Rhoades v. Progressive Cas. Ins. Co., Inc., No. 2:10-cv-1788-GEB-KJM (E.D. Cal. Oct. 8, 2010).

If at first you don’t succeed, try, try again. Those are good words to follow, but be sure you are ready to execute your attempts. This case involves two separate removals, both of which were remanded. For our purposes, remember that legal certainty is a high hurdle. You don’t want to be this guy in the picture!

In this case, United States District Judge Garland E. Burrell, Jr., writing for the Eastern District of California, found that a second removal based on the amended complaint, which was not considered while remanding the case upon the first removal, was permissible, BUT he remanded the case since the defendant’s damage calculations were speculative because of its over estimation of the class size.

The plaintiffs in this matter were claims adjusters employed by the defendant who brought a wage and hour class action in the state court. Now, that is something you do see everyday in California.  Another in a long procession of class action wage and hour claims from California.

The defendant removed the action.

After removal, the plaintiffs filed a First Amended Complaint alleging violations of the California’s Labor Code and Business and Professions Code. Without considering the First Amended Complaint, (a court cannot consider a pleading subsequent to the removal petition), the district court remanded the action to the state court.

Based on the allegations in the Amended Complaint, the defendant again removed the action to federal court.

The plaintiffs again moved to remand arguing that the defendant failed to satisfy its burden of showing that the amount in controversy exceeded the sum of $5 million.

The District Court, once again, remanded the case to state court.  Now, look back at the guy in the picture above who did not make it over the hurdle.

The district court found that the notice of removal was filed timely because it was filed within thirty days of the date on which the earlier remand order was filed, and was based on the Amended Complaint, which was not considered in the remand order. The court also held that the defendant’s remand motion based on Amended Complaint did not violate the law of the case or constitute an impermissible motion for reconsideration.

As to the merits of the second removal, the plaintiffs argued that the defendant had not adequately supported its class size assertions. After all, size does matter. The plaintiffs’ class consisted of California based Claims Adjusters, Claims Generalist Associate, and other similar positions, employed four years before the filing of the complaint until the date of trial.  The plaintiffs defined two subclasses: (1) an “Overtime Subclass” consisting of class members who did not receive overtime wages; and (2) a “Terminated Subclass” made up of class members who resigned or whose employment was terminated and who were not paid all wages due upon termination.

The defendant filed an affidavit stating that it employed an average of 544.53 full-time Claims Representatives in California, and terminated employment of 395 Claims Representatives in the state of California. Yes, you read it correctly. The number is 544.53. We feel sorry for the person who is the one that is considered 0.53. The Court, however, found that the defendant overestimated the terminated class by not limiting its estimate to those “who were not paid all wages due upon termination,” which was alleged in the Amended Complaint. In addition, the court pointed out that the defendant had not presented evidence on the number of class members in the overtime subclass, but instead assumed that the 544.53 individuals in the proposed class also comprised the overtime subclass. Given the allegations in the Amended Complaint that employees in the proposed class were paid overtime to some degree (but not for all overtime work), the court observed that the defendant offered no evidence that all members of the proposed class did not receive overtime wages for all overtime hours worked.

The court stated that because the plaintiffs pled in the Amended Complaint that the amount in controversy was less than $5 million, the defendant must prove with legal certainty that CAFA’s jurisdictional amount was met. The plaintiffs argued that the defendant’s damages calculations were not supported by evidence.

The defendant asserted that the unpaid overtime pay the plaintiffs claimed amounted to $7,940,815.60 to $19,852,039. The plaintiffs disputed the time period the defendant used to calculate unpaid overtime and the number of persons the defendant asserted were involved with this claim.  The court found that the defendant provided insufficient evidence in support of its supposition that 544.53 class members comprised the overtime subclass, and that each member of this subclass worked 52 weeks a year.

The court found that the defendant’s damages assumptions were unsubstantiated and that the defendant left the court to speculate as the value of the plaintiffs’ claims for relief and whether or not class members qualified for penalty and other damages. Such speculation did not meet the legal certainty standard. Therefore, the court remanded the case, again.