Kevin Do v. First Financial Security, 694 F. App'x 481

Background

Plaintiffs (former First Financial sales contractors) sued First Financial asserting a class action for withheld commissions and invoked CAFA to establish federal subject-matter jurisdiction.
Plaintiffs’ second amended complaint alleged roughly 360 class members and asserted withheld commissions exceeding $12 million, but did not explicitly link Moua’s sales-network commission with each individual class member in the pleading.
The district court dismissed the second amended complaint with prejudice for failure to satisfy CAFA’s amount-in-controversy and also found Local Rule 23-2.2 class-definition pleading defects; dismissal was sua sponte on some grounds not raised by defendant.
The Ninth Circuit majority affirmed dismissal as to the amount-in-controversy defect but held the district court abused its discretion by denying leave to amend.
The majority found amendment not futile because plaintiffs could plausibly amend to allege (1) ~360 eligible sales contractors, (2) withheld commissions exceeding $12 million for them, and (3) that those contractors correspond to the individual class members.
The Ninth Circuit rejected summary affirmance based on alleged appellate record defects and remanded with instruction to grant leave to amend; a partial dissent would have affirmed dismissal with prejudice.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether CAFA amount-in-controversy was adequately alleged	Plaintiffs asserted ~360 members and >$12M withheld commissions satisfy CAFA aggregate requirement	First Financial argued plaintiffs failed to connect the withheld commissions to the class members, so CAFA threshold not met	Amount-in-controversy allegation was deficient; dismissal on that ground was proper
Whether dismissal should be with or without leave to amend	Plaintiffs argued they could cure defects and plausibly allege the necessary connections and amounts	First Financial argued plaintiffs repeatedly failed to establish jurisdiction and dismissal with prejudice was warranted	District court abused its discretion by denying leave to amend; remand with instruction to grant leave to amend
Whether district court erred by sua sponte raising class-definition Local Rule defects	Plaintiffs argued they satisfied Local Rule 23-2.2 by alleging class definition and approximate size (260 in CA, ~100 outside)	First Financial did not raise the Local Rule ground	Ninth Circuit found the district court likely erred in applying Local Rule 23-2.2 to dismiss and that plaintiffs’ allegations were sufficient for the rule
Whether appellate record deficiencies justified summary affirmance	Plaintiffs acknowledged minor record issues but argued they do not meet the high bar for summary affirmance	First Financial sought summary affirmance based on record inadequacy	Ninth Circuit declined to summarily affirm; minor appellate record issues insufficient for summary dismissal

Key Cases Cited

Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2003) (dismissal with prejudice without leave to amend improper unless amendment clearly futile)
Jewel v. NSA, 673 F.3d 902 (9th Cir. 2011) (district court should give opportunity to cure defects when dismissing sua sponte)
Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025 (9th Cir. 2008) (same—opportunity to remedy perceived pleading defects)
United States v. Hinkson, 585 F.3d 1247 (9th Cir. 2009) (en banc) (district court abuses discretion when it commits legal error)
In re O’Brien, 312 F.3d 1135 (9th Cir. 2002) (standard for summary dismissal on appellate procedural grounds)
N/S Corp. v. Liberty Mut. Ins. Co., 127 F.3d 1145 (9th Cir. 1997) (examples of substantial appellate violations warranting summary dismissal)
Rich v. Shrader, 823 F.3d 1205 (9th Cir. 2016) (district court has wide discretion to grant or deny leave to amend)
Heay v. Phillips, 201 F.2d 220 (9th Cir. 1952) (noting deference to district court’s denial of leave to amend after first amendment)