Castillo v. Apple Core Enterprises, Inc., No. 09-CV-1622HRBB, Slip Copy, 2009 WL 2849124 (S.D. Cal. Sep 01, 2009).

A District Court in California remanded the action to state court holding that Apple Core (which does business as Applebee’s Neighborhood Grill and Bar) did not establish to a “legal certainty” that the amount in controversy exceeded $5 million, and that the plaintiffs were not in bad faith when they limited the potential recovery to avoid CAFA jurisdiction.

The plaintiffs brought a class action in state court alleging that the defendants violated the California Labor Code, the California Business and Professions Code, and the California Fair Employment and Housing Act. The plaintiffs alleged inter alia that the defendants manipulated the hours of Apple Core employees to avoid paying them their statutorily-mandated wages, failed to provide them an appropriate meal or rest period and adequate personal time off or vacation, and did not reimburse them for uniform costs. The plaintiffs also alleged that the defendant, Luis Aguilar, sexually harassed female employees in the class.

The plaintiffs stated in the complaint that the amount in controversy exceeded the statutory minimum limit of the state court; however, it did not reach or exceed $5 million.  Apple Core removed the action to the federal court, alleging that the amount in controversy exceeded $5 million. Naturally, the plaintiffs disagreed, and moved to remand.

Relying on Guglielmino v. McKee Foods Corp., 506 F.3d 696, 699-700 (9th Cir. 2007), the Court noted that because the state court complaint affirmatively alleged that the amount in controversy was less than the jurisdictional threshold, Apple Core must prove with “legal certainty” that CAFA’s jurisdictional amount was met. (Editors’ Note: See the CAFA Law Blog analysis of Guglielmino posted on November 6, 2007).

But the “legal certainty” standard is consistent with the limited jurisdiction of federal courts and the principle that the plaintiff is “master of her complaint.” Lowdermilk v. United States Bank Nat’l Ass’n, 479 F.3d 994, 999 (9th Cir. 2007) stated that it is “plaintiff’s prerogative, subject to the good faith requirement, to forgo a potentially larger recovery to remain in state court.” Thus, the Court noted that here, the plaintiffs exercised that option by limiting their recovery to an amount under $5 million.  (Editors’ Note: See the CAFA Law Blog analysis  of Lowdermilk posted on July 30, 2007).

Apple Core researched published verdicts and settlements in actions for sexual harassment and calculated the average verdict or settlement amount as over $2 million. Based on that figure, Apple Core estimated that the plaintiffs’ 200 sexual harassment claims could result in a verdict of over $400 million.  Apple Core also calculated that the plaintiffs’ wage and hour class might be owed more than $3.1 million.