McKinnon v. Restoration Hardware, Inc.

• Decision Date: 31 March 2022
• Docket Number: 4:21-cv-00605-SEP
• Parties: EASTE ZOE MCKINNON, individually and on behalf of all others similarly situated, Plaintiff, v. RESTORATION HARDWARE, INC. Defendant.
• Court: U.S. District Court — Eastern District of Missouri

EASTE ZOE MCKINNON, individually and on behalf of all others similarly situated, Plaintiff,
v.
RESTORATION HARDWARE, INC. Defendant.

No. 4:21-cv-00605-SEP

United States District Court, E.D. Missouri, Eastern Division

March 31, 2022

MEMORANDUM AND ORDER

SARAH E. PITLYK UNITED STATES DISTRICT JUDGE

Before the Court is Plaintiff Zoe McKinnon's motion to remand this action to the Circuit Court of St. Louis County, Missouri. Doc. 18. The motion is fully briefed and ready for disposition. For the reasons set forth below, the motion is granted.

Facts and Background

On March 11, 2021, Plaintiff initiated this action on behalf of herself and a putative class of Missouri residents who purchased products from Defendant Restoration Hardware during the five-year period prior to the filing of the Complaint and who were allegedly charged excess use tax. Doc. 1 ¶ 1; Doc. 2 ¶¶ 11, 25, 31. The facts, as alleged, are as follows: Missouri law requires retailers to charge a state use tax of 4.225%, combined with any local use tax, for remote sales that are shipped to Missouri purchasers from an out-of-state facility. Doc. 2 ¶ 24. The combined use tax for Plaintiff's St. Louis address is 5.725%, according to the Missouri Department of Revenue. Id. ¶ 29. Plaintiff purchased a towel set from Defendant's website. The set was shipped from Ohio to her Missouri address, and she was charged a 9.243% use tax. Id. ¶¶ 27, 28, 30. According to Plaintiff, Defendant has charged and continues to charge excess use tax for its remote sales to Missouri purchasers, and her situation is typical of the proposed class. Id. ¶ 25.

Defendant was served with Plaintiff's Complaint on April 26, 2021. Doc. 1 ¶ 2. On May 26, 2021, Defendant removed the action to this Court under 28 U.S.C. §§ 1441 and 1446. Doc. 1. Defendant's Notice of Removal claims that this Court has jurisdiction over the matter pursuant to the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. § 1332(d). Id. ¶ 12.

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Plaintiff filed a motion seeking remand on the grounds that Defendant's Notice fails to show that this case satisfies CAFA's amount-in-controversy requirement. Doc. 18 ¶ 4. During the pendency of this Motion, Plaintiff also filed notices of supplemental authority for two recent, related decisions from this district. Docs. 26, 27.^[1]

Legal Standard

Any action brought in state court over which the United States district courts have original jurisdiction may be removed to the district court in the jurisdiction where the action is pending. 28 U.S.C. § 1441(a). CAFA grants federal district courts original jurisdiction over class action lawsuits where, among other requirements, the amount in controversy exceeds $5 million. City of O'Fallon v. CenturyLink, Inc., 930 F.Supp.2d 1035, 1039 (E.D. Mo. 2013) (citing 28 U.S.C § 1332(d)(2)).

The removing defendant bears the burden of establishing federal jurisdiction, In re Prempro Prod. Liab. Litig., 591 F.3d 613, 620 (8th Cir. 2010) (citing Altimore v. Mount Mercy Coll., 420 F.3d 763, 768 (8th Cir. 2005)), but that burden is a pleading requirement, not a demand for proof. Pirozzi v. Massage Envy Franchising, LLC, 938 F.3d 981, 984 (8th Cir. 2019). “If the class action complaint does not allege that more than $5 million is in controversy, ‘a defendant's notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.'” Id. (quoting Dart Cherokee Basin Operating Co. v. Owens, 574 U.S. 81, 89 (2014)). “When the notice of removal plausibly alleges that the class might recover . . . more than $5 million, ‘then the case belongs in federal court unless it is legally impossible for the plaintiff to recover that much.'” Id. (emphasis in original) (quoting Raskas v. Johnson & Johnson, 719 F.3d 884, 888 (8th Cir. 2013)). “A defendant can rely on specific factual allegations, combined with reasonable deductions, reasonable inferences, or other reasonable extrapolations, but cannot rely on conjecture, speculation, or star gazing.” Gallagher v. Santander Consumer USA Inc., 2021 WL 2714101, at *2 (E.D. Mo. July 21, 2021) (cleaned up) (quoting Waters v. Ferrara Candy Co., 873 F.3d 633, 646 (8th Cir. 2017) (Waters II)).

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Federal courts ordinarily “resolve all doubts about federal jurisdiction in favor of remand” and strictly construe removal statutes, see Dahl v. R.J. Reynolds Tobacco Co., 478 F.3d 965, 968 (8th Cir. 2007) (quoting Transit Cas. Co. v. Certain Underwriters at Lloyd's of London, 119 F.3d 619, 625 (8th Cir. 1997)), but “no antiremoval presumption attends cases invoking CAFA, ” because the purpose of the statute was to expand federal jurisdiction for certain class actions. Dart Cherokee, 574 U.S. at 89 (citing Standard Fire Ins. Co. v. Knowles, 568 U.S. 588, 595 (2013); S. Rep. No. 109-14, at 43 (2005) (CAFA's “provisions should be read broadly, with a strong preference that interstate class actions should be heard in a federal court if properly removed by any defendant.”)); see also Stephen J. Shapiro, Applying the Jurisdictional Provisions of the Class Action Fairness Act of 2005: In Search of a Sensible Judicial Approach, 59 Baylor L. Rev. 77, 80 (2007) (citing S. Rep. No. 109-14, at 26-27 (2005)).

Discussion

Defendant claims that CAFA's $5 million amount-in-controversy requirement is satisfied by Plaintiff's claim for compensatory damages, attorneys' fees, and injunctive relief. Doc. 1 ¶¶ 15-28. Plaintiff argues that Defendant fails to establish CAFA's $5 million amount in controversy because the Notice does not plausibly allege the value of the requested injunctive relief. Doc. 18 ¶ 4; Doc. 19 at 6-7. The Court agrees.

The Notice estimates that the value of Plaintiff's claim for compensatory damages is $1, 970, 080, Doc. 1 ¶ 21, and that the value of Plaintiff's claim for attorneys' fees is $656, 693.33, Doc. 1 ¶ 24. Assuming those estimates to be plausible, in order to reach CAFA's $5 million amount-in-controversy requirement, Defendant must rely on the value of Plaintiff's requested injunctive relief.^[2]

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The Notice alleges that the value of the injunction, which would permanently enjoin Defendant from continuing to charge the allegedly excessive use tax rate, is between $3, 162, 081.32 and $5, 055, 336.22. Doc. 1 ¶¶ 25, 27. To reach that figure, the Notice begins with the average annual amount of allegedly over-collected taxes over the five-year class period: $396, 016. Id. ¶ 27. Projecting that annual average over the next 10-to-20 years and discounting at 5% per year, the Notice alleges that the present value of the taxes Defendant would have to forego collecting over the next 10 years is $3, 162, 081.32, and over the next 20 years is $5, 055, 336.22. Id. ¶ 26 (citing Keeling v. Esurance Ins. Co., 660 F.3d 273, 274 (7th Cir. 2011)).

As in Lizama, “[t]he flaw in Defendant's position arises in their argument with regard to the value of injunctive relief.” Lizama, 2021 WL 6125034, at *3. Defendant's calculations do not reflect the value of the injunction from the plaintiff's point of view, because they calculate future foregone taxes based on Defendant's future sales not just to the putative class members but also to future non-class members. Defendant cannot plausibly allege that the putative class members-that is, Missouri residents who have purchased an item from Restoration Hardware within the last five years-will purchase items of similar value at a similar rate over the upcoming 10 to 20 years. Rather, Defendant's calculation considers the aggregate future sales to all Missouri purchasers, regardless of their affiliation to this action. Thus, what Defendant's calculation actually approximates is the effect of the injunction from

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the point of view of the Defendant, as the injunction would effectively prevent Defendant from collecting taxes from all future purchasers, whether they are class members or not.

The Eighth Circuit did at one time approve of considering either party's viewpoint in assessing the...