Blomberg v. Serv. Corp. Int’l, No. 11-8009, 2011 U.S. App. LEXIS 7681 (7th Cir. Ill. Apr. 14, 2011).
In this case the Seventh Circuit, while reversing the district court’s remand order, held that under the “preponderance of the evidence” standard, a good-faith estimation of amount in controversy is acceptable if it is plausible and adequately supported by the evidence particularly when the plaintiffs provide little information about the value of their claims.
The plaintiffs, employees of Service Corporation International, SCI Funeral and Cemetery Purchasing Cooperative, Inc., and related individuals and entities (the defendants are collectively “SCI”), brought a putative class action in Illinois state court, alleging that SCI maintained national policies and practices that failed to compensate its employees for all hours worked, in violation of the Illinois Wage Payment and Collection Act and the Illinois Minimum Wage Law.
Asserting CAFA jurisdiction, SCI removed the case to federal court, but the district court concluded that SCI had failed to demonstrate by a preponderance of the evidence that the amount in controversy exceeded $5 million, and remanded the case to state court. Upon appeal, the Seventh Circuit reversed the district court’s order.
As an initial matter, the Seventh Circuit noted that under the “preponderance of the evidence” standard, a good-faith estimate is acceptable if it is plausibel and adequately supported by the evidence because the defendant faces difficulties when the plaintiffs, who control the allegations of the complaint, do not want to be in federal court and provide little information about the value of their claims. The party seeknig removal does not need to establish what damages the plaintiff will recover, but only how much is in controversy between the parties. Thus, this burden “is a pleading requirement, not a demand for proof.”
To establish the amount in controversy, SCI set forth several estimates in its Notice of Removal based upon pleadings from other related lawsuits, counsel’s affidavit, and a list of SCI’s 538 Illinois employees. SCI relied on information obtained from related lawsuits in other jurisdictions as the best evidence of the amount in controversy. It cited to the depositions of two of the three named class plaintiffs taken in an Arizona federal FLSA action in which the class members collectively asserted that they were not paid for 2,600 hours of work during a one-year time period. SCI calculated that each of the 538 Illinois employees would need to seek payment for a total of only 552 hours over the entire class period, using the average of its employees’ hourly pay rates, in order for CAFA’s jurisdictional amount to be met.
The district court thought that SCI failed to present any competent evidence that the named plaintiffs’ claims were typical of the other class members from the standpoint of the number of unpaid hours and the number of years employed.
Finding that the district court viewed that data too narrowly, the Seventh Circuit observed that SCI used these figures in an attempt to show the nature of the hours sought and to demonstrate how the amount in controversy was met based on the scope of the plaintiffs’ claims.
Next, SCI also attempted to demonstrate the amount in controversy by comparing this case with a Virginia federal district court case that made similar allegations against SCI and has an identical proposed class definition. Because the Virginia plaintiffs alleged that 300 potential Virginia members would meet the CAFA jurisdictional amount, SCI declared that it was axiomatic that the potential 538 Illinois members likewise would meet that requirement. SCI compared the potential recovery in Illinois to that in Virginia and explained that its liability under Illinois law was greater because the Illinois Minimum Wage Law permits recovery for an additional two percent of any underpayments in employees’ wages for each month that the amount remains unpaid. The Seventh Circuit thus found that this evidence was useful.
The Seventh Circuit observed that once the proponent of federal jurisdiction has explained plausibly how the stakes exceed $5 million, the case belongs in federal court unless it is legally impossible for the plaintiff to recover that much. Although there certainly was more that SCI could have done, such as offering a better comparison of the plaintiffs’ claims and potential recovery under Virginia law with Illinois law, estimating the amount of overtime and liquidated damages sought by the plaintiffs, or estimating the attorneys’ fees and punitive damages recoverable in unpaid wage cases, the Seventh Circuit was satisfied that SCI provided plausible, good-faith estimates demonstrating how the stakes exceeded $5 million. The Seventh Circuit pointed that the plaintiffs did not attempt to demonstrate that it was legally impossible for them to recover that amount.
Accordingly, the Seventh Circuit reversed the district court’s decision, and remanded the case with instructions to resolve the dispute on the merits.