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

Urban Outfitters’ Amount-in-Controversy Calculations Fail to Meet Preponderance of the Evidence Standard

Posted in Case Summaries, Wage and Hour

Abdulhaq v. Urban Outfitters Wholesale, Inc., 2014 WL 2212119 (N.D. Cal. May 28, 2014).

A district court in California remanded a case to the state court finding that the defendant’s attempt to show that the amount-in-controversy exceeded the jurisdictional threshold required the court to make assumptions that lacked evidentiary support, which did not meet the preponderance of the evidence standard.

The plaintiff brought this putative class action on behalf of similarly situated class of current and former hourly managers who worked at Anthropologie stores in the Superior Court of California, for the County of Alameda. The plaintiff alleged violations of California Labor Codes for unpaid overtime, unpaid minimum wages, unpaid meal rest premiums, unpaid rest period premiums, wages not timely paid upon termination, non-complaint wage statements, and for violations of California Business and Professions Code Section 17200.

The defendant removed the action contending that the federal court had jurisdiction under CAFA, which grants federal district courts original jurisdiction over certain class action suits. The plaintiff moved to remand.

For purposes of removal under CAFA, the parties did not dispute that the class comprised at least 100 persons. The plaintiff however, contended that the defendant did not prove that there was diversity of citizenship. The District Court noted that in the declaration filed in support of its opposition papers, the defendant demonstrated that according to its January 2013 Securities and Exchange Commissions’ Form 10–K, the state of incorporation and location of the company’s principal executive offices was the State of Pennsylvania. Accordingly, the District Court ruled that the defendant had carried its burden to demonstrate minimal diversity.

Regarding the amount-in-controversy, the District Court noted that the plaintiff did not allege a specific amount-in-controversy in his complaint but, without any evidence of bad faith, did plead that the amount was less than $5 million, exclusive of interest and costs. Here, to demonstrate the amount-in-controversy, the defendant estimated the plaintiff’s unpaid overtime and minimum wage claims to total over two million dollars. The defendant estimated that the plaintiff sought an estimated five hours of overtime per workweek at an estimated overtime rate of $26.78 (150% of the average regular hourly rate) for an estimated workforce, at any given time, of 100 during the applicable four-year period.

The defendant then estimated the plaintiff’s claim for failure to pay meal period premiums based on its estimate that 11,237 paychecks having been issued to putative class members, an average wage of $17.85, and two missed meal periods per pay period. Urban Outfitters also estimated the rest period premiums, the minimum wages claims, waiting time penalties claim, wage statement claim, business expenses claim, and attorneys’ fees.

The District Court, however, observed that such an estimation, which assumed time worked, estimated missed overtime per week without reference to actual workweeks worked, and estimated number of employees working at any one time, was unsupported by facts and was speculative at best. The District Court found that the defendant’s mere speculation fell grossly short of meeting the preponderance of the evidence burden.

The District Court remarked that given that the defendant was in the possession of the relevant payroll records, it would have been possible for the company to provide a more accurate estimated accounting and not rely upon extrapolation and speculation. In addition, the District Court found that the plaintiff did not allege that every putative class member was entitled to overtime and did not even allege the frequency in which the overtime violations occurred. Therefore, the District Court found that the defendant’s calculations seemed to require the District Court to make assumptions that lacked evidentiary support.

Accordingly, the District Court ruled that the defendant failed to show that the amount-in-controversy exceeded $5 million by preponderance of the evidence standard and remanded the case to the state court.