Arias v. Residence Inn By Marriott

• Decision Date: 03 September 2019
• Docket Number: No. 19-55803,19-55803
• Citation: 936 F.3d 920
• Parties: Blanca Argelia ARIAS, individually and on behalf of herself and others similarly situated, Plaintiff-Appellee, v. RESIDENCE INN BY MARRIOTT, a Delaware limited liability company; Marriott International, Inc., a Delaware corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

936 F.3d 920

Blanca Argelia ARIAS, individually and on behalf of herself and others similarly situated, Plaintiff-Appellee,

v.RESIDENCE INN BY MARRIOTT, a Delaware limited liability company; Marriott International, Inc., a Delaware corporation, Defendants-Appellants.

No. 19-55803

United States Court of Appeals, Ninth Circuit.

Argued and Submitted August 13, 2019 Pasadena, California

Filed September 3, 2019

Brian P. Long (argued), Seyfarth Shaw LLP, Los Angeles, California; William Dritsas, Seyfarth Shaw LLP, San Francisco, California; for Defendants-Appellants.

Samvel Gashgian (argued) and Ramin R. Younessi, Law Offices of Ramin R. Younessi, Los Angeles, California, for Plaintiff-Appellee.

Before: Consuelo M. Callahan, D. Michael Fisher,^* and Morgan Christen, Circuit Judges.

CALLAHAN, Circuit Judge:

Blanca Arias filed a putative class action against Residence Inn by Marriott, LLC and Marriott International, Inc. ("Marriott") in California superior court, alleging that Marriott failed to compensate its employees for wages and missed meal breaks and failed to issue accurate itemized wage statements. Marriott removed the action to federal court alleging diversity jurisdiction under the Class Action Fairness Act ("CAFA"). The district court sua sponte remanded the case back to state court, and Marriott appeals.

In some of our early cases interpreting CAFA, we adopted legal standards that were influenced by a general "presumption against federal jurisdiction." See Lowdermilk v. U.S. Bank Nat’l Ass’n , 479 F.3d 994, 999 (9th Cir. 2007). The Supreme Court has made clear that regardless of whether such a presumption exists in run-of-the-mill diversity cases, "no antiremoval presumption attends cases invoking CAFA." Dart Cherokee Basin Operating Co., LLC v. Owens , 574 U.S. 81, 135 S. Ct. 547, 554, 190 L.Ed.2d 495 (2014). Because some remnants of our former antiremoval presumption seem to persist,¹ we reaffirm three principles that apply in CAFA removal cases. First, a removing defendant’s notice of removal "need not contain evidentiary submissions" but only plausible allegations of the jurisdictional elements. Ibarra v. Manheim Investments, Inc. , 775 F.3d 1193, 1197 (9th Cir. 2015). Second, when a defendant’s allegations of removal jurisdiction are challenged, the defendant’s showing on the amount in controversy may rely on reasonable assumptions. See id. at 1197–99. Third, when a statute or contract provides for the recovery of attorneys’ fees, prospective attorneys’ fees must be included in the assessment of the amount in controversy. Fritsch v. Swift Transp. Co. of Ariz., LLC , 899 F.3d 785, 794 (9th Cir. 2018). We vacate the district court’s order remanding the action to state court, and we remand for further proceedings to allow the parties to present evidence and argument on the amount in controversy.

I.

Arias works for defendant Residence Inn by Marriott, LLC in Los Angeles, California. On August 23, 2018, Arias filed a putative class action in state court against Marriott alleging that Marriott failed to pay wages, provide rest breaks, and provide itemized wage statements, all in violation of state wage and hour laws. Arias seeks certification of a class of all employees of Marriott "who were subjected to individual wage and hour violations, during the period within four years from the filing of th[e] Complaint and continuing through trial." In addition to compensatory damages, Arias seeks civil penalties under the California Private Attorney General Act, disgorgement of "ill-gotten gains" under California’s Unfair Competition Law, and attorneys’ fees.

On October 12, 2018, Marriott removed the case to federal district court, invoking CAFA jurisdiction.² Specifically, Marriott alleged that the district court had original jurisdiction over the matter because the class action satisfied CAFA’s requirements of minimum diversity (any member of the class is a citizen of a state different from any defendant), class size (at least 100), and amount in controversy (exceeding $5,000,000). See 28 U.S.C. § 1332(d)(2), (d)(5)(B). To show minimum diversity, Marriott alleged that it is a citizen of Maryland and Delaware and it relied on the allegation in the complaint that Arias is a citizen of California. To satisfy the class size requirement, Marriott provided a declaration from a human resources officer stating that Marriott employed at least 2193 nonexempt employees during the period identified in the complaint.

To satisfy the amount-in-controversy requirement, Marriott relied on a combination of the complaint’s definition of the class, Marriott’s employee data (e.g., number of nonexempt employees, hourly rate of pay, and number of workweeks worked by putative class members), and assumptions about the frequency of the violations alleged in the complaint. Based on its assumptions and calculations, Marriott alleged a potential amount in controversy exceeding $15 million with its most "conservative estimate" totaling over $5.5 million, excluding attorneys’ fees (which Marriott alleged should be included in the calculation). Marriott’s calculation in its notice of removal breaks down as follows:

Unpaid Overtime . Marriott cited Arias’s allegation that Marriott "routinely" failed to pay its employees overtime wages. Using an assumption of 30 minutes per week (6 minutes per day) of unpaid overtime wages, Marriott calculated an amount in controversy for this claim of $1,617,017.70. Marriott suggested that, based on the allegations in the complaint, an assumed violation rate of 60 minutes per week would be reasonable and would double the estimated amount in controversy for unpaid overtime.

Rest Break Premiums . Marriott cited Arias’s allegation that Marriott failed to provide employees with uninterrupted rest periods and failed to compensate employees for missed rest periods. In Marriott’s most conservative estimate, it assumed a denial of one rest break per week and calculated an amount in controversy for this claim of $2,155,493. Marriott also suggested that assuming three missed rest periods per week would also be "conservative" and would yield an amount in controversy of $6,466,480 "in potential damages for penalties alone ." Marriott also suggested that the complaint could reasonably be interpreted as seeking one rest period premium per day, in which case the amount in controversy for this claim alone would be over $10 million.

Wage Statement Penalties . Marriott cited Arias’s allegation that Marriott failed to provide employees timely and accurate wage statements and that none of the paystubs actually given to employees complied with the Labor Code. Based on the penalties provided by statute, Marriott calculated an amount in controversy for this claim of $1,788,150.

Attorneys’ Fees . Marriott argued that a reasonable estimate of attorneys’ fees likely to be recovered should be included in the estimate of the amount in controversy. It argued that 25 percent of the amount of estimated damages should be added to the amount in controversy to account for attorneys’ fees.

Table 1. Marriott’s Estimate of Amount in Controversy

One month after Marriott filed the notice of removal, the district court issued an order sua sponte remanding the case to state court. The district court found Marriott’s calculations of the amount in controversy "unpersuasive," concluding that the calculations rested on speculation and conjecture. The court faulted Marriott for not offering evidentiary support for its assumptions of violation rates and reasoned that "[e]qually valid assumptions could be made that result in damages that are less than the requisite $5,000,000 amount in controversy." The court also concluded that "prospective attorneys’ fees are too speculative" to be included in the amount in controversy. The court thus concluded that Marriott "failed to satisfy [its] burden that the amount in controversy meets the jurisdictional requirement."

The parties report that since the district court’s remand order, litigation has gone forward in the state court. According to the parties, on July 18, 2019, Marriott filed a motion for summary judgment, arguing that a release from a related class action settlement bars all of Arias’s claims.

Marriott timely filed a petition for permission to appeal under 28 U.S.C. § 1453(c)(1), which we granted.

II.

"We review remand orders in CAFA cases de novo." Fritsch , 899 F.3d at 792.

"Congress designed the terms of CAFA specifically to permit a defendant to remove certain class or mass actions into federal court. 28 U.S.C. § 1332(d). Congress intended CAFA to be interpreted expansively." Ibarra , 775 F.3d at 1197. As in Ibarra , the parties here "do not contest CAFA’s jurisdictional requirements of minimum diversity and class numerosity on appeal; the sole dispute is whether CAFA’s requirement that the amount in controversy exceed $5 million is met here." Id. at 1196–97.

Marriott raises several challenges to the district court’s remand order. First, Marriott argues the district court imposed an erroneous burden of proof by sua sponte remanding the case to state court without allowing Marriott an opportunity to support its allegations with evidence. Second, Marriott argues the district court erred in disallowing Marriott’s use of assumed violation rates in its estimate of the amount in controversy. Third, it argues the district court erred by "refusing to consider prospective attorneys’ fees in the amount in controversy."

A.

We agree with Marriott that when a notice of removal plausibly alleges a basis for federal court jurisdiction, a district court may not remand the case back to state court without first giving the defendant an opportunity to show by a preponderance of the evidence that the jurisdictional requirements are satisfied.

"[W]hen a defendant seeks federal-court adjudication, the defendant’s amount-in-controversy allegation should be accepted when not contested by the plaintiff or questioned by the court." Dart...