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

Only Concrete Evidence Can Keep a Defendant’s Case Afloat Under CAFA’S Legal Certainty Standard

Posted in Case Summaries, Jurisdictional Amount, Wage and Hour

Bell v. Home Depot U.S.A., Inc., 2013 WL 1791920 (E.D.Cal. April 26, 2013).

As amended by CAFA, 28 U.S.C. § 1332(d) vests district courts with original jurisdiction of any civil action in which the amount in controversy exceeds $5,000,000, the aggregate number of proposed plaintiffs is 100 or greater, and any member of the plaintiff class is a citizen of a state different from any defendant.  But, if a class-action plaintiff stipulates, prior to certification of the class, that he, and the class he seeks to represent, will not seek damages that exceed $5,000,000 in total, does that stipulation remove the case from CAFA’s scope?  The District Court for the Eastern District of California certainly seems to suggest so.

In this case, the parties disputed which legal standard governed the amount in controversy determination.  Under CAFA, “where the plaintiff has pled an amount in controversy less than $5,000,000, the party seeking removal must prove with legal certainty that CAFA’s jurisdictional amount is met.”  Lowdermilk v. U.S. Bank Nat’l Ass’n., 479 F.3d 994, 1000 (9th Cir 2007).  However, if a plaintiff’s “complaint is unclear [regarding] ‘a total amount in controversy,’ the proper burden of proof . . . is proof by a preponderance of the evidence.”  Guglielmino v. McKee Foods Corp., 506 F.3d 696, 701 (9th Cir. 2007).

The plaintiffs, employees of Home Depot, brought an action in the Superior Court of the State of California alleging violations of California’s wage and hour law.  Plaintiffs sought to recover unpaid wages, unpaid overtime wages, statutory penalties, waiting time penalties, unreimbursed expenses, liquidated damages, restitution, injunctive relief, interest, attorneys’ fees, and costs.  Additionally, the plaintiffs’ Complaint alleged that the monetary damages and restitution sought exceeded the minimal jurisdiction limits of the Superior Court and would be established according to proof at trial.  The plaintiffs alleged that the amount in controversy for each class representative, including claims for monetary damages, restitution, penalties, injunctive relief, and a pro rata share of attorneys’ fees, was less than $75,000 and that the aggregate amount in controversy for the proposed class action, including monetary damages, restitution, penalties, injunctive relief, and attorneys’ fees, was less than $5,000,000, exclusive of interest and costs.  Unsurprisingly, the plaintiffs reserved the right to seek a larger amount based upon new and different information resulting from investigation and discovery.

The defendants removed the action to the District Court for the Eastern District of California.  The defendants asserted that because the plaintiffs expressly reserved the right to seek more than $5,000,000 in damages and refused to stipulate that they would not seek greater damages, the complaint was ambiguous, and thus the preponderance of the evidence standard applied.  The defendants asserted that given the various state law wage and hour claims in the Complaint, the plaintiffs’ allegations that such violations were systemic, and the data provided by the defendants here and in its removal papers, it was clear that plaintiffs’ claims placed more than $5,000,000 in controversy.  The plaintiffs moved to remand the case back to the Superior Court.

 The District Court remarked that the plaintiffs’ reservation of rights did not create an uncertainty about the amount in controversy; it only stated a right that the plaintiffs already possessed.  Because the plaintiffs specifically alleged that their case did not meet the diversity jurisdiction threshold required for CAFA jurisdiction, the District Court stated that the defendant must establish with legal certainty that the amount in controversy exceeded the statutory minimum of $5,000,000.

Further, the defendants contended that even under the legal certainty standard, federal jurisdiction was still proper.  The plaintiffs claimed unrecorded work time.  The defendants did not have records reflecting the frequency or amount of claimed unrecorded work time, but they made reasonable and conservative estimates regarding the number of penalties per class member based on the data that was available.  The defendants also based their estimates on the plaintiffs’ allegations that the claimed violations occurred regularly, and pursuant to corporate policy and or practice supported higher estimates of damages and penalties than the plaintiffs had estimated.  The defendants thus contended that the District Court could clearly estimate with certainty that the amount in controversy exceeded CAFA’s jurisdictional minimum.

All of defendants’ amount-in-controversy calculations were based upon the declaration of economist G. Edward Anderson, Ph.D.  The plaintiffs challenged Dr. Anderson’s calculations arguing that the defendants failed to produce any concrete evidence that would satisfy their burden under the legal certainty standard.  The District Court also noted that Dr. Anderson relied on assumptions and estimations in his calculations.  The defendants, however, argued that these estimates were appropriate because they could rely on reasonable estimates and assumptions to establish the jurisdictional amount.

 The District Court observed that numerous district courts had rejected the use of similar estimates under the legal certainty standard when the estimates and assumptions were not supported by concrete evidence.  Here, the defendants presented no concrete evidence to support their estimations and assumptions, and thus they failed to meet their burden to establish jurisdiction under CAFA.

 Accordingly, the District Court remanded the case.