Baldanzi v. WFC Holdings Corp., 2010 WL 125999 (S.D.N.Y. Jan 13, 2010) (NO. 07 CIV.9551 LTS GWG).

We bloggers hope this isn’t a typical New York Story. The plaintiffs burst out of the court after the judge, screaming frantically, wringing their hands, with their frumpy disheveled appearance – "But we were in the pool! We were in the pool!" It doesn’t take a guy to know what they were talking about – shrinkage. The plaintiffs believed that there had been significant shrinkage. The Judge’s response you ask – "It shrinks? Hmph, I don’t know how you guys put up with those things!"

 The plaintiffs brought a purported class action against WFC Holdings Corporation. The plaintiffs argued that there was sufficient size to satisfy … the amount in controversy, of course. Apparently there was so much girth because the plaintiffs’ members numbered in the thousands (Beavis voice in head "WHOA") and each member had allegedly incurred roughly $200 in damages. Of course, these estimates had to be based on Long Hard facts. Alas, there was apparently shrinkage.

The same plaintiffs subsequently revised their amount in controversy estimate and moved to dismiss the complaint arguing lack of subject matter jurisdiction. The district court didn’t buy the plaintiffs’ shrinkage argument. The court noted that jurisdiction is measured at the time-of-filing (the Zenith of any lawsuit), and once acquired it cannot be divested unless the court determines, to a "legal certainty," that the class never could have recovered a sufficient amount to satisfy the jurisdictional threshold.

Explaining that the legal certainty test is stringent, and only three situations clearly met the standard: 1) when the terms of a contract limit the possible recovery; 2) when a specific rule of substantive law limits the money recoverable; and 3) when independent facts show that the amount of damages was claimed by the plaintiff merely to obtain federal court jurisdiction. The court noted that the plaintiffs here did not meet that standard, and in fact the plaintiffs had merely argued that they could not meet the amount to a "reasonable probability." (sounds like the standard old motion of the ocean argument to us). The Court rejected this argument, refusing to indulge in speculation regarding the potential size of the recovery of the putative class.

The lesson: Size Matters.