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CAFA Law Blog

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

Citizenship, not Residency bring cases to Federal Court

Posted in Case Summaries

Villa v. United Site Servs. of California, Inc., 2013 WL 2436605 (N.D. Cal. June 4, 2013). 

District Judge Jon S. Tigar, writing for the Northern District of California remanded an action for failure to establish minimal diversity, holding that the relevant inquiry for determining whether minimal diversity exists is the citizenship of the parties, which was not proven by the defendant. 

The plaintiff brought an action alleging failure to provide rest breaks, to pay wages at the time of discharge, and to pay rest period premiums in violation of the California Labor Code.  The plaintiff sought to represent all current and former service technicians and pick-up delivery drivers working within the State of California at any time during the period beginning four years before the filing of the initial complaint, who worked for shifts of greater than three and one-half hours and who were denied rest breaks, who were denied compensation, including premium pay on a daily basis, and whose premium payments were delayed after their employment was terminated. 

The defendant removed the action from Superior Court of Santa Clara County to the District Court under § 1332(d) of CAFA.  The plaintiff moved for remand arguing that removal under was improper because the complaint asserted only state law claims and there was no minimal diversity.  The District Court granted the motion.  

Because the defendant was a citizen of California, the District Court noted that minimal diversity would exist only if at least one putative class member was not a citizen of California.  The defendant submitted two declarations of its attorneys to demonstrate that at least one purported class member was not a citizen of California.  The first declaration stated that during a telephone conversation a former employee informed the lawyer that she moved to Kansas in 2009 and that she was moving to Oklahoma the following week.  Further, the declaration stated that online research showed the employee’s address to be in Kansas and that another online search revealed that another former employee had an address in Texas.  The second declaration stated that the Texas address belonged to a former employee of the defendant. 

The District Court observed that the relevant inquiry for determining whether minimal diversity exists is the citizenship of the parties, and here, the declarations only spoke about the residence of the two purported class members, and not their citizenship.  The District Court opined that allegations pertaining to the state in which a person resides are not conclusive as to whether that person is a citizen of that state, and that the declarations did not establish that the putative class members’ permanent home was in a state other than California, because they contained no information as to whether the putative class members intended to remain in the places where the defendant claimed that they currently resided.  

Thus, the District Court stated that the defendant failed to meet its burden to support its allegations that minimal diversity under §1332(d) existed. 

Further, the District Court noted that courts evaluate a person’s domicile in terms of objective facts, and here, the defendant did not submit any objective facts to establish the citizenship of the two putative class members.  Instead, the defendant submitted two declarations of its own lawyers, which contained factual statements that were not based on personal knowledge. 

Although the defendant was capable of submitting competent proof as to the putative class members’ citizenship, either by submitting declarations of the putative class members themselves, or by submitting other proof of citizenship such as voting registration and voting practices, location of personal and real property, location of brokerage and bank accounts, location of spouse and family, place of employment or business, driver’s license and automobile registration, and payment of taxes, the defendant did not explain why it failed to submit any such proof. 

Thus, because the defendant failed to establish the citizenship of the putative class member, the District Court granted the plaintiff’s motion and remanded the action to state court. — JR

Amount in Controversy adequately supported by Defendant’s Affidavit

Posted in Uncategorized

Turnage v. Old Dominion Freight Line, Inc, 2013 WL 2950836 (N.D. Cal. June 14, 2013).

The plaintiff, truck driver, brought a wage and hour action in violation of California Labor Code, and Industrial Welfare Commission Wage Orders.  The plaintiff also brought a representative claim under the Private Attorney General Act, and a cause of action for unlawful, deceptive, and unfair business practices under California Business & Professions Code § 17200.  The plaintiff alleged failure to provide meal and rest periods, to pay minimum wages, to pay wages in a timely manner, to provide itemized wage statements, to maintain accurate records, and to allow inspection of personnel files and records.   

The defendant removed the action from the Alameda County Superior Court to the District Court under CAFA and submitted a declaration of its Director of Compensation and Employee Benefits, in which he provided calculations of an estimated amount in controversy in excess of $29 million.  

The plaintiff moved to the remand the action, and the defendant moved to dismiss all the claims, and to transfer, dismiss or stay the action.  The District Court denied the plaintiff’s motion, and granted the defendant’s motion to transfer the action, and rendered the defendant’s motion to dismiss as moot. 

First, the plaintiff sought remand arguing that the defendant failed to establish that the amount in controversy exceeded $5 million.  Because the complaint did not specify the amount of damages sought, the District Court stated that the removing defendant must prove by a preponderance of the evidence that the amount in controversy requirement had been met. (Editor’s Note:  See the CAFA Law Blog analysis of Abrego Abrego posted on May 25, 2006, the CAFA Law Blog analysis of Lowdermilk posted on July 30, 2007).   

The District Court observed that in calculating the amount in controversy, the ultimate inquiry is what amount is put in controversy by the complaint, not what a defendant will actually owe, and that the amount in controversy includes the amount of damages in dispute, as well as attorney’s fees, if authorized by statute or contract.  Further, the District Court noted that facts in the removal petition would be considered, and the parties may be required to submit summary-judgment type evidence relevant to the amount in controversy at the time of removal. 

The defendant simultaneously filed its opposition to the plaintiff’s motion to remand with an amended notice of removal, which was accompanied by a declaration by its Vice President, Human Resources.  The declaration, which was based on a review of the defendant’s personnel and employment records, showing that at least 341 full-time drivers were employed during the period from January 22, 2009 through January 22, 2013.  

Based on the number of employees working at any given time, and the number of net workweeks, the declaration estimated that the penalties for the meal break and rest break claims was $4,146,254.40, the penalties for the minimum wage claims was $681,040.00, and the penalties for waiting-time penalties and penalties for inaccurate wage statements exceeded $1.3 million.  In addition, the defendant claimed that a 25% attorney’s fee was reasonable.  

The District Court opined that the calculations were adequately supported by the declaration of the Vice President, and that they sufficiently established by a preponderance of the evidence that the total amount in controversy exceeded $5 million.  Accordingly, the District Court denied the motion to remand. 

Finally, the defendant sought to transfer the action to the Central District of California and asserted that the interests of justice strongly favored transfer because of the pendency in that district of another similar class action, which was filed before the present action was filed.  Because the convenience of the parties among other factors favored transferring venue, and the plaintiff did not provide any opposition to the motion in the form of analysis of the factors, the District Court ordered transfer of this action to the Central District of California. — JR

Individual Claims are Immaterial because CAFA Aggregates the Class Claims

Posted in Case Summaries

Stella v. Hertz Corp, 2013 WL 2456042 (S.D. Cal. June 5, 2013).

Establishing that the named plaintiff’s individual claims exceeds $75,000 is immaterial to CAFA jurisdiction.  What is important under CAFA is that the claim of the class should exceed $5 million.  Because the defendant here did not establish CAFA requirements, a District Court in California remanded the action to state court.   

The plaintiff, former non-exempt employee, brought an action in Alameda Superior Court, alleging failure to provide timely off-duty meal period to the defendant’s California non-exempt employees who were the sole employees on duty, failure to provide and/or on duty meal periods, and failure to pay full wages due upon separation of employment.   

The defendant removed the action to the District Court asserting diversity jurisdiction under CAFA, 28 U.S.C. §§ 1332(d).  The District Court sua sponte remanded the action holding that the defendant’s notice of removal was facially deficient.   

The District Court observed that federal courts possess only that power authorized by the Constitution or a statute, which is not to be expanded by judicial decree.  Also, the District Court noted that the removal statute is strictly construed against removal jurisdiction, and that federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.  The District Court stated that a district court’s duty to establish subject matter jurisdiction is not contingent upon the parties’ arguments.  

CAFA applies to class action lawsuits where the aggregate number of members of all proposed plaintiff classes is 100 or more persons and where the primary defendants are not States, State officials, or other governmental entities against whom the district court may be foreclosed from ordering relief.  Further, under 28 U.S.C. § 1332(d)(2), CAFA vests federal courts with original diversity jurisdiction over class actions if the aggregate amount in controversy exceeds $5 million, and any class member is a citizen of a state different from any defendant.  

The District Court stated that after a plaintiff files an action in state court, the defendant must allege and bear the burden of proof that the amount in controversy exceeds $5 million, and the defendant must set forth, in the removal petition itself, the underlying facts supporting its assertion that the amount in controversy exceeds $5 million. (Editor’s Note: See the CAFA Law Blog analysis of Abrego Abrego posted on May 25, 2006). 

Here, the plaintiff alleged that there were more than 2,000 current and former employees in the Class, thereby satisfying the threshold matter requiring that the class action include an aggregate number of members of all proposed plaintiff classes be 100 or more persons.   

The District Court, however, observed that the defendant failed to address whether the amount in controversy satisfied the CAFA’s $5 million jurisdictional threshold; rather the defendant only addressed the $75,000 jurisdictional limit that was inapplicable here.  The District Court held that the defendant failed to provide any explanation whatsoever to justify finding that it had satisfied the $5 million amount-in-controversy requirement under CAFA, and accordingly, remanded the action for lack of subject matter jurisdiction.

CAFA jurisdiction is different than diversity jurisdiction.  Always remember who has the burden of proof.  — JR

 

Severance Under Rule 21 May Defeat CAFA Jurisdiction

Posted in Case Summaries

State of Louisiana v. American National Property And Casualty Company, 2013 WL 5201146 (E.D. La. Sept. 11, 2013).

In this case, the District Court for the Eastern District of Louisiana held that, while subject matter jurisdiction is generally determined at the onset of litigation, when an action is severed under Federal Rule of Civil Procedure 21, the severed action must have an independent jurisdictional basis to remain in federal court.

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Standard Fire v Knowles at Use in Practice in Arkansas

Posted in Case Summaries

Standard Fire at Use in Practice in Arkansas

Deaton v. Frito-Lay N. America, Inc., 2013 WL 2455941 (W.D. Ark. June 5, 2013). 

Relying on the recent Supreme Court’s decision in Standard Fire that “to defeat CAFA jurisdiction, a stipulation must be binding, and a plaintiff bringing a proposed class action cannot bind members of the proposed class before it is certified,” Western District Court of Arkansas vacated its earlier remand order after remand from the Eighth Circuit. 

The plaintiff brought an action in Ouachita County Court, Arkansas, alleging that the defendants deceptively marketed several of its products, including Tostitos and SunChips as “All Natural” when in fact these products contained genetically modified corn and hexane-extracted soybean oil.  The plaintiff asserted violation of the Arkansas Deceptive Trade Practices Act, and that the defendants were unjustly enriched at her expense. 

The defendants removed the action to the District Court under CAFA, and the plaintiff moved for remand.  The District Court granted the motion because the plaintiff’s stipulation had limited the class recovery to a sum less than the amount-in-controversy required by CAFA.  On appeal, the Eighth Circuit Court of Appeals summarily remanded the case to the District Court for reconsideration in light of the Supreme Court’s recent decision in Standard Fire Insurance Co. v. Knowles, 133 S. Ct. 1345 (2013) regarding stipulations made on behalf of absent class members.  

Although the plaintiff previously argued that she put less than $5 million in controversy by stipulating not to accept more, she now acknowledged that Standard Fire definitively states that such stipulations may not prevent removal under CAFA.  In Standard Fire, the Supreme Court held that to defeat CAFA jurisdiction, a stipulation must be binding, and a plaintiff bringing a proposed class action cannot bind members of the proposed class before it is certified.  (Editor’s Note: see CAFA law blog analysis on Standard Fire posted on April 12, 2013.) 

Thus, the only issue remaining was whether the defendants submitted sufficient evidence to demonstrate that the amount in controversy exceeded $5 million.  The District Court noted that a defendant invoking federal-court diversity jurisdiction through removal must prove the required statutory amount in controversy by a preponderance of the evidence.  However, the defendants need not prove by a preponderance of evidence that the amount in controversy is more than the statutory amount, but rather that a fact finder might legally conclude that it is. 

The defendants asserted that the plaintiff’s complaint sought relief on behalf of all Arkansas residents who purchased one or more of 11 types of allegedly mislabeled products; the plaintiff did not specify or place any explicit limitation on the class period; and the plaintiff sought damages amounting to the entire purchase price of the product, in addition to restitution for unjust enrichment. 

The defendants submitted an affidavit from Frito-Lay’s Senior Finance Manager which stated that Frito-Lay’s revenues from sales of the products in Arkansas were greater than $5 million in both 2010 and 2011, and that Frito-Lay’s combined net profits for 2010-2011 were greater than $5 million. 

The plaintiff, however, argued that the sales figures submitted by the defendants accounted for sales to distributors and retailers rather than sales to consumers.  The plaintiff asserted that because her class was only made up of Arkansas consumers, the evidence regarding sales to retailers and distributors was too speculative to establish the amount in controversy. 

Although the District Court acknowledged the limitations of the evidence offered by the defendants, it opined that they had carried their burden of showing by a preponderance of the evidence that CAFA’s amount in controversy requirement had been met.  The District Court stated that a fact-finder could easily conclude that Frito-Lay’s supplier/retailer sales of over $5 million for both 2010 and 2011 translated to over $5 million in individual consumer sales during the same period.  Further, the District Court remarked that this amount did not even take into consideration the plaintiff’s claims for restitution. 

The District Court observed that the burden then shifted to the plaintiff to show to a legal certainty that the amount in controversy was $5 million or less.  The plaintiff, however, did not attempt to offer such evidence.  Because the defendants sufficiently demonstrated that the District Court had jurisdiction over this matter, the District Court vacated its previous order remanding the action. 

This case is a good example of Standard Fire applied in Arkansas.  Don’t let stipulations get in the way of CAFA jurisdiction.  — JR

California Case! – only 25% of California Labor Code Penalties can be considered for Amount in Controversy Requirement

Posted in Case Summaries

Walker v Corepower Yoga LLC, 2013 WL 2338675 (S.D. Cal. May 28, 2013).

 In absence of the Ninth Circuit precedent on the issue, a the District Court for the Southern District of  California, remanded an action to the state court and held that only 25 percent of the total potential California Labor Code Private Attorney General Act (“PAGA”) recovery may be included in calculating the amount in controversy on the PAGA claims. 

The plaintiff, a former yoga instructor, brought an action asserting violations of the California Labor Code, and unlawful and unfair business practices pursuant to California Business and Professions Code § 17200.  The plaintiff also sought statutory penalties pursuant to the PAGA, and damages for wrongful discharge in violation of public policy. 

The defendant removed the action from San Diego County Superior Court to the District Court asserting that the plaintiff was more likely than not seeking damages in excess of $75,000 and, alternatively, CAFA.  The plaintiff moved to remand, contending that the defendant did not meet its burden of showing that the amount in controversy requirement had been met.  The District Court remanded the case.

The defendant contended that a reasonable estimate of the amount in controversy with respect to all of the plaintiff’s claims, excluding statutory damages and penalties and attorneys’ fees, amounted to $38,770. The plaintiff did not challenge this estimate; the parties, however, disputed the amounts attributed towards statutory damages and penalties and attorneys’ fees.

Although the defendant contended that the statutory damages and penalties amounted to $49,718, the plaintiff contended that this amount was improperly inflated.  The Complaint was filed on November 14, 2011 and the plaintiff was only employed with the defendant through May 2011.  Thus, the District Court opined that the plaintiff could only recover PAGA and § Labor Code 226(e) penalties for a maximum of six months rather than the one-year period asserted by the defendant.  Accordingly, the District Court reduced by half the amount in controversy the defendant attributed to statutory penalties. 

Next, the parties disputed whether the total PAGA recovery should be considered in determining the amount in controversy.  The plaintiff asserted that the defendant improperly aggregated the penalties to be paid to the California Labor and Workforce Development Agency (“LWDA”) and the penalties to be paid to plaintiff pursuant to the PAGA.  The District Court observed that PAGA provides that 75 percent of the recovery must go to the LWDA, leaving 25 percent for aggrieved employees, and that as a general rule, aggregated claims of multiple claimants cannot form the basis of the amount in controversy.

The District Court noted that the Ninth Circuit has yet to rule on whether the total PAGA recovery or only 25 percent which is distributed to the aggrieved employees should be considered in determining amount in controversy.  The district courts, with in the Ninth Circuit are split on this issue.  Some district courts have held that the amount at stake in a PAGA claim is predicated on the total amount of the penalties that can be sought by the aggrieved employees as the proxy of the LWDA.  However, in Hernandez v. Towne Park, Ltd., 2012 WL 2373372 (C.D. Cal. June 22, 2012), the court stated that PAGA permits either the LWDA or the aggrieved employees to act independently to enforce the Labor Code, which cuts against aggregating the agency’s claims with the employees’ claims, even if the employees’ individual claims should be aggregated under the common and undivided interest exception.

Further, Pulera v. F & B, Inc., 2008 WL 3863489 (E.D. Cal. Aug.19, 2008) held that the amounts recoverable by plaintiff based on her PAGA claims are separate and distinct from the amounts recoverable by the State of California via the LWDA, and therefore these amounts may not be aggregated. 

Placing reliance on Hernandez and Pulera, the District Court held that only 25 percent of the total potential PAGA recovery may be included in calculating the amount in controversy on the PAGA claims.  

Further, the defendant contended that, even subtracting the entire amount to be remitted to the LWDA, the amount in controversy exceeded $75,000 because the PAGA recovery of all aggrieved employees should be aggregated, and there were 400 or more aggrieved employees.  In estimating the number of aggrieved employees, the defendant relied upon the allegation in the Complaint that there were over 400 individuals employed as yoga instructors during the four-year class period and the evidence submitted by the defendant that, from November 2007 to June 2012, 487 individuals worked for as yoga instructors. 

The District Court, however, remarked that the Complaint did not allege how many yoga instructors were employed during the one year PAGA limitations period, and the evidence submitted by the defendant did not contain any information regarding dates of employment.  Thus, the District Court stated that it would be required to speculate to an impermissible degree to arrive at a reasonable estimate of the number of aggrieved employees pursuant to the PAGA, and that the defendant thus failed to show that the amount in controversy requirement was met by including the PAGA penalties recoverable by all aggrieved employees. 

When only considering the PAGA penalties attributable to the plaintiff’s individual claims, the most reasonable estimate of PAGA penalties offered was the plaintiff’s estimate of $5,637.50.   

Next, the District Court held that attorneys’ fees awarded under California’s Consumer Legal Remedies Act must be divided among all plaintiff class members for purposes of amount in controversy.  Here, the defendant estimated attorneys’ fees as $50,000 over the life of the case, and the evidence indicating that there are 487 class members.  Dividing the estimated $50,000 in attorneys’ fees among the 487 class members resulted in $104 in attorneys’ fees being considered as part of the amount in controversy for the plaintiff’s claims.   

Adding $5,637.50, the PAGA penalties attributable to the plaintiff’s individual claims with the previously discussed estimate of $38,770 along with the attorney’s fees, the amount in controversy amounted to $46,175.50.  Thus, the District Court stated that the defendant failed to meet its burden of showing that the $75,000 amount in controversy requirement was met. 

The defendant also asserted that a settlement letter sent by the plaintiff’s counsel established that the amount in controversy requirement was met because the letter stated that the defendant’s possible total exposure was approximately $25,570,375. 

The plaintiff, however, contended that this figure was calculated using nothing but unsupported and inflated assumptions because at the time the plaintiff had not yet received initial disclosures or any discovery from the defendant.  Thus, because the settlement letter did not appear to reflect a reasonable estimate of the plaintiff’s claim, the District Court opined that it was insufficient to establish that the $75,000 amount in controversy requirement was met.

Finally, the defendant contended that federal subject matter jurisdiction existed pursuant to CAFA.  The defendant, however, provided no evidence to support its contention that the CAFA amount in controversy requirement was met.  The District Court stated that the defendant’s speculation was particularly unreasonable because the defendant could reasonably be expected to have access to its own employment records and therefore could produce summary-judgment-type evidence sufficient to show the amount in controversy. 

Accordingly, the District Court granted the plaintiff’s motion and remanded the action to the state court.

This case has importance to labor law practitioners in California, specifically in PAGA cases with jurisdiction issues.  No Ninth Circuit case here, so add this one to your research file.  — JR

Defendant’s Amount In Controversy Award Scrutinized for Time Barred and Other Inapplicable Damage Claims

Posted in Case Summaries, Uncategorized

Smith v. Lux Retail North America, Inc., 2013 WL 2932243 (N.D.Cal. June 13, 2013)

In calculating damages, the defendant in this action had added damages that were outside the statute of limitations and otherwise inapplicable.  Rejecting the defendant’s calculations, a District Court in California remanded the action to state court.

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Better Late Than Never: Defendant Allowed To Raise CAFA’s Home State Exception Three Years After Filing Complaint

Posted in Case Summaries

Gold v. New York Life Ins. Co., 730 F.3d 137 (2nd Cir. 2013).

In this appeal, the Second Circuit held (1) that CAFA’s home state exception is not jurisdictional and must be raised within a reasonable time, and (2) that the district court’s discovery schedule, which required the defendant to complete individual discovery before commencing class discovery, excused the defendant’s three-year delay in filing a motion to dismiss under the home state exception.

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