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CAFA Law Blog

Information, cases and insights regarding the Class Action Fairness Act of 2005

A Controversy No Matter How Local, Must Be Established With Evidence

Posted in Case Summaries

Mandragon v Capital One Auto Finance, 2013 WL 6183001 (9th Cir. Nov. 27, 2013).

In this action, the Ninth Circuit refused the plaintiff’s request that the class definition was sufficient to establish a local controversy exception, and that a requirement of evidence showing that the two-thirds of the class members were in fact California citizens, thereby vacating the district court’s order remanding the case.

The plaintiff filed a putative class action against the defendants Capital One Auto Finance and Ron Baker Chevrolet in the San Diego County Superior Court, alleging violations of various provisions of California state law related to automobile finance contract disclosures. Captial One removed the case to the United States District Court for the Southern District of California under CAFA. The plaintiffs filed a motion to remand under the local controversy exception. The plaintiff did not produce any evidence to establish the local controversy exception, but relied on the class definitions that more than two-thirds of the class members were citizens of California.

The plaintiff argued that the class definitions, limiting putative class members to those consumers who purchased and registered cars in California, were sufficient to establish that this action fell within CAFA’s local controversy exception. The district court agreed and remanded. Capital One appealed to the Ninth Circuit. On appeal, the district court’s remand order based on what the Ninth Circuit termed as “guesswork” was reviewed.

At the very outset, the Ninth Circuit observed that in many cases before this, it has held that the burden of proof for establishing the applicability of an exception to CAFA jurisdiction rests on the party seeking remand, which in this case, as in most cases, is the plaintiff. This meant that the plaintiff here must thus establish that greater than two-thirds of the prospective class members were citizens of California as of the date the case became removable. The plaintiff argued that more than two-thirds of the members of the class defined to be limited to persons who purchased vehicles in California for personal use to be registered in the State of California, would necessarily be California citizens, but he did not present any evidence, even after Capital One challenged it.

The Ninth Circuit noted that where the facts are in dispute, the statute requires the district court to make factual findings before granting a motion to remand a matter to state court. The Ninth Circuit remarked that it joined the other three circuits that had considered the issue, in holding that the plaintiff must have some facts in evidence from which the district court may make findings regarding class members’ citizenship for the purposes of CAFA’s local controversy exception.

In re Sprint Nextel Corp., 593 F.3d 669 (7th Cir. 2010), the Seventh Circuit noted that freewheeling discretion amounts to no more than guesswork, and a jurisdictional finding of fact should be based on more than guesswork. (Editors’ Note:  See the CAFA Law Blog analysis of In Re Sprint Nextel posted on March 28, 2010). Similarly, in Preston v. Tenet Healthsystem Mem’l Med. Ctr., Inc., 485 F.3d 793 (5th Cir. 2007); and in Evans v. Walter Indus., Inc., 449 F.3d 1159 (11th Cir. 2006), the Fifth Circuit and the Eleventh Circuit, have concurred with the Seventh Circuit that a jurisdictional finding of fact should be based on more than guesswork. (Editors’ Note: See the CAFA Law Blog analysis of Evans posted on May 25, 2006.)

Applying the rulings here, the Ninth Circuit remarked that merely because a purchaser may have a residential address in California, it does not mean that the person is a citizen of California. The Ninth Circuit remarked that if the plaintiff decides to expend the effort, he would be able to gather and submit evidence to support his contention that more than two-thirds of prospective class members were California citizens.

The Ninth Circuit, however, remarked that the burden of proof placed on a plaintiff should not be exceptionally difficult to bear, and that even under CAFA, the jurisdictional allegations in the complaint can be taken as a sufficient basis, on their own, to resolve questions of jurisdiction where no party challenges the allegations. Nevertheless, as the allegations were disputed in this case, the Ninth Circuit vacated the district court’s remand order and remanded the case to the district court with instructions to allow plaintiff an opportunity to renew his motion to remand and to gather evidence to prove that more than two-thirds of the putative class members were California citizens. –JR

Local Defendants Must be Significant Defendants

Posted in Uncategorized

Lefevre v Connextions Inc., 2013 WL 6241732 (N.D. Tex. Dec. 3, 2013).

In this action, the United States District Court for the Northern District of Texas found that the plaintiffs failed to distinguish between a local defendant, and the other defendants in order to establish by a preponderance of evidence that the local defendant was the one from whom significant relief was being sought. Therefore, the district court refused to remand the case under the local controversy exception.

The plaintiffs filed a suit in Texas state court alleging that the defendants offered them jobs with a promise that they would earn between $17 and $25 per hour, as a combination of hourly wages, sales commissions, and performance bonuses, but in reality they were paid nowhere near that amount. The plaintiffs asserted that they only received hourly wages and were never paid commissions on the sales of two specific drug plans. The defendants removed the case under CAFA, and the plaintiffs moved to remand under CAFA’s local controversy exception.

The plaintiffs asserted that there were two local defendants – Ayaya Staffing Professionals Ltd., and Patrick Kerl. The plaintiffs, however, did not contend that Kerl was a significant defendant within the meaning of CAFA. The district court noted that 28 U.S.C. § 1332(d)(4)(A)(i)(II)(aa) requires that Ayaya be one from whom significant relief was sought by the members of the plaintiff class. Second, subsection (bb) requires that Ayaya be one who alleged conduct formed a significant basis for the claims asserted by the proposed plaintiff class. The plaintiffs maintained that Ayaya was a significant defendant because it satisfied the requirements of subsections (aa) and (bb).

The district court noted that the plaintiffs sought damages equally from Ayaya and the other defendants. The district court also noted that Ayaya was a local defendant, and therefore, subsection (aa) was satisfied. As to the subsection (bb) the district court noted that in Opelousas General Hospital Authority v. Multiplan, Inc., 2013 WL 3245169 (5th Cir. June 28, 2013), the Fifth Circuit held that the plaintiff failed to satisfy subsection (bb) because the complaint contained no information about the conduct of the local defendant relative to the conduct of the other defendants as it related to the claims of the putative class or even the lead plaintiff. (Editor’s Note: See the CAFA Law Blog analysis of Multiplan here).

Unlike Opelousas General Hospital Authority, the plaintiffs’ complaint included allegations to distinguish the conduct of Ayaya from that of the other defendants. For example, the complaint alleged that Ayaya recruited plaintiffs and the class to work for defendant Connextions, Inc., suggesting that Ayaya was a recruiting organization whereas Connextions was the actual employer. The district court noted that these distinctions, however, were insufficient to prove by a preponderance of the evidence that Ayava was a significant defendant under subsection (bb). In fact, the district court remarked that the distinguishing conduct – that Ayava recruited plaintiffs to work for Connextions – cuts against the finding that Ayava was a significant defendant. The allegations suggest instead that Ayava was merely a recruiting agency that did not itself hire or purport to hire any of the plaintiffs.

In addition, the district court noted that the vast majority of the allegations in the amended petition did not distinguish between the conduct of Ayava and the conduct of the other defendants.

Consequently, the district court found that that the plaintiffs failed to carry their burden under subsection (bb) because they did not prove by a preponderance of the evidence that Ayava was a local defendant “whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class.” Because plaintiffs did not meet their burden of proof as to all the essential elements of the local controversy exception, the court denied their motion to remand. –JR

CAFA Coupon Settlements Must Be Approved

Posted in Case Summaries

Fouks v Red Wing Hotel, 2013 WL 6169209 (D. Minn. Nov. 21, 2013).

The district court in Minnesota finally approved a coupon settlement in terms stipulated in CAFA, but reduced the award for the class representatives, and deferred the award of attorneys’ fees after the redemption period of voucher was complete.

The plaintiff filed this putative class action for the defendant’s willful failure to properly redact its customers’ debit and credit card numbers from its receipts in violation of the Fair and Accurate Credit Transaction Act’s (“FACTA”) truncation requirement. The parties reached a tentative settlement, which was preliminarily approved by the district court. The plaintiffs then filed a motion for final approval of the class action settlement.

The parties sought final approval of their proposed settlement in which the defendant – St. James Hotel – would provide to the 161 class members who timely submitted claims a voucher for either 40% off a stay at the hotel or 30% off a meal at the hotel’s restaurant. Under the terms of the settlement, the defendant would also make direct cash payments of $4,000 to both the class representatives and a cy pres donation of $20,000 to the Red Wing Environmental Learning Center within 10 days of the court’s final approval.

Because the proposed settlement would provide the class members with vouchers that would require them to a purchase more of the defendant’s goods and services, in order to receive a discount, the district court observed that the provision of CAFA regarding coupon settlements at 28 U.S.C. § 1712 was applicable here. The statute specifies that, where a proposed settlement includes the award of coupons to class members, the court may approve the setlement only upon making a written finding that the settlement was fair, reasonable, and adequate for class members.

After having considered all the relevant factors, the district court in particular noted the difficulty FACTA plaintiffs who sought only statutory damages may encounter in providing the defendant’s willful non-compliance where the case does not settle and proceeds to trial. In addition, the court took notice that no class members had objected to the proposed settlement. Accordingly, the district court remarked that those factors cut in favor of final approval of the settlement, but it was uneasy about the difference in kind and amount between $4,000 cash payments the plaintiffs sought for themselves and the far less valuable coupons that they deemed adequate for the other class members. The district court found that here, the case was not strongly contested, as settlement negotiations began in the earliest stages of the litigation; demanded very little of the plaintiffs individually; did not implicate the public interest, and presented no novel, complex, or controversial issues. Accordingly, the district court reduced the award for class representative and paid $1,000 to one plaintiff and $500 to the other, and modified the settlement.

Similarly, the district court found that the class counsel’s award of attorneys’ fees of $65,000 was unreasonable, firstly because the hours expended were unreasonable for a case of this nature, and secondly, the hourly rate the counsel requested was exorbitant. The district court denied class counsel’s motion without prejudice, and gave them the liberty to refile once the voucher redemption period was concluded.

Accordingly, the district court modified, and finally approved the settlement. –JR

CAFA Does Not Fill the Lacunae Created by Lack of Article III Standing

Posted in Case Summaries

Wallace v Conagra Foods Inc., 2014 WL 1356860 (8th Cir. April 4, 2014).

On an appeal challenging the district court’s order dismissing an action for lack of subject matter jurisdiction due to lack of Article III standing, the Eighth Circuit made the following findings:

  1. CAFA does not abrogate the Article III standing’s injury in fact requirement and replace it with injury in law;
  2. On a case removed from a state court, if a federal court finds that it lacks subject matter jurisdiction, it must remand the case to the state court, and not dismiss it.

This opinion explains that the consumers brought an action in the state court against the defendant, who manufactures Hebrew National meat products (notably hot dogs) using beef slaughtered by AER Services, Inc. (“AER”). The slaughtering of the beef took place in the facilities of another entity, American Foods Group, LLC (“AFG”), which then sold the meat classified as kosher to the defendant and sold any remaining meat to third parties. AER employed the religious slaughterers who perform the “shechitah” (i.e., the ritual slashing of the cow’s throat) along with the other individuals responsible for marking particular meat as kosher. One such individual is supposed to inspect the freshly slaughtered carcass while another examines the lungs for signs of injury. If a lung cannot hold air because, for example, there is a small perforation, the meat should be deemed non-kosher. A third party kosher certification entity named Triangle K, Inc., nominally monitored whether AER, AFG, and the defendant complied with the kosher rules. Triangle K was a for-profit New York company owned and run by Ayreh Ralbag, an orthodox rabbi.

The plaintiffs contended that the defendant promoted these kosher requirements as a reason to purchase Hebrew National products, which cost more than similar non-kosher competitors. As American consumers sought purer foods prepared in accordance with strict safety standards, the kosher food industry expanded by catering to non-religious consumers. Like the consumers bringing this case, an increasing number of Americans chose to pay more for Hebrew National’s supposedly kosher products based on the defendant’s representations that the kosher label was a guarantee of quality and superior taste. The plaintiffs contended that manufacturing quotas–not kosher rules–were the deciding factor as to whether any batch of meat harvested at the AFG slaughterhouses was ultimately designated as kosher or non-kosher. The plaintiffs brought this action alleging that the defendant’s misrepresented that Kosher was the “New Organic”, which led them to pay an unjustified premium for the defendant’s ostensibly kosher beef.

This case began as a state class action filed in Minnesota state court. The defendant removed to federal court in the District of Minnesota, then moved for dismissal pursuant to Federal Rules 12(b)(1) and (6). Although the defendant itself first invoked federal jurisdiction, the defendant submitted that the federal district court lacked subject matter jurisdiction because (1) the consumers’ claims were “barred” by the First Amendment, and (2) the consumers lacked Article III standing. After the District Court granted the defendant’s motion, the consumers appealed.

At the very outset, the Eighth Circuit noted that the plaintiffs did not have an Article III standing because they failed to demonstrate an injury in fact. In other words, the plaintiffs failed to show that any of the particular packages of Hebrew National beef they personally purchased contained non-kosher beef.

The plaintiffs then argued that Congress extended federal jurisdiction to the causes of action as alleged by the plaintiffs meant the they need only show a bare statutory violation–injury in law rather than an injury in fact–to satisfy Article III. The Eighth Circuit remarked that to interpret CAFA as a congressional attempt to extend federal jurisdiction to cases involving no injury in fact would force it to presume–without any basis in the statutory text, and in contradiction to long-settled constitutional precedent–that Congress intended to stretch, if not breach, the constitutional limits on federal jurisdiction. The Eighth Circuit remarked that one cannot assume the people’s elected representatives would so casually disregard the Constitution they have sworn to uphold. To the contrary, recognizing that Congress is predominantly a lawyer’s body, it can be assumed that the elected representatives know the law.

The Eighth Circuit remarked that Congress clearly incorporated Article III’s traditional limits into CAFA. In drafting the Act, Congress was not required to restate existing standing law, nor to specify that Article III limited CAFA’s reach, because Congress legislates against the background of standing. The Eighth Circuit remarked that the Congress passed CAFA to restore the intent of the framers of the United States Constitution by providing for Federal court consideration of interstate cases of national importance under diversity jurisdiction. The Eighth Circuit concluded that this stated purpose was wholly inconsistent with the notion Congress wished to reject Article III’s historic injury in fact requirement.

Accordingly, The Eighth Circuit concluded that CAFA does not purport to extend federal jurisdiction to state claims–if any exist–permitting recovery for bare statutory violations without any evidence the plaintiffs personally suffered a real, non-speculative injury in fact.

The Eighth Circuit nevertheless, disagreed with the District Court’s finding of dismissing the case. The Eighth Circuit explained that when case originally filed in federal court does not belong there because the plaintiffs lack Article III standing, generally the appropriate remedy is to dismiss without prejudice. If, on the other hand, the case did not originate in federal court but was removed there by the defendants, the federal court must remand the case to the state court from whence it came. Further, the Eighth Circuit remarked that if at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case should be remanded.

Because this case began in the First Judicial District Court, Dakota County, Minnesota, the Eighth Circuit concluded that is where this case must return. Accordingly, the Eighth Circuit vacated the District Court’s judgment, reversed the district court’s dismissal with prejudice, and remand to the District Court with instructions to return this case to the Minnesota state court for lack of federal jurisdiction. –JR

Private Attorney Suits not Removable under CAFA

Posted in Case Summaries

National Consumers League v Flowers Bakeries LLC, 2014 WL 1372642 (D.D.C. April 8, 2014).

In an action brought by an organization on behalf of several consumers, the federal court remanded the action finding that a lawsuit brought as a private attorney does not meet the class action definition of CAFA.

The National Consumers League filed suit on behalf of the “general public” in D.C. Superior Court against Flowers Bakeries, LLC, alleging violations of the D.C. Consumer Protection Procedures Act (“DCCPPA”). The defendant removed the action to the federal court on the basis of diversity jurisdiction and under CAFA. The plaintiff moved to remand.

At the very outset, the defendant argued that the motion to remand should be denied on the grounds that it was not timely filed. Under the federal removal statute, a motion to remand on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal. However, the plaintiff filed its motion to remand 34 days after the case was removed, which according to defendant, did not raise a defect in the Court’s subject matter jurisdiction, but rather procedural defects in defendant’s Notice of Removal, and therefore should be denied.

However, the plaintiff’s motion to remand argued that based on the facts contained in the Notice of Removal, the defendant failed to establish that the amount-in-controversy exceeded the statutory minimum as a matter of law. The district court rejected the defendant’s timeliness argument because the plaintiff’s motion did not allege procedural defects in the Notice of Removal, but instead it presents a bona fide challenge to this Court’s subject matter jurisdiction.

The district court next noted that a complete diversity of citizenship existed as the plaintiff was a citizen of Washington, D.C., and the defendant a citizen of Georgia. The only contention was over the amount-in-controversy. The plaintiff argued that the defendant did establish that the amount-in-controversy exceeded $75,000.

The defendant identified three independent bases in support of its argument that it cleared the jurisdictional threshold. First, the defendant argued that because more than 300,000 loaves of the subject products were sold to consumers in D.C. and each violation carried with it a minimum statutory penalty of $1,500 per product under the DCCPPA, the total potential damages would easily eclipse $75,000. Second, the defendant argued that because there was at least one retailer who bought over fifty loaves, the amount-in-controversy requirement was met. Third, the defendant relied on the plaintiff’s settlement demand for an amount in excess of $75,000 to satisfy the amount-in-controversy requirement.

The court remarked that it was not persuaded by these arguments; as this type of case was often referred to as a private attorney general suit brought to enforce the rights of the general public. While the D.C. Circuit has yet to address the question of how to calculate the amount-in-controversy for purposes of determining diversity in such suits, this court was guided by the principal that the removal statute should be construed narrowly in favor of remand and that separate and distinct claims should not be aggregated. On these bases, the court concluded that the jurisdictional amount in controversy had not been satisfied.

As to jurisdiction under CAFA, the District Court remarked that this was not the first time that a court within this jurisdiction considered whether a DCCPPA private attorney general action was a “class action” under CAFA. For example, in Breakman v. AOL LLC, 545 F. Supp. 2d 96 (D.D.C. 2008), the court had concluded that because the plaintiff had not attempted to comply with Rule 23 of the D.C. Superior Court Rules of Civil Procedure, and he had not sought class certification, removal was not justified under CAFA’s class action provision. (Editor’s Note: See the CAFA Law Blog discussion of Breakman here). Similarly, in Zuckman v. Monster Beverage Corp., 958 F. Supp. 2d 293 (D.D.C. 2013), the court relied on similar factors when and concluded that because plaintiff brought his case as a representative action under the private attorney general provision of the DCCPPA, he did not refer to his claim as a class action, and did not seek to comply with any of the D.C. Superior Court’s class action rules; and accordingly, his case did not qualify as a class action under the CAFA. (Editor’s Note: See the CAFA Law Blog discussion of Zuckman here).

The defendant attempted to distinguish Breakman and Zuckman based on the fact that those cases were brought by individuals, whereas the present case was brought by a non-profit, public interest organization. The difference, defendant argues, was that under D.C. Code § 28–3905(k)(1)(D), a public interest organization is only permitted to bring a DCCPPA action on behalf of the interests of a consumer or a class of consumers. Because the plaintiff brought this suit on behalf of the General Public, the defendant contended that it must necessarily be bringing the suit on behalf of a class of consumers under CAFA.

The district court disagreed with this analysis for two reasons. First, the plaintiff’s complaint expressly relied on all four private attorney general standing provisions, not just subsection (D).  Second, even if the Court were to construe that the plaintiff’s complaint as one brought solely pursuant to subsection (D), it would not follow that the statute’s use of the term “class” would automatically permit removal under CAFA’s class action provision.

The district court explained that CAFA defines a “class action” as any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action. The issue, therefore, would be whether an action under D.C. Code 28–3905(k)(1)(D) constitutes a suit ‘filed under’ a state statute or rule of judicial procedure ‘similar’ to Rule 23 that authorizes a class action. The District Court observed that absent the hallmarks of Rule 23 class actions; namely, adequacy of representation, numerosity, commonality, typicality, or the requirement of class certification, courts have held that private attorney general statutes lack the equivalency to Rule 23 that CAFA demands.

The district court concluded that the same was true of D.C. Code § 28–3905(k)(1)(D). Accordingly, the district court remarked that it saw no reason to depart from the well-reasoned conclusions in Breakman and Zuckman that removal is not permitted under CAFA’s class action provision for actions brought by a private attorney general under D.C. Code § 28–3905(k)(1) where plaintiff has not brought a “class action” under D.C. Superior Court Rule 23. Accordingly, the district court granted the motion for remand. –JR

Law of the Case Doctrine Controls Remand Decisions Too

Posted in Case Summaries

Stafford v Dollar Tree Stores Inc., 2014 WL 1330675 (E.D. Cal. March 27, 2014).

The Eastern District (the transferee court) applied the law-of-the-case doctrine and refused to revisit motion to remand that was denied by the Central District (the transferor) finding that removal was appropriate under CAFA.

The plaintiff brought this wage and hour class action in the state court alleging inter alia failure to provide meal and rest periods; failure to pay minimum, regular and overtime wages. The defendant removed the action under CAFA, and the plaintiffs moved to remand. The defendant removed the case based on the allegations contained in the First Amended Complaint to the U.S. District Court for the Central District of California. After the case was removed to federal court, plaintiff filed a Second Amended Complaint in which he omitted the class action allegations and asserted only PAGA claims.

The District Court in the Central District of California denied plaintiff’s initial motion to remand. The plaintiff renewed his motion to remand after the Ninth Circuit passed Urbino v. Orkin Services of California, Inc., 726 F.3d 1118 (9th Cir. 2013). The Urbino court held that damages from PAGA claims could not be aggregated with damages from individual claims to satisfy the amount-in-controversy for ordinary diversity subject matter jurisdiction. The Ninth Circuit’s decision was issued after the Central District court denied plaintiff’s initial motion to remand. The case was transferred to Eastern District.

The plaintiff argued that the defendant’s aggregation of damages for PAGA claims was improper under the Ninth Circuit’s intervening decision in Urbino. The plaintiff also argued that the defendant’s asserted basis of removal relied on class action claims in a prior complaint that have been superseded by an amended complaint omitting all class allegations. The defendant opposed the plaintiff’s renewed motion to remand arguing the law-of-the-case doctrine prevents this court from reconsidering the decision denying the plaintiff’s initial motion to remand, made by the transferor Central District court.

The law-of-the-case doctrine states that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case. Here, the plaintiff argued that the district court should revisit the decision of its sister court in light of the Ninth Circuit’s decision in Urbino. In Urbino, the Ninth Circuit concluded that when an employee asserts individual claims and claims under PAGA, the aggrieved employee’s individual interest is different from the state’s collective interest in enforcing its labor laws through PAGA. Therefore, the court held that the PAGA claims cannot be aggregated together with an individual’s claims to meet the amount in controversy requirement for ordinary diversity jurisdiction.

The district court observed that in its order, the Central District court held it had diversity jurisdiction because the amount-in-controversy exceeded $75,000 after aggregating PAGA claims. Thus, this portion of the court’s decision may have been different under Urbino; plaintiff argues this court should revisit that decision under the exception to the law-of-the-case doctrine for an intervening change in controlling authority.

The district court observed that Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988), and Hanna Boys Ctr. v. Miller, 853 F.2d 682 (9th Cir.1988) were two persuasive authorities on the issue of whether the law-of-the case doctrine applies to an alternative basis for upholding subject matter jurisdiction. In Christianson, the Supreme Court stated that the law-of-the-case promotes the finality and efficiency of the judicial process by protecting against the agitation of settled issues. The Supreme Court noted that the doctrine must be applied rigorously to transfer decisions that implicate the transferee’s jurisdiction. Similarly, in Hanna Boys Ctr., the Ninth Circuit held that the law-of-the-case doctrine applies not only to the explicit holding of a sister court, but also to issues decided by necessary implication in a coordinate court’s previous disposition.

Based on Christianson, and Hanna Boys Ctr., the district court concluded that the law-of-the-case applies to alternative holdings, even if the other holding has been vacated on appeal, and found that the alternative holding of the transferor court is binding as the law of the case on this court, as the transferee court.

The plaintiff next argued the transferor court’s prior ruling, denying plaintiff’s initial motion to remand and upholding jurisdiction under CAFA was erroneous or worked a manifest injustice. The First Amended Complaint met the first three requirement was met.  But the plaintiff argued that the court lacked CAFA jurisdiction because his complaint omitted class allegations.

The district court ruled that the transferor court’s decision upholding CAFA jurisdiction was not clearly erroneous because plaintiff’s First Amended Complaint, not his Second Amended Complaint, is the controlling complaint. Here, the defendant timely removed the action to federal court based on the allegations contained in the First Amended Complaint. It was not until seven days later, that plaintiff filed his Second Amended Complaint, which asserted only PAGA claims and omits all class allegations. Therefore, the transferor court’s decision upholding CAFA jurisdiction based on allegations in the First Amended Complaint was not clear error.

Next, the plaintiff contended that amount-in-controversy did not exceed $5 million. The district court remarked that the plaintiff made several claims which took the amount-in-controversy past the jurisdictional threshold. For example, the district court noted that plaintiff’s amount-in-controversy challenge on failure to provide meal periods were unavailing. The district court pointed to its decision in Stevenson v. Dollar Tree Stores, 2011 WL 4928753 (E.D.Cal. Oct.17, 2011), where it held it was reasonable to estimate that fifty percent of meal periods were missed because the plaintiff alleged that members of the class were ‘routinely’ denied meal periods as part of a policy and practice. Here, the plaintiff’s complaint contained similar language, therefore, the transferor court could have reasonably credited defendant’s estimate that, for this claim alone, the amount in controversy is $5,314,825.69.

Similarly, the district court concluded that when the other claims of the plaintiff were aggregated along with the attorney fees and the failure to provide meal and rest breaks, the transferor court made no error in retaining jurisdiction.

Accordingly, the district court denied the plaintiff’s motion to remand as barred by the law-of-the-case doctrine. –JR

Urban Outfitters’ Amount-in-Controversy Calculations Fail to Meet Preponderance of the Evidence Standard

Posted in Case Summaries

Abdulhaq v. Urban Outfitters Wholesale, Inc., 2014 WL 2212119 (N.D. Cal. May 28, 2014).

A district court in California remanded a case to the state court finding that the defendant’s attempt to show that the amount-in-controversy exceeded the jurisdictional threshold required the court to make assumptions that lacked evidentiary support, which did not meet the preponderance of the evidence standard.

The plaintiff brought this putative class action on behalf of similarly situated class of current and former hourly managers who worked at Anthropologie stores in the Superior Court of California, for the County of Alameda. The plaintiff alleged violations of California Labor Codes for unpaid overtime, unpaid minimum wages, unpaid meal rest premiums, unpaid rest period premiums, wages not timely paid upon termination, non-complaint wage statements, and for violations of California Business and Professions Code Section 17200.

The defendant removed the action contending that the federal court had jurisdiction under CAFA, which grants federal district courts original jurisdiction over certain class action suits. The plaintiff moved to remand.

For purposes of removal under CAFA, the parties did not dispute that the class comprised at least 100 persons. The plaintiff however, contended that the defendant did not prove that there was diversity of citizenship. The District Court noted that in the declaration filed in support of its opposition papers, the defendant demonstrated that according to its January 2013 Securities and Exchange Commissions’ Form 10–K, the state of incorporation and location of the company’s principal executive offices was the State of Pennsylvania. Accordingly, the District Court ruled that the defendant had carried its burden to demonstrate minimal diversity.

Regarding the amount-in-controversy, the District Court noted that the plaintiff did not allege a specific amount-in-controversy in his complaint but, without any evidence of bad faith, did plead that the amount was less than $5 million, exclusive of interest and costs. Here, to demonstrate the amount-in-controversy, the defendant estimated the plaintiff’s unpaid overtime and minimum wage claims to total over two million dollars. The defendant estimated that the plaintiff sought an estimated five hours of overtime per workweek at an estimated overtime rate of $26.78 (150% of the average regular hourly rate) for an estimated workforce, at any given time, of 100 during the applicable four-year period.

The defendant then estimated the plaintiff’s claim for failure to pay meal period premiums based on its estimate that 11,237 paychecks having been issued to putative class members, an average wage of $17.85, and two missed meal periods per pay period. Urban Outfitters also estimated the rest period premiums, the minimum wages claims, waiting time penalties claim, wage statement claim, business expenses claim, and attorneys’ fees.

The District Court, however, observed that such an estimation, which assumed time worked, estimated missed overtime per week without reference to actual workweeks worked, and estimated number of employees working at any one time, was unsupported by facts and was speculative at best. The District Court found that the defendant’s mere speculation fell grossly short of meeting the preponderance of the evidence burden.

The District Court remarked that given that the defendant was in the possession of the relevant payroll records, it would have been possible for the company to provide a more accurate estimated accounting and not rely upon extrapolation and speculation. In addition, the District Court found that the plaintiff did not allege that every putative class member was entitled to overtime and did not even allege the frequency in which the overtime violations occurred. Therefore, the District Court found that the defendant’s calculations seemed to require the District Court to make assumptions that lacked evidentiary support.

Accordingly, the District Court ruled that the defendant failed to show that the amount-in-controversy exceeded $5 million by preponderance of the evidence standard and remanded the case to the state court.

California District Court Refuses to Exercise Jurisdiction Once FLSA Claims Are Dismissed Because a Class of Twenty-One Does Not Meet CAFA’s Numerosity Criteria

Posted in Case Summaries

Locke v. American Bankers Ins. Co. of Florida, 2014 WL 2091346 (E.D. Cal. May 19, 2014).

In a wage and hour action for violations of FLSA and California state laws, a district court in California refused to exercise jurisdiction over the action after the FLSA claims were dismissed, finding that a class of twenty-one does not meet the CAFA’s numerosity criteria.

The plaintiffs brought an action seeking to recover damages, penalties, injunctive relief, and attorneys’ fees under six causes of action. The plaintiff alleged violations of the federal Fair Labor Standards Act (“FLSA”); various provisions of the California Labor Code, etc. The plaintiffs in this case were insurance adjusters.  They claimed that they performed their duties under a tightly controlled manner dictated by the defendant’s procedures and software programs, that they exercised little judgment, and have virtually no discretion. Despite all of this, according to the plaintiffs, the defendant misclassified them as exempt employees not entitled to overtime pay.  As a result, the plaintiffs were not paid overtime wages.

The defendant filed a motion for partial summary judgment as to the plaintiff’s first claim for FLSA violations. The District Court, however, granted the defendant’s motion as to the plaintiffs’ FLSA claims, and dismissed the state law claims without prejudice.

Regarding the plaintiffs’ FLSA claims, the District Court found the plaintiffs did not show a genuine dispute that the plaintiffs’ primary duty included the exercise of discretion and independent judgment with respect to matters of significance. Therefore, the District Court concluded that the plaintiffs were covered by the administrative exception to the FLSA, and granted the defendant’s motion for partial summary judgment as to the FLSA claims.

Once the District Court had dismissed the only federal claim that permitted subject matter jurisdiction on the matter, the court remarked that that it would have only supplemental jurisdiction over the remaining state law claims. This meant that the District Court had the power to exercise discretion to either retain or decline jurisdiction.

Here, the District Court remarked that no unusual circumstances were present suggesting that the Court should retain jurisdiction over the plaintiffs’ state law claims. While it appeared that the parties were diverse, the plaintiffs had not alleged a significant amount-in-controversy to establish diversity jurisdiction under 28 U.S.C. § 1332(a) to allow them to proceed individually in federal court. The plaintiffs only alleged damages in excess of $25,000, well below the jurisdictional minimum of $75,000.

Similarly, the District Court found that the plaintiffs did not meet the minimum requirements to maintain federal jurisdiction pursuant to the CAFA. CAFA provides federal jurisdiction to class action where the number of members of all proposed plaintiff classes must be 100 or greater.  CAFA defines class members to mean the persons (named or unnamed) who fall within the definition of the proposed or certified class.

The District Court observed that courts generally apply the preponderance of the evidence standard to CAFA’s 100 person numerosity requirement. Here, the defendant moved to deny certification of class action based on California state claims, asserting that there were only seventeen potential class members in the state of California. In opposition, the plaintiffs contended that the defendant understated the number of class members in California and that there were at least twenty-one class members. The District Court remarked that regardless of the estimates of the parties, neither estimate of the number of class members falls meets the 100 member minimum under § 1332(d)(5)(B), and that it was not possible for the plaintiffs to establish a basis for jurisdiction under CAFA.

Accordingly, the District Court concluded that in light of the resolution of the federal claim, and finding no alternative basis for jurisdiction, it would not exercise jurisdiction over the plaintiffs’ state law claims, pursuant to Section 1367(c)(3), and dismissed them without prejudice.

Defendant’s Assumptions Deemed Appropriate In Determining Amount In Controversy

Posted in Uncategorized

Grozco v. Illinois Tool Works, Inc., 2015 WL 411209 (E.D. Cal. Jan. 30, 2015).

A district court in California denied a motion to remand, finding that the defendant had sufficiently established by a preponderance of the evidence that the amount-in-controversy exceeded $5 million.

The plaintiff class, comprising of current and former non-exempt hourly workers of the defendant, alleged unfair business practices and labor law violations. Their complaint alleged a failure to provide overtime pay, meal breaks and rest periods, among other claims. The dispute presented in the motion to remand was whether the class presented an amount-in-controversy that exceeded the jurisdictional threshold of $5 million.

The defendant contended that the aggregate potential liability based on the class’s claims regarding meal breaks and rest periods alone exceeded the statutory requirement. In support, the defendant attached a spreadsheet containing data regarding all members of the class, including the plaintiffs. The spreadsheet contained, among other things, the identification numbers, dates of hire, work locations, and hourly rates of pay of class members. The plaintiffs did not dispute the authenticity of the spreadsheet. Thus, the District Court ruled that the defendant appropriately relied on the spreadsheet to calculate its potential liability based on the meal break and rest period claims.

The class alleged that class members were denied 30 minute meal breaks each day. For each of the years at issue, the defendant used the class members’ actual rates of pay and assumed that each member was entitled to just one additional hour of pay for each workweek based on the alleged missed meal periods. For a class of at least 800 members, and a time period spanning 5 years, the defendant calculated its total potential liability for missed meal periods to be $2,714,117 on the basis of this assumption.

Utilizing the same actual rates of pay and same assumption that class members were each entitled to one additional hour of pay for each workweek, the defendant performed similar calculations to arrive at its potential liability regarding missed rest periods. Together, the defendant calculated its total potential liability based on the plaintiffs’ meal and rest period claims at $5,428,234, which exceeds the $5,000,000 CAFA jurisdictional threshold.

The plaintiffs took issue with the defendant’s assumed violation rate, i.e., that each class member would be entitled to one additional hour of pay for each workweek on the meal period and rest period claims, respectively. However, based on the plaintiffs’ allegations, the Court found the defendant’s assumption that each class member would be entitled to one additional hour of pay for each workweek based on the meal period claim reasonable and appropriate, and in fact, conservative. Following Rodriguez v. AT & T Mobility Servs. LLC, 728 F.3d 975 (9th Cir. 2013), the Court noted that the defendant did not need not to show through a legal certainty that the amount-in-controversy exceeded the jurisdiction minimum, but rather, only through a preponderance of the evidence. Accordingly, the District Court retained jurisdiction over the action and denied the motion to remand.

District Court Holds Home State Exception Requires Evidence and Allows Discovery

Posted in Case Summaries

Roche v Aetna Health Inc., 2014 WL 1309963 (D.N.J. March 31, 2014).

The plaintiff, New Jersey citizen, who was injured in a motor vehicle accident, brought a putative class action against five insurance defendants, Aetna Inc., Aetna Health Inc., Aetna Health Insurance Co., Aetna Life Insurance Co., and The Rawlings Company, LLC. The plaintiff claimed that the defendants were prohibited from pursuing subrogation or reimbursement claims with respect to New Jersey-regulated health benefit plans. The plaintiff’s medical treatment for the injuries she sustained in the accident was paid for by two health insurance plans.

The plaintiff successfully sued the other driver involved in her car accident and the other driver’s excess liability insurer, and was awarded damages. Then, the defendant Rawlings Company LLC (“Rawlings”), which was Aetna Life Insurance Company’s subrogation recovery vendor, sent her a letter asserting a lien, subrogation claim, and/or demand for reimbursement of the benefits paid as a result of the accident. In response to the letter, the plaintiff made payment to the defendants in the amount of $88,075.29.

The plaintiff along with two others filed an action (the “first action”) in the New Jersey state court against the same defendants. She later filed another action as class representative, again in the state court against the same five defendants.  Although the plaintiff filed two class actions, she was removed as a plaintiff from the first class action, which currently pending before the Court, Roche, Singleton and Minerly v. Aetna Inc., Civil Case No. 13-1377 (“Singleton”). The defendants removed both Singleton and Roche to the district court of New Jersey predicated upon diversity jurisdiction under CAFA, and federal question jurisdiction arising under the ERISA. The plaintiff moved to remand the case, which the district court granted in part.

The district court first noted that complaint set forth a cause of action centered upon a governmental health benefit plan that is exempt from ERISA. However, the complaint did not implicate the Bank of America policy and the defendants agreed that the New Jersey State Health Benefits Program plan was a non-ERISA plan. Accordingly, the district court concluded that the federal question jurisdiction was lacking because plaintiff’s complaint did not arise under federal law and exclusively implicates State law.

The district court, however, found that there was sufficient diversity between the parties to retain jurisdiction under CAFA. The plaintiff was New Jersey citizen, and the defendant Aetna Life Insurance Co. was a Connecticut Corporation with a principal place of business in Connecticut. Additionally, the class likely exceeds 100 members; and the plaintiff’s complaint alleged that there were over 100,000 individuals insured by Aetna in the State of New Jersey, and the defendants asserted that they had filed subrogation or reimbursement claims with “hundreds of members” of New Jersey governmental health insurance policies administered by Aetna. Lastly, the district court found that the amount-in-controversy far exceeded the jurisdictional threshold of $5 million.

The plaintiff however, argued that remand was appropriate because her claims fell within two exceptions to CAFA, the “local controversy” and “home state” exceptions, because the controversy is uniquely connected to New Jersey, the state in which the action was originally filed. The district court found that the complaint did not fall within the “local controversy exception” under CAFA because the plaintiff had previously filed, in the last three years, a class action in Roche, Singleton and Minerly v. Aetna Inc. that alleged the same or similar factual allegations.

The district court, however, found that remand may be appropriate because plaintiff’s claims appeared to fall within the home state exception to CAFA jurisdiction. The home state exception requires a federal court to decline to exercise jurisdiction where a party seeking to invoke the exception establishes that at least two thirds of the members of the putative class are citizens of the state where the action was originally filed and that the primary defendants are also citizens of the state in which the action was originally filed.

The district court observed that evidence here was insufficient for the plaintiff to demonstrate the number of class members who are citizens of New Jersey as opposed to the number of class members who are citizens of another state but have non-ERISA governmental health care policies originating from New Jersey. In fact, the plaintiff’s claims exclusively implicated New Jersey State Law and did not involve any matters of national or interstate interest. The plaintiff’s allegations in this regard, surpassed those considered deficient in Dicuio v. Brother Int’l Corp ., 11-CV-1147, 2011 WL 5557528, (D.N.J. Nov.15, 2011).

The defendant in Dicuio was a Delaware corporation with its principal place of business in New Jersey and removed the case to federal court predicated upon CAFA jurisdiction. The Dicuio court held that the plaintiff’s failure to limit its pleading to New Jersey citizens, combined with his failure to provide any evidence in support of his contention that two-thirds of the proposed class are New Jersey citizens renders his local controversy exception contention untenable. However, the proposed class in Dicuio considered a class that consisted of all purchasers in New Jersey, who since 2005 purchased Brother Laser Printers of similar models to Plaintiff’s and required the same color ink cartridges.

Here, the plaintiff’s claim was not “clearly frivolous” as the relationship between New Jersey governmental benefits to its citizens is far more connected than the out of state “passersby” who merely shop in New Jersey as described in Dicuio. Thus, while the plaintiff’s claim lacked the requisite specificity, it was more than mere speculation and jurisdictional discovery is warranted.

Likewise, the district court concluded that the jurisdictional discovery would aid the court in determining which of the defendants were “primary.” Additionally, the district court found that the plaintiff cannot sufficiently prove that the primary defendants reside in New Jersey.

The district court concluded that the home state exception appeared to negate the federal court’s jurisdiction; however, the evidence presented was not sufficient to conclusively establish the exception. Accordingly, the district court granted the plaintiff’s motion to remand in part, but ordered a limited jurisdictional discovery related to home state exception. –JR