Andersen v. Schwan Food Company, The

Filing 28

ORDER by Judge Hamilton granting 15 Motion to Remand; denying 21 Motion for Leave to File (pjhlc2, COURT STAFF) (Filed on 8/2/2013)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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KELLY ANDERSEN,
Plaintiff,

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v.

ORDER GRANTING MOTION TO
REMAND

THE SCHWAN FOOD COMPANY and
DOES 1 through 50, inclusive,

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For the Northern District of California

United States District Court

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No. C 13-2362 PJH

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Defendants.
_______________________________/

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On July 31, 2013, plaintiff’s motion to remand came on for hearing before this court.

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Plaintiff Kelly Andersen (“plaintiff” or “Andersen”) appeared by his counsel Michael C.

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Righetti. Defendant Schwan Food Company (“defendant” or “Schwan”) appeared by its

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counsel, Alan L. Rupe. Having carefully reviewed the parties’ papers and considered the

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arguments of counsel and the relevant legal authority, and good cause appearing, the court

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hereby GRANTS Andersen’s motion to remand as follows.

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BACKGROUND
In April 2013, Andersen filed a class action complaint against Schwan in state court,

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alleging: (1) violation of Labor Code § 1194; (2) violation of Business and Professions

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Code (“B & P”) § 17200, et seq.; (3) failure to provide mandated meal periods and rest

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breaks; (4) failure to indemnify employees for expenditures and/or losses; (5) failure to

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make payments within the required time; (6) private attorney general act (“PAGA”)

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penalties; and (7) failure to furnish accurate wage and hour statements.

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Andersen pleads that Schwan engaged in a “uniform policy and systematic scheme
of wage abuse” against its Route Sales Representatives (“RSRs”) in California.

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Specifically, Andersen alleges that the scheme involved, among other things, “categorically

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misclassifying the Route Sales Representatives position as ‘exempt’ for the purposes of the

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payment of overtime compensation and minimum wage,” denying RSRs meal and rest

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breaks mandated under California law, failing to indemnify RSRs for business cellular

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phone expenses, failing to pay former RSRs owed wages within 72 hours of termination,

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and failing to provide RSRs with timely and accurate wage and hour statements.
Further, Andersen claims in his complaint that “[t]he total damages for the entire

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case [do] not exceed $5,000,000.00.” Compl. at 2. However, on May 24, 2013, Schwan

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filed a notice of removal pursuant to the Class Action Fairness Act of 2005 (“CAFA”) and
had the case removed to this court.

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For the Northern District of California

United States District Court

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On June 25, 2013, Andersen filed the present motion to remand the case back to

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state court. The parties do not dispute that CAFA’s minimal diversity and minimal class

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size requirements are met. Andersen seeks remand solely on the basis that Schwan has

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failed to make a sufficient showing that the amount in controversy satisfies the $5,000,000

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minimum required by CAFA for federal jurisdiction.
DISCUSSION

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A.

Legal Standard
“[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 . . . to the district court

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

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pending.” Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 7–8 (1983)

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(citation omitted). See also 28 U.S.C. § 1441. However, federal courts are courts of

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limited jurisdiction. See, e.g., Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375,

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377 (1994).

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Accordingly, the burden of establishing federal jurisdiction for purposes of removal is

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on the party seeking removal, and the removal statute is construed strictly against removal

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jurisdiction. Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1117 (9th Cir. 2004). See also

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Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). “Federal jurisdiction must be

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rejected if there is any doubt as to the right of removal in the first instance.” Gaus, 980

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F.2d at 566.

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CAFA provides that district courts have original jurisdiction over any class action in

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which (1) the amount in controversy exceeds five million dollars, (2) any plaintiff class

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member is a citizen of a state different from any defendant, (3) the primary defendants are

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not states, state officials, or other government entities against whom the district court may

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be foreclosed from ordering relief, and (4) the number of plaintiffs in the class is at least

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100. 28 U.S.C. §§ 1332(d)(2), (d)(5). Further, “under CAFA the burden of establishing
removal jurisdiction remains, as before, on the proponent of federal jurisdiction.” Abrego

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For the Northern District of California

United States District Court

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Abrego v. The Dow Chemical Co., 443 F.3d 676, 685 (9th Cir. 2006).
The Ninth Circuit has held that if it is “unclear or ambiguous from the face of a state-

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court complaint whether the requisite amount in controversy is pled,” a “preponderance of

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the evidence” standard applies. Guglielmino v. McKee Foods, Inc., 506 F.3d 696, 699 (9th

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Cir. 2007) (citing Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996)).

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Further, the preponderance standard applies where the complaint merely states that

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“damages” are less than $5,000,000, as attorneys’ fees are included in the amount in

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controversy but are not included in a calculation of damages. See Guglielmino, 506 F.3d at

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700 (complaint is silent to amount in controversy when it only claims that “damages” are

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less than $5,000,000).

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B.

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Andersen’s Motion to Remand
As stated above, the parties’ only dispute is whether Schwan has shown, by a

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preponderance of the evidence, that the $5,000,000 amount in controversy is met.

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However, as a threshold issue, the parties disagree over whether Schwan is

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required to submit summary judgment type evidence to support its opposition to remand.

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In the Ninth Circuit, “the district court may consider whether it is ‘facially apparent’ from the

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complaint that the jurisdictional amount is in controversy. If not, the court may consider

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facts in the removal petition, and may ‘require parties to submit summary-judgment-type

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evidence relevant to the amount in controversy at the time of removal.’ ” Singer v. State

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Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997) (quoting Allen v. R & H Oil &

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Gas Co., 63 F.3d 1326, 1335-36 (5th Cir. 1995)).

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Schwan argues that a removing party, who may produce evidence, is not required to

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produce evidence to support CAFA jurisdictional requirements. Andersen, on the other

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hand, argues that evidence is not required to support CAFA jurisdiction in every case, but

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that it is required in cases, such as this, where the amount in controversy is not “facially

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apparent” from the complaint.
Both parties cite the same case in support of their argument, Altamirano v. Shaw

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For the Northern District of California

United States District Court

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Indus., Inc., 2013 WL 2950600 (N.D. Cal. June 14, 2013). In Altamirano, the plaintiff

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argued that in order to meet its burden to demonstrate removability, the defendant was

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required to submit “summary-judgment-type evidence.” Id. at *4. However, the court

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rejected the notion that “the fact that courts may consider such evidence necessarily

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requires the removing party to produce it.” Id.; see also Jimenez v. Allstate Ins. Co., 2011

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WL 65764 (C.D. Cal. Jan.7, 2011) (rejecting argument that defendant must offer summary

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judgment-type evidence); Gardner v. GC Servs., LP, 2010 WL 2721271 (S.D. Cal. July 6,

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2010) (“Contrary to Plaintiff’s contentions, however, there is no obligation on Defendant to

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submit any declarations or ‘summary-judgment-type evidence’ in support of its assertion

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that the jurisdictional amount is met in the present case.”).

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However, this does not mean that “summary-judgment-type evidence is never

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necessary under this analysis. If, for example, the allegations in the complaint provide no

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basis for certain assumptions in the calculations, a defendant must provide some evidence

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rather than relying on mere unsupported speculation or conclusory allegations.”

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Altamirano, 2013 WL 2950600 at *4 (citing Singer, 116 F.3d at 377).

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Therefore, Schwan is correct that it is not required to submit evidence to support
CAFA jurisdictional requirements. However, the court will reject Schwan’s calculations as

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speculative and conclusory if, in light of the lack of evidence presented, Andersen’s

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complaint provides no basis for the assumptions made.

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Having established the type of evidence required to support removal, the court now

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turns to the specific amount-in-controversy calculations performed by Schwan, and whether

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they are adequately supported by the complaint or Schwan’s declaration.

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Schwan argues that it “based [its] calculations on [Andersen’s] own statements and

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documents” and that it did not rely on “conclusory allegations” or “speculation and

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conjecture.” Dkt. 18 at 1. Andersen, on the other hand, claims that Schwan’s calculations

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are based on unsupported assumptions and fail to include necessary information such as
“the number of workweeks, work hours, average pay rates, and payroll periods/shifts

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For the Northern District of California

United States District Court

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worked by the putative class.” Dkt. 19 at 4.

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One of the major disagreements in the present case is whether Schwan is entitled to

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base its calculations on the assumption that each member of the class will have

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experienced each of the types of violations listed in the complaint. Schwan argues that it

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can extrapolate Andersen’s claims to the putative class as a whole and assume a 100%

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violation rate because Anderson alleges that his claims are “typical of the claims of all

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members of the class.” However, Andersen argues that “[t]his type of gambit has been

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attempted - and rejected - in the past.” Dkt. 19 at 4-6 (citing Roth v. Comerica Bank, 799

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F.Supp.2d 1107, 1119-1120 (C.D. Cal. 2010)).

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District courts in California have disagreed over whether defendants may assume

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certain variables, such as “average hours of overtime worked per week or the rate of wage

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statement violations,” when calculating the amount in controversy. Roth, 799 F.Supp.2d at

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1127. For example, compare Coleman v. Estes Express Lines, Inc., 730 F. Supp. 2d 1141,

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1150 (C.D. Cal. 2010) (“Plaintiff included no limitation on the number of violations, and,

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taking the complaint as true, Defendants could properly calculate the amount in controversy

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based on a 100% violation rate”) with Smith v. Brinker Int’l, Inc., 2010 WL 1838726 at *4

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(N.D. Cal. May 5, 2010) (“Defendants have failed to provide any evidence relating to either

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plaintiff's actual earnings or number of hours worked, asking the court to assume that each

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plaintiff worked an additional 2.5 hours each day in order to reach the amount-in-

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controversy threshold”).

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In Roth, the court surveyed the approaches taken by the different district courts and

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concluded that “cases allowing defendants to rely on unsupported assumptions of 100%

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violation rates ‘improperly shift the burden to plaintiff to refute speculative assertions of

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jurisdiction and establish that there is no jurisdiction.’ ” Altamirano, 2013 WL 2950600 at *5

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(citing Roth, 799 F.Supp.2d at 1129).

calculations, and the assumptions on which they are based, to determine whether they are

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For the Northern District of California

Courts that have followed the Roth approach have evaluated the defendant’s

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United States District Court

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reasonable in light of the allegations in the complaint or are unduly speculative. Id. at *6.

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See also Ruby v. State Farm Gen. Ins. Co., 2010 WL 3069333 (N.D. Cal. Aug. 4, 2010)

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(conducting claim-by-claim analysis of whether the defendant’s assumptions were

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reasonable); Baillie v. Account Receivable Mgmt. of Fla., 2011 WL 566817 (N.D. Cal.

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Feb.14, 2011) (analyzing reasonableness of defendant’s assumptions in light of allegations

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in complaint). Therefore, the court will go step by step through assumptions made in

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defendant’s calculations to determine whether they are reasonable in light of the allegations

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in the complaint.

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1.

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As to the first cause of action, Schwan makes a number of assumptions regarding

Estimated Overtime Damages

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estimated overtime damages. First, Schwan assumes that Andersen’s average estimated

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hourly wage is a reasonable estimate for the putative class. Second, Schwan assumes

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that the current number of RSRs, 136, is a reasonable average number of full-time RSRs

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during a calendar year over the four year relevant time period. Third, Schwan assumes

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that every member of the putative class worked the same number of overtime hours per

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week as Andersen. Fourth, Schwan assumes that every RSR worked every single work

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day over a four year period. All four assumptions are unsupported by the complaint and

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are unduly speculative.
First, Andersen’s complaint makes no reference to the hourly wage of other

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employees. It is entirely plausible that different RSRs were compensated at different rates,

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whether it be because of experience, seniority, or some other factor. Further, it is unlikely

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that Andersen would be aware of all of his co-workers’ hourly wage rates when that

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information is uniquely within the records of Schwan. In Roth, the court held that it is

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especially appropriate to require a defendant to provide evidence to justify assumptions

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when the defendant is in the best position to produce evidence on the question. 799

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F.Supp.2d at 1130. Therefore, the assumption that all RSRs were paid the same rate as
Andersen is unduly speculative and is not reasonable in light of the allegations in the

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For the Northern District of California

United States District Court

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complaint, particularly given the absence of evidence showing at least the range of pay

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rates or the median pay rate.

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Second, Schwan’s assumption that the current number of RSRs is a reasonable

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estimate of the average number of RSRs employed over the four year class period is

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unsubstantiated. Nowhere in the complaint does Andersen allege this number, nor is it

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supported by Schwan’s declaration. Although Schwan has provided evidence that there

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are 611 putative class members and 136 current RSRs, it made an uncorroborated leap

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when it assumed that 136 RSRs is a reasonable average number of RSRs employed over

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the four year relevant time period. Dkt. 18-3. Even slightly modifying this assumption can

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lead to wildly different amount-in-controversy calculations; thus, any calculation that

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incorporates this assumption is unduly speculative.

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Third, Schwan’s assumption that all RSRs worked the same number of overtime

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hours as Andersen is unsupported by the complaint, and similar assumptions have been

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rejected by courts in the past. In Martinez v. Morgan Stanley, the defendants used the

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plaintiff’s allegations that she worked 12 hours per weekday and approximately 60 hours

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per week to assume that every associate worked four hours of overtime every day. 2010

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WL 3123175 at *5 (S.D. Cal. Aug. 9, 2010). The court flatly rejected this assumption,

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stating that, “[a]lthough Plaintiff alleged that her claims are typical of the class as a whole

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and that class members consistently worked overtime, this does not provide a basis to

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assume that every class member worked any particular number of overtime hours, much

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less that he or she worked the same number of overtime hours every workday as Plaintiff

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did on an unspecified occasion.” Id.

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Similarly, in Roth, defendants assumed that each class member worked three to five

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hours of overtime a week because the plaintiff alleged “class member[s] regularly and/or

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consistently worked in excess of eight (8) hours in a day, in excess of twelve (12) hours in a

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day, and/or in excess of forty (40) hours in a week.” 799 F. Supp. 2d at 1124. The court
held that the plaintiff’s allegations did not support the defendant’s assumption and that,

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For the Northern District of California

United States District Court

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without additional supporting evidence from the defendants, “the court must conclude that

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defendants’ calculation is speculative to the extent it relies on this assumption.” Id.

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The exact same reasoning expounded in Martinez and Roth applies to the present

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case. Although Andersen has alleged that his claims are typical of the class, and that class

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members consistently worked overtime, this is not a basis for assuming that every class

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member worked any particular number of overtime hours, let alone the four hours of

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overtime per-day that Andersen alleges that he worked. Although Schwan has included

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alternate calculations under the assumption that every RSR worked 2 hours of overtime per

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day, this is still unsupported by any evidence.

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Fourth, Schwan’s calculation assumes that every single RSR worked every single

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possible work day over the four year class period. Schwan therefore assumes that not a

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single RSR took any sick days or vacation days during those four years. There is no basis

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for this assumption in either the complaint or Schwan’s declaration. Thus, this assumption

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is unduly speculative as well.

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Overall, Schwan’s estimated overtime damages figure is built upon layer upon layer

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of assumptions that are unsupported by the complaint or Schwan’s declaration. There is

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no evidence that (1) all employees were compensated at the same hourly wage as

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Andersen, (2) that the current number of RSRs employed is a reasonable estimate for the

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average number of RSRs over the four year class period, (3) that every RSR worked two to

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four hours of overtime per day, and (4) that every RSR worked every possible work day

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over the four year period. Additionally, both Andersen and Schwan disagree over the

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formula to calculate overtime wages, further muddying the waters.

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However, regardless of the correct formula for calculating overtime wages, the

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unsupported assumptions listed above make it impossible to calculate or even estimate the

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correct amount of overtime wages owed to the putative class. Therefore, the court cannot

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accept Schwan’s calculations as to the amount in controversy for the first cause of action.
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For the Northern District of California

United States District Court

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Meal and Rest Break Violation Damages

Next, Schwan’s damage calculations for the third cause of action, meal and rest

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break violations, are based upon some of the same faulty assumptions discussed above.

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Schwan assumed that (1) all RSRs were paid the same hourly wage as Andersen, (2) that

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every RSR worked every day for four straight years, and (3) that the current number of

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RSRs employed is a reasonable estimate for the average number of RSRs employed over

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the four year class period. As noted above, all three of these assumptions are

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unsubstantiated and thus are unduly speculative.

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However, as to this cause of action, Schwan’s assumption that there was a 100%

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violation rate is supported by the complaint. Andersen alleges in the complaint that, as a

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policy, Schwan failed to provide RSRs with the required meal/rest period. Thus it can be

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assumed that all class members were subject to this policy and are eligible for

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compensation. However, given the other unsubstantiated assumptions upon which this

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calculation was based, the court rejects the calculated figure as unduly speculative.

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3.

Waiting Time Penalties

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Schwan’s calculation for the fifth cause of action, waiting time penalties, relies on the

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unsubstantiated assumption that all RSRs were paid the same wages as Andersen. As

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discussed above, this assumption is not supported by either Andersen’s complaint nor

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Schwan’s declaration, making it unduly speculative. Therefore, the court will not accept the

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damages figure calculated by Schwan for this cause of action.

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4.

PAGA Penalties

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Andersen’s sixth cause of action seeks PAGA penalty damages. Under PAGA,

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damages are $100, per pay period, for each aggrieved employee. Cal. Lab. Code

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§ 2698(f)(2). Andersen seeks damages on behalf of employees who were not

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compensated for overtime pay. However, PAGA has a one year statute of limitations.

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Code of Civ. Pro. § 340(a). According to Schwan’s declaration, there are 222 putative

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class members who are eligible for PAGA penalties. Dkt. 18-3 at 2. Therefore, according
to Schwan, PAGA damages are calculated as 222 putative class members x 26 pay

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For the Northern District of California

United States District Court

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periods within the one year statute of limitations x $100 penalty per pay period.

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However, this calculation not only relies upon the unsubstantiated assumption that

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all 222 eligible class members worked during all 26 pay periods, but also directly

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contradicts an earlier assumption of Schwan’s, that there are an average of 136 RSRs

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working per calendar year. This calculation also fails to account for any of the 222 eligible

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RSRs leaving the company during the one-year limitations period and therefore not being

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eligible for PAGA penalties over all 26 pay periods. As a result, this calculation is unduly

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speculative and is rejected.

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5.

Failure to Provide Itemized Wage Statements

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Andersen’s seventh cause of action seeks damages for Schwan’s failure to provide

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itemized wage statements pursuant to Cal. Labor Code §§ 226.3 and 558. Damages for

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these violations are $50 for the initial pay period violation and $100 per subsequent pay

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period violation, subject to a $4,000 per employee cap. Cal. Lab. Code § 226(e). The

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statute of limitations for Section 226 is one year. Just as in Schwan’s calculations of PAGA

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penalties, Schwan again assumes that there are 222 eligible class members.

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Similar to the faulty assumption in the PAGA penalties calculation, Schwan’s
assumption that all 222 eligible class members were employed for the entirety of the

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statutory period is unsupported by either the complaint or Schwan’s declaration. Thus, the

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court rejects this calculation as overly speculative.

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6.

Attorneys’ Fees

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In addition to damages for the causes of action listed in the complaint, Andersen

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seeks attorneys’ fees and costs pursuant to Labor Code §§ 1194, 218.5, 2802, and 226.

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Where the underlying law provides for the payment of attorneys’ fees, the amount of fees is

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included in calculating the amount in controversy for CAFA jurisdiction. Guglielmino, 506

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F.3d at 700 (citing Galt v. Scandinavia, 142 F.3d 1150, 1156 (9th Cir. 1998)). Schwan

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argues that a reasonable estimate for attorneys’ fees is 25 percent of damages.
Irrespective of whether 25 percent of damages is a reasonable amount for attorneys’ fees

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For the Northern District of California

United States District Court

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in this case, Schwan has failed to provide supported calculations for any of the causes of

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action in this case. Thus, any calculation of attorneys’ fees would necessarily be based

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upon the unsubstantiated assumptions made by Schwan in its other calculations.

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CONCLUSION
Ultimately, Schwan has removed this case without first ascertaining whether the

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amount in controversy exceeds $5,000,000, even though it is in the best position to do so,

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given that all necessary records are within its control. Allowing Schwan to rely on

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unsupported assumptions would improperly shift the burden to plaintiff to refute speculative

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assertions of jurisdiction and to establish that there is no jurisdiction. Therefore, Schwan

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has failed to meet its burden of proving, by a preponderance of the evidence, that the

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$5,000,000 amount in controversy is satisfied. Thus, plaintiff’s motion to remand is

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GRANTED.

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Finally, the court DENIES Schwan's motion for leave to file a surreply because it

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finds that Andersen’s reply did not raise new issues of law or fact. Accordingly, the court

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does not rely on the arguments in Schwan’s proposed surreply.

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The Clerk shall REMAND this case to the Alameda County Superior Court.

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IT IS SO ORDERED.
Dated: August 2, 2013
______________________________
PHYLLIS J. HAMILTON
United States District Judge

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For the Northern District of California

United States District Court

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