Misclassification significant as evidence of amount in controversy for CAFA removal

In two separate putative class action California Labor Code suits, the Ninth Circuit presented examples of both sufficient and insufficient evidence of the amount in controversy for CAFA (32 USC §1332(d)) removal in simultaneously released opinions. In Lacross v. Knight Transp. Inc. (2015 U.S. App. LEXIS 335), the defense successfully appealed an order for remand, as the Ninth Circuit held the chain of reasoning and assumptions reasonable to prove the $5 million required amount in controversy.  The main difference between Lacross and Ibarra v. Manheim Investments, Inc., was the misclassification claim by the plaintiffs in Lacross.  Misclassification was significant because if the claim succeeded, Knight would be liable to all class members.

In a succinct opinion, Judge Gould went through Knight’s calculation for damages, distinguishing Ibarra.  Knight was a transportation company that classified its truckers as independent contractors.  If liable for the misclassification claim, Knight would need to reimburse class members for lease and fuel-related costs. The plaintiffs calculated damages based on the actual fuel costs for the least amount of class members for one quarter, then extrapolated the amount to the entire class period.  As the Court stated, even this conservative amount was $21 million.  The Court held the calculation reasonable because (1) the costs were necessary expenses, (2) the class members only worked for the defendant during the period, and (3) based on the smallest group of applicable members.

The plaintiffs argued that they may not be able to prove all elements for reimbursement, resulting in the actual amount of damages to be less than $5 million.  However, as explained in Ibarra, the amount in controversy was not to be conflated with the amount actually recovered.  The parties could still challenge the amount in subsequent proceedings and at trial.

The district court decision remanding to state court was reversed.