Dupre v. General Motors, No. CV-10-00955-RGK EX, 2010 WL 3447082 (C.D. Cal. Aug 27, 2010).

In a case of faulty acceleration to federal court, the district court put the brakes on removal and directed the case back to state court.   A District Court in California remanded the action to state court finding that in absence of allegations in the complaint that every class member was entitled to civil penalties up to the maximum amount available under California Labor Code, the defendant cannot maximize the statutory penalties to arrive at an amount in controversy without evidence supporting specific violations.

The plaintiff brought a class action in state court pursuant to the Private Attorneys General Act (PAGA) alleging that the General Motors Company (GM) failed to compensate its employees for missed meal and rest periods; failed to pay timely wages and comply wage statements; and conducted unlawful business practices in violation of California’s Labor Code and Business & Professions Code.

GM removed the case to the federal court asserting subject matter jurisdiction under CAFA, 28 U.S.C. §§1332(d). As expected, the plaintiff moved to remand. The Court granted the remand motion.

The plaintiff alleged in the complaint that the amount in controversy for each class representative was less than $75,000, and the total class claims would not exceed $5 million. The complaint alleged a class with more than 100 members. Using 101 as the number of class members, the total amount in controversy would exceed the requisite $5 million if the individual amount were $49,505.00. In contrast, if the individual amount were $49,504.00 (one dollar less), the total amount would not exceed $5 million. Thus, the Court noted that as the complaint was facially unclear as to whether the requisite total amount in controversy had been pled, GM bore the burden of establishing, by a preponderance of the evidence, that the amount in controversy exceeded the jurisdictional amount.

As an initial matter, the Court observed that CAFA expanded federal jurisdiction for diversity class actions where a class has more than 100 members, the district courts have original jurisdiction if at least one class member is diverse from at least one defendant, and the total amount in controversy exceeds $5 million. Thus, there was no requirement for GM to establish that the plaintiff’s individual damages were in excess of $75,000 as is required by § 1332(a).

Next, as to the requisite $5 million amount in controversy, GM contended that the complaint placed over $40 million in controversy. GM asserted that 440 nonexempt employees with average rate of pay of $27.35 per hour missed the meal break. GM assumed, without presenting any evidence, that all 440 class members worked 200 days per year throughout the four-year period, and that each employee missed one meal break per day.  These assumptions lead to penalty pay of $9,627,200.00 for missed meal breaks.  A similar calculation yielded penalty pay of $9,627,200.00 for missed rest periods.  GM then calculated PAGA penalties of $8,976,000.00, statutory penalties of $1,760,000.00, and attorneys fees of approximately $10,714.075.20.

Relying on Korn v. Polo Ralph Lauren Corp., 536 F. Supp. 2d 1199, GM argued that it may maximize statutory penalties. The Court noted that Korn,a consumer class action case alleging violation of California Civil Code §1747.08 held that because §1747.08 awarded a maximum statutory penalty of $1,000, and because the complaint alleged that every class member was entitled to civil penalties in amounts up to $1,000, the court may consider the maximum statutory penalty available in determining whether the jurisdictional amount in controversy requirement is met. (Editors’ Note: See the CAFA Law Blog analysis of Korn posted on April 3, 2008).

The Court, however, found Korn unpersuasive because here, no allegations were made that every class member was entitled to civil penalties up to the maximum amount available.  The calculation of penalties depended heavily on the number of days GM withheld wages or wage statements and the plaintiffs’ missed meal or rest breaks.  Without evidence supporting specific numbers for these variables, the Court could not accurately calculate the amount of civil penalties to which each class member would be entitled.  Furthermore, GM had not provided the Court with evidence regarding the duration of any of the alleged violations.  Thus, the Court found that it had no basis for considering the maximum civil penalties to establish the requisite amount in controversy.

Although the present case involved the preponderance of the evidence standard rather than the legal certainty standard, GM’s calculations were based on many assumptions that left the Court to speculate as to the value of too many variables.  Inasmuch as the removal statutes are construed restrictively, and any doubts as to the right of removal are resolved in favor of remanding the case to state court, the Court concluded that it could not base its jurisdiction on GM’s speculation and conjecture.

Accordingly, the Court found that GM failed to prove with a preponderance of the evidence that the amount in controversy met CAFA’s $5 million jurisdictional threshold.