Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-00620/USCOURTS-cand-3_05-cv-00620-0/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 28:1332 Diversity-Employment Discrimination

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

CARLO GUGLIELMINO et al,

Plaintiffs,

v

MCKEE FOODS CORP,

Defendant. /

No C-05-0620 VRW

ORDER

This putative class action is “brought on behalf of all

persons and entities who entered into ‘Distributorship Agreements’

with [d]efendant McKee Foods Corporation * * *, and functioned as

drivers/distributors of McKee Foods’s products to retail stores.” 

Notice Remov (Doc #1) Ex B (Complaint) ¶1. Plaintiffs allege

violations of various wage and hour laws based on defendant’s

treatment of them as independent contractors rather than employees. 

“Plaintiffs’ function was, and is, primarily to arrange

merchandise, rotate stock, place point-of-sale and other

advertising materials, and engage in other activities intended to

promote sales by the supermarkets of the goods they have

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delivered.” Id ¶22.

Defendant removed the case from the superior court of

Alameda to this court on February 10, 2005, on the basis of

diversity of citizenship. Notice Remov (Doc #1). The papers

before the court establish that plaintiffs are citizens of

California, see id ¶11(a); id Ex B (Complaint) ¶5, and that

defendant is a Tennessee corporation with its principal place of

business in Tennessee, and hence a citizen of Tennessee, see Notice

Remov (Doc #1) ¶11(b); id Ex B (Complaint) ¶7. Although there is

no question as to diversity of citizenship, the parties hotly

contest whether the $75,000 minimum amount-in-controversy

requirement of 28 USC § 1332 is met.

Plaintiffs contend that the amount-in-controversy

threshold of § 1332 is not met and thus remand is required pursuant

to 8 USC § 1447(c). Mot Remand (Doc #9). Defendant opposes,

attempting to demonstrate that, if they are successful, plaintiffs’

damages will each exceed $75,000. Def Opp (Doc #20). The court

finds this matter suitable for determination without oral argument,

and, accordingly, the hearing scheduled for May 5, 2005, is

VACATED. See Civ L R 7-1(b). For the reasons that follow, the

court DENIES the motion to remand and CERTIFIES this order for

interlocutory review pursuant to 28 USC § 1292(b).

I

The first -- and perhaps most difficult -- question is

what is (and who bears) the burden of proof in demonstrating that

the amount-in-controversy requirement is (or is not) met here. 

Plaintiffs’ complaint states that the “damages to each [p]laintiff

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are less than $75,000” and “the sum of such damages and the value

of the injunctive relief sought by plaintiff in this action is less

than $75,000.” Notice Remov (Doc #1) Ex B (Complaint) ¶4.

In all the authorities the court has consulted, one thing

is constant: Defendant, as the party invoking the court’s

jurisdiction, bears the burden of showing that removal is proper. 

See, e g, William W Schwarzer, A Wallace Tashima, James M

Wagstaffe, Federal Civil Procedure Before Trial ¶2:1093 (Rutter

Group, 2005) (“Plaintiff’s motion for remand effectively forces

defendant -- the party who invoked the federal court’s removal

jurisdiction -- to prove by a preponderance of the evidence

whatever is necessary to support the petition: e g, the existence

of diversity, the amount in controversy, or the federal nature of

the claim.” (citing Gaus v Miles, Inc, 980 F2d 564, 566 (9th Cir

1992)).

There are (at least) three possibilities for the removing

defendant’s burden of proof; they are compactly identified in the

Eleventh Circuit’s opinion in Burns v Windsor Insurance Co, 31 F3d

1092, 1094 (11th Cir 1994):

In the typical diversity case, plaintiff

files suit in federal court against a diverse

party for damages exceeding [the thenprevailing jurisdictional amount of] $50,000. 

Such a case will not be dismissed unless it

appears to a “legal certainty” that plaintiff’s

claim is actually for less than the

jurisdictional amount. St Paul’s Indemnity

Corp v Red Cab Co, 303 US 283, 288-89 (1938). 

In the typical removal case, a plaintiff files

suit in state court seeking over $50,000. The

defendant can remove to federal court if he can

show, by a preponderance of the evidence, facts

supporting jurisdiction. See McNutt v General

Motors Acceptance Corp, 298 US 178, 189 (1936). 

These standards give great weight to

plaintiff’s assessment of the value of

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plaintiff’s case.

Neither of these general rules fits our

atypical case. Here, plaintiff filed suit in

state court specifically requesting $45,000,

five thousand dollars less than the

jurisdictional amount. Defendant says

plaintiff’s prayer is illusory, that she

actually intends to recover more than $50,000;

so, the case should remain in federal court.

Burns goes on to opt for a third, “heavy” burden of proof: When

“plaintiff asserts in her ad damnum clause a specific claim for

less than the jurisdictional amount, defendant, to establish

removal jurisdiction, [must] prove to a legal certainty that

plaintiff, if she prevailed, would not recover [less than the

jurisdictional amount].” Id at 1097 (emphasis added).

To summarize the three possible standards: Defendant

might be required to show that plaintiff (1) might recover in

excess of the jurisdictional amount; (2) is more likely than not to

recover in excess of the jurisdictional amount; or (3) is legally

certain to recover in excess of the jurisdictional amount. (All of

these standards, of course, assume that plaintiff prevails on all

his claims for relief.) The first option does not appear to have

been adopted by any court. Moreover, it cannot be reconciled with

the Ninth Circuit’s consistent holding that the preponderance

standard applies when a defendant seeks to remove a case in which

the complaint itself supports the defendant’s position by seeking

more than the jurisdictional amount. See, e g, Sanchez v

Monumental Life Insurance Co, 102 F3d 398, 403-04 (9th Cir 1996);

Valdez v Allstate Insurance Co, 372 F3d 1115 (9th Cir 2004).

As between the “preponderance” and “legal certainty”

tests, however, the Ninth Circuit has not offered strong guidance. 

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As noted above, the Eleventh Circuit adopted the “legal certainty”

test in Burns, but the most the Ninth Circuit has said is that

“[w]here it is not facially evident from the complaint that more

than $75,000 is in controversy, the removing party must prove, by a

preponderance of the evidence, that the amount in controversy meets

the jurisdictional threshold.” Matheson v Progressive Specialty

Insurance Co, 319 F3d 1089, 1090 (9th Cir 2003) (per curiam). By

its literal language, this quotation from Matheson would seem

controlling here. Reliance on Matheson does not suffice, however,

because Matheson (like Sanchez, which it cites, and Valdez as well)

addressed a situation in which the state-court complaint was silent

on damages. Here -- as in Burns and in contrast to the Ninth

Circuit cases of Matheson, Sanchez and Valdez -- the complaint is

not silent, but affirmatively seeks less than the jurisdictional

amount.

Even the analogy to Burns is imperfect because the Burns

plaintiff sought a specific amount of damages that was less than

the jurisdictional amount; the complaint here simply maintains --

almost too conveniently -- that plaintiffs’ damages “are less than

$75,000.” The heightened standard adopted in Burns grew out of the

idea that a “plaintiff’s claim, when it is specific and in a

pleading signed by a lawyer, deserves deference and a presumption

of truth[;] * * * plaintiff’s counsel best knows the value of his

client’s case * * *.” 31 F3d at 1095. Plaintiffs’ disclaimer here

of the jurisdictional amount is not so obviously the product of

counsel’s specific assessment of his clients’ case, undermining

somewhat the reason for the rule in Burns.

The imperfect analogy to Burns and the categorical

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language of Matheson convince the court that it should proceed on

the preponderance standard. Nonetheless, the question is

sufficiently close -- and, as will be seen below, determinative --

that the court will certify this order for interlocutory appeal

pursuant to 28 USC § 1292(b).

II

Having established the burden of proof, the court applies

it to plaintiffs’ complaint. Because plaintiffs propose to proceed

as representatives of a class, all that matters is that they -- and

not (necessarily) the unnamed class members -- satisfy § 1332’s

amount-in controversy requirement. See Gibson v Chrysler Corp, 261

F3d 927, 940 (9th Cir 2001) (“[T]here is supplemental jurisdiction

over the claims of unnamed class members when the claim of an

individual named plaintiff satisfies the amount-in-controversy

requirement.”). (Precisely this question is, however, pending

before the Supreme Court in Exxon Corp v Allapattah Services, No

04-70, and upon a decision from the Supreme Court, the parties

should promptly address the effect of that decision on this case.) 

Accordingly, the court must evaluate the damages claimed by the two

named plaintiffs, Briant Chun-Hoon (“Chun-Hoon”) and Carlo

Guglielmino (“Guglielmino”).

The evidence that establishes the amount in controversy

must be just that -- evidence. As the Ninth Circuit recently

explained:

“[a]lthough we have not addressed the types of

evidence defendants may rely upon to satisfy

the preponderance of the evidence test for

jurisdiction, we have endorsed the Fifth

Circuit’s practice of considering facts

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presented in the removal petition as well as

any ‘summary-judgement-type [sic] evidence

relevant to the amount in controversy at the

time of removal.’” Matheson, 319 F3d at 1090,

quoting Singer [v State Farm Mutual Automobile

Insurance Co, 116 F3d 373, 377 (9th Cir 1997)];

see, e g, Cohn v Petsmart, Inc, 281 F3d 837,

840 (9th Cir 2002) (per curiam) (“A settlement

letter is relevant evidence of the amount in

controversy if it appears to reflect a

reasonable estimate of the plaintiff’s

claim.”); Singer, 116 F3d at 376-77 (holding

that a judicial admission may establish the

amount in controversy).

Valdez, 372 F3d at 1117 (first alteration in original). By

contrast, “information and belief hardly constitutes proof by a

preponderance of the evidence.” 372 F3d at 1117 (quotation marks

omitted).

Plaintiffs’ economic damages consist of (1) out-of-pocket

expenses for vehicles, warehouse leasing and “unsaleable” (i e,

spoiled) product that they incurred by virtue of being treated as

independent contractors; (2) overtime compensation; and (3)

employee benefits. Defendant’s computation of these damage

elements is found in the notice of removal and is entirely made on

information and belief. Accordingly, it is entitled to no weight. 

The court therefore adopts plaintiffs’ computations with respect to

(1) out-of-pocket expenses and (2) overtime compensation. See Mot

Remand (Doc #9) at 3-11. With respect to employee benefits, the

court has no probative evidence before it on the appropriate

measure of health insurance, but does recognize a 1.5%-of-salary

401(k) plan matching contribution to which plaintiffs claim an

entitlement. On this basis, the court finds that defendant has

established by a preponderance of the evidence that Guglielmino’s

/

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 This is the sum of $11,914.82 in vehicle operating expenses;

$8,178.64 in warehouse leasing costs; $6,679.03 in unsaleable product;

$7,463.36 in overtime; and a 401(k) contribution computed in Mot

Remand (Doc #9) 10 n5 as $1,354.22.

2This is the sum of $14,450 in vehicle operating expenses; $6,631

in warehouse leasing costs; $10,500 in unsaleable product; $11,115.52

in overtime; and a 401(k) contribution of 1.5% per year for four years

of an annual gross profit of $33,341.25, or $2,000.48.

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economic damages are $35,590.071

 and that Chun-Hoon’s economic

damages are $44,697.00.2

These sums do not satisfy the amount-in-controversy

requirement. But plaintiffs also seek punitive damages and

statutory attorneys’ fees. With respect to the former, defendants

have heeded the advice of other courts to “introduce evidence of

jury verdicts in cases involving analogous facts.” See, e g,

Surber v Reliance National Indemnity Co, 110 F Supp 2d 1227, 1232

(N D Cal 2000). The jury verdict reports are attached as Exhibit A

to defendant’s opposition paper. These verdict reports suggest

that punitive damage awards, after reduction by the court, are

typically a small single-digit multiple of the economic damage

award. (The reported awards, after reduction, were 3.4, 1.5 and

3.8 times the corresponding economic damage awards.) Plaintiffs

poke a few holes in these reports -- there are factual distinctions

and none represent punitive damage awards made in a class action -

- but no comparison will ever be perfect. What matters here is

that these cases share the employment fraud aspect of this case,

the basis for plaintiffs’ punitive damages claims. And while the

case comparisons might have been better, plaintiffs have offered

none of their own. As such, the court finds (again,

conservatively) that if plaintiffs prevail on their punitive

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damages claim, it is more likely than not that the punitive damage

award will be at least as great as the economic damage award. This

alone puts Chun-Hoon over the jurisdictional threshold, and brings

Guglielmino within $3,820 of the jurisdictional threshold.

As for attorneys’ fees, defendant points out that the

Ninth Circuit has established 25% as a “benchmark” award of fees. 

Def Opp (Doc #20) at 9 (citing Fischel v Equitable Life Assurance

Society, 307 F3d 997, 1006 (9th Cir 2002)). Of course, Fischel

(and the 25% “benchmark”) are creatures of the common fund class

action, and plaintiffs here pray for attorneys’ fees under a feeshifting rule. Nonetheless, conservatively estimating attorneys’

fees by a percentage seems appropriate in this context, where any

computation of the amount in controversy necessarily entails some

educated speculation. The court finds that it is more likely than

not that if they prevail, plaintiffs will be entitled to fees on

the order of 12.5% (half the 25% “benchmark”) of their economic

damages.

(Indeed, even a more conservative estimate for attorneys

fees would put Guglielmino over the jurisdictional threshold: If a

$70,000 claim is typical of the roughly 200 class members that

plaintiffs claim exist, then the class’ claims will be worth about

$14 million. Yet a fee award of merely $800,000 -- in the court’s

experience, a small award in comparison to such a large class claim

-- would add $4000 (1/200th of $800,000) to the amount in

controversy attributable to Guglielmino. And $4000 is enough to

put his claim over the jurisdictional threshold.)

Accordingly, the court finds that the total amount in

controversy -- conservatively estimated -- is the sum of (1)

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economic damages, (2) attorneys’ fees equal to 12.5% of economic

damages and (3) punitive damages equal to economic damages, or, in

total, 2.125 times economic damages. Using the figures computed

above for economic damages, this implies that the amount in

controversy for Guglielmino is $75,628.90 and the amount in

controversy for Chun-Hoon is $94,981.13. Both amounts exceed

$75,000. Accordingly, the court finds that the requirements of 28

USC § 1332 are met and that it has subject matter jurisdiction.

III

That said, the court is quick to note that its result

would be the opposite if it employed the “legal certainty” test. 

While its computation of economic damages would be no different --

their certainty derives from being grounded in matters of objective

fact -- there is no legal certainty at all that attorneys’ fees or

punitive damages would, if awarded, amount to any particular amount

at all. Put another way, plaintiffs’ overtime claims can be

reduced to a sum certain, but their attorneys might expend only

modest effort to prevail (and that effort would be spread over a

whole class) and a jury might award only $1 in punitive damages. 

Under the “legal certainty” test, the court cannot say that

plaintiffs will recover any particular amount of attorneys fees or

punitive damages. As such, the amount in controversy under the

“legal certainty” test is only plaintiffs’ economic damages, and

the court has found that these do not meet the amount-incontroversy requirement of 28 USC § 1332. Thus, this order

ultimately turns on the burden of proof the court has adopted.

Title 28 USC § 1292(b) provides that:

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When a district judge, in making in a civil

action an order not otherwise appealable under

this section, shall be of the opinion that such

order involves a controlling question of law as

to which there is substantial ground for

difference of opinion and that an immediate

appeal from the order may materially advance

the ultimate termination of the litigation, he

shall so state in writing in such order.

The requirements of this section are met here. An order

denying a motion to remand is a non-appealable interlocutory order. 

See, e g, Melancon v Texaco, Inc, 659 F2d 551, 552-53 (5th Cir

1981). As noted, although this order rests in part on factual

determinations, a question of law is ultimately dispositive. There

are substantial grounds for difference of opinion on this question;

the Eleventh Circuit makes convincing argument in Matheson for a

“legal certainty” burden, but Ninth Circuit precedent seems to

suggest that the traditional preponderance standard should apply. 

Finally, resolution of this question will substantially advance the

termination of this litigation in that reversal of this order will

cause the case to exit the federal system. The court is

particularly mindful of the substantial resources that must be

committed to reach an appeal after final judgment of a

jurisdictional issue presented on a threshold motion to remand --

and the risk that all will be for nought if that initial

jurisdictional determination is reversed on appeal.

Accordingly, this court CERTIFIES this order for

interlocutory appeal pursuant to 28 USC § 1292(b). The order

presents the following question for appeal: What is defendants’

burden of proof when plaintiffs move to remand pursuant to 28 USC §

1447(c) and their state-court complaint specifies that their

damages are less than the jurisdictional requirement? An

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interlocutory appeal shall not stay proceedings in this case.

IV

In sum, the court DENIES plaintiffs’ motion to remand

(Doc #9) and CERTIFIES this order for interlocutory appeal pursuant

to 28 USC § 1292(b). The parties are scheduled to appear for an

initial case management conference on June 14, 2005, at 9:00 am.

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

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