Ray v. Nordstrom, Inc., 2011 WL 6148668 (C.D. Cal. Dec. 9, 2011).

While remanding the action to the state court, a District Court in California held that under the preponderance of evidence standard, a defendant may not assume certain variables, because it amounts to shifting the burden to plaintiff to refute speculative assertions of jurisdiction and establish that there is no jurisdiction.

The plaintiff, Anthony Ray, brought this wage and hour class action on behalf of all current and former hourly paid or non-exempt employees who worked for the defendant, Nordstrom, Inc, within the State of California at any time during the period of past four years. The plaintiff sought relief, inter alia, for alleged (1) Violations of California Labor Code § 1194 (Unpaid Minimum and Overtime Wages); (2) Violations of California Labor Code § 226 (Failure to Provide Complete or Accurate Wage Statements); (3) Violations of California Business and Professions Code § 17200; (4) Fraud; and (5) Breach of Contract.

The defendant filed its Notice of Removal arguing that the federal court has original jurisdiction over this action under CAFA, 28 U.S.C. §1332(d).

The plaintiff moved to remand arguing that the defendant impermissibly relied on speculation and extrapolations from the Declaration of Janice Walsh, the Vice President for Human Resources Operations at Nordstrom, to show the amount in controversy, rather than producing more concrete evidence in the form of wage statements, attendance records, and other employment records.

The Court noted that because the plaintiff failed to plead a specific amount of damages, the defendant must prove by a “preponderance of the evidence” that the amount in controversy requirement was met. Under this standard, the defendant was required to submit summary judgment-type evidence showing that it was more likely than not that the amount in controversy exceeded the jurisdictional threshold. The defendant, however, was not required to “research, state, and prove” the plaintiff’s claims for damages.

The Walsh Declaration provided competent evidence as to number of the defendant’s California hourly employees (2,500), their average hourly wage (more than $13.00 per hour), number of hours worked per day (more than 6.8), and average days worked per pay period (9). The Court, however, found that the Notice of Removal relied largely on a number of assumptions in calculating the amount-in-controversy, none of which were adequately supported by evidence.

For example, when calculating the amount in controversy for the alleged failure to pay regular and overtime wages, the defendant assumed that 1,500 out of 2,500 hourly employees did not receive full compensation for all regular and overtime hours worked.

Next, it assumed that those 1,500 employees missed one hour of regular pay and one hour of overtime pay per pay period.  The defendant asserted that it was entitled to make these assumptions because the plaintiff alleged that the defendant “failed to pay ‘all’ California hourly employees at least some regular and overtime hours.” The Court observed that this allegation did not necessarily support the defendant’s contention that purported class members missed one hour of regular pay and one hour of overtime pay per pay period. Although the Walsh Declaration did include the average number of hours hourly employees worked per day, the Court found that the defendant provided no other support for its contention regarding the amount of unpaid wages.

The Court pointed out that similar problems existed with the defendant’s other calculations of the amount put in controversy by the plaintiff’s meal and rest period claim, as well as waiting time penalties. For the meal and rest period claim, the defendant, without further support, assumed that 2,000 of the California hourly employees missed one meal period and one rest period each pay period during the purported class period, or, in the alternative, that they missed two missed meal or rest periods per month. For the waiting time penalties, the defendant provided sufficient evidence that more than 4,000 California hourly employees have separated from the defendant since August 1, 2008. The plaintiff, however, assumed without further support, that 2,000 employees were not paid wages owed at separation.

The Court found that the defendant had not supported its assumptions with evidence of its own. Accordingly, the Court concluded that the assumptions essential to the defendant’s amount-in-controversy calculations were not supported by summary judgment type evidence.

The Court maintained that the California district courts have disagreed as to whether defendants may assume certain variables—as the defendant had done—in order to calculate the amount in controversy. The defendant pointed to several decisions holding that the removing defendant is entitled to make assumptions when determining the amount in controversy. The Court found the case in Roth v. Comerica Bank, 2010 WL 6982510, at *15 (C.D. Cal. August 31, 2010) unpersuasive because it “shift the burden to plaintiff to refute speculative assertions of jurisdiction and establish that there is no jurisdiction.” In addition, the Court remarked that allowing the defendant to remove the case to federal court based only on its assumptions would ignore that “the removal statute is strictly construed against removal jurisdiction.”

The Court noted that although a removing defendant need not “conduct a fact-specific inquiry into whether the rights of each and every potential class member were violated” or “try the case itself for the purposes of establishing jurisdiction,” it is appropriate for a district court to evaluate which party has access to evidence necessary to determine whether jurisdiction exists.

In this action, the defendant was in the best position to produce evidence regarding the working hours of their California hourly employees. Although the Walsh Declaration contained information regarding the hourly employees’ average number of hours worked per day, average wage, and days worked per pay period, the Notice of Removal provided no supplemental information, perhaps in the form of the defendant’s actual policies or practices, to show that their amount-in-controversy assumptions were warranted.  The Court remarked that the defendant could have conducted a sampling or other analysis demonstrating that it was more likely than not that many of its employees regularly worked more than eight hours in a day or forty hours in a week to support calculations regarding potential overtime claims. The defendant, however, provided no such information.

Accordingly, the Court stated that without further evidence to support the defendant’s assumptions, it could not conclude that the defendant had met its burden of proving that the amount in controversy in this action exceeded $5 million. Therefore, the Court remanded the action to Los Angeles Superior Court