Kevin_Do_v_First_Financial_Security_Inc, No. 15-56837, 2017 WL 2297624 (9th Cir. May 25, 2017).
In this unpublished decision, the United States Court of Appeals for the Ninth Circuit determined that the district court abused its discretion when it denied the plaintiffs leave to amend its complaint because the plaintiffs could plausibly allege the jurisdictional requirements of the Class Action Fairness Act (“CAFA”).
The plaintiffs, former sales contractors, brought a class action, alleging that the defendant, First Financial Security, Inc. (“FFS”), wrongfully withheld sales commissions that it owed to the plaintiffs and others within the putative class. The district court dismissed the plaintiffs’ second amended class action complaint against FFS with prejudice for failure to establish subject-matter jurisdiction under CAFA. On appeal, the Ninth Circuit affirmed in part, but reversed and remanded the case with instructions to the district court to grant the plaintiffs leave to amend their complaint.
The Ninth Circuit determined that the district court did not err when it dismissed the complaint for failure to satisfy CAFA’s amount-in-controversy requirement; however, the court ruled that the lower court abused its discretion when it denied the plaintiffs leave to amend their complaint, for several different reasons.
First, the Ninth Circuit found that amendment was not futile because the plaintiffs could plausibly allege that they met CAFA’s amount-in-controversy requirement. The court calculated that the alleged withheld commissions for the class members exceeded $12 million, which would more than satisfy CAFA’s amount-in-controversy requirement. Next, the Ninth Circuit found that the district court dismissed the complaint sua sponte on two bases not raised by the defendant: (1) that the plaintiffs’ amount-in-controversy allegations were facially deficient and (2) that the plaintiffs’ class action allegations failed to satisfy Local Rule 23-2.2’s pleading requirements. Because neither ground was raised by the defendant, the Ninth Circuit decided that the lower court should have allowed the plaintiffs leave to amend their complaint to correct these alleged deficiencies. Last, the Ninth Circuit found that the district court erred when it held that the plaintiffs’ class action allegations failed to satisfy Local Rule 23-2.2’s class definition pleading requirements. The Ninth Circuit therefore ruled that the plaintiffs were entitled to leave to amend because they could plausibly correct the alleged deficiencies.
The Ninth Circuit took a more broad approach to amending complaints asserting CAFA jurisdiction in this case, yet it is important to note that the Ninth Circuit categorized this decision as not appropriate for publication and it does not have precedential value.