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

Damages Stated in a Mediation Brief Were Not Enough to Establish the $5 Million Jurisdictional Minimum under CAFA

Posted in Case Summaries

Vitale_v_Celadon_Trucking_Services_Inc., 2017 WL 626356 (C.D. Cal. Feb. 15, 2017).

In this action, where the United States District Court, Central District of California (the “District Court”) granted the plaintiff’s motion to remand, it also found plaintiff’s mediation brief did not represent a reasonable estimate of his claims, and therefore could not support the defendant’s burden of establishing the amount in controversy because the plaintiff disavowed the damages estimate in the mediation brief, arguing that it was intended for discussion purposes only.

The plaintiff, a truck driver, brought a putative class action in Los Angeles Superior Court on behalf of himself and all current and former employees of the defendant alleging that the defendant misclassified them as independent contractors and, inter alia, failed to provide meal and rest breaks in violation of the California Labor Code and California’s Unfair Competition Law.

The defendant previously removed the action to federal court pursuant to the Class Action Fairness Action (“CAFA”). Challenging the defendant’s calculations of the amount in controversy, the plaintiff moved to remand.  The District Court granted the plaintiff’s motion, finding the defendant had failed to carry its burden of demonstrating it was more likely than not the amount in controversy reached $5 million.  Subsequently, the parties engaged in private mediation in state court prior to the exchange of formal discovery.  At the mediation, the plaintiff provided the defendant with portions of his mediation brief which contained an estimate of the defendant’s liability for damages in excess of $18 million.

The defendant then filed a second notice of removal to federal court on grounds the plaintiff’s mediation brief constituted a “paper” under 28 U.S.C. § 1446(b)(3), rendering the case removable. The plaintiff, once again, moved to remand, which the District Court granted.  The plaintiff argued the mediation brief did not represent a reasonable estimate of the claims and therefore could not support the defendant’s burden of establishing the jurisdictional minimum of $5 million under CAFA was met.

The plaintiff disavowed the damages estimate in the mediation brief, arguing it was intended for discussion purposes only and that it did not reflect a reasonable estimate of his claims. The plaintiff contended the mediation brief merely represented an analysis of possible government penalties, but that at no time did he nor his counsel believe those were valid claims.  The plaintiff further conceded he had overstated the damages for meal and rest break violations, thus reducing the damages from an estimated $4,106,250 to $68,437.  The plaintiff also disavowed his claim to misclassification penalties and overtime at the mediation, thereby eliminating those damages entirely from the total estimate.  The plaintiff further contended the $10,783,080 damage estimate for unreimbursed business expenses “was a complete shot in the dark” and “a blind guess,” because the defendant had still not provided him with the requested data on the defendant’s deductions from drivers’ pay.  On the basis of those adjustments, the plaintiff submitted a new calculation which it believed represented an accurate representation of his estimated damages.

The District Court noted where a plaintiff takes steps to disavow a damages estimate, the estimate, standing alone, is insufficient to show the requisite amount has been met. The District Court found that in light of plaintiff’s disavowal of the damages estimate in the mediation brief, reduction of or disavowal of claims, and offer of a new calculation; it could not conclude the mediation brief damages statement represented a reasonable estimate of the plaintiff’s claims.  The District Court therefore ruled the plaintiff’s estimate was insufficient and the defendant presented no additional evidence that the damages exceeded $5 million.  Thus, the defendant had failed to demonstrate by a preponderance of the evidence the amount in controversy exceeded the jurisdictional minimum under CAFA.

Accordingly, the District Court granted the plaintiff’s motion to remand.

Yaron Shaham