Thrift Auto Repair, Inc. v. U.S. Bancorp, et al., 2007 WL 2788465 (N.D. Ga. Sept. 21, 2007)

In this case, the Northern District of Georgia applied Eleventh Circuit law on a removing defendant’s burden of proof for establishing amount in controversy to grant the plaintiff’s motion to remand where the ad damnum clause included a claim for less than CAFA’s jurisdictional amount, but the defendant, in an affidavit submitted with its removal pleadings, asserted that the claims at issue exceeded $5,000,000.

This dispute arose out of a lease agreement between Thrift Auto Repair, Inc. and U.S. Bancorp. Thrift filed suit on behalf of itself and Georgia class members alleging that U.S. Bankcorp improperly added fees, charges and taxes on its (and class members’) accounts. In the complaint’s ad damnum clause, Thrifty asserted that the total damages for the entire class totaled “$4,995,000 or less, excluding interest and costs” and that “under no circumstances will the total damages…exceed $4,995,000, excluding interest and costs.” 

The defendants removed under CAFA and, in support of the removal, submitted an affidavit from a “Director of Portfolio” in which she claimed the damages at issue exceeded $9,125,000. The affidavit included a breakdown of the total figure by total fees, total sales taxes, and total property taxes.

Evaluating the plaintiff’s motion to remand, the district court looked to Lowery v. Alabama Power Co., 483 F.3d 1184 (11th Cir. 2007), a recent Eleventh Circuit case in which the Court “reiterated that the removing party bears this burden [of proving federal jurisdiction exists] even in the context of CAFA, despite legislative history to the contrary.” (Editors’ Note: See the CAFA Law Blog analysis of Lowery posted on May 15, 2007).

And here comes the hellish part of removal: the court noted that where a plaintiff seeks an unspecified amount of damages, a defendant must meet that burden by a preponderance of the evidence standard, but where a plaintiff pleads a specific figure that is less than the jurisdictional threshold in its ad damnum clause, the defendant must satisfy a heightened “legal certainty” standard. The court, perhaps engaging in a bit of irony, explained that “In theory, this heightened standard is not insurmountable.” But in reality, at least in this case, it was.

The parties asserted arguments assuming that the outcome of the motion to remand hinged on whether, under Eleventh Circuit law—specifically, Lowery–the court could consider evidence not supplied by the plaintiff (i.e., the affidavit) in determining whether the defendants met their burden of proof for removal. In the affidavit, one of the defendant’s employees explained the amount of surcharges, fees and taxes the defendants charged or received from the members of the potential class. The court noted that the only information provided by the plaintiff was the types of the charges, fees and taxes at issue. The defendants supplied the amounts themselves. And that was the kicker: the court determined that under Eleventh Circuit precedent, it could not consider the figures provided by the defendants in determining the amount in controversy.

The defendants also argued that the court could consider a term of an equipment lease agreement under an exception allowing defendants to introduce damages evidence arising from a contract provision, even if the plaintiff did not provide the contract. However, the court found that because the contract at issue did not “specify the amounts of the allegedly improper fees, charges and taxes,” it could not determine what the damages would be from the contract.

Even though the court determined it could not properly consider the affidavit under Lowery, it went on to explain the affidavit’s deficiencies. Maybe this will give some guidance to future souls who face the devilish Eleventh Circuit standard. What tolled the death knoll for this removal? The defendants’ affidavit was “too sweeping in its calculations.” Specificity, it seems, is the key the gates of the paradise of federal court. 

The court explained that the affidavit failed to break down how much of the amount collected for surcharges and fees was attributable to each type of surcharge and fee at issue and that the affiant’s “best estimates” of the taxes collected for the relevant time period were “overreaching and too rudimentary.” Therefore, while the affidavit gave “some indication” of the damages at issue, it could not meet the “heavy burden” of showing damages exceeded $5,000,000 under the legal certainty standard. 

The court noted that while a number of other district courts in the Eleventh Circuit had denied motions to remand, they were all pre-Lowery decisions. Therefore, although the plaintiff requested an award of attorney’s fees, the court denied it, finding that, based on the pre-Lowery cases, the defendants had an objectively reasonable basis for removal under CAFA. Devil’s in the house of the rising sun, and this case is sent back to the house of Georgia state court.