In Ibarra v. Manheim Investments, ___ F.3d ___ (9th Cir. January 8, 2015), the Ninth Circuit Court of Appeals vacated the order of the U.S. District Court for the Southern District of California (Judge Bencivengo) remanding a putative wage and hour class action to state court due to defendant’s failure to prove that at least $5M was at stake, as required by the Class Action Fairness Act (“CAFA”).
Plaintiff filed a putative class against his former employer in California state court for “failure to pay minimum wages and overtime, failure to provide meal and rest periods, failure to furnish compliant wage statements, and failure to pay timely wages upon termination.” In his complaint, plaintiff explicitly alleged that “the aggregate claims of the individual class members do not exceed the $5,000,000 jurisdictional threshold for federal court under [CAFA].” Nevertheless, defendant removed the action to federal court on the ground that the amount in controversy on plaintiff’s meal and rest period claims alone was well over the jurisdictional minimum. Yet, the district court remanded the action to state court, concluding that defendant had not satisfied its burden. Defendant appealed.
The appellate court disagreed with the district court. In determining the amount in controversy, the court noted, courts first look to the complaint. Generally, “the sum claimed by the plaintiff controls if the claim is apparently made in good faith.” [citations omitted] When the amount is unstated (or understated), however, defendant bears the burden of showing by a preponderance of the evidence that the aggregate amount in controversy exceeds $5 million. “CAFA’s requirements are to be tested by consideration of real evidence and the reality of what is at stake in the litigation, using reasonable assumptions underlying the defendant’s theory of damages exposure.” In this case, defendant’s “proof” was a declaration from its senior director of employee services and administration, which estimated – by assuming one missed meal period and one missed break period per employee per shift – that the exposure on plaintiff’s meal and rest period claims was over $12M. The complaint, however, did not allege that defendant “universally, on each and every shift, violate[d] labor laws by not giving rest and meal breaks.” Thus, defendant’s reliance on an assumption about the rate of its alleged labor law violations “was not grounded in real evidence.” On the other hand, plaintiff also failed to “assert an alternative violation rate grounded in real evidence, such as an affidavit by [plaintiff] asserting how often he was denied meal and rest breaks.” Accordingly, the action was remanded so that both sides could submit proof related to the disputed amount in controversy. In considering this evidence, the appellate court admonished the district court to bear in mind that “under the preponderance of the evidence standard, if the evidence submitted by both sides is balanced, in equipoise, the scales tip against federal-court jurisdiction.”