Otay Hydraulics, Inc. v. Safety-Kleen Systems, Inc., 2013 WL 1773955 (C.D. Cal. April 25, 2013).

In this matter, the plaintiff brought an action in the Los Angeles County Superior Court alleging that the defendant breached contracts with its California customers by charging unauthorized fuel surcharges and excessive fees.

The defendants removed the action to the District Court for the Central District of California asserting diversity jurisdiction under CAFA, 28 U.S.C. § 1332(d).  The District Court, however, remanded the action to state court on its own motion for lack of jurisdiction.  On appeal, the Ninth Circuit vacated the order.

As a result, the action came back to the District Court, and plaintiff again moved for remand.  Plaintiff argued that remand was appropriate because the defendant failed to establish that the amount in controversy exceeded $5,000,000, an issue the Ninth Circuit declined to address on appeal.

Plaintiff had not specified an amount in controversy; so, the defendant was required to establish by a preponderance of the evidence that the amount in controversy exceeded $5,000,000.  In its Notice of Removal, the defendant argued that the total amount it charged the putative class members during the four years preceding the filing of the action was $5,281,406.  The defendant calculated this figure by adding together the amounts it charged for fuel surcharges and fees, which were $3,527,781 and $1,753,625, respectively.

The plaintiff, on the other hand, argued that its putative class only included persons and entities residing in California who actually paid fuel surcharges and late-payment fees, and that the defendant only collected $3,239,822 in fuel surcharges and $317,215 in fees, totaling $3,557,037.

The District Court noted that the plaintiff is the master of the complaint, and because the plaintiff only proposed a class of persons and entities residing in California who paid the fuel surcharges and late-payment fees, the amount defendant charged but did not necessarily receive had little effect on the amount in controversy computation.  Also, the defendant admitted that it only collected $3,557,037 in questioned fees.

The defendant also assumed that every class member would continue to pay the questioned charges throughout the litigation.  The District Court calculated the amount defendant collected each month from the fuel surcharges and fees and multiplied those amounts by 5.7, the median number of months a case took to go from filing to disposition.  Yet, the amount in controversy ($3,962,587) was still below the jurisdictional threshold.

The defendant’s remaining arguments were flawed as well.  For example, the defendant valued the plaintiff’s claim for injunctive relief, namely prohibiting it from continuing its allegedly unfair, illegal, and fraudulent businesses practices in the future.  The defendant’s manager assumed that if the defendant was prohibited from assessing a fuel surcharge to its customers, the defendant would need to increase its service price, which would result in the defendant losing some of its current customers.  The manager estimated lost sales of $1,780,000 within one year of a potential injunction.  The District Court, however, declined to base its jurisdiction on the defendant’s speculation and conjecture, and noted that the defendant failed to produce any concrete evidence in support of its assertions.

Additionally, the defendant argued that it could include the value of the plaintiff’s requested recessionary relief, and contended that there was a reasonable likelihood that the total gross revenues generated by the defendant on contracts with putative class members who paid a fuel surcharge and/or a late payment fee exceeded $5 million.  Because the defendant, again, asserted a conclusion, without adducing any evidence to support its proposition, such as the value of its contracts, the District Court refused to take note.

Unfortunately for the defendant, it failed to identify any applicable statute that either required or permitted an attorneys’-fees award.  This was perhaps the defendant’s biggest mistake as such fees may be included in the amount in controversy.

Thus, because the defendant failed to prove by a preponderance of the evidence that the amount in controversy exceeded $5,000,000 as mandated by 28 U.S.C. § 1332(d)(2), the District Court granted the plaintiff’s motion for remand.