Richard Brancaccio v. Knauf Insulation, Inc.

• Court: District Court, C.D. California
• Decided: April 7, 2020
• Docket: 2:20-cv-01439
• Status: Unknown

Opinion

1 JS-6 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 ) 11 ) Case No.: CV 20-01439-CJC(AGRx) ) 12 RICHARD BRANCACCIO, ) ) 13 individually and on behalf of all others ) similarly situated, ) 14 ) ORDER GRANTING PLAINTIFF’S ) MOTION TO REMAND [Dkt. 12] 15 Plaintiff, ) ) 16 v. ) ) 17 ) KNAUF INSULATION, INC.; KNAUF ) 18 INSULATION USA; KNAUF ) ) 19 INSULATION, GMBH; KNAUF ) INSULATION; and DOES 1–100, ) 20 ) ) 21 Defendants. ) ) 22 ) 23 24 25 I. INTRODUCTION 26 27 Plaintiff Richard Brancaccio filed this wage-and-hour class action against 1 GMBH, Knauf Insulation, and unnamed Does in Los Angeles County Superior Court. 2 (Dkt. 1-2 [Complaint, hereinafter “Compl.”].) Knauf removed to this Court. 3 (Dkt. 1 [Notice of Removal, hereinafter “NOR”].) Before the Court is Plaintiff’s motion 4 to remand. (Dkt. 12 [hereinafter “Mot.”].) For the following reasons, that motion is 5 GRANTED.1 6 7 II. BACKGROUND 8 9 Plaintiff allegedly worked for Defendants “as an hourly-paid, non-exempt 10 employee in the positions of production associate, quality assurance, and backup line 11 technician, from approximately January 2016 to approximately January 27, 2019.” 12 (Dkt. 11 [hereinafter “FAC”] ¶ 21.) Plaintiff’s final base rate was $18.34 per hour. (Id.) 13 14 On January 3, 2020, Plaintiff filed this putative class action against Defendants in 15 Los Angeles County Superior Court. In his original Complaint, Plaintiff asserted nine 16 causes of action under California’s Labor Code for (1) unpaid overtime wages, (2) unpaid 17 meal period premiums, (3) unpaid rest period premiums, (4) unpaid minimum wages, 18 (5) final wages not timely paid, (6) untimely wages during employment, (7) non- 19 compliant wage statements, (8) failure to keep accurate payroll records, and 20 (9) unreimbursed business expenses, as well as a tenth cause of action for (10) violations 21 of California’s Unfair Competition Law. In February 2020, Knauf filed a Notice of 22 Removal. Knauf asserts that this Court has jurisdiction over the dispute pursuant to the 23 Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. § 1332(d). (NOR ¶ 8.) 24 Alternatively, Knauf claims that the Court has federal question jurisdiction because the 25 action “involves valid and applicable collective bargaining agreements pursuant to 26

27 1 Having read and considered the papers presented by the parties, the Court finds this matter appropriate 1 Section 301 of the Labor Management Relations Act, as well as purportedly concerted 2 action by employees covered under the National Labor Relations Act.” (Id. ¶ 9 [citations 3 omitted].) 4 5 After removal, Plaintiff filed the operative First Amended Complaint (“FAC”). In 6 it, he withdraws the first, sixth, and eighth causes of action—for unpaid overtime wages, 7 untimely wages during employment, and failure to keep accurate payroll records—from 8 the original Complaint. (See FAC ¶¶ 49–103.) The remaining seven causes of action 9 appear unchanged. (See id.) Plaintiff asserts these claims on behalf of a proposed class 10 of “[a]ll current and former hourly-paid or non-exempt employees who worked for any of 11 the Defendants within the State of California at any time during the period from January 12 3, 2016 to final judgment and who reside in California.” (FAC ¶ 16; see Compl. ¶ 16.) 13 14 Plaintiff alleges broadly that “Defendants engaged in a pattern and practice of 15 wage abuse against their hourly-paid or non-exempt employees” that “involved, inter 16 alia, failing to pay them for all regular wages earned and for missed, short, late, and/or 17 interrupted meal periods and rest breaks in violation of California law.” (FAC ¶ 27.) The 18 boilerplate allegations assert that Defendants failed to properly compensate employees, 19 forced them to work through required breaks, and failed to keep accurate records. (See 20 id. ¶¶ 22–48.) Plaintiff has not alleged any specific facts about Defendants’ practices and 21 policies or the frequency of the alleged violations. (See id.) 22 23 III. ANALYSIS 24 25 “Federal courts are courts of limited jurisdiction,” possessing “only that power 26 authorized by Constitution and statute.” Gunn v. Minton, 568 U.S. 251, 256 (2013) 27 (internal quotations omitted). A civil action brought in state court may only be removed 1 originally. 28 U.S.C. § 1441(a). The removing party has the burden of establishing 2 federal jurisdiction. See id. In the instant motion, Plaintiff challenges this Court’s CAFA 3 jurisdiction and federal question jurisdiction. The Court addresses each challenge in turn. 4 5 A. CAFA Jurisdiction 6 7 CAFA provides original federal jurisdiction over class actions in which (1) the 8 amount in controversy exceeds $5 million, (2) there is minimal diversity between the 9 parties, and (3) the number of proposed class members is at least 100. 28 U.S.C. 10 §§ 1332(d)(2), 1332(d)(5)(B). “Congress designed the terms of CAFA specifically to 11 permit a defendant to remove certain class or mass actions into federal court. . . [and] 12 intended CAFA to be interpreted expansively.” Ibarra v. Manheim Invs., Inc., 775 F.3d 13 1193, 1197 (9th Cir. 2015). The Supreme Court has also held that “no antiremoval 14 presumption attends cases invoking CAFA” because CAFA was enacted to facilitate 15 federal courts’ adjudication of certain class actions. Dart Cherokee Basin Operating Co., 16 LLC v. Owens, 135 S. Ct. 547, 550 (2014). Under CAFA, a defendant’s notice of 17 removal must contain a “short and plain statement of the grounds for removal.” Dart, 18 135 S. Ct. at 553. 19 20 Plaintiff contends that this case must be remanded because Knauf has not properly 21 established the amount in controversy.2 The Court agrees. “[A] defendant’s notice of 22 removal need include only a plausible allegation that the amount in controversy exceeds 23 the jurisdictional threshold.” Id. at 554. However, if the asserted amount in controversy 24 is contested after removal, “[e]vidence establishing the amount is required.” Id. at 554. 25 “In such a case, both sides submit proof and the court decides, by a preponderance of the 26

27 2 Plaintiff does not dispute that the other two CAFA requirements—minimal diversity and minimum 1 evidence, whether the amount-in-controversy requirement has been satisfied.” Id. at 550. 2 Ultimately, the defendants bear the burden of proving that the amount in controversy is 3 met. Rodriguez v. AT&T Mobility Servs. LLC, 728 F.3d 975, 978 (9th Cir. 2013). 4 “Under this system, CAFA’s requirements are to be tested by consideration of real 5 evidence and the reality of what is at stake in the litigation, using reasonable assumptions 6 underlying the defendant’s theory of damages exposure.” Ibarra, 775 F.3d at 1198. 7 8 Because Plaintiff contests the amount in controversy, Knauf must provide evidence 9 to show that the $5 million threshold is met. To fulfill that requirement, Knauf offers the 10 declarations of Eric Long, the Plant Manager of its manufacturing plant in Shasta Lake, 11 California, (Dkt. 1-14 [hereinafter “Long Decl.”]), and Beth Muncie, its Senior Manager 12 for Human Resources and Labor Relations, (Dkt. 15-1 [hereinafter “Muncie Decl.”]). 13 After reviewing human resource and payroll records, Muncie and Long found that Knauf 14 employed 187 different full-time non-exempt employees in California between December 15 2015 and December 2019. (Muncie Decl. ¶ 6(h); Long Decl. ¶ 6(e).) They also found 16 that, on average, Knauf employed 107 full-time non-exempt employees at any given time 17 during this period. (Muncie Decl. ¶ 6(f); Long Decl. ¶ 6(c).) Finally, they found that in 18 December 2015 the average hourly wage for these employees was $19.44. (Muncie Decl. 19 ¶ 6(i); Long Decl. ¶ 6(f).) 20 21 Based on this evidence, Knauf estimates the amount in controversy as follows: 22 Estimated Amount in 23 Claim Controversy 24 Unpaid Overtime Wages $3,527,815.68 25 Unpaid Meal Period Premiums $440,976.96 26 Unpaid Rest Period Premiums $440,976.96 27 Unpaid Minimum Wages Claim $408,312.00 1 Failure to Provide Accurate Wage Statements $272,850.00 2 Failure to Maintain Records $53,500.00 3 Subtotal (without attorney’s fees and other claims) $5,499,017.20 4 Attorney’s fees (20% of recovery) $1,099,803.44 5 Subtotal (with 20% attorney’s fees) $6,598,820.64 6 7 (Dkt. 15 [Knauf’s Opposition to Mot., hereinafter “Opp.”] at 18.) As this chart shows, 8 Plaintiff’s overtime wages claim accounts for more than half of the estimated amount in 9 controversy—approximately $3.5 million. Because this figure relies on unsupported and 10 unreasonable assumptions, the Court finds that Knauf has failed to carry its burden.3 11 12 To estimate the amount in controversy for Plaintiff’s overtime wage claim, Knauf 13 assumed that, during the relevant period, every putative class member worked five hours 14 of unpaid overtime every workweek. (See Opp. at 15.) Knauf has not presented any 15 evidence to support or contextualize this assumption. Indeed, Long and Muncie’s 16 declarations do not include any information about Knauf’s overtime practices or policies. 17 Instead, Knauf contends that this violation rate is a reasonable assumption based on the 18 allegations in the Complaint. The Court disagrees. 19 20 As discussed above, Plaintiff has not alleged any details about the frequency or 21 nature of the alleged overtime wage violations. (See, e.g., Compl. ¶ 56 [“Defendants 22 intentionally and willfully failed to pay overtime wages owed to Plaintiff and the other 23 class members.”].) This obviously created some ambiguity about the amount in 24 controversy. In Arias v. Residence Inn by Marriott, the Ninth Circuit addressed exactly 25 this issue. 936 F.3d 920 (9th Cir. 2019). It explained that that a removing party can 26 27 3 Plaintiff’s evidentiary objections to the Muncie and Long Declarations are OVERRULED. The underlying employment records fall under the business records exception to the hearsay rule. See Fed. 1 make “reasonable assumptions” about violation rates to estimate the amount in 2 controversy for boilerplate wage-and-hour claims. Id. at 925. “[A]n assumption may be 3 reasonable if it is founded on the allegations of the complaint.” Id. 4 5 But Knauf’s assumptions are not reasonable. In the Complaint, Plaintiff alleges 6 broadly that Defendants engaged in a “pattern and practice” of “failing to pay 7 [employees] for all regular and/or overtime wages earned.” (Compl. ¶ 28; see also FAC 8 ¶ 27.) This allegation simply does not support the assumption that employees worked 9 five hours of unpaid overtime every week. See Arias, 936 F.3d at 925. This would be a 10 dramatic and flagrant violation of California law—it assumes that, on average, every non- 11 exempt employee worked one hour of unpaid overtime every workday. Nothing in the 12 pleadings suggest that this is an exceptional or extreme case. Nor has Knauf offered any 13 context or information about its overtime practices—e.g., the average number of 14 compensated overtime work by qualifying employees. 15 16 While Knauf need not “provide evidence proving [its] assumptions correct,” the 17 assumed violation rates must have “some reasonable ground underlying them” and 18 “cannot be pulled from thin air.” Arias, 936 F.3d at 925–27 (quoting Ibarra, 775 F.3d at 19 1199) (internal quotations omitted). A removing party can assume extreme violation 20 rates only if supported by allegations in the pleadings. For example, in Arias, the Ninth 21 Circuit found that the removing defendant reasonably assumed a 100% violation rate for 22 a wage statement claim because plaintiffs alleged that “not one” of defendant’s 23 statements complied with the California Labor Code. Id. at 926. Conversely, courts 24 generally reject extreme violation rates based solely on allegations that the violations 25 were “routine.” See Sifuentes v. Roofline, Inc., 2020 WL 1303796, at *2 (E.D. Cal. Mar. 26 19, 2020) (explaining that the removing defendant’s “maximum assumptions fall short of 27 the Ninth Circuit’s guidance for reasonability”); cf. Arias, 936 F.3d at 925–27 1 (assumption of 1 rest break violation per week was reasonable when plaintiffs claimed 2 “routine” violations). 3 4 This is a common issue in the Ninth Circuit—an employee-plaintiff files a 5 boilerplate wage-and-hour class-action complaint in state court, and the employer- 6 defendant removes under CAFA. See, e.g., Gant v. ALDI, Inc., 2020 WL 1329909 (C.D. 7 Cal. Mar. 20, 2020); Lopez v. First Student, Inc., 2019 WL 8137149 (C.D. Cal. Dec. 2, 8 2019); Andrade v. Beacon Sales Acquisition, Inc., 2019 WL 4855997, at *4 (C.D. Cal. 9 Oct. 1, 2019). Based on the Court’s review, no district court has ever accepted an 10 assumed violation rate of five hours per week based solely on an alleged “pattern and 11 practice” of overtime wage violations. Cf. Gant v. ALDI, Inc., 2020 WL 1329909, at *5 12 (C.D. Cal. Mar. 20, 2020) (assumption of one-hour unpaid overtime per workweek was 13 reasonable when plaintiff alleged “pattern and practice”); Cavada v. Inter-Cont’l Hotels 14 Grp., Inc., 2019 WL 5677846, at *4 (S.D. Cal. Nov. 1, 2019) (same for two hours of 15 unpaid overtime per workweek). Because there are no allegations or evidence that 16 suggest this case is exceptional, the Court finds Knauf’s assumption unreasonable. 17 18 Without this inflated estimate of Plaintiff’s overtime wage claim, the amount in 19 controversy falls short of $5 million. (See Opp. at 18.)4 Accordingly, Knauf has not 20 satisfied its burden of meeting this jurisdictional threshold, and the Court therefore lacks 21 CAFA jurisdiction over this action. See Arias, 936 F.3d at 925. 22 23 // 24 // 25

26 4 The estimated amount in controversy for the remaining claims is approximately $2 million, or $2.4 27 million with 20% attorney fees. (See Opp. at 18.) If Knauf had assumed a violation rate of one, two, or even three hours of unpaid overtime work per workweek, the cumulative amount in controversy would 1 B. Federal Question Jurisdiction 2 3 Knauf has similarly failed to establish federal question jurisdiction. Federal courts 4 have subject matter jurisdiction over cases “arising under” federal law. 28 U.S.C. 5 § 1331. Generally, under the “well-pleaded complaint rule,” cases arise under federal 6 law only when “a federal question is presented on the face of the plaintiff’s properly 7 pleaded complaint.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). An 8 exception to the well-pleaded complaint rule occurs “when a federal statute wholly 9 displaces the state-law cause of action through complete pre-emption.” Beneficial Nat. 10 Bank v. Anderson, 539 U.S. 1, 8 (2003). In these instances, cases asserting state law 11 claims that fall within the scope of the preemption are removable under 28 U.S.C. § 1441 12 even though no federal claim expressly appears on the face of the complaint. See id. 13 When a case is removed, the burden of establishing subject matter jurisdiction falls on the 14 defendant, and the removal statute is strictly construed against removal jurisdiction. 15 Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). “Federal jurisdiction must be 16 rejected if there is any doubt as to the right of removal in the first instance.” Id. 17 18 Knauf argues that it has a federal preemption defense under Section 301 of the 19 Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185, and under Sections 7, 8, 20 and 9 of the National Labor Relations Act (“NLRA”), 29 U.S.C. §§ 151–69. (See NOR 21 ¶ 48.) Because neither defense appears on the face of the Complaint, the mere possibility 22 that these laws could preclude liability is insufficient to confer federal jurisdiction. See 23 Valles v. Ivy Hill Corp., 410 F.3d 1071, 1075 (9th Cir. 2005) (“A federal law defense to a 24 state-law claim does not confer jurisdiction on a federal court, even if the defense is that 25 of federal preemption and is anticipated in the plaintiff’s complaint.”). Instead, the Court 26 only has subject matter jurisdiction if some or all of Plaintiff’s claims are “completely 27 preempted” and “wholly displaced.” Beneficial Nat. Bank v. Anderson, 539 U.S. 1, 8 1 1. Labor Management Relations Act 2 3 Section 301 of the LMRA gives federal courts exclusive jurisdiction to adjudicate 4 “[s]uits for violation of contracts between an employer and a labor organization.” 29 5 U.S.C. § 185(a). Section 301 “mandate[s] resort to federal rules of law in order to ensure 6 uniform interpretation of collective-bargaining agreements [‘CBAs’], and thus to promote 7 the peaceable, consistent resolution of labor-management disputes.” Lingle v. Norge 8 Division of Magic Chef, Inc., 486 U.S. 399, 404 n.3 (1988). Accordingly, any suit 9 “alleging a violation of a provision of a labor contract must be brought under § 301 and 10 be resolved by reference to federal law.” See Allis-Chalmers Corp. v. Lueck, 471 U.S. 11 202, 210 (1985). However, it is well settled that Section 301 does not preempt 12 “nonnegotiable rights conferred on individual employees as a matter of state law.” 13 Livadas v. Bradshaw, 512 U.S. 107, 123 (1994). “Setting minimum wages, regulating 14 work hours and pay periods, requiring paid and unpaid leave, protecting worker safety, 15 prohibiting discrimination in employment, and establishing other worker rights remains 16 well within the traditional police power of the states, and claims alleging violations of 17 such protections will not necessarily be preempted, even when the plaintiff is covered by 18 a CBA.” Curtis v. Irwin Indus., Inc., 913 F.3d 1146, 1152 (9th Cir. 2019) (quotations 19 omitted). 20 21 Courts in the Ninth Circuit apply a two-step approach to determine whether a state 22 law claim is preempted by Section 301. “First, we ask whether the asserted cause of 23 action involves a right that exists solely as a result of the CBA.” Id. (quotations omitted). 24 In other words, the first step considers whether the claim seeks to vindicate a right or 25 duty created by the CBA. See id. If so, the claim is preempted and the analysis ends. 26 See id. If not, courts proceed to the second step and consider “whether a plaintiff’s state 27 law right is substantially dependent on analysis of the CBA.” Id. at 1153 (cleaned up). 1 A state law right is “substantially dependent” if it requires “interpreting,” as opposed to 2 simply “looking to,” the CBA. See id. 3 4 Here, Plaintiff asserts claims based on nondiscretionary state law rights. 5 Accordingly, his claims are only preempted if they are “substantially dependent on 6 analysis of the CBA.” See Curtis, 913 F.3d at 1153. In its Notice of Removal, Knauf 7 asserts that a CBA “governed the terms and conditions” of Plaintiff’s employment. 8 (NOR ¶ 49.) However, Knauf has not identified which, if any, specific terms or 9 conditions are relevant here and has not explained why the Court will need to “interpret” 10 the CBA to assess Plaintiff’s claims. In the instant motion to remand, Plaintiff argues 11 that “[e]ven if the parties may need to refer to [CBAs] at some point to determine rates of 12 pay or other policies governing the putative class employment, the Court will not be 13 called to interpret the [CBAs].” (Mot. at 8.) Knauf does not respond to this argument in 14 its Opposition, (see Opp. at 22–24), and the Court agrees with Plaintiff. “[W]hen the 15 meaning of contract terms is not the subject of dispute, the bare fact that a collective- 16 bargaining agreement will be consulted in the course of state-law litigation plainly does 17 not require the claim to be extinguished.” See Livadas v. Bradshaw, 512 U.S. 107, 124 18 (1994). Accordingly, the Court concludes that Knauf has not carried its burden of 19 establishing federal preemption under Section 301 of the LMRA. 20 21 2. National Labor Relations Act 22 23 Section 7 of the NLRA protects employees’ right “to self-organization, to form, 24 join or assist labor organizations, to bargain collectively through representatives of their 25 own choosing, and to engage in other concerted activities for the purpose of collective 26 bargaining or other mutual aid or protection.” 29 U.S.C. § 157. Section 8 of the NLRA 27 prohibits unfair labor practices, including attempts “to interfere with, restrain, or coerce 1 Diego Building Trades Council v. Garmon, the Supreme Court held that the NLRA 2 preempts state laws and state law actions “[w]hen it is clear or may be fairly assumed that 3 the activities that a State purports to regulate are protected by § 7 . . . or constitute an 4 unfair labor practice under § 8.” 359 U.S. 236, 244 (1959). The party claiming an action 5 is preempted bears the burden of showing that the challenged activity is arguably 6 prohibited by the NLRA. See Int’l Longshoremen’s Ass’n v. Davis, 476 U.S. 380, 396 7 (1986). 8 9 Knauf’s theory of NLRA preemption is vague and, frankly, hard to decipher. (See 10 Opp. at 22 [“The Complaint was filed as a class action and raises questions regarding 11 class and collective issues.”].) As best the Court understands it, Knauf makes two 12 separate arguments for preemption under the NLRA. First, Knauf contends that because 13 this lawsuit involves “purportedly concerted action by employees,” it is preempted by 14 Garmon. (See id. [citing Garmon, 359 U.S. 236].) This argument is fatally vague and 15 unsubstantiated. Knauf has not identified any “concerted action” nor any “challenged 16 activities” protected or prohibited by the NRLA. (See id.) Reviewing the Complaint, the 17 Court is at a loss to understand what allegations could possibly trigger Garmon 18 preemption. 19 20 Second, Knauf argues that because Plaintiff seeks to assert claims on behalf of 21 other employees, his claims are preempted by Section 9 of the NLRA. This argument 22 falls flat. Section 9 gives the National Labor Relations Board (“NLRB”) exclusive 23 jurisdiction over disputes regarding the appointment of representative employees “for the 24 purposes of collective bargaining.” Id. § 159. By its plain terms, Section 9 does not 25 apply here. In this action, Plaintiff seeks to vindicate non-negotiable rights created by 26 state law. While he intends to assert claims on behalf of similarly-situated employees, his 27 putative role as lead plaintiff does not involve “collective bargaining.” Id. § 159. In 1 ||indeed, he no longer works for Defendants. As a matter of law, the Court concludes that 2 ||Section 9 of the NLRA has no preemptive force in this action. Knauf has not identified 3 precedent or persuasive argument to the contrary. (See Opp. at 24.) 4 5 The test for “complete preemption” is demanding, and Knauf has not shown that it 6 satisfied here. See In re Miles, 430 F.3d 1083, 1088 (9th Cir. 2005) (explaining that 7 ||“[t]he Supreme Court has construed only three federal statutes to so preempt their 8 ||respective fields as to authorize removal of actions seeking relief exclusively under state 9 ||law”). Accordingly, Knauf has not carried its burden of establishing federal question 10 || jurisdiction. 1 12 || IV. CONCLUSION 13 14 For the foregoing reasons, Knauf has not carried its burden to show that the Court 15 subject matter jurisdiction over this action under either CAFA or 28 U.S.C. § 1331. 16 || Accordingly, Plaintiff's motion to remand is GRANTED, and this case is hereby 17 || REMANDED to Los Angeles County Superior Court. 18 19 . DATED: April 7, 2020 Ko ff fe >

22 CORMAC J. CARNEY 23 UNITED STATES DISTRICT JUDGE 24 25 26 27 28