Standard Fire at Use in Practice in Arkansas

Deaton v. Frito-Lay N. America, Inc., 2013 WL 2455941 (W.D. Ark. June 5, 2013). 

Relying on the recent Supreme Court’s decision in Standard Fire that “to defeat CAFA jurisdiction, a stipulation must be binding, and a plaintiff bringing a proposed class action cannot bind members of the proposed class before it is certified,” Western District Court of Arkansas vacated its earlier remand order after remand from the Eighth Circuit. 

The plaintiff brought an action in Ouachita County Court, Arkansas, alleging that the defendants deceptively marketed several of its products, including Tostitos and SunChips as “All Natural” when in fact these products contained genetically modified corn and hexane-extracted soybean oil.  The plaintiff asserted violation of the Arkansas Deceptive Trade Practices Act, and that the defendants were unjustly enriched at her expense. 

The defendants removed the action to the District Court under CAFA, and the plaintiff moved for remand.  The District Court granted the motion because the plaintiff’s stipulation had limited the class recovery to a sum less than the amount-in-controversy required by CAFA.  On appeal, the Eighth Circuit Court of Appeals summarily remanded the case to the District Court for reconsideration in light of the Supreme Court’s recent decision in Standard Fire Insurance Co. v. Knowles, 133 S. Ct. 1345 (2013) regarding stipulations made on behalf of absent class members.  

Although the plaintiff previously argued that she put less than $5 million in controversy by stipulating not to accept more, she now acknowledged that Standard Fire definitively states that such stipulations may not prevent removal under CAFA.  In Standard Fire, the Supreme Court held that to defeat CAFA jurisdiction, a stipulation must be binding, and a plaintiff bringing a proposed class action cannot bind members of the proposed class before it is certified.  (Editor’s Note: see CAFA law blog analysis on Standard Fire posted on April 12, 2013.) 

Thus, the only issue remaining was whether the defendants submitted sufficient evidence to demonstrate that the amount in controversy exceeded $5 million.  The District Court noted that a defendant invoking federal-court diversity jurisdiction through removal must prove the required statutory amount in controversy by a preponderance of the evidence.  However, the defendants need not prove by a preponderance of evidence that the amount in controversy is more than the statutory amount, but rather that a fact finder might legally conclude that it is. 

The defendants asserted that the plaintiff’s complaint sought relief on behalf of all Arkansas residents who purchased one or more of 11 types of allegedly mislabeled products; the plaintiff did not specify or place any explicit limitation on the class period; and the plaintiff sought damages amounting to the entire purchase price of the product, in addition to restitution for unjust enrichment. 

The defendants submitted an affidavit from Frito-Lay’s Senior Finance Manager which stated that Frito-Lay’s revenues from sales of the products in Arkansas were greater than $5 million in both 2010 and 2011, and that Frito-Lay’s combined net profits for 2010-2011 were greater than $5 million. 

The plaintiff, however, argued that the sales figures submitted by the defendants accounted for sales to distributors and retailers rather than sales to consumers.  The plaintiff asserted that because her class was only made up of Arkansas consumers, the evidence regarding sales to retailers and distributors was too speculative to establish the amount in controversy. 

Although the District Court acknowledged the limitations of the evidence offered by the defendants, it opined that they had carried their burden of showing by a preponderance of the evidence that CAFA’s amount in controversy requirement had been met.  The District Court stated that a fact-finder could easily conclude that Frito-Lay’s supplier/retailer sales of over $5 million for both 2010 and 2011 translated to over $5 million in individual consumer sales during the same period.  Further, the District Court remarked that this amount did not even take into consideration the plaintiff’s claims for restitution. 

The District Court observed that the burden then shifted to the plaintiff to show to a legal certainty that the amount in controversy was $5 million or less.  The plaintiff, however, did not attempt to offer such evidence.  Because the defendants sufficiently demonstrated that the District Court had jurisdiction over this matter, the District Court vacated its previous order remanding the action. 

This case is a good example of Standard Fire applied in Arkansas.  Don’t let stipulations get in the way of CAFA jurisdiction.  — JR