Ninth Circuit confirms that Lowdermilk is overruled and damage caps won't save you from CAFA (Rodriquez v. AT&T Mobility)

In Rodriguez v. AT&T Mobility Services LLC (9th Cir. Aug. 27, 2013), the plaintiff brought a putative class action against AT&T Mobility Services, LLC, on behalf of himself and all other similarly situated retail sales managers of AT&T wireless stores in Los Angeles and Ventura counties.  The plaintiff asserted various claims related to alleged unpaid wages, overtime compensation, and damages for statutory violations, filing in Los Angeles County Superior Court in a doomed effort to escape federal court.  AT&T removed the case to federal court under 28 U.S.C. § 1332(d)(2).  Plaintiff moved to remand the case to state court, arguing that defendant could not establish subject-matter jurisdiction because the total amount in controversy did not exceed $5 million.  Plaintiff cited his First Amended Complaint, in which he alleged as much, that “the aggregate amount in controversy is less than five million dollars.” To bolster his position, in that pleading, he also “waive[d] seeking more than five million dollars ($5,000,000) regarding the aggregate amount in controversy for the class claims alleged.”  The district court rejected AT&T’s argument and ordered remand to state court.  The trial court did not address the parties’ calculations of amount in controversy.

The Ninth Circuit recognized the applicability of the U.S. Supreme Court's first CAFA decision, Standard Fire Ins. Co. v. Knowles, ___ U.S. ___, 133 S.Ct. 1345 (2013).  As to Standard Fire, the parties agreed that Standard Fire mandated reversal of the district court's remand order, which was issued before Standard Fire was decided.  The Ninth Circuit directed the district court to reconsider the remand motion. Slip op., at 7.

On the second issue involved in the appeal, the burden of proof, the Court held that Standard Fire overruled Lowdermilk v. U.S. Bank National Association, 479 F.3d 994 (9th Cir. 2007), which had imposed a "legal certainty" standard, instead of a “preponderance of the evidence” standard, for defeating a pleading’s allegations of amount-in-controversy:

The reasoning behind Lowdermilk's imposition of the legal certainty standard is clearly irreconcilable with Standard Fire. We hold that Standard Fire has so undermined the reasoning of our decision in Lowdermilk that the latter has been effectively overruled. A defendant seeking removal of a putative class action must demonstrate, by a preponderance of evidence, that the aggregate amount in controversy exceeds the jurisdictional minimum. This standard conforms with a defendant's burden of proof when the plaintiff does not plead a specific amount in controversy.

Slip op., at 14.  The Court went on to observe that a “lead plaintiff of a putative class cannot reduce the amount in controversy on behalf of absent class members, so there is no justification for assigning to the allegation weight so significant that it affects a defendant's right to a federal forum under § 1332(d)(2).”  Slip op., at 15.

With this decision in mind, a lead plaintiff is taking a serious chance with their adequacy if there is an attempted waiver of any recovery exceeding $5 million that cannot be supported down the road as having been based on a good faith calculation of recoverable damages.