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

Unsupported Assumptions Prove Insufficient To Establish Amount In Controversy Under CAFA

Posted in Case Summaries

Pazol v. Tough Mudder Inc., 2016 WL 1638045 (1st Cir. April 26, 2016)

Lisa C. Pazol, Maria C. Newman, Lisa Russ and Audrey J. Bennet (“Plaintiffs”) were registrants of an extreme obstacle course that was organized by Tough Mudder Incorporated, Tough Mudder, LLC and BK Bridge Events, LLC (“Defendants”). Defendants are business entities that organized physically challenging obstacle courses in various locations in the United States. Plaintiffs registered to participate in one of those events called the “Mudderella”, which was scheduled to take place on September 6, 2014, in Haverhill, Massachusetts.Plaintiffs alleged that on August 22, 2014, Defendants notified the Mudderella participants that the event had been moved approximately 12 miles from Haverhill to Amesbury, Massachusetts. About a week before the event, Defendants notified the Mudderella participants that the event had been moved to Westbrook, Maine, which was 79 miles from Haverhill. As a result, Plaintiffs were unable to participate in the event and were not refunded their participation fee. In response, Plaintiffs brought a putative class action in the Massachusetts Superior Court (“Superior Court”). Plaintiffs alleged that Defendants changed the event locations unexpectedly leaving them to either pay for additional lodging due to the move or forfeit their participation fee.

Plaintiffs asserted various claims under Massachusetts law, including breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, and violation of the Massachusetts Consumer Protection Act. In connection with their claims, Plaintiffs sought damages in an amount to be determined at trial, reasonable attorneys’ fees and costs, restitution, disgorgement, rescission, permanent injunction prohibiting Defendants from engaging in the conduct described herein, and such other relief as the court deems just.

Defendants removed the action to the federal court under The Class Action Fairness Act (“CAFA”) and contemporaneously filed a motion to dismiss. Defendants argued that the amount in controversy exceeded the $5 million. While Plaintiffs moved to remand, Defendants responded with estimates of the amount in controversy based on references in Plaintiffs’ compliant concerning registration fees and added expenses, including, but not limited to gas, food, and/or lodging. Finding that Defendants showed a reasonable probability that the amount in controversy exceeded $5 million, the District Court denied Plaintiffs’ motion to remand and granted Defendants’ Motion to Dismiss. Plaintiffs appealed to the First Circuit.

 The First Circuit agreed with Plaintiffs that the amount in controversy did not meet the $5 million threshold as required under CAFA. The First Circuit noted that, although Defendants established $4,042,475.92 in possible damages in registration fees, food and fuel costs when combined with treble damages and attorney’s fees; however, they failed to appropriately account for approximately $1 million in lodging fees. According to the First Circuit, Defendants’ argument that all registrants incurred an additional lodging expense of $113 or alternatively, that all attendees incurred an additional lodging expense of $128 failed because Defendants provided no support for the conclusion that the predicate assumptions underlying their estimate of lodging expenses were reasonably probable ones.

 The First Circuit noted that Defendants possessed the home addresses of everyone who registered for the event. Thus, with that information, Defendants could have ascertained a reasonable estimate of the number of participants who might have travelled far enough to require lodging. Rather, Defendants left this issue to the court’s speculation. The District Court opted to not engage in such speculation because it took into account “which party has better access to the relevant information” and here, that party was Defendants.

Therefore, the First Circuit concluded that Defendants did not meet their burden of showing that the amount in controversy exceeded $5 million. Accordingly, the decision of the District Court was reversed, and the action was remanded to the District Court with instructions to remand the case to the Superior Court for lack of jurisdiction, without prejudice to removal at a later date.

-Mike Aleali