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

A Removing Defendant Can Use Over-inclusive Evidence to Establish the Amount in Controversy

Posted in Case Summaries

Scott v. Cricket Communications, LLC, 2017 WL 3197548 (4th Cir. July 28, 2017).

In this action, vacating a district court’s judgment, the Fourth Circuit found that the district court committed legal error by disregarding the defendant’s evidence of the amount in controversy as over inclusive, since a removing defendant can use over inclusive evidence to establish the amount in controversy, so long as the evidence shows that it is more likely than not that “a fact finder might legally conclude that” damages will exceed the jurisdictional amount.

The plaintiff brought a putative class action in state court in Baltimore City, Maryland, alleging that the defendant violated Maryland’s express warranties and implied warranties of merchantability and fitness for a particular purpose, which in turn resulted in a violation of the Magnuson-Moss Warranty Act.

The plaintiff purchased two cellular phones from the defendant for “hundreds of dollars each,” which were only operable on a network using Code Division Multiple Access (“CDMA”) technology.  Unbeknownst to the plaintiff, at the time the plaintiff purchased his phone the defendant had begun to shut down its CDMA network.  When the defendant completed that process, the plaintiff alleged that his phones, which were “locked” to the defendant’s CDMA network, were rendered “useless and worthless.”

The defendant removed the case to the district court pursuant to CAFA. In support of its notice of removal, the defendant attached the declaration of former employee, Chad Walker, who attested that during the relevant period the defendant’s customers purchased at least 50,000 CDMA handsets that were shipped to and activated in Maryland.  The defendant therefore applied a conservative estimate of $200 per phone and asserted that “the total amount in controversy was, at a minimum, $10,000,000.”

The plaintiff moved to remand arguing that the defendant did not satisfy its burden to obtain CAFA jurisdiction, because the class described in its notice of removal was broader than the plaintiff’s defined class. The defendant attached another declaration from employee Rick Cochran (“Cochran Declaration”), which stated that the defendant’s records indicated that during the relevant time period, the defendant’s customers who listed addresses  in Maryland on their accounts with defendant purchased at least 47,760 CDMA handsets that were “locked” to the defendant’s CDMA network.  Again, using the conservative estimate of $200 per phone, the defendant alleged that the revised amount in controversy was $9,552,000, which still fell well above the CAFA threshold.

Despite this evidence, the district court granted the plaintiff’s motion to remand holding that although the defendant sufficiently alleged federal jurisdiction under CAFA, it had not proven jurisdiction by a preponderance of the evidence. The district court held that the Cochran Declaration was “over inclusive” because the class included only Maryland citizens, and that the defendant’s evidence pertained to all consumers who provided Maryland addresses.  The defendant appealed.

On appeal, the defendant argued that the Cochran Declaration showed it was more likely than not that the putative class included more than 100 members and that the amount in controversy exceeded $5,000,000. The plaintiff argued that the defendant failed to tailor its evidence to the defined class of Maryland citizens.

The Fourth Circuit noted that when the amount in controversy hinges on the citizenship of class members, a removing defendant need not conclusively establish domicile, but the record must show more than naked averments of citizenship. The Fourth Circuit agreed with the district court that the defendant’s initial statement that it sold “at least 50,000 CDMA mobile telephones that were shipped to and activated in Maryland,” during the relevant time period sufficed to allege jurisdiction under CAFA.  The Fourth Circuit found that while the defendant’s assertion was broader than the proposed class that did not make the notice of removal “incurably defective.”  The Fourth Circuit found that the defendant’s short and plain statement contained enough facts to allow the court to draw the reasonable inference that the amount in controversy exceeded $5,000,000.

Next, the Fourth Circuit found that the defendant’s evidence was over inclusive was not dispositive. The Fourth Circuit opined that the key inquiry in determining whether the amount-in-controversy requirement was met was not what the plaintiff would actually recover, but rather an estimate of the amount that will be put at issue in the course of the litigation.  The Fourth Circuit found that a removing defendant can use over inclusive evidence to establish the amount in controversy, so long as the evidence shows it is more likely than not that “a fact finder might legally conclude” that damages will exceed the jurisdictional amount.

The Fourth Circuit found that because the plaintiff chose to limit the class to Maryland citizens, the defendant must show it was more likely than not that enough Maryland citizens purchased locked phones to meet the $5,000,000 threshold. The defendant contended that it could not acquire information narrowly tailored to the proposed class because it was an impossible task given that definitive determination of domicile required consideration of numerous factors, including the location where someone votes, pays taxes, and works.   The Fourth Circuit, however, found that the defendant did not need to make a “definitive determination of domicile” and noted that many factors relevant to the domicile inquiry were publicly available, including business and professional licensures, property ownership, property taxes, and voter registration.  The Fourth Circuit further found that while the defendant need not tailor its evidence to exactly match the plaintiff’s proposed class, it still must provide enough factual detail for the district court to discharge its constitutional duty and make an accurate assessment as to whether jurisdiction exists.  Accordingly,  The Fourth Circuit thus ruled that the district court applied the wrong legal standard to the defendant’s evidence and vacated the district court’s judgment.

-Melissa Broussard