Nguyen v. SMTC Manufacturing Corporation of California

Background

Momo Nguyen filed the action in Alameda County Superior Court on January 18, 2023. She alleged that the defendants failed to pay overtime wages and sick time, provide required meal and rest periods, provide accurate wage statements, pay final wages on time, reimburse necessary business expenses, and comply with California’s Unfair Competition Law. She brought the action for herself and proposed employee classes.

Nguyen later added 40 HRS, Inc. as a defendant and, in October 2024, identified SMTC Corporation as an additional defendant. SMTC Corporation removed the case to federal court under the Class Action Fairness Act, a federal statute that can give federal courts jurisdiction over certain class actions when the class has more than 100 members, the parties are minimally diverse, and more than $5 million is in controversy.

Nguyen moved to remand, meaning to return the case to state court. She argued that removal was untimely and that the defendants had not proved the required amount in controversy. The defendants claimed that $6,974,421.25 was at stake, including rest-break premiums, waiting-time penalties, wage-statement damages, and attorney fees.

Amount in Controversy

The court held that the defendants had the burden to prove by a preponderance of the evidence that more than $5 million was in controversy. The court may consider evidence outside the complaint, but the assumptions used in calculating potential damages must be reasonable.

The defendants relied partly on Nguyen’s settlement demand of more than $5 million during mediation. The court assumed, without deciding, that the demand could be considered. It nevertheless found the demand insufficiently reliable because Nguyen had based it on a class count supplied by the defendants, and the defendants later acknowledged that their earlier count had been inflated by double-counting a significant number of people. The court concluded that the defendants had not shown how later increases in the amount at stake offset the effect of that earlier overcounting.

For rest-break damages, the defendants assumed that a violation occurred on 100% of qualifying shifts. The court rejected that assumption as unreasonable because Nguyen alleged that employees “often” could not take rest breaks and were not provided all rest breaks, rather than alleging a violation during every rest period. The court calculated the rest-break amount using a lower, weekly violation rate and determined that the resulting amount was $569,917.40.

The court accepted the defendants’ 100% assumptions for waiting-time penalties and wage-statement damages. For the waiting-time claim, the complaint alleged that employees were entitled to the statutory maximum of 30 days of wages, and the record did not suggest that the defendants paid the alleged unpaid wages within the relevant period after employees left. For the wage-statement claim, the court found the assumption reasonable in light of the allegations that unpaid rest-period premiums caused inaccurate wage statements.

The accepted amounts for the rest-period, waiting-time, and wage-statement claims totaled $3,299,867.40. Even adding 25% for attorney fees, or $824,966.85, produced only $4,124,834.25. The defendants did not provide estimates for several other claims, and the court stated that it could not supply the missing calculations for them. The court therefore found that the defendants failed to prove that the amount in controversy exceeded $5 million.

Ruling and Effect

Because the court resolved the case on the amount-in-controversy requirement, it did not reach Nguyen’s argument that removal was untimely. It granted the motion to remand, directed the Clerk to return the action to Alameda County Superior Court, and closed the federal case.

The court denied Nguyen’s request for attorney fees related to the remand motion because the defendants had raised legitimate arguments supporting removal. The court also did not address the pending motions to compel arbitration or the motion to deny class certification because it determined that it lacked jurisdiction over the case.