Fredrickson v. Starbucks Corp.
Decision Date | 17 March 2017 |
Docket Number | Case No. 3:13-cv-00029-SB |
Parties | HANNAH FREDRICKSON, ASHLEY KRENING and MAURIALEE BRACKE, Plaintiffs, v. STARBUCKS CORPORATION, a Washington corporation, Defendant. |
Court | U.S. District Court — District of Oregon |
FINDINGS AND RECOMMENDATION
Plaintiffs filed suit in Oregon state court on December 10, 2012, against Starbucks Corporation ("Starbucks"), seeking unpaid wages and statutory penalties based on Starbucks' improper withholding of state and federal taxes from their tips.1 Specifically, Plaintiffs alleged that Starbucks made payroll tax deductions from employees' paychecks based on "imputed" tips of fifty cents per hour, in violation of Oregon law. Starbucks timely removed the case to federal court, asserting federal question jurisdiction, diversity jurisdiction under the Class Action Fairness Act ("CAFA"), and jurisdiction under 28 U.S.C. § 1340.
Following removal, Starbucks filed a motion to dismiss on the ground that federal law preempts all of Plaintiffs' claims. In response, Plaintiffs moved to remand to state court contending that, among other things, the Tax Injunction Act divests this Court of jurisdiction. On August 28, 2013, a magistrate judge held that Starbucks' removal was proper because all of Plaintiffs' claims are preempted by federal law. Fredrickson v. Starbucks Corp., 980 F. Supp. 2d 1227, 1250 (D. Or. 2013) (Fredrickson I). Subsequently, the district judge adopted the magistrate judge's recommendation, finding that "jurisdiction was proper in this court because [P]laintiff's complaint ultimately raised a substantial federal question." Id. at 1230. The district judge also determined that subject matter jurisdiction was appropriate under CAFA, and that the Tax Injunction Act did not deprive this court of jurisdiction. Id. at 1232-33. Accordingly, the district judge denied the motion to remand, and granted the motion to dismiss. Id. at 1233. Plaintiffs appealed to the Ninth Circuit.
On November 3, 2016, the Ninth Circuit reversed the decision of this Court and held that although Plaintiffs "concede that the Class Action Fairness Act provides a basis for federal subject matter jurisdiction," the Tax Injunction Act and the federal-state comity doctrine deprive the federal courts of jurisdiction. Fredrickson v. Starbucks Corp., 840 F.3d 1119, 1121, 1126 (9th Cir. 2016) (Fredrickson II). On finding that all of Plaintiffs' claims were "jurisdictionally barred or foreclosed by the comity doctrine," the Ninth Circuit ordered that "the entire action must be remanded to state court." Id. at 1126. Based on the Ninth Circuit's holding, Plaintiffs seek a determination that they are entitled to fees and costs under 28 U.S.C. § 1447(c), incurred as a result of Starbucks' removal. For the reasons set forth below, the district judge should find that Plaintiffs are not entitled to fees and costs, and deny Plaintiffs' Motion for 28 U.S.C. § 1447(c) Determination (ECF No. 95).
"An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." 28 U.S.C. § 1447(c). The standard for awarding costs and fees turns on the reasonableness of the removal. Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). "Absent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal." Id. "[R]emoval is not objectively unreasonable solely because the removing party's arguments lack merit[.]" Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1065 (9th Cir. 2008); see also Burkholder v. Asbestos Claims Mgmt. Corp., No. 07-cv-781, 2007 WL 2463307, at *4 (D. Or. Aug. 28, 2007) ( ). Remand does not create a presumption in favor of awarding attorney's fees and costs. Martin, 546 U.S. at 137.
I. STARBUCKS' REMOVAL WAS OBJECTIVELY REASONABLE
The sole issue before the Court is whether Starbucks' removal was objectively reasonable. The test for objective reasonableness "is whether the relevant case law clearly foreclosed the defendant's basis of removal." Lussier, 518 F.3d at 1066. At the time of Starbucks' removal, the relevant case law was complex and not easily discernable under the facts of this case. See Fredrickson I, 980 F. Supp. 2d at 1230 ( ). Indeed, both the magistrate judge and district judge concluded that Starbucks' removal was proper. Standing alone, those opinions demonstrate that the relevant case law did not clearly foreclose Starbucks'bases for removal. In any event, this Court also concludes, based on the analysis set forth below, that Starbucks' removal of this case was objectively reasonable.
As a threshold matter, the Court notes that CAFA provided an undisputed basis for removal of this case. See Fredrickson II, 840 F.3d at 1121 () (citing 28 U.S.C. § 1332(d)); see also Fredrickson I, 980 F. Supp. 2d at 1230 ( ). The Ninth Circuit ultimately concluded, however, that the Tax Injunction Act and the federal-state comity doctrine deprived the district court of jurisdiction. Plaintiffs now contend that because "clear and binding statutory and case-law authority required remand[,] . . . there was no objectively reasonable basis for Starbucks' removal." (Pls.' Mot. 3-4.) The Court disagrees.
The Tax Injunction Act directs that: "[D]istrict courts shall not enjoin, suspend, or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." 28 U.S.C. § 1341. In Fredrickson I, the district court found that the "dispositive question" in resolving § 1341's jurisdictional bar is whether Plaintiffs' action would reduce the flow of state tax revenue. 980 F. Supp. 2d at 1232. The district court determined that the Tax Injunction Act was not applicable here, because although "this is a tax refund suit insofar as [P]laintiffs are seeking to recover from Starbucks sums paid as taxes, it does not affect state tax revenue in any way, as [P]laintiffs admit that the tip income is taxable in some manner." Id. at 1233.
On appeal, the Ninth Circuit agreed the dispositive issue was whether Plaintiffs' relief would impede the collection of taxes within the meaning of the Tax Injunction Act. Fredrickson II, 840 F.3d at 1122. Contrary to the district court's finding, however, the Ninth Circuit foundthat granting Plaintiffs' requested equitable relief would "stop" the collection of taxes, triggering the Tax Injunction Act's bar. Id. In reaching its conclusion, the Ninth Circuit relied in part upon non-binding precedent from the Third and Fourth Circuits. Id. at 1122 () (citing Sipe v. Amerada Hess Corp., 689 F.2d 396, 401-03 (3d Cir. 1982), and Int'l Lotto Fund v. Virginia State Lottery Dep't, 20 F.3d 589, 591-93 (4th Cir. 1994)). In addition, the Ninth Circuit looked to the post-removal Supreme Court decision in Direct Mktg. Assoc. v. Brohl, ___ U.S. ___, 135 S. Ct. 1124, 1127 (2015) for guidance on the scope of the Tax Injunction Act. See, e.g., id. at 1123 (). Even though the Ninth Circuit reached a different conclusion regarding whether Plaintiffs' requested relief would impede the collection of taxes, Starbucks' arguments to the contrary were not clearly foreclosed by existing case law. See Lussier, 518 F.3d at 1066 ( ). Rather, it was a close question.
Accordingly, the Court concludes that Starbucks' removal was objectively reasonable, and Plaintiffs' request for fees and costs should be denied. See, e.g., Toensmeier v. Amalgamated Transit Union, No. 3:15-CV-01998-HZ, 2016 WL 884644, at *4 (D. Or. Mar. 8, 2016) ( ); Salomon v. Mass. Mut. Life Ins. Co., No. 03:11-cv-01007-HU, 2012 WL 1081191, at *9 (D. Or. Jan. 13, 2012) ( ); Brownlow v. Am. Beef Processing, LLC, No. 09-1277-AC,2011 WL 3268340, at *3-4 (D. Or. June 21, 2011) ( ); Fed. Home Loan Mortg. Corp. v. Lettenmaier, No. CV-11-165-HZ, 2011 WL 1297960, at *2 (D. Or. Apr. 5, 2011) ( ).
Nor were Starbucks' arguments against application of the federal-state comity doctrine clearly foreclosed by existing case law. In Frederickson II, the Ninth Circuit found that "[a]ny award of statutory damages here would have the same disruptive effect as entry of a declaratory judgment or issuance of an injunction, thereby undermining the...
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