Coleman v. Estes Express Lines Inc.

• Decision Date: 25 January 2011
• Docket Number: No. 10–56852.,10–56852.
• Citation: 631 F.3d 1010
• Parties: Bradford COLEMAN, individually, and on behalf of other members of the general public similarly situated, and as aggrieved employee pursuant to the Private Attorneys General Act (“PAGA”), Plaintiff–Appellee,v.ESTES EXPRESS LINES, INC., a Virginia Corporation; ESTES WEST, a business entity form unknown; G.I. Trucking Company, fka Doe 1, dba Estes West, Defendants–Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

631 F.3d 1010

17 Wage & Hour Cas.2d (BNA) 236

11 Cal. Daily Op. Serv. 1250

2011 Daily Journal D.A.R. 1437

Bradford COLEMAN, individually, and on behalf of other members of the general public similarly situated, and as aggrieved employee pursuant to the Private Attorneys General Act (“PAGA”), Plaintiff–Appellee,

v.ESTES EXPRESS LINES, INC., a Virginia Corporation; ESTES WEST, a business entity form unknown; G.I. Trucking Company, fka Doe 1, dba Estes West, Defendants–Appellants.

No. 10–56852.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Jan. 10, 2011.Filed Jan. 25, 2011.

Robert Ebert Byrnes, Mark Paul Estrella, Sue Jin Kim, Darrel Menthe, David M. Medby, Mirian Leigh Schimmel, Glenn Danas (argued), Initiative Legal Group APC, Los Angeles, CA, Payam Shahian, Strategic Legal Practices APC, Los Angeles, CA, for the plaintiff-appellee.Timothy M. Freudenberger, Garrett V. Jensen, Carlton Disante & Freudenberger LLP, Irvine, CA, David Lee Terry, David L. Woodard (argued), Poyner Spruill LLP, Raleigh, NC, for the defendants-appellants.Appeal from the United States District Court for the Central District of California, Audrey B. Collins, Chief District Judge, Presiding. D.C. No. 2:10–cv–02242–ABC–AJW.Before: DIARMUID F. O'SCANNLAIN, WILLIAM A. FLETCHER, and RICHARD R. CLIFTON, Circuit Judges.Opinion by Judge WILLIAM A. FLETCHER; Concurrence by Judge O'SCANNLAIN.

OPINION

W. FLETCHER, Circuit Judge:

Under the Class Action Fairness Act of 2005 (“CAFA”), Pub.L. No. 109–2, 119 Stat. 4 (2005), defendants may remove a diversity class action from state to federal court when, among other conditions, the parties are minimally diverse and the amount in controversy exceeds $5,000,000. 28 U.S.C. §§ 1332(d)(2), 1453(b). However, plaintiffs may obtain a remand to state court if the suit involves a local controversy. Id. § 1332(d)(4)(A)(i). The question before us is whether a federal district court is limited to the complaint in deciding whether two of the criteria for the local controversy exception are satisfied. We hold that the district court is so limited.

I. Background

Estes Express is a Virginia corporation. It acquired G.I. Trucking, a California corporation, in 2005. After the acquisition, G.I. Trucking was renamed Estes West (d/b/a G.I. Trucking) but remained a California corporation. Bradford Coleman, who was employed as a pickup and delivery driver by G.I. Trucking and then by Estes West from 2004 to 2009, brought a putative class action against Estes West and Estes Express (collectively, “Estes”) in Los Angeles County Superior Court based on multiple alleged violations of California law.

Coleman alleged in his complaint that Estes West and Estes Express (1) failed to pay overtime, (2) failed to provide meal and rest periods, (3) failed to timely pay earned wages after discharging employees, (4) failed to pay earned wages to current employees, (5) failed to provide wage statements, and (6) engaged in unlawful business practices, all in violation of California law. On behalf of the proposed class, Coleman requested that Estes West and Estes Express pay unpaid overtime and other wages, pay one hour of wages for each day that a meal break was not provided and an additional hour for each day that rest breaks were not provided, and pay miscellaneous civil penalties. Coleman also requested injunctive relief against Estes West and Estes Express.

Coleman alleged that both Estes West and Estes Express violated California law. He alleged that

each and all of the acts and omissions alleged herein was [sic] performed by, or is attributable to [Estes Express Lines, Inc. and/or Estes West and Doe Defendants], each acting as the agent for the other, with legal authority to act on the other's behalf.... At all relevant times herein mentioned, Defendants, and each of them, ratified each and every act or omission complained of herein. At all times herein mentioned, Defendants, and each of them, aided and abetted the acts and omissions of each and all the other Defendants in proximately causing the damages herein alleged.

The remainder of the complaint referred to actions taken by “Defendants,” rather than actions taken separately by Estes Express or Estes West.

Estes removed to federal court under CAFA. 28 U.S.C. §§ 1332(d), 1453(b). Coleman moved to remand to state court, arguing that the case was a local controversy under CAFA.

A plaintiff whose putative class action has been removed can obtain a remand to state court under any of three exceptions to the district court's subject matter jurisdiction under CAFA. Id. § 1332(d)(3), (d)(4)(A), (d)(4)(B). The local controversy exception, upon which Coleman relies, provides that a federal district court “shall decline to exercise [removal] jurisdiction ... over a class action in which—”

(I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed;

(II) at least 1 defendant is a defendant—

(aa) from whom significant relief is sought by members of the plaintiff class;

(bb) whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and

(cc) who is a citizen of the State in which the action was originally filed; and

(III) principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed[.]

28 U.S.C. § 1332(d)(4)(A)(i). A plaintiff seeking remand has the burden of showing that the local controversy exception applies. Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1024 (9th Cir.2007). Estes opposed remand, arguing that two of the criteria for the local controversy exception were not satisfied. First, Estes argued that Estes West had insufficient funds to satisfy a judgment, and that “significant relief” therefore had not been “sought” from it. See 28 U.S.C. § 1332(d)(4)(A)(i)(II)(aa). Second, Estes argued that Estes Express had almost complete control over the operations of Estes West, and that Estes West's “alleged conduct” therefore did not “form a significant basis for the claims asserted by the proposed plaintiff class.” Id. § 1332(d)(4)(A)(i)(II)(bb). If either of Estes's arguments is correct, Coleman is not entitled to a remand under the local controversy exception.

In support of its arguments, Estes filed a declaration by Brenda Gerczak, Director of Human Resources for Estes Express. With respect to funds from which Estes West could satisfy a judgment, Ms. Gerczak declared:

Estes West does not have the funds to satisfy a potential judgment in the lawsuit brought by Bradford Coleman; only Estes Express would possess such funds. Although, in compliance with California law, Estes maintains a bank account in California for payroll purposes, the account is funded entirely by Estes Express from its own funds....

Estes West has no source of revenue. Estes Express supplies all funds needed for the operation of the Estes West region. Revenue in Estes' trucking operation is derived from bills submitted to customers who use Estes to transport freight.... All monies paid by customers on account of these invoices are paid directly to Estes Express and retained by Estes Express except for the money needed to fund the payroll account for Estes West.... Estes West receives no income from any other source.

With respect to Estes Express's control over the operations of Estes West, Ms. Gerczak declared:

Estes Express assumed complete control over payroll practices and functions immediately after it completed its acquisition of Estes West. Since the acquisition, Estes Express has directed every aspect of the payroll function in California, including establishing pay periods, pay days and pay rates for all employees in California and elsewhere in the Estes West region....

In addition to matters of payroll, Estes Express maintains control over all other general terms of employment for California employees.... In sum, Estes Express possesses and maintains complete control over every significant term of employment for every Estes employee in the State of California. Local managers in the Estes West region give day to day instructions to employees, but such instructions are given strictly within the operating rules and guidelines established by Estes Express in Virginia.

The district court held that it could not look beyond the allegations in the complaint in deciding whether Coleman “sought” “significant relief” from Estes West. Looking only to the complaint, it held that Coleman had satisfied the significant relief requirement of § 1332(d)(4)(A)(i)(II)(aa). The district court did not resolve the question of whether it could look beyond the complaint in deciding whether Estes West's “alleged conduct form[ed] a significant basis” for Coleman's claims. It held that regardless of whether it considered Ms. Gerczak's declaration, Coleman had satisfied the conduct requirement of § 1332(d)(4)(A)(i)(II)(bb). The district court therefore remanded Coleman's putative class action to state court.

Under CAFA, a party may seek to appeal to the court of appeals a remand order of the district court. The court of appeals has discretion whether to accept the appeal. 28 U.S.C. § 1453(c)(1). On November 30, 2010, we granted Estes permission to appeal. Coleman v. Estes Express, 627 F.3d 1096 (9th Cir.2010) (per curiam). In granting permission, we noted that the question whether a district court may look beyond the allegations of the complaint in determining the applicability of the local controversy exception had not been resolved in this circuit. We therefore concluded that “appellate review would be useful.” Id. at 1101.

II. Standard of Review

We review issues of statutory interpretation de novo. Rodriguez v. Smith, 541 F.3d 1180, 1183 (9th Cir.2008).

III. Discussion

A. The Text

We begin with the words of the statute. United States v. Nader, 542 F.3d 713,...