Morgan Stanley Wage and Hour Class Action Remanded to San Diego Superior Court for Failure to Show Diversity or Amount in Controversy

by charlesjung

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Judge James Lorenz faced a remand motion in Martinez v. Morgan Stanley & Co., Inc., Civil No. 09cv2937-L(JMA), 2010 WL 3123175 (S.D. Cal. Aug. 9, 2010).  The court remanded, holding that Defendants did not meet their burden of showing that it is more likely than not that the matter in controversy for the class action exceeds $5 million or that Plaintiff’s individual claims exceed $75,000.

Defendants removed this wage and hour class action from state court based on 28 U.S.C. Sections 1332 and 1441, or in the alternative, on the Class Action Fairness Act (“CAFA”), 28 U.S.C. §§ 1332(d) and 1453.  Plaintiff filed a motion to remand arguing that Defendants failed to establish the requisite diversity of citizenship and the jurisdictional amount in controversy.

Minimal Diversity

Morgan Stanley offered the declaration of Ms. Grassman, the Assistant Secretary of Morgan Stanley & Co. Incorporated who is employed in its Legal and Compliance Department.  The court found that Ms. Grassman’s declaration lacked foundation because it did not elaborate on her job duties or state how they made it possible for her to acquire the personal knowledge regarding where the executive officers “direct, control, and coordinate” the company’s business.  Id. *3.  The Court councluded that the declaration was insufficient to overcome Plaintiff’s objections to removal.  The court also found that defendants’ declarations regrading the principal place of business of the relevant entities suffered from the same foundational defect were therefore insufficient to overcome Plaintiff’s objection to removal.

Amount in Controversy

The court recited the amount in controversy requirement for diversity jurisdiction as follows:

For purposes of diversity under 28 U.S.C. Section 1332(a), the matter in controversy on Plaintiff’s individual claim must exceed $75,000. If it does, the court may exercise supplemental jurisdiction pursuant to 28 U.S.C. Section 1367(a) over the claims of the putative class members. See Exxon Mobil Corp. v. Allapattah Serv., Inc. 545 U.S. 546, 559 (2005).

Id. *5


Defendants argued that the matter in controversy exceeds $75,000 because of Plaintiff’s allegation that she “worked approximately 12 hours per weekday [and] approximately 60 hours per week” and that “[f]or at least four years preceding the filing of this action, [she] consistently worked in excess of eight hours in a day and/or in excess of forty hours in a week” without overtime compensation. Defendants assumed that Plaintiff worked four hours of unpaid overtime per workday for the entire class period, but the court found that this assumption was not supported by Plaintiff’s allegations or any evidence submitted by Defendants. Thus, Based on Defendants’ evidence and argument, the court concluded that it was not more likely that not that Plaintiff’s individual claim exceeds $75,000.

Defendants also argued that the matter in controversy for the class exceeded the $5 million threshold under CAFA.  Defendants’ assumed that every assistant who worked for them during the class period worked overtime.  But the court concluded this assumption is unsupported by evidence or the complaint.

Rather than alleging that every assistant worked overtime, the complaint alleges that every assistant who worked overtime is a putative class member. (Compl. at 7.) This unsupported assumption alone undermines Defendants’ arguments because the number of class members may be smaller than the total number of associates who worked for Defendants during the class period. Moreover, Defendants’ arguments and calculations are further undermined by additional unsupported assumptions discussed below.

Defendants often oppose remand motions by arguing that Plaintiff’s allegation of typicality supports applying plaintiff’s basis for damages across the class.  The court disagreed with this assumption here:

With respect to the overtime claim, Defendants use Plaintiff’s allegation that she worked approximately 12 hours per weekday and approximately 60 hours per week (Compl. at 5) and assume that every associate worked four unpaid overtime hours every work day. (Opp’n at 9-10.) Although Plaintiff alleged that her claims are typical of the class as a whole (Compl. at 9) and that class members consistently worked overtime (id. at 12), this does not provide a basis to assume that every class member worked any particular number of overtime hours, much less that he or she worked the same number of overtime hours every workday as Plaintiff did on an unspecified occasion. Defendants provided no evidence to support their assumption.

Meal and Rest Periods, Waiting Time and Pay Statements

Plaintiff alleged that she “frequently missed meal and rest periods” and that “[i]t was the environment at Morgan Stanley for Assistants to forego and work through his/her statutory right to rest breaks.” (Id. at 5.) “Morgan Stanley created such unrealistic production goals for their Financial Advisors, that the Financial Advisors then, passed this increased and related administrative work to all Assistants, which in turn, required Plaintiff and the Assistants to work the entire day without rest and/or meal period.”  Based on these allegations, Defendants assumed that assistants were not provided three rest or meal breaks per week. But the court found that this assumption was unsupported by the allegations in the complaint or by evidence.

The court followed similar reasoning with respect to the the California Labor Code Section 203 waiting time penalties and Labor Code Section 226 accurate wage statement penalties.

Based on the foregoing, Defendants have not met their burden of showing that it is more likely than not that the matter in controversy for the class action exceeds $5 million or that Plaintiff’s individual claims exceed $75,000. Plaintiff’s motion to remand is therefore GRANTED on this alternative ground.