McCray v. Marriott Hotel Servs., Inc.

• Decision Date: 31 August 2018
• Docket Number: No. 17-15767,17-15767
• Citation: 902 F.3d 1005
• Parties: Ian MCCRAY, an individual, and on behalf of himself, and on behalf of all other persons similarly situated, Plaintiff-Appellant, v. MARRIOTT HOTEL SERVICES, INC., a Delaware corporation; SJMEC, Inc., a California corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

902 F.3d 1005

Ian MCCRAY, an individual, and on behalf of himself, and on behalf of all other persons similarly situated, Plaintiff-Appellant,

v.MARRIOTT HOTEL SERVICES, INC., a Delaware corporation; SJMEC, Inc., a California corporation, Defendants-Appellees.

No. 17-15767

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 11, 2018, San Francisco, California

Filed August 31, 2018

James L. Pagano (argued) and Ian A. Kass, Pagano & Kass APC, San Jose, California, for Plaintiff-Appellant.

William J. Dritsas (argued), Seyfarth Shaw LLP, San Francisco, California; Michael W. Kopp, Seyfarth Shaw LLP, Sacramento, California; for Defendants-Appellees.

Paul L. More, McCracken Stemerman & Holsberry LLP, San Francisco, California, for Amicus Curiae Unite Here Local 19.

Before: Mary M. Schroeder, Ronald M. Gould, and Albert Diaz,^* Circuit Judges.

Dissent by Judge Schroeder

DIAZ, Circuit Judge:

When the City of San Jose enacted an ordinance that established a minimum wage of $10/hour, the San Jose Marriott Hotel continued to pay Ian McCray and other employees less. It turned out that McCray’s union had negotiated with Marriott and agreed to waive the ordinance’s minimum-wage requirement so that it could bargain for other benefits for its members.

McCray sued Marriott in state court. He says that the ordinance doesn’t allow for waiver, and so Marriott owes him the difference between what he was paid and the new minimum wage. Marriott removed the case to federal court on the basis that McCray’s claims are preempted by § 301 of the Labor Management Relations Act (the "LMRA"), 29 U.S.C. § 185. The district court concluded that McCray failed to first exhaust his claim through a required grievance process and granted summary judgment to Marriott.

Whether McCray’s claims were exhausted or not, the district court was without jurisdiction to hear this case. While we recognize the strong preemptive force of § 301, McCray’s lawsuit amounts to an interpretive challenge to the San Jose ordinance, not one that requires substantial analysis of his union’s collective-bargaining agreement. We therefore vacate the district court’s denial of remand and grant of summary judgment. We remand this case so that it may be returned to state court for further proceedings.

I.

In 2012, voters in San Jose, California, considered a ballot initiative that would establish a new minimum wage for most of the city’s workers. Under the proposed ordinance, employees would be paid a minimum wage of $10 an hour, subject to cost-of-living adjustments over time. See San Jose, Cal., Mun. Code § 4.100.040. The ordinance also purported to give employers and employees the ability to waive the minimum wage requirements through collective bargaining. "To the extent required by federal law," the proposed law provided, "all or any portion of the applicable requirements of this Chapter may be waived in a bona fide collective bargaining agreement, provided that such waiver is explicitly set forth in such agreement in clear and unambiguous terms." Id. § 4.100.050.

Meanwhile, Ian McCray was employed at the Marriott Hotel in San Jose. There, he performed several hospitality-related jobs, including working as a busser, then later a server, in the hotel’s restaurant. As a busser, McCray received an hourly wage of $10.80. When McCray became a server, his hourly wage decreased to $9, but he generally wound

up taking home more pay than he had as a busser because of tips he received from customers.

Throughout his employment with Marriott, McCray was represented by the union Unite Here, Local 19. The terms of McCray’s employment were governed by a collective-bargaining agreement (a "CBA") entered into between Unite Here and Marriott. Anticipating the passage of San Jose’s minimum wage ordinance, Marriott and the union executed an addendum to the CBA, prospectively opting out of the minimum wage requirement. The waiver explained that should the ordinance become law, the "Employer and the Union, through collective bargaining, have agreed to explicitly waive as part of the parties[’] collective bargaining agreement, all provisions and requirements of the City of San Jose Minimum Wage Ordinance." EOR 119. The ballot initiative passed, and the ordinance and waiver took effect in 2012.

Shortly thereafter, McCray, then earning $9 an hour as a server, spoke with a Marriott human resources employee and a representative from his union and asked why he was being paid less than the new minimum wage.¹ McCray was told that the union had opted out of the minimum wage ordinance so that it could secure other benefits, such as healthcare, for its members.

Apparently not satisfied with that answer, McCray filed this lawsuit in state court in Santa Clara County. McCray seeks to represent himself as well as similarly situated Marriott employees in a class action. His complaint asserts a bevy of wage and hour claims that flow from a single, simple theory: the San Jose ordinance requires Marriott to pay its employees a minimum wage of $10 an hour; McCray and others received less.

Marriott removed this case to federal court. In support of removal, Marriott argued that § 301 of the LMRA preempts McCray’s claims and thus jurisdiction to hear this case lies in federal court. The district court agreed and denied McCray’s motion to remand. Next, the court granted summary judgment in favor of Marriott. It held that McCray couldn’t pursue his claims in court because he had failed to exhaust the mandatory administrative grievance procedure set forth in the CBA. This appeal followed.

II.

We begin with the issue of preemption. The question here is whether the LMRA preempts McCray’s state law claims, thus allowing this case to be heard in federal court. Preemption is a matter of subject matter jurisdiction, which we review de novo. See Ritchey v. Upjohn Drug Co. , 139 F.3d 1313, 1315 (9th Cir. 1998).

Section 301 of the LMRA vests federal courts with jurisdiction to hear suits "for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce ... without respect to the amount in controversy or without regard to the citizenship of the parties." 29 U.S.C. § 185(a). By enacting the LMRA, Congress completely preempted state law for certain labor-related claims. See Caterpillar Inc. v. Williams , 482 U.S. 386, 393–94, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987).

A claim that falls within § 301’s ambit "is considered, from its inception, a federal claim," and so is subject to removal based on federal question jurisdiction. Id. at 393, 107 S.Ct. 2425 ; see also 28 U.S.C. §§ 1331, 1441. In these areas, "the preemptive force of § 301 is so powerful as to displace entirely any state cause of action for violation of contracts between an employer and a labor organization. Any such suit is purely a creature of federal law, notwithstanding the fact that state law would provide a cause of action in the absence of § 301." Franchise Tax Bd. v. Constr. Laborers Vacation Tr. for S. Cal. , 463 U.S. 1, 23, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983) (internal quotation marks and footnote omitted). However, "not every dispute concerning employment, or tangentially involving a provision of a collective-bargaining agreement, is preempted by § 301 or other provisions of the federal labor law." Allis-Chalmers Corp. v. Lueck , 471 U.S. 202, 211, 105 S.Ct. 1904, 85 L.Ed.2d 206 (1985). "Claims bearing no relationship to a collective-bargaining agreement beyond the fact that they are asserted by an individual covered by such an agreement are simply not pre-empted by § 301." Caterpillar , 482 U.S. at 396 n.10, 107 S.Ct. 2425.

The distinction between claims that are preempted and claims that are not doesn’t "lend[ ] itself to analytical precision." Cramer v. Consol. Freightways, Inc. , 255 F.3d 683, 691 (9th Cir. 2001) (en banc); see also Livadas v. Bradshaw , 512 U.S. 107, 124 n.18, 114 S.Ct. 2068, 129 L.Ed.2d 93 (1994). In an effort to clear the waters, our prior decisions have set out a two-part test to determine when § 301 preemption applies. Section 301 preempts claims that are "founded directly on rights created by collective-bargaining agreements," Caterpillar , 482 U.S. at 394, 107 S.Ct. 2425, as well as claims that are "substantially dependent on analysis of a collective-bargaining agreement," Int’l Bhd. of Elec. Workers v. Hechler , 481 U.S. 851, 859 n.3, 107 S.Ct. 2161, 95 L.Ed.2d 791 (1987). So when faced with a claim that may implicate a CBA, a court must first ascertain "whether the asserted cause of action involves a right conferred upon an employee by virtue of state law, not by a CBA. If the right exists solely as a result of the CBA, then the claim is preempted, and the analysis ends there." Kobold v. Good Samaritan Reg’l Med. Ctr. , 832 F.3d 1024, 1032 (9th Cir. 2016) (alteration omitted) (quoting Burnside v. Kiewit Pac. Corp. , 491 F.3d 1053, 1059 (9th Cir. 2007) ).

On the other hand, if the court determines that the right at issue exists independently of the CBA, it must then ask "whether the right is nevertheless substantially dependent on analysis of a collective-bargaining agreement." Id. (internal quotation marks omitted). A claim that substantially depends on a collective-bargaining analysis is preempted. In other words, § 301 generally preempts state law claims that implicate a collective-bargaining agreement, except for claims that (1) arise independently of a CBA, and (2) don’t substantially depend on analysis of a CBA.

A.

We first decide whether McCray’s complaint asserts claims that exist solely as a result of the CBA, or if the rights at issue are conferred independently by state law. In doing so, we consider whether "the legal character of a claim" is rooted in the CBA. Burnside , 491 F.3d at 1060 (internal quotation marks and emphasis omitted). A defendant can’t rely on a CBA as an aspect of her defense simply to "inject a federal question into an action...