Houpt v. Victoria Fire & Cas. Co., No. 11-55869, 2011 WL 2792343 (9th Cir. July 18, 2011).

While reversing the district court’s remand order, the Ninth Circuit held that amount sought by the facial allegations of the complaint are key factors to determine if the jurisdictional amount is greater than $5 million.

The plaintiff brought a class action in state court asserting eleven causes of action, inter alia for failure to pay wages, failure to provide meal periods and rest periods, illegal wage deductions and failure to timely furnish accurate itemized wage statements, under California Labor Code and California and Business and Professional Code. (Editors’ Note: Seems like every single case coming out of California is about failure to pay wages. We challenge California attorneys to come up with some more interesting causes of action. We know from personal experience that there are some very smart attorneys in California.  It is boring for us to report on the same wage dispute every time a CAFA comes out of California. But our loyal readers know, no matter how repetitive the causes of action may be, we will bring it to you).

The plaintiff brought this action on behalf of the defendants’ California based Sales Agent positions who were classified by the defendants as non-exempt and were paid by the defendants on a purportedly commission-only basis, and later on an hourly basis plus purported commissions. The plaintiff stated in the complaint that total class claims would not exceed $5 million.

The defendants removed the action to federal court arguing that it was clear to a legal certainty that the amount sought by the facial allegations of the complaint was greater than the jurisdictional amount of $ 5 million required by CAFA.

The plaintiff moved to remand.

The district court remanded the action to state court holding that the defendants needed to prove the amount in controversy to a “legal certainty” rather than by a “preponderance of the evidence.”

Upon appeal, the Court of Appeal for the Ninth Circuit reversed the district court’s findings.

The Ninth Circuit found that because the plaintiff’s parenthetical request for relief above CAFA’s $5 million jurisdictional limit rendered her complaint ambiguous as to the total recovery sought, the district court erred in concluding that the defendant insurers needed to prove the amount in controversy to a legal certainty rather than by a preponderance of the evidence.  The Ninth Circuit observed that the defendants satisfied CAFA’s jurisdictional requirements because: the plaintiff alleged that the defendants improperly reduced the plaintiffs’ sales commissions, the full amount of those commissions, $12,375,968, rather than the sum of all “improper” deductions, was properly included in the amount in controversy.

Finally, the Ninth Circuit remarked that by alleging only that the plaintiffs were “California-based” sales agents, rather than California citizens, the plaintiff failed to plead or prove a necessary element of both the discretionary abstention and local controversy exceptions to CAFA jurisdiction.  The Ninth Circuit therefore declined to affirm the decision of the district court on these alternative grounds.

Accordingly, the Ninth Circuit reversed the order and remanded the action to the district court for further proceedings consistent with its opinion.