Companies facing the uncertainties of defending class actions in state court often seek ways to access the federal forum under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d).  The defendant in Amaya v. Apex Merchant Group, LLC, pending in the Eastern District of California, is trying to do just that.  In that suit, plaintiff alleges that defendant misclassified him and a class of other sales consultants as exempt employees, violating the California Labor Code and California Business & Professions Code.  At issue was whether the CAFA requirement that the “amount in controversy” exceed $5 million was satisfied.  The plaintiff omitted reference to any damages figures in the complaint. 

That left defendant in the awkward position of calculating the value of plaintiff’s claims against it – with the goal of exceeding $5 million.  Defendant submitted a declaration from a record custodian calculating damages at almost $8 million. He reviewed business records and identified 1,750 sales consultants who were employed and terminated during the relevant time frame.  Defendant calculated statutory penalties for violations of the minimum wage requirements  and meal and rest period violations under Cal. Labor Code §§ 226.7 and 1197.1, and used a “conservative” calculation for unpaid wages at discharge.  Plaintiff submitted no evidence contradicting defendant’s calculations. 

Nevertheless, the court could not conclude, based on the defendant’s evidence, that the amount in controversy more likely than not exceeded $5 million.  The court noted its “skeptic[ism] of high CAFA estimates that rely solely on declarations with non-specific human resource data.”  In these situations, the “chain of reasoning and its underlying assumptions must be reasonable.”  The court found that defendant’s calculations were largely based on unsupported assumptions.  Of note, defendant assumed a 100% violation rate for the meal/rest period and minimum wage violations, even though the Complaint did not allege a frequency of these violations.  Alleging that these violations occurred “at all material times” did not mean violations each and every time, according to the court.  Further, defendant assumed the maximum penalty for unpaid wages at discharge, which the court held was unreasonable without any supporting evidence.  Defendant tried to point out instances where it had made conservative estimates, but the court countered that “the fact defendant could have assumed a higher amount does not make its estimate any less speculative.” 

Defendant gets one more bite at the apple:  the court gave it 30 days to “submit more specific evidence” before the court rules on the plaintiff’s motion to remand.  If you represented defendant, how far would you go to provide evidence supporting damages calculations – essentially assisting plaintiff in proving its case – in order to remain in federal court?

Amaya v. Apex Merchant Group, LLC, No. 16-00050, 2016 WL 881152 (E.D. Cal. Mar. 8, 2016) (slip op.).