Sloan v. Soul Circus, Inc., 2015 WL 9272838 (D.D.C. Dec. 18, 2015).

The district court remanded the action after the defendant based its amount in controversy calculation on a misinterpretation of the plaintiff’s class definition.  The district court found that under the Dart framework, the defendant failed to show by a preponderance of the evidence that the amount in controversy exceeded CAFA’s jurisdictional threshold.

The plaintiff, Melanie Sloan, filed this lawsuit against the defendant Soul Circus, Inc. in the Superior Court of the District of Columbia on behalf of herself and a class of all District of Columbia residents who purchased UniverSoul Circus tickets because of alleged false and misleading claims.  The plaintiff alleged that the defendant violated six subsections of the District of Columbia Consumer Protection Procedures Act (“CPPA”) and sought CPPA statutory remedies; treble damages or $1,500 per violation, whichever was greater; attorney’s fees; punitive damages; and injunction against the Circus’ practices; and any other relief that the Court deemed proper.

The defendant removed the action, citing the parties’ complete diversity of citizenship and an amount in controversy $75,000.  The defendant also based removal on CAFA.  The defendant then moved to dismiss the plaintiff’s claims.

Arguing that the defendant failed to meet its burden to prove a sufficient amount in controversy, the plaintiff moved to remand.  While the motions were still pending, the plaintiff moved for class certification.

At the very outset, the District Court noted that in Dart Cherokee Basin Operating v. Owens, 135 S.Ct. 547 (2014), the Supreme Court articulated a two phase framework for adjudicating the amount in controversy.  In the first phase, the defendant’s amount in controversy should be accepted when not contested by the plaintiff or questioned by the court.  If the amount in controversy is contested, then in the second phase, the court should by a preponderance of the evidence determine that the amount in controversy exceeds the jurisdictional threshold.  (Editors’ Note: See the CAFA Law Blog analysis of Dart Cherokee posted on August 26, 2014).

The District Court remarked that in class actions, an additional consideration applies to the amount in controversy analysis: class action plaintiffs’ claims are generally not aggregated to establish the amount in controversy for diversity jurisdiction.  This principle, the District Court noted, extended to CPPA private attorney general actions brought on behalf of the class.

Here, the District Court noted that a prevailing CPPA plaintiff may recover treble damages or $1,500 per violation, whichever is greater.  The defendant asserted that an alleged violation occurred every time the plaintiff viewed, received, or was otherwise exposed to the defendant’s communications with the D.C. residents.  Further, the defendant stated that by multiplying the estimated number of class members who purchased tickets (2,667) by the number of violations per ticket purchaser (6) and the amount of damages per violation ($1500), the result was $24,003,000 in total damages.  The plaintiff argued against the defendant’s conclusions and stated that the defendant incorrectly assumed that each of its communications in the past three years was a violation, as not all of the communications were necessarily unlawful under the CPPA.  Second, the plaintiff noted that the defendant failed to cite legal authority supporting the proposition that a consumer’s mere observation of a merchant’s communications can trigger CPPA statutory damages.

The District Court agreed with the plaintiff’s view, observing that it is true that a person can violate the CPPA whether or not any consumer is in fact misled, deceived or damaged thereby.  But the CPPA specifies that, for claims brought by testers and nonprofit organizations, damages claims may seek relief from the use of a trade practice when that trade practice involves consumer goods or services that the consumer tester or nonprofit organization purchased or received.  The District Court explained that the statute implies, therefore, that CPPA statutory damages awards flow from a purchase or receipt of consumer goods or service–not the mere observation of a merchant’s unlawful communication.

The District Court, therefore, rejected the defendant’s assumption that a CPPA violation occurred every time the plaintiff viewed, received, or was otherwise exposed to one of the defendant’s advertisements.  Because the defendant’s claims about the plaintiff’s statutory damages were speculative and unsupported, the District Court concluded that the defendant failed establish that the plaintiff’s total statutory damages by a preponderance of the evidence exceeded $75,000.

The District Court next noted that the Dart framework applicable in the CAFA context to amount in controversy requires the defendant to make a mere showing that the claims of the entire class collectively exceeds $5 million.

In the removal context, the District Court noted that two additional procedural differences existed between cases invoking CAFA jurisdiction and cases invoking plain diversity jurisdiction.  First, Dart eliminated cases the antiremoval presumption typically applied in diversity cases, second, Congress eliminated in CAFA cases the one-year deadline to remove typically applied to diversity cases.  Despite these new considerations, the District Court remarked that the Dart framework still placed the burden to establish federal court jurisdiction on the party seeking removal.

Here, the plaintiff proposed a class including all resident of the District who, in the last three years, purchased tickets to the defendant’s shows because of the Circus’s unlawful trade practices.  Elsewhere in her complaint, the plaintiff alleged that the Circus’s unlawful trade practices took the form of communications that must meet at least seven conditions: (1) they must be District of Columbia residents; (2) they must have viewed a Circus communication; (3) the Circus communication they viewed must have been one that the plaintiff alleged was unlawful, (4) the class members must have bought Circus tickets, (5) they must have bought those tickets in the three years before the plaintiff filed her complaint, (6) they must have bought those tickets after viewing the allegedly unlawful communication, and (7) they must have bought those tickets because of the allegedly unlawful communication.

The District Court found that the defendant failed to address the nuances of the plaintiff’s class definition; instead, it defined the claims it aggregated based on the number of ticket purchasers from the District of Columbia in the three-year period referenced in the complaint.  The defendant, using location data it had for 46% of the ticket purchasers during the three-year period, asserted that it sold at least 11,470 tickets to the District residents.  Because the defendant’s records showed that the average purchaser bought 4.3 tickets, the defendant divided 11,470 by 4.2 to obtain a minimum potential class size of 2,667 members.  From there, the defendant multiplied 2,667 by six (the number of CPPA violations the defendant assumed that the plaintiff alleged for each ticket purchase), and then again by $1,500 (the statutory damages per violation) to obtain an aggregate amount in controversy of $24,003,000.

The District Court stated that because the defendant did not incorporate all of the elements of the plaintiff’s class definition, the calculation was unreasonable from the very beginning.  Accordingly, the District Court remanded the action to the state court and dismissed the other motions as moot.