Coffin v. MAGELLAN HRSC, INC.

• Court: District Court, S.D. California
• Decided: February 18, 2020
• Docket: 3:19-cv-02047
• Status: Unknown

Opinion

5 6

7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10

11 CHRISTIE COFFIN, on behalf of Case No. 19-cv-2047-BAS-NLS 12 herself and all other aggrieved employees, ORDER GRANTING 13 PLAINTIFF’S MOTION TO Plaintiff, REMAND 14 v. [ECF No. 16] 15 MAGELLAN HRSC, INC., 16 Defendant. 17 18 19 In September 2019, Plaintiff Christie Coffin filed a complaint against 20 Defendant Magellan HRSC, Inc. in California state court. (ECF No. 1-3.) The 21 complaint alleges violations of the California Private Attorney General’s Act, 22 California Labor Code sections 2689 et seq. Magellan removed the case to this Court 23 pursuant to 28 U.S.C. § 1332(a). Plaintiff now moves for remand. (“Mot.,” ECF 24 No. 16.) Magellan filed an opposition to the Motion, (“Opp’n,” ECF No. 26), to 25 which Plaintiff replied, (“Reply, ECF No. 28). 26 The Court finds this Motion suitable for determination on the papers and 27 without oral argument. Civ. L. R. 7.1(d)(1). For the reasons stated below, the Court 1 I. PLAINTIFF’S FACTUAL ALLEGATIONS 2 Plaintiff works for Magellan in a non-exempt capacity as a senior care 3 manager. (“Compl.,” ECF No. 1-3, ¶ 10.) At all relevant times, Magellan had a 4 policy where it did not compensate its California non-exempt care managers and/or 5 senior care managers with overtime wages equal to 1 ½ times the employees’ regular 6 rate of pay for all hours worked in excess of 40 hours in a week or 8 hours in a work 7 day. (Id. ¶ 11.) Also at all relevant times, Magellan did not provide its employees 8 with an accurate itemized wage statement telling them the number of hours worked, 9 the appropriate rate of pay for the hours, and detailing any overtime compensation. 10 (Id. ¶ 12.) Therefore, Plaintiff, on behalf of herself and other employees who worked 11 as care managers and/or senior care managers, brings this action pursuant to the 12 California Private Attorneys General Act (“PAGA”) (California Labor Code § 2698 13 et seq.). Plaintiff alleges violations of Labor Code sections 201, 202, 203, 204, 206, 14 226(a), 510, 1198, and IWC Wage Order No. 4, California Code of Regulations title 15 8, section 11090 (“Wage Order No. 4”). (Id. ¶ 13.) 16 Magellan removed this case pursuant to diversity jurisdiction.1 17 II. LEGAL STANDARD 18 “Federal courts are courts of limited jurisdiction.” Kokkonen v. Guardian Life 19 Ins. Co. of Am., 511 U.S. 375, 377 (1994). “They possess only that power authorized 20 by Constitution or a statute, which is not to be expanded by judicial decree.” Id. 21 (internal citations omitted). “It is to be presumed that a cause lies outside this limited 22 jurisdiction and the burden of establishing the contrary rests upon the party asserting 23 jurisdiction.” Id. (internal citations omitted); see also Abrego Abrego v. Dow Chem. 24 Co., 443 F.3d 676, 684 (9th Cir. 2006). 25

26 1 Plaintiff submitted evidentiary objections as part of her Motion to Remand. (ECF No. 16-2.) Plaintiff objects to two declarations that Magellan attached to its Notice of Removal. The 27 declarations relate to Magellan’s contention regarding Plaintiff’s attorney’s fees. The Court did 1 Consistent with the limited jurisdiction of federal courts, the removal statute 2 is strictly construed against removal jurisdiction. Gaus v. Miles, Inc., 980 F.2d 564, 3 566 (9th Cir. 1992); see also Sygenta Crop Prot. v. Henson, 537 U.S. 28, 32 (2002). 4 “The ‘strong presumption’ against removal jurisdiction means that the defendant 5 always has the burden of establishing that removal is proper.” Gaus, 980 F.2d at 6 566. 7 “A motion to remand is the proper procedure for challenging removal.” 8 Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009) (citing 9 28 U.S.C. § 1447(c)). The propriety of removal turns on whether the case could have 10 originally been filed in federal court, Chicago v. Int’l Coll. of Surgeons, 522 U.S. 11 156, 163 (1997), and the court’s analysis focuses on the pleadings “as of the time the 12 complaint is filed and removal is effected,” Strotek Corp. v. Air Transp. Ass’n of Am., 13 300 F.3d 1129, 1131 (9th Cir. 2002). 14 III. ANALYSIS 15 Diversity jurisdiction exists where an action is between “citizens of different 16 States” and “the matter in controversy exceeds the sum or value of $75,000, exclusive 17 of interest and costs.” 28 U.S.C. § 1332(a). Plaintiff argues neither requirement is 18 met. 19 A. Claim Splitting 20 Magellan’s first argument is that this case is removable because Plaintiff acted 21 in bad faith in filing it. (“Removal Notice,” ECF No. 1, ¶ 29.) Plaintiff currently has 22 two cases pending before this Court, and Magellan argues Plaintiff has impermissibly 23 “split” one cause of action into the two suits. (Id. ¶ 35); see Crowley v. Katleman, 8 24 Cal. 4th 666, 681 (1994) (“A pleading that states the violation of one primary right 25 in two causes of action contravenes the rule against ‘splitting’ a cause of action.”). 26 In Plaintiff’s other case, she and two other plaintiffs bring causes of action against 27 Magellan for violations of the California Labor Code for failure to pay wages, failure 1 statements. (“Coffin I,” 19-cv-1337-BAS-NLS.) Magellan requests the Court 2 consolidate the two cases. (Opp’n at 3; see also ECF No. 12 (motion to consolidate).) 3 Under some circumstances, Federal Rule of Civil Procedure 42 authorizes 4 consolidation of actions pending before a federal district court. See Fed. R. Civ. P. 5 42. Consolidation is distinct from subject matter jurisdiction. Subject matter 6 jurisdiction is a fundamental constitutional requirement and cannot be waived. 7 Billingsly v. C.I.R., 868 F.2d 1081, 1085 (9th Cir. 1989). “Generally a court cannot 8 consider a motion to consolidate where the court does not have subject matter 9 jurisdiction over the case.” Alvandi v. CVS Pharmacy, Inc., No. CV 15-1503-AB 10 (AGRx), 2015 WL 3407899, at *4 (C.D. Cal. May 27, 2015); Fed. Nat. Mortg. Ass’n 11 v. Lemon, No. CV 11-3948 DDP (FFMx), 2011 WL 3204344, at *3 (C.D. Cal. July 12 26, 2011) (“Federal Rule of Civil Procedure 42 allows the court to consolidate 13 actions with a common question of law or fact that are properly before the court. . . . 14 As the court does not have subject matter jurisdiction over the complaint, the court 15 cannot consolidate this action as requested by Defendant with [the other] matter.”). 16 The exception to this rule is when plaintiffs try to “game the system” by artificially 17 splitting their claims and filing separate state actions when there is “no colorable 18 basis” for dividing up the claims “other than to frustrate CAFA.” Freeman v. Blue 19 Ridge Paper Prods., Inc., 551 F.3d 405, 408–09 (6th Cir. 2008). Courts in this circuit 20 have recognized Freeman but noted the narrow exception the case established. See 21 Tanoh v. Dow Chem. Co., 561 F.3d 945, 955 (9th Cir. 2009); Alvandi, 2015 WL 22 3407899, at *4; Site Mgmt. Sols., Inc. v. TMO CA/NV, LLC, No cv 10-679 MMM 23 (JEMx), 2011 WL 1743285, at *4 (C.D. Cal. May 4, 2011); Royalty Alliance, Inc. v. 24 Tarsadia Hotel, No. 09-cv-2739 DMS (CAB), 2010 WL 3339202, *3 (S.D. Cal. Aug. 25 23, 2010). 26 Here, while Magellan argues that Plaintiff has engaged in improper claim- 27 splitting (Opp’n at 3), it does not convincingly argue that Plaintiff did so to frustrate 1 rather than add her PAGA claim to her first complaint,2 but Plaintiff does not dispute 2 that Coffin I is properly in this Court, therefore, she does not appear to be attempting 3 to stay out of federal court (or avoid CAFA) entirely. (See Coffin I, ECF No. 1 4 (Magellan’s removal pursuant to CAFA).) The Court is sympathetic to Magellan’s 5 plight in having to defend itself against Plaintiff in two separate courts, but, without 6 evidence of a clear attempt by Plaintiff to frustrate CAFA, the Court declines to apply 7 the Freeman exception and evaluate consolidation before analyzing the propriety of 8 subject matter jurisdiction. 9 And, the Court further notes that it cannot assert supplemental jurisdiction over 10 this case to connect it to the other case. Section 1367(a) “does not authorize 11 supplemental jurisdiction over free-standing state law claims that are related to a 12 separate action over which the court has jurisdiction.” Bank of New York Mellon v. 13 Palmer, No. 1:17-cv-00707-DAD-SKO, 2017 WL 2791662, at *2 (E.D. Cal. June 14 28, 2017); see also Qualxserv, Inc. v. Alvarez, No. C 06-05956 JSW, 2007 WL 15 608121, at *1 (N.D. Cal. Feb. 23, 2007) (“The language of section 1367 ‘requires 16 that the supplemental jurisdiction be exercised in the same case, not a separate or 17 subsequent case.’”). 18 The Court now turns to the two requirements of diversity jurisdiction. 19 B. Complete Diversity 20 “When an action is removed based on diversity, complete diversity must exist 21 at removal.” Gould v. Mut. Life Ins. Co. of New York, 790 F.2d 769, 773 (9th Cir. 22 1986) (citing Miller v. Grgurich, 763 F.2d 372, 373 (9th Cir. 1985)). Complete 23

24 2 PAGA provides a statutory right to amend a prior pleading to add a PAGA claim. Cal. Labor 25 Code § 2699.3(C) (“Notwithstanding any other provision of law, a plaintiff may as a matter of right amend an existing complaint to add a cause of action arising under this part at any time within 60 26 days of the time periods specified in this part.”). It appears that Plaintiff originally intended to do so, as evidenced by the Coffin I complaint which states, “Plaintiffs will amend this complaint to 27 allege a claim for civil penalties pursuant to California Labor Code sections 210 and/or 2699(f) 1 diversity exists where “the citizenship of each plaintiff is diverse from the citizenship 2 of each defendant.” Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). When 3 removing a case, defendants are “merely required to allege (not to prove)” the 4 citizenship of the parties. See Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th 5 Cir. 2001). 6 “In assessing diversity jurisdiction, courts look to the real parties to the 7 controversy.” Lewis v. Clarke, 137 S. Ct. 1285, 1295 (2017) (citing Navarro Sav. 8 Ass’n v. Lee, 446 U.S. 458, 460 (1980)). “Thus, a federal court must disregard 9 nominal or formal parties and rest jurisdiction only upon the citizenship of real 10 parties to the controversy.” Navarro, 446 U.S. at 460; see also Carden v. Arkoma 11 Assocs., 494 U.S. 185, 191–92 (1990) (explaining the “real party to the controversy” 12 approach has been used to determine whose citizenship should be considered for 13 diversity jurisdiction—not to determine whether a specific party is a citizen). 14 Plaintiff provides that she is a citizen of California. (Compl. ¶ 1.) Magellan 15 provides that it is not and was not at the time this action was commenced, a citizen 16 of California. (Removal Notice ¶ 14.) It is a corporation organized and existing 17 under the laws of the state of Ohio with its headquarters and principal place of 18 business located in Columbia, Maryland. (Id.) Therefore, Magellan contends that 19 there is complete diversity. However, Plaintiff argues that the Court must consider 20 the citizenship of the State of California—“the real party in interest”—not the 21 citizenship of Coffin, who is only “the State’s nominal plaintiff and proxy.” (Mot. 22 at 12.) 23 In support of her argument, Plaintiff relies on Urbino v. Orkin Services of 24 California, Inc., 726 F.3d 1118, 1122 (9th Cir. 2013), where the Ninth Circuit was 25 faced with the question of “whether the penalties recoverable on behalf of all 26 aggrieved employees may be considered in their totality to clear the jurisdictional 27 hurdle” of the $75,000 amount in controversy. In that case, the defendant argued 1 enforcing its labor laws through PAGA.” Id. Thus, the defendant argued for 2 aggregation because there was a single plaintiff aggregating multiple of his own 3 claims against a single defendant, which is allowed to satisfy the amount in 4 controversy requirement. Id. The Ninth Circuit held: 5 To the extent Plaintiff can—and does—assert anything but his individual interest, however, we are unpersuaded that such a suit, the 6 primary benefit of which will inure to the state, satisfies the 7 requirements of federal diversity jurisdiction. The state, as the real party in interest, is not a ‘citizen’ for diversity purposes.” 8 9 Id. at 1122–23 (citing Navarro, 446 U.S. at 461 (stating courts “must disregard 10 nominal or formal parties and rest jurisdiction only upon the citizenship of real 11 parties to the controversy”)). Plaintiff also points to another Ninth Circuit case, 12 Baumann v. Chase Investment Services Corp., 747 F.3d 1117 (9th Cir. 2014), for the 13 proposition that the named plaintiff in a PAGA action—who steps in the shoes of the 14 State of California as a deputized attorney general—is a nominal party. (Reply at 8); 15 see Baumann, 747 F.3d at 112 (“PAGA plaintiffs are private attorneys general who, 16 stepping into the shoes of the LWDA, bring claims on behalf of the state agency.”). 17 But other courts have pointed out that Urbino and Baumann “do not stand for 18 the proposition that in PAGA actions, California is a ‘real party to the controversy’ 19 whose presence destroys diversity.” Solis v. Dunbar Armored, Inc., No. 17-cv-2193 20 DMS (JLB), 2018 WL 259200 at *2 (S.D. Cal. Jan. 2, 2018). The statement in 21 Urbino was made “in the context of a discussion about whether the portion of 22 individual PAGA penalties which inure to the state could be aggregated and counted 23 towards the amount in controversy requirement for purposes of conferring diversity 24 jurisdiction.” Id. Courts note that Urbino does not stand for the proposition that “the 25 state is always an actual party in all PAGA actions, such that federal courts could 26 never exercise diversity jurisdiction over PAGA claims.” Olson v. Michaels Stores, 27 Inc., No. CV1703403ABGJSX, 2017 WL 3317811, at *3 (C.D. Cal. Aug. 2, 2017) 1 19-766 AG (SSx), 2019 WL 2522674, at *2 (C.D. Cal. June 18, 2019) (holding 2 “courts in the Ninth Circuit have considered the named plaintiff’s citizenship, and 3 not the state’s, to be determinative of diversity jurisdiction in PAGA cases” and that 4 Urbino was “considering a different question”); Solis, 2018 WL 259200 at *2 5 (finding that neither Urbino nor Baumann “holds that in PAGA actions the state is 6 always an actual party or that a representative plaintiff is always a nominal party, 7 thereby precluding diversity jurisdiction”). 8 This Court agrees with these decisions and does not read Urbino or Baumann 9 to support Plaintiff’s proposition. Considering the citizenship of Plaintiff 10 (California) and Magellan (Ohio and Maryland), the Court finds there is complete 11 diversity. 12 C. Amount in Controversy 13 In her complaint, Plaintiff details that she and other similarly situated 14 aggrieved employees 15 are entitled to recover civil penalties in the amount of one hundred dollars ($100) for each aggrieved employee per pay period for each 16 initial violation and two hundred dollars ($200) for each aggrieved 17 employee per pay period for each subsequent violation, plus costs and attorney’s fees, for violations of the Labor Code sections 201, 202, 203, 18 204, 206, 226(a), 510, 1198, and Wage Order No. 4. 19 20 (Compl. ¶ 14.) Plaintiff also seeks attorney’s fees and costs. (Id. at Prayer for Relief.) 21 Plaintiff contends that her maximum recovery in this case, including her individual 22 PAGA penalties and her pro-rata share of a reasonable attorney’s fees, is $5,687.50. 23 (Mot. at 7.) Magellan disagrees. “Where, as here, ‘it is unclear or ambiguous from 24 the face of a state-court complaint whether the requisite amount in controversy is 25 pled,’ the ‘removing defendant bears the burden of establishing, by a preponderance 26 of the evidence, that the amount in controversy exceeds’ the jurisdictional threshold.” 27 Urbino, 726 F.3d at 1121–22 (citations omitted). 1 acquiesces “that PAGA penalties may be ‘stacked’ for each of the four Labor Code 2 violations applicable to her individual claim (e.g., Labor Code sections 204, 206, 3 226(a), and 510/1198.).” (Reply at 7); see Salazar v. PODS Enters., LLC, No. EDCV 4 19-260-MWF (KKx), 2019 WL 2023726, at *6 (C.D. Cal. May 8, 2019) (noting that 5 many district courts have allowed the stacking of PAGA penalties in determining the 6 amount of controversy in an individual action). 7 Magellan calculates 33 pay periods in which Plaintiff was paid during the 8 relevant time period. (Removal Notice ¶ 18.)3 Plaintiff does not contest this. (Mot. 9 at 6.) In sum, Magellan calculates the total potential liabilities for PAGA penalties 10 to be $42,100. (Removal Notice ¶ 23.) Magellan adds to this amount what it believes 11 will be at least “6 figures” in attorney’s fees and arrives at an amount in controversy 12 of $142,100. (Id. ¶ 28.) 13 Although the parties disagree over a number of issues, the most important one 14 is aggregation of the penalties. PAGA requires that any penalties assessed against a 15 defendant “be distributed as follows: 75 percent to the Labor and Workforce 16 Development Agency [(“LWDA”)]. . . and 25 percent to the aggrieved employees.” 17 Cal. Lab. Code § 2699(i). Under Ninth Circuit precedent, all aggrieved employees’ 18 PAGA penalties may not be aggregated to meet the minimum amount in controversy 19 requirement. Urbino, 726 F.3d at 1122. However, the issue is whether the court can 20 aggregate an individual plaintiff’s share (25%) with the share that goes to the state 21 (75%). 22 Many courts have analyzed this question. See Proctor v. Helena Agri- 23 3 To explain this calculation, Magellan provides, 24 California law currently applies a one-year statute of limitation to PAGA claims, 25 with an additional 65 day tolling period, for the period a plaintiff must wait for LWDA to provide notice about whether a plaintiff may pursue a civil action. Using 26 the one year and 65 day statute of limitations, Plaintiff’s PAGA claim goes back to July 15, 2018 (or one year and 65 days before Plaintiff filed her Complaint on 27 September 18, 2019) and run through today, October 25, 2019. There are 1 Enterprises, LLC, No. 18-CV-2834 JLS (NLS), 2019 WL 1923091, at *2 (S.D. Cal. 2 Apr. 30, 2019) (noting the split of authority on this question). The Proctor court 3 noted that although the issue is undecided, most courts only consider the plaintiff’s 4 portion of the 25% that aggrieved employees may recover in calculating the amount 5 in controversy. Id. It found this approach to be more persuasive, as there is “no 6 logical reason for [c]ourts to refuse to consider one portion of an award that the 7 plaintiff will not recover (the other aggrieved employees’ shares), but take into 8 account another portion that the plaintiff will not recover (LWDA’s share).” Id. 9 (quoting Sloan v. IGH Mgmt (Md.) LLC, No. CV 19-21-DMG (JCX), 2019 WL 10 1111191, at *2 (C.D. Cal. Mar. 11, 2019)); see also Adame v. Comtek Logistics, Inc., 11 No. EDCV 15-2232 DDP (KKx), 2016 WL 1389754, at *6 (C.D. Cal. Apr. 7, 2016) 12 (finding more persuasive the cases that did not aggregate the state’s share with the 13 aggrieved employee’s share). 14 This Court agrees with this analysis and finds it sound. The majority of courts 15 consider only the plaintiff’s portion of the award, and the Court finds no reason to 16 stand with the outliers. Further, as one court pointed out, “since the matter is unclear, 17 the Court finds that the presumption against diversity jurisdiction also weighs in favor 18 of remand.” Adame, 2016 WL 1389754, at *6. The Court agrees and therefore will 19 only consider Plaintiff’s portion of the 25% that aggrieved employees may recover. 20 Even if the Court were to use Defendant’s highest calculation which combines 21 penalties for all alleged Labor Code violations ($42,100) and take 25% of this number 22 ($10,525), this falls far below the $75,000 threshold. 23 Further, adding attorney’s fees does not raise the amount above the threshold. 24 PAGA provides that “[a]ny employee who prevails in any [PAGA] action shall be 25 entitled to an award of reasonable attorney’s fees and costs.” Cal. Lab. Code 26 § 2699(g)(1). “[W]here an underlying statute authorizes an award of attorneys’ fees, 27 either with mandatory or discretionary language, such fees may be included in the 1 1998). Courts may exercise their discretion to choose between the lodestar and 2 || percentage method in calculating fees. In re Mercury Interactive Corp. Secs. Litig., 3 |1618 F.3d 988, 992 (9th Cir. 2010). Under the percentage method, the Ninth Circuit 4 ||has established that 25% is the benchmark award for attorney’s fees in a common 5 ||fund case. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1029 (9th Cir. 1998); see 6 || Hernandez v. Dunbar Armored, Inc., No. 18-cv-1046 JLS (LL), 2019 WL 1324743, 7 |jat *4 (S.D. Cal. Mar. 25, 2019) (noting that district courts assume a benchmark fee 8 □□ award of 25% in cases similar to this one). Even assuming, as some district courts 9 ||have, a benchmark fee award of 25%, and even using 25% of Defendant’s highest 10 |/calculation ($42,100), this would only double the amount in controversy from 11 |/$10,525 to $21,050. This falls far below the diversity jurisdiction threshold. 12 Therefore, the Court finds that Magellan has not met its burden in establishing 13 that the amount in controversy exceeds the jurisdictional threshold. The Court lacks 14 || subject matter jurisdiction over this case. 15 CONCLUSION 16 In light of the foregoing, the Court GRANTS Plaintiff’s Motion to Remand 17 ||(ECF No. 16) and REMANDS this action to the Superior Court of the State of 18 || California, County of San Diego. The Court also DENIES AS MOOT Magellan’s 19 || Motion to Stay (ECF No. 15) and Motion to Consolidate (ECF No. 12). Because this 20 || Order concludes the litigation in this matter, the Clerk of Court SHALL CLOSE the 21 |/ file. 22 IT IS SO ORDERED. 23 24 ||DATED: February 18, 2020 25 ( pict 4 (Hiphaa 6 26 United States District Judge 27 28