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A California District Court Holds that Defendant’s Proof of Amount in Controversy Falls Short of Both the Preponderance of the Evidence and the Legal Certainty Standards

In Naranjo v. General Nutrition Corp., No. C 12-01680, 2012 U.S. Dist. Lexis 80602 (N.D. Cal. June 11, 2012) the plaintiff filed a putative class action for the defendant’s alleged violation of California’s wage-and-hour laws.  The prayer for relief did not contain the amount in controversy, but the complaint contained the following statement:  [T]he individual claims of Plaintiff Naranjo and the members of the Class and Subclass as defined herein, including each putative Class Member’s pro-rata share of the attorneys’ fees and all other requested relief, are under the $75,000 jurisdictional threshold for federal court, and the aggregate claims, including attorneys’ fees and all other requested relief, are less than the $5 million required to establish federal jurisdiction under the Class Action Fairness Act of 2005.”  The defendant removed the case pursuant to CAFA, alleging that the amount in controversy exceeded $5 million.  The Notice of Removal was supported by the declaration of a company human resources generalist who provided a detailed calculation of the amount of damages based upon the allegations in the complaint.  She concluded that the amount placed in controversy by the plaintiff’s allegations was at least $6.8 million.

The plaintiff moved to remand the action to state court and the parties disputed what burden of proof the defendant had to satisfy in order to establish CAFA’s amount in controversy.  The court noted that the Ninth Circuit follows three different burdens of proof.  First, there is a presumption that CAFA’s jurisdictional amount has been satisfied if the complaint contains damages allegations above CAFA’s jurisdictional threshold, unless it appears to a legal certainty that the claim is lower than that amount.  Second, if the amount in controversy is not clear from the face of the complaint, the removing party must show by a preponderance of the evidence that CAFA’s amount in controversy has been met.  Finally, if the plaintiff specifically pleads that the amount of damages sought is less than the jurisdictional requirement, then the removing party must prove to a legal certainty that CAFA’s amount in controversy has been met. 

The defendant argued that the preponderance of the evidence standard should apply pursuant to Guglielmino v. McKee Foods, Corp., 506 F.3d 696 (9th Cir. 2007).  In Guglielmino, the plaintiff included a statement in the complaint that the damages plus the value of the injunctive relief sought were below the jurisdictional minimum, but the plaintiff also sought attorneys’ fees and penalties and the complaint did not state that the “total dollar amount in controversy” was below the required jurisdictional amount. The Ninth Circuit followed the preponderance of the evidence standard.  The defendant in Naranjo argued that like Guglielmino, the instant case involved no mention of a total dollar amount in controversy in the prayer for relief and the plaintiff sought injunctive and statutory relief, including penalties so the preponderance of the evidence standard should apply.  The district court disagreed.   First, it observed that the disclaimer does not need to appear in the prayer for relief in order to be effective.  What matters is that the complaint be unambiguous as to the value of the relief sought.  Second, the plaintiff in the instant action did not omit categories of relief sought from her statement as to the amount in controversy. Instead she made it clear that “the aggregate claims, including attorneys’ fees and all other requested relief” were less than the $5 million.  Thus the legal certainty burden of proof followed in Loudermilk v. U.S. Bank National Assoc., 479 F.3d 994 (9th Cir. 2007) applied.

Next, the court concluded that the defendant had not proved either to a legal certainty or by a preponderance of the evidence that CAFA’s amount in controversy had been met because the damages calculation contained in the declaration filed by GNC in support of removal was based upon too many unsupported assumptions.  These assumptions included : (1) that each putative class member worked 2.5 hours of overtime pay “every week” when the allegation in the complaint was that the putative class members only worked overtime during “certain workweeks”; (2) that each putative class member claimed failure to provide a proper meal or rest break twice a week, when the allegation in the complaint was that such breaks were “routinely” denied to employees; and (3) that each terminated employee failed to timely receive timely pay wages at separation, when the allegation in the complaint was that GNC consistently failed to pay timely wages at separation. 

© 2022 Dinsmore & Shohl LLP. All rights reserved.National Law Review, Volume II, Number 222
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About this Author

Gabrielle Hils, Complex Litigation Lawyer, Dinsmore, law firm
Partner

Gabrielle Hils’ diverse experience and knowledge of complex litigation, including class action proceedings, has allowed her to guide a variety of clients through the legal labyrinth, ranging from small manufacturers to multinational corporations. With a thorough understanding of multidistrict, class action, and mass tort proceedings, Gabrielle is adept at tailoring her approach to meet the unique needs of her clients. She has developed her skills over many years of service as a lead case management attorney directing pretrial discovery and motion practice in products...

513-977-8175
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