Vathana v. EverBank, 5:09-cv-2338-RS (September 10, 2009).
Nice try, but try again. The Northern District of California gives the defendant another shot at proving the amount in controversy.
This case was originally filed in April, 2009, by Ek Vathana in Santa Clara County Superior Court against EverBank surrounding a breach of contract dispute. The complaint alleged that EverBank offered a World Currency CD wherein EverBank would accept U.S. dollars and convert those U.S. dollars to any one of a number of different foreign currencies.
In July 2008, the plaintiff invested $9,447.49 in a World Currency CD made up of Icelandic Krona valued at 743,045.22 ISK. In September 2008, the plaintiff invested $40,040.07 in a second World Currency CD again denominated in ISK at a value of 3,525,527.75 ISK. Both of these CDs had a term of 3 months. The document governing these transactions provided that investors had three options when their CDs matured: (1) Liquidation of the CD, (2) Return of the interest and reinvestment of the principle, or (3) Rollover of the CD by reinvesting the same currency for the same maturity.
In October 2008, the plaintiff requested that the first CD be rolled over and reinvested. EverBank, however, closed the first CD two days later and converted it into U.S. dollars for a loss of $6,489.46. EverBank did the same with the second CD causing the plaintiff to lose $23,700.88.
EverBank removed the action to the Northern District of California under both diversity and CAFA. The court quickly pointed out that the removing defendant bears the burden of establishing a preponderance of the evidence that the amount in controversy exceeds the jurisdictional amount. (Editors’ Note – The court cited the decisions in Guglielmino and Lowdermilk for its burden of proof proposition. See the CAFA Law Blog analysis of Lowdermilk posted on July 30, 2007 and the CAFA Law Blog analysis of Guglielmino posted on November 6, 2007.)
In evaluating this burden, the court instructed that it considered facts presented in the removal petition, as well as any summary judgment type evidence relevant to the amount in controversy at the time of removal.
As to the individual claims, the plaintiff itemized his losses as $30,190.34. EverBank, however, calculated the losses at $42,202.78 and then doubled the amount to $84,405.56 pursuant to a pre-suit demand letter sent by plaintiff’s counsel providing that the plaintiff would file suit within 30 days and seek damages including punitive damages. The court categorized EverBank’s arithmetic as convoluted and stated that it had failed to satisfy its burden of proof as to the amount in controversy under the individual claims, but then addressed EverBank burden under CAFA.
In an effort to meet its under CAFA, EverBank presented a declaration of its executive vice-president calculating damages at either $50 million or $78 million without elaborating as to how he arrived at these figures, but merely stating that he employed Vathana’s loss calculation methodology. The court stated that the bare allegations of the declaration standing alone, could not carry the evidentiary burden under CAFA. The court however gave the defendant another shot stating that the plaintiff’s lack of clarity as to the definition of the putative class could have contributed to EverBank’s failure to quantify the damages in sufficient detail.
The court concluded by extending an opportunity to EverBank to supplement its declaration with more specific information as to how it arrived at the damage estimates. The court gave the defendant an additional week to provide further documentation in support if the jurisdictional amount it sought to prove under CAFA.
We may see this case again. Maybe by then we will figure out why anyone would invest in Icelandic Krona.