Ibarra v. Manheim Investment, Inc., No. 14-56779 (9th Cir. 2015)
Annotate this CasePlaintiff filed a putative class action against his former employer, Manheim, alleging violations of the California Labor Code. Manheim removed the case to federal court and the district court remanded to state court, concluding that Manheim's proof of the $5 million amount in controversy requirement was inadequate. At issue was what a defendant seeking removal must produce to prove the amount-in-controversy requirement under the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. 1332(d), when the complaint does not include a facially apparent amount in controversy or the plaintiff may have understated the true amount in controversy. The court concluded that when " a defendant's assertion of the amount in controversy is challenged... both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied." A damages assessment may require a chain of reasoning that includes assumptions and such assumptions must be based on reasonable ground. Because the complaint does not allege that Manheim universally, on each and every shift, violates labor laws by not giving rest and meal breaks, Manheim bears the burden to show that its estimated amount in controversy relied on reasonable assumptions. A remand is necessary to allow both sides to submit evidence related to the contested amount in controversy. Therefore, the court vacated and remanded for further proceedings.
Court Description: Class Action Fairness Act / Amount in Controversy. The panel vacated the district court’s order remanding the putative class action to state court, and remanded to the district court to allow both parties the opportunity to submit evidence and arguments whether the $5 million amount in controversy requirement under the Class Action Fairness Act had been satisfied where the complaint did not include a facially apparent amount in controversy or may have understated the true amount in controversy. The plaintiff putative class of employees sued in state court alleging violations of California’s Labor Code, and explicitly alleging that damages did not exceed $5 million. Defendant Manheim Investments, Inc. removed the case to federal court under the Class Action Fairness Act, asserting more than $5 million was at stake based on a “pattern and practice” of labor law violations. The panel held that because the complaint did not allege that Manheim universally, on each and every shift, violated labor laws by not giving rest and meal breaks, Manheim bore the burden to show that its estimated amount in controversy relied on reasonable assumptions. The panel also held that a remand to the district court was necessary to allow both sides to submit evidence – direct or circumstantial – related to the contested amount in controversy. The panel further held that if the damages assessment included assumptions, the chain IBARRA V. MANHEIM INVESTMENTS 3 of reasoning and the assumptions needed some reasonable ground underlying them. The panel concluded that Manheim relied on an assumption about the rate of its alleged labor law violations that was not grounded in real evidence, and remanded on an open record for both sides to submit proof related to the disputed amount in controversy.
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