Assumption based evidence insufficient to prove amount in controversy for CAFA removal

In Ibarra v. Manheim Investments, Inc. (2015 U.S. App. LEXIS 334), plaintiffs filed a putative class action suit against Manheim for violations of California Labor Code.  They specifically alleged that damages did not exceed $5 million as required for CAFA removal. Manheim nonetheless removed the case to federal court pursuant to CAFA.  Plaintiffs moved to remand three times (as recent decisions affected the amount in controversy issue), and on their third attempt the district court agreed that the defendants had not proven $5 million in controversy.  Manheim petitioned the 9th Circuit for appeal.

Under CAFA, when damages are understated in a complaint, the burden of proof shifts to the defendant seeking removal.  If the plaintiff challenges the amount through a motion to remand, both sides submit evidence to be determined by preponderance.

In granting the order for remand, the district court found Manheim’s evidence insufficient.  Manheim submitted a declaration calculating the amount of damages that assumed a violation for each applicable shift.  It claimed this was a “pattern and practice” of wage violations.  The Ninth Circuit agreed with the district court against Manheim’s universal violation assumption - alleging a pattern and practice does not assume a violation every time.  In addition, Ibarra’s allegations also implied that violations occurred several times, but not always.  The Court remanded the case for both parties to submit proof related to the disputed amount in controversy.

At appeal, the parties submitted conflicting proposed procedures for proof of the amount in controversy.  The Court avoided the argument and instructed the district court to address it on remand.