Calagno v. Rite Aid Corporation

• Court: District Court, N.D. California
• Decided: November 13, 2020
• Docket: 4:20-cv-05476
• Status: Unknown

Opinion

1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6 NICOLE CALAGNO, Case No. 4:20-cv-05476-YGR

7 Plaintiff, ORDER: (1) GRANTING MOTION TO REMAND FOR LACK OF SUBJECT MATTER 8 vs. JURISDICTION; (2) DENYING AS MOOT STIPULATION RE: MOTION HEARING; 9 RITE AID CORPORATION, ET. AL. (3) VACATING CASE MANAGEMENT CONFERENCE 10 Defendants. 11 Re: Dkt. Nos. 21, 36

12 13 Plaintiff Nicole Calagno brings this action against defendants Rite Aid Corporation (“Rite 14 Aid”) and Does 1 to 50, inclusive. Calagno alleges three causes of action, namely, violations of 15 (1) the California False and Misleading Advertising Law (“FAL”) (Cal. Bus. & Prof. Code §§ 16 17500, et seq.); (2) the California Unfair Competition Law (“UCL”) (Cal. Bus. & Prof. Code §§ 17 17200, et seq); and (3) the California Consumer Legal Remedies Act (“CLRA”) (Cal. Civ. Code 18 §§ 1750, et seq). 19 Now before the Court is plaintiff’s motion to remand for lack of subject matter jurisdiction 20 on the sole basis that defendant Rite Aid has not demonstrated that the amount in controversy 21 exceeds $5 million, in order to satisfy the diversity jurisdictional requirements under the Class 22 Action Fairness Act, 28 U.S.C. section 1332(d). The parties have fully briefed the motion. (See 23 Dkt. Nos. 21, 24, 29.)1 24 25 1 Having preliminarily reviewed the parties’ briefing, the Court determined that the 26 motion was appropriate for decision without oral argument, as permitted by Civil Local Rule 7- 1(b) and Federal Rule of Civil Procedure 78, and vacated the oral argument that was set for 27 October 20, 2020. See also Lake at Las Vegas Investors Group, Inc. v. Pacific Malibu Dev. Corp., 1 Having carefully reviewed the pleadings, the papers submitted on each motion, and for the 2 reasons set forth more fully below, the Court GRANTS plaintiff’s motion for remand for lack of 3 subject matter jurisdiction. The Court further DENIES AS MOOT the stipulation seeking to 4 reschedule the motion hearing to coincide with the case management conference set for November 5 16, 2020, and VACATES this case management conference. 6 I. BACKGROUND 7 On June 1, 2020, Calagno filed this putative class action lawsuit against Rite Aid in the 8 Superior Court of the State of California, County of Alameda, captioned Nicole Calagno, 9 individually and on behalf of a class of similarly situated individuals v. Rite Aid Corporation, 10 Case No. HG20064377 (the “State Court Action”). Calagno asserts individual and class claims 11 against Rite Aid for unfair, deceptive, and fraudulent practice of marketing and selling Rite Aid 12 brand liquid acetaminophen as two different, unique products – infant’s acetaminophen and 13 children’s acetaminophen. (Dkt. No. 1-1, Ex. A (“Cmplt.”)). In short, Calagno alleges that Rite 14 Aid charged more for the version of acetaminophen marketed toward infants as compared to those 15 marketed toward children, despite that both products are alleged to be identical. Calagno further 16 alleges that Rite Aid owes Calagno and the proposed class restitution, and seeks to enjoin Rite Aid 17 from engaging in the unlawful acts alleged in the complaint. Rite Aid removed the State Court 18 Action to this Court on August 6, 2020, under the basis of federal subject matter jurisdiction under 19 the Class Action Fairness Act (“CAFA”) 28 U.S.C. section 1332 (d). (Dkt. No. 1 (Removal)). 20 II. LEGAL STANDARD 21 “Federal courts are of limited jurisdiction. They possess only that power authorized by 22 Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). 23 Federal courts are presumed to lack jurisdiction unless the contrary appears affirmatively from the 24 record. Daimler Chrysler Corp v. Cuno, 547 U.S. 332, 342 n.3 (2006) (citing Renne v. Geary, 501 25 U.S. 312, 316 (1991)). Accordingly, there is a “strong presumption against removal jurisdiction” 26 when evaluating a motion to remand. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). 27 “The burden of establishing federal jurisdiction is upon the party seeking removal.” Emrich v. 1 the burden to establish subject matter jurisdiction of a removed putative class action; thus, that 2 burden remains with the party seeking removal. Abrego v. Dow Chemical Co., 443 F.3d 676, 685 3 (9th Cir. 2006). 4 Rite Aid argues that the court has jurisdiction under CAFA. CAFA grants district courts 5 original jurisdiction of “any civil action in which the amount in controversy exceeds the sum or 6 value of $5,000,000, exclusive of interest and costs, and is a class action [of more than 100 7 putative class members] in which (A) any member of a class of plaintiffs is a citizen of a State 8 different from any defendant; (B) any member of a class of plaintiffs is a foreign state or a citizen 9 or subject of a foreign state and any defendant is a citizen of a State; or (C) any member of a class 10 of plaintiffs is a citizen of a State and any defendant is a foreign state or a citizen or subject of a 11 foreign state.” 28 U.S.C. §1332 (d)(2)(A). 12 “When measuring the amount in controversy, a court must assume that the allegations of 13 the complaint are true, and that a jury will return a verdict for the plaintiff on all claims made in 14 the complaint.” Gyorke-Takatri v. Nestle USA, Inc., No. 15-cv-03702-YGR, 2015 WL 6828258, 15 at *3 (N.D. Cal. Nov. 6, 2015). The amount in controversy is “determined by the complaint 16 operative at the time of removal and encompasses all relief a court may grant on that complaint 17 . . . .” Fritsch v. Swift Transp. Co. of Arizona, 899 F.3d 785, 791 (9th Cir. 2018) quoting Chavez 18 v. JPMorgan Chase & Co., 888 F.3d 414-15 (9th Cir. 2018). The defendant must prove evidence 19 that it is “more likely than not that the amount in controversy satisfies the jurisdictional amount 20 requirement.” Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996); see also 21 Fritsch, 899 F.3d at 795 (requiring the defendant to prove by a preponderance of the evidence the 22 amount in controversy exceeds the jurisdictional threshold). 23 A court must determine the appropriateness of removal “on the basis of the pleadings at the 24 time of removal.” Broadway Grill, Inc. v. Visa Inc., 856 F.3d 1274, 1277 (9th Cir. 2017). The 25 amount in controversy includes “all relief claimed at the time of removal to which plaintiff would 26 be entitled if [they] prevail.” Fritsch, 899 F.3d at 793; see Korn v. Polo Ralph Lauren Corp., 536 27 F. Supp. 2d 1199, 1205 (E.D. Cal. 2008) (“The ultimate inquiry is what amount is put ‘in 1 III. ANALYSIS 2 There is no dispute regarding the diversity of parties, and that the aggregate number of 3 putative class members meets the 100 or greater threshold. The present issue is whether the 4 CAFA amount-in-controversy threshold has been met. 5 Calagno asserts that Rite Aid has failed to meet the amount in controversy CAFA 6 requirement of $5,000,000. Rite Aid contends that the requirement is satisfied upon consideration 7 of: (1) potential statutory fines and penalties; (2) restitution and disgorgement calculations; (3) 8 punitive damages; and (4) inclusion of attorneys’ fees. The Court addresses each of these grounds 9 in turn below. 10 A. Statutory Fines and Penalties 11 Rite Aid contends that the potential statutory fines and penalties it is facing based on these 12 asserted state claims must be considered as part of satisfying the CAFA requirement. Under Cal. 13 Bus. Prof. Code section 17500 et seq., a violation for a corporation’s false or misleading statement 14 is punishable by imprisonment or by a fine “not exceeding two thousand five hundred dollars.” 15 Thus, Rite Aid contends that Calagno’s allegation under the FAL satisfies the amount in 16 controversy requirement of $5,000,000 due to the penalty fine of $2,500 multiplied by the proven 17 distribution of at least 2,000 bottles of infants’ liquid acetaminophen in California. 18 Rite Aid does not persuade. Private plaintiffs are limited to seeking equitable relief under 19 section 17500. Brown v. Allstate Ins. Co., 17 F. Supp. 2d 1134, 1140 (S.D. Cal. 1998); see also 20 Chern v. Bank of America, 15 Cal.3d 866, 875 (1976) (holding section 17500 does not authorize 21 recovery of damages by private individuals, as they are limited to the filing of actions for an 22 injunction). Under the FAL, “[p]rivate relief is limited to the filing of actions for an injunction, 23 and civil penalties are recoverable only by specified public officers.” Chern, 15 Cal.3d at 875 24 (internal citations omitted). 25 Accordingly, as private plaintiff’s may not recover the penalty fine, but rather are solely 26 entitled to equitable relief under the FAL, the Court does not consider such statutory fines and 27 penalties when determining whether the CAFA threshold is met. 1 B. Restitution and Disgorgement 2 Calagno, individually and on behalf of a purported class, seeks remedy in the form of 3 disgorgement of profits and restitution and restoration of all costs incurred, sums or property 4 unlawfully withheld, and losses caused by Rite Aid’s alleged violations. (See Cmptl.) Here, Rite 5 Aid advances two arguments for higher calculation figures: (1) that the time period for calculating 6 restitution and disgorgement begin in 2011; and (2) that damage should be calculated on the full 7 purchase price of the acetaminophen, and not merely the price differences between the otherwise 8 two identical versions. 9 Neither of these bases persuade. First, with respect to the issue of timing, Rite Aid 10 contends that the time frame was not sufficiently pled in the complaint, and that the Court should 11 therefore calculate restitution from 2011 to present, applying the applicable period where the Food 12 and Drug Administration (“FDA”) changed regulations for liquid acetaminophen for infants. This 13 argument fails, as the complaint only references the year 2011 in two paragraphs to identify action 14 undertaken by the FDA. The complaint is otherwise replete with references to April 2016. 15 (Cmplt. ¶¶ 17, 19, 20, 25). As pled, the complaint identifies the class period as reaching back to 16 April 6, 2016, which is approximately in sync with the applicable statute of limitations period for 17 the FAL, CLRA, and UCL. See Cal Code Civ. Proc § 338(a); Cal. Code Civ. Proc. §1783; Cal. 18 Bus. & Prof. Code § 17208. Thus, the timeframe is appropriately limited to damages beginning 19 from April 2016. 20 Second, Rite Aid’s calculations based on the full purchase price of the acetaminophen are 21 also without merit.2 As Calagno correctly notes, any damages calculation should be reduced to the 22 per-ounce price difference between the lower-priced Children’s acetaminophen and the higher- 23 priced Infants’ acetaminophen multiplied by the number of ounces of the Infants’ brand that were 24 sold in California, due to the fact that the putative class received some benefit of the use of the 25 allegedly indifferent acetaminophen formulas. Rite Aid cites no authority for the proposition that 26

27 2 The Court notes that even accepting Rite Aid’s calculations based on the full purchase 1 the Court should consider the full purchase price instead of the price difference between two 2 identical versions. The alleged overcharge percentage is 60%, reducing the estimated total sales of 3 $1,350,000 to an estimated overcharge amount of $810,000. Thus, the Court calculates the 4 restitution amount to be approximately $810,000. 5 C. Punitive Damages 6 Rite Aid included punitive damages as part of its calculation to reach the $5,000,000 7 CAFA threshold. Rite Aid relies on Greene v. Harley-Davidson, Inc., where that defendant cited 8 four prior punitive damage awards under the CLRA to meet the amount in controversy 9 requirement under CAFA. Greene, 965 F.3d 767, 769 (9th Cir. 2020). Specifically, the 10 identification of prior cases involving the “same cause of action in which the juries awarded 11 punitive damages based on the same or higher punitive damage ratios,” demonstrated that it was 12 reasonably possible to achieve the punitive damage amount in their own case. Id. 13 Here, Calagno does not seek punitive damages. Under the operative complaint, Calagno 14 may only seek such punitive damages under the CLRA, as punitive damages are otherwise not 15 recoverable under the UCL or FAL. (See, e.g., Veera v. Banana Republic, LLC., 6 Cal.App.5th 16 907, 915 (2016) (“[R]emedies available in a UCL or FAL action are generally limited to injunctive 17 relief and restitution”); see Clark v. Superior Court, 50 Cal.4th 605, 610 (2010) (holding punitive 18 damages not available under the UCL). Under the CLRA, punitive damages are only available if 19 the allegations in a complaint support an award of punitive damages. Petkevicius v. NBTY, Inc., 20 No. 3:14-cv-02616-CAB-(RBB), 2017 WL 1113295, * 9 (S.D. Cal. March 24, 2017) (holding 21 punitive damages can be included in the amount in controversy if “the party with the burden 22 presents evidence of a possible punitive damage award, usually in the form of punitive damage 23 awards in factually analogous cases”); see Killion v. AutoZone Stores Inc., No. 5:10-cv-01978- 24 JHN-AGRx, 2011 WL 590292, at *2 (C.D. Cal. Feb. 8, 2011) (“Defendants cite two cases . . . in 25 which punitive damages were awarded, but make no attempt to analogize. . . Simply citing these 26 cases merely illustrate that punitive damages are possible but in no way shows that it is likely in 27 this case. Therefore, Defendants’ inclusion of punitive damages in the calculation of the 1 pled to only request injunctive and equitable relief. There is otherwise no require for punitive 2 damages anywhere in the operative complaint. Thus, the Court concludes that no amount for 3 punitive damages should be considered in the CAFA threshold determination, given that no such 4 amounts are pled. 5 Even if the Court were to consider potential punitive damages, despite not being so pled in 6 the complaint, in calculating the CAFA requirement, such an amount would not impact the 7 Court’s calculations and analysis. In general, courts have applied a 1:1 multiplier to the economic 8 damages to punitive damages to determine the amount of damages at issue under CAFA. Greene, 9 965 F.3d at 772. Applying the above restitution value, the possible punitive damage amount 10 would equal $810,000. As will be discussed, this amount, even in connection with the other 11 amounts, is not close to the necessary $5,000,000 threshold under CAFA. 12 D. Attorneys’ Fees 13 Calagno seeks attorneys’ fees, which are included in determining the amount in 14 controversy under CAFA. See Fritsch, 899 F.3d at 795 (“[A] court must include future attorneys’ 15 fees recoverable by statute or contract when assessing whether the amount in controversy 16 requirement is met”). “[T]he defendant must prove the amount of attorneys’ fees at stake by a 17 preponderance of the evidence . . . .” Id. at 796. 18 Here, Rite Aid and Calagno agree to the inclusion of attorneys’ fees at the 25% 19 benchmark. See id. at 796 (demonstrating the reasonableness of assuming an attorney fee as 25% 20 of the amount in controversy). Based on both parties acceptance of the 25% standard, the 21 calculation of attorneys’ fees would equal $202,500 in the model excluding punitive damages. 22 Even with punitive damages, the amount is only $405,000. 23 E. Calculations 24 In summation, the Court provides two summary calculations, based on whether punitive 25 damages are included in the model or not: 26 Damages With Punitive Damages Without Punitive Damages 27 Restitution $810,000 $810,000 $105,000 $202,500 2 TOTAL $2,025,000 $1,012,500 3 Both of these calculations fail to reach the $5,000,000 amount in controversy requirement for 4 || jurisdiction under CAFA3 5 || Iv. Conclusion 6 For the foregoing reasons, the Court GRANTS the motion to remand for lack of subject 7 matter jurisdiction. The Court further DENIES AS MOOT the stipulation seeking to reschedule the 8 || motion hearing to coincide with the case management conference set for November 16, 2020, and 9 VACATES this case management conference. 10 The Clerk of the Court is directed to close the case and remand to the Alameda County 11 |) Superior Court. This Order terminates Docket Numbers 21 and 36.

13 Ir Is SO ORDERED.

(«4 © 15 || Dated: November 13, 2020 16 YVONNE GONZALEZ ROGERS UNITED STATES DISTRICT JUDGE 17 Z 18 19 20 21 22 23 24 25 26 3 Even assuming the best figures for Rite Aid based on the full purchase price, the Court 07 calculates that restitution ($1,350,000), punitive damages ($1,350,000), and the corresponding attorneys’ fees ($675,000) only total $3,375,000. Such a figure still does not satisfy the 2g || $5,000,000 CAFA threshold.