Faltaous v. Johnson & Johnson, No. 07-1572, 2007 WL 3256833 (D.N.J. Nov. 5, 2007).
Congrats go out to Magistrate Judge Falk of the District of New Jersey because he sure can write a a long opinion on amount in controversy under CAFA. With every other remand issue conceded in this state law overtime class action, in a 23 page opinion Magistrate Judge Falk takes us through the majestic world of amount in controversy in the Third Circuit and me to the medicine cabinet for some of J&J’s Extra Strength Tylenol®. The good news, for those of you who favor federal court litigation over state court litigation, is that Magistrate Judge Falk recommended that remand be denied and the district court judge agreed. That should cut off any windfall cash flow in this case like a good dose of IMODIUM®.
This class action started when a bunch of sales reps, led by Joseph Faltaous, got together and decided, with respect to whether they should be considered employees entitled to overtime pay, J&J had found another use for its famed K-Y® brand. The plaintiffs brought a putative class action suit against J&J in New Jersey state court under the state’s Wage and Hour Law. J&J removed, alleging CAFA jurisdiction, and the plaintiffs moved to remand, ultimately just attacking on amount in controversy grounds.
Central to the dispute between the parties was the burden of proof in establishing the amount in controversy. The court noted that Morgan v. Gay, 471 F.3d 469, 474 (3d Cir. 2006), cert. denied, 128 S.Ct. 66 (2007), held that a defendant removing a case to federal court under CAFA bears the burden of establishing federal subject matter jurisdiction “to a legal certainty.” (Editors’ Note: the Morgan decisions have been discussed a great deal on the CAFA Law Blog. The district court opinion was analyzed on October 24, 2006, the first Third Circuit opinion was analyzed on December 7, 2006, and the second Third Circuit opinion was analyzed on January 19, 2007. You avid readers know our position on who bears the burden of proof, but if you have forgotten or if you are new, see our law review article on the subject.)
Not surprisingly, the parties disagreed on the burden. The plaintiffs argued that J&J must establish the $5,000,000.00 minimum amount in controversy to a “legal certainty.” According to J&J, this legal standard applied only in cases when the plaintiff’s claims are explicitly limited to an amount below the jurisdictional minimum. J&J also argued that because the plaintiffs had not pled an amount below the jurisdictional threshold, unlike the plaintiff in Morgan, a different standard (most likely a “preponderance of the evidence” standard) applied. So at this point, I am at page 7 of the opinion and start to leaf through to see what could require another 16 pages. Let’s add some Codeine to that TYLENOL®. Ah, the hell with it, let’s go for the gusto with some Ultram®.
When I woke up 8 hours later, cleaned up the spilled scotch, and finally figured out that my cigarette was what burned the hole in my laptop, this is what I remembered the court had said about amount in controversy (or was it just a dream?):
· A removing CAFA defendant must prove to a legal certainty that the plaintiff’s claim exceeds $5,000,000.
· Because the ultimate determination regarding the amount in controversy requires a reasonable reading of the value of the rights being litigated, a court should first look to the complaint, and then to the moving papers, and then to anything else when considering this jurisdictional issue.
· A plaintiff will not be allowed to narrow the putative class during a remand fight.
· When a plaintiff places no limit on the amount of overtime sought and alleges the class members regularly worked overtime, a three hour per week per class member estimate is reasonable for purposes of determining amount in controversy.
· A liability period of 2 years backward (as permitted by the statute of limitations) and 2 years forward from the filing of the complaint (based on the median time from filing to trial in that court) was appropriate for determining amount in controversy.
· Attorney’s fees and penalties under the State Wage and Hour Law should be considered in determining amount in controversy.
Based on all of this, the court found that J&J had shown that the amount in controversy well exceeded $5M. Supported by the complaint were the following numbers:
1. an average rate of $35.58 based on an average yearly salary of $74,000 (which is less than plaintiff’s asserted $80,000 yearly average);
2. a time and a half overtime rate utilizing the standard workweek method;
3. an average of 3 hours of unpaid overtime a week;
4. 300 class members;
5. a four year liability period.
This resulted in a total claim of $9,990,864.00 for unpaid overtime ($35.58 x 1.5 x 3 x 300 x 208 weeks), plus attorneys’ fees of approximately $3,000,000.00 ($9,990,864 x average attorney fee recovery of 30% as supported by district statistics). Thus, the court found the amount in controversy could exceed $12,000,000 without consideration of penalties.
So J&J was able to WART-OFF® this remand attempt and, after all this reading, I need some new ACUVUE® lenses. (L. Bowling)