The Ninth Circuit recently held that a declaration from the defendant’s comptroller stating that the defendant’s sales of the challenged product during the class period exceeded $5 million was sufficient to satisfy the amount-in-controversy requirement of the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2) (“CAFA”).   Watkins v. Vital Pharmaceuticals, Inc., No. 13-55755 (9th Cir. July 2, 2013).  The Ninth Circuit reversed the federal trial court’s remand of the action to state court and directed the federal court to exercise jurisdiction over the case.  The decision adds clarity to what evidence may be adduced to establish federal court jurisdiction under CAFA and provides guidance to businesses seeking to remove state court putative class actions to federal court.

Background

Plaintiff Gabe Watkins (“Plaintiff”) filed a putative class action against Vital Pharmaceuticals, Inc. (“Vital”) in California state court alleging that Vital distributed ZERO IMPACT protein bars that were erroneously marketed and labeled as having little to no impact on blood sugar.  Plaintiff asserted California state law claims and alleged a nationwide class of consumers.

Vital removed the action to federal court under CAFA.  CAFA provides an alternative basis for federal court subject matter jurisdiction, but requires, among other things, that the combined claims of all class members exceed $5 million exclusive of interest and costs.  At issue on appeal, was whether the amount-in-controversy requirement was met.

Vital submitted two declarations in support of its assertion that more than $5 million was in controversy.  First, Vital submitted a declaration from its counsel.  Defense counsel’s declaration pointed out Plaintiff’s own allegations in his Complaint regarding the amount in controversy.  Specifically, Plaintiff alleged that “the aggregate damages sustained by the Class are likely in the millions of dollars.”  The declaration also referred to the fact that Plaintiff sought, in addition to damages, restitution, disgorgement of profits, and attorneys’ fees based on sales to thousands of consumers nationwide.  Second, Vital submitted a declaration from its comptroller.  In that declaration, the defendant’s comptroller stated that Vital’s nationwide sales of its ZERO IMPACT bars during the four-year class period exceeded $5 million.

Despite Vital’s showing, the district court remanded the case to state court.  The district court held that Vital did not meet its burden of proving CAFA’s amount in controversy requirement.  The district court found defense counsel’s declaration vague and conclusory and downplayed the sales data as mere averments without mentioning the comptroller’s declaration.

On appeal, the Ninth Circuit agreed with Vital that the undisputed declaration from its comptroller was sufficient to establish that CAFA’s $5 million amount in controversy requirement was met.

Implications

The Vital Pharmaceuticals decision provides guidance to businesses seeking removal of putative class actions from state to federal court under CAFA and to lower courts considering remand of removed cases.  It is unclear, however, whether federal district courts in the Ninth Circuit would reach the same result under different facts and with a more aggressive plaintiff’s attorney.  For example, the Ninth Circuit specifically noted that: (1) the comptroller’s declaration went uncontroverted by Plaintiff; and (2) Plaintiff filed a document stating that he took no position on Vital’s appeal and that he declined to file a brief.  That said, Plaintiff’s counsel here may have recognized and been swayed by the difficulty in challenging the sales data proffered by Vital Pharmaceuticals.