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8th Cir. Affirms Remand of Putative Class Action Under CAFA on Lack of Amount in Controversy

class action fairness actThe U.S. Court of Appeals for the Eighth Circuit recently affirmed a trial court’s order remanding a putative class action suit to state court. In so ruling, the Eighth Circuit held that when a plaintiff contests the amount in controversy after removal, the party seeking to remove under the federal Class Action Fairness Act must establish the amount in controversy by a preponderance of the evidence. 

Here, the Eighth Circuit concluded that the defendant company presented no data or other evidence to support a reasonable inference that the value of the injunctive relief portion of the amount in controversy was over $5 million, and therefore that the trial court properly concluded that it lacked jurisdiction.

A copy of the opinion in Lizama v. Victoria’s Secret Stores, LLC is available at:  Link to Opinion.

A consumer filed a putative class action in Missouri state court against a clothing company, alleging that the company violated the Missouri Merchandising Practices Act by assessing taxes on a category of purchases, which were sold online and shipped to customers in Missouri from out-of-state facilities, at a rate greater than required by the Missouri tax code. On behalf of the putative class, the consumer sought compensatory damages, attorney’s fees, and a permanent injunction preventing the company from collecting excess taxes in the future.

The company removed the action to federal court under the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2). The consumer in turn moved to remand the case back to state court, arguing that the company failed to show that the amount in controversy exceeded $5 million. 

The parties agreed that the amount in controversy included $2.5 million in actual damages and about $800,000 in attorney’s fees, bringing the amount to at least $3.3 million. However, the company argued that the amount in controversy exceeded $5 million because the value of injunctive relief was more than $1.7 million and that amount must be added to the $3.3 million that the parties agreed was in controversy. 

The trial court agreed with the parties that compensatory damages and attorney’s fees would total about $3.3 million. However, the court concluded that the company’s estimate of the value of injunctive relief was “speculative” and that, as a result, the company had failed to show that the amount in controversy exceeded $5 million. 

The trial court thus remanded the case to state court. The company timely appealed.

When a plaintiff contests the amount in controversy after removal, the party seeking to remove under CAFA must establish the amount in controversy by a preponderance of the evidence. Hargis v. Access Capital Funding, LLC, 674 F.3d 783, 789 (8th Cir. 2012); see also Waters v. Ferrara Candy Co., 873 F.3d 633, 636 (8th Cir. 2017) (per curiam).  

The parties debated whether the amount in controversy should be measured only from the plaintiffs’ perspective — i.e., the aggregate value of the claims to the class members — or whether a trial court may determine the amount from either party’s point of view, and thus may consider the amount from the defendant’s perspective — i.e., the total potential cost to the defendant if the plaintiffs prevail. 

However, the Eighth Circuit chose not to decide this question because it determined that the company did not meet its burden to show an amount in controversy over $5 million from either perspective.

Measuring from the company’s viewpoint, the Eighth Circuit reasoned that it is possible for injunctive relief to contribute to the amount in controversy where the injunction would cause the defendant to suffer a financial loss. See, e.g., Keeling v. Esurance Ins. Co., 660 F.3d 273,274 (7th Cir. 2011). 

In this case, however, the Court concluded that the requested injunction would impose no cost on the company and instead would simply prevent the company from collecting allegedly unnecessary taxes that the company would then remit to the State of Missouri. Thus, the Court held that the amount in controversy from the company’s perspective did not exceed $5 million.

The remaining question then was whether the company had established by a preponderance of the evidence that the injunction would have a value of at least $1.7 million to the members of the putative class. 

The Eighth Circuit noted that the requested injunctive relief would have value to future customers of the company, as it would allow customers to avoid paying allegedly excess taxes on future purchases. However, the Court also pointed out that the class here was not defined as all customers who would make qualifying purchases from the company in the future, but rather as a group of customers who made qualifying purchases from the company over the preceding five years.

Although the company projected that it would collect $2.5 million in allegedly excess taxes over the next five years, the Eighth Circuit held that the company presented no data or other evidence to support a reasonable inference that the putative class would include future purchasers who would pay at least $1.7 million in disputed taxes.

Without a non-speculative basis to infer that the requested injunction would bring the amount in controversy between the parties over $5 million, the Eighth Circuit held that the trial court properly concluded that it lacked jurisdiction.

Accordingly, the Eighth Circuit affirmed the order of the federal trial court remanding the case back to state court.

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Daniel Miller is an associate in the Chicago office of Maurice Wutscher LLP, practicing in the firm’s Consumer Credit Litigation and Commercial Litigation groups. Daniel has substantial experience as a litigation attorney representing clients in both individual and class action cases involving the FDCPA, TCPA, FCRA, TILA, RESPA, Illinois Consumer Fraud Act, and various other federal and state statutes. He also has experience in representing corporate clients in commercial transactions and executive compensation agreements. Daniel earned his Juris Doctor from the University of Illinois College of Law, and his Bachelor of Arts in History from Durham University in the United Kingdom. He is admitted to practice law in Illinois and the U.S. District Courts for the Northern District of Illinois and the Southern District of Illinois.

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