Smith v. 9W Halo Western OpCo L.P.

• Court: District Court, N.D. California
• Decided: October 27, 2021
• Docket: 3:20-cv-01968
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA

7 KENNETH C. SMITH, Case No. 20-cv-01968-PJH 8 Plaintiff,

9 v. ORDER DENYING MOTION TO REMAND 10 ANGELICA CORPORATION, et al., Re: Dkt. No. 44 11 Defendants. 12

13 14 Plaintiff’s motion to remand came on for hearing before this court on October 7, 15 2021. Plaintiff appeared through his counsel, William Pao. Defendant appeared through 16 its counsel, Christopher Alvarez. Having read the papers filed by the parties and 17 carefully considered their arguments and the relevant legal authority, and good cause 18 appearing, the court hereby DENIES the motion for the following reasons. 19 On February 18, 2020, plaintiff filed a class action suit against defendant in the 20 Superior Court of the County of Alameda. Dkt. No. 1-2 at 4–30. Plaintiff purported to 21 represent four classes: (1) the Hourly Employee class; (2) the Vacation Pay class; (3) the 22 Unfair Competition Law class; and (4) the Expense Reimbursement class. Id. at 7, ¶ 12. 23 Plaintiff also purported to represent four subclasses of the Hourly Employee class: (1) the 24 Rest Period subclass; (2) the Waiting Time Penalties subclass; (3) the Wage Statement 25 Penalties subclass; and (4) the Meal Period subclass. Id. Plaintiff has since filed an 26 amended complaint where he has dropped the Vacation Pay and Expense 27 Reimbursement classes, but the court focuses on the operative complaint at the time of 1 Cir. 2018) (noting that the court assesses the amount in controversy at the time of 2 removal). 3 On March 20, 2020, defendant removed this case to federal court pursuant to the 4 Class Action Fairness Act, 28 U.S.C. §§ 1332(d), 1453 (“CAFA “). Dkt. No. 1. In its 5 Notice of Removal, defendant asserted that the amount in controversy was $12,327,562 6 based on its calculations for the Rest Period, Waiting Time Penalties, and Wage 7 Statement Penalties subclasses and attorneys’ fees. Id. at ¶¶ 31–36. Defendant’s 8 calculations presumed a 100% violation rate for the Rest-Period, the Waiting Time 9 Penalties, and the Wage Statement Penalties subclasses, and presumed the maximum 10 penalties available for the Wage Statement Penalties subclass. Id. Defendant supported 11 its calculations with a declaration from its Vice President of Human Resources who 12 identified the number of employees in the relevant classes. Dkt. No. 1-3, ¶¶ 2–5. 13 Defendant provided no other evidence. 14 On December 20, 2020, the parties participated in a mediation where plaintiff 15 made a settlement demand of $21 million. Dkt. No. 45-1, ¶ 2. On June 29, 2021, plaintiff 16 made a reduced settlement demand of $10 million. Id., ¶ 3. Plaintiff now brings this 17 motion to remand, arguing that defendant failed to meet its burden to show that the 18 amount in controversy exceeds CAFA’s $ 5 million requirement. Dkt. No. 44. In 19 response, defendant provided a more conservative estimate for the amount in 20 controversy, $7,908,397.60. Dkt. No. 45 at 21–23. Defendant included in its calculations 21 classes and subclasses from the complaint that were not factored in its original amount in 22 controversy. Id. at 21–23. But defendant reduced the violation rate to 50% for the Rest- 23 Period, the Waiting Time Penalties, and the Meal Period subclasses, and did not seek 24 maximum penalties for the Wage Statement Penalties subclass. Id. at 20–21. Defendant 25 also reduced attorneys’ fees from twenty-five percent to ten percent. Id. at 21. And 26 defendant provided a nearly identical declaration from its Vice President of Human 27 Resources. Dkt. No. 45-2. 1 brought in state court. 28 U.S.C. § 1441(a). CAFA “gives federal courts jurisdiction over 2 certain class actions, defined in § 1332(d)(1), if the class has more than 100 members, 3 the parties are minimally diverse, and the amount in controversy exceeds $5 million.” 4 Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S. Ct. 547, 552 (2014). Under 5 CAFA, the burden of establishing removal jurisdiction remains on the proponent of 6 federal jurisdiction. See Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 686 (9th Cir. 7 2006). The parties agree that the only issue is whether defendant has met its burden to 8 show that CAFA's $5 million amount in controversy requirement has been met. 9 An amount in controversy “reflects the maximum recovery the plaintiff could 10 reasonably recover.” Arias v. Residence Inn by Marriott, 936 F.3d 920, 927 (9th Cir. 11 2019). When a plaintiff challenges a defendant’s amount in controversy assertion, “both 12 sides submit proof and the court decides, by a preponderance of the evidence, whether 13 the amount-in-controversy requirement has been satisfied.” Id. at 925 (internal quotation 14 marks omitted). A court may consider a settlement demand as “relevant evidence of the 15 amount in controversy if it appears to reflect a reasonable estimate of the plaintiff's 16 claim.” Acad. of Country Music v. Cont'l Cas. Co., 991 F.3d 1059, 1069 (9th Cir. 2021) 17 (quoting Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002)). 18 Defendant’s initial calculations in its Notice of Removal were speculative and not 19 based on reasonable assumptions. Plaintiff’s complaint does not expressly allege or infer 20 that every class member would qualify for every subclass or would qualify for every claim 21 within a subclass. In other words, nothing in the complaint supports a calculation where 22 there is a 100% violation rate for the Rest Period, the Waiting Time Penalties, and the 23 Wage Statement Penalties subclasses. See Harris v. KM Indus., Inc., 980 F.3d 694, 701 24 (9th Cir. 2020) (finding the defendant did not carry its burden because it presumed that all 25 the class members were members of the alleged subclasses). Likewise, defendant 26 cannot support its presumption that all the members of the Wage Statement Penalties 27 subclass would qualify for the maximum statutory penalties because the complaint 1 class periods. See Dkt. Nos. 1-3, 45-2. 2 Nonetheless, plaintiff made two settlement demands that exceed the $5 million 3 CAFA requirement. Contrary to plaintiff’s assertions, the court may consider these 4 settlement demands notwithstanding the mediation privilege under California Evidence 5 Code § 1119. Under Federal Rule of Evidence 501, “privileges provided by state law 6 apply in civil actions only with respect to an element of a claim or defense as to which 7 State law supplies the rule of decision.” Babasa v. LensCrafters, Inc., 498 F.3d 972, 974 8 (9th Cir. 2007) (internal quotation marks omitted). Thus, even if the California mediation 9 privilege applied to settlement demands, the court would not be precluded from 10 considering them for purposes of determining its subject matter jurisdiction. 11 Plaintiff made a settlement demand of $21 million in December 2020 followed by a 12 $10 million settlement demand in June 2021. Dkt. No. 45-1, ¶¶ 2–3. Plaintiff does not 13 dispute that those demands were reasonable estimates of his claims. See Cohn, 281 14 F.3d at 840 (noting plaintiff “could have argued that the demand was inflated and not an 15 honest assessment of damages, but he made no attempt to disavow his letter or offer 16 contrary evidence”). Indeed, plaintiff would have a particularly difficult time taking this 17 position when he made his reduced settlement demand only two months before he filed 18 this motion. Dkt. No. 45-1, ¶ 3. Defendant’s reduced amount in controversy, while 19 speculative, is not based on a 100% violation rate, and the amount is more than $2 20 million less than plaintiff’s reduced settlement demand. Taken together, the court finds 21 that plaintiff’s settlement demands along with defendant’s reduced amount in controversy 22 calculations establishes that the $5 million CAFA threshold has been met. Accordingly, 23 plaintiff’s motion to remand is DENIED. 24 Plaintiff’s request for limited discovery to investigate defendant’s calculations is 25 similarly DENIED. A court may grant discovery to assist it in determining whether it has 26 subject matter jurisdiction. See Wells Fargo & Co. v. Wells Fargo Exp. Co., 556 F.2d 27 406, 430 n.24 (9th Cir. 1977). A court’s denial of discovery is appropriate unless 1 would be different.” Laub v. U.S. Dep't of Interior, 342 F.3d 1080, 1093 (9th Cir. 2003) 2 (internal quotation marks omitted). Defendant’s calculations were only a minor 3 consideration in the court’s analysis of subject matter jurisdiction. Accordingly, more 4 information on defendant’s calculations would not change the court’s ruling on plaintiff’s 5 motion to remand. 6 CONCLUSION 7 For the reasons stated above, the court DENIES plaintiff’s motion to remand and 8 DENIES his request for discovery. 9 IT IS SO ORDERED. 10 Dated: October 27, 2021 11 /s/ Phyllis J. Hamilton PHYLLIS J. HAMILTON 12 United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27