Perez v. NxEdge MH, LLC

[3] 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA [6] 7 FELIS A PEREZ, Case No. 3:21-cv-10036-WHO Plaintiff, [8] ORDER GRANTING MOTION TO 9 v. REMAND 10 NXEDGE MH, LLC, Re: Dkt. No. 13 Defendant. [12] 13 Plaintiff Felis Perez moves to remand this putative wage-and-hour class action to state 14 court. Because defendant NxEdge MH, LLC (“NxEdge”) has failed to show that more than 15 $75,000 is in controversy, the motion is GRANTED and the case is REMANDED. 16 BACKGROUND 17 Perez, a citizen of California, worked for NxEdge, a limited liability corporation that is a 18 citizen of Delaware. See Amended Complaint (“Compl.”) [Dkt. No. 1-10] ¶ 3; Notice of Removal 19 (“Not.”) [Dkt. No. 1] ¶¶ 14–15.1 According to Perez, NxEdge violated the California Labor Code 20 by, among other things, failing to compensate him and other employees for all hours worked, 21 provide them meal and rest breaks, and provide them accurate wage statements. Compl. ¶¶ 19–95. 22 He also brings derivative claims for unfair competition. See id. 23 In September 2021, Perez filed a suit in state court on behalf of himself and others 24 similarly situated. Dkt. No. 1-1. In November 2021, he filed an amended complaint in state court. 25 NxEdge removed the case to this court in December 2021. See Not. Perez now moves to remand. [27] 1 Perez originally alleged that NxEdge was also a citizen of California, but NxEdge’s notice of 1 LEGAL STANDARD 2 Generally, a case can be removed from state to federal court only when the federal court 3 would have had original jurisdiction over it. 28 U.S.C. § 1441 (a). The defendant has the burden 4 of establishing federal subject matter jurisdiction. See Washington v. Chimei Innolux Corp., 659 5 F.3d 842, 847 (9th Cir. 2011). Removability is “generally determined as of the time of the petition 6 for removal.” Local Union 598, Plumbers & Pipefitters Industry Journeymen & Apprentices 7 Training Fund v. J.A. Jones Constr. Co., 846 F.2d 1213, 1215 (9th Cir. 1988). 8 Under 18 U.S.C. § 1332 (a)(1), federal diversity jurisdiction exists when each plaintiff is a 9 citizen of a different state from each defendant and the amount in controversy exceeds $75,000. 10 Natural persons are the citizens of the state in which they are domiciled—that is, the state in which 11 they reside with intent to remain permanently. See Kanter v. Warner-Lambert Co., 265 F.3d 853 , 12 857 (9th Cir. 2001). In making this assessment, courts consider factors including “current 13 residence, voting registration and voting practices, location of personal and real property, location 14 of brokerage and bank accounts, location of spouse and family, membership in unions and other 15 organizations, place of employment or business, driver’s license and automobile registration, and 16 payment of taxes.” Lew v. Moss, 797 F.2d 747, 750 (9th Cir. 1986). 17 Generally, “[i]f removal of a civil action is sought on the basis of the jurisdiction conferred 18 by section 1332(a), the sum demanded in good faith in the initial pleading shall be deemed to be 19 the amount in controversy.” 28 U.S.C. § 1446 (c)(2). But, “when a defendant seeks federal-court 20 adjudication, the defendant’s amount-in-controversy allegation should be accepted when not 21 contested by the plaintiff or questioned by the court.” Dart Cherokee Basin Operating Co., LLC 22 v. Owens, 574 U.S. 81 , 87 (2014). “Where the complaint does not specify the amount of damages 23 sought, the removing defendant must prove by a preponderance of the evidence that the amount in 24 controversy requirement has been met.” Abrego v. The Dow Chem. Co., 443 f.3d 676, 683 (9th 25 Cir. 2006). And if the plaintiff does contest the notice of removal’s allegation, “removal is proper 26 on the basis of an amount in controversy asserted by the defendant if the district court finds, by the 27 preponderance of the evidence, that the amount in controversy exceeds the jurisdictional 1 alterations omitted). 2 DISCUSSION 3 Perez argues that NxEdge has failed to show that the amount in controversy exceeds 4 $75,000. See Motion to Remand (“Mot.”) [Dkt. No. 13]. His leading argument is that NxEdge’s 5 figure impermissibly relies on so-called “subsequent” violations under California’s Private 6 Attorneys General Act (“PAGA”). See id. 3–5. NxEdge calculates its amount in controversy by 7 treating every violation alleged in the Complaint except the first as a subsequent violation. A 8 “subsequent” violation under PAGA comes with a heightened penalty, but it only occurs after the 9 employer is notified that it is violating the Labor Code. See Bernstein v. Virgin Am., Inc., 3 F.4th 10 1127, 1144 (9th Cir. 2021); Amaral v. Cintas Corp. No. 2, 163 Cal. App. 4th 1157, 1209 (2008). 11 Here, the complaint does not allege an amount in controversy and Perez contests NxEdge’s 12 asserted amount, so NxEdge must establish the amount in controversy by a preponderance of the 13 evidence. Dart, 574 U.S. at 88. But NxEdge has presented no evidence of when it was notified 14 that it was violating the Labor Code, let alone that this notice was sufficient to impose heightened 15 civil penalties. Indeed, some courts have held that the “notification” must come either from the 16 Labor Commissioner or a court. See Trang v. Turbine Engine Components Techs. Corp., No. CV 17 12-07658 DDP RZX, 2012 WL 6618854 , at *5 (C.D. Cal. Dec. 19, 2012). And the Ninth Circuit 18 appears to have endorsed that view. Bernstein, 3 F.4th at 1144 (“Virgin was not notified by the 19 Labor Commissioner or any court that it was subject to the California Labor Code.”). Regardless 20 of what type of notice is required, NxEdge does not point to any notifying event that demarcates 21 the moment after it would have been subject to heightened penalties. 22 In these circumstances, a number of district courts have excluded a defendant’s calculation 23 of subsequent penalties from the amount in controversy and treated the violations as normal, initial 24 violations. See, e.g., Steenhuyse v. UBS Fin. Servs., Inc., 317 F. Supp. 3d 1062, 1067 (N.D. Cal. 25 2018) (Gonzalez Rogers, J.); Trang, 2012 WL 6618854 , at *5. Other courts have included the full 26 possible subsequent penalties. See, e.g., Flores v. Marriott Resorts Hosp. Corp., No. 27 CV188012JVSJPRX, 2019 WL 1069528 , at *4 (C.D. Cal. Jan. 7, 2019). But these latter courts 1 not. See, e.g., Higginbotham v. S. E. Emp. Leasing Servs., Inc, No. 2:20-CV-00575-KJM-DB, [2] 2020 WL 5535421 , at *4 (E.D. Cal. Sept. 15, 2020) (“For purposes of the motion only, the court 3 assumes the higher subsequent violation amount applies in each instance.”). I conclude that 4 counting these violations as subsequent would improperly take into account speculative 5 possibilities, rather than what the defendant has shown is in controversy, so I follow the former 6 approach. See Ibarra v. Manheim Invs., Inc., 775 F.3d 1193, 1197 (9th Cir. 2015) (“[A] defendant 7 cannot establish removal jurisdiction by mere speculation and conjecture.”). 8 NxEdge’s only counterargument relies on Perez’s own pleading. It argues that Perez 9 alleges that all of the violations in the Complaint will be subject to subsequent penalties. See 10 Opposition to the Mot. (“Oppo.”) [Dkt. No. 14] 4–7. NxEdge overreads the Complaint. All that 11 the cited paragraphs say are that Perez is entitled to non-heightened penalties for initial violations 12 and heightened penalties for subsequent violations. See Compl. ¶ 93A–F. That does not state or 13 imply that every alleged violation qualifies as a subsequent violation; it just recites the legal truism 14 that plaintiffs get non-heightened penalties for initial violations and heightened penalties for 15 subsequent ones. 16 For the reasons explained, NxEdge has not shown that any alleged violation would lead to 17 subsequent penalties. Nor does it offer a date—and supporting evidence—after which violations 18 would start to qualify as subsequent. As a result, for jurisdictional amount-in-controversy 19 purposes, none of the violations have been shown to be worth a heightened penalty. See 20 Steenhuyse, 317 F. Supp. 3d at 1067 . Once the heightened penalties are removed from NxEdge’s 21 calculation (and replaced with non-heightened penalties), it is $56,326.66.2 Even assuming 22 NxEdge is correct about its remaining calculations—many of which Perez disputes—that amount 23 is below the more-than-$75,000 threshold. [25] 2 This figure comes from the following calculations. NxEdge calculates that, with all heightened penalties except the first, the penalties that the parties dispute amount to $50,500. See Oppo. 9. [26] Perez calculates that, with all non-heightened penalties, the penalties that the parties dispute amount to $17,850. See Mot. 7. The parties agree that there are undisputed penalties of $16,220. [27] See id.; Oppo. 10. And NxEdge would add $22,256.66 in attorney’s fees (a figure that Perez 1 CONCLUSION 2 The motion to remand is GRANTED. This case is remanded to the California Superior 3 Court for the County of Santa Clara. 4 IT IS SO ORDERED. 5 Dated: March 9, 2022 [7] William H. Orrick 8 United States District Judge [13] © [16] = 17 Z 18