Jayme v. Checksmart Financial, LLC, No. 2:10-CV-01174-GEB, 2010 WL 2900333 (E.D. Cal. July 22, 2010).

Because the defendant failed to establish the amount in controversy to meet the CAFA jurisdiction, a District Court in California remanded the action to the state court holding that the defendant’s affidavits were not sufficient to meet the “legal certainty standard” to establish the amount in controversy.

The plaintiffs brought a class action against their employer in state court alleging seven claims under the California Labor Code and one claim under the California Business and Professions Code.  The defendant removed the action to federal court under CAFA. Naturally, the plaintiffs moved to remand arguing that the defendant had not satisfied its burden of showing that the amount in controversy exceeded $5 million. The, District Court agreed.

The plaintiffs alleged in their complaint that the maximum potential recovery in this action was less than $5 million; whereas, the defendant, based on the declaration of Pagle Helterbrand, VP, Human Resources, argued that the amount in controversy was $5,225,658 based on the plaintiffs’ fifth, sixth, and seventh claims, the civil penalties recoverable under the Private Attorney General’s Act of 2004 (“PAGA”) for all seven Labor Code claims, and recoverable attorneys’ fees.  Helterbrand declared that there were approximately 210 individuals whose employment with the defendant had ended during the period from April 2007 to April 5, 2009.  Helterbrand also declared that from April 5, 2009 to April 5, 2010, the defendant employed approximately 138 employees, who worked a total of 2,560 pay periods during that time period.

The Court, however, opined that there was a conspicuous lack of evidentiary support for these numbers.

First, regarding waiting time penalties under Lab. Code § 203, the defendant arrived at $549,215, which represented 30 days of wages for each of the 210 employees, calculated at the rate of 8 hours per day at the employee’s last rate of pay.  The Court remarked that the defendant failed to explain how it calculated the wage of each employee because absent evidence showing the wage of each employee, it was nearly impossible to estimate with any certainty the actual amount in controversy.

Second, the defendant used the 2,560 pay period figure in calculating that $249,100 was the amount in controversy under the plaintiffs’ sixth claim and that $3,487,400 was the amount of PAGA penalties the plaintiffs sought.  The Court observed that the variation in employment end dates of the plaintiffs indicated that not all 138 class members worked the same amount of pay periods; thus, the defendant had not explained how its pay period calculation accounted for this variation.

Third, the Court stated that other than Helterbrand’s conclusory averment that she reviewed the defendant’s records, the defendant failed to provide sufficient evidence in support of the class sizes–(1) the 210 employees whose employment ended during the time period April 2007 to April 5, 2009, and (2) the 138 employees who worked during April 5, 2009 to April 5, 2010.

Fourth, the defendant used the 138 employee figure to calculate $484,000 in PAGA civil penalties for the plaintiffs’ waiting time penalties claim without explaining why the defendant concluded that 138 employees quit or were discharged during the one-year time period from April 5, 2009 to April 5, 2010.  The Court found that although the defendant stated that 210 employees quit or were discharged within the three-year statute of limitations period for the waiting time penalties claim, it had not provided evidence showing that 138 employees quit or were discharged within the one-year statute of limitations for PAGA civil penalties.

Finally, based upon the declaration of the defendant’s counsel, the defendant estimated that it would recover 20% of the “total penalties” in attorneys’ fees, which the defendant estimated at $870,943.  The Court, however, remarked that this calculation was problematic because the total penalty the defendant calculated was not based on evidence sufficient to satisfy the legal certainty standard.

Because the defendant had not met its burden of proving with legal certainty that CAFA’s jurisdictional amount was met, the Court granted the plaintiffs’ motion to remand.