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

District Court Holds That Amount In Controversy Can Be Proven By A Reasonable Chain Of Logic Flowing From The Allegations Of The Complaint

Posted in Case Summaries, Uncategorized

Clay v. Chobani LLC, 2015 WL 4743891 (S.D. Cal. Aug.10, 2015).

In this action, a District Court declined to remand the action to state court finding that the defendants had satisfied their burden of proof by showing a reasonable chain of logic based on the allegations of the complaint and sufficient evidence to establish that the amount in controversy exceeded $5 million.

The plaintiff, purchaser of Chobani yogurt for personal consumption, brought a putative class action in California Superior Court on behalf of a class of all California retail purchasers of the Chobani Products alleging violation of California’s Unfair Competition Law (“UCL”), False Advertising Law, Consumers Legal Remedies Act (“CLRA”), and negligent misrepresentation.

The plaintiff is a California citizen, and Chobani LLC—the manufacturer of yogurt, is a citizen of Delaware and New York.  The distributors—Safeway, Inc. and The Vons Companies, Inc.—are California citizens.  The complaint alleged that the amount in controversy “likely did not exceed the sum or value of $5 million.  The complaint, however, alleged that in California alone, the defendants had “collected tens of millions of dollars,” and as a result of the defendants’ wrongful conduct, the class members had suffered economic losses and other general and specific damages, including the amounts paid for the products.

The defendants removed the action to the federal court under CAFA.  Along with the notice of removal, the defendants filed a declaration of Mr. Bellardini, the Vice President of Finance and the Treasurer for Chobani, stating that Chobani’s revenues from the sale of all Challenged Products in California over the entirety of the Class Period would be substantially in excess” of $5 million.  When the plaintiff asserted that the declaration was inadmissible hearsay, and did not contain any numbers that served as a basis for his findings, Mr. Bellardini filed a second declaration stating that Chobani’s revenues from the sale of the challenged products in California far exceeded $5 million for a single year alone. Chobani’s Notice of Removal further stated that a factually similar class action—Stoltz, et al. v. Chobani, LLC, et al.—was filed before the instant complaint in the Eastern District of New York that also alleged a violation of CLRA and UCL.  In that case, the plaintiff also moved to remand, which the District Court denied.

Although, the Ninth Circuit has not yet detailed a procedure for the submission of evidence when a plaintiff controverts the defendant’s allegation on the minimum amount in controversy, the Court noted that two opinions provide guidance — Ibarra v. Manheim Investments, Inc., 775 F.3d 1193 (9th Cir.2015) and LaCross v. Knight Transp. Inc., 775 F.3d 1200, 1202–03 (9th Cir.2015).  Under these decisions, defendants must “persuade the court that the estimate of damages in controversy is a reasonable one.”  The district court should consider “real evidence (direct or circumstantial) and the reality of what is at stake in the litigation,” and provide each party a “fair opportunity to submit proof.”  LaCross further concludes that defendants satisfy that burden of proof when they “rely on a reasonable chain of logic” based on the allegations of the complaint, and “present sufficient evidence to establish that the amount in controversy exceeds $5 million.”

Based on the above principles, the Court found that the defendants presented a reasonable chain of logic supported by the declarations, as well as the plaintiff’s own allegations.

First, the Court found that although the complaint stipulated that the amount in controversy “likely” did not exceed the CAFA threshold, the Supreme Court in Standard Fire held that, before a class is certified, the lead plaintiff lacks the authority to bind class members on the amount in controversy because of the possibility that the “stipulation may not survive the class certification process.”

Second, the Court accepted defendants’ reliance on the factual allegations of the complaint.  Specifically, the complaint stated that “as a direct result of the defendants’ unlawful and deceptive sales practices” and “based on public filings with the federal government,” Chobani generated revenues estimated to be $1 billion for the year 2012; and in California alone, the defendants had “collected tens of millions of dollars.”  In relying on the allegations of the plaintiff’s complaint, the Court concluded that the defendants had thus established a “reasonable chain of logic.”

With respect to Ibarra’s “real evidence,” the plaintiff contested the admissibility of the first declaration as hearsay, on the grounds that its assertions must be supported by facts or numbers.  The Court noted that when considering the amount in controversy on a motion to remove, “summary-judgment-type” evidence, such as affidavits or declarations, are to be considered.  Mr. Bellardini, as the Vice President of Finance and the Treasurer, declared under his general knowledge and experience gained while working for Chobani, specific knowledge gained “by virtue of the duties, responsibilities, and obligations of his current position at Chobani, and personal knowledge obtained in the ordinary course of business and from reviewing corporate records created maintained by Chobani,” with “certainty that Chobani’s revenues from the sale of the Challenged Products in California during the last four years (class period) had been substantially in excess of $5 million.”  In his second declaration, Mr. Bellardini declared that Chobani’s revenues from the California sales of the Challenged Products in 2013 alone, i.e. a single year of the class period, were well in excess of $5 million.  Both of these statements directly supported the plaintiff’s allegation that “tens of millions” had been collected in California, and that Chobani’s “estimated sales revenue in 2012” was $1 billion.  According to Mr. Bellardini, the amount the plaintiff sought would be even higher due to the other defendants’ retailers’ markup, which were not reflected in his calculations. Accordingly, the Court concluded that the evidence submitted by the defendants supported their conclusion that the plaintiff’s own complaint put the amount in controversy in excess of $5 million.

Next, the plaintiff argued that the “local controversy” exception under 28 USC § 1332(d)(4) applied.  The Court noted that under subsections (4)(A)(i)(II)(bb), when an allegedly defective product is sold in all fifty states, but a class action is only brought on behalf of an in-state class against an out-of-state manufacturer and a few in-state retailers, the Ninth Circuit recognized in Coleman v. Estes Exp. Lines, Inc., 631 F.3d 1010, 1018 (9th Cir.2011) that the “local controversy” exception does not apply.  Further, the exception does not apply where “the great bulk of any damage award is sought from the manufacturer rather than from the local retailers.”

The Court found that according to the complaint, Chobani—non citizen—was the real defendant.  It sold the allegedly mislabeled product in all fifty states, and the product had become the best-selling brand of Greek yogurt in the US. Although the distributors—Vons and Safeway—had allegedly collected “tens of millions of dollars from the sale” of Chobani yogurt, it was Chobani that had an “estimated sales revenue in 2012 of $1 billion.”  Under subsection (d)(4) (A)(i)(II)(aa), the allegations of the Complaint indicated that the relief sought from Vons and Safeway was “small change” compared to what was sought from the real defendant—Chobani.  Further, the claims against Chobani were of substantial national interest, as demonstrated by the existence of the first-filed New York Stoltz class action.  The Court concluded that the local controversy exception did not apply.

Accordingly, the Court denied the plaintiff’s motion to remand.