ABM Sec. Servs., Inc. v. Davis, 646 F.3d 475 (7th Cir. 2011)

The Point: The estimate of the stakes advanced by the proponent of federal jurisdiction controls unless a recovery that large is legally impossible for the plaintiff to recover. Additionally, for purposes of crunching the numbers to reach the $5,000,000 mark, attorneys’ fees may be included, but only those attorneys’ fees incurred up to the time of removal, which includes fees for work performed prior to filing a complaint.

The Details: In this case, the plaintiffs, hourly security guards of ABM Security Services, Inc., brought a putative class action in Illinois state court alleging that ABM violated the Illinois Minimum Wage Law (“IMWL”) when it failed to compensate employees for time spent working before and after their shifts. 

ABM removed the case to federal court asserting jurisdiction under CAFA. The district court concluded that ABM failed to show that the amount in controversy exceeded $5,000,000 as required to establish CAFA jurisdiction, and remanded the case to state court.  

ABM appealed and the Seventh Circuit reversed the district court’s ruling.

ABM amended its notice of removal twice, each time responding to specific instructions from the district court regarding what to calculate in determining the amount in controversy. ABM was shot down twice. Included in ABM’s amount-in-controversy calculation were: the compensatory damages for the three-year period immediately preceding the filing of the original complaint, interest on all regular and overtime compensation due, punitive damages in the amount of 2% of the underpayments for each month which remained unpaid as provided under the IMWL, costs and attorneys’ fees. 

In its second attempt, ABM calculated the amount-in-controversy to be: potential back-pay damages in the amount of $3,801,204.07, plus the 2% IMWL statutory penalty of $1,442,878.07, thus arriving at a total amount in controversy of $5,244,082.14.

The district court disagreed, finding that the amount in controversy was approximately $5,500 short of the $5,000,000 jurisdictional requirement. The district court accepted the calculation of relevant back-pay damages, but it took issue with the calculation of the 2% IMWL statutory penalty. The district court concluded that ABM applied the IMWL statutory penalty incorrectly which resulted in the wrong dollar amount. Therefore, the district court made an independent calculation of the IMWL statutory penalty and held that it was $1,193,244, making the total amount in controversy $4,994,448.07. As for attorneys’ fees, the district court concluded that as of the date of removal, counsel for the class had “simply filed the Complaint, legal work that did not push the total past the $5 million-plus floor prescribed by CAFA.”

The Chart(s): In its petition for appeal, ABM attempted to recreate the district court’s calculations and evidenced its own calculations in the form of several charts. ABM argued that the district court erred in calculating the statutory penalty “start” dates under the Illinois Wage Payment and Collection Act (820 Ill. Comp. Stat. 115/3). By using the wrong “start” dates, the district court’s calculation resulted in a penalty of $1,193,244, making the total amount in controversy only $4,994,448.07. However, when the proper “start” date was utilized, the penalty amount was $1,323,971.92, for a total amount in controversy of $5,125,235.97. 

Alternatively ABM argued that even if the penalty did not begin accruing until one full month later than what ABM alleged to be the correct “start” date, it would still result in a penalty of $1,248,485.11, for a total amount in controversy of $5,049,749.18. 

The Seventh Circuit observed that “[h]ad ABM provided the district court with the charts and comprehensive explanation included in its petition, this appeal may have been avoided.”

The Seventh Circuit noted that recently, in Back Doctors Ltd. v. Metropolitan Property & Casualty Insurance Co., 637 F.3d 827, 830 (7th Cir. 2011), and Blomberg v. Serv. Corp. Int’l, 639 F.3d 761, 764 (7th Cir. 2011), it reiterated the legal standard to be used when determining if the amount in controversy is met. (Editors’ Note: see the CAFA Law Blog analysis of Back Doctors posted on May 3, 2011, and the analysis of Blomberg posted on May 3, 2011). 

Relying on St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 293 (1938), the Seventh Circuit found that the estimate of the dispute’s stakes advanced by the proponent of federal jurisdiction controls unless a recovery that large is legally impossible.

The Seventh Circuit found that ABM’s calculations regarding the accrual of the statutory penalty were a reasonable interpretation of the IMWL’s statutory language. The Court further remarked that although the district court relied upon its own independent calculations to reject ABM’s calculations, it did not show its calculations in its remand order or explain how it calculated the statutory penalty. Once ABM laid out its calculations showing that the amount in controversy exceeded $5,000,000, the district court needed to find that it was legally impossible for plaintiffs to recover that much in order to deny jurisdiction.  

Finally, the Seventh Circuit found that the district court also failed to satisfactorily explain why it was legally impossible for there to be at least $5,552 in attorneys’ fees in controversy at the time of removal. The Court concluded that although attorneys’ fees incurred only up to the time of removal could be included in the amount in controversy, attorneys’ fees are available for work performed prior to filing a complaint, and “it is quite plausible that the value of preliminary legal work in a class-action lawsuit exceeds $5,552.” 

The Lesson: When the amount in controversy is just barely clinging to the jurisdictional threshold, be sure to use chart(s) to detail the amount-in-controversy calculations. This work on the front end will make it easy as A B C, easy as 1, 2, $5,000,0003 on the back end, particularly when the district court repeatedly shuts you down on the issue.