 14 997 (9th Cir. 2007). Under CAFA, a federal district court has subject matter jurisdiction over a class 15 action in which: (1) there are 100 or more proposed class members; (2) at least some of the members 16 of the proposed class have a different citizenship from the defendant; and (3) the aggregated claims of 17 the proposed class members exceed the sum or value of $5,000,000. See 28 U.S.C. § 1332(d). 18 “[U]nder CAFA the burden of establishing removal jurisdiction remains, as before, on the proponent 19 of federal jurisdiction.” Lowdermilk, 479 F.3d at 997 (quoting Abrego Abrego v. The Dow Chemical 20 Co., 443 F.3d 676, 685 (9th Cir.2006) (per curiam)). 21 Here, Plaintiffs’ motion for remand is based solely upon their assertion that Defendants have 22 not met their burden of proof to establish that the case meets the amount in controversy requirement 23 under CAFA. No dispute is raised regarding diversity of citizenship or numerosity of the proposed 24 class. DISCUSSION 25 26 A. Appropriate Standard of Proof Required of Removing Defendant 27 The parties dispute the legal standard of proof that governs the amount in controversy 28 determination. Plaintiffs argue Quest must establish the amount in controversy exceeds $5 million to a 4 1 legal certainty; Defendants counter the preponderance-of-the-evidence standard applies because the 2 circumstances indicate that the allegations regarding the amount in controversy were made in bad 3 faith. (Doc. 9 at 8). 4 In Lowdermilk, the Ninth Circuit concluded that when a plaintiff alleges that the amount in 5 controversy is less than the jurisdictional minimum of $5 million required by the CAFA, the defendant 6 must show with “legal certainty” that more than $5 million is in controversy, unless plaintiff has pled 7 in bad faith. Lowdermilk, 479 F.3d at 999. However, if a plaintiff’s “complaint is unclear [regarding] 8 ‘a total amount in controversy,’ the proper burden of proof . . . is proof by a preponderance of the 9 evidence.” Guglielmino v. McKee Foods Corp., 506 F.3d 696, 701 (9th Cir. 2007). 10 Applying Lowdermilk, the Court must first assess whether Plaintiffs’ amount in controversy 11 pleading was specific in order to determine the appropriate standard of review. The Court “reserve[s] 12 the preponderance of evidence standard for situations where a plaintiff ‘seeks no specific amount in 13 damages,’ . . . and a court is forced to look beyond the complaint to determine whether the suit meets 14 the jurisdictional requirements.” See Lowdermilk, 479 F.3d 994 at 998. In contrast, when a plaintiff 15 pleads a “specific amount” of damages by alleging, e.g., that damages amount to “less than five 16 million dollars,” a defendant must meet the higher standard of establishing, by a legal certainty, that 17 the actual amount of damages would be more than the $5 million jurisdictional threshold. See Id. at 18 998. 19 Here, Plaintiffs allege that they are seeking less than the jurisdictional maximum, including 20 attorney’s fees, throughout their complaint filed in state court.2 See Id. at 999. Thus, the Court finds 21 that Plaintiff has specifically alleged the amount in controversy, and that Defendants must therefore 22 prove the jurisdictional amount in controversy to a legal certainty, absent proof of bad faith. See id. 23 Defendants contend that the preponderance of evidence standard still applies because Plaintiffs 24 plead the amount in controversy in bad faith for two reasons. First, relying on Butterworth v. American 25 26 27 28 2 Plaintiffs repeat their jurisdictional allegations—inclusive of attorney’s fees—in their prayer for relief. Cf. Guglielmino v. McKee, 506 F.3d 696, 701 (9th Cir. 2007) (suggesting that plaintiff failed to allege a sufficiently specific total amount in controversy under Lowdermilk because, while plaintiff alleged that recovery was less than $5 million, the allegation was not repeated in the Prayer for Relief and did not include a request for attorneys’ fees). 5 1 Eagle Outfitters, Inc., Defendants argue that Plaintiffs failed to support their allegation that the amount 2 in controversy is less than $5,000,000.00 despite the large class size, relatively high rate of pay 3 ($17.00 per hour on average) and the nine causes of action pled. 2011 U.S. Dist. LEXIS 119192, * 9 4 (E.D. Cal. Oct. 14, 2011); (Doc. 9 at 8). In Butterworth, a plaintiff representing 14,314 individuals 5 alleged the amount in controversy was less than $5,000,000. Magistrate Judge Dennis L. Beck found 6 bad faith because the plaintiff “made no effort to support his allegations” and “rest[ed] on his desire to 7 be in state court.” 2011 U.S. Dist. LEXIS 119192, at *10. 8 Defendants’ reliance on Butterworth is misplaced. As the Court pointed out in Negrete v. 9 Petsmart, while the district court affirmed Judge Beck’s ruling, Judge Lawrence O’Neil did so without 10 affirming the magistrate judge’s finding of bad faith. See Negrete v. PetSmart, Inc., 2013 U.S. Dist. 11 LEXIS 31871, *10-12 (E.D. Cal. Mar. 7, 2013) (citing Butterworth, 2011 U.S. Dist. LEXIS 132816, 12 *7). The Negrete Court stated that “the magistrate judge in Butterworth ignored controlling Ninth 13 Circuit precedent on the issue.” Id. at *12. Contrary to the Court’s ruling in Butterworth, Ninth 14 Circuit precedent concludes that pleading damages of $5,000,000.00 is sufficiently specific and does 15 not amount to bad faith. 16 Second, Defendants argue that Plaintiffs’ reservation of the right to seek larger damages at a 17 later date also evidences Plaintiffs’ bad faith. This identical argument has been widely rejected 18 throughout the Ninth Circuit. See Id. at *13-14 (finding that Plaintiff’s reservation of rights does not 19 amount to bad faith); Velasquez v. HMS Host USA Inc., No. 2:12-cv-02312-MCE-CKD, 2012 U.S. 20 Dist. LEXIS 172801, *19 (E.D. Cal. Dec. 5, 2012)(same). 21 Moreover, the plaintiffs reserving the right to amend does not prejudice Defendants and is not 22 bad faith. In Jones, the Court noted that ordinarily, the right to remove based on an amended 23 complaint is limited to the first year after an action is filed. Jones v. ADT Security Services, Inc., No. 24 CV 11-7750 PSG (JCGx), 2012 U.S. Dist. LEXIS 558, *6-8 (C.D. Cal. Jan 3, 2012) (“[A] case may 25 not be removed on the basis of [diversity jurisdiction] more than 1 year after commencement of the 26 action.”). However, this limitation does not apply to cases removable under CAFA. 28 U.S.C. § 27 1453(b) (providing that the one year limitation under § 1446(b) does not apply to class actions). This 28 exception protects a Defendant from the possibility that a Plaintiff could plead below the jurisdictional 6 1 threshold now, wait out Defendant’s right to remove, and then amend to allege a larger amount in 2 controversy. Id. at *7. As reasoned in Jones, Plaintiffs are at liberty to plead conservatively to secure 3 a state forum and still reserve their rights for a larger damage award, with little consequence to 4 Defendants. Id. Thus, Plaintiffs “reservation of right does not create an uncertainty about the amount 5 in controversy; it does no more than state a right that Plaintiffs already possess.” See Velasquez, 2012 6 U.S. Dist. LEXIS 172801 at *20. The Court finds Plaintiffs’ allegations regarding the amount in 7 controversy do not amount to bad faith. Accordingly, the legal certainty standard applies. 8 B. Legal Certainty Standard 9 Defendants contend that even under the legal certainty standard, federal jurisdiction still 10 applies. (Doc. 9 at 13). Though the standard for “legal certainty” is difficult to define, at the very 11 least, it requires defendant to provide enough “concrete evidence . . . to estimate” that the actual 12 amount controversy is over $5 million. See Lowdermilk, 479 F.3d at 1000. While the standard does 13 not require defendant to prove the plaintiff’s case, the defendant must produce enough evidence to 14 allow a court “to estimate with . . . certainty the actual amount in controversy.” Id. at 1001. Hence, 15 mere reliance on the plaintiff’s pleadings or unsupported affidavits, without more, is insufficient to 16 demonstrate the amount in controversy. See Cifuentes v. Red Robin Int’l, Inc., 2012 U.S. Dist. LEXIS 17 27211, *4 (N.D. Cal. Mar. 1, 2012) (holding that defendant may not meet its burden to show with 18 “legal certainty” that the amount in controversy in this case exceeds the $5 million minimum by 19 merely taking as true the allegations in the complaint). A court “cannot base [its] jurisdiction on a 20 [d]efendant’s speculation and conjecture.” Lowdermilk, 479 F.3d at 1002. It is therefore “a high bar 21 for the party seeking removal, but it is not insurmountable.” Id. A defendant must set forth the 22 specific underlying facts supporting its assertion that the amount in controversy exceeds the statutory 23 minimum. Gaus, 980 F.2d at 56 (pre-CAFA case holding that defendant’s unsupported allegation that 24 amount in controversy exceeded $50,000 did not overcome strong presumption against removal 25 jurisdiction). 26 27 28 C. AMOUNT IN CONTROVERSY 7 1 Defendants contend that they have shown to a legal certainty that the amount in controversy in 2 this case is at least $8,625,000. (Notice of Removal at 7). In addition, the jurisdictional amount is 3 certain to be met, because Defendants’ computations rely on only two of Plaintiffs’ nine asserted 4 claims, and do not include attorneys’ fees. (Doc. 9 at 7). Plaintiffs argue Defendants fail to meet their 5 burden because Defendants’ notice of removal is based entirely on assumptions and “speculative, 6 evidence-free calculations.” (Doc. 10 at 6). The Court discusses each of Defendants’ calculations 7 below. 8 1. Inaccurate Wage Statement Violations 9 Plaintiffs’ sixth cause of action alleges Defendants “intentionally and willfully” failed to 10 provide employees with accurate wage statements in accord with Labor Code § 226(a). Compl. ¶¶ 88- 11 89. These allegations are largely predicated on Defendants’ failure to pay employees for all hours 12 worked. 13 knowingly and intentionally failed to provide an accurate wage statement, the employee: Compl. ¶ 88. California Labor Code § 226(e) provides that where an employer has is entitled to recover the greater of all actual damages [suffered because of the employer’s failure] or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not to exceed an aggregate penalty of four thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney’s fees. 14 15 16 17 Defendants calculate the value of this claim as $5,565,000.00. Defendants support their 18 calculations with the declaration of Megan Bassler. (Doc. 9-1). Bassler declares that Defendants 19 issued at least 2,100 paychecks in the one-year preceding the complaint. Bassler Decl. ¶ 3. In 20 calculating the value of the inaccurate wage statement claim, Defendants assume that every wage 21 statement issued over twenty-six pay periods was incorrect. Based on that assumption, Plaintiffs are 22 entitled to recover $50 for the initial incorrect wage statement and $100 for every additional erroneous 23 wage statement; meaning each employee would be entitled to receive $2,650 in statutory 24 compensation, at a minimum. Thus, 2,100 pay checks x $2,650 in statutory damages for a year = 25 $5,565,000.00. 3 26 27 3 28 Calculated another way, (at least 2,100 paychecks x $50 first time violation) + (at least 2,100 paychecks x 100 subsequent violation rate x 26 subsequent pay periods) = $5,565,000.00 8 1 Defendants’ calculations provide only assumptions and conjecture without proper evidentiary 2 support. Here, Defendants merely speculate that each class member received an improper wage 3 statement every pay period throughout the year. A declaration stating the number of pay checks 4 issued during the years prior to this action, together with assumptions as to erroneous payments for 5 each and every employee, is not sufficient to establish that the amount in controversy in this case 6 exceeds $5,000,000 to a legal certainty. See, e.g., Roth v. Comerica Bank, 799 F. Supp. 2d 1107, 1127 7 (C.D. Cal. 2010) (“When applying the preponderance of the evidence standard to California Labor 8 Code claims, many California district courts have refused to credit damage calculations based on 9 variables not clearly suggested by the complaint or supported by evidence, concluding that the 10 calculations are mere conjecture.”). 11 Further, there are no allegations in the Complaint to support this assumption. In support of 12 their calculations, Defendants rely on Jasso v. Money Market Express, Inc., No, 11-5500, 2012 U.S. 13 Dist. LEXIS 27215, 2012 WL 699465, at *5-6 (N. D. Cal. Mar. 1, 2012) for the proposition that 14 “Defendants may base [their] amount in controversy calculations in wage and hour cases on evidence 15 of the number of paychecks under the legal certainty standard.” (Doc. 9 at 12). The Jasso court found 16 that Defendants paycheck evidence was supported, not because Defendants submitted an exact number 17 of paychecks, but because the assumptions underlying Defendant’s calculations were supported by 18 Plaintiff’s allegations in the Complaint. The Jasso court held, where a plaintiff alleges a consistent 19 policy or practice of failure to pay all wages due, it is reasonable, for purposes of determining the 20 amount in controversy to a legal certainty, to assume that at least one violation occurred per putative 21 class member per week. Id. at *19. The same court later limited its holding to the specific allegations 22 there; namely, where the plaintiff alleged a “uniform policy and scheme” and that the violations took 23 place “at all material times.” See Morris v. LiquidAgents Health Care, LLC, No. 12-4220, 2012 U.S. 24 Dist. LEXIS 159992, 2012 WL 5451163 at *5 (N. D. Cal. Nov. 7, 2012) (distinguishing Jasso). 25 Defendants similarly here cannot assume consistent or regular wage statement violations without 26 identifying specific supporting allegations in the Complaint. 27 The absence of concrete evidence coupled with the lack of supporting language in Plaintiffs’ 28 Complaint leaves the Court to speculate about the amount in controversy. See Lowdermilk, 479 F.3d 9 1 at 1002 (a court cannot base its jurisdiction on speculation and conjecture). As a result, Defendants’ 2 assumptions here are unwarranted and cannot be relied upon to prove CAFA jurisdiction. 3 2. Wages Due at Termination 4 Plaintiffs’ fifth cause of action alleges that Defendants willfully failed to pay members of the 5 proposed class—who were previously employed by Defendants but who quit or were terminated—all 6 wages due within 72 hours of their separation. Compl., ¶ 82. Under Section 203 of the California 7 Labor Code, such a violation results in a penalty of one full day’s wages for each day that the unpaid 8 wages remain outstanding, with a limit of 30 days. See CAL. LAB. CODE § 203 (“If an employer 9 willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.5, 202, 10 and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall 11 continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is 12 commenced; but the wages shall not continue for more than 30 days”). 13 Relying on Ms. Bassler’s declaration, which states that 815 putative class members have 14 separated from employment with Defendants during the statutory period, Defendants calculate that the 15 amount in controversy for this claim is $3,325,200.00.4 Defendants reach this amount by assuming 16 that the maximum penalty of eight hours per day for thirty days applies to Plaintiffs’ case. (Doc. 9 at 17 15). Furthermore, Defendants’ calculations assume that every employee who ceased employment was 18 1) owed unpaid wages at the time of separation and 2) did not receive the unpaid wages within thirty 19 days of separation.5 See Roth, 799 F.Supp.2d at 1125-26 (“The court agrees that Roth’s allegations 20 suggest all class members were denied some form of proper compensation during their employment, 21 and that the underpayment was not corrected at the end of their employment. Thus, defendants can 22 properly assume that all employees were entitled to maximum waiting time penalties under Labor 23 Code § 203”). 24 25 26 27 28 4 (815 former employees x 8 hours x 30 days x $17.00 average wage). Defendants do allege that since the complaint was filed—over 90 days ago—Defendants have not made any payments to any former employees for alleged unpaid work. (Doc. 9 at 14). 5 10 1 Even if the Court could reasonably infer that each class member suffered some form of Labor 2 Code violation at some point during his or her employment, and was thus entitled to waiting time 3 penalties, the Court is unwilling to infer a maximum penalty for each plaintiff. 4 assumption that each employee is entitled to recover the full thirty-day maximum penalty has no basis 5 in the allegations of the Complaint or the proof submitted by Defendants. Defendants’ fail to point to 6 any allegations in the Complaint that class members are entitled to wages for the maximum of 30 days. 7 Plaintiffs’ complaint alleges that class members may be entitled to penalties for “up to” the thirty day 8 maximum, not that each class member is entitled to the maximum penalty for all thirty days. The 9 Court in Hernandez found that a Plaintiff’s use of the qualifying phrase “up to,” acknowledges that not 10 all class members may be entitled to recover the maximum penalty. See Hernandez v. Towne Park, 11 Ltd., 2012 U.S. Dist. LEXIS 86975, *12 (C.D. Cal. June 22, 2012). In Hernandez, the plaintiff alleged 12 “regularly” occurring Labor Code violations without alleging the frequency of those violations. Id. at 13 *22. After analyzing the complaint and the applicable law, the Court concluded that the removing 14 defendant could not rely on “assumptions that have no evidentiary basis.” Id. at *24. Thus, even 15 though the Hernandez defendants estimated a class size of 1,902—similar to Defendants’ estimate of 16 2,100-member class here—they could not meet the legal certainty standard. Id. at *69. Defendants’ 17 Other Courts have followed this approach. Compare, Longmire v. HMS Host USA, Inc., No. 18 12-cv-2203-AJB, 2012 U.S. Dist. LEXIS 167463, *21-22 (S.D. Cal. Nov. 26, 2012) (following 19 Hernandez in rejecting speculative violation rates for allegations of Labor Code violations); Vigil v. 20 HMS Host USA, Inc., 2012 U.S. Dist. LEXIS 112928 (N.D. Cal. Aug. 10, 2012), *15-16 (same) with 21 Altamirano v. Shaw Indus., 2013 U.S. Dist. LEXIS 84236 (N.D. Cal. June 14, 2013) 22 In Altamirano, a recent decision decided after the close of the instant briefing period, the 23 Northern District found that it was reasonable to assume that each class member leaving employment 24 would have experienced at least one incident resulting in underpayment during the course of 25 employment where Plaintiff alleged Defendants engaged in illegal time shaving or rounding practices. 26 Altamirano is distinguishable from the instant case for two reasons. First, Altamirano applied 27 the preponderance of the evidence standard and not the more rigorous legal certainty standard because 28 there, Plaintiff’s amended complaint was silent on the amount of damages. 11 Here, Plaintiffs 1 specifically plead an amount of damages less than the jurisdictional amount, and thus the legal 2 certainty standard applies. Courts applying the legal certainty standard have found that assumptions of 3 maximum violation rates are unduly speculative. See Campbell v. Vitran Express, Inc., No. CV-10- 4 04442-RGK(SHx), 2010 U.S. Dist. LEXIS 132071, at *10 (C.D. Cal. Aug. 16, 2010); Riddoch v. 5 McCormick & Schmicks Seafood Rests., Inc., No. CV 09-7127 ODW (MANx), 2010 U.S. Dist. LEXIS 6 65799, at *9-10 (C.D. Cal. June 28, 2010). 7 Second, in Altamirano, Defendants provided concrete evidence of time shaving. In ruling on 8 the motion to remand, the Court requested supplemental briefing estimating the amount in controversy 9 during the relevant time period. Id. at *6. After finding that Defendants’ calculations were supported 10 by concrete evidence, the Court stated that Plaintiffs alleged time shaving policy applied to all putative 11 class members, and given that the penalties would attach even if there were only one minor violation 12 during a given pay period, the 100% violation rate was not unreasonable. 13 Here, Defendants allegations are not accompanied with concrete evidence establishing that the 14 maximum penalty should apply to each class member. In fact, in the vast majority of employment 15 cases where the defendant failed to proffer concrete evidence supporting its estimates, district courts 16 have declined to rely on defendant’s unsupported calculations. As Defendants’ argument here is 17 virtually identical to these other cases, it is likewise denied. Civil Penalties (“PAGA”) 18 3. 19 Plaintiffs seek to recover penalties under The Private Attorneys General Act of 2004 20 (“PAGA”). CAL. LAB. CODE § 2699. Pursuant to PAGA, an “aggrieved employee” may bring a civil 21 action personally and on behalf of other current, or former, employees to recover civil penalties for 22 violations of the California Labor Code. CAL. LAB. CODE § 2699(a). PAGA defines an “aggrieved 23 employee” as “any person who was employed by the alleged violator and against whom one or more 24 of the alleged violations was committed.” Id. § 2699(c). Seventy-five percent of the civil penalties 25 recovered go to the Labor and Workforce Development Agency, leaving the remaining twenty-five 26 percent for the “aggrieved employees.” Id. § 2699(i). PAGA penalties are $100 for each initial 27 violation and $200 for each subsequent violation. CAL. LAB. CODE § 2699(f)(2). Defendants issued 28 approximately 2,100 paychecks during the period covered by PAGA. Defendants assume that there 12 1 was one PAGA violation present for each employee during each pay period. Thus, Defendants 2 calculated the PAGA penalties as follows: ($100 initial violation penalty x 2,100 paychecks) + ($200 3 subsequent violation penalty x 25 remaining pay periods x 2,100 paychecks per pay period) = 4 $10,710,000. 5 With regard to the PAGA penalties, Defendants calculations suffer the same fate as seen 6 above. Defendants again put forth no evidence in support of their assertion that each putative class 7 member is entitled to full PAGA penalties. Therefore, Defendants have failed to show this amount in 8 controversy with legal certainty and cannot use this amount to reach the $5,000,000 jurisdictional 9 threshold either. See Negrete, 2013 U.S. Dist. LEXIS 31871, at *25 (E.D. Cal. Mar. 6, 2013) 10 (declining to count PAGA penalties toward the amount in controversy where the defendants did not 11 offer “evidence to support their assertion that each putative class member is entitled to maximum 12 penalties under PAGA”). CONCLUSION 13 14 In sum, Defendants failed to prove to a legal certainty that the amount in controversy exceeds 15 $5,000,000. As a result, CAFA does not provide a proper basis for subject matter jurisdiction. 16 Accordingly, the Court RECOMMENDS that Plaintiff’s Motion to Remand should be GRANTED and 17 that this action be REMANDED to the Stanislaus County Superior Court of California for all further 18 proceedings. 19 These findings and recommendations are submitted to the district judge assigned to this action, 20 pursuant to Title 28 of the United States Code section 636(b)(1)(B) and this Court’s Local Rule 304. 21 Within fifteen (15) days of service of this recommendation, any party may file written objections to 22 these findings and recommendations with the Court and serve a copy on all parties. Such a document 23 should be captioned “Objections to Magistrate Judge’s Findings and Recommendations.” The district 24 ///// 25 ///// 26 ///// 27 ////// 28 ///// 13 1 judge will review the magistrate judge’s findings and recommendations pursuant to Title 28 of the 2 United States Code section 636(b)(1)(C). The parties are advised that failure to file objections within 3 the specified time may waive the right to appeal the district judge’s order. Martinez v. Ylst, 951 F.2d 4 1153 (9th Cir. 1991). 5 6 7 8 IT IS SO ORDERED. Dated: /s/ Barbara June 27, 2013 A. McAuliffe _ UNITED STATES MAGISTRATE JUDGE 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14

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