Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-14-56780/USCOURTS-ca9-14-56780-0/pdf.json

Parties Involved:
Knight Transportation Inc
Appellant
Knight Truck and Trailer Sales, LLC
Appellant
Patrick LaCross
Appellee
Robert Lira
Appellee
Matthew Lofton
Appellee

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PATRICK LACROSS; ROBERT LIRA;

MATTHEW LOFTON, on behalf of

themselves and all others similarly

situated,

Plaintiffs-Appellees,

v.

KNIGHT TRANSPORTATION INC., an

Arizona Corporation; KNIGHT

TRUCK AND TRAILER SALES, LLC,

an Arizona Limited Liability

Company,

Defendants-Appellants.

No. 14-56780

D.C. No.

5:14-cv-00771-

JGB-JC

OPINION

Appeal from the United States District Court

for the Central District of California

Jesus G. Bernal, District Judge, Presiding

Argued and Submitted

December 8, 2014—Pasadena, California

Filed January 8, 2015

Before: Susan P. Graber, Ronald M. Gould,

and Consuelo M. Callahan, Circuit Judges.

Opinion by Judge Gould

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2 LACROSS V. KNIGHT TRANSPORTATION

SUMMARY*

Class Action Fairness Act / Amount in Controversy 

The panel reversed the district court’s judgment

remanding the putative class action to state court, and held

that the defendants Knight Transportation, Inc., and Knight

Truck and Trailer Sales had shown that they were entitled

under the Class Action Fairness Act to proceed in federal

court because they had established the requisite $5 million

amount in controversy.

The plaintiff putative class of truck drivers alleged that

Knight misclassified them as independent contractors and

asserted other labor law violations, and filed their action in

California state court. Knight removed the case to federal

court and estimated the amount in controversy for

reimbursing the drivers’ lease-related and fuel costs to be at

least $44 million

In Ibarra v. Manheim Investments, Inc., __ F.3d __.

No. 14-56779 (9th Cir. Jan. 8, 2015), filed simultaneously

with this opinion, the panel held that when a defendant relies

on a chain of reasoning that includes assumptions to satisfy

its burden to prove by a preponderance of the evidence that

the amount in controversy exceeded $5 million, the chain of

reasoning and its underlying assumptions must be reasonable.

The panel applied the framework of analysis in Ibarra to

defendants’ proof, and concluded that defendants had met

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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LACROSS V. KNIGHT TRANSPORTATION 3

their burden of proof because defendants relied on a

reasonable chain of logic and presented sufficient evidence to

establish that the amount in controversy exceeded $5 million.

COUNSEL

Richard H. Rahm (argued), James E. Hart, Carly Nese, and

Thomas J. Whiteside, Littler Mendelson, P.C., San Francisco,

California, for Defendants-Appellants.

James M. Trush (argued), Trush Law Office, Costa Mesa,

California; Ellen R. Serbin, Todd H. Harrison, and Brennan

S. Kahn, Perona, Langer, Beck, Serbin, Mendoza &Harrison,

APC, Long Beach, California, for Plaintiffs-Appellees.

OPINION

GOULD, Circuit Judge:

With this appeal pending, we decided Ibarra v. Manheim

Investments, Inc., __F.3d__, No. 14-56779 (9th Cir. Jan. 8,

2015), filed simultaneously with this opinion, and addressed

what proof a defendant seeking removal must produce to

prove the amount in controversy requirement under the Class

Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. § 1332(d),

when the complaint does not include a facially apparent

amount in controversy or may have understated the true

amount in controversy. We held in Ibarra that when the

defendant relies on a chain of reasoning that includes

assumptions to satisfy its burden to prove by a preponderance

of the evidence that the amount in controversy exceeds $5

million, the chain of reasoning and its underlying

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4 LACROSS V. KNIGHT TRANSPORTATION

assumptions must be reasonable. Ibarra, __F.3d. at __, slip

op. at 12. We apply our framework of analysis in Ibarra to

defendants’ proof here and conclude that because defendants

relied on a reasonable chain of logic and presented sufficient

evidence to establish that the amount in controversy exceeds

$5 million, defendants have met their burden of proof. We

reverse the district court’s judgment and remand for further

proceedings consistent with this opinion. Defendants have

shown that they are entitled under CAFA to proceed in

federal court.

I

Defendants Knight Transportation,Inc., andKnight Truck

and Trailer Sales, LLC (collectively, “Knight”), are Arizona

corporations licensed to do business in California. The

named plaintiffs Patrick LaCross, Robert Lira, and Matthew

Lofton are truck drivers or “Owner Operators” who

performed work for Knight. Plaintiffs filed a putative class

action against Knight in California state court, alleging that

Knight misclassified them as independent contractors and

asserting other labor law violations.

Knight removed the case to federal court and estimated

the amount in controversy for reimbursing the drivers’ leaserelated and fuel costs to be at least $44 million. The leaserelated and fuel costs are at stake because if plaintiffs prevail

on their claim that they are employees, Knight will be liable

for its employees’ expenditures related to the ownership and

operation of the trucks. See Cal. Lab. Code § 2802. Plaintiffs

filed a motion to remand the class action to state court. The

district court granted plaintiffs’ motion and remanded the

case to state court, concluding that Knight did not meet its

burden of proof to establish the amount in controversy

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LACROSS V. KNIGHT TRANSPORTATION 5

because all of Knight’s calculations relied on a flawed

assumption that all drivers worked 50 weeks a year.1 On July

31, 2014, Knight petitioned for permission to appeal, which

we granted on November 10, 2014.2

II

The sole dispute here is whether CAFA’s requirement that

the amount in controversy exceed $5 million is met. In

Ibarra, we adhered to the rule that the defendant seeking

removal bears the burden of proof to establish by a

preponderance of the evidence that the amount-in-controversy

requirement is satisfied. Ibarra, __F.3d at __, slip op. at 8. 

As the Supreme Court has held, a removing party must

initially file a notice of removal that includes “a plausible

allegation that the amount in controversy exceeds the

jurisdictional threshold.” Dart Basin Operating Co. v.

Owens, No. 13-719, 2014 WL 7010692, at *6 (U.S. Dec. 15,

1 The district court found that Knight’s assumption was contradicted by

its own evidence of actual fuel costs. For example, plaintiff LaCross was

counted as a class member for one year but he only paid fuel costs for 18

weeks.

2 Our November 10, 2014 order granting Knight’s petition for

permission to appeal contains a typographical error where it states that

“we find that the petition for permission to appeal was timely filed on July

21, 2014.” Knight’s petition for permission to appeal was filed on July

31, 2014.

Plaintiffs contend that the district court’s remand order was entered

on July 18, 2014, so Knight’s petition for permission to appeal was

untimely filed on July 31, 2014. Although the district court’s remand

order was filed on July 18, 2014, the order was entered on July 21, 2014. 

Knight’s petition for permission to appeal was timely filed. 28 U.S.C.

§ 1453(c)(1).

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6 LACROSS V. KNIGHT TRANSPORTATION

2014). When, as here, “a defendant’s assertion of the amount

in controversy is challenged . . . both sides submit proof and

the court decides, by a preponderance of the evidence,

whether the amount-in-controversy requirement has been

satisfied.” Id. at *5. As we further held in Ibarra, when the

defendant relies on a chain of reasoning that includes

assumptions to satisfy its burden of proof, the chain of

reasoning and its underlying assumptions must be reasonable

ones. Ibarra, __F.3d. at __, slip op. at 12.

We apply our framework of analysis in Ibarra to Knight’s

evidence but start by noting an important distinction in the

complaints. Unlike the complaint in Ibarra, which alleged a

“pattern and practice” of labor law violations but not

universal violations, the complaint here clearly defined the

class to include only the truck drivers, all of whom allegedly

should have been classified as employees rather than as

independent contractors. As our first source of reference in

determining the amount in controversy, plaintiffs’ complaint

claimed that the truck drivers, as employees, should be

reimbursed for their business expenses. See St. Paul Mercury

Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938)

(directing courts to first look to the complaint in determining

the amount in controversy). Were plaintiffs to succeed on

their claim that they are employees, Knight will need to

reimburse them for expenditures related to the ownership and

operation of their trucks, including lease-related costs and

fuel costs. See Cal. Lab. Code § 2802; see also Rea v.

Michaels Stores, Inc., 742 F.3d 1234, 1239 (9th Cir. 2014)

(per curiam) (upholding the underlying assumption that when

all members of the putative class are alleged to have been

misclassified, the consequences of misclassification apply to

all of them).

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LACROSS V. KNIGHT TRANSPORTATION 7

Knight calculated its potential liability for the drivers’

fuel costs as follows. Knight provides its drivers with fuel

cards to pay for fuel at a discount. The drivers are not

required to use the cards, so the fuel costs invoiced on

Knight’s fuel cards may be less than the actual fuel costs. 

The total fuel costs invoiced on Knight’s fuel cards in the first

quarter of 2014 were $2,369,628. Knight contends that if we

multiply the quarterly fuel costs of $2.3 million by 16

quarters in the four-year class period, the amount in

controversy would be $36.8 million.

Knight further extrapolated a more conservative estimate

of total fuel costs by taking into account that the number of

drivers varied each year. For example, there were 116 drivers

in 2010 as opposed to 207 drivers in 2014, so a more accurate

calculation of the fuel costs in each quarter of 2010 should be

$1,327,907 ($2,369,628 x 116/207). Knight’s number of

drivers was the lowest in 2010, and even using the lowest

number of drivers in 2010 for all 16 quarters during the

relevant class period, the total estimated fuel costs would be

$21 million ($1,327,907 x 16 quarters).

The district court erred in concluding that “all of Knights

calculations rely on the assumption that . . . the class . . .

worked for the entirety of the year.” Contrary to the district

court’s conclusion, the foregoing method of calculation

extrapolated fuel costs based on the actual invoiced fuel costs

in the first quarter of 2014 and the actual number of drivers

who signed the independent contractor agreements with

Knight during the relevant class period, without relying on

the assumption that each driver worked the entire year.

Reviewing the district court’s remand order de novo,

Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 679 (9th

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8 LACROSS V. KNIGHT TRANSPORTATION

Cir. 2006) (per curiam), we conclude that Knight has

produced sufficient evidence to establish by a preponderance

of the evidence that the amount in controversy exceeds $5

million. We also conclude that the chain of reasoning and its

underlying assumption to extrapolate fuel costs for the entire

class period using the actual invoiced fuel costs of one quarter

are reasonable for several reasons. First, the complaint

alleges that the class includes only truck drivers, so the fuel

costs are necessary expenses in the discharge of the drivers’

duties. See Cal. Lab. Code § 2802. Second, nothing in the

record shows that the drivers worked for another company

while working for Knight. Third, while the number of drivers

varied during the class period, even using the lowest number

of drivers in 2010 for all 16 quarters during the class period,

the fuel costs would still exceed $5 million.

At oral argument, plaintiffs contended that the class may

not be able to prove all the elements for reimbursement under

California Labor Code § 2802, so the amount in controversy

likely will not exceed $5 million. Plaintiffs are conflating the

amount in controversywith the amount of damages ultimately

recoverable. As we explained in Ibarra, __F.3d at __, slip

op. at 9 n.1:

Even when defendants have persuaded a court

upon a CAFA removal that the amount in

controversy exceeds $5 million, they are still

free to challenge the actual amount of

damages in subsequent proceedings and at

trial. This is so because they are not

stipulating to damages suffered, but only

estimating the damages that are in

controversy.

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LACROSS V. KNIGHT TRANSPORTATION 9

III

We reverse the district court’s judgment and remand for

further proceedings consistent with this opinion.

REVERSED and REMANDED.

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