Trahan v. U.S. Bank, N.A., 2014 WL 116606 (N.D. Cal. Jan. 13, 2014).
A District Court while denying a motion to remand opined that the preponderance of the evidence standard applied, and held that the legal certainty standard is not applicable in actions involving absent class members.
The plaintiff brought an action on behalf of Business Banking Officers, including trainees for the Business Banking position, alleging that the defendant failed to reclassify such employees as non-exempt employees even after Duran v. U.S. National Bank Association, Alameda Co. Sup.Ct. Case No.2001–035537, held that such employees had been misclassified as exempt. The plaintiff alleged that because of this misclassification, the putative class was not paid overtime, and rest and meal breaks.
After the defendant removed the action from Alameda County Superior Court to the District Court, the Ninth Circuit affirmed the order of the District Court granting the plaintiff’s motion to remand. Thereafter, the plaintiff filed his first amended complaint wherein he dismissed, without prejudice, the claims for conversion, meal and rest break violations, and for statutory penalties. The plaintiff also removed trainees from the class definition, and alleged that the amount in controversy, inclusive of damages, restitution, attorneys’ fees, penalties and the value of injunctive and declaratory relief and exclusive of interests of costs, was less than $5,000,000.
The defendant again removed the action contending that CAFA jurisdiction existed, and specifically asserting that the attorneys’ fees had reached a level that exceeded $5 million (the amount in controversy requirement under CAFA), particularly when combined with the aggregate damages and penalties sought and in controversy. This time around, the District Court denied the plaintiff’s motion for remand.
The first bone of contention was whether the defendant removed the action in a timely manner. Under § 1446(b)(1), a defendant must file a notice of removal within 30 days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based. Additionally, § 1446(b)(3) provides that if the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one or which has become removable.
Further, the District Court noted that the Ninth Circuit in Roth v. CHA Hollywood Medical Center, L.P., 720 F.3d 1121, 1125 (9th Cir. 2013) held that §§1441 and 1446, read together, permit a defendant to remove outside the two 30-day periods on the basis of its own information, provided that it has not run afoul of either of the 30-day deadlines. Moreover, in Harris v. Bankers Life and Casualty Company, 425 F.3d 689, 694 (9th Cir. 2005), the Ninth Circuit held that notice of removability under §1446(b) is determined by examining the four corners of the applicable pleadings, not through subjective knowledge or a duty to make further inquiry. Thus, the District Court opined that the defendant does not have a duty of inquiry if the initial pleading or other document is indeterminate with respect to removability.
Here, the plaintiff did not expressly state that the amount in controversy would exceed $5,000,000 in the motion for class certification or the declarations, and he did not make any specific assertions about the amount of damages that might be available to the class or the value of injunctive relief. Further, because these documents did not contain information that would permit the defendant to make a simple mathematical calculation, the District Court remarked that these documents were indeterminate as to the amount in controversy, and that pursuant to Harris and Roth, the defendant was not obliged to engage in the extrapolations to determine whether the amount in controversy exceeded $5,000,000.
Accordingly, the District Court opined that the removal was timely.
The second ground for debate involved the standard of review. While the defendant relied on Standard Fire Insurance Company v. Knowles, U.S., 133 S.Ct. 1345, 1348- 49 (2013), and Rodriguez v. AT & T Mobility Services, LLC, 728 F.3d 975 (9th Cir. 2013) and asserted that the preponderance of the evidence standard applied, the plaintiff argued that the legal certainty standard set forth in Lowdermilk v. U.S. Bank National Association, 479 F.3d 994 (9th Cir. 2007) was applicable.
Standard Fire held that a plaintiff cannot escape CAFA jurisdiction by mere stipulation that the amount in controversy is less than $5,000,000 because any stipulation prior to class certification is not binding on absent class members. Standard Fire opined that, under CAFA, to determine whether the jurisdictional threshold is met, a court must aggregate the claims of persons (named or unnamed) who fall within the definition of the proposed or certified class.
Further, in Rodriguez, the Ninth Circuit held that because its reasoning in Lowdermilk was clearly irreconcilable with the Supreme Court’s reasoning in Standard Fire, Lowdermilk had been effectively overruled, and that the proper burden of proof imposed upon a defendant to establish the amount in controversy is the preponderance of the evidence standard. Rodriguez also noted that Standard Fire directed courts to consider the potential claims of absent class members to determine the amount in controversy, and that Lowdermilk’s legal certainty standard is a consequence of plaintiff’s ability to plead to avoid federal jurisdiction, which principle is not viable in actions involving absent class members.
Here, the District Court observed that although the plaintiffs alleged that the amount in controversy was less than $5,000,000, pursuant to Standard Fire, those allegations cannot bind the class, and although a class had now been certified, and assuming arguendo that the plaintiff could legally bind the class without providing notice of that stipulation, it did not resolve the issue, because the plaintiff was not willing to stipulate that the amount in controversy, including attorneys’ fees, was less than $5,000,000.
Accordingly, the District Court stated that the preponderance of the evidence standard applied.
Next, the District Court stated that it was undisputed that overtime damages and waiting time penalties alone would not trigger CAFA’s jurisdictional minimum, however, the defendant contended that the attorneys’ fees tipped the jurisdictional balance. The District Court noted that if an underlying statute authorizes an award of attorneys’ fees, such fees may be included in the amount in controversy, and observed that a majority of the district courts had concluded that a court should focus on the amount of attorneys’ fees accrued or incurred at the time of removal.
Here, the defendant proffered evidence of the amount of fees it had incurred to date, evidence relating to the plaintiff’s counsel’s hourly rates, and records from the Duran case setting forth the number of hours the plaintiff’s counsel expended on that case.
Considering the evidence provided, the District Court opined that the defendant had adequately showed that it was more likely than not that the plaintiff had incurred attorneys’ fees in an amount that placed the amount in controversy above $5,000,000, and accordingly, denied the plaintiff’s motion for remand.