Perez v. Del Monte Fresh Produce N.A., Inc., 2011 WL 3664595 (D. Or. May 12, 2011) (magistrate recommendation), 2011 WL 3664306 (D. Or. Aug. 19, 2011) (district judge opinion).

Del Monte Fresh Produce slipped on a banana peel and landed back in state court.  In this putative class action, a District Court in Oregon remanded the case to the state court finding that the defendant failed to establish by a preponderance of evidence that the attorney’s fees would help bring the amount in controversy over the $5 million to retain a federal jurisdiction.

The plaintiffs, Caroline C. Perez and Maria T. Perez, filed this action in the Circuit Court of the State of Oregon for the County of Mulnomah against the defendant, Del Monte Fresh Produce N.A., Inc., for (yes., you guessed it) violations of wage and hour laws and breach of contract.

The plaintiffs alleged that Del Monte breached Oregon’s wage and hour laws by failing to pay them for preparatory and concluding activities such as time spent locating, obtaining, donning, doffing, and returning their uniforms and protective equipment, etc. The plaintiffs contended that as a result of the violations, Del Monte allegedly underpaid each of the class members by at least 30 minutes for each fully day of work, failed to pay overtime to class members who worked more than 10 hours per day, and over 40 hours per week, and breached a settlement agreement entered into in late July 2006, in which Del Monte agreed to comply with state law in all of the above particulars. The named plaintiffs sought damages ranging between $560 to $8,088 in unpaid overtime and other damages.

Immediately, Del Monte removed the action to the United States District Court for the District of Oregon asserting diversity jurisdiction under 28 U.S.C. § 1332(a) and (d).

The District Court remanded the case finding that Del Monte failed to present evidence that the damages alleged exceeded either $75,000 required under § 1332(a) or the aggregate $ 5 million in controversy as required under CAFA, § 1332(d). (Editors’ Note: See CAFA law blog analysis of the first Perez order posted on June 06, 2010.)

Upon remand, Del Monte proceeded with discovery to obtain the information needed to support a second removal of the case to the federal court, and then removed the case “again” to the federal court arguing that the court had diversity jurisdiction under § 1332(a), as well as CAFA § 1332(d).

Del Monte first argued that even in the absence of a class certification, all the attorney’s fees incurred by the plaintiffs to date should be attributed equally to two named plaintiffs and that by adding half of the nearly $125,000 in fees to Perez’s $22,521.40 in damages, it had clearly met the $75,000 jurisdictional requirement. The plaintiffs argued that the attorney’s fees should be apportioned among the more than 100 class members, and not just the named plaintiffs, which would bring both the named plaintiffs’ claims well below the jurisdictional minimum.

The Magistrate Judge observed that the Ninth Circuit faced this exact issue in Gibson v. Chrysler Corp., 261 F.3d 927 (9th Cir. 2001), and held that even in the absence of class certification, the language of the statute that provides the authority for an award of attorney’s fees determines whether the attorney’s fees are attributed solely to the named plaintiffs or allocated on a pro rata basis to all class members. The Ninth Circuit found that the attorney’s fees would exceed $75,000 per named plaintiff if removal to federal court was upheld and class certification was granted. Then, it held that because the state statute relied on by the plaintiffs for an award of attorney’s fees did not award such fees solely to the named plaintiffs in a class action, it could not be allocated solely to those plaintiffs for purposes of amount in controversy.

Again in Kanter v. Warner–Lambert Co., 265 F.3d 853 (9th Cir.2001) the Ninth Circuit held that attorney’s fees must be divided among all members of the plaintiff class for purposes of amount in controversy. Based on the existing Ninth Circuit case law, the Court concluded that Del Monte failed to establish that the jurisdictional amount in controversy requirement had been met.

Next, Del Monte estimated the amount in controversy under CAFA was $5,164,147.73 based on information provided by the plaintiffs. Del Monte calculated the statutory penalties for overtime wage violations, minimum wage violations, damages for wrongfully deducting wages, and unpaid wages, minimum wages, and attorney’s fees to sum up to cross the $5 million threshold of CAFA.

The plaintiffs asserted that a primary assumption under which Del Monte’s estimate was based – that class members were entitled to all of the damages they alleged– was false. The plaintiffs also argued that the projected attorney’s fees should not be considered because Del Monte based its attorney’s fees prediction granted in Cortez Liborio v. Del Monte Fresh Produce, a virtually identical class action for violations of state wage and hour laws tried to verdict in the plaintiffs’ favor. In Liborio, the attorney’s fees awarded were in excess of $1.2 million. The plaintiffs contended that Del Monte based its attorney’s fees prediction on the fees incurred in Liborio without addressing differences between the two cases.

Because Del Monte failed to establish by a preponderance of the evidence that the plaintiffs would incur attorney’s fees in excess of $1,117,299.70 in order to bring the amount in controversy over $5 million – in this case, the Magistrate Judge remarked that the first two arguments need not be addressed.

Regarding attorney’s fees, the Magistrate Judge explained that the plaintiffs estimated that they would incur a total of $632,580.55 in attorney’s fees to litigate this action as a class action. Using this figure, and those provided by Del Monte for damages and statutory penalties, the Magistrate Judge noted that the amount in controversy was $4,545,280.85, a total well below the statutory minimum for federal jurisdiction under the act. Because Del Monte did not justify as to why the attorney’s fees awarded in Liborio must be included in this case, the Court concluded that Del Monte failed to establish that the amount in controversy was over $5 million. Accordingly, the Magistrate Judge recommended the case be remanded.

The District Court adopted the Magistrate Judge’s findings on Del Monte’s attorney’s fees argument, and remanded the case to the state court.