Carrick v. Peloton Interactive, Inc.

Background

Gabrielle Esther Carrick sued her former employer, Peloton Interactive, Inc., and Peloton managers Sharon Fox and Martha Murphy in California state court. Carrick alleged that Fox harassed and discriminated against her based on her sexual orientation, and that after she reported Fox’s conduct, she was scheduled for closing shifts, denied rest breaks, required to work overtime without sufficient compensation, and treated differently from other employees. She also alleged that Peloton required her to use her personal vehicle for work and buy Peloton-branded clothing without reimbursement.

Carrick asserted twelve California-law claims and one federal claim under the Fair Labor Standards Act. The claims included wage-and-hour violations, discrimination, failure to prevent discrimination, sexual harassment, intentional infliction of emotional distress, unreimbursed business expenses, and unfair competition. The sexual-harassment and emotional-distress claims were also asserted against Fox and Murphy. Peloton removed the case to federal court, and Carrick moved to remand it to state court under 28 U.S.C. § 1447(c).

Jurisdiction over Claims 1–6 and 11–13

The parties agreed that the court had federal-question jurisdiction over claim 13, Carrick’s Fair Labor Standards Act claim, because it arose under federal law. The court therefore denied Carrick’s motion to the extent she sought remand of that claim.

The court also held that it had supplemental jurisdiction over claims 1–6 and 11–12. Supplemental jurisdiction allows a federal court to hear related state-law claims that share a common set of operative facts with a federal claim. The court found that the wage, wage-statement, minimum-wage, waiting-time, business-expense, and unfair-competition claims were sufficiently connected to the Fair Labor Standards Act claim because they concerned alleged failures to pay wages or make required payments. The court therefore denied the motion as to claims 1–6 and 11–13.

Jurisdiction over Claims 7–10

The court reached a different conclusion about claims 7–10, which alleged sexual-orientation discrimination, failure to prevent discrimination, sexual harassment, and intentional infliction of emotional distress. Those claims focused on Fox’s allegedly inappropriate conduct and Murphy’s alleged failure to stop it, rather than on Peloton’s alleged failure to pay wages. The court held that these claims did not arise from the same case or controversy as the wage-related claims, so supplemental jurisdiction did not apply.

The court then considered diversity jurisdiction. Complete diversity generally requires every plaintiff to be a citizen of a different state from every defendant. The court stated that Carrick was a California citizen, Peloton was a citizen of Delaware and New York, and Fox and Murphy were California residents. Because Fox and Murphy were not diverse from Carrick, complete diversity was absent.

Peloton argued that Fox and Murphy’s citizenship should be disregarded because they were not properly joined and served before removal or were fraudulent, sham defendants. The court rejected both arguments. It explained that the lack of service did not eliminate the need for complete diversity. It also held that a defendant may be disregarded as fraudulently joined only when it is abundantly obvious that the plaintiff could not possibly prevail against that defendant. The court found that Carrick sufficiently pleaded claims against Fox and Murphy under that standard. It further found that the alleged conduct was not obviously barred by managerial privilege or the California Workers’ Compensation Act, and that there was at least a possibility that a state court would find the claims legally viable.

Disposition

The court granted Carrick’s motion to remand as to claims 7–10 but denied the motion as to claims 1–6 and 11–13. The order did not decide the ultimate merits of Carrick’s employment, discrimination, harassment, or emotional-distress claims.