Jose Arceo v. Ardent Mills, LLC

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES - GENERAL

Case No.: 5:23-cv-01146-AB-E Date: August 9, 2023

Title: Jose Arceo v. Ardent Mills, LLC et al

Present: The Honorable ANDRE BIROTTE JR., United States District Judge

Carla Badirian N/A

Deputy Clerk Court Reporter

Attorney(s) Present for Plaintiff(s): Attorney(s) Present for Defendant(s):

None Appearing None Appearing

Proceedings: [In Chambers] ORDER GRANTING PLAINTIFF’S MOTION

FOR REMAND [DKt. No. 10] and DENYING DEFEDANT?’S EX

PARTE APPLICATION TO FILE A SUR-REPLY [Dkt. No. 15]

Before the Court is Plaintiff Jose Arceo’s (“Plaintiff”) Motion for Remand

(“Motion,” Dkt. No. 10). Defendant Ardent Mills LLC (“Defendant”) filed an

opposition and Plaintiff filed a reply. Defendant also filed an Ex Parte Application

to File Sur-reply (“Ex Parte Application,” Dkt. No. 15) that Plaintiff opposed. The

Court will resolve these matters without oral argument and therefore VACATES

the August 11, 2023 hearing. See Fed. R. Civ. P. 78, C.D. Cal. L.R. 7-15.

Plaintiff's Motion for Remand is GRANTED. Defendant’s Ex Parte Application is

DENIED.

I BACKGROUND

Plaintiff filed this putative class action in state court, alleging state law wage

and hour violations, and, in a First Amended Complaint, adding a claim for PAGA

penalties. Defendant removed, invoking traditional diversity jurisdiction under 28

U.S.C. § 1332(a). See Notice of Removal (“NOR,” Dkt. No. 1) § 7.

CV-90 (12/02) CIVIL MINUTES — GENERAL Initials of Deputy Clerk CB

Plaintiff’s Motion for Remand argues that Defendant failed to establish

diversity of citizenship because it did not plausibly allege it own citizenship:

Defendant is an LLC, but Defendant alleged its citizenship as if it were a

corporation. Plaintiff also argued that Defendant failed to establish the amount in

controversy.

After briefing closed, Defendant filed an Ex Parte Application to File a Sur-

reply, and 2 days later, on August 4, 2023, without leave, filed the Sur-reply (Dkt.

No. 17). The Court will address the Ex Parte Application first.

II. DEFENDANT’S EX PARTE APPLICATION IS DENIED

Defendant seeks leave to file a sur-reply, claiming that it needs to do so

“[s]ince Plaintiff’s Reply raises four new arguments that Plaintiff failed to raise in

its Motion and because Defendant has discovered new facts regarding the diversity

of the parties. . .” Ex Parte Appl. 3:12-14.

But the four new arguments that Defendant faults Plaintiff for raising the

first time in his reply are merely responses to arguments that Defendant made for

the first time in its opposition and failed to present in its NOR. Specifically, in its

opposition, Defendant added PAGA penalties to its calculation of the amount in

controversy. Defendant could have and should have included these amounts in its

Notice of Removal, so that Plaintiff could have addressed them in his Motion, but

Defendant did not, and instead sought to, in effect, amend its NOR. That Plaintiff

did not address the PAGA claim in its Motion is due to Defendant failing to value

the PAGA claim in its NOR. Plaintiff was not required to anticipate in its Motion

that Defendant would, in its opposition, try to bolster its amount-in-controversy

showing with claims that it did not initially value in its NOR. Plaintiff

appropriately responded in his reply and did not expand the scope of the Motion

beyond what Defendant put in issue in its opposition. An argument in a reply is not

“new” if it simply responds to arguments asserted in opposition to a motion.” Laub

v. Horbaczewski, 2020 WL 5092452, at *1 (C.D. Cal. June 24, 2020) (sur-reply

denied because “Defendants’ Reply brief do[es] not present ‘new’ information, but

respond[s] to arguments raised in Plaintiffs’ Opposition”). Accordingly, Plaintiff’s

PAGA arguments do not entitle Defendant to file a sur-reply.

Nor do Defendant’s “new facts” regarding the diversity of the parties

warrant a sur-reply. The “new facts” that Defendant wishes to brief concern its

own citizenship, in particular, “the citizenship of the corporations that are members

of Ardent Mills, LLC.” Ex Parte Appl. 4:10-11. But information about Defendant’s

own citizenship is not new, because “a corporate defendant, like any other, is

presumed to know its own citizenship.” Leon v. Gordon Trucking, Inc., 76 F. Supp.

3d 1055, 1063 (C.D. Cal. 2014). The facts about its own citizenship that Defendant

wishes to present are thus not new, even if Defendant failed to marshal them

timely. Furthermore, that Defendant used the wrong standard in its NOR to allege

its own citizenship suggests that Defendant should have been more careful to

present complete information in its opposition. Instead, Defendant seems to have

omitted some information from its opposition, and wants to correct this by filing a

sur-reply. This is not good cause. Defendant’s Ex Parte Application to File Sur-

reply is therefore DENIED, and the sur-reply (Dkt. No. 17) is STRICKEN.

III. PLAINTIFF’S MOTION FOR REMAND IS GRANTED

A. Legal Standard

A defendant may remove a civil action filed in state court to federal court.

28 U.S.C. § 1441(a). The removal statute is strictly construed against removal.

Takeda v. Nw. Nat. Life Ins. Co., 765 F.2d 815, 818 (9th Cir. 1985). “The ‘strong

presumption’ against removal jurisdiction means that the defendant always has the

burden of establishing that removal is proper.” Gaus v. Miles, Inc., 980 F.2d 564,

566 (9th Cir. 1992). Thus, “[i]f it is unclear what amount of damages the plaintiff

has sought, . . . then the defendant bears the burden of actually proving the facts to

support jurisdiction, including the jurisdictional amount.” Id. at 566–67. If any

doubt exists as to the right of removal, federal jurisdiction must be rejected. Id.

Jurisdiction based on diversity of citizenship requires the parties to be

citizens of different states and the amount in controversy to exceed $75,000. 28

U.S.C. § 1332(a)(1).

B. Defendant Has Not Plausibly Alleged Complete Diversity

As noted above, in its NOR, Defendant alleged its citizenship as if it were a

corporation. 28 U.S.C. § 1332(c)(1) (corporation has dual citizenship in state of

incorporation and the state where it maintains its principal place of business). But

Defendant is an LLC, and an LLC “is a citizen of every state of which its

owners/members are citizens.” Johnson v. Columbia Properties Anchorage, LP,

437 F.3d 894, 899 (9th Cir. 2006). Thus, to properly allege diversity jurisdiction

“with respect to a limited liability company, the citizenship of all of the members

must be pled.” NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 611 (9th Cir. 2016).

In its opposition, Defendant tried to correct this error, but apparently still left

out some information concerning the citizenship of “additional business entities”

that it sought to add through the sur-reply. But the Court is denying Defendant’s

Ex Parte Application to file that Sur-reply, so Defendant has not fully alleged the

citizenship of all of its members, and has therefore failed to allege complete

diversity. On this ground alone, the Motion to Remand is GRANTED.

C. Defendant Has Not Established the Amount in Controversy

The amount in controversy, for purposes of diversity jurisdiction, is the total

“amount at stake in the underlying litigation.” Theis Research, Inc. v. Brown &

Bain, 400 F.3d 659, 662 (9th Cir. 2005). “[T]his includes any result of the

litigation, excluding interests and costs, that ‘entails a payment’ by the defendant.”

Gonzales v. CarMax Auto Superstores, LLC, 840 F.3d 644, 648 (9th Cir. 2016).

“Among other items, the amount in controversy includes damages (compensatory,

punitive, or otherwise), the costs of complying with an injunction, and attorneys’

fees awarded under fee-shifting statutes or contract.” Fritsch v. Swift

Transportation Co. of Arizona, LLC, 899 F.3d 785, 793 (9th Cir. 2018).

In determining the amount in controversy, courts first look to the allegations

in the complaint. Ibarra v. Manheim Invs., Inc., 775 F.3d 1193, 1197 (9th Cir.

2015). But “where it is unclear or ambiguous from the face of a state-court

complaint whether the requisite amount in controversy is pled[,]” courts apply a

preponderance of the evidence standard, which requires the defendant to provide

evidence showing that it is more likely than not that the $75,000.00 amount in

controversy is met. Guglielmino v. McKee Foods Corp., 506 F.3d 696, 699 (9th

Cir. 2007) (citing Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir.

1996)). In considering whether the removing defendant has satisfied its burden, the

court “may consider facts in the removal petition” and “summary-judgment-type

evidence relevant to the amount in controversy at the time of removal.” Singer v.

State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997) (quoting Allen v.

R & H Oil & Gas. Co., 63 F.3d 1326, 1335–36 (5th Cir. 1995)). “[A] damages

assessment may require a chain of reasoning that includes assumptions . . . [but]

those assumptions cannot be pulled from thin air but need some reasonable ground

underlying them.” Ibarra, 775 F.3d at 1199.

In its opposition, Defendant presents the following estimates of the amount

in controversy for each claim:

Claim Def’s Estimated Amount in Controversy

Unpaid Wages $10,446.03

Meal Premiums $9,286.20

Rest Premiums $18,572.40

Wage Statement Penalties $1,150.00

Waiting Time Penalties $6,338.40

PAGA Penalties (226.3) $167,750.00

PAGA Penalties (others) $33,500

Attorneys’ Fees $55,000

Total $302,043.03

Not all of these amounts were included in the NOR, but the Court will “treat

the removal petition as if it had been amended to include the relevant information

contained in the later-filed affidavits.” Willingham v. Morgan, 395 U.S. 402, 407 n.

3 (1969); see also Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002) (“The

district court did not err in construing Petsmart’s opposition as an amendment to its

notice of removal.”). Nevertheless, the amounts Defendant proffers are inflated.

Unpaid wages claim: Defendant values this donning-and-doffing claim at

$10,446.03 based on a 100% violation rate, even though the FAC alleges that this

happened either “consistently” or “two or three times a week” (relating to lunch

breaks). Defendant’s 100% violation rate is an unreasonable assumption

unsupported by evidence. By contrast, Plaintiff filed a declaration saying he was

not paid for donning and doffing 5-10 minutes, 2-3 days per week, for a total of 60

minutes each week, resulting in an amount in controversy of $4,642.68.

Meal Premiums: Defendant uses a 50-60% violation rate. This is inflated

and unsupported by the FAC, which alleges that Plaintiff was discouraged from

taking breaks. Plaintiff points to at least one cases interpreting such allegations as

implying a 20% violation rate, which works out to $3,714.48.

Rest Premiums: It appears that Defendant uses a 100% violation rate for rest

premiums, which is not supported by the quoted paragraphs of the FAC, which

alleges that the class members were “discouraged” from taking breaks as a matter

of “company policy” and that they were not allowed to leave Defendant’s facilities.

FAC ¶¶ 90, 91. This does not equate to a 100% violation rate. Using the 20%

violation rate, this claim is valued at $3,714.48.

Wage Statement Penalties, Waiting Time Penalties: Plaintiff does not

contest these valuations of $1,150.00 and $6,338.40, so the Court will accept them.

PAGA Penalties (226.3): Defendant calculates this amount based on

penalties accruing for 4 years worth of pay periods. But this is a gross overestimate

because PAGA has a 1-year statute of limitations—a defense that Defendant has

asserted in its Answer. See Answer (Dkt. No. 1-3). Furthermore, according to

Plaintiff, he worked for Defendant for only six pay periods during the 1-year

limitations period, so his penalty could only be for six pay periods. The Court also

agrees with Plaintiff’s argument that Defendant has not shown that the $1,000

penalty for “subsequent” violations applies, so the penalty is $250, totaling $1,500

for the six pay periods in issue here. And, although the Ninth Circuit has not

squarely decided the issue, the Court will exclude from the amount in controversy

the 75% of the PAGA penalty that will be paid to the California Labor Workforce

Development Agency (“LWDA”). See Steenhuyse v. UBS Financial Services, Inc.,

317 F.Supp.3d 1062, 1068 (N.D. Cal. 2018) (discussing district court split on this

issue). Accordingly, from this PAGA penalty, only 25%, or $375, will count

towards the amount in controversy.

PAGA Penalties (others): Defendant addresses this perfunctorily in a

footnote. See Opp’n fn. 8. And, these penalties appear to be subject to a 1-year

limitation period, and Plaintiff worked for only 6 pay periods. Given Defendant’s

threadbare treatment of this claim, the Court will disregard its valuation.

Attorneys’ Fees: Plaintiff seeks recovery of attorneys’ fees pursuant to

several Labor Code sections, so they count towards the amount in controversy.

Defendant values attorneys’ fees at $55,000, which is 100 hours billed at a blended

rate of $550. This is the estimated fees counsel would accrue for the entire class

action. But when “attorneys’ fees are not awarded solely to the named plaintiffs in

a class action [by the authorizing statute] they [ ] cannot be allocated solely to

those plaintiffs for purposes of amount in controversy.” Gibson v. Chrysler Corp.,

261 F.3d 927, 942 (9th Cir. 2001). Plaintiff has pointed to several decisions

applying this Ninth Circuit holding to Labor Code claims asserted herein. In

response, Defendant cites three Central District cases for the proposition that

Courts should not split attorneys’ fees among several plaintiffs or all class

members for purposes of deciding the amount in controversy. The Court has

reviewed these cases, and simply stated, none of them actually decided this

question, so they should not be taken to stand for this proposition. See Guerrero v.

RJM Acquisitions LLC, 499 F.3d 926, 938 (9th Cir. 2007) (“We are not required to

follow what amounts to, at most, an implicit assumption, because ‘[s]uch unstated

assumptions on non-litigated issues are not precedential holdings binding future

decisions.’”) (citations omitted); Webster v. Fall, 266 U.S. 507, 511 (1925)

(“Questions which merely lurk in the record, neither brought to the attention of the

court nor ruled upon, are not to be considered as having been so decided as to

constitute precedents.”). And Sanchez v. Russell Sigler, Inc., Case No. CV 15-

01350-AB, 2015 WL 12765359 (C.D. Cal. Apr. 2015), which was decided by this

Court, was removed under the Class Action Fairness Act (“CAFA”) 28 U.S.C. §§

1332(d), pursuant to which the amount in controversy is the aggregate of all class

members’ claims. Accordingly, in calculating the amount in controversy, the Court

correctly (and without discussion) considered the entire fee for the whole class.

This is not a CAFA case; Defendant removed based on traditional diversity.

Defendant does not estimate the number of class members, but the FAC alleges

that there at least 100 class members. See FAC ¶28(c). Accordingly, the Court will

divide the $55,000 estimated attorneys’ fee by 100, and attribute that amount—

$550—to Plaintiff for purposes of calculating the amount in controversy.

The Court therefore calculates the amount in controversy to be $20,485.04:

Claim Amount in Controversy

Unpaid Wages $4,642.68

Meal Premiums $3,714.48

Rest Premiums $3,714.48

Wage Statement Penalties $1,150.00

Waiting Time Penalties $6,338.40

PAGA Penalties (226.3) $375

PAGA Penalties (others) $33,500

Attorneys’ Fees $550

Total $20,485.04

This amount is far below the jurisdictional threshold. Accordingly,

Defendant has not shown by a preponderance of the evidence that the amount in

controversy is satisfied. The Motion for Remand is GRANTED on this basis, too.

IV. CONCLUSION

For the foregoing reasons, Defendant’s Ex Parte Application to File Sur-

reply (Dkt. No. 15) is DENIED, and Defendant’s unauthorized Sur-reply (Dkt. No.

17) is STRICKEN.

Defendant has failed to establish either complete diversity of the parties, or

that the amount in controversy is satisfied. Accordingly, Defendant has failed to

meet its burden of establishing diversity jurisdiction. Plaintiff’s Motion for

Remand is therefore GRANTED.

The Clerk of Court is ORDERED to immediately remand this action to the

state court from which it was removed.

IT IS SO ORDERED.