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

More than Declarations are Required for Evidence of CAFA Jurisdiction

Posted in Case Summaries

Emmons v Quest Diagnostics Clinical Labs Inc, 2014 WL 584393 (E.D. Cal. Feb. 12, 2014).

In this action, the federal court refused to accept the defendants’ attempt to establish amount-in-controversy exceeded $5 million through a declaration by one of its employees, finding that the declarations were not enough evidentiary support to retain jurisdiction under CAFA.

Two phlebotomists, on behalf of themselves and others similarly situated, brought this action in the Stanislaus County Superior Court against the defendants seeking overtime wages, unpaid minimum wages, unpaid meal period and rest period premiums. Phlebotomists are those who are trained and certified to draw blood for diagnostic testing. The plaintiffs defined three classes of similarly situated persons: (1) non-Floater Phlebotomists in California; (2) Floater Phlebotomists in California; and (3) non-Floater and Floater Phlebotomists in California who worked for defendants within one year prior to filing of the complaint, until certification.

The defendants removed the action to the federal court under CAFA. Supporting removal, the defendants attached the declaration of Megan Bassler, the Senior Human Resources Generalist, who stated that there were at least 2,000 employees who worked in California as non-Floater Phlebotomists during the 4-year period, and 785 were former employees; at least 180 employees were Floater Phlebotomists, among them 30 were former employees. The defendants indicated that the entire alleged class consisted of at least 2,180 individuals. The plaintiffs sought remand on the grounds that the defendants failed to meet their burden of establishing that the amount-in-controversy exceeded $5 million.

As in many cases, here too, the complaint did not specify an amount of damages, therefore, the defendants again landed with the burden of establishing the amount-in-controversy by preponderance of evidence. The district court noted that in Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 F.3d 994 (9th Cir. 2007), the Ninth Circuit adopted “legal certainty” standard as the standard of proof in CAFA cases where a state court complaint affirmatively alleges that the amount-in-controversy was less than CAFA’s jurisdictional minimum. (Editor’s Note:  See the CAFA Law Blog analysis of Lowdermilk posted on July 30, 2007). The defendants argued that in Rodriguez v. AT & T Mobility Services, LLC, 728 F.3d 975 (9th Cir. 2013), the Ninth Circuit found that the Supreme Court overruled Lowdermilk in Standard Fire Insurance Company v. Knowles, 133 S.Ct. 1345 (2013) instructing the district courts to look to the potential claims of the absent class members, rather than plaintiff’s complaint. (Editors’ Note: see CAFA law blog analysis of Standard Fire posted on April 12, 2013). The Rodriguez court observed that Lowdermilk reasoned that the initial jurisdictional determination derives from the complaint, while the Standard Fire mandates that courts determine their jurisdiction by aggregating all potential class members’ individual claims.

Under this heightened burden, the district court found that the defendants did not show that the amount-in-controversy exceeded $5 million. The district court explained that here, the defendants contended that the amount-in-controversy exceeded $8,625,000 based on three of the nine allegations of violations of the California Labor Code. The district court noted that in their sixth cause of Action, the plaintiffs alleged that the defendants intentionally and willfully failed to provide the employees with accurate wage statements in accordance with California Labor Code § 226(a). The defendants calculated the value of this claims as $5,565,000 with support from Megan Basler’s declaration. Basler declared that the defendants issued at least 2,100 paychecks in the one-year preceding the complaint, and the defendants assumed that every wage-statement issued over 26 periods was incorrect. Based on that assumption, the defendants argued that the plaintiffs were entitled to recover $50 for the initial incorrect wage statement, $100 for every additional erroneous wage statement, and therefore, each employee would be entitled to receive $2,650 in statutory compensation at minimum. According to the defendants 2,100 paychecks X $2,650 equaled over $5.56 million.

The district court noted that in Garibay v. Archstone Communities LLC, the plaintiff alleged violations of § 226, and the defendant calculations assumed that every single member would be entitled to recover maximum penalties for every single period without providing supporting evidence for that assertion. The Garibay court observed that the only support for the defendants’ calculation of the amount-in-controversy was a declaration by their superior. Accordingly, the Garibay court rejected this evidence as a support for amount-in-controversy. Similarly, the district court in this case relied on other cases where the defendants attempted to establish amount-in-controversy by declarations as opposed to producing solid evidence. The district court concluded that similar to those cases, the defendants here merely speculated without much evidence that the violations of § 226 would result in them paying maximum penalties. The district court ruled that it cannot rely on the defendants’ assertions that the amount-in-controversy was in excess of $5.65 million only in violations of § 226 for the purpose of calculation amount-in-controversy.

Likewise, the district court found that the defendants’ reliance of Basler’s declarations to establish that the violation of § 203 – waiting time penalties – also attracted maximum penalties. The district court refused to accept the defendants’ argument the plaintiffs’ allegations of PAGA violations also helped cross the $5 million threshold.

Accordingly, the district court granted plaintiffs’ request to remand the case to the state court. –JR