Pagel v. Dairy Farmers of Am., Inc.

• Decision Date: 11 December 2013
• Docket Number: Case No. CV 13–2382 SVW (VBKx).
• Citation: 986 F.Supp.2d 1151
• Parties: Sean PAGEL, Plaintiff, v. DAIRY FARMERS OF AMERICA, INC., Defendant.
• Court: U.S. District Court — Central District of California

986 F.Supp.2d 1151

Sean PAGEL, Plaintiff,

v.DAIRY FARMERS OF AMERICA, INC., Defendant.

Case No. CV 13–2382 SVW (VBKx).

United States District Court,

C.D. California.

Dec. 11, 2013.

Brian Daniel Hefelfinger, Daniel J. Palay, Michael Anthony Strauss, Palay Law Firm, Ventura, CA, for Plaintiff.

Allison C. Eckstrom, Keith A. Watts, Ogletree Deakins Nash Smoak and Stewart PC, Costa Mesa, CA, for Defendant.

ORDER DENYING PLAINTIFF'S MOTION FOR REMAND

STEPHEN V. WILSON, District Judge.

This is a wage and hour dispute that was filed in the Ventura County Superior Court and removed here under the Class Action Fairness Act of 1995 (“CAFA”). The question presented by the motion for remand is whether civil penalties sought by plaintiff under California's Private Attorney General Act (“PAGA”), Cal. Labor Code § 2699, are included in the amount in controversy for purposes of determining jurisdiction under 28 U.S.C. § 1332(d)(2). If they are not—or if the 75% of any PAGA penalty recovery that must be paid to California's Labor and Workforce Development Agency (“LWDA”) is not part of the amount in controversy—then the federal courts lack jurisdiction over this action and the case must be remanded to state court. For the reasons discussed herein, the Court concludes that the full amount of potential PAGA penalties payable by defendant must be included in assessing whether “the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs” under 28 U.S.C. § 1332(d)(2), and that therefore the motion to remand must be denied.

I. Background

Plaintiff Sean Pagel contends that defendant Dairy Farmers of America (“DFA”) failed to pay wages to him and other employees for missed meal periods and time spent donning and doffing uniforms at DFA's three California dairy processing facilities. In addition to claims under California Labor Code § 226 and California Business and Professions Code § 17200, Pagel seeks civil penalties as provided by PAGA. PAGA permits an employee to recover civil penalties on behalf of herself and other current or former employees that would otherwise be paid to the state LWDA if that agency had brought its own an enforcement action. Cal. Labor Code § 2699(a). The penalties are calculated based on the total number of employees who experienced the violation. Id. § 2699(f)(2). State courts do not require class certification to obtain PAGA penalties on behalf of a group of employees, because an individual plaintiff may act “as the proxy or agent of the state's labor law enforcement agencies.” Arias v. Superior Court, 46 Cal.4th 969, 986, 95 Cal.Rptr.3d 588, 209 P.3d 923 (2009). If the plaintiff prevails, 75% of total penalties assessed are paid to the LWDA, with the remaining 25% going to the aggrieved employees. Cal. Labor Code § 2699(I).

Pagel filed his complaint in the Ventura County Superior Court on behalf of all DFA employees who did not receive full pay for their time spent at work in DFA's manufacturing facilities in California. DFA removed the action here alleging jurisdiction under CAFA. Pagel moved to remand, arguing that the amount in controversy was below CAFA's $5 million jurisdictional threshold. Based on a settlement demand in a letter from plaintiff's counsel to DFA, however, the Court found that DFA had carried its burden of demonstrating the existence of CAFA jurisdiction. (Dkt. 19: Order on Mot. Remand, July 9, 2013, at 5–7); see Babasa v. LensCrafters, Inc., 498 F.3d 972, 975 (9th Cir.2007); Cohn v. Petsmart, Inc., 281 F.3d 837, 839–40 (9th Cir.2002). The motion to remand was therefore denied.

II. Plaintiff's Renewed Motion to Remand

Pagel contends that a recent Ninth Circuit decision issued after the first remand motion was denied now makes clear that PAGA penalties cannot be aggregated to determine the amount in controversy. See Urbino v. Orkin Servs. of California, Inc., 726 F.3d 1118 (9th Cir.2013). Pagel's first remand motion did not argue that PAGA penalties (or at least the 75% paid to the state) were not part of the amount in controversy (Dkt. 14, 17), even though this theory had already been accepted by other federal courts in California.¹ Ordinarily, a motion for reconsideration would require analysis of whether Pagel's new argument is based on “a material difference in ... law from that presented to the Court before ... that in the exercise of reasonable diligence could not have been known to [plaintiff] at the time of [the earlier] decision.” Local Rule 7–18. But the instant motion raises a substantial question about the Court's jurisdiction over the subject matter of this case, which is a defense that cannot be waived. Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir.1983). The Court has “a continuing duty to dismiss an action whenever it appears that [it] lacks jurisdiction.” Id.;Fed.R.Civ.P. 12(h)(3). This is no less true in actions removed from state court. See28 U.S.C. § 1447(c) (“If at any time before final judgment it appears that the district court lacks subject matter jurisdiction [over a removed case], the case shall be remanded.”).

DFA correctly observes that jurisdiction over the subject matter of a case is determined at the time the case is removed. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 293, 58 S.Ct. 586, 82 L.Ed. 845 (1938); United Steel Int'l Union v. Shell Oil Co., 602 F.3d 1087, 1091 (9th Cir.2010). DFA concludes from this that since the Court correctly found there was jurisdiction before the Urbino decision was announced, the issue cannot now be revisited. But Pagel is not arguing that a post-filing development, like a reduction in class size or the amount in controversy, has defeated jurisdiction. Cf. St. Paul Mercury, 303 U.S. at 293, 58 S.Ct. 586 (“[E]vents occurring subsequent to removal which reduce the amount recoverable, whether beyond the plaintiff's control or the result of his volition, do not oust the district court's jurisdiction once it has attached.”) Instead, Pagel argues that there never was jurisdiction because PAGA penalties are not part of the amount in controversy. The question is not whether something has changed since this action was removed, but whether “jurisdiction was properly invoked as of the time of filing.” United Steel, 602 F.3d at 1092. Plaintiff contends that the Ninth Circuit's decision in Urbino shows that it was not. In view of the divergent opinions of the district courts in this area, this jurisdictional question deserves consideration.

III. Divergence in District Court Opinions

District courts in California are split over the question of whether the full amount of PAGA penalties sought from a defendant should be included when calculating the amount in controversy, or only the 25% that would ultimately be paid to the aggrieved employee. Considering an individual action where the plaintiff asserted diversity jurisdiction under 28 U.S.C. § 1332(a), one court concluded that only the 25% payable directly to the employee plaintiff should be counted toward the amount in controversy. Pulera, 2008 WL 3863489, at *4. Two other courts reached the opposite conclusion in non-CAFA class actions, reasoning that the aggrieved employees' claims are “common and undivided” rather than separate and distinct,² so that the total civil penalties the defendant is exposed to in the action should be combined in assessing whether the plaintiff's damages meet the $75,000 threshold for jurisdiction under 28 U.S.C. § 1332(a). See Urbino v. Orkin Services, 882 F.Supp.2d 1152, 1164 (C.D.Cal.2011); Thomas v. Aetna Health of California, Inc., No. CV 10–1906–AWI–SKO, 2011 WL 2173715, at *19 (E.D.Cal. June 2, 2011); accord Urbino, 726 F.3d at 1123–24 (Thomas, J., dissenting). The Ninth Circuit's recent decision in Urbino resolved this disagreement, holding that the penalties payable to other members of the potential class of employees may not be aggregated to satisfy the amount in controversyrequirement for jurisdiction under 28 U.S.C. § 1332(a). Urbino, 726 F.3d at 1122–23.

Urbino did not address jurisdiction under CAFA. Prior to Urbino, several district courts had held that the entire potential PAGA recovery should be included in the amount in controversy when assessing jurisdiction in a CAFA case. See Altamirano v. Shaw Industries, Inc., No. C–13–0939 EMC, 2013 WL 2950600, at *6–7 (N.D.Cal. June 14, 2013); Quintana v. Claire's Stores, No. CV 13–368 PSG, 2013 WL 1736671, at *7 (N.D.Cal., April 22, 2013); Schiller v. David's Bridal, Inc., No. CV 10–616–AWI–SKO, 2010 WL 2793650, at *8 (E.D.Cal. July 14, 2010); see also Andersen v. Schwan Food Co., No. C 13–2362 PJH, 2013 WL 3989562, at *5–6 (N.D.Cal. Aug. 2, 2013) (assuming 100% of PAGA penalties count toward amount in controversy but rejecting defendant's calculation as speculative); Allen v. Utiliquest, LLC, C 13–49 SBA, 2013 WL 4033673, at *7–8 (N.D.Cal. Aug. 01, 2013) (same); Bell v. Home Depot U.S.A., Inc., CV 12–2499–GEB, 2013 WL 1791920, at *3–4 (E.D.Cal. Apr. 26, 2013) (same).³

Other courts have rejected this view and held that in a CAFA case, although the potential penalties attributable to all class members should be aggregated, only the 25% of this total amount that is paid directly to the class members should be included in the amount in controversy. See Hernandez, 2012 WL 2373372, at *16;Walker v. CorePower Yoga, LLC, CV12–4–WHQ, 2013 WL 2338675, at *4–5 (S.D.Cal. May 28, 2013); Lopez v. Source Interlink Cos., No. CV 12–3–JAM, 2012 WL 1131543, at *3 (E.D.Cal. Mar. 29, 2012); see also Smith v. Brinker Int'l, Inc., No. C 10–0213 VRW, 2010 WL 1838726, at *2, *5 (N.D.Cal. May 5, 2010) (not disputing removing defendant's assumption that damage calculations are based on only 25% of PAGA penalties). Recently, the same district court that decided Pulera (an individual action) also reached this conclusion in a CAFA case. The court observed that under CAFA, “[i]n determining ‘whether the matter in controversy exceeds the sum or...