This blog has previously discussed the importance of the amount-in-controversy requirement for jurisdictional purposes. Plaintiffs wishing to remain in state court need to provide a clear and definitive allegation that the amount in controversy falls below CAFA’s $5 million jurisdictional threshold. For some plaintiffs, this requirement can pose a dilemma. On the one hand, most plaintiffs would like to maximize the amount of recovery for any particular case, even if the amount of that recovery exceeds $5 million. On the other hand, definitively admitting that the amount in controversy exceeds $5 million increases the likelihood that the case will be removed to federal court if all other requirements for removal are satisfied.
A recent case from the Ninth Circuit illuminates the catch-22 associated with the $5 million amount-in-controversy requirement in class action cases. In Campbell v. Vitran Express, Inc., former employees alleged that the defendant trucking company violated California Labor Code provisions. The plaintiffs properly pled in their complaint that the amount in controversy was less than $5 million, forcing the defendant to prove “by a legal certainty” that the amount in controversy exceeded $5 million. In its removal petition, the defendant offered two separate damages calculations showing the amount in controversy to be greater than $5 million. The plaintiffs did not dispute either of the defendant’s damages calculations.
More compelling to the court than the defendant’s damages calculations, however, was the plaintiffs’ steadfast refusal to stipulate at oral argument that they would seek less than $5 million in damages. To the court, this refusal equaled a tacit admission that plaintiffs would in fact seek more than $5 million at trial. The court admonished, “[W]e see nothing in [precedent] that supports the proposition that a party may avoid federal court by pleading that he is seeking less than $5 million in the complaint, but refusing to support that pleading with any sort of judicially binding admission—which tells us he is actually seeking more than $5 million.” Because the plaintiffs were “unwilling” to stipulate to damages less than $5 million and because the defendants had produced undisputed damages calculations, the court held that the defendant had established “to a legal certainty” that the amount in controversy exceeded $5 million. All of the other jurisdictional requirements in CAFA being met, the Ninth Circuit reversed the district court’s order to remand the case to state court.
Campbell not only illustrates the importance of clearly pleading the amount in controversy in the complaint, but it also demonstrates the vulnerability of plaintiffs who are forced to choose between staying under the jurisdictional threshold and maximizing their potential for recovery. Campbell offers defendants a potential avenue to force plaintiffs to make this choice early in the litigation.