Butterworth v. American Eagle Outfitters, Inc., 2011 WL 5825700 (E.D. Cal. Nov. 17, 2011).

Don’t you hate it when you get maple syrup stuck on your fingers when you are eating your pancakes?  In this action, the case is stuck in federal court.  A California the District Court affirms a magistrate’s judge’s recommendation of denial of a motion to remand finding that the defendants established by preponderance of the evidence that the amount-in-controversy exceeded $ 5 million based on the plaintiffs’ claims vis-à-vis the penalties imposed by various statutes.

The plaintiff, a sales associate, had initially brought an action on behalf of himself and other similarly situated sales associate who worked for the defendant, American Eagle Outfitters, Inc., in California state court. The plaintiff alleged 8 causes of action, of which two were for violations of the Private Attorneys Generals Act (“PAGA”) and the California Business and Professions Code sections 17200 et seq., and the remaining for California labor code violations. 

After the defendant removed this action, the plaintiff unsuccessfully moved to remand this case to the state court. 

The magistrate judge found that although the plaintiff had stated that the claims were below $5 million, the defendant had by preponderance of evidence established that the amount-in-controversy far exceeded $5 million. (Editors’ Note: See CAFA Law Blog analysis of the magistrate judge’s report and recommendation in Butterworth posted on March 14, 2012). The plaintiff now moved to reconsider the magistrate judge’s order.   

As relevant to the plaintiff’s motion for reconsideration, the Court noted that the defendant showed by a preponderance of the evidence that the class claim for nearly 14,314 class members, for failure to provide seating class, added up to nearly $11 million. The defendant used the calculation method used for failure to provide seating class to estimate for the remaining 7 causes of action and consisting of 5,513 penalties subclass, 202,238 actual pay periods, and 57,445 penalties subclass pay periods, which in totaled a little over $38 million amount-in-controversy. 

The plaintiff first argued that the magistrate judge erred in requiring the plaintiff to produce extrinsic evidence to prove that his allegations were made in good faith. In Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 F.3d 994 (9th Cir. 2007), the Ninth Circuit determined that a court should apply the ‘familiar legal certainty’ standard when a defendant seeks to remove a state court action based on CAFA and the state court complaint alleges that the amount-in-controversy less than the jurisdictional amount. The Lowdermilk court, however, failed to define the burden, but explained that good faith in this context is entwined with the legal certainty test, so that a defendant will be able to remove the case to federal court by showing to a legal certainty that the amount-in-controversy exceeds statutory minimum.  (Editors’ Note:  See the CAFA Law Blog analysis of Lowdermilk posted on July 30, 2007).

In his order, the magistrate judge found that even under a legal certainty standard the defendant established that the plaintiff’s claims exceeded the statutory minimum. The magistrate judge arrived at this conclusion after analyzing the defendant’s calculations related to the plaintiff’s failure to provide seating claim, which the judge found were supported with non-speculative concrete evidence. After examining the records, the Court concluded that the magistrate judge’s conclusion was well supported by the allegations of the complaint and the defendant’s well supported calculations, which were also based on the allegations of the complaint.

In addition, the Court found that the magistrate judge properly rejected the plaintiff’s objections to the defendant’s use of the 100% violation rate in its failure to providing calculation. Accordingly, the Court found no error with the magistrate judge’s conclusion that the defendant established with legal certainty that the amount-in-controversy exceeded $5 million.