Freeman v. Mercy Services Corp

Filing 16

ORDER signed by District Judge Troy L. Nunley on 6/13/17 ORDERING that Plaintiff's MOTION to REMAND 7 is GRANTED. Defendant's Motion to Dismiss (ECF No. 5 ) is hereby DENIED as MOOT. The Clerk of the Court is directed to close the case. Copy of remand order sent to other court. CASE CLOSED.(Mena-Sanchez, L)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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SHERRI FREEMAN, individually, and on
behalf of other members of the general
public similarly situated,

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Plaintiff,

No. 2:16-cv-01151-TLN-KJN

ORDER GRANTING PLAINTIFF’S
MOTION TO REMAND

v.
MERCY SERVICES CORP, an unknown
business entity,
Defendant.

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This matter is before the Court on Plaintiff Sherri Freeman’s (“Plaintiff”) Motion to

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Remand (ECF No. 7). Defendant Mercy Services Corp’s (“Defendant”) opposes the motion.

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(ECF No. 9.) Plaintiff filed a reply. (ECF No. 11.) Having reviewed the briefing filed by both

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parties and for the reasons set forth below, the Court hereby GRANTS Plaintiff’s Motion to

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Remand (ECF No. 7).

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I.

FACTUAL BACKGROUND

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On September 14, 2015, Plaintiff filed a complaint in the Superior Court of California,

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County of Sacramento against Defendant on behalf of herself and all others similarly situated.

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(ECF No. 1-2 at 3–29.) Plaintiff alleges claims for various violations of state law: (1) unpaid

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overtime; (2) unpaid meal period premiums; (3) unpaid rest period premiums; (4) unpaid
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minimum wages; (5) final wages not timely paid; (6) wages not timely paid during employment;

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(7) non-compliant wage statements; (8) failure to keep requisite payroll records; (9) unreimbursed

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business expenses; and (10) unlawful business acts and practices. (ECF No. 1-2 at 12–23.)

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Plaintiff defines the class as “[a]ll current and former hourly-paid or non-exempt employees who

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worked for any of the Defendants within the State of California at any time during the period

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from four years preceding the filing of this Complaint to final judgment.” (ECF No 1-2 ¶ 14.)

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On May 27, 2016, Defendant filed a Notice of Removal, alleging that this Court has

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jurisdiction pursuant to the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d). (ECF No.

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1.) In support of removal, Defendant submitted the declaration of Christopher Reed, the Senior

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Vice President of Operations for Mercy Housing Management Group, Inc. (Reed Decl., ECF No.

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1-2 at 51–53.) Mr. Reed caused inquiries to be made regarding the number of non-exempt

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employees employed by Defendant during the time period of the Complaint, the total number of

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pay periods worked by non-exempt employees, and their average hourly wage. (Reed Decl. ¶ 5.)

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Mr. Reed also caused an inquiry to be conducted into the number of non-exempt employees who

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were discharged or voluntarily ended employment with Defendant. (Reed Decl. ¶ 6.)

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On June 3, 2016, Defendant filed a motion to dismiss. (ECF No. 5.) On June 27, 2016,

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Plaintiff filed the instant motion to remand for lack of subject matter jurisdiction. (ECF No. 7.)

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Plaintiff only challenges whether the amount in controversy requirement of the CAFA is satisfied.

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In its Opposition, Defendant contends the total amount in controversy is approximately

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$16,805,789. (ECF No. 9 at 24.) The alleged total is derived from unpaid overtime ($1,596,088),

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meal violations ($872,039), rest violations ($872,039), minimum wage violations ($6,477,975),

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waiting time penalties ($1,254,490), penalties for non-compliant wage statements ($2,372,000),

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and attorney’s fees ($3,361,157). (ECF No. 9 at 23–24.)

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II.

STANDARD OF LAW

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“[A]ny civil action brought in a State court of which the district courts of the United

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States have original jurisdiction, may be removed by the defendant or the defendants, to the

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district court of the United States for the district and division embracing the place where such

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action is pending.” 28 U.S.C. § 1441(a). However, “[i]f at any time before final judgment it
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appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” 28

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U.S.C. § 1447(c).

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CAFA gives federal district courts jurisdiction where: (1) the amount in controversy

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exceeds $5,000,000; (2) the number of members of all proposed plaintiff classes in the aggregate

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is 100 or greater; and (3) there is minimal diversity between the defendants and plaintiffs. 28

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U.S.C. § 1332(d). In calculating the amount in controversy, a court must assume that the

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allegations in the complaint are true and that a jury will return a verdict for plaintiffs on all claims

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alleged. Korn v. Polo Ralph Lauren Corp., 536 F. Supp. 2d 1199, 1205 (E.D. Cal. 2008).

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Moreover, the claims of class members may be aggregated to determine whether the amount in

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controversy requirement has been satisfied. Id.; 28 U.S.C. § 1332(d)(6). In a CAFA case, “the

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proper burden of proof imposed on a [removing] defendant to establish the amount in controversy

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is the preponderance of the evidence standard.” Rodriguez v. AT&T mobility Services, Inc., 728

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F.3d 975, 977 (9th Cir. 2013).

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“[N]o antiremoval presumption attends cases invoking CAFA, a statute Congress enacted

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to facilitate adjudication of certain class actions in federal court.” Dart Cherokee Basin

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Operating Co., LLC v. Owens, 135 S.Ct. 547, 550 (2014). However, “[t]he burden of establishing

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removal jurisdiction under CAFA lies with the proponent of federal jurisdiction.” Turner v.

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Corinthian Int’l Parking Servs., Inc., No. C 15-03495 SBA, 2015 WL 7768841, at *1 (N.D. Cal.

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Dec. 3, 2015) (citing Ibarra v. Manheim Investments, Inc., 775 F.3d 1193, 1199 (9th Cir. 2015)).

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Thus, Defendant must establish that this Court has jurisdiction over Plaintiff’s claims. Abrego

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Abrego v. The Dow Chemical Co., 443 F.3d 676, 685 (9th Cir. 2006). In order to determine

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whether the removing party has met this burden, a court may consider the contents of the removal

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petition and “summary-judgment-type evidence.” Valdez v. Allstate Ins. Co., 372 F.3d 1115,

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1117 (9th Cir. 2004).

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III.

ANALYSIS

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Plaintiff does not dispute that this matter as pled involves more than 100 class members or

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that minimal diversity exists between the parties. (See ECF No. 7.) The only question before the

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Court is whether Defendant has established by a preponderance of the evidence that the amount in
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controversy exceeds $5 million. Defendants argue the amount in controversy is at least

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$16,805,789 based on estimates of the amount in controversy for six of the ten causes of action.

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(ECF No. 9 at 24.) Plaintiff asserts Defendant fails to meet its burden of proof because Defendant

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relies on an unsupported declaration and the estimates are based on assumptions and speculative

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numbers. (ECF No. 11 at 2.) The Court agrees. As explained below, under the preponderance of

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the evidence standard, Defendant has failed to satisfy its burden.

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A. Unpaid Overtime

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Plaintiff seeks restitution for herself and all others similarly situated for unpaid overtime
in violation of California Labor Code §§ 510 & 1198. (ECF No. 1-2 at 3.) Defendant contends in

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its opposition that the estimated amount in controversy is $1,596,088.1 (ECF No. 9 at 15.)

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Plaintiff asserts that Defendant’s calculations are too speculative because Defendant assumes

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without support that each employee was entitled to “one hour of overtime pay per pay period.”

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(ECF No. 9 at 15.) Defendant argues Plaintiff does not allege how many hours of overtime she or

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the other class members are entitled to. (ECF No. 9 at 15.) Defendant contends when the

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complaint is generalized, as is the case here, a defendant may calculate the amount in controversy

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based on reasonable assumptions. (ECF No. 9 at 15 (citing Coleman v. Estes Express Lines, Inc.,

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730 F. Supp. 2d 1141, 1150 (C.D. Cal. 2010)).) Defendant argues that one hour of overtime per

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pay period is reasonable because Plaintiff alleged that she and the other class members were

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entitled to overtime pay “at all material times.” (ECF No. 9 at 15.)
“Courts have been skeptical of high CAFA estimates that rely solely on declarations with

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non-specific human resource data.” Page v. Luxottica Retail N. Am. Inc., Civ. No. 2:13-01333

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MCE KJN, 2015 WL 966201, at *11 (E.D. Cal. Mar. 4, 2015). The Ninth Circuit in Ibarra relied

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on a single declaration and the complaint when it found that a “pattern and practice of doing

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something does not necessarily mean always doing something.” Ibarra, 775 F.3d at 1198–99.

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The Ninth Circuit noted the complaint alleged a pattern or practice, but did not say that the

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pattern or practice was universally followed each and every pay period. Id. at 1199.

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This number is based on a finding of approximately 518 non-exempt or hourly paid employees, 125 pay
periods and an average minimum wage of $16.43. (ECF No. 9 at 15.) Defendant derived these numbers from the
declaration of Audrey Stepp. (Stepp Decl., ECF No. 9-1 ¶ 7.)

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Here, Defendant cites the term “at all material times” used in Plaintiff’s complaint in order

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to explain why Defendant assumed one hour of overtime per pay period. However, just as

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“pattern and practice” does not mean always or universally, neither does “at all material times”

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mean each and every pay period. There is no explanation as to why at all material times could

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not mean one hour of overtime a month or any other number of hours or intervals. See Garibay v.

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Archstone Communications LLC, 539 Fed. App’x 763, 764 (9th Cir. 2103) (questioning why two

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missed rest periods per paycheck was more appropriate than one missed rest period per paycheck

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or one missed rest period per month). “[W]hen the defendant relies on a chain of reasoning that

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includes assumptions to satisfy its burden to prove by a preponderance of the evidence that the

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amount in controversy exceeds $5 million, the chain of reasoning and its underlying assumptions

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must be reasonable.” LaCross v. Knight Trasnp. Inc., 775 F.3d 1200, 1201 (9th Cir. 2015).

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Defendant has not shown that its assumption of one hour of over time per pay period is a

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reasonable assumption. Accordingly, Defendant has failed to meet its burden to demonstrate the

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amount in controversy on Plaintiff’s unpaid overtime claim is $1,596,088.

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B. Remaining Claims
Defendant uses the same assumption of one violation per pay period and reasoning in its

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calculations of the amount in controversy for Plaintiff’s claims for unpaid meal period premiums,

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unpaid rest period premiums, and alleged minimum wage violations. (See ECF No. 15 at 16–18.)

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Courts have applied the above cited cases uniformly to claims for overtime as well as missed

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meal and rest periods and minimum wage. See Amaya v. Apex Merchant Group, LLC, No. 2:16-

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00050 WBS CKD, 2016 WL 881152, at *3–5 (E.D. Cal. March 8, 2016) (applying the Ibarra

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analysis to claims for failure to timely pay minimum wage and failure to provide meal and rest

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periods).

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burden to establish the amount in controversy for Plaintiff’s claims for unpaid meal period

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premiums, unpaid rest period premiums, and alleged minimum wage violations.

Accordingly, for the reasons detailed above, Defendant similarly has not met its

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Defendant conducted calculations on three other claims, waiting time penalties

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($1,254,490), non-complaint wage statements ($2,375,000), and attorney’s fees ($3,361,157).

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(ECF No. 9 at 23–24.) Defendant’s calculation of attorney’s fees is no longer accurate in light of
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the Court’s determination that the above calculations were unreasonable. Assuming the waiting

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time penalties and non-compliant wage statements are accurate, Defendant has only demonstrated

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an amount in controversy of $3,629,490. Courts allow defendants to estimate attorney’s fees at

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an amount of 25% of the potential damages. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1029 (9th

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Cir. 1998). However, when the underlying amount used to calculate attorney’s fees is not at least

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$4 million, the 25% recovery rate would not allow the amount in controversy to reach the $5

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million minimum. See Garibay, 539 Fed. App’x at 764. Accordingly, Defendant fails to meet its

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burden to demonstrate by a preponderance of the evidence that the amount in controversy exceeds

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$5 million.

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The Court recognizes that Defendant’s burden of demonstrating the amount in controversy

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exceeds $5 million requires it to find a balance between using speculative facts and assumptions

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to calculate the amount and providing too many facts such that Defendant essentially admits

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liability. See Armstrong v. Ruan Transp. Corp., No. 16-1143-VAP (SPx), 2016 WL 6267931, at

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* 7 (C.D. Cal. Oct. 25, 2016). However, “there are methods of determining a reasoned basis for

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the calculations such as random sampling and . . . using actual numbers, rather than averages.”

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Weston, v. Helmerich & Payne Inter. Drilling Co., No. 1:13-cv-01092-LJO-JLT, 2013 WL

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5274283, at *6 (E.D. Cal. Sept. 17, 2013); see also LaCross, 775 F.3d at 1203 (finding sufficient

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evidence to establish amount in controversy based on extrapolating fuel costs based on the actual

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cost of fuel and the actual number of drivers).

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IV.

CONCLUSION

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For the above state reasons, the Court ORDERS as follows:

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1. Plaintiff’s Motion to Remand (ECF No. 7) is hereby GRANTED.

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2. Defendant’s Motion to Dismiss (ECF No. 5) is hereby DENIED as MOOT.

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3. The Clerk of Court is directed to close the case.

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IT IS SO ORDERED.
Dated: June 13, 2017

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Troy L. Nunley
United States District Judge

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