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8th Cir. Holds Total Revenues from Disputed Practice Can Satisfy CAFA’s $5 Million Requirement

class action fairness actThe U.S. Court of Appeals for the Eighth Circuit recently held that the total amount of money received from a challenged practice can be used to satisfy the federal Class Action Fairness Act’s jurisdictional requirement of $5 million in controversy.

A copy of the opinion in Nicholas Brunts v. Walmart, Inc. is available at:  Link to Opinion.

A consumer filed a class action lawsuit against a retail company in Missouri state court. The consumer alleged that the company engaged in misleading and deceptive marketing practices by selling cough suppressants with dextromethorphan hydrobromide and a “non-drowsy” label.

The company removed the case to federal court under the federal Class Action Fairness Act, and the consumer moved to have the case remanded back to state court, arguing that the company did not meet CAFA’s jurisdictional requirement of $5 million in controversy.

The company filed a brief in opposition to the remand motion and attached a declaration from one of its senior managers. The senior manager asserted in his affidavit that there was more than $5 million in controversy based on three possible remedies identified in the complaint: (1) the total amount of product sales during the relevant time period; (2) the sales lost if the court enjoined the company from selling the products; and/or (3) the attorneys’ fees awarded to the consumer’s counsel if the consumer were to prevail.

The federal trial court remanded, finding that the company did not show that the amount in controversy was greater than $5 million because the company did not provide enough detail to show that the amount in controversy exceeded $5 million. The court also concluded that injunctive costs were not part of the amount in controversy and the company did not specify the amount of the attorneys’ fees with enough detail to be considered. The company timely appealed to the Eighth Circuit under 28 U.S.C. § 1453(c).

A party can remove a class action to federal court under CAFA if three conditions are met: (1) minimum diversity exists, (2) the proposed class has at least 100 members, and (3) there is more than $5 million in controversy. Leflar v. Target Corp., 57 F.4th 600, 603 (8th Cir. 2023) (citing 28 U.S.C. § 1332). Here, the parties agreed that the first two conditions were met, but disagreed on whether there was more than $5 million in controversy.

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. Lizama v. Victoria’s Secret Stores, LLC, 36 F.4th 762, 765 (8th Cir. 2022). However, the amount in controversy is not established by a preponderance of the evidence if a court must resort ‘to conjecture, speculation, or star gazing.’” Waters v. Ferrara Candy Co., 873 F.3d 633, 636 (8th Cir. 2017).

The Eighth Circuit concluded that the senior manager’s declaration was sufficient to support a finding that the amount in controversy exceeded $5 million. The Court reasoned that a removing party’s burden of describing how the controversy exceeds $5 million is a pleading requirement, not an evidentiary requirement. Hartis v. Chicago Title Ins. Co., 694 F.3d 935, 944 (8th Cir. 2012). “[D]istrict courts must ‘accept’ the allegations in the notice if they are ‘made in good faith.’” Leflar, 57 F.4th at 604.

Additionally, the Eighth Circuit held that the total amount of revenue generated from a challenged activity can be a measure of the amount in controversy. Raskas v. Johnson & Johnson, 719 F.3 884, 888 (8th Cir. 2013). Specifically, the Court determined that, when a lawsuit questions part of a transaction, an affidavit describing the total sales of the product at issue during the relevant time period meets the amount in controversy requirement. Id. at 87.

Because the Eighth Circuit found that the total revenue received satisfies the amount in controversy requirement, it declined to discuss the inclusion of — or sufficiency of the evidence for — compliance costs or attorneys’ fees.

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

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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