CALIFORNIA CLASS ACTION LAW

The United States District Court for the Eastern District of California remanded a class action case for failure to meet the $5,000,000 amount in controversy requirement under the Class Action Fairness Act (“CAFA”).  Rhoades v. Progressive Casualty Insurance Co., Inc., No. 2:10-cv-1788-GEB-KJM, 2010 WL 3958702 (E.D. Cal. Oct. 8, 2010).  Plaintiffs alleged that they and the members of the putative class were “employed in the State of California by the Defendant[ ] to adjust insurance claims and their positions were known as ‘Claims Adjuster,’ ‘Claims Generalist Associate,’ or similar titles” during the past four years. Id. Plaintiffs and members of the putative class were allegedly “not paid overtime wages for all hours worked” and were not “provided accurate itemized wage statements.” Id.

Apparently attempting to avoid federal court jurisdiction, Plaintiffs also alleged that “the individual members of the classes herein have sustained damages under the seventy-five thousand … jurisdictional threshold and that the aggregate claim is under the five million dollar … threshold, [and argue therefore] removal under the CAFA would be improper.” Id. Plaintiffs state in their prayer for relief: “Plaintiffs are informed and believe that the damages, back-wages, restitution, penalties, interest and attorneys’s [sic] fees do not exceed an aggregate of $4,999,999.99 and that Plaintiffs’ individual claims do not exceed $74,999.99.” Id.

CAFA “vests district courts with ‘original jurisdiction of any civil action in which, inter alia, the amount in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs,’ and in which the aggregate number of proposed plaintiffs is 100 or greater, and any member of the plaintiff class is a citizen of a state different from any defendant.” Id. *1 (citing Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 F.3d 994, 997 (9th Cir.2007) (quoting 28 U.S.C. s 1332(d)(2))).

Standard

The court stated the standard set forth in Lowdermilk, discussed as follows in Guglielmino v. McKee Foods Corp.,506 F.3d 696 (9th Cir.2007):

[I]n the CAFA context[,] … when a state-court complaint affirmatively alleges that the amount in controversy is less than the jurisdictional threshold, the “party seeking removal must prove with legal certainty that CAFA’s jurisdictional amount is met.” Two animating principles informed our judgment in Lowdermilk. The first is that federal courts are courts of limited jurisdiction which we will strictly construe. The second principle is that the plaintiff is “master of her complaint” and can plead to avoid federal jurisdiction. Thus, in Lowdermilk, by adopting “legal certainty” as the standard of proof, “we guard[ed] the presumption against federal jurisdiction and preserve[d] the plaintiff’s prerogative, subject to the good faith requirement, to forgo a potentially larger recovery to remain in state court.”

Id. *2 (citing Guglielmino, 506 F.3d at 699-700 (quoting Lowdermilk, 479 F.3d at 998- 1000)).

The court held that Defendant failed to meet the “legal certainty” standard for the amount in controversy. Id. *3

However, Defendant has over estimated the terminated class by not limiting its estimate to those “who were not paid all wages due upon termination,” which is alleged in the FAC. (FAC P 12.)  In addition, Defendant has not presented evidence on the number of class members in the overtime subclass, but instead assumes that the 544.53 individuals in the proposed class also comprise the overtime subclass. However, Defendant offers no evidence that all members of the proposed class “did not receive overtime wages for all hours worked in excess of eight (8) hours per day and/or forty hours (40) hours per week[.]” . . . .

Defendant could have better tailored its estimate of the size of the overtime class by addressing Plaintiffs’ specific allegations with regard to the overtime subclass. Therefore, it is unclear how many individuals are included in the overtime subclass and what amount in controversy is involved with the claims of this subclass.

Id. *4.

Likewise with respect to the claim for unpaid overtime, the court held that Defendant failed to present sufficient evidence to meet the amount in controversy:

However, Defendant’s provides insufficient evidence in support of its supposition that 544.53 class members comprise the overtime subclass, and that each member of this subclass worked fifty-two weeks a year. “[A]bsent more concrete evidence, it is nearly impossible to estimate with any certainty the actual amount in controversy.” Lowdermilk, 479 F.3d at 1001.

Id. *5.

The court concluded that “Defendant has left the Court to speculate as to the value of Plaintiffs’ claims for relief, and “whether or not members of [a] class qualify for penalty [and other damages].” Id. *7 (citing Lowdermilk, 479 F.3d at 1002).  “[S]uch speculation does [not] meet the ‘legal certainty’ standard.”  Id. Accordingly, the court remanded the case.

Judge

District Judge Garland E. Burrell, Jr.

By CHARLES JUNG