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

The Eighth Circuit Refused To Apply The Plaintiff’s Viewpoint Rule Or The Either Viewpoint Rule To Determine The Amount In Controversy Because The Defendant Did Not Meet Its Burden Under Either Rule

Posted in Case Summaries

Jaclyn_Waters_v__Ferrara_Candy_Co., 2017 WL 4562635 (8th Cir. Oct. 13, 2017).

In this action, while affirming the United States District Court for the Eastern District of Missouri’s (the “District Court”) remand order, the United States Court of Appeals for the Eighth Circuit (the “Eighth Circuit”) found the amount in controversy is not established by a preponderance of the evidence if a court must resort to conjecture, speculation, or star gazing.

Plaintiff Jaclyn Waters (“Plaintiff”), consumer, brought a putative class action in the Circuit Court for the City of St. Louis, Missouri, alleging Defendant Ferrara Candy Co. (“Defendant”) misrepresented the amount of candy in each box in violation of the Missouri Merchandising Practices Act. Plaintiff alleged Defendant engaged in false, deceptive, and misleading conduct by selling substantially under-filled or “slackfilled” cardboard boxes of its Red Hot candies.

After Defendant removed the action to the District Court pursuant to the Class Action Fairness Act (“CAFA”), the District Court granted Plaintiff’s motion to remand. On appeal, the Eighth Circuit affirmed.

Defendant submitted an affidavit from its vice president who attested, inter alia, that Defendant’s sales of Red Hots packaged in cardboard boxes totalled $27,592,167.  Defendant also submitted an affidavit from its executive who averred that, based on his knowledge of Defendant’s packing processes and his investigation into the costs of upgrading its packaging equipment, necessary changes to Defendant’s production capital equipment, which could result from an injunction requiring a material increase in the percentage fill of Red Hots candy, would exceed $6,000,000.  Defendant thus argued its affidavits established the amount in controversy exceeded $5 million.

Defendant further argued the District Court erred by applying the plaintiffs’ viewpoint rule when it calculated the amount in controversy. According to Defendant, in enacting CAFA, Congress authorized federal courts to apply the “either viewpoint rule” under which, courts may determine the amount in controversy either from the plaintiffs’ perspective, i.e., the aggregate value of the claims to the class members, or from the defendant’s perspective, i.e., the total potential cost to the defendant should the plaintiffs prevail, including all damages, attorney’s fees, and costs the defendant would incur in complying with an award of injunctive relief.  In support, Defendant pointed to CAFA’s text in 28 U.S.C. § 1332(d)(6), which—unlike the anti-aggregation rule applicable to federal diversity jurisdiction under 28 U.S.C. § 1332(a)—mandates aggregation of the value of the Plaintiff’s claims.  Defendant also relied on a Senate Judiciary Committee Report endorsing the either viewpoint rule.

The Eighth Circuit, however, opined it need not resolve the issue of whether courts should apply the plaintiffs’ viewpoint rule or the either viewpoint rule when determining the amount in controversy under CAFA because Defendant did not meet its burden under either rule.  The Eighth Circuit found that if Plaintiff prevailed in this case, she would be entitled to monetary relief and attorney’s fees well below $5 million, regardless of whether the monetary relief came in the form of compensatory damages, restitution, or disgorgement.  The Eighth Circuit further found punitive damages were not in controversy because the petition did not seek them.

Additionally, the Eighth Circuit found Defendant’s affidavits were insufficient to quantify, beyond mere speculation, the costs it would incur in complying with an award of injunctive relief in this case. The Eighth Circuit found Defendant’s executive did not specify whether the assumed injunction would require additional filling of the existing package sizes or shrinking the package size to more closely fit the current weight of actual candy, and he also did not specify whether the supposed injunction would require modification of every Red Hots candy production line or only a few lines.  The Eighth Circuit thus opined that even if it were to apply the either viewpoint rule, Defendant did not establish by a preponderance of the evidence the amount of controversy exceeded $5 million.

Accordingly, the Eighth Circuit affirmed the judgment of the District Court.

Yaron Shaham