Kim v. Mosaic Sales Solutions Holding Co., No. 2:10-cv-03186-MCE-GGH, 2011 WL 775895 (E.D. Cal. Feb. 28, 2011).

As lawyers, sometimes we are not the best number crunchers. After all, many of us pursued degrees in Political Science because there was very little math required. But, when fooling with  CAFA, make sure your math is correct if you have the burden to prove the jurisdictional amount.

In this case in the Eastern District of California, Judge Morrison C. England, Jr. held that although the preponderance of the evidence standard is not ‘daunting,”he could not conclude that the amount in controversy exceeded $5 million, particularly when the amount in controversy asserted exceeded the jurisdictional requirement by only a small amount and the large portion of the defendant’s calculation was based on false assumptions.

The plaintiff, an employee of the defendant, brought a class action in state court, alleging that the defendant, Mosaic Sales Solutions Holding Company, failed to fully compensate its hourly employees in violation of the California Labor Code. Specifically, the complaint alleged that Mosaic Sales instituted a “uniform and systematic scheme” of wage abuse, pursuant to which its employees were required to work uncompensated hours.

According to the plaintiff, Mosaic Sales assigned its employees tasks that could not be completed within scheduled hours while, at the same time, precluding them from recording the extra hours needed to accomplish those tasks. If employees did record extra hours, the plaintiff asserted that Mosaic Sales would alter or delete the pertinent time records. As a result, Mosaic Sales allegedly failed to compensate employees for all hours worked, and also failed to pay overtime. The plaintiff accordingly sought damages, statutory penalties, interest, attorneys’ fees, and injunctive relief.

Mosaic Sales removed the action to the federal court under CAFA.

The plaintiff moved to remand arguing that Mosaic Sales had not established the $5 million amount in controversy requirement under CAFA.

The district court agreed and remanded the action to state court.

In the complaint, the plaintiff alleged that the “total damages for the entire case do not exceed $5 million.” Because the complaint failed to affirmatively state a specific amount in controversy, the court found that the defendant needed to prove the jurisdictional requirement by a preponderance of the evidence. Under the preponderance of the evidence standard, a defendant must prove that it is more likely than not that the amount in controversy exceeds the jurisdictional requirement. The court stated this is not a “daunting” burden, and defendant is not required to “research, state and prove the plaintiff’s claims for damages.”

In order to discharge its burden of proving the amount, Mosaic Sales provided detailed calculations to the effect that the amount in controversy was at least $5,149,636 excluding attorney’s fees. In support of its calculations, Mosaic Sales presented evidence that there were 1,852 Class members, that they received an average of $11.98 hourly pay, and that they received an average of $17.97 average hourly overtime pay. Mosaic Sales also produced evidence of the number of class members who were former employees, the number of initial paychecks, and the total number of paychecks issued to the class, the total number of overtime eligible shifts worked, the total number of overtime eligible weeks worked, and the total number of lunch-break eligible shifts worked.

The court observed that although Mosaic Sales’ calculations were detailed, and for the most part convincing, ultimately the evidence proved inadequate to establish the court’s jurisdiction. The court remarked that the defendant committed its most significant error in its calculation of the amount in controversy associated with waiting time penalties pursuant to Lab. Code § 203. Under § 203, employees are entitled to continuing wages for up to thirty days as a penalty for an employer’s failure to provide final pay within a certain time following conclusion of employment. Mosaic Sales calculated that this claim placed $2,415,168 into controversy by assuming thirty days of eight-hour pay for each class member who is a former employee.

The Court pointed that penalties under §203 are calculated by multiplying the average pay per day worked by the number of days of nonpayment. In determining the average daily pay, Mosaic Sales assumed without evidence that all formerly employed class members worked eight-hour days. Mosaic Sales’ evidence, however, established that the class worked less than eight hours daily. As a result, Mosaic Sales’ calculation of $2,415,168 additional amount in controversy was inflated.

The court stated that Mosaic Sales’ claimed amount in controversy only exceeded the jurisdictional requirement by $149,636. Because such a large portion of Mosaic Sales alleged amount in controversy was based on the false assumption that class members worked an average of eight hour per day, the court concluded that it was more likely than not that the amount in controversy did not in fact exceed $5 million.

Accordingly, the court remanded the action to the Superior Court of California, for final adjudication.