holding the "statutory remedies for unpaid overtime wages bar[red] plaintiff's claim for conversion"Summary of this case from Jacobs v. Genesco, Inc.
Case No.: CV-01-09681 CAS (Ex)
April 9, 2002
On September 25, 2001, plaintiff Marcus Green, a citizen of California, filed this case as a class action in Superior Court of California, County of Los Angeles, alleging that defendant Party City Corporation, a Delaware corporation with its principal place of business in New Jersey, failed to pay him and other alleged class members overtime compensation as required by law. Plaintiff alleges three claims for relief: (1) violation of Cal. Labor Code § 1194 et seq.; (2) violation of Cal. Bus. Prof. Code § 17200 et seq.; and (3) conversion. On November 9, 2001, defendant timely removed the action to this Court on the basis of diversity of citizenship.
On February 4, 2002, defendant filed a motion for judgment on the pleadings on plaintiff's claim for conversion. On February 25, 2002, the parties appeared before the Court for the hearing on defendant's motion for judgment on the pleadings; at that hearing, counsel for plaintiff and defendant agreed that if plaintiff's conversion claim were to be dismissed, the jurisdictional amount of $75,000 would no longer be satisfied and that remand to the Superior Court would be appropriate. At the February 25, 2002 hearing, plaintiff argued that the Court should first determine whether removal was appropriate inasmuch as plaintiff contended that the amount in controversy would be less than $75,000 even if the conversion claim remained as a claim in the case. The Court then continued the motion for judgment on the pleadings until after it considered plaintiff's motion for remand.
On March 14, 2002, plaintiff filed a motion to remand this case to the Superior Court, on the grounds that defendant has failed to demonstrate that plaintiff's claim meets the $75,000 amount in controversy requirement. In the same motion, plaintiff requests the imposition of sanctions against defendant and defendant's counsel for their asserted wrongful removal of this case to this Court.
Defendant Party City Corporation owns and operates approximately thirty retail stores in California. Complaint ("Comp.") ¶ 3. Plaintiff and the alleged class members currently are or previously were employed by defendant as "salaried employees," a category which includes store managers, executive assistant managers, and assistant managers. Id. ¶ 4. Plaintiff alleges that he and the other salaried employees "were regularly scheduled as a matter of uniform company policy to work and in fact worked . . . in excess of eight hours per workday and/or in excess of forty hours per workweek without receiving straight time or overtime compensation for such overtime hours worked in violation of California Labor Code Section 1194 and the applicable California Industrial Welfare Commission wage order[s]." Id. ¶ 10. Plaintiff alleges that defendant's failure to pay overtime compensation resulted from its improper classification of plaintiff and the other class members as "managerial employees" (who are exempt from overtime compensation requirements), when these employees are in fact non-managerial employees (and not exempt from such requirements). Id.
Plaintiff seeks back pay, overtime pay, injunctive relief, disgorgement of business profits, waiting time penalties, interest and attorneys' fees, and punitive damages. Id. at ¶¶ 15-16. Plaintiff's claim for punitive damages is based on his claim for conversion. Id. ¶ 27. In his complaint, plaintiff does not plead a specific dollar amount of damages.
III. PLAINTIFF'S MOTION FOR REMAND
A. Standard for Motion for Remand
In order to establish removal jurisdiction over a diversity action pursuant to 28 U.S.C. § 1332, the removing defendant must demonstrate that (1) the amount in controversy exceeds $75,000, and (2) the suit is between citizens of different states. The defendant bears the burden of establishing that removal is proper. See Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996). As a general matter, removal jurisdiction is to be construed strictly, and any doubts as to removability should be resolved in favor of remanding the case to state court. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992).
The parties do not dispute diversity.
As the removing party, defendant must prove by a preponderance of the evidence that the amount in controversy exceeds $75,000. Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996). Under this burden, the defendant must provide evidence establishing that it is "more likely than not" that the amount in controversy exceeds $75,000. Id. The amount in controversy is determined as of the date of removal.Meritcare, Inc. v. St. Paul Mercury Ins. Co., 166 F.3d 214, 217-18 (3rd Cir. 1999). In a case brought as a class action, only the claim of the named plaintiff is relevant for determining whether the case meets the amount-in-controversy requirement. Gibson v. Chrysler Corp., 261 F.3d 927 (9th Cir. 2001).
In cases in which the existence of diversity jurisdiction depends on the amount in controversy, the district court may consider whether it is facially apparent from the complaint that the jurisdictional amount is in controversy. Singer v. State Farm Mutual Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997) (citations omitted). If the complaint is silent on the amount of damages claimed, the court may consider facts in the removed petition and may require the parties to submit evidence relevant to the amount in controversy at the time of removal. Id. A speculative argument regarding the potential value of the award is insufficient. Id. at 376.
B. Application to the Instant Case
Plaintiff contends that remand is required because defendant has failed to identify any facts demonstrating that it is more likely than not that the amount in controversy exceeds the jurisdictional minimum for this Court. Plaintiff's Memorandum of Points and Authorities in Support of Motion to Remand and Request for Sanctions ("Mot.") at 1. Plaintiff argues that defendant has submitted no evidence that plaintiff's overtime claim exceeds $75,000. Id. at 4. In addition, plaintiff argues that defendant has failed to show by a preponderance of the evidence that plaintiff's claim for punitive damages in conjunction with his conversion claim would increase his claim to $75,000 or more. Id. at 4-5. Finally, plaintiff contends that to the extent defendant argues that plaintiff's claim for attorneys fees increases the amount of his claim, (1) defendant has submitted no evidence as to the amount of fees at issue; (2) attorneys' fees recovered pursuant to Cal. Labor Code § 1194 may not be properly included in calculating the amount in controversy in determining diversity jurisdiction; and (3) the amount of fees incurred up to the point of removal is de minimus. Id. at 6-9.
Plaintiff contends that such evidence would include the hours worked by plaintiff; plaintiff's dates of employment; and plaintiff's rate of pay. Id. at 4. In a declaration filed by defendant's counsel Martha Keon on February 11, 2002, Keon stated that plaintiff was employed by defendant for six months at an annual salary of $28,000. Keon Dec. ¶ 5. As a result, it does not appear that plaintiff's underlying claim for compensatory damages alone would approach $75,000.
Plaintiff notes that attorneys' fees are calculated at the time of removal for purposes of diversity jurisdiction, Faulkner v. Astro-Med, Inc., 1999 WL 820198, *4 (N.D. Cal. 1999), and that the only work done by plaintiff's counsel prior to removal was the filing of the complaint.
In response, defendant argues that plaintiff's claim for punitive damages raises the amount in controversy to more than $75,000. Defendant's Memorandum of Points and Authorities in Opposition to Plaintiff's Motion to Remand and Request for Sanctions ("Opp. Mot.") at 5-6. In evaluating punitive damages, the Court may only consider those sought by the named plaintiff rather than by the other members of the putative class. Gibson, 261 F.3d at 945-47. Defendant argues that numerous California court decisions and jury verdicts demonstrate that punitive damages in excess of $75,000 have been awarded to individual plaintiffs where the plaintiff has alleged conversion of money or personal property. Opp. Mot. at 6; see, e.g., Leatherman Tool Group, Inc. v. Cooper Industries, Inc., 2002 WL 507526 (9th Cir. 2002) (approving $500,000 punitive damages award for improper use of photograph of competitor's product in connection with $50,000 compensatory damages award);Professional Seminar Consultants, Inc. v. Sino American Technology Exchange Council, Inc., 727 F.2d 1470 (9th Cir. 1984) (awarding plaintiff $200,000 in punitive damages on the claim that defendant had converted funds received under an agreement to arrange study tour).
When asked at oral argument whether he intended to seek punitive damages, counsel for plaintiff stated that he did, but that nonetheless, any punitive damages were required to be reasonably related to compensatory damages, thereby suggesting that there was possibility that the amount in controversy could exceed $75,000. The Court disagrees and denies plaintiff's motion for remand by reason of the fact that a jury could reasonably be expected to return a verdict in excess of $75,000.
IV. DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS
Having determined that the Court has jurisdiction over the instant case, the Court now turns to defendant's motion for judgment on the pleadings.
A. Standard for Judgment on the Pleadings
A motion for judgment on the pleadings brought pursuant to Fed.R.Civ.P. 12(c) provides a means of disposing of cases when all material allegations of fact are admitted in the pleadings and only questions of law remain. See McGann v. Ernst Young, 102 F.3d 390, 392 (9th Cir. 1996). In considering a Rule 12(c) motion, the district court must view the facts presented in the pleadings and the inferences to be drawn from them in the light most favorable to the nonmoving party. NL Indus. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986); In Re Century 21-Re/Max Real Estate Adver. Claims Litig., 882 F. Supp. 915, 921 (C.D. Cal. 1994). For purposes of the motion, the moving party concedes the accuracy of the factual allegations of the complaint, but does not admit other assertions that constitute conclusions of law or matters that would not be admissible in evidence at trial. Wright Miller, Federal Practice and Procedure: Civil 2d § 1368.
B. Application to the Instant Case
Defendant argues that judgment on the pleadings is warranted on two separate bases: (1) plaintiff is limited to the remedies provided by statute for failure to pay overtime wages and (2) disputed wages are not the type of property that can form the basis for a claim for conversion.
Conversion is a tort consisting of the wrongful exercise of dominion over personal property of another. 5 B.E. Witkin, Summary of California Law § 610 (9th ed. 1988). A claim for conversion properly lies where there is substantial interference with possession of the property or the right to it. Id. Property that may be the subject of a claim for conversion includes tangible personal property, intangible property represented by documents such as bonds, notes, and bills of exchange, and money, so long as a specific, identifiable sum is at issue. Id. §§ 612-14.
Defendant argues that because the right to overtime pay is statutory, plaintiff is limited to the remedies provided by statute and cannot assert a claim for conversion for the same alleged wrong. Mot. at 2-3. Under California law, "when a new right has been created by statute, and a statutory remedy for its infringement is provided, the statutory remedy is exclusive and no other remedy will be allowed." 3 B.E. Witkin, California Procedure § 7 (4th ed. 1996); see, e.g., Stevenson v. Superior Court, 16 Cal.4th 880, 900 (1997) ("Where a new right is created by statute, the party aggrieved by its violation is confined to the statutory remedy if one is provided. . . ."). Defendant argues that the right to overtime pay is a right created by statute, and that the California Legislature has created an extensive remedial scheme to address overtime wage disputes. Mot. at 3; see Cal. Labor Code §§ 98, 98.1, 98.2, 98.3, 98.4, 203, 218.5, 225.5, 1194.
In response, plainfiff argues that the recent California Supreme Court case of Cortez v. Purolator Air Filtration Products, 23 Cal.4th 163 (2000) establishes that his claim for overtime wages he is not limited to statutory remedies. Plaintiff's Opposition to Defendant's Motion for Judgment on the Pleadings ("Opp. Mot.") at 9. The plaintiff in Cortez brought an action against her former employer for failure to pay overtime wages. The Cortez court held that payment of wages unlawfully withheld from an employee is a restitutionary remedy authorized by Cal. Bus. Prof. Code § 17203. See id. at 177-78. Plaintiff appears to be arguing that Cortez in some way establishes that plaintiffs are not limited to remedies established by the Labor Code. Opp. Mot. at 7-8; see also Kraus v. Trinity Management Services, 23 Cal.4th 116 (2000) (order that a defendant disgorge money obtained through an unfair business practice prohibited by the unfair competition law may include a restitutionary element). However, the plaintiffs in Cortez and Kraus brought claims under Cal. Bus. Prof. Code § 17200, a statute that had been held to enable a party to seek relief for violation of an independent statute for which there might not otherwise be a private right of action. Neither Cortez nor Kraus addressed whether the plaintiffs in those cases could have maintained a claim for conversion. Plaintiff fails to cite, and this Court was unable to find, a case in which a statutorily-based claim for nonpayment of wages has been the subject of a conversion claim.
In these circumstances, the Court finds that the statutory remedies for unpaid overtime wages bars plaintiff's claim for conversion. Plaintiff does not appear to dispute that the duty to pay overtime is a duty created by statute rather than one that existed at common law, nor that the Labor Code provides a detailed remedial scheme for violation of its provisions. Thus plaintiff cannot assert a claim for conversion based on defendant's alleged violation of the statutory duty to pay overtime, but is limited to the remedies provided by statute.
In light of this holding, the Court does not reach defendant's argument that disputed wages are not the type of property that can give rise to a claim for conversion.
Although plaintiff alleges claims for violation of Cal. Labor Code § 1194 et seq., violation of Cal. Bus. Prof. Code § 17200 et seq., and conversion, punitive damages are only available for conversion. See Czechowski v. Tandy Corp., 731 F. Supp. 406, 410 (N.D. Cal. 1990) (punitive damages not available under section 17200 of the Business and Professions Code); Cal. Labor Code § 1194(a) (limiting available remedies to "unpaid balance of the full amount of minimum wage or overtime compensation, including interest thereon, reasonable attorney's fees, and costs of suit.") In light of the fact that plaintiff cannot advance a claim for punitive damages, it does not appear that plaintiff's damages are in excess of $75,000, and as a result this Court lacks jurisdiction over the instant case.
Plaintiff's motion to remand is DENIED. Plaintiff's request for sanctions is DENIED. Defendant's motion for judgment on the pleadings is GRANTED. Defendant is ordered to show cause within twenty days why the case should not be remanded to Superior Court.