Why it matters

The amount in controversy required for jurisdiction under the Class Action Fairness Act (CAFA) should include future attorneys’ fees recoverable by statute or contract, the U.S. Court of Appeals for the Ninth Circuit ruled in a wage and hour class action, reversing a district court’s order that had sent the case back to state court. When Grant Fritsch sued Swift Transportation Company in state court, the employer filed a notice of removal, arguing that future attorneys’ fees (in addition to recovery for overtime, meal periods and appropriate wage statements, as well as statutory penalties) in the case tipped the potential recovery over the $5 million benchmark required for a removal under CAFA. The district court disagreed, refusing to include attorneys’ fees that had yet to accrue, and remanded the case to the state court. But the Ninth Circuit reversed, holding that a court must include future attorneys’ fees recoverable by statute or contract when assessing whether the amount in controversy requirement is met under CAFA. If the law entitles the plaintiff to future attorneys’ fees if the action succeeds, then there is no question that future attorneys’ fees are “at stake” in the litigation and should be included in such a calculation, the panel ruled.

Detailed discussion

A driver for Swift Transportation, Grant Fritsch filed a wage and hour class action in San Bernardino Superior Court. According to his third amended complaint, Fritsch alleged that Swift denied him and other employees proper overtime pay, meal periods and appropriate wage statements. The complaint sought wages and premiums owed, prejudgment interest, statutory penalties, attorneys’ fees pursuant to the California Labor Code and costs of suit. He also asked for equitable relief under California’s Unfair Competition Law and statutory damages under California’s Private Attorneys General Act (PAGA).

As part of a mediation brief, Fritsch provided Swift with a damages chart that listed, as of Oct. 18, 2017, a total of $5,924,104, exclusive of PAGA penalties: $1,806,080 for unpaid overtime wages, $361,216 for unpaid double-time wages, $531,404 for interest on unpaid overtime wages, $948,192 for unpaid meal period premiums, $948,192 for unpaid rest period premiums, $515,000 for wage statement penalties, $664,020 for waiting time penalties and $150,000 for attorneys’ fees and costs.

Subtracting the interest payments but adding an estimate for future attorneys’ fees, Swift informed the court that the amount in controversy was $6,553,375. The district court deducted the amount for unpaid rest period premiums (because the complaint did not list such a claim) and refused to include future attorneys’ fees. This left the total amount of damages in controversy at $4,778,475, causing the court to rule that it lacked jurisdiction as a result. The court then remanded the case to the state court.

Swift appealed. While the petition was pending, the Ninth Circuit issued a decision in Chavez v. JPMorgan Chase & Co., where the federal appellate panel held that “the amount in controversy is not limited to damages incurred prior to removal,” but rather “is determined by the complaint operative at the time of removal and encompasses all relief a court may grant on that complaint if the plaintiff is victorious.”

Tackling the question of whether the amount in controversy requirement was met, the court explained that it is the “amount at stake in the underlying litigation,” including damages (compensatory, punitive or otherwise), the costs of complying with an injunction and attorneys’ fees awarded under fee-shifting statutes or contract.

“We conclude, in light of Chavez and our precedents, that a court must include future attorneys’ fees recoverable by statute or contract when assessing whether the amount-in-controversy requirement is met,” the panel wrote. “We have long held (and reiterated in Chavez) that attorneys’ fees awarded under fee-shifting statutes or contracts are included in the amount in controversy. As explained in Chavez, when we assess the amount in controversy at the time of removal, we must include all relief to which a plaintiff is entitled if the action succeeds. Accordingly, if the law entitles the plaintiff to future attorneys’ fees if the action succeeds, ‘then there is no question that future [attorneys’ fees] are ‘at stake’ in the litigation,’ and the defendant may attempt to prove that future attorneys’ fees should be included in the amount in controversy.”

Applying this rule to Fritsch’s complaint, the Ninth Circuit vacated the district court’s order. “Because the law entitles Fritsch to an award of attorneys’ fees if he is successful, such future attorneys’ fees are at stake in the litigation, and must be included in the amount of controversy,” the court held. “Accordingly, we must remand to allow the district court to determine if Swift can carry its burden of proving that the amount in controversy (including future attorneys’ fees) exceeds the jurisdictional threshold.”

The panel disagreed with Fritsch’s argument that future attorneys’ fees are inherently speculative and can be avoided by the defendant’s decision to settle an action. District courts are “well equipped” to determine whether defendants have carried their burden of proving future attorneys’ fees by a preponderance of the evidence, the court stated, and to determine when a fee estimate is too speculative because of the likelihood of a prompt settlement.

To read the opinion in Fritsch v. Swift Transportation Co. of Arizona, LLC, click here.