Butterworth v. American Eagle Outfitters, Inc., 2011 WL 4905641 (E.D. Cal. Oct. 14, 2011).

In this action, a District Court in California found that an allegation in the complaint limiting the damages to under $5 million could be negated with a showing by preponderance of the evidence that the claim actually exceeds CAFA threshold.

The plaintiff (whose wife is famous for her maple syrup), a sales associate, individually and on behalf of similarly situated employees brought an action in the Stanislaus County Superior Court alleging wage and hour claims under California law. (Is there any employer in California that has not been sued in the last year for alleged violation of California’s wage and hour law?)

The plaintiff claimed that he worked as a sales associate, which was a non-exempt hourly paid position, at the defendant’s retail stores in Capitola and San Jose, California. The plaintiff’s duties included helping customers pick out clothing, opening fitting rooms, operating cash registers, etc. The plaintiff alleged six violations of California labor code including, unpaid minimum wages; unpaid reporting time; a claim for violating the California Private Attorneys General Act (“PAGA”); and a claim for violating the California Business and Professions Code.

The defendant removed the action to the federal court under CAFA; and the plaintiff moved to remand the case to the state court.

The parties agreed that there were over 100 class members and that at least one class member was citizen of a state different from the state of any defendant. The parties, however, disagreed as to whether the amount-in-controversy exceeded $5 million.

The court noted that under ‘Jurisdiction & Venue’ in the complaint, the plaintiff affirmatively stated that all his relief together was less than $5 million. (Sneaky, huh?)

The defendant, however, contended that the class consisted of approximately 14,314 individuals; and when the number of possible class members was combined with the number of claims, the amount-in-controversy far exceeded $5 million.

The Court further recognized that discovery had not commenced, but in light of the defendant’s facts, the plaintiff could not rest on his desire to be in state court. Accordingly, the Court concluded that it had no means of determining how the plaintiff, in good faith, limited the amount-in-controversy.

The defendant, however, attempted to establish by preponderance of evidence that the amount-in-controversy was in excess of $ 5 million. For example based solely on PAGA penalties on the plaintiff’s fourth cause of action – failure to provide seating claim – the labor code provides for a civil penalty of $100 for each aggrieved employee, per pay period, for the first violation, and $200 each for each aggrieved employee, per pay period for each subsequent violation. A one-year statute of limitations applied under PAGA. The defendant contended that around 5,153 employees worked in its stores for nearly 57,445 pay periods. Applying the formula: (Total initial pay periods during PAGA limitations period: 5,298) x (Applicable penalty under PAGA for initial violations: $100) ] + [ (Total subsequent pay periods during PAGA limitations period: 52,147) x (Applicable penalty under PAGA for subsequent violations: $200) ], the defendant reached that the class would be entitled to $10,959,200.

In response, the plaintiff failed to offer any rebuttal to the defendant’s calculation that would bring the class claim to under $5 million. Therefore, based only on the PAGA penalties related to the failure to provide seating claim, the court found that amount-in-controversy exceeded $5 million.

The Court likewise found that the plaintiff’s sixth cause of action for violation of labor code § 226(a) – requires an employer to furnish an accurate, complete and itemized wage statement to each employee – demanded damages in excess of $ 5 million. The Court explained that § 226(a) allows recovery of the greater of all actual damages or $ 50 for the initial pay period, and $ 100 per employee for each subsequent pay period violation. Applying the formula: (Initial pay periods worked by employees during the one year statute of limitations period: 5,298) x (Applicable penalty for initial violations: $50)] + [(Subsequent pay periods worked by employees during the one year statute of limitations period: 52,147) x (Applicable penalty for subsequent violations: $100)], the defendant arrived at $5,479,600.

Accordingly, the Court concluded that the amount-in-controversy was definitely in excess of $5 million, and denied the plaintiff’s motion to remand.

CAFA Law Blog readers—tune in tomorrow, March 15, to find out if the District Judge agreed with the Magistrate Judge.