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

Ninth Circuit Reverses District Court’s Remand Order Finding that Defendant’s Theory of Damages Reasonable

Posted in Case Summaries, Wage and Hour

Branch v. PM Realty Group, L.P., 647 Fed. App’x. 743 (9th Cir. 2016).

In this case, the Ninth Circuit reversed a district court’s order remanding the action finding that the defendant’s assumption of the amount-in-controversy objectively established that the amount-in-controversy exceeded CAFA’s jurisdictional minimum.

The plaintiff, Daniel Branch, filed a class action on behalf of non-exempt employees against the defendant PM Realty Group, L.P. (“PMRG”) alleging that PMRG failed to provide timely, work-free meal and rest breaks to nonexempt employees in violation of the California Labor Code.  PMRG removed the action under CAFA.  In support of its assertion that CAFA jurisdiction was proper, PMRG made assumptions about the number of meal and rest breaks put at issue by the plaintiff’s complaint.  PMRG also provided a declaration attesting to the number of non-exempt hourly employees, the number of weeks they worked, and their average hourly rate of pay.

Utilizing a class of 184 members, an average hourly wage of $23.41, and a rate of five missed-meal and five missed rest breaks per employee per week, PMRG calculated the amount-in-controversy at $4.49 million.  Alternatively, PMRG calculated the damages at issue if only two meal and two rest period violations per workweek per putative class member were put at issue, which yielded an amount-in-controversy of $1.79 million.  When these estimates were considered together with estimates of amounts in controversy on other claims, PMRG alleged a total amount-in-controversy of anywhere between $6.42 million to $12 million.

The plaintiff moved to remand, and a few days later, filed a motion for class certification on the grounds that PMRG’s Labor Code violations stemmed from its uniform policies. The District Court granted the plaintiff’s motion and remanded the action to the state court.  Although PMRG asserted that the class certification declarations supported the total amount-in-controversy at over $11 million, the District Court limited its analysis to the conservative valuation of the class claims of $6.422 million.  The District Court held that absent a valid theory of damages as to the meal and rest break claims, PMRG would not be able to establish the amount-in-controversy exceeded $5 million. The District Court concluded that through the record “perhaps” demonstrated Branch missed two meal and two rest breaks per week, that violation rate could not be extended to the entire class for lack of evidence.

On appeal, the Ninth Circuit reversed and remanded.

The Ninth Circuit found that the District Court erred in ruling that PMRG failed to present evidence to support an assumed violation rate of at least two-meal and two-rest breaks per workweek per employee.  The plaintiff’s class certification motion alleged that PMRG’s failure to provide meal and rest breaks in violation of the California law was a result of PMRG’s uniform employment policies.  The Ninth Circuit, therefore, found that the declarations indicated that relevant employees suffered extensive meal break and almost universal rest break violation rates.  The Ninth Circuit concluded that given this evidence, PMRG’s extrapolated violation rate was reasonable.

Accordingly, the Ninth Circuit reversed and remanded the action to the District Court to accurately determine whether PMRG demonstrated that the claims of the putative class exceeded $5 million.  The Ninth Circuit directed the District Court to resolve whether a higher assumed rate of amount-in-controversy was reasonable.