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

A Challenge to Defendants’ Calculation of the Amount-in-Controversy Requires More than Mere Criticism of Evidence

Posted in Case Summaries

Carter, et al., v. Westlex Corporation, et al., 2016 WL 1397648 (5th Cir. April 8, 2016).

The Fifth Circuit affirmed the District Court’s order retaining jurisdiction over an action where the defendants established by a preponderance of the evidence that the amount-in-controversy exceeded CAFA’s $5 million jurisdictional threshold.

The plaintiffs filed suit against Toyota Motor Sales USA, Inc., and several dealerships in Texas state court based on alleged heat damage to the dashboards and other interior components of their Lexus and Toyota vehicles. The plaintiffs, who owned vehicles that have suffered heat damage, brought a putative class action on behalf of all Texas residents whose vehicles suffered similar damage, alleging various theories of recovery.

The defendants removed the action under CAFA, asserting that the amount-in-controversy exceeded $5 million, and therefore, the District Court had jurisdiction over the action. Their argument relied on the declaration of Toyota Motor Sale’s Manager of Customer Quality Services, Mark Rhymer, who stated that the average cost to repair a heat-damaged dashboard and door panel was $1,215.45 and $1,663.42, respectively.

Based on these estimates, the defendants calculated that the total economic damages the plaintiffs placed in controversy was at least $2,881,737. Because the plaintiffs also requested exemplary damages, the defendants estimated that at least $5,763,474 in exemplary damages was in controversy under Texas law. The defendants reasoned that Texas law limits the exemplary damages to twice the amount of economic damages. The defendants added attorney fees using a 20 percent of the total damages as a conservative benchmark, and contended that the amount-in-controversy was well over $5 million. The District Court agreed with the defendants, and dismissed the plaintiffs’ motion to remand. The plaintiffs appealed to the Fifth Circuit.

At the outset, the Fifth Circuit noted that while the plaintiffs contested the defendants’ amount-in-controversy calculation, they offered no evidence to show that the amount-in-controversy was below the jurisdictional threshold. The plaintiffs merely criticized the defendants’ evidence and the District Court’s interpretation of the defendants’ evidence. The Fifth Circuit remarked that the class consisted of 1,001 class members, and assuming that each member required both repairs, the defendants had established, by a preponderance of the evidence, that CAFA’s jurisdictional threshold for the amount-in-controversy was satisfied.

Next, the plaintiffs argued that the declaration of Mark Rhymer on which the defendants relied was merely conclusory, and as a result, the amount-in-controversy did not meet the jurisdictional threshold. The Fifth Circuit rejected this argument and found that when the allegations in the complaint that each class member would require both repairs, were coupled with Rhymer’s assertion that Rhymer had personal knowledge of matters related to the repair of heat damaged vehicle interiors, it was evident that Rhymer’s declarations were not merely conclusory.

The plaintiffs also contended that the defendants included the maximum amount of exemplary damages in their amount-in-controversy calculations, which was improper. The Fifth Circuit rejected this argument finding that it is what the plaintiff is claiming and not what the plaintiff is likely to be awarded that determines whether the CAFA’s jurisdictional amount is satisfied.

Lastly, the plaintiffs asserted that the defendants’ decision to voluntarily extend the warranties of vehicles affected by heat damage reduced the amount-in-controversy. The Fifth Circuit found this argument unpersuasive, because the existence of the warranty enhancement program did not affect what the plaintiffs sought in this case, since the plaintiffs continued to seek economic and exemplary damages even after the establishment of this warranty program. The Fifth Circuit also rejected this argument and reminded the plaintiffs that the events that occur after a suit is filed, that may reduce the amount recoverable to an amount that falls below the jurisdictional threshold do not oust the federal jurisdiction.

Accordingly, the Fifth Circuit affirmed the District Court’s order denying the plaintiffs’ motion to remand.

– Melissa Broussard Carroll