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

Jurisdiction under CAFA Denied Because the Defendant Suffered From Foot in Mouth Disease

Posted in Case Summaries, Wage and Hour

Aparicio v. Abercrombie & Fitch Stores, Inc., 2014 WL 545795 (C.D. Cal. Feb. 10, 2014).

A District Court in California remanded the case to the state court finding that the plaintiff relied on the defendant’s data to reach her settlement demand for $16 million; whereas the defendant refuted that it ever produced such a data.  Because the defendant refuted the sole reason for the plaintiff’s amount-in-controversy calculation, the District Court remanded the case.

The plaintiff, Jessica Aparicio, filed this putative class action in the state court against the defendant Abercombie & Fitch Stores, her employer, and certain fictitious defendants.  The complaint alleged failure to provide rest breaks, waiting time penalties, violations of the Unfair Competition Law (“UCL”), and a cause of action under the Private Attorneys General Act.  The plaintiff alleged that the amount-in-controversy exceeded $25,000 and that the class consisted of 90 hourly employees.  The plaintiff sought compensatory damages, penalties, interest, restitution under the UCL, costs, and attorneys’ fee.  The plaintiff also sought an order enjoining the defendant from failing to provide plaintiffs with proper rest breaks.

The defendant made a request to settle, and the plaintiff responded seeking $16 million in damages.  The plaintiff calculated her damages as follows: (1) rest break premium at $682,848; (2) interest at $99,246; (3) § 203 penalties at $7 million; and (4) PAGA penalties at around $9 million.  The damages model appeared to calculate rest break damages assuming a class of 3,338 former employees, 2,999 current employees, an average hourly rate of $8.87, 76,984 shifts worked, and a rest break violation during 100% of the shifts.  The defendants then removed the action to the federal court.

The first question before the District Court was whether the removal was timely.  The District Court noted that 28 U.S.C. § 1446(b) provides that an action must be removed within 30 days from the defendant’s receipt of the initial pleading.  If the amount-in-controversy is not clear on the face of the initial pleading, then the 30 day period begins only after the defendant receives a copy of an amended pleading, motion, or other paper from which it can determine that the case is removable.  Here, the District Court noted that the defendant became aware of the amount-in-controversy only after the plaintiff filed her paper seeking $16 million in settlement.  The District Court observed that this document in settlement demand in excess of the jurisdictional minimum constituted “other paper” sufficient to provide notice that a case is removable.  Accordingly, the District Court held that the removal was timely.

The next question was whether the District Court could exercise jurisdiction under CAFA.  Here, the District Court observed that the defendant failed to establish a minimal diversity.  The plaintiff did not allege her citizenship; instead, the plaintiff only stated that she was a resident of California, and the notice of removal likewise alleged that she was a resident of California.  The District Court found this was insufficient to establish citizenship.  The District Court, therefore, ruled that, because the defendant failed to allege the plaintiff’s citizenship and also failed to allege the citizenship of any other class member, it had failed to carry its burden of showing citizenship of the parties was minimally diverse.

Because the plaintiff’s damages model estimate that the class consisted of 3,338 former employees and 2,999 current employees, the CAFA’s numerosity requirement was satisfied.  The only other question left was that of the amount-in-controversy.  In that regard, the District Court noted that a settlement letter was relevant evidence that the amount-in-controversy if it appeared to reflect a reasonable estimate of the plaintiff’s claim.  However, a plaintiff’s damage estimate would not establish the amount-in-controversy if it appeared to be only a “bold optimistic prediction.”  This meant that the defendant still had the burden to show by preponderance of evidence that the amount-in-controversy far exceeded the jurisdictional minimum.  In her email to the defendant, the plaintiff asserted that her damages model made no assumptions, because it was based entirely on the data that the defendant provided.  However, the defendant’s attorney contended that it did not produce data that supported the assumption that all 3,338 former employees worked 8 hours per day and were not paid all wages due for 30 days after termination.

The defendant’s attorney further contended that the defendant could not discern how the plaintiff calculated PAGA penalties.  According to the defendant’s attorney, the damages model identified no other source that purportedly supported the figures set forth in the model.  Because the plaintiff identified the defendant’s data as the sole source supporting her damages model and the defendant contended that its data did not support the model, the District Court remarked that it was unable to conclude that the model set forth a reasonable estimate as opposed to a bold optimistic prediction regarding damages.  Accordingly, the District Court concluded that the defendant did not appear to have established, by a preponderance of the evidence, that the amount-in-controversy exceeded the jurisdictional threshold.