Nico Cruz v. Mohawk Industries, Inc. et al

Filing 18

ORDER DENYING 7 Motion to Remand, signed by District Judge Jennifer L. Thurston on 01/09/2022. (Maldonado, C)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 12 NICO CRUZ, individually and on behalf of other members of the general public similarly situated, Plaintiff, 13 14 15 16 Case No. 1:20-cv-01510-JLT-EPG ORDER DENYING MOTION TO REMAND (Doc. 7) v. MOHAWK INDUSTRIES, INC., et al., Defendants. 17 18 Nico Cruz filed a putative class-action complaint in the California Superior Court, Fresno 19 County against Defendants Mohawk Industries, Inc., Daltile Services, Inc., Dal-Tile Services, 20 Inc., and Dal-Tile Corporation on September 14, 2020. (Doc. 1-2.) Defendants removed the 21 action to this court on October 23, 2020, invoking federal jurisdiction under the Class Action 22 Fairness Act of 2005 (“CAFA”). (Doc. 1.) 23 24 BACKGROUND Plaintiff’s complaint asserts nine causes of action for violations of various provisions of 25 the California Labor Code and one violation of the California Business and Professions Code. 26 (Doc. 1-2 (“Compl.”).) Plaintiff alleges that defendants “engaged in a pattern and practice of 27 wage abuse against their hourly-paid or non-exempt employees within the State of California,” 28 including “failing to pay them for all regular and/or overtime wages earned and for missed meal 1 1 periods and rest breaks in violation of California law.” (Id. ¶ 28.) Plaintiff seeks to represent a class of “All current and former hourly-paid or non-exempt 2 3 employees who worked for any of the Defendants within the State of California at any time 4 during the period from four years preceding the filing of this Complaint to final judgment and 5 who reside in California.” (Id.¶ 16.) Plaintiff alleges that “[t]he amount in controversy for the 6 named Plaintiff . . . is less than seventy-five thousand dollars ($75,000).” (Id. ¶ 1.) 7 Defendants removed this action to this court on October 23, 2020, based upon CAFA 8 jurisdiction. (Doc. 1.) Defendants rely upon a declaration of Robin Krueger, the director of 9 human resources for Defendant Daltile Services, Inc., who declared that the defendants were 10 incorporated in or have principal places of businesses in a mixture of Delaware, Georgia, 11 Pennsylvania, and Texas. (Doc. 1-6 ¶¶ 3–6.) Krueger further declared that there were 4201 12 individuals falling within Plaintiff’s definition of the proposed class, and the amount in 13 controversy exceeded $5 million. (Id. ¶¶ 7–8.) Plaintiff’s sole argument in the motion to remand the matter is that CAFA removal is 14 15 improper because Defendants failed to prove by a preponderance of the evidence that the amount 16 in controversy exceeds $5 million. (See Doc. 7.) 17 In their opposition to the motion, Defendants filed additional declarations by Krueger, 18 concerning the size of the proposed class and Defendants’ citizenship; Sean Chasworth, a third- 19 party data analyst, concerning the amounts in controversy based on assumptions from the 20 complaint; and Ian Wright, Defendants’ counsel concerning attorneys’ fees that Plaintiff’s 21 counsel had requested in previous cases. (Docs. 10-1, 10-2, 10-3.) 22 Earlier, the Court noted that it was likely to grant the motion to remand. (Doc. 12.) The 23 Court indicated that Defendants had improperly assumed a 100% violation rate for several of the 24 causes of action they had briefed, and such an assumption is improper. (Id. (citing Ibarra v. 25 Manheim Inv. Inc., 775 F.2d 1193, 1198–99 (9th Cir. 2015).) Because Defendants requested 26 leave to make arguments concerning Plaintiff’s sixth, eighth and tenth causes of action if the 27 1 28 In a subsequent declaration, Krueger revised this number to 490, stating that she had since reviewed records from a discontinued computer system. (Doc. 10-2 ¶ 4.) 2 1 Court intended to grant the motion to remand, (Doc. 10 at 19), the Court granted leave to do so 2 (Doc. 12 at 3). Defendants supplemental briefing (Docs. 14 & 15), is now before the court.2 3 LEGAL STANDARD 4 A suit brought in state court may be removed to federal court if the federal court would 5 have had original jurisdiction over the suit. 28 U.S.C. § 1441(a); see also Libhart v. Santa 6 Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979) (“The removal jurisdiction of the federal 7 courts is derived entirely from the statutory authorization of Congress.”). Under CAFA, federal 8 courts have original jurisdiction “over certain class actions, defined in [28 U.S.C.] § 1332(d)(1), if 9 the class has more than 100 members, the parties are minimally diverse, and the amount in 10 controversy exceeds $5 million.” Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 11 81, 84–85 (2014) (citing Standard Fire Ins. Co. v. Knowles, 568 U.S. 588, 592 (2013)). 12 “Congress enacted CAFA to ‘curb perceived abuses of the class action device which, in the view 13 of CAFA’s proponents, had often been used to litigate multi-state or even national class actions in 14 state courts.’” Singh v. Am. Honda Fin. Corp., 925 F.3d 1053, 1067 (9th Cir. 2019) (quoting 15 United Steel v. Shell Oil Co., 602 F.3d 1087, 1090 (9th Cir. 2010)). The Supreme Court has held 16 that there is “no presumption against removal jurisdiction [under CAFA] and that CAFA should 17 be read ‘with a strong preference that interstate class actions should be heard in a federal court if 18 properly removed by any defendant.’” Allen v. Boeing Co., 784 F.3d 625, 633 (9th Cir. 2015) 19 (alteration in original) (quoting Dart Cherokee, 574 U.S. at 89). “The burden of establishing removal jurisdiction, even in CAFA cases, lies with the 20 21 defendant seeking removal.” Washington v. Chimei Innolux Corp., 659 F.3d 842, 847 (9th Cir. 22 2011) (citation omitted); see also Guglielmino v. McKee Foods Corp., 506 F.3d 696, 700 (9th 23 Cir. 2007) (“[T]he plaintiff is ‘master of her complaint’ and can plead to avoid federal 24 jurisdiction.”). “A defendant seeking removal must file in the district court a notice of removal 25 ‘containing a short and plain statement of the grounds for removal . . .’” Ibarra v. Manheim 26 Investments, Inc., 775 F.3d 1193, 1197 (9th Cir. 2015) (quoting 28 U.S.C. § 1446(a)). “‘[W]hen 27 a defendant seeks federal-court adjudication, the defendant’s amount-in-controversy allegation 28 2 Plaintiff has not filed a reply, and the deadline to do so has expired. 3 1 should be accepted when not contested by the plaintiff or questioned by the court.’ ‘[A] 2 defendant’s notice of removal need include only a plausible allegation that the amount in 3 controversy exceeds the jurisdictional threshold,’” and “need not contain evidentiary 4 submissions.” Arias v. Residence Inn by Marriott, 936 F.3d 920, 922, 927 (9th Cir. 2019) 5 (emphasis added) (quoting Dart Cherokee, 574 U.S. at 87–89; Ibarra, 775 F. 3d at 1197); see 6 also 28 U.S.C.A. § 1446(c)(2) (With certain exceptions, “the sum demanded in good faith in the 7 initial pleading shall be deemed to be the amount in controversy”). “Where a removing defendant 8 has shown potential recovery could exceed $5 million and the plaintiff has neither acknowledged 9 nor sought to establish that the class recovery is potentially any less, the defendant has borne its 10 burden to show the amount in controversy exceeds $5 million.” Arias, 936 F.3d at 927 (internal 11 quotation marks and citation omitted). 12 “Evidence establishing the amount is required by § 1446(c)(2)(B) only when the plaintiff 13 contests, or the court questions, the defendant’s allegation.” Dart Cherokee, 574 U.S. at 89. If 14 evidence is required, “[b]oth parties may submit evidence supporting the amount in controversy 15 before the district court rules.” Harris v. KM Indus., Inc., 980 F.3d 694, 699 (9th Cir. 2020). 16 Nonetheless, the defendant seeking removal bears the ultimate burden of showing “by a 17 preponderance of the evidence that the aggregate amount in controversy exceeds $5 million when 18 federal jurisdiction is challenged.” Ibarra, 775 F. 3d at 1197; see also Sanchez v. Monumental 19 Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996) (observing that a preponderance of the evidence 20 means “it is ‘more likely than not’ that the amount in controversy exceeds” the jurisdictional 21 threshold.). This burden may be satisfied by submitting “affidavits or declarations, or other 22 ‘summary-judgment-type evidence relevant to the amount in controversy at the time of 23 removal,’” Ibarra, 775 F. 3d at 1197, or by relying on a chain of reasoning that includes 24 reasonable assumptions, LaCross v. Knight Transp. Inc., 775 F.3d 1200, 1202 (9th Cir. 2015); see 25 also Arias, 936 F.3d at 925 (holding that “[a]n assumption may be reasonable if it is founded on 26 the allegations of the complaint.”). Removal is proper “if the district court finds, by a 27 preponderance of the evidence, that the amount in controversy exceeds” the jurisdictional 28 threshold. Dart Cherokee, 574 U.S. at 88 (citations omitted). 4 1 The amount in controversy is not the amount of damages that Plaintiff will likely recover, 2 see Chavez v. JPMorgan Chase & Co., 888 F.3d 413, 417 (9th Cir. 2018), nor is it “a prospective 3 assessment of defendant’s liability,” Lewis v. Verizon Commc’ns, Inc., 627 F.3d 395, 401 (9th 4 Cir. 2010). Rather, it “is simply an estimate of the total amount in dispute.” Id. Thus, the 5 amount in controversy merely “reflects the maximum recovery the plaintiff could reasonably 6 recover.” Arias, 936 F.3d at 927 (emphasis added). 7 8 ANALYSIS A. 9 Minimal Diversity Krueger has averred that Defendants are corporations with states of incorporation or 10 principal places of business in Delaware, Georgia, Pennsylvania and Texas. (Doc. 1-6 ¶¶ 3–6.) 11 Defendants allege that Plaintiff is a citizen of California. (Doc. 1 ¶ 18.) Thus, they have alleged 12 minimal diversity as required for jurisdiction under CAFA. Ehrman v. Cox Commc’ns, Inc., 932 13 F.3d 1223, 1226–27 (9th Cir. 2019) (discussing diversity requirements of CAFA). Because 14 “[D]efendant[s’] allegations of citizenship are unchallenged, nothing more is required” to 15 establish CAFA’s diversity requirement. Id. at 1228. 16 B. Size of Class In Krueger’s supplemental declaration, Kreuger declared that she is the custodian of 17 18 employee records and that she has reviewed their records to determine 490 employees fit the 19 definition of plaintiff’s proposed class. (Doc. 10-2 ¶¶ 3–4.) Though Plaintiff argues that 20 Krueger’s initial declaration failed to provide sufficient detail, (Doc. 7 at 10), certainly by this 21 point, Defendants have adequately established that there are more than 100 members in the 22 proposed class. 23 C. 24 Amount in Controversy The crux of this dispute is whether at least $5 million is in controversy in this action. The 25 Court finds that Defendants have met their burden based on Plaintiff’s second, third, fourth and 26 sixth claims. 27 As often happens in CAFA removal cases concerning alleged violations of California 28 labor laws, Plaintiff alleges that defendants had a “pattern and practice” of violating specified 5 1 California labor laws but do not allege any specific rate of violations. (Compl. ¶ 28.) When 2 encountering such allegations, a defendant asserting CAFA jurisdiction cannot assume a 100% 3 violation rate: We agree with the district court that a “pattern and practice” of doing something does not necessarily mean always doing something. The complaint alleges a “pattern and practice” of labor law violations but does not allege that this “pattern and practice” is universally followed every time the wage and hour violation could arise. . . . Because the complaint does not allege that Manheim universally, on each and every shift, violates labor laws by not giving rest and meal breaks, Manheim bears the burden to show that its estimated amount in controversy relied on reasonable assumptions. 4 5 6 7 8 9 Ibarra, 775 F.3d at 1198–99. Following Ibarra, “[d]istrict courts have found, however, that 10 violation rates of 25% to 60% can be reasonably assumed as a matter of law based on ‘pattern and 11 practice’ or ‘policy and practice’ allegation.” Avila v. Rue21, Inc., 432 F. Supp. 3d 1175, 1189 12 (E.D. Cal. 2020) (citing cases). 13 1. Claim 2: Meal Breaks Plaintiff’s second cause of action alleges that Defendants failed to comply with California 14 15 Labor Code §§ 226.7 and 512(a) and an applicable Industrial Welfare Commission Wage Order 16 requiring paid meal and rest breaks. Defendants’ argument in its first round of briefing rests mostly on Chasworth’s 17 18 declaration. (See Doc. No. 10.) Chasworth reviewed defendants’ California employment records, 19 including the periods of September 14, 2016 through November 30, 2016 (“Four-Year Period”) 20 and September 14, 2019 through November 30, 2020 (“One-Year Period”). (Doc. 10-3 ¶¶ 7, 10.) 21 Each week (a “workweek”), the typical employee worked 40 hours over five days. (Id. ¶ 6.b.) 22 During the Four-Year Period, there were 490 non-exempt California employees who worked a 23 total of 65,120 workweeks and were paid an average of $21.38 per hour. (Id. ¶ 8.)3 During the 24 One-Year Period, there were 337 such employees who worked 19,154 workweeks at an average 25 hourly rate of $22.21. (Id. ¶ 10.) 26 For meal breaks, Chasworth took the 65,120 workweeks in the Four-Year Period with a 27 $21.38 average wage and assumed that 20% of days had a meal break violation—or an average of 28 3 For ease of reading, this order uses a rounded $21.38 wage instead of $21.3832213739509. 6 1 one hour per workweek. (Doc. 10-3 at 7–8.) This amount comes to 65,120 workweeks × 1 hour 2 per workweek × $21.38 / hour = $1,392,475. Where, as here, Plaintiffs do not contest these 3 assumptions with alternate evidence, courts find allegations such as these reasonable. See Avila, 4 432 F. Supp. 3d at 1189 (collecting cases). Thus, the Court finds that these assumptions are 5 reasonable, and that Defendants have established this is the amount in controversy by a 6 preponderance of the evidence. See also Arias, 936 F.3d at 927 (when defendant puts forth 7 evidence “and the plaintiff has neither acknowledged nor sought to establish that the class 8 recovery is potentially any less, the defendant has borne its burden to show the amount in 9 controversy exceeds $5 million” (citation omitted)). 10 11 2. Claim 3: Rest Breaks The same calculations apply as for the meal-breaks claim. Thus, for the same reasons as 12 above, the court finds that Defendants have established that $1,392,475 is the amount in 13 controversy for this claim by a preponderance of the evidence. 14 15 3. Claim 4: Unpaid Minimum Wage (Non-Penalties) If an employer fails to pay its employees the minimum wage, California Labor Code 16 § 1194 provides that “[n]otwithstanding any agreement to work for a lesser wage, any employee 17 receiving less than the legal minimum wage . . . is entitled to recover in a civil action the unpaid 18 balance of the full amount of this minimum wage[,] . . . including interest thereon, reasonable 19 attorney’s fees, and costs of suit.” In addition, the employee is “entitled to recover liquidated 20 damages in an amount equal to the wages unlawfully unpaid and interest thereon.” Id. § 1194.2. 21 Plaintiff alleges that he and other class members were “hourly-paid or non-exempt 22 employees” and that Defendants “failed to compensate them for all hours worked and missed 23 meal periods and/or rest breaks.” (Compl. ¶ 22.) Additionally, Plaintiff alleges that he and the 24 other class members “were not receiving at least minimum wages for all hours worked,” (id. 25 ¶ 33), and that their wage statements “fail[ed] to include the total number of hours worked by 26 Plaintiff and the other class members,” (id. ¶ 36). 27 28 As to the unpaid wages and liquidated damages, Chasworth assumed that a $10 minimum wage applied because since January 1, 2016, the California minimum wage applicable to 7 1 defendants has been at least $10. (Doc. No. 10-2 ¶ 19.) Chasworth assumed an average of 0.5 2 unpaid hours per workweek. At a minimum wage of $10, that equals $10 per hour × 0.5 hours 3 per workweek × 65,120 workweeks in the Four-Year Period = $325,600. Chasworth then 4 doubles that amount to account for liquidated damages, to reach $651,200. Defendants have 5 established this amount by a preponderance of the evidence. 6 4. Claim 6: Timely Payment of Wages Plaintiff’s sixth claim is for failing to pay timely wages under California Labor Code 7 8 § 204. California Labor Code § 204 sets forth the schedule by which California employees must 9 be paid. Civil actions brought for violations of § 204 may recover $100 for an initial violation for 10 each employee and $250 for all subsequent violations for each employee, plus 25% of all 11 amounts unlawfully withheld. Cal. Labor Code § 210(a).4 Plaintiff alleges that “Plaintiff and the 12 other class members did not receive payment of all wages, including overtime and minimum 13 wages and meal and rest period premiums, within any time permissible under California Labor 14 Code section 204.” (Compl. ¶ 35.) 15 Chasworth makes assumptions that reduce the violations to every other week instead of 16 every week. (Doc. 14 ¶¶ 17–21.) Although “pattern or practice” allegations standing alone 17 cannot support a 100% violation rate, Ibarra, 775 F.3d at 1198–99, this 50% violation rate falls 18 within the “25% to 60% [rates that] can be reasonably assumed as a matter of law based on 19 ‘pattern and practice’ or ‘policy and practice’ allegation,” particularly because Plaintiff provided 20 no contrary figures. Avila, 432 F. Supp. 3d at 1189. Thus, the Court finds these figures are 21 reasonable. Chasworth counts 337 initial pay periods and 8,726 subsequent periods. (Id.) 22 Chasworth further assumes for the 25% penalty that all employees were paid the minimum wage 23 of $10 per hour and that on average, they were not compensated the minimum wage for 30 24 minutes per workweek (i.e., 30 minutes for every 40 hours went uncompensated). Given the 25 19,154 relevant workweeks, Chaworth reaches a figure of $1,790,229.5 26 4 27 28 Section 204b, which concerns employees paid weekly, has the same penalty structure. Id. § 210(a). 5 337 initial workweeks × $100 per initial workweek + 8,726 subsequent workweeks × 200 per subsequent workweek + $10 per hour × 0.5 hours per workweek × 19,154 workweeks × 25% 8 1 2 3 CONCLUSION AND ORDER Defendants have established the following amounts are in controversy by a preponderance of the evidence: 4 Type of Claim Claim 2: Meal Breaks Claim 3: Rest Breaks Claim 4: Unpaid Minimum Wage (Non-Penalties) Claim 6: Payroll Records Total: 5 6 7 8 9 10 Value $1,392,475 $1,392,475 $651,200 $1,790,229 $5,226,379 Because this amount exceeds $5 million, Plaintiff’s motion to remand (Doc. 7) is DENIED. 11 12 13 IT IS SO ORDERED. Dated: January 9, 2022 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 statutory penalty = $1,790,229. 9

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