In 2005, Congress passed the Class Action Fairness Act (CAFA), which creates federal jurisdiction over class actions involving more than 100 class members and $5 million in controversy. Plaintiffs have long attempted to avoid CAFA’s invocation of federal jurisdiction by stipulating to no more than $5 million in classwide damages. In Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345 (2013), the Supreme Court’s first CAFA case, the Court rejected such stipulations on the basis that, prior to class certification, a named plaintiff has no authority to legally bind unnamed class members.
Rodriguez v. AT&T Mobility Servs. LLC, 2013 WL 4516757 (9th Cir. Aug. 27, 2013), is the first published U.S. Court of Appeals opinion to analyze Standard Fire in detail. Specifically, the Ninth Circuit reevaluated its prior opinion in Lowdermilk v. US Bank Nat’l Ass’n, 479 F.3d 994 (9th Cir. 2007), which had significantly curtailed a defendant’s right to remove class action cases under CAFA.
In Lowdermilk, the complaint alleged that the classwide damages were under $5 million. The Lowdermilk court held that a plaintiff’s damages allegation was presumptively correct provided it was made in “good faith.” Accordingly, if a defendant wanted to remove a case to federal court under CAFA in which a plaintiff had tried to plead around CAFA’s jurisdictional minimum, the Ninth Circuit ruled that the defendant would have to rebut this presumption by showing to a “legal certainty” that the amount in controversy exceeded $5 million. Lowdermilk unfairly increased the evidentiary burden to a defendant from establishing the amount in controversy by a preponderance of the evidence to one requiring a showing of “legal certainty” associated with plaintiff’s alleged damages.
In Rodriguez, the Ninth Circuit expressly overruled Lowdermilk, holding that it was “clearly irreconcilable” with Standard Fire. The court noted that Lowdermilk was based on the theory that a plaintiff was the “master of his complaint,” including his damages claim. Standard Fire made clear that this principle is not applicable in the class action context. For CAFA purposes, the relevant question is not the face of the pleading, but the aggregate value of all claims which could be asserted by all members of the class. This requires a court to look beyond the “four corners of the complaint.” Rodriguez is a welcome development for class action defendants in California, including employers, making it easier to remove putative class action cases to federal court.
In related news, the Ninth Circuit held in Urbino v. Orkin Servs. of Cal., Inc., 2013 WL 4055615 (9th Cir. Aug. 13, 2013), that claims under the Private Attorneys General Act of 2004 (“PAGA”) cannot be aggregated to satisfy the $75,000 jurisdictional minimum required for removal of actions based on diversity of citizenship. The court reasoned that “Defendants’ obligation to [the employees] is not ‘as a group,’ but as ‘individuals severally.’ Thus diversity jurisdiction does not lie because their claims cannot be aggregated.”