In re E-3 Systems Litigation

• Court: District Court, N.D. California
• Decided: November 8, 2019
• Docket: 4:19-cv-01453
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 JOSE FRANCO, Case No. 19-cv-01453-HSG

8 Plaintiff, ORDER DENYING PLAINTIFF’S MOTION TO REMAND 9 v. Re: Dkt. No. 8 10 E-3 SYSTEMS, 11 Defendant.

12 JOSE FRANCO, Case No. 19-cv-02854-HSG 13 Plaintiff, Re: Dkt. No. 9

14 v.

15 E-3 SYSTEMS, 16 Defendant.

17 18 Plaintiff Jose Franco filed these putative class and representative actions in state court. 19 Case No. 19-cv-1453-HSG, Dkt. No. 1, Ex. A (“Mot.”); Case No. 19-cv-2854-HSG, Dkt. No. 1, 20 Ex. A.1 Defendant removed the actions to federal court based on federal preemption under § 301 21 of the Labor Management Relations Act of 1974 (“LMRA”), 29 U.S.C. § 185. Dkt. No. 1; Case 22 No. 19-cv-2854-HSG, Dkt. No. 1. Plaintiff now seeks to remand the actions back to state court. 23 After carefully considering the parties’ arguments, the Court DENIES Plaintiff’s motion. 24 I. LEGAL STANDARD 25 “Except as otherwise expressly provided by Act of Congress, any civil action brought in a 26 State court of which the district courts of the United States have original jurisdiction, may be 27 1 removed” to federal court. 28 U.S.C. § 1441(a). Federal district courts are courts of limited 2 jurisdiction, and “[n]o principle is more fundamental to the judiciary’s proper role in our system of 3 government than the constitutional limitation of federal-court jurisdiction to actual cases or 4 controversies.” DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 341 (2006) (citation and 5 quotations omitted and alterations in original). Consistent with this foundational principle, there is 6 a “‘strong presumption’ against removal jurisdiction.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th 7 Cir. 1992) (citation omitted). 8 If the district court lacks jurisdiction over an action, a plaintiff may seek remand to state 9 court. See 28 U.S.C. § 1447(c). “Federal jurisdiction must be rejected if there is any doubt as to 10 the right of removal in the first instance.” Gaus, 980 F.2d at 566. Accordingly, “[t]he strong 11 presumption against removal jurisdiction means that the defendant always has the burden of 12 establishing that removal is proper . . . .” Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th 13 Cir. 2009). 14 In the context of diversity jurisdiction, the Supreme Court has held that the defendant bears 15 the burden of establishing jurisdiction by a preponderance of the evidence. Dart Cherokee Basin 16 Operating Co., LLC v. Owens, 574 U.S. 81, 88 (2014); see also 28 U.S.C. § 1446. District courts 17 in this circuit have applied this standard in the § 301 preemption context. See, e.g., Huffman v. 18 Pac. Gateway Concessions LLC, No. 19-CV-01791-PJH, 2019 WL 2563133, at *2 (N.D. Cal. 19 June 21, 2019); Van Bebber v. Dignity Health, No. 119CV00264DADEPG, 2019 WL 4127204, at 20 *8 (E.D. Cal. Aug. 30, 2019). 21 II. DISCUSSION 22 Plaintiff is a citizen of California and worked as a non-exempt hourly employee for 23 Defendant E-3 Systems from August 18, 2014 to May 15, 2018. Dkt. No. 1, Ex. A (“Compl.”); 24 Dkt. No. 9-1, Ex. B, Declaration of Albert Gonzales (“Gonzales Decl.”) ¶ 3. E-3 Systems is a 25 California corporation with its headquarters in Union City, California. Compl. ¶ 5. On February 26 13, 2019, Plaintiff filed this putative labor class action alleging claims under the California Labor 27 Code, including a claim for failure to pay overtime under § 510. Compl. ¶¶ 34–75. The putative 1 After Defendant removed the putative class action on March 20, 2019, Plaintiff filed 2 another action in state court, Case No. 19-cv-2854-HSG. The complaint is based on the same set 3 of facts as those in his putative class action complaint, although Plaintiff asserts that the complaint 4 is a representative and “PAGA-only” action. Case No. 19-cv-2854-HSG, Dkt. No. 1, Ex. A 5 (“PAGA Compl.”). That complaint only includes PAGA claims, but the predicate California 6 Labor Code violations for which Plaintiff seeks penalties are the same as those in Case No. 19-cv- 7 1453-HSG. See generally id. Defendant removed that action on May 23, 2019. Case No. 19-cv- 8 2854-HSG, Dkt. No. 1. 9 A. Section 301 Preemption 10 Under § 301 of the LMRA, “[s]uits for violation of contracts between an employer and a 11 labor organization … may be brought in any district court of the United States.” 29 U.S.C. 12 § 185(a). As recently reaffirmed by the Ninth Circuit, the Supreme Court has interpreted the 13 LMRA to authorize federal courts “to create a uniform body of federal common law to adjudicate 14 disputes that arise out of labor contracts.” Curtis v. Irwin Indus., Inc., 913 F.3d 1146, 1155 (9th 15 Cir. 2019) (citations omitted). “A state rule that purports to define the meaning or scope of a term 16 in a contract suit therefore is pre-empted by federal labor law.” Id. at 1152 (quoting Allis- 17 Chalmers Corp. v. Lueck, 471 U.S. 202, 210 (1985)). Although federal preemption is a defense 18 that does not generally authorize removal to federal court, the Supreme Court has held that § 301 19 has such “extraordinary pre-emptive power” that it “converts an ordinary state common law 20 complaint into one stating a federal claim for purposes of the well-pleaded complaint 21 rule.” Metro. Life Ins. v. Taylor, 481 U.S. 58, 65 (1987). 22 However, § 301 “cannot be read broadly to pre-empt nonnegotiable rights conferred on 23 individual employees as a matter of state law.” Curtis, 913 F.3d at 1152 (quoting Livadas v. 24 Bradshaw, 512 U.S. 107, 123 (1994)). Further, “not every dispute concerning employment, or 25 tangentially involving a provision of a collective-bargaining agreement, is preempted by § 301 or 26 other provisions of federal labor law.” McCray v. Marriott Hotel Servs., Inc., 902 F.3d 1005, 27 1009 (9th Cir. 2018) (quoting Lueck, 471 U.S. at 211). Claims which have no relationship to a 1 by such an agreement are simply not pre-empted by § 301.” Id. (citation and quotations omitted). 2 The Ninth Circuit has employed a two-step test to ensure that § 301 preemption “extends 3 only as far as necessary to protect the role of labor arbitration in resolving CBA disputes.” Curtis, 4 913 F.3d at 1153 (citation and quotations omitted). First, the court asks whether the asserted cause 5 of action involves a “right [that] exists solely as a result of the CBA.” Burnside v. Kiewit Pac. 6 Corp., 491 F.3d 1053, 1059 (9th Cir. 2007). “If the right exists solely as a result of the CBA, then 7 the claim is preempted, and our analysis ends there.” Id. (citing Lueck, 471 U.S. at 210). If not, 8 the court proceeds to the second step and asks “‘whether a plaintiff’s state law right is 9 substantially dependent on analysis of [the CBA],’ which turns on whether the claim cannot be 10 resolved by simply ‘look[ing] to’ versus ‘interpreting’ the CBA.” Curtis, 913 F.3d at 1153 11 (citations and quotations omitted and alterations in original). Interpretation is construed narrowly 12 in this context. Id. If claims are dependent on interpretation of the CBA, then the claim is 13 preempted by § 301; if not, the claim may proceed under state law. Burnside, 491 F.3d at 1059– 14 60. 15 i. Step 1: Whether Plaintiff’s Overtime Right Exists Solely as a Result of the CBA 16 17 The dispositive question in this case is whether Plaintiff’s § 510 overtime claim involves a 18 “right [that] exists solely” as a result of the CBAs. See Curtis, 913 F.3d at 1152 (citations and 19 quotations omitted and alterations in original). Defendant argues that the CBAs between it and 20 Plaintiff’s union satisfy the “Labor Code exemption” in Cal. Lab. Code § 514, so as to preempt 21 Plaintiff’s overtime claim under Curtis. Dkt. No. 9 (“Opp.”) at 4–5; Case No. 19-cv-2854-HSG, 22 Dkt. No. 12. Plaintiff argues that his claims assert “independent state law rights” which do not 23 require interpretation of the CBAs. Mot. at 5–10. 24 Curtis is dispositive. In Curtis, the Ninth Circuit held that overtime claims under Cal. Lab. 25 Code § 510 are controlled by the CBA if the CBA satisfies the requirements of Cal. Lab. Code 26 § 514. Curtis, 913 F.3d at 1155. Section 510 provides a default rule for overtime, but does not 27 apply if there is an “alternative workweek schedule adopted pursuant to a collective bargaining 1 Section 510 and 511 do not apply to an employee covered by a valid collective bargaining agreement if the agreement expressly provides 2 for the wages, hours of work, and working conditions of the employees, and if the agreement provides premium wage rates for 3 all overtime hours worked and a regular hourly rate of pay for those employees of not less than 30 percent more than the state minimum 4 wage. 5 Cal. Lab. Code § 514. Based on the language in §§ 510 and 514, the Ninth Circuit held that where 6 a CBA meets the requirements of § 514, a plaintiff’s § 510 claim for overtime is “controlled” by a 7 CBA and therefore preempted by § 301 of the LMRA. Curtis, 913 F.3d at 1155. The Curtis court 8 noted that any other interpretation would make §§ 510(a)(2) and 514 superfluous. Id. In reaching 9 this conclusion, Curtis overruled Gregory v. SCIE, LLC, 317 F.3d 1050 (9th Cir. 2003), which had 10 held that § 510, rather than a CBA, defined what hours constituted “overtime hours.” Id. 11 (concluding that Gregory was overruled by intervening California case law). 12 Under Curtis, the Court must determine whether the applicable CBAs satisfy the 13 requirements of § 514. The applicable CBAs during the putative class period were: (1) the April 14 1, 2005 CBA, Dkt. No. 9-1, Gonzales Decl., Ex. 1 (“2005 CBA”); and (2) the October 1, 2018 15 CBA, Dkt. No. 26, Declaration of John F. McIntyre, Jr., Ex. 1 (“2018 CBA”). Gonzales Decl. ¶ 4. 16 Having reviewed the CBAs and Defendant’s supplemental declaration, the Court finds that the 17 CBAs satisfy the requirements of § 514, meaning that Plaintiff’s overtime claim is preempted by 18 § 301 of the LMRA. 2 The CBAs provide for the hours of work and premium wage rates for all 19 overtime hours worked. 2005 CBA at 5–6 (Article 19 specifying that an employee shall be paid 20 1.5 times his/her hourly rate for hours worked in excess of forty hours; normal hours of work shall 21 be eight hours per day and forty hours per week, consisting of five eight-hour days; an employee 22 shall be paid 1.5 times his/her hourly rate for all hours worked on Sunday; and Defendant may 23 decide to establish a four-day schedule as a “normal workweek.”); 2018 CBA at 5–6 (same). 24 Further, the CBAs provide a regular hourly rate of pay of at least 30 percent higher than 25

26 2 During oral argument, the Court directed Defendant to submit a supplemental declaration detailing how the CBAs satisfy the requirement that all covered employees were paid at a regular 27 hourly rate of pay of not less than 30 percent more than the California minimum wage. Dkt. No. 1 California’s minimum wage. See 2005 CBA, Appendix 1; 2018 CBA, Appendix 1; Dkt. No. 28, 2 Supplemental Declaration of John F. McIntyre (“Supp. McIntyre Decl.”), Ex. 4.3 3 Plaintiff does not challenge the substance of the CBAs, but instead argues that Curtis is 4 distinguishable because “in that matter plaintiff conceded that the CBA is applicable to plaintiff.” 5 Dkt. No. 16 (“Reply”) at 3. But Plaintiff does not (and apparently cannot) dispute that his 6 employment is governed by the CBAs, so the absence of an express concession is of no 7 consequence. Further, Plaintiff’s entire motion relies on cases decided years before Curtis. See 8 generally Mot. The Court thus finds that Defendant has met its burden of proving that the CBAs 9 here satisfy the requirements of § 514. Accordingly, Plaintiff’s claim for overtime is controlled by 10 the CBAs, “exists solely as a result of the CBA[s],” and is therefore preempted by the LMRA. See 11 Curtis, 913 F.3d at 1155. The Court has federal question jurisdiction over the overtime claim. 12 B. Supplemental Jurisdiction 13 Defendant asserts that because the Court has exclusive federal jurisdiction over Plaintiff’s 14 overtime claim, the Court should exercise supplemental jurisdiction over the remaining state law 15 claims. Opp. at 7. Plaintiff’s remaining claims under California law arise from the same working 16 conditions and relationship with Defendant during the same period as Plaintiff’s overtime claim. 17 See Compl. ¶¶ 34–85 (failure to pay minimum wages, failure to provide meal and rest breaks, 18 failure to provide accurate itemized wage statements, unlawful collection of wages, and violation 19 of Cal. Bus. & Prof. Code §§ 17200 et seq.). Therefore, the Court finds that the claims derive 20 from a “common nucleus of operative fact” and asserts supplemental jurisdiction over the 21 remaining claims. Kuba v. 1-A Agr. Ass’n, 387 F.3d 850, 855 (9th Cir. 2004) (“Nonfederal claims 22 3 Appendix 1 of the 2005 CBA provides that effective April 4, 2006, the regular hourly rate of pay 23 for a Step 1 employee, the lowest-paid employee, is $10.58, with a “2.25% increase plus .70X the increase in the CPI-W in excess of 2.25% year to year effective April 1, 2007.” 2005 CBA, 24 Appendix 1. The CPI-W is the Consumer Price Index for Urban Wage Earners and Clerical Workers. Supp. McIntyre Decl. ¶ 7; see id., Ex. 6. Factoring in the baseline increase of 2.25% 25 each year, plus any increase in CPI-W in excess of 2.25% multiplied by 0.70, the hourly rate of pay is more than 30% of California’s minimum wage for each respective year. Supp. McIntyre 26 Decl., Ex. 4; see also id., Exs. 6, 7; Cal. Lab. Code § 1192.12(a) (setting California’s minimum wages). The 2018 CBA provides for minimum hourly rates for a Step 1 employee in 2018 (after 27 September 30, 2018) and 2019 of $15.50 and $15.89, respectively, also satisfying the condition 1 are part of the same ‘case’ as federal claims when they derive from a common nucleus of 2 operative fact and are such that a plaintiff would ordinarily be expected to try them in one judicial 3 proceeding.” (citation and quotations omitted)). 4 C. PAGA Claims 5 California enacted PAGA, Cal. Lab. Code § 2698 et seq., to allow “aggrieved employees, 6 acting as private attorneys general, to recover civil penalties for Labor Code violations, with the 7 understanding that labor law enforcement agencies were to retain primacy over private 8 enforcement efforts.” Arias v. Superior Court, 46 Cal. 4th 969, 980 (2009). PAGA claims are 9 derivative of the predicate California Labor Code violations, and therefore rise and fall with those 10 underlying claims. See Curtis, 913 F.3d at 1150 n.3 (noting that the PAGA claim was derivative 11 of the § 510 claim and could only succeed if the plaintiff prevailed on his § 510 claim). 12 Plaintiff, without citing any supporting authority, argues that his PAGA claims cannot be 13 preempted because “an employee who brings an action pursuant to § 2699 stands in the shoes of 14 the LWDA [Labor Workforce Development Agency],” so “it is immaterial if said employee is 15 subject to any collective bargaining agreement during his or her employment.” Case No. 19-cv- 16 2854-HSG, Dkt. No. 9, at 7. According to Plaintiff, “if the LWDA is not a party to the CBA, then 17 the CBA cannot affect or impact in any way an employee’s § 2699 claims.” Id. Plaintiff’s 18 argument misunderstands the nature of PAGA claims. That Plaintiff demands civil penalties 19 under PAGA does not change the underlying nature of the predicate California Labor Code 20 violations, which in this case include the same claims asserted in his putative class action 21 complaint. Compare Compl. ¶¶ 43–47 (alleging that Defendant failed to pay overtime under 22 § 510) with PAGA Compl. ¶¶ 60–91 (seeking penalties under PAGA for Defendant’s failure to 23 pay overtime under § 510). Thus, for the reasons already discussed, the Court finds it has 24 jurisdiction over the PAGA claims. 25 // 26 // 27 // 1 Wl. CONCLUSION 2 Plaintiff's motion to remand is DENIED. The Court SETS a case management 3 || conference for November 26, 2019. The parties need not submit a further joint case management 4 statement. 5 IT IS SO ORDERED. 6 || Dated: 11/8/2019 ’ HAYWOOD S. GILLIAM, JR. 8 United States District Judge 9 10 11 a 12

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