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CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

Defendant’s Reliance On A Reasoning That Includes Assumptions To Satisfy Its Burden Of Proof Must Be Reasonable, And Not Constitute Mere Speculation And Conjecture

Posted in Case Summaries

Farley v. Dolgen California LLC, No. 2:16-cv-02501 (E.D. Cal. Aug. 9, 2017).

In this action, while granting the plaintiffs’ motion to remand, a district court in California found that when the plaintiffs challenge the defendant’s calculation of the amount in controversy, the defendant faces a heightened burden to support its calculation by a preponderance of evidence.

The plaintiffs brought a putative class action in San Joaquin County Superior Court alleging, inter alia, meal period and rest break violations, waiting time penalties, and wage statement penalties.  The putative class included the defendant’s current or former non-exempt retail employees who were unable to take proper rest or meal breaks because they were the only employees on duty with “key carrier” responsibility.

The defendant removed the case to federal court pursuant to CAFA. Relying on the complaint and the declarations of Leslie Cheesman, the defendant’s Workforce Reporting Analyst (“Cheesman’s declaration”), and Kellie Collier, the Senior Director of Business Law, the defendant’s notice of removal evaluated the alleged meal and rest break violations, wage statement penalties, waiting-time penalties, and potential attorneys’ fees to make its showing that the aggregated amount in controversy exceeded $5 million.

The plaintiffs moved to remand, which the District Court granted. The plaintiffs challenged the defendant’s calculations and argued that the defendant did not meet its burden because it relied on “unsupported assumptions.”  The defendant contended that the plaintiffs did not submit required evidence or offer an alternative basis for calculating the amount in controversy.  The District Court noted that the defendant must provide more than a plausible statement to show that it satisfies the jurisdictional prerequisite, and the absence of the plaintiffs’ rebuttal evidence does not change that requirement.

First, regarding the meal and rest break violations, the defendant calculated a total amount in controversy to be $1,838,845.80. The District Court found that the defendant’s calculation assumed an average hourly rate of $12.14, yet it was unclear how the defendant arrived at that average.  The District Court noted that although Cheesman’s declaration averred that this was the average salary of the 3,366 retail employees, she did not provide the individual salaries that informed this average.  The District Court further noted that the calculation also assumed that half of the class incurred at least two violations per week.   The District Court found that the defendant had neither fully supported its estimate nor sufficiently explained its reasonableness.  The District Court opined that without corroborating documents, Cheesman’s declaration was speculative and self-serving, and therefore it did not consider the $1,838,845.80 estimate in assessing the amount in controversy.

Next, for the waiting time penalties, the defendant calculated the total amount in controversy to be $1,956,564.00. The defendant again relied on the first amended complaint to create the following equation: 1,042.5 (half of the number of terminated employees) x 8 (hours in a work day) x 20 (assumed number of days violations occurred) x $11.73 (average hourly rate) for a total of $1,956,564.00.  The District Court found that the defendant’s calculation assumed that half of the terminated employees would seek two-thirds of the available recovery, however, the defendant had not supported this calculation by a preponderance of the evidence.  The District Court thus ruled that it would not consider the defendant’s $1,956,564.00 estimate as part of the amount in controversy.

Finally, for the allegedly inaccurate wage statements violation, the defendant estimated $1,585,575.00 in controversy. The defendant estimated that half of the putative class received inaccurate wage statements, and also referenced the $50 statutory fee for an initial wage time penalty and $100 fee for all subsequent violations.  The defendant then combined the three award estimates for meal and rest time violations, overtime violations and inaccurate wage statements, and estimated $1,345,246.20 in attorneys’ fees applying the Ninth Circuit’s twenty-five percent benchmark recovery rate.

The District Court found that it had rejected the defendant’s meal and rest time violation and overtime violation calculations as unsupported, and the defendant’s attorneys’ fees estimate derived from that unsupported foundation. The District Court thus ruled that it would not consider the defendant’s $1,345,246.20 attorneys’ fees estimate in assessing amount in controversy.

The District Court found that without the defendant’s three estimates, meal and rest break calculation of $1,838,845.80, overtime calculation of $ 1,956,564.00, and attorneys’ fee calculation of $1,345,246.20, the total amount in controversy did not exceed $5 million. The District Court opined that although the defendant’s notice of removal adequately stated an amount in controversy beyond $5 million, when the plaintiffs challenged that calculation, the defendant faced a heightened burden to support its calculation by a preponderance of evidence, and the defendant had not met that burden.

Accordingly, the District Court granted the plaintiffs’ motion to remand.

-Melissa M. Grand