Lao v. Wickes Furniture Co., Inc.

• Decision Date: 04 October 2006
• Docket Number: No. EDCV 06 448 SGL OPX.,EDCV 06 448 SGL OPX.
• Citation: 455 F.Supp.2d 1045
• Parties: Sherry LAO and Betty Yates, individually and on behalf of all others similarly situated, Plaintiffs, v. WICKES FURNITURE COMPANY, INC.; Sun Capital Partners, Inc.; Sun Capital Partners II, LP; and R.T.G. Furniture Corporation Defendants.
• Court: U.S. District Court — Central District of California

455 F.Supp.2d 1045

Sherry LAO and Betty Yates, individually and on behalf of all others similarly situated, Plaintiffs, v. WICKES FURNITURE COMPANY, INC.; Sun Capital Partners, Inc.; Sun Capital Partners II, LP; and R.T.G. Furniture Corporation Defendants.

No. EDCV 06 448 SGL OPX.

United States District Court, C.D. California.

October 4, 2006.

COPYRIGHT MATERIAL OMITTED

Darren D Daniels, Marc D Roberts and Associates, Marc D Roberts, Marc D Roberts & Associates, Raphael Albert Katri, Marc D Roberts and Associates, Ontario, for Sherry Lao individually and on behalf of all others similarly situated, Betty Yates individually and on behalf of all others similarly situated, Plaintiffs.

Anne Marie Estevez, Morgan Lewis and Bockius, Miami, FL, Barbara J Miller, Morgan Lewis and Bockius, Jesse Elijah Maram Randolph, Morgan Lewis and Bockius, Irvine, Anne Marie Estevez, Morgan Lewis and Bockius, Miami, FL, for Wickes Furniture Company Inc a Delaware corporation, Sun Capital Partners Inc a Florida corporation, Sun Capital Partners II LP, a Delaware limited partnership, Sun Capital Partners LLC, a De laware limited liability company, Sun Capital Advisors II LP, a Delaware limited partnership, Rooms To Go Inc a California corporation, RTG Furniture Corp a Florida corporation, Master Home USA Inc a Delaware corporation, Does 1 through 50 inclusive, Master Home USA Inc a Delaware corporation, R T G Furniture Corp a Florida corporation, Rooms To Go Inc a California corporation, Sun Capital Advisors II LP a Delaware limited partnership, Sun Capital Partners LLC a Delaware limited liability company, Defendants.

ORDER GRANTING PLAINTIFFS' MOTION TO REMAND

LARSON, District Judge.

This case requires the Court to examine the Class Action Fairness Act of 2005 ("CAFA"), a statute in which some major terms are left undefined, certain of the provisions of which have been aptly characterized as "bewildering" or "clumsily crafted," and whose legislative history is, in part, of questionable interpretive value. In short, it is a statute that is a headache to construe.

On April 7, 2006, plaintiffs filed a class action suit in San Bernardino County Superior Court. The proposed class represents those who were or still are employed as commissioned salespersons at Wickes Furniture Company, Inc.'s ("Wickes") showrooms in California from March 24, 2002, until the time a class is certified, a class potentially representing "hundreds of people." (First Am. Compl. ¶¶ 1, 26).¹ Plaintiffs allege that they regularly performed non-sales (and, hence uncompensated) work, such as attending meetings (some sponsored by the company and some by furniture vendors whose wares Wickes sold), cleaning the stores, and researching the prices charged by Wickes' competitors. They also allege that the commissions they earned from a sale were subject to being stripped, or in industry jargon "housed," if they committed even inconsequential clerical errors in the sales paperwork. The complaint asserts state law claims for unpaid wages, unpaid overtime, unfair business practices, breach of contract, and a violation of California Labor Code § 226 (relating to the furnishing of wage statements).

The complaint further alleges that two of the other defendants named in the complaint, Sun Capital Partners, Inc., and Sun Capital Partners II, LP (collectively "Sun Capital"), jointly managed and operated the showrooms in question and, in conjunction with Wickes, were "plaintiffs' joint employers." (First Am. Compl. ¶ 10).² Indeed, the complaint paints a portrait of Sun Capital as being the moving force behind the actions alleged in the complaint, terming Wickes itself "as a mere shell and conduit" for Sun Capital and, at other points, labeling Wickes as an "alter ego" of Sun Capital. (First Am. Compl. ¶ 11). Such an intermingling in the other defendants' business structure with Wickes prompted plaintiffs to seek to hold all the defendants jointly liable for any liability incurred. (First Am. Compl. ¶ 12 ("defendants and each of them should respond, as a whole, for the debts and liabilities of this integrated enterprise. Accordingly, defendants and each of them should be considered plaintiffs' employer and liable for the acts and omissions as stated herein")).

On May 2, 2006, defendants removed the action to this Court pursuant to CAFA, 28 U.S.C. § 1332(d). Presently before the Court are plaintiffs' motion to remand defendants' opposition thereto, plaintiffs' reply, and defendants' surreply. For the reasons set forth below, the Court GRANTS the motion to remand.

In its motion, plaintiffs posit three reasons why remand is required, all of which are tied to the provisions allowing removal under CAFA: (1) The $5 million amountin-controversy requirement for removal under the Act contained in subsection (d)(2) is not met; (2) the action falls within the home-state controversy bar from removal jurisdiction contained in subsection (d)(4)(B); and (3) the matter falls within the local controversy bar from removal jurisdiction contained in subsection (d)(4)(A).

A. AMOUNT IN CONTROVERSY

Insofar as the amount in controversy requirement contained in CAFA is concerned, the Ninth Circuit has already held that it is the removing party, that is, defendants, who bear the burden of proof. See Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 685 (9th Cir.2006).

Subsection (d)(2) grants federal district courts jurisdiction over any class action governed by CAFA in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interests and costs, provided the minimal diversity requirements of the Act are met. Both sides agree that minimal diversity exists in this case as at least one named defendant is a citizen of a State different from that of a member of the proposed class. See 28 U.S.C. § 1332(d)(2)(A). The only question is in defendants' valuation of the amount in controversy contained in their notice of removal.

The process of determining the amount in controversy is relatively straightforward:

The question is not what damages the plaintiff will recover, but what amount is `in controversy' between the parties. That the plaintiff may fail in its proof, and the judgment be less than the threshold (indeed, a good chance that the plaintiff will fail and the judgment will be zero) does not prevent removal. Once the proponent of jurisdiction has set out the amount in controversy, only a `legal certainty' that the judgment will be less forecloses federal jurisdiction.

Application of the St. Paul Mercury "legal certainty" standard usually is straightforward when the plaintiff wants to be in federal court. Then the complaint will contain allegations that, if established at trial, would justify a judgment exceeding the jurisdictional minimum. . . . The demonstration concerns what the plaintiff is claiming (and thus the amount in controversy between the parties), not whether plaintiff is likely to win or be awarded everything he seeks.

Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 448-49 (7th Cir2005)(citing St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 58 S.Ct. 586, 82 L.Ed. 845 (1938)).

In the notice of removal defendants posited that the potential value of the first claim for unpaid wages was worth in excess of $6,000,000 when one aggregates, as CAFA requires, see 28 U.S.C. § 1332(d)(6), the value of the claims of all the proposed class members. Defendants calculate the value of plaintiffs' second claim for waiting-time penalties as potentially topping $2,000,000. Plaintiffs have raised two objections to the method employed by defendants in arriving at these numbers. First, in their remand motion, plaintiffs quibbled only with how defendants calculated the number of proposed class members: "Defendants provided the Court with damages calculations based on the total number of proposed plaintiffs, instead of Full Time Equivalents (`FTE s')." This method is completely inadequate because most of the proposed plaintiffs were not employees of Wickes during the entire limitations period. Thus, defendants' calculations, which are based on the total amount of proposed plaintiffs during the entire limitations period of this lawsuit, produces inflated numbers solely for the purpose of establishing federal subject matter jurisdiction. (Pls' Mot. Remand at 12).

When defendants in their opposition noted that their calculation was in fact based on such FTEs (Defs' Opp. at 16-18), plaintiffs shifted gears and posited that the problem with defendants' calculation was one of timing, specifically objecting to defendants' calculating the amount of potential damages plaintiffs' class in the aggregate could be awarded by using both the four years immediately preceding the filing of the complaint and defendants' estimate that it will take two more to take the case to trial. (Defs' Opp. at 16-18; Pls' Reply at 13-14). As explained by plaintiffs, determination of the amount in controversy is made at the time of removal and, additionally, allowing defendants to calculate potential damage awards into the future would mean that CAFA's amount in controversy requirement would always be met, as "[w]hat would stop" a defendant from "calculating damages for an indefinite and arbitrary period." (Pls' Reply at 13).

The Court is not unsympathetic to plaintiffs' argument, but notes that some of the blame lies with how plaintiffs drafted their complaint. The complaint makes plain that it seeks to recoup unpaid wages from March 24, 2002, up "until the time a class is certified." (First Am. Compl. ¶ 1). Thus, the complaint itself posits the potential of damages flowing to the proposed class to a future, as of yet undetermined, date. While it is true that defendants seek to calculate damages up until the "the time of trial," which goes well beyond the scope of the damages proposed in the complaint, that there is potential future damages to calculate at all is solely the...