An Employer Has the Burden of Proving Its Jurisdictional Allegations for CAFA Removal Are Reasonable.

Harris v. KM Indus., Inc., 980 F.3d 694 (9th Cir. Nov. 13, 2020)

Plaintiff filed a wage and hour class action against Defendant in state court, including for meal and rest breaks. Defendant removed the action to federal court under the Class Action Fairness Act of 2005 (“CAFA”), which requires a removing defendant to allege the amount in controversy exceeds $5 million.[i] Plaintiff moved to remand, facially attacking Defendant’s allegations. The district court, after reviewing the evidence, remanded the action back to state court, finding that Defendant based its claimed amount ($7,163,325.00) by incorrectly assuming all putative class members worked shifts long enough to be entitled to meal and rest periods. Specifically, Defendant’s human resources director submitted two declarations setting forth the approximate number of putative class members (442), their average hourly rate of pay ($22.94), and an aggregate of their workweeks (39,834) without identifying the number or length of the shifts the class members worked or what constituted a fulltime shift or workweek. In other words, Defendant assumed that all 442 putative class members were also members of the meal and rest period subclasses and that each member had missed one meal period and two rest periods per workweek in the 39,834 workweeks. The district court agreed with Plaintiff that Defendant had not met its burden of proving by a preponderance of the evidence the legitimacy of its calculations, noting an increased likelihood that Defendant had “grossly exaggerated” the amount in controversy, and remanded the matter back to state court. The Court of Appeals for the Ninth Circuit affirmed the remand, finding that Plaintiff had not only mounted a facial attack on Defendant’s assumptions (which would not have required Defendant to present evidence akin to summary judgment) but that Plaintiff had also made a factual attack because he directly challenged Defendant’s allegation that all 442 members worked shifts that were long enough to qualify for meal and rest periods. Accordingly, Defendant failed to meet its burden of supporting its allegations with competent proof.

The Court also noted that in reviewing a removing defendant’s evidence a district court should not make its own assumptions, nor is it required to perform detailed mathematical calculations of its own. But the fact that Defendant had not submitted any evidence to support its faulty assumptions made such assumptions unreasonable, and because both parties had been given the opportunity to place evidence on the record and Defendant had failed to overcome Plaintiff’s attacks the matter was worthy of remand.

Judge Collins dissented, finding that the wording of Plaintiff’s complaint (that putative class members “consistently” worked through meal periods and “regularly” were not provided with rest periods) forced Defendant to make certain assumptions that did not require the degree of specificity the district court sought. Moreover, Judge Collins thought it was reasonable to assume that all class members were full-time employees based on the factual allegations in the complaint (it seemed unlikely the activities described could have been completed in a partial workday). At worst, he argued, the majority should have reversed the remand order and remanded the matter to the district court for further evidentiary proceedings.

[i] 28 U.S.C. § 1332(d)(2).

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