CAFA Is Eternal, Only If Class Action Is Properly Removed

Quiroz v. Mistras Group, Inc., No. CV 09-7146 PSG (SSX), 2010 WL 2079833 (C.D. Cal. May 21, 2010).

While retaining the jurisdiction under CAFA after denial of class certification, the District Court in California observed that although the denial of class certification does not eliminate CAFA jurisdiction, the Court can still determine whether the case was properly removed under CAFA.

The plaintiff brought a class action in state court against his employers seeking unpaid wages, civil penalties and damages for conversion under the California Labor Code.

After the defendants removed the action to the District Court under CAFA, the Court denied class certification and requested supplemental briefing on the question whether denial of class certification eliminated CAFA jurisdiction and the case should be remanded to state court.

After briefing, the Court decided to retain subject matter jurisdiction over the case.

The Court remarked that after briefing on the issue was complete, the Ninth Circuit, in United Steel v. Shell Oil Co., 602 F.3d 1087 (9th Cir. 2010), held that if a defendant properly removed a putative class action at the get-go, a district court’s subsequent denial of class certification does not divest the court of jurisdiction. (Editors’ Note: See the CAFA Law Blog analysis of United Steel posted on August 13, 2010). Thus, the only question remaining for the Court’s determination was whether the case was properly removed under CAFA in the first place.

The plaintiff primarily contended that the $5 million jurisdictional minimum under CAFA was not met because the defendants exaggerated the potential unpaid wages of the putative class.

The Court observed that the putative class contained at least 237 members; thus, the class claims amounted to more than $5 million, even excluding other penalties, attorneys’ fees, and punitive damages. First, the plaintiff’s claim for unpaid wages under Lab. Code § 204 included civil penalties of $100 for each initial violation, $200 for each subsequent violations, and 25% of the amount unlawfully withheld; thus, even assuming that all 237 putative class members earned a minimum wage, the amount in controversy would be $3,427,020. Second, for the plaintiff’s conversion claim, even at minimum wage, one year of alleged unpaid wages for 237 putative class members amounted to $3,943,680. Third, the plaintiff’s claim for penalties under Lab. Code § 226 ($4000 per employee) was for at least $948,000. Do the math.

Thus, the Court concluded that in sum, the defendants had demonstrated that the amount in controversy was at least $8,318,700, which satisfied the jurisdictional minimum requirement under CAFA.