Lead Opinion
In this case we are called upon to resolve a question of first impression: Under the Class Action Fairness Act of 2005
I
Willene Lowdermilk (“Plaintiff’) filed a complaint in Oregon state court on March 28, 2006, on behalf of herself and a class of employees “who worked for U.S. Bank as hourly employees in the past six years.” Plaintiff sought relief for two alleged violations of Oregon law. First, she claimed U.S. Bank (“Defendant”) denied her full compensation for the hours she worked because Defendant had a policy of rounding actual hours worked down to the nearest tenth of an hour and that this resulted in employees not being compensated for one to five minutes of the time they worked per day. She sought unpaid wages plus penalty wages under Or. Rev. Stat. § 653.055. Second, Plaintiff alleged that Defendant failed to promptly pay Plaintiff her wages upon termination, for which she sought damages and penalty wages under Or. Rev. Stat. § 652.150. In addition to damages and penalty wages, Plaintiff sought costs, attorneys’ fees, and interest, a sum Plaintiff alleged in her prayer for relief was “in total, less than five million dollars.” In the jurisdiction section of her complaint, Plaintiff further alleged that “[t]he aggregate total of the claims pled herein do not exceed five million dollars.”
On April 26, 2006, Defendant filed a Notice of Removal to federal court under CAFA, see 28 U.S.C. §§ 1332, 1441, 1453, and argued that the actual amount in controversy far exceeded CAFA’s jurisdictional amount. Plaintiff opposed removal and continued to argue that “the aggregate total of the claims [for unpaid and late wages] pled[in her complaint] does not exceed five million dollars” and, therefore, did not meet CAFA’s requirements for federal jurisdiction. See 28 U.S.C. § 1332(d).
On August 16, 2006, the district court held that it was bound by the complaint as to the amount in controversy “unless plaintiffs prayer is determined to have been made in bad faith.” It held that Defendant had not proved that Plaintiffs allegation was made in bad faith nor had it met its burden of establishing jurisdiction under CAFA. Consequently, the district court remanded the case to state court. Defendant filed a petition for permission to appeal,
Under CAFA, we have 60 days from the time we accept the appeal to “complete all action on such appeal, including rendering judgment,” 28 U.S.C. § 1453(c)(2); Bush v. Cheaptickets, Inc.,
II
A civil action in state court may be removed to federal district court if the district court had “original jurisdiction” over the matter. 28 U.S.C. § 1441(a).
A
The questions of minimal diversity and class numerosity are not contested on appeal, and we are satisfied that the evidence supports the district court’s decision. With respect to minimal diversity, Defendant is a citizen of Ohio because its main office is located in that state, Wachovia Bank, N.A. v. Schmidt,
B
Whether the amount in controversy is met here is a more difficult question. In her complaint, Plaintiff claimed only damages “in total, less than five million dollars,” although she also asked for attorneys’ fees, which Oregon law authorizes.
Although Defendant bears the burden of proving that the Plaintiffs suit meets the requirements of 28 U.S.C. § 1332(d), we must consider what level of proof the Defendant must meet. In Abrego Abrego, we discussed three different scenarios. First, when the plaintiff fails to plead a specific amount of damages, the defendant seeking removal “must prove by a preponderance of the evidence that the amount in controversy requirement has been met.”
Defendant argues that this case falls within the first scenario described above, and that because Plaintiff failed to specify her damages, Defendant must prove only by a preponderance of the evidence that the damages claimed exceed $5,000,000. Our starting point is “whether it is ‘facially apparent’ from the complaint that the jurisdictional amount is in controversy.” Abrego Abrego,
We now turn to the question we reserved in Abrego Abrego: What proof must the defendant adduce to contradict the plaintiffs claim that her damages are less than the jurisdictional amount? There are two principles that inform our judgment here. First, as federal courts, we are courts of limited jurisdiction and we will strictly construe our jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am.,
By adopting “legal certainty” as the standard of proof, we guard the presumption against federal jurisdiction and preserve the plaintiffs prerogative, subject to the good faith requirement, to forgo a potentially larger recovery to remain in state court. See St. Paul Mercury,
C
Finally, we must decide whether or not attorneys’ fees and costs should be included with damages to reach CAFA’s $5,000,000 minimum. In ordinary diversity cases, “when there is no direct legal authority for an attorney’s fee, a request for a fee cannot be included in ... the jurisdictional amount,” but “where an underlying statute authorizes an award of attorneys’ fees, either with mandatory or discretionary language, such fees may be included in the amount in controversy.” Galt G/S v. JSS Scandinavia,
We must look to Oregon law to determine whether attorneys’ fees are statutorily authorized in this instance. Plaintiff bases her rounding claim on Or. Rev. Stat. § 653.010(11) which defines “work time” as including “both time worked and time of authorized attendance.” Id. Damages for violation of this provision are set by Or. Rev. Stat. § 653.055, which also authorizes the court to “award reasonable attorney fees to the prevailing party.” Id. at § 653.055(4). Plaintiffs late payment claim is based on Or. Rev. Stat. § 652.140, which governs payment of wages owed upon termination of employment. Employers who violate this provision are liable for up to 30 days of penalty wages under Or. Rev. Stat. § 652.150, and under certain circumstances, must pay plaintiffs a “reasonable sum for attorney fees” for prevailing in the litigation. Or. Rev. Stat. § 652.200(2). Because the relevant Oregon statutes provide for the payment of attorneys’ fees, we include the fees in the amount in controversy.
Ill
The “legal certainty” standard sets a high bar for the party seeking removal, but it is not insurmountable. In the case at hand, Defendant advances a theory, supported by evidence from its own files, that Plaintiffs claims are worth far more than the $5,000,000 CAFA requires for federal jurisdiction. We address each of Plaintiffs claims separately.
A
Defendant asserts that Plaintiffs claim for late payment of wages upon termination is worth more than $13,000,000. Under Oregon law, employers may be liable for penalty wages if they fail to tender employees’ final paycheck by the “end of the first business day after the discharge or termination.” Or. Rev. Stat. § 652.140(1). Penalty wages run from the date when the wage is owed (but not paid) until the date the employer actually pays the wage; recovery is capped at a maximum of 30 days. Or. Rev. Stat. § 652.150. Defendant examined company records and determined that 7,571 employees left U.S. Bank’s employment during the period specified in the complaint. It then assumed that the bank waited at least 30 days after termination to tender employees their final paycheck, which would entitle each plaintiff to the maximum recovery. Or. Rev. Stat. § 652.150(l)(a). Its ultimate calculation multiplies the estimated class size (7,571) and number of days of late payment (30) by Oregon’s current minimum wage of $7.25/hour and the typical 8-hour work day to yield damages of $13,173,540.
Defendant’s numbers are weak for other reasons as well. Defendant assumes that all class members would be entitled to the maximum damages under Oregon law, but provides no evidence to support this assertion. Plaintiff, however, alleges that under Oregon law, she is owed “up to 30 days” of penalty wages. Many employees may have been paid only a few days late and, consequently, would be entitled to fewer days of penalty wages. Holding all other factors constant, if all 7,571 potential members of the class were paid only one day late, the aggregate claim would be worth only $439,118. In order to break the $5,000,000 minimum, all members of the class would have to be paid on average twelve days late. We have no evidence to support such a supposition. The problem is only compounded if Defendant is wrong about both the class size and the number of late days. Again, absent more concrete evidence, it is nearly impossible to estimate with any certainty the actual amount in controversy.
B
Defendant did not raise the issue of Plaintiffs rounding claim in its Notice of Removal, but in its appellate brief estimates that the amount in controversy on this claim is well over the $5,000,000 jurisdictional limit. It arrives at this conclusion by assuming that each class member is owed $200 in unpaid wages, a number for which Defendant provides no support.
This assumption is even more poorly supported than Defendant’s late wages analysis. Defendant arrives at the potential class size based on a preliminary class
In short, Defendant has left us to speculate as to the size of the class, the amount of unpaid wages owed due to the rounding policy, and whether or not members of the class qualify for penalty wages; such speculation does meet the “legal certainty” standard. Until the parties are able to more definitively ascertain the potential size of the class or the extent of the damages, we cannot base our jurisdiction on Defendant’s speculation and conjecture. Even if we include attorneys’ fees in the calculation, Defendant is no closer to carrying its burden because we simply have no basis for estimating the claims of the individual class members. Accordingly, we hold that at this juncture of the litigation, Defendant has failed to prove with legal certainty that the amount in controversy meets CAFA’s jurisdictional requirements.
rv
We acknowledge that strict construction of our jurisdiction creates the potential for manipulation of the jurisdictional rules by plaintiffs “who may plead for damages below the jurisdictional amount in state court with the knowledge that the claim is actually worth more, but also with the knowledge that they may be able to evade federal jurisdiction by virtue of the pleading.” De Aguilar,
Plaintiffs counsel repeatedly stated at oral argument that the sum total of damages plaintiffs are currently seeking — including attorneys’ fees and costs — does not exceed $5,000,000. Plaintiff might reasonably have claimed more, but absent evidence of bad faith, we are obliged to honor that representation. CAFA’s removal provision and the “legal certainty” rule strike a balance, leaving plaintiff as master of her case, but giving defendants an option of a federal forum at the point when they can prove its jurisdiction.
V
We affirm the judgment of the district court and remand for further proceedings not inconsistent with this opinion.
AFFIRMED.
Notes
. Defendant filed its petition for permission to appeal August 23, 2006. After the court granted an extension of time, Plaintiff filed her response on September 11, 2006.
. If a final judgment is not issued before the statutory deadline, including any extension under 28 U.S.C. § 1453(c)(3)(B), "the appeal shall be denied.” 28 U.S.C. § 1453(c)(4).
. We review issues pertaining to removal de novo. Harris v. Bankers Life & Cas. Co.,
. In Abrego Abrego, for example, the complaint asked only for "pre-and post-judgment interest, attorney's fees and costs, and relief in the form of special, general, punitive, and exemplary damages due and awardable pursuant to the actions of Defendants.”
. The irony of the parties' claims vis-a-vis the amount in controversy is not lost on us: The Plaintiff here has diminished or disparaged the amount she is seeking, while the Defendant seeks to augment or aggrandize that amount. A plaintiff may, of course, stipulate to damages in order to avoid federal jurisdiction, or the jurisdiction of particular federal courts. See United States v. Hohri,
. The Seventh Circuit's decision in Brill v. Countrywide Home Loans is not to the contrary. The court observed that "the removing party’s burden is to show not only what the stakes of the litigation could be, but also what they are given the plaintiff’s actual demands.’’
. In explaining this assumption, Defendant merely drops a perplexing footnote stating that the dollar amount of each class member's rounding claim is $1,740, but then does not use this number when making its calculation of the amount in controversy for this claim. We can not divine why Defendant inserted this footnote. The calculation arriving at $1,740 appears to be based on the assessment of penalty wages under Or. Rev. Stat. § 652.150. If Plaintiff prevails on the rounding claim, the class members would, indeed, be entitled to penally wages. See Or. Rev. Stat. § 653.055(l)(b). Yet, if this is trae, it is baffling why Defendant would not include the penalty wages along with the $200 it uses in its calculation. Absent any evidentiary support or explanation, we decline to speculate and, for the purposes of this appeal, adopt Defendant's assumption that each class member’s rounding claim is worth a total of $200 even though this number is wholly unsupported in its briefing or the record.
. We note that Defendant makes a serious computational error in its brief. Multiplying 4,650 (half of the 9,300 employees) by $200 yields $930,000 not $9,300,000.
. Often suits are much smaller than a plaintiff's counsel initially thinks and pleads. See, e.g., Farrar v. Hobby,
Dissenting Opinion
dissenting.
I respectfully dissent.
Our analysis must begin with the pleading. The pleading requires no new law, just the well reasoned decisions in Abrego Abrego,
Plaintiff filed the case in state court. For the defendant to avoid remand after removing the case to federal court, it had to show that the matter in controversy “exceeds” $5 million.
The complaint in this case is poorly drafted. It contradicts itself about the amount in controversy. In the caption area, the complaint says that “THE AGGREGATE OF CLAIMS DOES NOT EXCEED 5 MILLION DOLLARS.” In paragraph 4, under a heading “JURISDICTION AND VENUE,” it says the “[t]he aggregate total of the claims pled herein do [sic] not exceed five million dollars.” So far, clear as a bell, and an easy affirmance of the remand.
But the prayer for relief contradicts the complaint’s previous statements. The
Because attorneys’ fees get added to the damages, and all the complaint says is that the damages will not exceed $5 million, the complaint does not say whether the amount in controversy exceeds $5 million. It could be $10,000 plus attorneys’ fees (below the jurisdictional requirement), or $4,999,999.99 plus attorneys’ fees (conferring federal jurisdiction). Sometimes a formal judicial admission can establish that a claim uncertain in amount will not meet the federal jurisdictional requirement.
The law is already established in our circuit for CAFA
The district court did not determine whether the defendant established by a preponderance of the evidence that the
The majority does not make a preponderance of the evidence determination. It applies the more demanding standard of proof to a legal certainty. But, as Abrego Abrego sets forth, the “legal certainty,” or “good faith,” test from St Paul Mercury is applicable where the complaint at issue specifies an amount in controversy lower than the jurisdictional minimum, not where the complaint fails to specify what the amount in controversy is.
For these reasons, we should remand this case to the district court for it to make the necessary determination under a preponderance of the evidence standard.
. Abrego Abrego v. The Dow Chemical Co.,
. Sanchez v. Monumental Life Ins. Co.,
. Singer v. State Farm Mutual Automobile Ins. Co.,
. See 28 U.S.C. § 1332(d)(2).
. St. Paul Mercury Indemnity Co. v. Red Cab Company,
. See Abrego Abrego v. The Dow Chemical Co.,
. Galt G/S v. JSS Scandinavia,
. See O.R.S. 652.140, 653.010(11)
. See O.R.S. 652.200(2), 653.055(4).
. See Galt G/S v. JSS Scandinavia,
. See Singer v. State Farm Mutual Automobile Ins.Co.,
. At oral argument, plaintiff's counsel did indeed make some remarks that sounded as though her total demand including attorneys’ fees was under $5 million, as the majority opinion says at page 2821. I understood her also to make remarks avoiding any commitment to that position. She appeared to me to be arguing and to be avoiding making a formal admission. She did not file any paper, in district court or this court, making such an admission.
. Majority at 998.
. 28U.S.C. § 1332(d)(2).
. Abrego Abrego v. The Dow Chemical Co.,
. See Abrego Abrego v. The Dow Chemical Co.,
. See Abrego Abrego v. The Dow Chemical Co.,
