Lewis v. Verizon Communications, Inc., No. 10-56512, 2010 WL 4645465 (9th Cir. (Cal.) Nov. 18, 2010).

This case involves that oh so popular practice by phone carriers called "slamming." The plaintiff filed a class action in the state court alleging that she and the other putative class members were being billed by Verizon for premium services they never ordered. Enhanced Services Billing, Inc. (“ESBI”)–a billing processor, or “aggregator,” for third-party vendors who offer telephone-related services bills customers for the premium content through local landline telephone providers, like Verizon, which places a charge on a subscriber’s bill. “Premium content” included weather and traffic reports, sports scores, stock tips, and jokes etc. Describing these premium services charges as “unauthorized,” the plaintiff sought to represent a class of landline Verizon customers in California who have been billed for such services that they never expressly agreed to or requested. The complaint, however, stated no fixed amount for the damages sought.

Verizon removed the action the federal District Court under CAFA. To support removal, Verizon submitted an affidavit establishing that the members of the class were billed more than $5 million during the relevant period for the premium services. The plaintiff moved to remand, which the District Court granted holding that Verizon did not meet its burden to demonstrate the requisite amount in controversy, because it calculated the total sum of all ESBI charges billed by Verizon, not just the unauthorized charges as claimed in the complaint. In deciding to remand the case, the District Court assumed that the total billings would include both authorized and unauthorized charges, and held that Verizon failed to show that the unauthorized charges exceeded the jurisdictional amount.

Upon appeal, Verizon contended that, given the plaintiff’s refusal to limit the damages sought and Verizon’s showing that the total billings exceed $5 million, the total billings constituted the “amount in controversy.” 

The Ninth Circuit agreed and reversed the order of the District Court. Interestingly, Verizon took the position that if the charges were unauthorized, all the charges as to ALL class members would be unauthorized and thus the amount in controversy exceeded $5 million. Essentially, Verizon went all in stating that if any consumers were entitled to a refund, all consumers were entitled to a refund.

The Ninth Circuit observed that the District Court’s findings were based on a semantic misunderstanding that some significant portion of the total billings were “authorized” and separate from the damages the plaintiff sought; thus, it refused to accept the total billings as representing the amount in controversy. The Ninth Circuit remarked that when Verizon produced evidence of the total billings, the plaintiff had not attempted to demonstrate, or even argue, that the claimed damages were less than the total billed.