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Calculating Amount In Controversy For Purposes Of CAFA Jurisdiction—Ninth Circuit Takes Liberal Approach

07/24/2020 Patrick Hammon

Last week, in a case focused on the intersection between two uniquely American institutions—the Harley-Davidson motorcycle and the class action--the Ninth Circuit answered “a technical, but unresolved question” in Greene v. Harley-Davidson, Inc., No. 20-55281, 2020 WL 3969285 (9th Cir. July 14, 2020).  In Greene, the Court of Appeals held that a defendant may rely on past punitive damages awards in earlier cases in which the same causes of action were asserted in order to calculate the amount in controversy for asserting CAFA jurisdiction.  In so finding, the Ninth Circuit has significantly eased a class action defendant’s burden in seeking to remove a case to federal court.

Background

Matthew Greene filed a putative class action against Harley-Davidson on June 11, 2019, in California state court, asserting eight (8) causes of action, including for violations of the Consumer Legal Remedies Act (CLRA), fraud, false advertising, and unfair competition.  In his complaint, Greene claimed he suffered $1,399 in damages, which he asserted amounted to $1,000,000 per year in class-wide damages, for the period beginning June 11, 2015 through August 23, 2017.

Harley-Davidson removed the case, invoking federal jurisdiction under the Class Action Fairness Act (CAFA), arguing that the claimed damages satisfied CAFA’s $5 million amount-in-controversy requirement because (1) the class’s compensatory damages amounted to $2.1 million (or $1.0 million per year for the class period), (2) there were approximately $2.1 million at stake in punitive damages (based on a 1:1 punitive/compensatory damages ratio), and (3) a potential $1.0 million award in attorneys’ fees was also possible.

Greene moved to remand, arguing that any punitive damages calculation could only be based on his individual damages (i.e., $1,399), not the class claims (i.e., $2.1 million).  He also challenged Harley-Davidson’s attorneys’ fees amount, claiming that such fees would come out of the total damages, and therefore should not be added to the total amount in controversy.

The district court granted Greene’s motion to remand.  In doing so, the court concluded that any potential punitive damages award had to be based upon Greene’s individual damages, not those of the entire class.  Additionally, the court rejected Harley-Davidson’s argument that punitive damages awards from several past cases in which similar claims were asserted, and in which juries had awarded punitive damages on at least a 1:1 ratio, could be used for projecting punitive damages to determine CAFA jurisdiction.  The court found Harley-Davidson’s showing insufficient since the defendant had made “no attempt to analogize or explain how [such] cases [we]re similar to the instant action.”  Harley-Davidson appealed.

Decision

The Ninth Circuit reversed the trial court, finding that Harley-Davidson had shown there was more than $5 million in controversy.  The Court of Appeals started its analysis by explaining that the amount in controversy requirement refers to “possible liability,” not “likely or probable liability.” 

The Court held that one way a defendant could meet its burden of showing its “possible liability” is to cite cases involving the same or similar statutes or claims in which a jury or court awarded punitive damages based upon the same punitive/compensatory damages ratio asserted in the defendant’s removal notice.  The Ninth Circuit rejected the district court’s logic, which would have required Harley-Davidson not just to cite such cases, but also to show how they were similar to its own, explaining that such a standard would have effectively changed the amount-in-controversy requirement from “possible liability” to “probable liability.”  The Court of Appeals also rejected the district court’s paradigm because it would create “practical difficulties” for a defendant asked to analogize a case at the pleading stage to cases tried to verdict, something the Court called “all but impossible.” 

While the Court did not specifically address Greene’s position that any such punitive damages estimation should be based upon his claimed damages alone, rather than those of the class, in finding that the amount in controversy exceeded $5 million, the Ninth Circuit impliedly rejected that argument. 

Impact

While ordinarily there is a presumption against federal jurisdiction in typical diversity cases (see, e.g., Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992)), Greene confirmed there is “no antiremoval presumption [in] cases invoking CAFA.”  Instead, the Ninth Circuit reaffirmed that the jurisdictional inquiry under CAFA is to be simple and mechanical, making it plain that a defendant seeking to remove merely needs to cite—not analogize—cases involving similar causes of action to support the asserted punitive/compensatory ratio for the purpose of calculating the amount in controversy.  In sum, the Greene decision paves a clear path for class action defendants to remove cases to federal court without going through the difficult exercise of estimating their actual liability.