Ortiz v. Menu Foods, Inc., Civil No. 07-00323 DAE-LEK (D.C. Hawaii November 13, 2007).
Do pets go to heaven? Well, thanks to the Chinese and their tainted wheat gluten, those of you who go to heaven may find out the answer. You know that the CAFA Law Blog loves animals…the facts of this one really tugs at our heartstrings. On November 13, 2007, United States District Judge David Allen Ezra, entered an order adopting a magistrate judge’s findings remanding this pet food products case back to Hawaiian state court.
The action was initially filed in state court as a class action lawsuit against the defendant, Pet Food Manufacturing Companies, who allegedly manufactured contaminated and adulterated dog and cat food between November 2006 and March 2007. The products were sold in stores throughout Hawaii allegedly causing illness, injury and death to cats and dogs. The defendant manufacturing companies had recalled approximately 220 different pet food products.
The plaintiffs seek relief for Hawaii consumers who purchased the contaminated foods for their cats and dogs, estimated to include several thousand potential class members. The plaintiffs sought to recover the cost of the food purchased, the cost of the veterinary screening to determine if their pets were injured, treble damages pursuant to Hawaii code, statutory damages of $5,000 per elder plaintiff, punitive damages, attorneys fees and injunctive relief. The plaintiffs stated in their complaint that the total amount of controversy did not exceed five million dollars.
Upon removal to the district court of Hawaii, the plaintiffs filed a motion for remand. On August 21, 2007, the Magistrate Judge found that the defendant manufacturing companies had failed to prove by a legal certainty that they had met the $5 million amount in controversy requirement under CAFA.
On September 4, 2007, the defendants filed objections to the Magistrate Judge’s findings and recommendations arguing that the Magistrate Judge improperly considered the likelihood that the plaintiffs would not prevail recovering damages for elders and that the judge imposed a greater burden on defendants than required by expecting them to provide data that they do not maintain as part of their own records.
Judge Ezra took up the issue and began his discussion by stating that it was undisputed that the requirements of diversity and the minimal number of class members had been met in the instant case. The issue, therefore, was whether the amount in controversy requirement had been met. The plaintiffs asserted that they were careful to specifically allege in their complaint that the amount in controversy did not exceed $5 million. The defendants argued, however, that despite the plaintiffs’ disclaimer, they were able to establish with a legal certainty that the amount in controversy exceeded $5 million.
Judge Ezra outlined three specific burdens of proof that the court must adhere to when determining the objections involved in the case. Specifically, he noted that all of the burdens work in favor of the plaintiffs and against the defendants.
First, pursuant to 28 U.S.C. § 1441 removal is to be strictly construed and any doubts as to the right of removal must be resolved in favor of remanding to state court.
Second, citing Lowdermilk and Abrego, the defendants, as a removing party, bear the burden of establishing federal jurisdiction. (Editors’ Note: See the CAFA Law Blog analysis of the Lowdermilk case from the 9th Circuit posted on July 30, 2007 and the CAFA Law Blog analysis of Abrego posted on May 25, 2006).
Third, the plaintiffs are the masters of their complaint and they pled that the damages at issue are less than that required for diversity jurisdiction in federal court in order avoid federal jurisdiction. Citing Lowdermilk, Judge Ezra stated, where a plaintiff does so, the Court need not look beyond the four corners of the complaint to determine whether the CAFA jurisdictional amount is met. Furthermore, where there is no evidence of bad faith, the defendant must not only contradict the plaintiffs’ own assessment of damages, but must overcome the presumption against federal jurisdiction and show with a legal certainty that the amount in controversy exceeds $5 million.. The legal certainty standard sets a high bar for defendants.
Judge Ezra examined the calculations set forth by the defendants in regards to the amount in controversy. The defendants asserted that the five million dollar minimum is met my adding together the categories of damages. Judge Ezra, however, negated each element of the calculations set forth by the defendants. The Judge stated that the defendants’ calculations called for too much extrapolation and speculation for the court to determine with a legal certainty the number of pets affected. For instance, the Judge stated that calculations did not account for the fact that Hawaii may have a smaller percentage households owning cats and dogs compared to the rest of the nation since Hawaii is a unique island state, which imposes a quarantine on cats and dogs brought into the state.
Contrary to the defendants’ arguments, the Judge stated that the defendants could have provided data which would help determine their market share. They could have provided information from their customers regarding the sales price of the pet food and how much pet food was sold during the time period at issue. He concluded that the defendants were in a better position than the plaintiffs to make such a request of their customers, gather such information and present it to the Court. Additionally, the defendants could have presented evidence from their own records of the number of units of products they sold to Hawaii retailers, defendants’ wholesale price, and the number of units of their products that were recalled. This type of evidence would have certainly been more reliable than the extrapolations and calculations set forth by the defendants.
Citing Guglielmino, Judge Ezra stated that the Ninth Circuit has held that where the complaint specifically states that damages are less than the jurisdiction threshold for diversity cases, but does not specify a total amount in controversy, and the complaint is unclear or ambiguous as to the amount pled, a preponderance of the evidence standard applies. (Editors’ Note: See the CAFA Law Blog analysis of Guglielmino posted on November 6, 2007). In the instant case, however, the plaintiffs made clear in their complaint that the amount in controversy does not exceed five million dollars. The Judge held that the plaintiffs’ complaint was not ambiguous regarding the amount in controversy because the plaintiffs specifically states that the amount in controversy was less than the jurisdictional amount required, therefore, the legal certainty standard applied. The Judge did state, however, that even if the preponderance of the evidence standard applied, defendants could not meet the burden for the same reasons stated by the court.