Class Action Fairness Act of 2005 | CALIFORNIA CLASS ACTION LAW

March 19, 2013

U.S. Supreme Court Rules a Putative Class Action Plaintiff May Not Use Stipulation to Defeat CAFA Amount in Controversy

Official portrait of Supreme Court Justice Stephen Breyer. (Photo credit: Wikipedia)

In a unanimous opinion written by Justice Breyer, the U.S. Supreme Court held today that a putative class representative’s stipulation that he and the class would seek less than $5 million in damages does not defeat federal jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”). Standard Fire Insurance Co. v. Knowles, No. 11-1450, 586 U.S. __ (Mar. 19, 2013).

The question presented concerned a class-action plaintiff who stipulates, prior to certification of the class, that he, and the class he seeks to represent, will not seek damages that exceed $5 million in total. Does that stipulation remove the case from CAFA’s scope?

The Court concluded no, reasoning that stipulations must be binding, and a “plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified.”

We do not agree that CAFA forbids the federal court to consider, for purposes of determining the amount in controversy, the very real possibility that a nonbinding, amount-limiting, stipulation may not survive the class certification process. This potential outcome does not result in the creation of a new case not now before the federal court. To hold otherwise would, for CAFA jurisdictional purposes, treat a nonbinding stipulation as if it were binding, exalt form over substance, and run directly counter to CAFA’s primary objective: ensuring “Federal court consideration of interstate cases of national importance.” §2(b)(2), 119 Stat. 5. It would also have the effect of allowing the subdivision of a $100 million action into 21 just-below-$5-million state-court actions simply by including nonbinding stipulations; such an outcome would squarely conflict with the statute’s objective.

The Court concluded that “the stipulation at issue here can tie Knowles’ hands, but it does not resolve the amount-in-controversy question in light of his inability to bind the rest of the class.”

By CHARLES H. JUNG

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October 14, 2010

Eastern District Remands Class Action for Failure to Meet CAFA Amount in Controversy

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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. Read the rest of this entry »

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September 7, 2010

Central District Remands Class Action for Defendant’s Failure to Prove Amount in Controversy Under CAFA

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The Central District remanded a putative minimum wage and overtime class action suit in Munoz v. Central Parking Sys., Inc., No. CV 10-6172 PA (RCx), 2010 WL 3432239 (C.D. Cal. Aug. 30, 2010) (unpublished).

Plaintiff’s Complaint attempted to avoid removal, stating “[i]t is believed that the total sum owed to the Class alleged herein is less than $5 million, based upon the anticipated size of the Class and the amount in controversy for each member of the Class.” Id. *1. Read the rest of this entry »

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September 6, 2010

Eastern District Holds That Plaintiffs May Rely on a “Few Representative Inquiries” and Extrapolate to the Class

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The court in Adoma v. University of Phoenix, Inc., No. CIV. S-10-0059 LKK/GGH, 2010 WL 3431804 (E.D. Cal. Aug. 31, 2010 (slip op.) held that even where plaintiff’s proposed method of “reconstructing records of hours worked . . . will be imperfect”, plaintiffs may rely on “a few representative inquiries whose results will be extrapolated to the class.” Read the rest of this entry »

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August 16, 2010

Morgan Stanley Wage and Hour Class Action Remanded to San Diego Superior Court for Failure to Show Diversity or Amount in Controversy

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Judge James Lorenz faced a remand motion in Martinez v. Morgan Stanley & Co., Inc., Civil No. 09cv2937-L(JMA), 2010 WL 3123175 (S.D. Cal. Aug. 9, 2010). The court remanded, holding that Defendants did not meet their burden of showing that it is more likely than not that the matter in controversy for the class action exceeds $5 million or that Plaintiff’s individual claims exceed $75,000.

Defendants removed this wage and hour class action from state court based on 28 U.S.C. Sections 1332 and 1441, or in the alternative, on the Class Action Fairness Act (“CAFA”), 28 U.S.C. §§ 1332(d) and 1453. Plaintiff filed a motion to remand arguing that Defendants failed to establish the requisite diversity of citizenship and the jurisdictional amount in controversy. Read the rest of this entry »

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August 13, 2010

Southern District of California Denies Remand in Wage & Hour Case Asserting CAFA Jurisdiction

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In Johnson v. U.S. Vision, Inc., No. 10-CV-0690 BEN (CAB), 2010 WL 3154847 (S.D. Cal. Aug. 9, 2010) the Southern District of California faced a remand motion in a wage and hour case that had been removed pursuant to the Class Action Fairness Act (“CAFA”), 28 U.S.C. §§ 1332, 1441, 1453.

Judge Roger T. Benitez denied the motion to remand. Defendant presented a calculation of damages, supporting its calcualtions with declaration from, among other people, the Assistant Controller, Operations, for U.S. Vision, Inc., responsible for enforcing Defendants’ payroll policies and procedures. The declaration set forth Plaintiff’s most recent hourly rate of pay, as well as the specific number of optical managers and optechs employed during the Class Period, average hourly rates of pay for managers and optechs, number of employees who separated their employment with Defendants, and number of possible wage statements for each employee per year.

Plaintiff argued that Defendants miscalculated the amount in controversy because:

Defendants erroneously assumed “each class member was damaged to the same extent that Plaintiff Johnson was, and that every putative class member, among other things, worked off the clock and incurred a break violation every single day of the entire class period.” Mot. 6. Plaintiff emphasizes that Defendants have access to more specific figures to calculate the amount in controversy and that “each [class] member can be identified using information contained in Defendants’ payroll, scheduling and personnel records.” Compl. ¶ 39.

But the Court held that absent a “persuasive argument that Defendants are required to prove actual damages in order to remove this action, however, the Court must consider the amount put in controversy by the Complaint, not the ultimate or provable amount of damages.” (citing Rippee v. Boston Market Corp., 408 F. Supp. 2d 982, 986 (S.D. Cal. 2005).) The Court found that, having based their calculations on allegations provided in the Complaint, Defendants proved with a legal certainty that CAFA’s jurisdictional threshold is satisfied.

Despite Plaintiff’s attempt to provide supplemental information in the motion to remand, Defendants were entitled to, and did, use the factual allegations in the Complaint to calculate the amount in controversy. See Gaus v. Miles, Inc., 980 F.2d 564, 567 (9th Cir. 1992) (holding that defendant must use specific factual allegations or provisions in the complaint to support its argument of proper removal). The Court finds that Defendants provided detailed and competent evidence supporting their calculations and showing, to a legal certainty, that the jurisdictional threshold under CAFA is met. To the extent subsequent events show that jurisdiction would not be proper, the Court can address remand at that time. 28 U.S.C. § 1447(c).

By CHARLES H. JUNG

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