In_re_Whole_Foods_Market__Inc, 2015 WL 5737692 (W.D. Tex. Sept. 30, 2015).

The United States District Court, Western District of Texas (the “District Court”), denied two motions to remand finding the allegations in the respective complaints was facially sufficient to establish an amount-in-controversy under the Class Action Fairness Act (“CAFA”).

This matter concerned a multidistrict litigation involving eleven (11) nationwide and statewide putative class action lawsuits against the defendant Whole Foods Market, Inc., and various related corporate entities (collectively, “Whole Foods Defendants”) based on the alleged misrepresentation of the sugar content in store-brand “Whole Foods 365 Everyday Value Plain Greek Yogurt” (the “Yogurt”). The consumer classes typically alleged the Whole Foods Defendants-as developers, manufacturers, labelers, and exclusive sellers and distributors of the Yogurt–falsely led them to believe the Yogurt contained only two grams of sugar per serving, when in fact the Yogurt contained over 11 grams of sugar per serving.

The Judicial Panel for Multidistrict Litigation (“JPML”) centralized the eleven (11) member cases with the District Court. The plaintiffs in the following two cases originally filed their lawsuits in Missouri and Florida state courts respectively, Rodhouse v. Whole Foods Market Grp., Inc., Case No. 1:14-cv-1135-SS, and Frydman v. Whole Foods Market Grp., Inc., et al., Case No. 1:15-cv-264-SS. Each action was subsequently removed to federal court on the basis of diversity jurisdiction under CAFA. The plaintiffs in both of these actions filed their respective motions to remand.

The District Court noted the plaintiffs’ state court complaint did not allege a specific amount in damages, and thus, the defendants bore the burden to prove by a preponderance of the evidence the amount-in-controversy exceeded $5 million. The District Court observed the Whole Foods Defendants submitted no extrinsic evidence in support of their removal allegations; rather, they relied exclusively on the allegations in the respective complaints. According to Whole Foods Defendants, the plaintiffs’ damages allegation seeking less than $75,000 per individual was tantamount to placing into controversy $74,999 per individual less de minimis costs. The Whole Foods Defendants further argued that by multiplying the alleged sum certain of approximately $74,999 per class member by thousands or “tens of thousands” of alleged class members in each respective class, the complaint facially established the amount-in-controversy for purposes of CAFA at no less than $5 million.

In response to the Whole Foods Defendants, the plaintiffs argued Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S. Ct. 547 (2014), altered the Fifth Circuit’s precedent such that the Whole Foods Defendants may no longer rely on the face of the plaintiffs’ complaints to meet their removal burden. In Dart Cherokee, the U.S. Supreme Court reversed a district court order remanding the class action to state court on the grounds the removing defendant failed to include proof of amount-in-controversy in the notice of removal itself. The U.S. Supreme Court held a removing defendant’s notice of removal need include only a plausible allegation the amount-in-controversy exceeded the jurisdictional threshold and did not require extrinsic evidence. In reaching its conclusion, the U.S. Supreme Court stated the evidence establishing the amount-in-controversy is required only when the plaintiff contests, or the court questions the defendant’s allegations. Drawing from Dart Cherokee’s, framework, the plaintiffs argued that once they contested the jurisdictional allegations in Whole Foods Defendants’ notice of removal, the Whole Foods Defendants were required to submit extrinsic evidence proving the amount-in-controversy by a preponderance of the evidence because the Whole Foods Defendants failed to submit a single shred of evidence. (Editor’s Note: See the CAFA Law Blog analysis of Dart Cherokee posted on August 26, 2014;  See also Article by Rollo, Ferachi and Crowson posted here).

The District Court declined the plaintiffs’ invitation to disrupt the Fifth Circuit’s precedent based on Dart Cherokee.  The District Court explained the single question on appeal in Dart Cherokee was to assert the amount-in-controversy adequately in the Notice of Removal, does it suffice to allege the requisite amount plausibly, or must the defendant incorporate into the notice evidence supporting the allegations.  The U.S. Supreme Court held a Notice of Removal need only contain a plausible allegation of the amount-in-controversy.  The issue concerning whether a removing defendant must submit evidence of the amount-in-controversy once a plaintiff contests federal jurisdiction was not before the District Court.  Accordingly, the District Court concluded that it would continue to follow the Fifth, Eighth, and Eleventh Circuit’s respective precedents, which permits Whole Foods Defendants to rely on the face of plaintiffs’ complaints to show by a preponderance of the evidence CAFA’s jurisdictional prerequisites are met.

According to the Whole Foods Defendants, because the plaintiffs affirmatively sought up to $74,999 per class member, and the putative classes numbers in the “thousands” or “tens of thousands,” it was facially apparent the amount-in-controversy exceeds $5 million. Whole Foods Defendants cited to Stafford v. Whole Foods Market California, Inc., 2014 WL 4755988 (E .D.Ark. Sept. 24, 2014), in support of their argument.  This case was virtually indistinguishable from the present as it represented a putative class action lawsuit against Whole Foods Market California, Inc. for alleged mislabeling of various Whole Foods 365 Everyday Value products as “Organic” or “All Natural” when they were in fact not.  The Stafford complaint alleged no individual class member had a claim exceeding $74,999 and that the total amount in controversy did not exceed $4,999,999. Id.  The named plaintiff sought to represent a class numbering “in the thousands.”  Whole Foods Market California, Inc. removed the case to federal court on the basis of diversity jurisdiction under CAFA, and the plaintiff moved to remand the case to state court.  The parties made arguments substantially similar to those made by the parties in the above-styled cases.

In denying the plaintiff’s motion to remand, the Stafford Court looked to the face of the complaint to determine whether Whole Foods Market California, Inc. met its burden of establishing the amount in controversy by a preponderance of the evidence.  The Stafford Court’s reasoning was largely driven by two Eighth Circuit decisions, both of which addressed arguments similar to those made by the plaintiffs in the instant cases.  The Stafford decision relied on Hartis v. Chicago Title Ins. Co., 694 F.3d 935 (8th Cir.2012), where the Eighth Circuit rejected the argument a removing defendant must submit proof of the class size or amount of damages per class member where such information was readily obtainable by the corporate defendant.  

 Second, the Stafford court relied on Grawitch v. Charter Communications, Inc., 750 F.3d 956 (8th Cir.2014), where two class action plaintiffs sought damages based an alleged misrepresentation of the speeds at which certain internet modems were capable of performing, and they alleged members of the class had “been damaged, collectively, in an amount in excess of $50,000.00.  However, no individual Plaintiff has been damaged in an amount in excess of $50,000.00.”  On appeal of the district court’s refusal to remand the case to state court, the Eighth Circuit held because the putative class consisted of at least 50,000 class members, and because the plaintiffs sought “up to $50,000 in damages per class member … a jury might conclude that the class suffered damages of more than $5 million dollars, even if the individual class members’ monthly overpayment was minimal.”

In a further attempt to convince the District Court to remand, the plaintiffs argued that alleging less than $75,000 per class member was not the same as alleging up to $74,999.00. However, the plaintiffs provided no relevant authority to support that position.  Accordingly, the District Court rejected that argument.

Accordingly, the District Court denied the plaintiffs’ motion to remand, and retained jurisdiction over the actions.

Yaron Shaham