Press "Enter" to skip to content

9th Cir. Holds CAFA Amount in Controversy Includes Future Attorney’s Fees Incurred After Removal

The U.S. Court of Appeals for the Ninth Circuit recently reversed a trial court’s order remanding a putative class action lawsuit to state court on the ground that the defendant removing party failed to prove that the amount in controversy exceeded $5 million, as required for jurisdiction under the Class Action Fairness Act (CAFA).

In so ruling, the Ninth Circuit held that the amount in controversy for jurisdiction under CAFA includes all attorney’s fees that the plaintiff would be entitled to under a contract or statute, including future fees incurred after the date of removal.

A link to the opinion in Fritsch v. Swift Transportation Company of Arizona, LLC is available at:  Link to Opinion.

A driver (“employee”) filed a wage-and-hour class action against his employer, a trucking and transportation company.  The employee alleged that the employer 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, attorney’s fees under California Labor Code § 218.5 and 1194, and costs of suit.  The employee also asked for equitable relief under California’s unfair competition law and statutory damages under California’s Private Attorneys General Act (PAGA).

During the litigation, the employee delivered a mediation brief that listed total damages in the amount of $5,924,104, which included $948,192 in unpaid rest period premiums, $150,000 in attorney’s fees and costs incurred as of the date of the brief, and $531,404 in interest on unpaid overtime wages.  The employee also estimated that the employer faced PAGA penalties of $5,874,079.

In October 2017, the employer filed a notice of removal asserting jurisdiction under CAFA.  As you may recall, CAFA gives trial courts jurisdiction over civil actions in which “the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs,” the proposed class consists of more than 100 members, and “any member of [the] class of plaintiffs is a citizen of a State different from any defendant.”  28 U.S.C. § 1332(d)(2).

Using the damages listed in the mediation brief — minus estimated interest payments and PAGA penalties, which are not included in the amount in controversy — the employer alleged that the amount in controversy was $5,392,700.  The employer also argued that in addition to the $150,000 in attorney’s fees and costs incurred to date, the trial court could recognize future attorney’s fees that would accrue over the course of the case.

The trial court determined that because the complaint did not include a claim for failure to provide rest periods, the $948,192 for unpaid rest period premiums could not be included as part of the jurisdictional amount.  The trial court also ruled that attorney’s fees may only include fees incurred as of the date of removal, which was $150,000.  Because the employer established that only $4,778,575 was at stake, the trial court held that this amount did not meet the minimum required under CAFA, and remanded the case to state court.

This appeal followed.

The Ninth Circuit began its analysis by observing that where “it is unclear or ambiguous from the face of a state-court complaint whether the requisite amount in controversy is pled,  the removing defendant bears the burden of establishing, by a preponderance of the evidence, that the amount in controversy exceeds the jurisdictional threshold.”  Urbino v. Orkin Servs. of Cal., 726 F.3d 1118, 1121-22 (9th Cir. 2013).

While the appeal was pending, the Ninth Circuit issued its ruling in Chavez v. JPMorgan Chase & Co., 888 F.3d 413 (9th Cir. 2018), which held that “the amount in controversy is not limited to damages incurred prior to removal — for example, it is not limited to wages a plaintiff-employee would have earned before removal (as opposed to after 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.”

The Ninth Circuit acknowledged that before Chavez, it had not clarified what it meant to say by the amount in controversy is determined “at the time of removal,” and trial courts had not consistently applied this language.  However, the Ninth Circuit clarified this issue in Chavez.  Therefore, the only issue on appeal was whether the trial court erred in concluding that the employer had failed to prove, by a preponderance of the evidence, that CAFA’s amount in controversy requirement was met.

The employee argued that Chavez should be limited to its facts, and that it applied only to the claims for future wage loss.

However, while Chavez itself concerned a claim for future wage loss, the Ninth Circuit stated that its holding applied to any class of damages included in the amount in controversy.  Specifically, the amount in controversy included “all relief claimed at the time of removal to which the plaintiff would be entitled if she prevails.”  Chavez, 888 F.3d at 418.  Thus, the Ninth Circuit concluded that its reasoning in Chavez applied equally to attorney’s fees available under fee shifting statutes.

Next, the employee argued that future attorney’s fees should not be included in the amount in controversy because they are inherently speculative and can be avoided by the defendant’s decision to settle an action quickly.  The employee relied on Gardynski-Leschuck v. Ford Motor Co., 142 F.3d 955 (7th Cir. 1998), where the Seventh Circuit held that under the Magnuson-Moss Warranty Act, 15 U.S.C. § 2310(d), the amount in controversy cannot include attorney’s fees that have not yet been incurred.

The Ninth Circuit explained that its precedent in Chavez was controlling.

Moreover, unlike the Seventh Circuit where the defendant need only show “a  reasonable probability” that the amount in controversy exceeds the minimum, the Ninth Circuit requires a removing defendant to prove that the amount in controversy (including attorney’s fees) exceeds the jurisdictional threshold by a preponderance of evidence.  The defendant is also required to make this showing with summary judgment type evidence.

Given defendants’ obligation to prove future attorney’s fees by a preponderance of the evidence, and noting trial courts’ expertise in evaluating litigation expenses, the Ninth Circuit concluded that it did not share the Seventh Circuit’s concerns about calculating future attorney’s fees.

In the Ninth Circuit’s view, the amount in controversy must include future attorney’s fees because the complaint demanded attorney’s fees permitted by California law.  The trial court’s conclusion was incorrect that, as a matter of law, the amount in controversy included only the $150,000 in attorney’s fees incurred up to the time of removal.

Accordingly, the Ninth Circuit reversed the trial court’s order remanding the case to state court.

Print Friendly, PDF & Email

Eric Tsai practices in Maurice Wutscher’s Commercial Litigation and Consumer Credit Litigation groups, and in its Regulatory Compliance group. He concentrates his practice primarily on the defense of consumer and commercial financial services companies, including mortgage lenders and servicers, mortgage loan investors, third party debt collectors, and other financial services providers. He also counsels clients on regulatory compliance, licensing, and other consumer protection matters. Eric earned his undergraduate degree from the University of California, Irvine. Prior to attending law school, he worked as a loan officer for national direct lenders. He earned his Juris Doctor from California Western School of Law and thereafter obtained a Master of Laws (LLM) in Taxation from the University of San Diego School of Law. Eric publishes extensively on various issues affecting consumer lending and litigation, including both federal and California-specific developments. He is licensed to practice law in California, Nevada, and Oregon, and is admitted in all United States District Courts in the State of California, the United States District Court for the District of Oregon, the United States District Court for the District of Nevada, the U.S. Tax Court, and the Ninth Circuit Court of Appeals. He is also a licensed real estate broker in the State of California.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.