# Jose Arceo v. Ardent Mills, LLC

> District Court, C.D. California · August 9, 2023

URL: https://www.frixlaw.com/law-library/cases/9984051

## Case

- **Court:** District Court, C.D. California
- **Decided:** August 9, 2023
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9984051

## How later opinions describe it (automated extraction)

- discussing district court split on this issue

## Opinion text

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.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9984051. Public record. Not legal advice.