Montalvo v. Swift Transp. Corp., 2011 WL 6399457 (S.D. Cal. Dec. 19, 2011).

Remember, the true meaning of “assume” is found within the letters that compose the word. When you assume you make an “ass (out) of u and me.” In this action, a District Court in California, citing to the language in Lowdermilk that “CAFA’s removal provision and the ‘legal certainty’ rule strike a balance, leaving plaintiff as master of her case, but giving defendant an option of a federal forum at the point when they can prove its jurisdiction” concluded that the defendant failed to prove the amount in controversy to a legal certainty, and remanded the action to state court.

The plaintiff, Simona Montalvo, brought this wage and hour class action on behalf of certain of the defendant’s California-based drivers and/or other employees, alleging that her employer, Swift Transportation Corporation, a truckload motor carrier, failed to pay straight, minimum and/or overtime wages, particularly for hours attending orientations and/or training in violation of California Labor Law.

The plaintiff’s proposed class included six sub-classes: (1) the Orientation Class, (2) the Wage Statement Class, (3) the Derivative LC 203 Class, (4) the LC 212 Class, (5) the Independent LC 203 Class, and (6) the 17200 Class. The plaintiff sought to recover alleged unpaid straight-time, minimum and overtime wages, prejudgment interest, injunctive relief, penalties, attorneys’ fees and costs, and limited the total value of the entire complaint, not just damages, to less than $5 million.

The defendant removed the action to the federal court pursuant to CAFA, and the plaintiff moved to remand.

The District Court granted the plaintiff’s motion.

The Court observed that the plaintiff’s allegations limiting the claim to less than $5 million were functionally equivalent to the language found in the complaint in Lowdermilk v. United States Bank Nat’l Ass’n, 479 F.3d 994 (9th Cir. 2007), where the Ninth Circuit applied the “legal certainty” standard, under which a defendant must prove with a “legal certainty” that CAFA’s jurisdictional amount is met. (Editors’ Note: See CAFA Law Blog analysis of Lowdermilk posted on July 30, 2007.)

Courts have observed that “although the precise meaning of legal certainty is not immediately apparent, it is something less than absolute certainty and more stringent than a preponderance of the evidence.” To determine whether the removing defendant has met the more stringent burden of legal certainty, the court may consider facts in the notice of removal and may “require parties to submit summary-judgment-type evidence relevant to the amount in controversy at the time of removal.”

The Court noted that absent evidence of bad faith, “there are cases—as in the instant case—in which the plaintiffs cannot anticipate from the outset the value of their case,” and in such cases, “they are not obligated to overstate their damages to satisfy the defendant’s interest in a federal forum, but may plead conservatively to secure a state forum.”  The Ninth Circuit has acknowledged in Lowdermilk that “CAFA’s removal provision and the ‘legal certainty’ rule strike a balance, leaving plaintiff as master of her case, but giving defendant an option of a federal forum at the point when they can prove its jurisdiction.”

Here, the defendant did not challenge the application of the legal certainty standard; rather, it contended that it satisfied the Court’s jurisdiction to a legal certainty. To support this contention, the defendant provided several calculations that it purported to be “very conservative” and only in the lowest range, which in sum exceeded the $5,000,000 jurisdictional threshold, and four declarations of defendant’s employees familiar with payroll and the orientation process. The plaintiff, however, argued that the defendant’s calculations were based on conjecture, speculation and assumptions, falling short of the standard necessary for removal.  The Court agreed with the plaintiff.

The defendant’s declarations stated that (1) Derivative LC 203 Class consisted of 4,520 former California-based drivers who attended orientation in California; (2) LC 212 Class consisted of 7,050 current and former California-based drivers who (at some point) received payment via a Comdata Card; and (3) Independent LC 203 Class consisted of 5,940 former California-based drivers, whose employment with the defendant ended during the four years prior to the filing of the Complaint. The Court found that these calculations were ultimately based on class-size estimates that were not supported by evidence or allegations in the complaint.

Specifically, for the Derivative LC 203 Class, the defendant based its estimate on presumably all former California-based drivers who attended an orientation in California between a specified time period. The alleged violations are not substantively discussed in any of the declarations. Based on the allegations in the complaint that the defendant’s violations were a “consistent and uniform policy and practice,” it contended that every member of the proposed class was entitled to penalties.

The Court, however, found that the allegations in the complaint did not suggest such an expansive class. The Court noted that the plaintiff first limited the class to those drivers who attended orientation or training during the specified time period, and then further limited the class to those who were not paid their allegedly due wages.  This suggested that the proposed class size was the theoretical maximum, and that with the Orientation Class, the plaintiff was targeting a smaller subset of the group of people the defendant had proposed.  Thus, the Court concluded that without additional evidence, the Court could not determine to a legal certainty the size of that subset.

Similarly, for the Independent LC 203 Class, the defendant estimated presumably all former California-based drivers, “whose employment ended during the four years prior to the filing of the Complaint, and then relied on the “consistent and uniform” allegation in the Complaint and applied the violations to every driver in this time period.  Although the defendant contended that it could apply the violations to 100% of the proposed class members based on the plaintiff’s allegations, it only assumed that 33% to 51% of the proposed class had such claims for its amount-in-controversy calculation. However, the allegations in the Complaint did not suggest such an expansive class.

The plaintiff had alleged that the defendant failed to pay members of the Independent LC 203 Class all wages due and owed at the time of their termination or within 72 hours of their resignation, and defined the class as drivers during a specified time period “whom the defendant independently failed to comply with Labor Code § 203.” The plaintiff first limited the class to drivers within a specified time period, and then further limited the class to those whom the defendant failed to comply with § 203.  Foremost, the defendant conceded that it assumed a percentage in its calculation.  An assumption, regardless of its purpose, by definition is “something taken for granted,” the Court remarked. Thus, the Court concluded that these values lacked any evidentiary support, and did not reflect the members who have legitimate claims to the violations alleged in the Complaint with any certainty.

Finally, the defendant initially proposed that the LC 212 Class consisted of 7,050 former California-based drivers who (at some point) received payment via a Comdata Card during the class period.  The revised estimate for the LC 212 Class put the class size at 2,775 members.  These members are categorized into subgroups based on the number of deposits potential members received on a Comdata Card, which translates into the number of violations.  Each deposit is one violation.  Of these individuals, 846 received a single deposit, 355 received two deposits, 194 received three, 164 received four, and 1,216 received five or more. Even though the last subgroup includes members who have had considerably more than five deposits/violations, the defendant used the aforementioned numbers to calculate its amount in controversy for the LC 212 Class for up to five violations, which totals $1,740,000.  Combining that value with the $1,180,000 for the Orientation Class and $275,000 for the Wage Statement Class, however, failed to meet CAFA’s jurisdictional thresholds.

Therefore, the Court concluded that the defendant failed to prove with legal certainty that the amount in controversy for this case met CAFA’s $5 million jurisdictional threshold. Accordingly, the Court remanded the action to the state court.