Gaasterland v. Ameriprise Financial Services, Inc.

Filing 22

Order by Judge Lucy Koh Granting 13 Motion to Remand. (lhklc2S, COURT STAFF) (Filed on 9/15/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

United States District Court
Northern District of California

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LARRY GAASTERLAND,
Plaintiff,

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ORDER GRANTING MOTION TO
REMAND

v.

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Case No. 16-CV-03367-LHK

Re: Dkt. No. 13
AMERIPRISE FINANCIAL SERVICES,
INC.,
Defendant.

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Plaintiff Larry Gaasterland (“Plaintiff”) brings this action against Ameriprise Financial

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Services, Inc. (“Defendant”). Before the Court is Plaintiff’s motion to remand this case to Santa

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Clara County Superior Court. ECF No. 13 (“Mot.”). The Court finds this motion suitable for

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decision without oral argument pursuant to Civil Local Rule 7-1(b) and VACATES the motion

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hearing set for October 27, 2016, at 1:30 p.m. The case management conference, set for October

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27, 2016, at 1:30 p.m., is also VACATED. Having considered the submissions of the parties, the

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relevant law, and the record in this case, the Court GRANTS Plaintiff’s motion to remand.

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I.

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BACKGROUND
A. Factual Background
Plaintiff was employed by Defendant from January 2013 to March 16, 2016. ECF No. 1-1
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Case No. 16-CV-03367-LHK
ORDER GRANTING MOTION TO REMAND

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(“Compl.”) ¶ 5. “During the course of Plaintiff’s employment,” id., Defendant made three loans

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to Plaintiff totaling $406,106.20 in principal, ECF No. 16 at 3. Plaintiff alleges that Defendant

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“systematically engaged and continues to engage in unlawful wage and hour practices” by

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“unlawfully deduct[ing] amounts” owed on these loans from Plaintiff’s wage statements. Compl.

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¶ 5. Pursuant to this practice, “Defendant failed to pay Plaintiff . . . earned wages, made unlawful

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deductions from earned wages, failed to pay minimum wages, failed to pay overtime wages and

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failed to provide accurate wage statements.” Id. ¶ 7.

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B. Procedural History
On May 13, 2016, Plaintiff filed the original complaint in this case in Santa Clara County

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Superior Court. Plaintiff’s complaint contains a single cause of action, brought under the

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United States District Court
Northern District of California

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California Private Attorneys General Act (“PAGA”), Cal. Lab. Code § 2698. Id. ¶¶ 9–11.

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Plaintiff “seeks recovery of civil penalties and unpaid wages as prescribed by . . . PAGA on behalf

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of himself and other current and former employees of Defendant against whom one or more . . .

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violations of the [California] Labor Code and IWC Wage Orders were committed.” Id. ¶ 10.
On June 16, 2016, Defendant removed this case to federal court. In the notice of removal,

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Defendant claims that federal jurisdiction is appropriate on the basis of diversity jurisdiction.

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Defendant states that Plaintiff is a California citizen and that Defendant is a Minnesota citizen.

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Defendant avers that the amount in controversy in the instant case is $838,033.52, which is over

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the minimum $75,000 threshold required for diversity jurisdiction. ECF No. 1 at 9.
On July 15, 2016, Plaintiff moved to remand this case to Santa Clara County Superior

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Court. Defendant filed a response on July 29, 2016, ECF No. 16 (“Opp’n”), and Plaintiff filed a

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reply on August 5, 2016, ECF No. 17 (“Reply”).

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II.

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LEGAL STANDARD
A suit may be removed from state court to federal court only if the federal court would

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have had subject matter jurisdiction over the case in the first instance. 28 U.S.C. § 1441(a); see

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Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) (“Only state-court actions that originally

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could have been filed in federal court may be removed to federal court by the defendant.”). If it

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ORDER GRANTING MOTION TO REMAND

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appears at any time before final judgment that the federal court lacks subject matter jurisdiction,

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the federal court must remand the action to state court. 28 U.S.C. § 1447(c). A notice of removal

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must contain a “short and plain statement of the grounds for removal,” a requirement that tracks

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the general pleading standard of Rule 8(a) of the Federal Rules of Civil Procedure. 28 U.S.C.

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§ 1446(a). The defendant bears the burden of establishing removal jurisdiction. See Dart

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Cherokee Basin Operating Co., LLC v. Owens, 135 S. Ct. 547, 554 (2014).

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III.

DISCUSSION
“In order for federal subject matter jurisdiction to exist, a case must either involve diversity

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of citizenship between the parties or involve a claim arising under federal law.” Nguyen v. Caldo
Oil Co., 2015 WL 5461666, *3 (N.D. Cal. Sept. 16, 2015). Because Plaintiff’s only cause of

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United States District Court
Northern District of California

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action, PAGA, arises under California law, this case does not “involve a claim arising under

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federal law.” Id. As to diversity jurisdiction, federal law requires the party asserting federal

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jurisdiction to show (1) diversity of citizenship between the parties and (2) an amount in

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controversy greater than $75,000. Kanter v. Warner-Lambert Co., 265 F.3d 853, 856 (9th Cir.

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2001). Here, the parties agree that there is diversity of citizenship. Thus, Plaintiff’s motion rises

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and falls based on whether Defendant has shown by a preponderance of the evidence that the

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amount in controversy exceeds $75,000. Gibson v. Chrysler Corp., 261 F.3d 927, 933 (9th Cir.

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2001).

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Defendant alleges that the amount in controversy is $838,033.52. The basis for
Defendant’s calculation is as follows:

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Category

Amount

Penalties for Unpaid Wages

$59,228.52

Overtime Penalties

$42,258.40

Waiting Time Penalties

$16,461.40

Inaccurate Record Keeping / Wage Statement Penalties

$4,500.00

Cancellation of Loans

$274,585.00
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ORDER GRANTING MOTION TO REMAND

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Future Attorney’s Fees

$441,000.00

Before examining these computations, the Court takes a moment to briefly review the
purpose and structure of PAGA.
A. Legal Framework
The California Legislative enacted PAGA as a “[r]espon[se] to a shortage of State funds

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and staffing to enforce State labor laws.” Caliber Bodyworks, Inc. v. Superior Court, 36 Cal. Rptr.

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3d 31, 36 (Ct. App. 2005). PAGA “allow[s] aggrieved employees, defined as any person who was

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employed by the alleged violator and against whom one or more of the alleged violations was

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committed, to bring a civil action to collect civil penalties for [California] Labor Code violations
previously only available in enforcement actions initiated by the State’s labor law enforcement

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United States District Court
Northern District of California

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agencies.” Id. at 36–37 (internal quotation marks omitted).

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An employee suing under PAGA “does so as [a] proxy or agent of the state’s labor law

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enforcement agencies.” Arias v. Superior Court, 209 P.3d 923, 933 (Cal. 2009). In other words,

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“an aggrieved employee’s action under . . . [PAGA] functions as a substitute for an action brought

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by the government itself.” Iskanian v. CLS Transp. Los Angeles, LLC, 327 P.3d 129, 147 (Cal.

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2014). Consequently, PAGA allows an employee to recover “civil penalties on behalf of the state

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against his or her employer for [California] Labor Code violations.” Id. at 133 (emphasis added);

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see also Villacres v. ABM Indus. Inc., 117 Cal. Rptr. 3d 398, 412 (Ct. App. 2010) (“PAGA is

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limited to the recovery of civil penalties.”).

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The distinction between civil penalties and statutory penalties is particularly important to

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the instant case. As the California Court of Appeal has explained, “[s]ome [California] Labor

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Code provisions establish penalties that are not expressly denominated ‘civil penalties’ and are

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therefore not subject to . . . PAGA.” Id. “If a penalty under the [California] Labor Code is not a

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‘civil penalty,’ it is commonly called a ‘statutory penalty.’” Id.

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By way of example, California Labor Code § 201(a) “requires an employer to pay an

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employee’s wages immediately upon discharge.” Id. If an employer does not comply with

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California Labor Code § 201(a), California Labor Code § 203 “imposes a statutory penalty of one

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ORDER GRANTING MOTION TO REMAND

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day’s wages for each day that the wages remain unpaid, not to exceed 30 days.” Id. On the other

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hand, California Labor Code § 256 “impose[s] a civil penalty in the form of waiting time pay for

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the same statutory violation. But only the recovery of the civil penalty falls within the [purview

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of] PAGA.” Id.; see also Iskanian, 327 P.3d at 147 (“The civil penalties recovered on behalf of

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the state under . . . PAGA are distinct from the statutory damages to which employees may be

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entitled in their individual capacities.”).

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Some California Labor Code sections provide a specific civil penalty. An employer who
“violat[es] [California Labor Code §§] 212, 216, 221, 222, or 223,” for instance, is subject to a

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$100 civil penalty for the initial violation. Cal. Lab. Code § 225.5. For California Labor Code

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violations where no civil penalty is provided, PAGA provides a default penalty: “$100 for each

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United States District Court
Northern District of California

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aggrieved employee per pay period for the initial violation and $200 per pay period for each

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subsequent violation.” Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 429 (9th Cir. 2015)

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(citing Cal. Lab. Code § 2699(f)(2)).

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Under PAGA, “civil penalties recovered by aggrieved employees [are] distributed as

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follows: 75 percent to the [California] Labor and Workforce Development Agency [LWDA] . . . ;

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and 25 percent to the aggrieved employees.” Cal. Lab. Code § 2699(i). If successful, an

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employee who prevails in a PAGA action is “entitled to an award of reasonable attorney’s fees.”

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Cal. Lab. Code § 2699(g). The attorney’s fees award is not subject to the 75%-25% allocation

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between the LWDA and aggrieved employees. PAGA claims are subject to a one-year statute of

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limitations, unless another statutory provision provides otherwise. Thomas v. Home Depot USA

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Inc., 527 F. Supp. 2d 1003, 1007 (N.D. Cal. 2007).

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To summarize, PAGA claims are unique in several respects. First, employees bringing suit

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under PAGA step into the shoes of a California government agency, and the PAGA suit “functions

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as a substitute for an action brought by the government itself.” Iskanian, 327 P.3d at 147.

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Second, because “the state is the real party in interest” in a PAGA action, employees who bring

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suit under PAGA can only recover civil penalties. Id. at 151. Third, these civil penalties are

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apportioned so that 75% of the penalties go to the LWDA, and 25% go to the aggrieved

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employees.1 Finally, PAGA claims are subject to a one-year statute of limitations.

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With these principles in mind, the Court turns to the categories that comprise the alleged

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amount in controversy: civil penalties for unpaid wages, overtime, waiting time, and inaccurate

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record keeping and wage statements; cancellation of loans; and future attorney’s fees.

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B. Unpaid Wages

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The complaint in this case was filed on May 13, 2016. Under a one-year statute of

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limitations, the relevant time period thus begins on May 13, 2015. The complaint further alleges

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that Plaintiff’s employment with Defendant ended on March 16, 2016. Compl. ¶ 5. Hence, the

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parties agree that the Court should focus on incidents occurring between May 13, 2015 and March
16, 2016—an approximate 10-month period. Because Plaintiff was paid every two weeks, the

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United States District Court
Northern District of California

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parties also agree that there were 22 pay periods during these 10 months.

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During this 10-month period, Defendant asserts that loan “repayment deductions equaled

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$4,935.71” per month, for a total of $49,357.10. ECF No. 1 at 6. Defendant further asserts that

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Plaintiff may recover up to $9,871.42 in interest if Plaintiff prevails at trial. Id. Together, these

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numbers total $59,228.52.

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As an initial point, the Court can not, as a matter of law, consider the $9,871.42 in interest

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in the amount in controversy. The federal statute governing diversity jurisdiction expressly states

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that “district courts shall have original jurisdiction of all civil actions where the matter in

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controversy exceeds the sum or value of $75,000, exclusive of interest.” 28 U.S.C. § 1332(a)

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(emphasis added); see also Sauer v. Prudential Ins. Co. of Am., 2011 WL 5117772, *2 (C.D. Cal.

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Oct. 28, 2011) (“[P]rejudgment interest [is] expressly prohibited from inclusion in the amount in

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controversy requirement.”).

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“District courts in California are split over the question of whether the full amount of PAGA
penalties sought from a defendant should be included when calculating the amount in controversy,
or only the 25% that would ultimately be paid to the aggrieved employee.” Pagel v. Dairy
Farmers of Am., Inc., 986 F. Supp. 2d 1151, 1154 (C.D. Cal. 2013); id. at 1154–55 (citing cases).
The Court need not, however, weigh in on this split. As shown below, Defendant has failed to
meet the $75,000 threshold even if the full amount of civil penalties were included in the amount
in controversy.
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Defendant’s attempt to include the entire $49,357.10 in loan repayment deductions is

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likewise unavailing. The $49,357.10 in loan deductions appear to correspond to the complaint’s

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assertion that Defendant “unlawfully deducted debt alleged[ly] owed to [Defendant] . . . from

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Plaintiff’s earned wages,” which “result[ed] in a failure by [Defendant] to pay Plaintiff earned

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wages on a by-monthly basis.” Compl. ¶ 6.

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Under PAGA, however, the remedy for unpaid wages is not full reimbursement of those

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unpaid wages. Rather, “every person who fails to pay the wages of each employee . . . shall be

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subject to a civil penalty as follows:

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(2) For each subsequent violation, or any willful or intentional violation, two
hundred dollars ($200) for each failure to pay each employee, plus 25 percent of
the amount unlawfully withheld.

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Cal. Lab. Code § 210(a). Thus, Plaintiff may recover $100.00 for his first pay period, and $200.00

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for each of the remaining 21 pay periods, for a total of $4,300.00. In addition, pursuant to Cal.

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Lab. Code § 210(a)(2), assuming that the total amount unlawfully withheld from Plaintiff’s wages

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was $49,357.10, Plaintiff may also recover up to 25% of $49,357.10, which is $12,339.28.

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Adding these figures together results in a total of $16,639.28. This figure—$16,639.28—is the

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proper amount that Plaintiff may recover under PAGA for unpaid wages, not Defendant’s claim of

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$59,228.52.

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United States District Court
Northern District of California

(1) For any initial violation, one hundred dollars ($100) for each failure to pay
each employee.

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C. Overtime
Next, Defendant asserts that $42,258.40 should be included in the amount in controversy

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for overtime liability. Plaintiff counters that the amount should in fact be $11,726.04. Reply at 4.

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Both parties are incorrect.

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Under PAGA, “[t]he failure to pay . . . overtime . . . penalties [is] governed by the penalties

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[set forth] in California Labor Code Section 558.” Guifu Li v. A Perfect Day Franchise, Inc., 2012

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WL 2236752, *17 (N.D. Cal. June 15, 2012); see also Kamar v. RadioShack Corp., 2008 WL

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2229166, *14 (C.D. Cal. May 15, 2008) (“Because section 558 authorizes recovery of civil

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penalties and provides for LWDA enforcement, the private right of action authorized [by PAGA]

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reaches section 558.”).

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California Labor Code § 558 provides as follows:

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(a) Any employer or other person acting on behalf of an employer who violates,
or causes to be violated, a section of this chapter or any provision regulating hours
and days of work in any order of the Industrial Welfare Commission shall be
subject to a civil penalty as follows:

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(1) For any initial violation, fifty dollars ($50) for each underpaid employee for
each pay period for which the employee was underpaid in addition to an amount
sufficient to recover underpaid wages.
(2) For each subsequent violation, one hundred dollars ($100) for each underpaid
employee for each pay period for which the employee was underpaid in addition
to an amount sufficient to recover underpaid wages.

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United States District Court
Northern District of California

Cal. Lab. Code § 558(a). Plaintiff acknowledges that he worked overtime in each pay period.
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ECF No. 17-1. Thus, under California Labor Code § 558, Plaintiff can recover at least $50.00 for
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his first pay period and $100.00 for the subsequent 21 pay periods, for a total of $2,150.00.
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Moreover, the California Court of Appeal has held that California Labor Code § 558
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should be “construed as providing a civil penalty that consists of both the $50 or $100 penalty

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amount and any underpaid wages, with the underpaid wages going entirely to the affected
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employee or employees as an express exception to the general rule that civil penalties recovered in
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a PAGA action are distributed 75 percent to the Labor and Workforce Development Agency
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(LWDA) and 25 percent to the aggrieved employees.” Thurman v. Bayshore Transit Mgmt., Inc.,
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138 Cal. Rptr. 3d 130, 157 (Ct. App. 2012). Hence, Plaintiff may recover both $2,150.00 and any
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amount in overtime wages that he was not paid.
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In order to compute the amount of overtime that Plaintiff is due, the Court must multiply
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Plaintiff’s total overtime hours by one and one-half times Plaintiff’s regular hourly rate of pay.

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Huntington Mem. Hosp. v. Superior Court, 32 Cal. Rptr. 3d 373, 374 (Ct. App. 2005). Defendant
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has provided a summary of Plaintiff’s wage statements, which indicate that Plaintiff’s average

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hourly rate of pay was $68.59. ECF No. 1-4 at 2. Based on this hourly rate, the parties agree that
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Plaintiff’s overtime rate was approximately $102.86. Mot. at 9; Opp’n at 8.2
The parties, however, part ways on how many overtime hours Plaintiff worked. Plaintiff

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has submitted a declaration stating that he worked 114 overtime hours from May 2015 through

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March 2016. ECF No. 17-1 at 2. Plaintiff has reported his overtime hours by month, with

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Plaintiff reporting as few as 4 overtime hours in February 2016 to as many as 16 overtime hours in

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May 2015. Id.
Defendant, on the other hand, relies upon a one-page excerpt from a report produced by the

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Research and Practice Institute (“RPI”). ECF No. 1-7 at 2. This excerpt states that, based on a

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survey of financial advisers, RPI concluded that being a financial adviser “is not a 9:00-5:00 job;
nearly a third of advisors are working 50 or more hours, with most working several evenings every

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United States District Court
Northern District of California

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week.” Id. at 5. The excerpt further notes that “[f]ifty-one percent of advisers, who work in

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businesses that manage between $500m-$1b in client assets, work 50+ hours/week, dropping to

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31% for those working in businesses that manage less than $100m in assets.” Id. Based on this

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excerpt, Defendant assumes that Plaintiff worked 50 hours per week, which results in 10 hours of

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overtime per week and 20 hours of overtime per two-week pay period.
Under Ninth Circuit precedent, Defendant bears the burden of establishing removal

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jurisdiction by a preponderance of the evidence. See Gibson, 261 F.3d at 933 (“A defendant

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attempting to remove a diversity case must show by a preponderance of the evidence that the

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amount-in-controversy requirement is satisfied.”). Between these two perspectives—Plaintiff’s

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declaration of his overtime hours and Defendant’s third party survey of financial advisers—

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Plaintiff clearly has the better case, and Defendant has not sufficiently met its burden.

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Indeed, the RPI report has little bearing on the facts of this case. The report’s findings, for

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instance, were apparently “based on input from more than 750 advisers across the country.” Id. at

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4. Which country? Did any of these 750 advisers work for Defendant? Did any perform the sort

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One and a half times $68.59 is in fact $102.89. It is possible that the parties made a slight
rounding error. In any event, a $102.89 overtime rate and a $102.86 overtime rate does not affect
the result in the instant case.
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of work that Plaintiff performed? If so, did any of these 750 advisers regularly work 20 overtime

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hours per pay period?

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Moreover, RPI’s findings are based on information from a survey that was conducted

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“between February 11 and February 26, 2014.” Id. That is not the relevant time period for

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purposes of the instant case. As the parties acknowledge, the Court must focus on the overtime

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that Plaintiff worked between May 2015 and March 2016. Finally, the report states that only 51%

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of financial advisers who worked in businesses managing between $500 million to $1 billion in

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assets in fact worked 50 or more hours per week. Defendant has presented no evidence to indicate

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that Plaintiff was among the 51% of advisers who worked 50 or more hours per week rather than
the 49% of advisers who worked fewer than 50 hours per week. Nor has Defendant presented

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United States District Court
Northern District of California

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evidence demonstrating that Plaintiff worked in a business which managed between $500 million

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to $1 billion in assets.

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In a similar case concerning the overtime hours worked by a sales representative, the

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district court in Anderson v. The Schwan Food Co., 2013 WL 3989562 (N.D. Cal. Aug. 2, 2013),

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rejected defendant’s attempt to estimate plaintiff’s overtime based upon certain industry-wide

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assumptions. As the Anderson court explained, defendant’s “estimated overtime damages figure

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is built upon layer upon layer of assumptions that are unsupported by the complaint.” Id. at *5.

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

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[plaintiff], (2) that the current number of [sales representatives] employed is a reasonable estimate

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for the average number of [sales representatives] over the four year class period, (3) that every

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[sales representative] worked two to four hours of overtime per day, and (4) that every [sales

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representative] worked every possible work day over the four year period.” Id.

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In contrast to the RPI report, Plaintiff relies upon a declaration that he has provided under

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penalty of perjury which specifies the number of overtime hours worked during each month of the

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relevant time period. Both this Court and other courts have relied on similar declarations to

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calculate the wages due an employee. See Rivera v. Rivera, 2011 WL 1878015, *4 (N.D. Cal.

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May 17, 2011) (using sworn declaration of “amount of hours worked by each employee” and “pay

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rate” to compute total wages due); see also id. (citing Ulin v. Alaea-72, Inc., 2011 WL 723617

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(N.D. Cal. Feb. 23, 2011)). Accordingly, the Court shall consider the overtime hours set forth in

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Plaintiff’s declaration for purposes of calculating the amount in controversy.

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Plaintiff declares that he worked 114 overtime hours between May 2015 and March 2016.

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At an overtime rate of $102.86, Plaintiff may be entitled to $11,726.04 in overtime wages. This

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number must be added to the $2,150.00 that California Labor Code § 558 also allows Plaintiff to

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recover. Taken together, Plaintiff could recover $13,876.04 in overtime penalties under PAGA.

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D. Waiting Time Penalties
California Labor Code § 256 provides “a civil penalty in an amount not exceeding 30 days
pay” as a “waiting time” penalty for employers who do not pay an employee his or her wages on

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United States District Court
Northern District of California

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termination. Cal. Lab. Code § 256. Defendant asserts that Plaintiff’s claim for waiting time

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penalties places $16,461.60 in the amount in controversy, and the Court agrees. Plaintiff’s

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average hourly rate of pay was $68.59. ECF No. 1-4 at 2. Assuming an 8-hour work day and a

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30-day waiting time period results in a total penalty of $16,461.60.

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Plaintiff’s attempt to challenge this calculation is misplaced. Plaintiff asserts that his

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waiting time penalty should be based on his daily rate of pay at the time of termination. When

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Plaintiff was terminated, he had been paid $342.73, per his final wage statement. ECF No. 1-4 at

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26. If that payment is treated as a weekly rate, then Plaintiff’s daily rate of pay, assuming a seven

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day work week, would be $48.96. Reply at 6.

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Plaintiff’s calculation is flawed in several respects. First, Plaintiff has cited no authority to

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suggest that the waiting time penalty must be paid according to Plaintiff’s daily wage in the week

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immediately preceding Plaintiff’s termination. The Court has found none in its own research.

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Second, and more importantly, $342.73 does not reflect a week of work. It reflects a single day of

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work. Plaintiff’s final wage statement starts at March 16, 2016. ECF No. 1-4 at 26. Plaintiff’s

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employment terminated on March 16, 2016. There would thus be no need to divide $342.73 by 7.

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Accordingly, the Court declines to adopt Plaintiff’s calculation. Instead, consistent with
Defendant’s contentions, the Court finds that Plaintiff may recover $16,461.60 in waiting time
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penalties under PAGA.
E. Inaccurate Record Keeping / Wage Statement Penalties
Next, Defendant asserts that $4,500.00 should be included in the amount in controversy

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because Plaintiff alleges that his “written compensation records were not accurate.” ECF No. 1 at

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7. Defendant’s calculations, however, underestimate the amount in controversy.

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Plaintiff’s attempt to recover civil penalties for inaccurate compensations records

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implicates four California Labor Code provisions. First, California Labor Code § 1174.5 states

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that “[a]ny person employing labor who willfully fails to maintain . . . accurate and complete

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records . . . shall be subject to a civil penalty of five hundred dollars ($500).” Cal. Lab. Code §
1174.5. This is a one-time penalty, and both parties agree that it should be included in the amount

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United States District Court
Northern District of California

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in controversy. ECF No. 1 at 7; Reply at 6. The Court concurs with this assessment, and

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considers $500.00 under California Labor Code § 1174.5 as part of the amount in controversy.

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Next, California Labor Code § 226(a) states that “[e]very employer shall, semimonthly or

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at the time of each payment of wages, furnish each of his or her employees, either as a detachable

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part of the check, draft, or voucher paying the employee’s wages, or separately when wages are

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paid by personal check or cash, an accurate itemized [wage] statement in writing.” Cal. Lab. Code

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§ 226(a). According to Defendant, Plaintiff may recover up to $4,000.00 if Defendant violated

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California Labor Code § 226(a). Defendant bases this argument on California Labor Code §

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226(e), which states that “[a]n employee suffering injury as a result of a knowing and intentional

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failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual

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damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one

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hundred dollars ($100) per employee for each violation in a subsequent pay period, not to exceed

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an aggregate penalty of four thousand dollars ($4,000).” Cal. Lab. Code § 226(e).

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California Labor Code § 226(e), however, provides employees a statutory penalty that they

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may recover if they sue in their individual capacities, not a civil penalty recoverable under PAGA.

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As such, California Labor Code § 226(e) “does not apply to . . . PAGA,” because under PAGA a

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plaintiff may only “seek[] the recovery of civil penalties . . . as a private attorney general.”

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Case No. 16-CV-03367-LHK
ORDER GRANTING MOTION TO REMAND

1

McKenzie v. Fed. Express Corp., 765 F. Supp. 2d 1222, 1231 (C.D. Cal. 2011) (emphasis added);

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see also Stoddart v. Express Servs., Inc., 2015 WL 5522142, *9 (E.D. Cal. Sept. 16, 2015)

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(“Plaintiff correctly asserts that [California] Labor Code section 226(e) provides for statutory

4

penalties, not the civil penalties recoverable on behalf of the State.”).

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Consequently, the appropriate provision the Court must examine for violations of

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California Labor Code § 226(a) is not California Labor Code § 226(e), but California Labor Code

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§ 2699, the PAGA provision which provides a default civil penalty if no civil penalty is otherwise

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prescribed. This default civil penalty is “one hundred dollars ($100) for each aggrieved employee

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per pay period for the initial violation and two hundred dollars ($200) for each aggrieved
employee per pay period for each subsequent violation.” Cal. Lab. Code § 2699(f)(2). Pursuant

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United States District Court
Northern District of California

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to California Labor Code § 2699, Plaintiff would be entitled to $100.00 for the first pay period,

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and $200.00 for each of the 21 remaining pay periods. In total, Plaintiff may recover up to

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$4,300.00.

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If Plaintiff’s potential recovery under California Labor Code § 2699 ($4,300.00) is added

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to Plaintiff’s potential recovery under California Labor Code § 1174.5 ($500.00), the total would

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be $4,800.00. This figure—$4,800.00—is the proper amount in controversy that Plaintiff may

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recover under PAGA in inaccurate record keeping and wage statement penalties.

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F. Cancellation of Loans
Next, Defendant’s notice of removal states that Plaintiff continues to owe Defendant

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$274,585.00 from three loans. Defendant’s attempt to include this number—$274,585.00—in the

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amount in controversy, however, is misguided.

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First, as Plaintiff notes, Plaintiff’s loan amounts are “irrelevant to Plaintiff’s PAGA claim.”

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Mot. at 12. “Nowhere in Plaintiff’s PAGA claim does Plaintiff seek to . . . challenge the

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enforceability of [Defendant’s loans]. Plaintiff’s PAGA action seeks only the recovery of PAGA

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penalties arising from unlawful wage deductions.” Id. at 15 (internal quotation marks omitted).

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To put it another way, Plaintiff does not, in the instant action, dispute that Plaintiff owes

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Defendant $274,585.00 in outstanding loans. Instead, Plaintiff challenges whether Defendant

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Case No. 16-CV-03367-LHK
ORDER GRANTING MOTION TO REMAND

1

violated PAGA by deducting from Plaintiff’s wage statements in order to pay Plaintiff’s loans.

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Second, Defendant has cited no provision of the California Labor Code that would allow

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Plaintiff, as a civil penalty under PAGA, to cancel the remaining amounts on Plaintiff’s loans to

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Defendant. Nor has Defendant cited any case where a state or federal court has cancelled an

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individual employee’s debts as a PAGA civil penalty. The Court has found none in its own

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research.

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Third, Defendant acknowledges that the outstanding loan balances are actually part of an

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entirely separate action before the Arbitration Board of the Financial Industry Regulatory

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Authority (the “FINRA Action”). Opp’n at 4. The outstanding loan balances and Defendant’s
allegedly unlawful wage deductions are thus being litigated in two separate actions. In the FINRA

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United States District Court
Northern District of California

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Action, the Arbitration Board must decide whether Plaintiff owes Defendant $273,585.00 in

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outstanding loans. In the instant case, a court must decide whether Defendant’s method of

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collecting Plaintiff’s debt—via wage deductions—was unlawful. The $273,585.00 in outstanding

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loans is in controversy in the FINRA Action, while the instant action concerns what Plaintiff may

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recover in civil penalties under PAGA.

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Defendant does not challenge the foregoing points. Instead, Defendant contends that “a

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favorable ruling on the wage and hour violations pled will have binding collateral estoppel effects

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as to” the FINRA Action. Id. at 18. Hence, under the “either viewpoint” rule, Defendant argues

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that these outstanding loan amounts must be included in the amount in controversy.

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The Court disagrees. “Under the ‘either viewpoint’ rule, the test for determining the

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amount in controversy is the pecuniary result to either party which the judgment would directly

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produce.” In re Ford Motor Co./Citibank (S. Dakota), N.A., 264 F.3d 952, 958 (9th Cir. 2001).

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“The rule is usually applied in cases where the plaintiff pursues an equitable remedy,” because it

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“can be difficult to place a monetary value on the proposed remedy when it is viewed from the

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perspective of the plaintiff, but relatively straightforward to ascertain the cost to the defendant of

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complying with the remedy.” Pagel, 986 F. Supp. 2d at 1158. As the Seventh Circuit has

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explained, the “either-viewpoint” rule generally does not apply where only money damages are at

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Case No. 16-CV-03367-LHK
ORDER GRANTING MOTION TO REMAND

1

issue, as “[i]n a case that seeks only money damages, the amount the defendant will lose is more

2

or less the same” as what a plaintiff might gain. Uhl v. Thoroughbred Tech. & Telecomm., Inc.,

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309 F.3d 978, 983 (7th Cir. 2002).

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The “either viewpoint” rule does not apply to the instant case. As an initial matter, the

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rule—as noted above—is “associated almost exclusively with cases seeking injunctive relief.”

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Pagel, 986 F. Supp. 2d at 1158. Here, Plaintiff does not seek injunctive relief: Plaintiff seeks civil

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penalties under PAGA, attorney’s fees and costs, and interest. Compl. at 4–5.

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In addition, Defendant has cited no authority to suggest that a ruling in the instant case
would have any collateral estoppel effect upon the underlying FINRA Action. The Court has

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explained that these actions are different in nature: the FINRA Action will determine whether

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United States District Court
Northern District of California

9

Plaintiff owes Defendant $273,585.00 in outstanding debt, while the instant action will determine

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whether Defendant’s method of collecting Plaintiff’s debt was unlawful. These are separate and

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distinct questions. It is possible for a court to find that Defendant’s wage deductions were

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unlawful and for the FINRA Arbitration Board to determine that Plaintiff continues to owe

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$273,585.00 in outstanding loans.

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Moreover, Defendant’s own representations demonstrate that Defendant could take steps to

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prevent collateral estoppel from becoming an issue. Indeed, in Defendant’s opposition, Defendant

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states that “[o]nce this matter”—the motion to remand—is “decided,” Defendant “will move to

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enforce the terms of this valid Arbitration Agreement as it is written and compel Plaintiff to

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pursue his employment related claims in individual FINRA arbitration, if at all.” Opp’n at 5.

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Thus, Defendant has declared that it will take actions, in either federal or state court, to ensure that

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the FINRA Action and the instant action do not overlap.

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Defendant’s citation to Wright v. RBC Capital Markets Corp., 2010 WL 2599010 (E.D.

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Cal. June 24, 2010), and Sciborski v. Pacific Bell Directory, 140 Cal. Rptr. 3d 808 (Ct. App.

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2012), are inapposite. In Wright, the district court granted defendant’s motion to dismiss under

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the first-to-file doctrine. As the Wright court noted, the status of plaintiff’s debts to defendant had

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been pending before the FINRA Arbitration Board. 2010 WL 2599010, *1. Plaintiff, however,

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Case No. 16-CV-03367-LHK
ORDER GRANTING MOTION TO REMAND

1

decided to file a completely parallel lawsuit in federal court “seek[ing] a judicial declaration that

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the promissory notes [on these loans were] unenforceable.” Id. at *7. Plaintiff in Wright did not

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assert a PAGA claim; he simply attempted to re-litigate the status of his debts in an alternative

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forum. The Wright court did not discuss the “either-viewpoint” rule. In short, the facts in Wright

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are substantially distinguishable from the facts here. As the Court has pointed out, the FINRA

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Action and the instant action involve separate and distinct issues. The instant action is not, as it

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was in Wright, simply an attempt to re-litigate Plaintiff’s debts in an alternative forum.

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In Sciborski, the California Court of Appeal examined whether plaintiff’s causes of action
under the California Labor Code were preempted by the federal Labor Management Relations Act.
After concluding that plaintiff’s causes of action were not preempted, the California Court of

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United States District Court
Northern District of California

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Appeal upheld the jury’s decision to award plaintiff $35,000 in statutory penalties under the

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California Labor Code. 140 Cal. Rptr. 3d at 826–27. Notably, plaintiff in Sciborski did not bring

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a PAGA claim, did not seek civil penalties, and only recovered statutory penalties. There was no

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parallel proceeding in Sciborski, and the California Court of Appeal did not discuss the “either-

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viewpoint” rule.

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To summarize, because Plaintiff can not seek cancellation of his outstanding loans under

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PAGA, because Plaintiff’s outstanding loan balance is the subject of a separate FINRA Action,

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and because the “either viewpoint” rule does not apply, the Court declines to consider Plaintiff’s

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$274,585.00 loan balance in the amount in controversy.

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G. Future Attorney’s Fees
Finally, the parties agree that Plaintiff has, at this time, incurred little in attorney’s fees.

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Other than the instant motion to remand, there have been no other substantive motions filed.

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Rather, the primary dispute between the parties is whether the Court should estimate and include

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future attorney’s fees in determining the amount in controversy requirement.

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“As a general rule, attorneys’ fees are excludable in determining the amount in controversy

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because, normally, the successful party does not collect his attorneys’ fees in addition to or as part

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of the judgment.” Galt G/S v. JSS Scandinavia, 142 F.3d 1150, 1155 (9th Cir. 1998) (alteration

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Case No. 16-CV-03367-LHK
ORDER GRANTING MOTION TO REMAND

1

omitted). However, an exception exists if “a statute mandates or allows the payment of such

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fees.” Id. (emphasis removed). Here, PAGA does allow prevailing plaintiffs to recover attorney’s

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fees. See Cal. Lab. Code § 2699(g) (“Any employee who prevails in any action shall be entitled to

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an award of reasonable attorney’s fees.”).

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In examining whether attorney’s fees may be considered in determining the amount in
controversy in a PAGA action, “[c]ourts in the Ninth Circuit are split as to whether only attorneys’

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fees that have accrued at the time of removal should be considered in calculating the amount in

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controversy, or whether the calculation should take into account fees likely to accrue over the life

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of the case.” Carranza v. Nordstrom, Inc., 2014 WL 10537816, *17 n.99 (C.D. Cal. Dec. 12,

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2014). The Carranza court cited two cases where district courts had decided to include post-

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United States District Court
Northern District of California

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removal attorney’s fees in calculating the amount in controversy, and eight cases where district

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courts had declined to do so. Id.

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After discussing these cases, the Carranza court ultimately concluded that “only attorneys’

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fees that have accrued as of the date of removal may be considered in determining the

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jurisdictional amount . . . at stake.” Id. In reaching this decision, the Carranza court stated that

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considering future attorney’s fees would be “entirely speculative,” based on “unsupported

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assumptions,” and possibly “irrelevant,” depending on how a case is ultimately disposed. Id.

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Indeed, even in those cases where courts have considered future attorney’s fees in

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determining the amount in controversy, these courts have required defendants to provide a

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reasonably specific showing as to why a certain fee award is appropriate. In Sasso v. Noble Utah

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Long Beach, LLC, 2015 WL 898468, *5 (C.D. Cal. Mar. 3, 2015), for example, the district court

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cautioned that future attorney’s fees estimates should be “reasonable,” based on “evidence,” and

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should arrive at a “conservative estimate[].” The district court went on to base its estimate of the

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total hours in an employment discrimination case—100 hours—after surveying relevant decisions

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from other courts, with a resulting fee award of $30,000. Id. at *6. Similarly, in Brady v.

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Mercedes-Benz USA, Inc., 243 F. Supp. 2d 1004, 1011 (N.D. Cal. 2002), defendant produced

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evidence showing that approximately $5,000 had been spent in attorney’s fees prior to removal,

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Case No. 16-CV-03367-LHK
ORDER GRANTING MOTION TO REMAND

1

and, in a number of factually similar cases, approximately $60,000 was spent in total attorney’s

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fees. This reasonableness requirement also comports with the statutory text—PAGA allows

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prevailing plaintiffs to recover “an award of reasonable attorney’s fees.” Cal. Lab. Code §

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2699(g) (emphasis added).

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The Court need not, in the instant case, decide whether future attorney’s fees may be

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considered in the amount in controversy as a matter of law because Defendant’s estimate of future

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attorney’s fees is far too speculative. As such, Defendant’s estimate does not satisfy the

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reasonably specific showing that was made in Sasso or Brady and that is required under PAGA.
In the notice of removal, Defendant states that, “[a]s of 2012, Plaintiff’s counsel was

10

charging between $600 and $700 per hour for partners and between $500 and 600 per hour rate for

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United States District Court
Northern District of California

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associates.” ECF No. 1 at 8. Assuming that these same rates would be charged in the instant case,

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and “assuming Plaintiff’s counsel expends 700 hours should the matter proceed to trial,

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[attorney’s] fees would total $441,000.00 if the work was apportioned 70% to associates and 30%

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to partners.” Id. at 8.

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Defendant has provided no support for Defendant’s assumption that this matter will go to

16

trial. In fact, Defendant’s stated intention to enforce the arbitration agreement between Plaintiff

17

and Defendant immediately after this motion is decided suggests that Defendant does not believe

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that this matter will go to trial. Defendant has likewise provided no support for its assumption that

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Plaintiff’s counsel would spend 700 hours on this case. Defendant cites without explanation to

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Simmons v. PCR Technology, 209 F. Supp. 2d 1029 (N.D. Cal. 2002), but Simmons was not a

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PAGA case and the Simmons court did not once discuss how many hours were necessary to

22

litigate a PAGA action.

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The Court has also reviewed a number of cases where courts have decided to include

24

future attorney’s fees in the amount in controversy. In none of these cases did the district court (1)

25

predict that as many as 700 hours would be spent on litigation, (2) predict that a matter would

26

proceed to trial, (3) estimate attorney’s fees to be as high as $441,000.00, or (4) estimate that

27

nearly half of the alleged amount in controversy would be future attorney’s fees. See, e.g., Brady,

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18
Case No. 16-CV-03367-LHK
ORDER GRANTING MOTION TO REMAND

1

243 F. Supp. 2d at 1011 ($60,000 in attorney’s fees); Sasso, 2015 WL 898468 ($30,000 in

2

attorney’s fees); Simmons, 209 F. Supp. 2d at 1035 ($6,500 in attorney’s fees).

3

The fact that Defendant has estimated that nearly half of the amount in controversy in this

4

case will be in the form of future attorney’s fees—an amount unsupported by both fact and law—

5

is indicative of the weakness of Defendant’s case. The Court thus declines to consider the

6

$441,000.00 attorney’s fees for purposes of the amount in controversy requirement.
Having examined each of the categories of civil penalties available to Plaintiff under

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8

PAGA, the Court finds that the amount in controversy is below $75,000, the threshold amount

9

necessary for federal diversity jurisdiction. As demonstrated below, the total estimated amount in

10

controversy is $51,746.72.

United States District Court
Northern District of California

11
Category

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$51,476.72

Plaintiff’s motion to remand is therefore GRANTED.

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21

$0.00

Total

18

$0.00

Future Attorney’s Fees

17

$4,800.00

Cancellation of Loans

16

$16,461.40

Inaccurate Record Keeping / Wage Statement Penalties

15

$13,876.04

Waiting Time Penalties

14

$16,639.28

Overtime Penalties

13

Amount

Penalties for Unpaid Wages

12

IV.

CONCLUSION
For the foregoing reasons, Plaintiff’s motion to remand is GRANTED. The Clerk shall

23

transfer the case file to Santa Clara County Superior Court. The Clerk shall also serve a copy of

24

this Order on Defendant.

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26

IT IS SO ORDERED.

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Case No. 16-CV-03367-LHK
ORDER GRANTING MOTION TO REMAND

1

Dated: September 15, 2016.
______________________________________
LUCY H. KOH
United States District Judge

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United States District Court
Northern District of California

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Case No. 16-CV-03367-LHK
ORDER GRANTING MOTION TO REMAND