Balcorta v. Twentieth Century-Fox Film Corp.

Citations: 208 F.3d 1102; 2000 Cal. Daily Op. Serv. 2673; 5 Wage & Hour Cas.2d (BNA) 1835; 2000 Daily Journal DAR 3623; 164 L.R.R.M. (BNA) 2071; 2000 U.S. App. LEXIS 6229; 2000 WL 350562Docket: No. 98-56547

Court: Court of Appeals for the Ninth Circuit; April 6, 2000; Federal Appellate Court

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David Balcorta filed a lawsuit against his employer, Twentieth Century Fox Film Corporation, in state court for violating California wage law. Fox removed the case to federal court, claiming the issues were "completely preempted" by federal labor law, and subsequently sought summary judgment. Balcorta moved to remand the case back to state court and requested attorney’s fees. The district court granted Balcorta’s remand motion, stating that California Labor Code section 201.5 provided a nonnegotiable state law right that did not require interpretation of the collective bargaining agreement, thus denying Fox’s summary judgment motion. The court awarded Balcorta $1,950 in attorney’s fees for the wrongful removal. While Fox could not appeal the remand order, it did appeal the attorney’s fees award. The appellate court affirmed the district court’s decision. Balcorta, employed as an electrical rigger and a member of The Studio Electrical Lighting Technicians, Local 728, had alleged that Fox failed to pay him within 24 hours of his discharge on eleven occasions, seeking statutory penalties under California law.

Jurisdiction to review the district court’s decision to remand a case to state court under 28 U.S.C. section 1447(c) is restricted, as per 28 U.S.C. section 1447(d), but the appellate court can review the award of attorney’s fees under section 1447(c). Such awards are reviewed for abuse of discretion, specifically if they are based on an incorrect legal determination regarding the remand. The validity of the attorney’s fees award hinges on whether the district court correctly found the absence of federal question jurisdiction, which is determined by the 'well-pleaded complaint rule.' This rule indicates that federal jurisdiction is present only when a federal question emerges on the face of the plaintiff's complaint, allowing plaintiffs to avoid federal jurisdiction by solely relying on state law. 

Federal defenses, including preemption, cannot serve as a basis for removal to federal court. However, the 'complete preemption' doctrine allows for federal jurisdiction when a statute's preemptive force is so strong that it converts a state law claim into a federal claim from its inception. This doctrine primarily applies to cases under section 301 of the Labor Management Relations Act (LMRA), which allows lawsuits for contract violations between employers and labor organizations to be brought in federal court. The Supreme Court has established through several rulings that section 301 not only grants federal jurisdiction over collective bargaining agreement disputes but also empowers federal courts to develop a substantive body of federal law for their enforcement.

The Court analyzed the preemptive force of federal common law in relation to labor contracts, emphasizing that state laws attempting to define terms within labor contract disputes are preempted by federal labor law under section 301, which seeks uniformity in labor law. The ruling in Avco Corp. v. Aero Lodge No. 735 established that state claims related to collective bargaining agreements are completely preempted, transforming them into federal claims, thus displacing any state cause of action related to employer-labor organization contracts.

Although section 301's language refers specifically to contract violations, courts have interpreted its complete preemption to include most state-law actions that require interpretation of labor agreements. This expansion is justified to uphold the uniformity of labor law and promote arbitration of disputes, preventing attempts to circumvent section 301 by reclassifying contract claims as tort claims.

The Supreme Court has clarified that while complete preemption is broad, not every claim involving a labor agreement is necessarily preempted. There is a distinction between claims needing interpretation of a labor agreement and those that merely reference it. If the terms of a contract are clear and not disputed, the mere consultation of a collective bargaining agreement in state litigation does not warrant preemption. The term "interpret" is narrowly defined, indicating a deeper engagement than simply considering or applying the agreement.

The excerpt addresses the legal standards surrounding the interpretation of labor agreements in relation to claims under California Labor Code section 201.5, which mandates that an employee be paid within 24 hours of discharge. Fox argues that Balcorta's claims are completely preempted by the need to interpret the collective bargaining agreement (CBA) to ascertain the definitions of "discharge" and "timely payment." The district court determined that the issues surrounding Balcorta's alleged discharge were purely factual and did not require interpretation of the CBA. Fox's claims that certain paragraphs of the CBA (14, 15, and 18) necessitate interpretation are dismissed as lacking supporting argument, with the court finding these provisions straightforward in their meaning. Specifically, paragraph 14's language about employee notification of discharge is deemed clear, and any assertion that Balcorta's testimony contradicts the CBA does not imply ambiguity in the provision itself. The court concludes that the determination of Balcorta's discharge does not involve interpretation of the CBA, thus his claims are not subject to complete preemption.

Fox contends that the interpretation of the collective bargaining agreement is necessary to assess whether Balcorta was discharged and whether his payment was timely. The agreement includes a clause regarding wage payment timelines post-discharge, but the determination of timeliness is governed solely by section 201.5 of the California Labor Code, which mandates payment within 24 hours of discharge. This statute's clarity eliminates the need to reference or interpret the collective bargaining agreement. 

Fox also argues that the collective bargaining agreement may preempt state law regarding payment timing. He suggests that state law allows deviations from its minimum standards, which would necessitate interpreting the agreement, or that section 301 of the Labor Management Relations Act (LMRA) permits such waivers. However, these arguments lack merit because the rights under California Labor Code section 201.5 are nonnegotiable and cannot be waived by private agreements. Section 219 explicitly states that no private agreement can contravene the rights provided in that chapter, reinforcing the nonnegotiable nature of these labor rights. The Supreme Court supports this interpretation, confirming that section 301 does not allow for waiving nonnegotiable state rights. Allowing such waivers would undermine state authority to enforce minimum labor standards, enabling parties to evade state law through collective bargaining contracts.

Section 301 of the Labor Management Relations Act (LMRA) does not completely preempt state law claims, as established in various court rulings. The court emphasized that Congress did not intend for section 301 to allow unions and employers to contract around state labor standards or engage in illegal agreements. Specifically, the ruling in Balcorta’s case indicated that his claims under California Labor Code section 201.5, which requires prompt payment of wages upon termination, are not preempted by section 301. Consequently, the district court was correct in remanding his case to state court due to lack of subject matter jurisdiction and did not abuse its discretion in awarding attorney’s fees. Balcorta sought penalties under section 203 for late wage payments, having already received all earned wages prior to his action. His original complaint involved late payments on nine occasions, with the Commissioner ruling in his favor on ten claims after one was withdrawn. The court noted that an award could only be overturned if based on a clearly erroneous factual finding.

Defendants argue that the district court abused its discretion in determining attorney's fees by suggesting that fees would not be awarded if Fox's removal attempt was "fairly supportable." Although the district court has discretion not to award fees under these circumstances, case law allows for fee awards when a defendant’s removal is legally incorrect, even if deemed "fairly supportable." The court's view on fees being inappropriate in such instances stems from Schmitt v. Insurance Co. of North America, which held that fees were not warranted if the removal was fairly supportable without evidence of bad faith. However, this decision was based on a pre-amendment version of section 1447(c), which only allowed for the award of "just costs." Following the amendment in 1998, section 1447(c) permits the award of "just costs and any actual expenses, including attorney's fees," without requiring a finding of bad faith. The Moore case clarified that the amendment eliminated the necessity of demonstrating bad faith to obtain fees, instead focusing purely on the absence of subject matter jurisdiction. Consequently, the standard for reviewing fee awards under section 1447(c) is now for abuse of discretion. The concept of "complete preemption," while related to jurisdiction, does not alter the rule that a defense of preemption does not establish federal question jurisdiction. The Supreme Court has recognized that some state rights may retain their validity despite the potential need for interpreting collective bargaining agreements, which supports the role of arbitration in labor disputes.

Earlier dicta suggested that the doctrine of complete preemption could extend beyond the 'interpretation' test, particularly in cases involving state constitutional privacy claims, where any claim that is a 'properly negotiable subject for purposes of collective bargaining' was deemed completely preempted. However, more recent rulings clarify that the outcomes in those earlier cases were contingent on the need to interpret the relevant collective bargaining agreements. In Stikes v. Chevron USA, Inc., the court affirmed that claims were completely preempted solely because their resolution required such interpretation. Both the Supreme Court and the Ninth Circuit have rejected the broad interpretation of complete preemption suggested by prior dicta. 

In the case of Balcorta, Fox argues that the resolution of Balcorta’s claims necessitates interpretation of collective bargaining agreement provisions, citing decisions from other circuits. However, an analysis of these cases reveals that they do not support the notion of complete preemption for Balcorta’s claims. Specifically, in Atchley, the Seventh Circuit found preemption applicable because the determination of wage due dates required interpreting the collective bargaining agreement. Similarly, in Antol, the state law claim was preempted as it effectively constituted a breach of the collective bargaining agreement. 

The relevant provisions of the collective bargaining agreement clarify the conditions under which calls can be canceled and outline specific layoff provisions for 'Off Production' employees, indicating that certain operational procedures must be followed regarding employee notifications and scheduling.

Language in paragraph 14 has a clear meaning, and requiring its interpretation could lead to the preemption of nearly all state law claims that reference collective bargaining agreements. This outcome contradicts the Supreme Court’s guideline that 'interpretation' should not be broadly applied to instances where a collective bargaining agreement is simply referenced. Section 201.5 may not rely on the agreement's definitions of layoff or discharge, potentially allowing courts to apply state common law without consulting the agreement. However, it is evident that no interpretation of the collective bargaining agreement is necessary, even if Balcorta's discharge is governed by it. Specifically, paragraph 19 of the agreement outlines the conditions for wage payment upon layoff, stating that employees must be paid within twenty-four hours upon request and that any delayed payments due to the producer's fault must be rectified within three days of notification.