Fredrickson v. Starbucks Corp.

• Decision Date: 29 October 2013
• Docket Number: No. 3:13–cv–00029–HU.,3:13–cv–00029–HU.
• Parties: Hannah FREDRICKSON, Ashley Krening, and Maurialee Bracke, Plaintiffs, v. STARBUCKS CORPORATION, a Washington corporation, Defendant.
• Court: U.S. District Court — District of Oregon

980 F.Supp.2d 1227

Hannah FREDRICKSON, Ashley Krening, and Maurialee Bracke, Plaintiffs,

v.STARBUCKS CORPORATION, a Washington corporation, Defendant.

No. 3:13–cv–00029–HU.

United States District Court,

D. Oregon.

Oct. 29, 2013.

Limited on Preemption Grounds

West's Or.Rev. Stat. Ann. §§ 652.120, 652.140, 652.610, 653.025, 653.261Jon M. Egan, Lake Oswego, OR, for Plaintiffs.

Carol J. Bernick, Derek D. Green, Christopher F. McCracken, Davis Wright Tremaine, LLP, Portland, OR, Daniel L. Nash, Patricia A. Millett, Akin Gump Strauss Hauer & Feld, LLP, Washington, DC, Gregory W. Knopp, Akin Gump Strauss Hauer & Feld, LLP, Los Angeles, CA, for Defendant.

OPINION AND ORDER

MARSH, District Judge.

Magistrate Judge Hubel filed his Findings and Recommendation on August 28, 2013. The matter is now before me pursuant to 28 U.S.C. § 636(b)(1)(B) and Fed.R.Civ.P. 72(b).

When a party objects to any portion of the Magistrate's Findings and Recommendation, the district court must make a de novo determination of that portion of the Magistrate's report. See28 U.S.C. § 636(b)(1)(B); McDonnell Douglas Corp. v. Commodore Business Machines, Inc., 656 F.2d 1309, 1313 (9th Cir.1981), cert. denied,455 U.S. 920, 102 S.Ct. 1277, 71 L.Ed.2d 461 (1982); accord Dawson v. Marshall, 561 F.3d 930, 932 (9th Cir.2009); United States v. Reyna–Tapia, 328 F.3d 1114, 1121 (9th Cir.2003) (en banc).

Plaintiffs have filed timely objections. Therefore, I have given the file of this case a de novo review. I find no error. I write additionally, however, to address some of plaintiff's objections.

BACKGROUND

A brief summary of the factual and procedural background is necessary. Plaintiffs, former employees of defendant Starbucks Corporation, filed a Class Action Complaint in the Circuit Court for the State of Oregon in Multnomah County on December 10, 2012, primarily alleging that Starbucks violated various state wage and hour statutes by improperly withholding state and federal taxes from tips Starbucks imputed to its employees. Notice of Removal (# 1) exh. 1. Plaintiffs allege that, pursuant to company policy, Starbucks employees distribute tips left in coffee shop tip jars among themselves based on hours worked. Id., exh. 1 at ¶¶ 5–28. Rather than instructing its employees to report the tips the employees received, plaintiff alleged that Starbucks “imputed” or “estimated” that each of its coffee shop employees received $0.50 of tips per hour worked, and improperly withheld state and federal taxes based on that assumption. Id.

Based on the above, plaintiffs pled five claims for relief on the basis that Starbucks failed to pay the applicable minimum wage, overtime wages, wages upon termination, and agreed wages, as well as made wrongful deductions from plaintiffs' and the class members' paychecks. Id. exh. 1 at ¶¶ 40–54. Each of the claims seek some combination of direct damages, statutory penalty damages, attorney's fees, and interest. Id. exh. 1 at ¶¶ 42, 45, 48, 51, 54. Finally, in its Prayer for Relief, plaintiffs additionally requested a declaration that the class members' rights were violated by defendant's actions, and an injunctionenjoining Starbucks from withholding state or federal taxes based on tips in any employees' future paychecks. Id. exh. 1 at 29.

On January 8, 2013, defendant removed the action to federal court, asserting federal question jurisdiction and diversity jurisdiction under the Class Action Fairness Act (CAFA). Id. On February 7, 2013, defendant filed a Motion to Dismiss for Failure to State a Claim (# 18). On March 4, 2013, plaintiffs filed a Motion to Remand Case to State Court (# 27). After briefing and oral argument, Judge Hubel recommended that plaintiff's Motion to Remand be denied and defendant's Motion to Dismiss be granted.

DISCUSSION

Judge Hubel found that' jurisdiction was proper in this court because plaintiff's complaint ultimately raised a substantial federal question. See28 U.S.C. §§ 1331, 1340. I agree. I appreciate, however, the substantial and difficult questions raised by the parties concerning federal question jurisdiction, and accordingly address diversity jurisdiction under CAFA, 28 U.S.C. § 1332(d), and the applicability of the Tax Injunction Act (TIA), 28 U.S.C. § 1341.

I. Class Action Fairness Act Diversity Jurisdiction

CAFA provides federal courts original jurisdiction over class action lawsuits in which the class contains more than 100 members, any class member is a citizen of a state different from any defendant, and the aggregated amount in controversy exceeds $5,000,000. 28 U.S.C. § 1332(d)(2)(A), (d)(5)(B), (d)(6); Standard Fire Ins. Co. v. Knowles, ––– U.S. ––––, 133 S.Ct. 1345, 1348, 185 L.Ed.2d 439 (2013). For purposes of defining the class at this stage of the litigation, “ ‘class members' include ‘persons (named or unnamed) who fall within the definition of the proposed or certified class.’ ” Knowles, 133 S.Ct. at 1348 (quoting 28 U.S.C. § 1332(d)(1)(D)) (emphasis in original).

The only element of CAFA jurisdiction disputed by the parties is the amount in controversy requirement. “A defendant seeking removal of a putative class action must demonstrate, by a preponderance of evidence, that the aggregate amount in controversy exceeds the jurisdictional minimum.” Rodriguez v. AT & T Mobility Services, LLC, 728 F.3d 975, 981 (9th Cir.2013). “[T]he amount-in-controversy inquiry in the removal context is not confined to the face of the complaint.” Valdez v. Allstate Insurance Company, 372 F.3d 1115, 1117 (9th Cir.2004.). In addition to the complaint, the court considers “facts presented in the removal petition as well as any ‘summary-judgment-type evidence relevant to the amount in controversy at the time of removal.’ ” Id. (quoting Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir.2003)).

In its Notice of Removal, defendant alleged that plaintiff's Complaint, while asserting in its title that damages were “not believed to exceed $5,000,000,” in fact stated claims that amounted to substantially more than $5,000,000. Notice of Removal at ¶¶ 16–26, exh. 1 at 2. Defendant attached a declaration from Adrienne Gemperle, a “partner resources vice president for the division encompassing Oregon,” attesting that during the relevant time period, Starbucks employed 6,028 individuals as baristas and shift supervisors, including 3,335 individuals whose employment terminated during the relevant time period. Declaration of Adrienne Gemperle (# 3) (Gemperle Dec.) at ¶¶ 1, 13–14. Ms. Gemperle additionally averred that the average wages of the 3,335 terminated employees at the time of separation was $9.77 per hour. Id. at ¶ 6.

After plaintiffs noted that Ms. Gemperle's declaration did not specify how many employees received the “imputed tips” and found some modest discrepancies between data summarized in Ms. Gemperle's declaration and data defendant provided to plaintiff in prelitigation discovery, defendant submitted a supplemental declaration from Ms. Gemperle. Declaration of Adrienne Gemperle (# 40) (Gemperle Supp. Dec.). In her supplemental declaration, Ms. Gemperle explained the discrepancies and specified that 5,921 coffee shop employees received imputed tips during the relevant time, of which 3,258 separated from Starbucks in the relevant time period. Id.

Starbucks argues that the size of the class and the relief requested on each claim, including statutory penalties, establishes that it is more likely than not that the amount in controversy exceeds $5,000,000. Plaintiffs respond that Ms. Gemperle's declarations are inadmissible hearsay and otherwise unreliable, and that Starbucks has accordingly failed to carry its burden to demonstrate that the amount in controversy exceeds the jurisdictional minimum.

I find that the contents of Ms. Gemperle's declarations, are admissible at this point of the proceedings. A record of regularly conducted activity is excepted from the hearsay rule if: 1) “the record was made at or near the time by—or from information transmitted by—someone with knowledge;” 2) the record was kept in the course of a regularly conducted activity of a business; 3) making the record was a regular practice of that activity; 4) the above conditions are shown by the testimony of the custodian or another qualified witness; and 5) “neither the source of information nor the method or circumstances of preparation indicate a lack of trustworthiness.” Fed.R.Evid. 803(6).

Ms. Gemperle stated that “Starbucks maintains the electronic human resources and payroll databases” from which she obtained her information “[i]n the regular course of business,” that she is familiar with these databases, and “regularly rel[ies] on the data they maintain in connection with [her] job responsibilities.” Gemperle Dec. ¶ 11; Gemperle Supp. Dec. ¶ 2. In addition, Ms. Gemperle stated that she has “personal knowledge of. the employment records maintained regarding Starbucks employees.” Gemperle Dec. ¶ 1; Gemperle Supp. Dec. ¶ 1.

While I acknowledge that Ms. Gemperle's declarations could have been tailored to more clearly present the foundational elements of Rule 803(6) on their face, a commonsense reading of the declarations makes clear that the data relied upon by Ms. Gemperle would be admissible. See Fraser v. Goodale, 342 F.3d 1032, 1036 (9th Cir.2003) (“At the summary judgment stage, we do not focus on the admissibility of the evidence's form. We instead focus on the admissibility of its contents.”). The human resources and payroll databases cited by Ms. Gemperle are textbook examples of records of regularly conducted activity within the hearsay exception of Rule 803(6). I reject plaintiffs' argument that Ms. Gemperle's declarations are unreliable; the apparent discrepancies in the first declaration were adequately explained in the supplemental declaration in such a way as to not undermine the trustworthiness of the data relied upon by Ms. Gemperle. Moreover, as discussed in greater...