Zachary Gurzenski v. Delta Air Lines, Inc.

1 JS-6 [7] 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 ZACHARY GURZENSKI, an Case No. 2:21-cv-05959-AB (JEMx) individual, on behalf of himself and all 11 other similarly situated non-exempt ORDER GRANTING PLAINTIFF’S current and former employees, MOTION TO REMAND [12] Plaintiff, [13] 14 v. 15 DELTA AIR LINES, INC., a Delaware corporation; and DOES 1 through 10, 16 inclusive, 17 Defendants. [18] Plaintiff Zachary Gurzenski (“Plaintiff”) filed a Complaint (“Compl.,” Dkt. No. [19] 2-1) in Los Angeles County Superior Court alleging that Defendant Delta Airlines, [20] Inc. (“Defendant”) violated various California labor laws. Id. Defendant removed the [21] action pursuant to the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332 (d)(2). [22] Now before the Court is Plaintiff’s Motion to Remand. (“Motion,” Dkt. No. 15.) [23] Defendant filed an Opposition and Plaintiff filed a Reply. (Dkt. Nos. 16, 17.) For the [24] following reasons, the Court GRANTS Plaintiff’s Motion. [25] I. BACKGROUND [26] Plaintiff was employed by Defendant as a non-exempt Ramp Agent, and seeks [27] to represent a class of all current and former Ramp Agents at any of Defendant’s [28] 1 locations at Los Angeles International Airport (“LAX”) during the class period. See 2 Compl. ¶¶ 6, 14. According to Plaintiff, Defendant violated California labor law 3 because it “routinely required [Class Members] to purchase and use their own 4 mandatory personal protective equipment, mandatory safety equipment and tools, and 5 personal cell phone data and minutes as a direct consequence of the discharge of their 6 employment duties.” Id. ¶ 14 . Defendant did not compensate Class Members for this 7 equipment. The equipment Class Members purchased for themselves consisted of 8 protective steel-toed boots, safety vests, earmuffs, marshaling wands, and knee pads. [9] Id. ¶¶ 15, 19 . Defendant also required Class Members to use their personal cell phones 10 for work purposes and did not compensate them for this. Id. ¶¶ 22-23 . 11 Based on these allegations, the Complaint alleges the following three (3) causes 12 of action: (1) Failure to Indemnify Employees for Necessary Expenditures Incurred in 13 Discharge of Duties ( Cal. Lab. Code § 2802 ); (2) Failure to Pay All Wages Due to 14 Discharged and Quitting Employees ( Cal. Lab. Code § 203 ); and (3) Unfair and 15 Unlawful Business Practices ( Cal. Bus. & Prof. Code § 17200 , et seq.). 16 Plaintiff contends that he pled only these three claims to avoid passing CAFA’s 17 $5 million amount in controversy threshold. He argues that Defendant has not 18 established that these three claims satisfy the threshold, contending that Defendant’s 19 estimate of about $5.1 million—barely surpassing CAFA’s minimum—is inflated 20 because it double-counts some damages and uses unreasonable assumptions. 21 II. LEGAL STANDARD 22 A defendant may remove a civil action filed in state court to federal court when 23 the federal district court has original jurisdiction over the action. 28 U.S.C. § 1441 (a). 24 “A suit may be removed to federal court under 28 U.S.C. § 1441 (a) only if it could 25 have been brought there originally.” Sullivan v. First Affiliated Sec., Inc., 813 F.2d 26 1368, 1371 (9th Cir. 1987). The burden of establishing federal jurisdiction is on the 27 party invoking it. 28 The Class Action Fairness Act (“CAFA”) vests federal district courts with 1 original jurisdiction over class actions in which (1) the parties are minimally diverse, 2 (2) the proposed class has more than 100 members, and (3) the total amount in 3 controversy exceeds $5 million. 28 U.S.C. § 1332 (d); Serrano v. 180 Connect, Inc., [4] 478 F.3d 1018 , 1020–21 (9th Cir. 2007). 5 III. DISCUSSION 6 The parties do not dispute that Plaintiff’s class exceeds 100 members and that 7 the parties are minimally diverse. The only dispute is whether the amount in 8 controversy is satisfied: Plaintiff’s Complaint alleges that “the amount in controversy 9 for the aggregate claims of PLAINTIFF and the class he seeks to represent is under 10 Five Million Dollars ($5,000,000.00),” Compl. ¶ 3, while Defendant contends that it 11 exceeds $5 million. 12 A. Removal and Remand Under CAFA 13 A removing defendant bears the burden of establishing federal jurisdiction. See 14 Ibarra v. Manheim Investments, Inc., 775 F.3d 1193, 1197 (9th Cir. 2015). To meet 15 this burden as to the amount in controversy, “a defendant’s notice of removal need 16 include only a plausible allegation that the amount in controversy exceeds the 17 jurisdictional threshold.” Dart Cherokee Basin Operating Co., LLC v. Owens, 574 18 U.S. 81 , 88 (2014) (citing 28 U.S.C. § 1446 (c)(2)(B)). 19 Only “when the plaintiff contests, or the court questions, the defendant’s 20 allegation” must the defendant submit evidence to establish the amount in controversy 21 by a preponderance of the evidence. Id. at 89 (citing 28 U.S.C. § 1446 (c)(2)(B)); see 22 Ibarra, 775 F.3d at 1195 . The Court should “treat the removal petition as if it had 23 been amended to include the relevant information contained in the later-filed 24 affidavits.” Willingham v. Morgan, 395 U.S. 402 , 407 n. 3 (1969); see also Cohn v. 25 Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002) (“The district court did not err in 26 construing Petsmart’s opposition as an amendment to its notice of removal.”). 27 The plaintiff may submit evidence to the contrary. Ibarra, 775 F.3d at 1198 28 (citing Dart Cherokee, 574 U.S. at 89). “The parties may submit evidence outside the 1 complaint, including affidavits or declarations, or other ‘summary-judgment-type 2 evidence relevant to the amount in controversy at the time of removal.’ ” Id. at 1197 3 (quoting Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997)). 4 Once “both sides submit proof [] the court then decides where the preponderance 5 lies.” Ibarra, 775 F.3d at 1198 . “Under this system, a defendant cannot establish 6 removal jurisdiction by mere speculation and conjecture, with unreasonable 7 assumptions.” Id. at 1197 . 8 B. Defendant Has Not Established By a Preponderance of The Evidence 9 That The Amount in Controversy Exceeds $5,000,000. 10 As noted, the Complaint alleges that the amount in controversy does not exceed 11 $5 million. In its Notice of Removal, Defendant estimates the amount in controversy 12 to be at least $5,897,910. See NOR ¶ 57. In his Motion, Plaintiff explains why 13 Defendant’s estimate is inflated and calculates the amount to be about $3.6 million. 14 See Mot. p. 22. In its Opposition, Defendant estimates an amount in controversy of 15 $5,100,112, about $800,000 less than the amount alleged in the NOR. In his Reply, 16 Plaintiff explains why even Defendant’s $5,100,112 estimate is inflated. Both sides 17 filed evidence to support their calculations. Having considered the arguments and 18 evidence, the Court finds that Defendant has not satisfied its burden of proving by a 19 preponderance of the evidence that the amount in controversy exceeds $5 million. 20 First, consistent with the above-referenced authorities, the Court will treat the 21 Defendant’s Notice of Removal to have been amended by, and to include the materials 22 Defendant filed with, its Opposition. Accordingly, the Court will determine whether 23 Defendant has carried its burden based on the Opposition’s $5,100,112 estimate. 24 The only claims contributing to the amount in controversy are Plaintiff’s claims 25 for unreimbursed footwear, unreimbursed cell phone usage, waiting time penalties, 26 and attorneys’ fees. Because reasonable attorneys’ fees are recoverable pursuant to [27] Cal. Lab. Code § 2802 and Cal. Civ. Code § 1021.5 , they must be included in the 28 amount in controversy. See Chavez v. JPMorgan Chase & Co., 888 F.3d 413, 416 (9th 1 Cir. 2018) (the amount in controversy includes “attorneys’ fees awarded under fee 2 shifting statutes”); Fritsch v. Swift Transportation Co. of Arizona, LLC, 899 F.3d 785 , 3 794 (9th Cir. 2018) (when “the law entitles [the plaintiff] to an award of attorneys’ 4 fees if he is successful, such future attorneys’ fees are at stake in the litigation, and 5 must be included in the amount in controversy.”). 6 Defendant estimates these amounts to be: [7] Defendant’s Estimated 8 Claim Amount in Controversy 9 Expense Reimbursement for Footwear $563,892.50 10 Expense Reimbursement for Cell Phone $2,404,978.20 11 Waiting Time Penalties $1,111,219.56 12 Attorneys’ Fees $1,020,022.57 13 Total $5,100,112.83 [14] 15 Plaintiff does not challenge Defendant’s estimate for the waiting time penalties, 16 but attacks aspects of all other calculations. Plaintiff’s argument that Defendant has 17 double-counted in its future damages calculations is not convincing so the Court 18 rejects it. However, the Court finds that some of Defendant’s key evidence is 19 inconsistent and is plausibly refuted by Plaintiff’s evidence, that Defendant’s cell 20 phone calculation relies on an unreasonable assumption, and that the attorneys’ fee 21 calculation is unreasonable. Applying more reasonable estimates yields an amount in 22 controversy below $5 million. Therefore, Defendant has not met its burden to prove 23 by a preponderance of the evidence that the amount in controversy is satisfied. 24 1. Defendant May Have Overcounted the Number of Class Members. 25 First, Defendant may have overcounted the number of class members, leading 26 to an inflated damages calculation overall. Plaintiff limited the class to Ramp Agents 27 at LAX. See Compl. ¶ 6. Defendant submitted the declarations of Kavya Ranabothu 28 (Dkt. No. 19-3), a Data Analysis Specialist, and of Michael Trent (Dkt. No. 19-2), 1 General Manager of Resource Planning, to establish the number of class members. 2 Ms. Ranabothu states that Defendant employed 1,098 Ramp Agents during the pre3 suit class period, and that each worked an average of 2.6 years. See Ranabothu Decl. ¶ 4 4. Mr. Trent projected that the number of Ramp Agents over the next year would 5 exceed the current number of 529, see Trent Decl. ¶ 3, but that Defendant’s 6 calculations for ongoing damages is based on just 529 Class Members. 7 Notably, however, Mr. Trent referred to Customer Service Agents (“CSAs”) 8 and Ramp Agents interchangeably: “I am familiar with . . . . headcount projections for 9 hourly, non-exempt Customer Service Agents (‘CSAs’), also known as Ramp 10 Agents…”. See Trent Decl. ¶ 3. But according to Plaintiff, the category of employees 11 called “Customer Service Agents” is not synonymous with Ramp Agents, but instead 12 is a broader category that also includes Ticket and Gate Agents, Cargo Agents, and 13 ACC/Tower Agents. See Gurzenski Decl. ¶ 4. Thus, according to Plaintiff, “Customer 14 Service Agent” is a much broader category of employees than Ramp Agents. 15 Plaintiff’s declaration on this point is based on his personal experience applying for 16 employment and during his employment, and it is credible.1 Considering the three 17 declarations, it is not clear whether Defendant’s count of class members was properly 18 limited to just Ramp Agents, or whether it was overinclusive because it included the 19 broader category of Customer Service Agents generally. If the latter, then Defendant 20 included a significant number of employees who are not putative class members, and 21 that certainly inflated the amount in controversy calculations to the point that they are 22 unreliable. See Miller v. A-1 Express Delivery Servs., Inc., 2017 WL 462406 , at *5 23 (N.D. Cal. Feb. 3, 2017) (remanding case because defendant “based its amount in 24 controversy calculations on an incorrect class definition”). Furthermore, “[t]he [25] 1 The Court credits only Plaintiff’s assertion that “Customer Service Agent” includes [26] categories beyond just Ramp Agents, not his further observation that only about 25% 27 of CSAs are Ramp Agents. See Gurzenski Decl. ¶¶ 7. For purposes of this inquiry, it suffices to conclude, as the Court does here, that it is unclear whether Defendant’s 28 class count is significantly overinclusive. 1 uncertainty regarding the number of putative class members affects the entirety of the 2 amount in controversy calculations.” Id. Because Defendant’s own evidence as to who 3 they counted is unclear, the Court cannot find that any of the resulting calculations are 4 sufficiently reliable. This alone forecloses Defendant from satisfying its burden of 5 establishing the amount in controversy by a preponderance of the evidence. 6 2. The Cell Phone Calculation Depends on Unreasonable Assumptions. 7 Defendant calculates that the cell phone reimbursement claim puts 8 $2,404,978.20 in issue. To get this amount, Defendant (1) estimated the average 9 monthly cost of a cell phone, (2) assumed that 75% of an employee’s cell phone usage 10 was for work, and then (3) multiplied both of the above by the number of months 11 worked. The Court considers the first two parts of this calculation. 12 To estimate the average monthly cost of a cell phone, Defendant asserts that the 13 average cost of a cell phone is $580; that people replace them every 36 months on 14 average so the monthly phone cost is ($580/36 months) = $16; and that the average 15 monthly cell phone plan costs $60. This yields a monthly cell phone cost of: 16 $16 monthly phone cost + $60 monthly plan price = $76. The Court finds that these 17 numbers are reasonable and are based on reliable market-based evidence filed with the 18 opposition. See Frederick Decl. (Dkt. No. 19-1). 19 But the second number—the percentage of class members’ cell phone usage 20 that was for work—is not reasonable. Defendant assumed that “75% of putative class 21 member’s total cell phone usage was attributable to the performance of their duties.” 22 Opp’n 13:4-8.2 Defendant argues that the Complaint’s allegations that class “members 23 ‘routinely’ use ‘personal cell phone data and minutes’ for work-related purposes, see 24 Compl. ¶ 14, support the assumption that 75% of each putative class member’s total 25 cell phone usage was attributable to the performance of their duties with Delta.” See 26 Opp’n 12:10-14. But it is a stretch to find that “routine” accounts for 75% of [27] 2 75% of $76 monthly cell phone cost is $57, which puts in controversy $57 per month 28 worked as a Ramp Agent. 1 something. “[A] damages assessment may require a chain of reasoning that includes 2 assumptions . . . [but] those assumptions cannot be pulled from thin air but need some 3 reasonable ground underlying them.” Ibarra, 775 F.3d at 1199 . By Defendant’s 4 estimate, only 25% of class members’ cell phone usage—whether on or off the 5 clock—was for non-work-related purposes. This is not a reasonable assumption. 6 Plaintiff attests that 50% of his cell phone usage is attributable to work duties. See 7 Gurzinski Decl. ¶ 2. This rate is supported by at least some evidence—Plaintiff’s 8 declaration—and is more reasonable than Defendant’s 75% estimate. Applying a 50% 9 usage rate, but accepting all of Defendant’s other facts and assumptions, reduces 10 Defendant’s estimated amount in controversy for this claim by about 1/3, or $801,659. 11 As a result, the cell phone claim puts $1,603,318.8 in issue. Given that Defendant 12 calculated a total amount in controversy of only $5.1 million, this $801,659 reduction 13 in the cell phone damages would reduce the amount in controversy to about $4.3 14 million—well below CAFA’s $5 million threshold. 15 3. Defendant’s Attorneys’ Fee Calculation is Inflated and Unreasonable. 16 Defendant calculated the amount put in controversy by the claim for attorneys’ 17 fees using the 25% benchmark that applies to common fund class action settlements. 18 This yields $1,020,022.57. This is not a reasonable estimate of the amount in 19 controversy for the attorneys’ fees claim in this case. 20 The Ninth Circuit has provided some guidance for estimating attorneys’ fees for 21 purposes of calculating the amount in controversy in CAFA cases. The Circuit has 22 observed that “district courts have developed expertise in determining ‘the number of 23 hours reasonably expended on the litigation multiplied by a reasonable hourly rate’ 24 when awarding attorneys’ fees under a statute . . . authorizing recovery of ‘reasonable 25 attorneys’ fees’ at the close of litigation.” Fritsch, 899 F.3d at 795 . The Circuit 26 similarly declined to adopt a per se rule that “the amount of attorneys’ fees in 27 controversy in class actions is 25 percent of all other alleged recovery” because “a 28 court’s calculation of future attorneys’ fees is limited by the applicable contractual or 1 statutory requirements that allow fee-shifting in the first place.” Id. at 796 . 2 District courts sometimes do use the 25% benchmark to estimate the amount 3 put in controversy by attorneys’ fee shifting statutes. But the Court finds that that 4 approach does not make sense here. 5 First, because the amount in controversy includes all amounts a plaintiff would 6 be entitled to if she prevailed, attorneys’ fees are part of the amount in controversy 7 when they are “awarded under fee-shifting statutes . . . .” Id. at 793 . Given that 8 attorneys’ fees count towards the amount in controversy when they are recoverable 9 pursuant to a fee-shifting statute, it makes sense to estimate the attorneys’ fee for 10 amount-in-controversy purposes in the same manner that it would be calculated under 11 the fee-shifting statute upon a noticed motion for fees at the close of litigation. In 12 California, courts use the lodestar method to calculate attorneys’ fees. Ketchum v. 13 Moses, 24 Cal. 4th 1122, 1132 (2001). The lodestar figure is “calculated by 14 multiplying the number of hours the prevailing party reasonably expended on the 15 litigation by a reasonable hourly rate.” See Candle v. Bristow Optical Co. Inc., 224 16 F.3d 1014 , 1028 (9th Cir. 2000). By contrast, the 25% benchmark that Defendant 17 espouses is used in a completely different context: to award attorneys’ fees in class 18 action settlements, regardless of whether the underlying claims involve fee-shifting. In 19 class action settlements, the attorneys’ fee is simply a portion of the common fund 20 recovered for the class; it is not a function of a fee-shifting statute and is not an 21 additional amount to which a prevailing plaintiff is entitled to be paid by the 22 defendant. Thus, while using the 25% benchmark might make for a straight-forward 23 calculation, it comes from a very different context. 24 Second, and importantly, the 25% benchmark from the class action settlement 25 context is not a suitable proxy for estimating the amount put in controversy by the 26 attorneys’ fee claim in this fee-shifting case. Estimating the attorneys’ fee by applying 27 the 25% benchmark from the settlement context to the total amount in controversy 28 will usually overstate the fee award plausibly recoverable pursuant to a fee-shifting 1 statute. This is because cases usually settle for significantly less than the entire amount 2 in controversy calculated at the outset of the case based on all claims in issue. In the 3 Court’s experience, a settlement for less than the amount in controversy is especially 4 likely in wage and hour cases like this one. In addition, in this Court’s experience 5 adjudicating class action settlement fee motions, the 25% benchmark (or similar 6 percentage) applied in class action settlements often represents some multiplier of the 7 lodestar, so the 25% benchmark cannot be considered a reasonable proxy for the 8 lodestar for purposes of estimating the amount in controversy. For all of these 9 reasons, applying the 25% benchmark from the class action settlement context to the 10 entire amount in controversy would substantially overestimate the attorneys’ fee 11 recoverable under the fee-shifting statutes here, so that approach is unreasonable. For 12 the same reasons, the Court rejects Defendant’s argument that the Court should look 13 to the percentage that Plaintiff’s counsel has previously sought in the class action 14 settlement context to determine the amount put in controversy by the statutory fee15 shifting provisions here. 16 The Court therefore finds that using the lodestar method (rather than the 25% 17 benchmark) to estimate the amount in controversy for the attorneys’ fee claim makes 18 most sense in this statutory fee-shifting case. 19 Defendant presented no evidence of what a lodestar fee would be. Plaintiff 20 presented evidence that counsel could spend up to 1,000 on a class action case. See 21 Savoy Decl. ¶ 8. This amount of time seems generous for case like this, but the Court 22 accepts it. At counsel’s $650 hourly rate, id. at ¶ 6 , the maximum lodestar is $650,000. 23 Even accepting all of Defendant’s other calculations as correct, a $650,000 attorneys’ 24 fee would yield a total amount in controversy of only $4,730,090.26. This amount is 25 below CAFA’s $5 million threshold. The Court therefore finds that the amount in 26 controversy is not satisfied and this case must be remanded. [28] 1 IV. CONCLUSION 2 Each of the above three faults in Defendant’s estimate of the amount in 3 | controversy independently causes the amount in controversy to fall below CAFA’s $5 4 | million threshold. Accordingly, Defendant has not met its burden of establishing by a 5 || preponderance of the evidence that that threshold is satisfied. Accordingly, the Court 6 | lacks subject matter jurisdiction over this case. The Court GRANTS Plaintiff's 7 | Motion to Remand and ORDERS the Clerk of Court to remand this matter to Los 8 || Angeles County Superior Court. [9] 10 IT IS SO ORDERED. 11 de 12 Dated: November 12, 2021 13 HONORABLE ANDRE BIROTTEJR. 14 UNITED STATES DISTRICT COURT JUDGE