Harris v. KM Indus., Inc.

• Citation: 980 F.3d 694
• Decision Date: 13 November 2020
• Docket Number: No. 20-16767,20-16767
• Parties: Levone HARRIS, on behalf of himself and all others similarly situated, Plaintiff-Appellee, v. KM INDUSTRIAL, INC., a Delaware corporation, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

980 F.3d 694

Levone HARRIS, on behalf of himself and all others similarly situated, Plaintiff-Appellee,

v.KM INDUSTRIAL, INC., a Delaware corporation, Defendant-Appellant.

No. 20-16767

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 16, 2020 San Francisco, California

Filed November 13, 2020

EATON, Judge:

In order to remove a case commenced as a class action in a state court, the Class Action Fairness Act of 2005 ("CAFA") requires that the removing defendant allege that the amount in controversy exceeds $5 million. 28 U.S.C. § 1332(d)(2). Here, the plaintiff factually attacked the defendant's allegations regarding the amount in controversy. After the parties had an opportunity to submit evidence, the district court remanded the case to state court because it found that the defendant based the claimed amount in controversy on unreasonable assumptions. We affirm.

I.

On October 24, 2019, Levone Harris filed a class action complaint in California state court against his former employer KM Industrial, Inc. ("KMI"). Harris alleged that KMI had violated several provisions of the California Labor Code including failing to provide meal and rest breaks, pay overtime wages, furnish compliant wage statements, indemnify expenditures and losses, and timely pay all final wages.

Harris brought suit on behalf of several putative classes and subclasses of employees for the "Relevant Time Period," commencing "four years prior to the filing of this action until judgment is entered." The complaint contained a cause of action for labor violations suffered by an "Hourly Employee Class," described as "[a]ll persons employed by [KMI] and/or any staffing agencies and/or any other third parties in hourly or non-exempt positions in California during the Relevant Time Period." Harris also brought causes of action based on subclasses of the Hourly Employee Class. Two of these subclasses are important here: (1) the "Meal Period Sub-Class" and (2) the "Rest Period Sub-Class."

In his complaint, Harris defined the Meal Period Sub-Class as "[a]ll Hourly Employee Class members who worked a shift in excess of five hours during the Relevant Time Period." Harris alleged that KMI "maintained a policy or practice of not providing [Harris] and members of the Meal Period Sub-Class with uninterrupted, duty-free meal periods for at least thirty (30) minutes for each five (5) hour work period, as required by Labor Code section 512 ad [sic] the applicable Wage Order." The Rest Period Sub-Class was defined as "[a]ll Hourly Employee Class members who worked a shift of at least three and one-half (3.5) hours during the Relevant Time Period." Harris alleged that KMI "maintained a policy or practice of not providing [Harris and] members of the Rest Period Sub-Class with net rest period [sic] of at least ten minutes for each four hour work period, or major fraction thereof, as required by the applicable Wage Order."

KMI timely filed a notice of removal on November 27, 2019, asserting that CAFA vested the federal district court with original subject matter jurisdiction because the amount placed in controversy by the claims in Harris's complaint exceeded $5 million.¹ 28 U.S.C. § 1332(d)(2). KMI alleged that the amount in controversy was $7,163,325, which it calculated by totaling the value it assigned to five of the eight causes of action, plus attorney's fees. KMI represented that this calculation was based on the allegations set forth in the complaint, employee and payroll data, and KMI's own assumptions regarding the frequency of violations as applied to the relevant class or subclass. To support its calculation, KMI also submitted evidence in the form of a declaration by Julian Lopez ("First Lopez Declaration"), the corporate human resources director for KMI's parent company.²

In his declaration, Lopez estimated that, in the four-year period prior to the filing of the complaint, KMI had "employed approximately 442 putative class members" who "worked an aggregate of 39,834 workweeks." He based the declaration on his own personal knowledge and information taken from KMI's "computer system which, among other things, tracks certain personnel and payroll information of [KMI's] employees." The First Lopez Declaration made no mention of the number or length of shifts worked by the Hourly Employee Class members during the 39,834 workweeks. Nor did it define the length of a workweek itself with respect to what constituted a fulltime week or shift.

Importantly, KMI assumed, for purposes of calculating the amount in controversy, that all of the individuals in the putative Hourly Employee Class—442—were also all members of the Meal Period Sub-Class and the Rest Period Sub-Class for the duration of the Relevant Time Period. Thus, for Harris's meal period claim, KMI assumed that the entire Hourly Employee Class of 442 employees missed one meal period per workweek across an aggregate of 39,834 workweeks. Similarly, for the rest period claim, KMI assumed that all 442 members of the Hourly Employee Class were also members of the Rest Period Sub-Class and had missed two rest periods per workweek across an aggregate of 39,834 workweeks. Thus, KMI assumed that the 442 Hourly Employee Class members worked shifts long enough to qualify for one meal period and two rest periods during each week of the 39,834 workweeks during the four-year Relevant Time Period.

Harris filed a motion to remand the case to state court on the grounds that the district court lacked subject matter jurisdiction because KMI "ha[d] failed to establish by a preponderance of the evidence that the amount in controversy exceeds $5 million, as required under CAFA." In his brief supporting his remand motion, Harris contended that KMI's calculations "improperly inflate the amount in controversy" by relying on "unfounded assumptions." Specifically, Harris objected to KMI's assumption that the violation rate of one missed meal period and two missed rest periods, suffered by the Meal Period and Rest Period subclasses, was suffered by the entire Hourly Employee Class. Harris found unreasonable KMI's assumption that "every [Hourly Employee Class member] missed [one] meal period every week [and] two rest periods every week," without considering "other relevant factors, including shift length, the number of days the [Hourly Employee Class members] worked per week, or whether they took vacations or leaves of absence." Harris thus maintained that KMI's "removal is predicated upon misinterpretations of the class definitions and allegations asserted in the complaint[,]" by assigning meal period and rest period damages to the entire Hourly Employee Class.

KMI opposed Harris's motion to remand and provided additional evidence in the form of a second declaration by Julian Lopez ("Second Lopez Declaration"). While the Second Lopez Declaration responded to some of Harris's attacks on the allegations underlying the assumptions,³ it did not address the frequency with which Hourly Employee Class members worked shifts that would have made them eligible for meal or rest breaks. Thus, in response to Harris's challenge, KMI did not provide specific evidence to support its assumption that all 442 individuals that composed the Hourly Employee Class were also members of the Meal Period Sub-Class and the Rest Period Sub-Class throughout the Relevant Time Period.

The district court granted Harris's motion to remand to the state court, finding that KMI had "failed to establish the amount-in-controversy by a preponderance of the evidence" because "no evidence support[ed]" KMI's assumption "that the 442 potential class members regularly, or at least more often than not" worked the requisite number of hours that would have entitled them to meal or rest periods. That is, the district court found that KMI did not support with competent evidence its assumption that the 442 Hourly Employee Class members worked shifts sufficient to make them members of both subclasses during the 39,834 individual workweeks. The district court held that, without more, it could not credit KMI's calculations "because [KMI's] potential damages calculations rely on these assumptions." Given the lack of evidence on the record showing "how many putative [Hourly Employee Class] members worked shifts that would entitle them to a meal or rest break," the district judge found that KMI's assumptions were unreasonable because they increased the likelihood that "KMI's [amount in controversy] calculation would be grossly exaggerated."

II.

We have jurisdiction pursuant to 28 U.S.C. § 1453(c), and we review district court "remand orders in CAFA cases de novo ." Greene v. Harley-Davidson, Inc. , 965 F.3d 767, 771 (9th Cir. 2020) (quoting Arias v. Residence Inn by Marriott , 936 F.3d 920, 924 (9th Cir. 2019) ). The sole jurisdictional dispute here is whether KMI sufficiently demonstrated below that it met CAFA's requirement that the amount in controversy exceed $5 million.

A.

In his complaint, Harris does not enumerate the putative class's claimed damages. Where this allegation is lacking, a removing defendant need only allege in its notice of removal that the amount in controversy requirement is met. See Dart Cherokee Basin Operating Co., LLC v. Owens , 574 U.S. 81, 88–89, 135 S.Ct. 547, 190 L.Ed.2d 495 (2014).

Thereafter, the plaintiff can contest the amount in controversy by making either a "facial" or "factual" attack on the defendant's jurisdictional allegations. See Salter v. Quality Carriers , 974 F.3d 959, 964 (9th Cir. 2020). "A ‘facial’ attack accepts the truth of the [defendant's] allegations but asserts that they ‘are insufficient on their face to invoke federal jurisdiction.’ " Id. (quoting Leite v. Crane Co. , 749 F.3d 1117, 1121 (9th Cir. 2014) ). A factual attack "contests the truth of the ... allegations" themselves. Id. (citation omitted). When a plaintiff mounts a factual attack, the burden is on the defendant to show, by a preponderance of the...