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

The Eighth Circuit’s Longstanding Precedent Outweighs The Senate Report Endorsing ‘The Either Viewpoint Rule’

Posted in Case Summaries

Jaclyn_Waters_v_Ferra_Candy_Co., 2017 WL 2618271 (E.D. Mo. June 16, 2017).

In this action, while granting Plaintiff Jaclyn Waters; Motion to Remand, the United States District Court, Eastern District of Missouri (the “District Court”) found the plain language of the Class Action Fairness Act (“CAFA”) implies the “plaintiff’s viewpoint test” was still proper in the class action context rather than the “either-viewpoint test”. 

Plaintiff brought a putative class action in the Circuit Court for the City of St. Louis, Missouri (the “State Court”) alleging Defendant Ferrara Candy Co. (“Defendant”), an Illinois corporation, was leaving too much empty space (“slack-fill”) in the cardboard boxes of its “Chewy Red Hots” candy product, which constituted an unfair, fraudulent or deceptive practice under the Missouri Merchandising Practices Act (“MMPA”). Plaintiff alleged the amount of slack-fill misrepresented how much candy was in each box despite the weight of the product being printed on the packaging.

Defendant removed the action to the District Court pursuant to CAFA and Plaintiff moved to remand. The District Court granted Plaintiff’s motion.

Plaintiff alleged the $5 million jurisdictional minimum was not satisfied in this case, pointing to, among other things, statements in the petition that the aggregated amount in controversy will not exceed $4,999,999 for the entire class. The District Court, however, found that unlike in traditional cases, stipulated disclaimers of recovery were not effective when determining the value of a putative class action prior to certification of the class.

Defendant asserted there were multiple categories of award which, singly or stacked, added up to more than $5 million. Defendant submitted an affidavit from its Vice President, Mark Riegel, who stated the total retail sales of all Red Hots products was $779,296.  He further stated the majority of sales of Red Hots were in the “Theatre” or “Changemaker” cardboard boxes, and that estimated sales of those products were approximately $464,903.  Defendant also submitted an affidavit from its Chief Operating Officer, Michael Murray, who asserted that if Defendant was compelled by an injunction to change its packaging processes to eliminate slack-fill, it would cost approximately $3,595,000 to upgrade the Theatre packing equipment and a similar amount for the Changemaker equipment.

At the outset, the District Court found compensatory damages and attorneys’ fees did not, by themselves, satisfy the $5 million minimum. The District Court found even if it credited the assertion that compensatory damages and/or disgorgement could equal the full purchase price of the allegedly deceptive products, it appeared that sales of Red Hots were more likely than not less than $1 million across the whole state of Missouri.  The District Court further found even if it were to award class counsel attorneys’ fees at the rate of 40 percent of compensatory damages, they would more likely than not be $400,000 or less.  The District Court thus held it must look to Defendant’s allegations regarding punitive damages and injunctive relief to determine if they added enough value to surpass the $5 million CAFA minimum.

The District Court noted recovering punitive damages under the MMPA requires pleading facts supporting a finding Defendant’s conduct was outrageous due to its evil motive or reckless indifference to the rights of others. The District Court found Plaintiff made no mention of punitive damages in her pleadings, and did not included the statutorily-required separate statement as to any amount of punitive damages sought.  The District Court further found Plaintiff had not pled facts to support a finding Defendant’s conduct was outrageous due to “evil motive or reckless indifference to the rights of others.”  The District Court thus opined punitive damages would not be recoverable under the case as pled, and therefore, Defendant’s estimate of possible punitive damages was not included in the jurisdictional amount calculation.

Defendant argued Plaintiff’s decision not to plead for punitive damages should be treated the same way as her disclaimer of other recovery over $4,999,999, and disregarded, on the theory that this was also not binding on the class prior to certification. The District Court, however, found that any argument Plaintiff or subsequent class counsel could amend the pleadings to include punitive damages as authorized by the MMPA was unavailing, as jurisdiction was determined at the time of removal.

Next, for injunctive relief, Defendant had projected costs of $3,595,000 to retool the Theatre packaging line to decrease the percentage of slack-fill, and a similar amount for the Changemaker line, making the total potential value of an injunction approximately $7.19 million.

The District Court found there currently exist two schools of thought on how to evaluate the amount-in-controversy of a case for jurisdictional purposes in a class action. First, the traditional rule in the Eighth Circuit is that value is judged solely from the plaintiff’s viewpoint in determining the amount in controversy (the “plaintiff’s-viewpoint test”), and the other main methodology is to evaluate whether the value of the case is greater than the jurisdictional amount from either party’s point of view, and to allow removal if one or the other meets the threshold (the “either-viewpoint test”).  The District Court noted the plain language of CAFA does not specify whose viewpoint is to be used when determining whether the $5 million threshold has been met, however, the Senate Report accompanying the law endorses the either viewpoint rule.

The District Court found that the Senate Report was ultimately unpersuasive because the language of diversity jurisdiction ultimately remained unchanged when Congress passed CAFA. The District Court noted because Congress chose to pass CAFA and incorporate previous diversity jurisdiction sections without providing a particular viewpoint test, the plain language of the statute implied that the plaintiff’s-viewpoint test was still proper in the class action context.  The District Court further found the Judiciary Committee’s CAFA report was issued ten days after CAFA was signed into law, and thus the Senate Report was outweighed by the Eighth Circuit’s longstanding precedent that favors the plaintiff’s-viewpoint test.  The District Court, thus, applied the plaintiff’s-viewpoint test in the instant case and found that because Defendant had not submitted any evidence regarding the value of requested injunctive relief from the putative class’s point of view, this factor could not be used in calculating the overall sum required to satisfy CAFA’s amount-in-controversy standard.

Additionally, the District Court found that even if it were to apply the either-viewpoint test, Defendant failed to meet its burden to establish that the overall sum of alleged injunctive relief from its perspective would raise the total sum of requested relief above CAFA’s amount-in-controversy threshold. The District Court found in the affidavit Defendant submitted, Mr. Murray failed to 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 or whether the supposed injunction would require modification of every Red Hots candy production line.  The District Court opined Defendant proposed a speculative $7.19 million injunctive relief cost Plaintiff could not reasonably have enough information to rebut.

The District Court thus held Defendant had not met its burden to show the amount in controversy exceeded $5 million, and accordingly, granted Plaintiff’s motion to remand.

Yaron Shaham