The Ninth Circuit recently interpreted the Supreme Court’s newly minted decision in Dart Cherokee Basin Operating Co., LLC v. Owens, holding that plaintiffs seeking remand of actions removed to federal court pursuant to the Class Action Fairness Act must present evidence when mounting challenges to a defendant’s evidentiary showing that the $5 million jurisdictional threshold has been met.
In Ibarra v. Manheim Investments, Inc., plaintiff filed a class action asserting violations of the California labor code for failure to pay minimum wages and overtime, provide meals and rest periods, furnish compliant wage statements, and pay timely wages upon termination. In a preemptive attempt to avoid CAFA removal, plaintiff expressly alleged in the complaint that the aggregate claims did not exceed $5 million.
Manheim attempted to remove the case under CAFA several times, only to have the district court send the case back to state court because it found Manheim did not present sufficient evidence to establish that more than $5 million was at stake.
Manheim appealed the district court’s most recent remand, arguing that it had sufficiently demonstrated that damages in the case exceeded $5 million by submitting a declaration from a senior employee detailing the number of shifts worked by non-exempt employees and assuming that one meal break was missed for each 5-hour shift, and one break was missed for each 3.5-hour shift. Based on these violations, Manheim estimated that potential penalties were $5,560,246 for missed meal periods and $6,448,295 for missed break periods, thereby putting the amount in controversy over the CAFA threshold.
Plaintiff challenged these calculations, arguing that Manheim’s assumption that a violation occurred on every shift was unreasonable. Plaintiff did not submit any evidence of his own to estimate actual damages.
The district court sided with plaintiff and remanded the case to state court.
Ninth Circuit says plaintiff should have submitted evidence
In its January 8, 2015 order, the Ninth Circuit vacated the district court’s remand, sending the case back to the court with the directive that it make a new ruling considering evidence presented by both sides.
Interestingly, the Court agreed that Manheim’s assumption of violations for every shift was unreasonable and could not be used to show the case’s potential value. However, citing Dart, the Court said that plaintiff was also required to submit his own evidence establishing how often the violations did occur, rather than simply stating that defendant’s calculation was wrong.
Although the Court was clear that the burden of proof remained with Manheim to establish more than $5 million in controversy, it enforced Dart’s directive that when “a defendant’s assertion of the amount in controversy is challenged…both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied.”
Practically, this decision does not change the fact that defendants bear the burden of establishing that CAFA requirements are met. However, it does make plaintiff-challenges to evidence in support of removal more difficult. Now, a plaintiff cannot simply poke holes at the defendant’s estimation of the amount in controversy, but must provide evidence tending to show that less than $5 million is at stake.
Plaintiff argued that requiring him to submit evidence in support of remand was an improper burden shift, as he should be allowed to “simply say nothing and offer no evidence of amount in controversy at all.” At least for now, the Ninth Circuit punted the issue, stating that the Supreme Court did not decide the procedure for how each side was to submit proof on remand and directing the district court to establish its own procedure.
Because the tension between defendant carrying the burden of proof and the requirement that both sides present evidence has been left open by the Ninth Circuit, we can expect to see some conflict at the district court level regarding how to interpret and implement this new decision. Particularly, a likely question is just how much evidence plaintiffs must introduce when challenging a CAFA removal.