Case Name: Carlo GUGLIELMINO; Briant Chun-Hoon, Plaintiffs-Appellants, v. McKEE FOODS CORPORATION, a Tennessee Corporation, Defendant-Appellee
Court: United States Court of Appeals for the Ninth Circuit
Jurisdiction: United States
Decision Date: 2007-10-09
Citations: 506 F.3d 696
Docket Number: No. 05-16144
Parties: Carlo GUGLIELMINO; Briant Chun-Hoon, Plaintiffs-Appellants, v. McKEE FOODS CORPORATION, a Tennessee Corporation, Defendant-Appellee.
Judges: Before: DIARMUID F. O’SCANNLAIN, MICHAEL DALY HAWKINS, and KIM McLANE WARDLAW, Circuit Judges.
Reporter: Federal Reporter 3d Series
Volume: 506
Pages: 696–705

Head Matter:
Carlo GUGLIELMINO; Briant Chun-Hoon, Plaintiffs-Appellants, v. McKEE FOODS CORPORATION, a Tennessee Corporation, Defendant-Appellee.
No. 05-16144.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted Aug. 15, 2007.
Filed Oct. 9, 2007.
Edward S. Zusman, San Francisco, CA, argued the cause and filed briefs for the plaintiffs-appellants. Kevin K. Eng, San Francisco, CA, was also on the briefs.
William H. Pickering, Chattanooga, TN, argued the cause and filed a brief for the defendant-appellee. Anthony A. Jackson, Chattanooga, TN, R. Brian Dixon, San Francisco, CA, and Michael Hoffman, San Francisco, CA, were also on the briefs.
Before: DIARMUID F. O’SCANNLAIN, MICHAEL DALY HAWKINS, and KIM McLANE WARDLAW, Circuit Judges.

Opinion:
Opinion by Judge O'SCANNLAIN; Concurrence by Judge O'SCANNLAIN.
O'SCANNLAIN, Circuit Judge:
We must decide the proper burden of proof to be borne by the removing defendant when plaintiffs move to remand the case to state court and their complaint alleges damages less than the jurisdictional threshold for diversity cases but does not specify a total amount in controversy.
I
Briant Chun-Hoon and Carlo Guglielmi-no (collectively "the Distributors") are distributors of McKee Foods' ("McKee") bakery products to retail stores. Although the precise meaning of the term "distributor" is at issue in the underlying case, roughly stated, the Distributors purchase bakery products (such as Little Debbie snack cakes) from McKee; they deliver the purchased products to local retail stores; they stock the retail shelves and are responsible for arranging, displaying and advertising the products; and they must remove from the shelves damaged goods or goods that are beyond their sell-by date. In addition, the Distributors contend that McKee requires them to buy a specific quantity of product and further makes them financially responsible for any damaged, stale, or old product.
The Distributors filed a complaint against McKee in California Superior Court on January 3, 2005, on behalf of a putative class of persons who entered into "Distributorship Agreements" with McKee. The complaint alleged that McKee had violated various wage and hour laws by treating its distributors as independent contractors instead of employees. Specifically, the complaint alleged that McKee: (1) violated California Labor Code by failing to pay its distributors overtime wages; (2) intentionally defrauded its distributors; (3) made negligent misrepresentations to its distributors; (4) breached its Distributorship Agreements and other oral and written agreements with its distributors; and (5) violated the California Business and Professions Code by committing unlawful, unfair and fraudulent business practices against its distributors. In addition, in its sixth cause of action, the complaint sought a declaratory judgment that the distributors of McKee products are, in fact, employees of McKee and not independent contractors.
In paragraph four of the complaint, under the heading "Jurisdiction and Venue," it is alleged that "[t]he damages to each Plaintiff are less than $75,000. In addition, the sum of such damages and the value of injunctive relief sought by plaintiff in this action is less than $75,000." In its "Prayer for Relief," however, the complaint sought, among other things, damages under statutory and common law, punitive and exemplary damages (as to the fraud count), an accounting of other moneys due to plaintiffs, attorneys' fees, payments of back taxes and benefits, a declaration of the respective rights and obligations of the distributors and of McKee, an injunction prohibiting McKee's unfair business practices, and such other relief as the Court deemed proper.
On February 10, 2005, McKee filed a notice of removal to the United District Court for the Northern District of California pursuant to 28 U.S.C. § 1441 and 1332. The removal notice stated that "[although the Complaint affirmatively attempts to allege that the damages suffered by each Plaintiff are less than $75,000.00 ., the categories of damages actually claimed by Plaintiffs, if recoverable, would be significantly in excess of the $75,000.00 minimum amount in controversy (exclusive of interest and costs) required to invoke diversity jurisdiction." The notice of removal attempted to calculate the damages suffered by the Distributors and concluded that economic damages for Hoon would total roughly $76,000 (without including attorneys' fees, back taxes, or punitive damages), and that for Guglielmino separately, economic damages (prior to including attorneys' fees, back taxes, or punitive damages) would total roughly $150,000. Thus, McKee's calculations purported to show an amount in controversy sufficient to invoke federal jurisdiction.
On March 14, 2005, the Distributors filed a motion under 28 U.S.C. § 1447 for an order remanding the action to state court. Although they did not dispute that the plaintiffs were diverse from McKee, they challenged McKee's calculations of the amount in controversy and sought to show that less than $75,000 was at stake. Hoon and Guglielmino each also filed affidavits stating: "I am not seeking damages in excess of $75,000."
The district court, Chief Judge Vaughn Walker presiding, issued an order denying the Distributors' motion to remand on May 3, 2005. The order explained that there were three possible standards for the removing defendant's burden of proof: (1) that the plaintiff "might recover" in excess of the jurisdictional amount; (2) that the plaintiff is "more likely than not to recover" in excess of the jurisdictional amount (the "preponderance of the evidence standard"); and (3) that the plaintiff is "legally certain to recover" in excess of the jurisdictional amount. The order also explained that no Ninth Circuit precedent was directly on point, because the complaint specified that damages were below the jurisdictional threshold yet did not demand a specific amount. Ultimately, the district court decided that the "preponderance of the evidence" standard should be applied: the defendant has the burden to show that the allegations in the complaint set forth an amount in controversy that is "more likely than not" greater than $75,000. Applying such standard, when (1) economic damages were accounted for, (2) attorneys' fees (measured by a "conservative" estimate of 12.5% of economic damages) were added, and (3) punitive damages ("conservatively estimated" at a 1:1 ratio to economic damages) were added, the district court determined that the amount in controversy for both plaintiffs was in excess of the jurisdictional threshold.
The district court's order was "quick to note" that if the more stringent "legal certainty" test was applied, then McKee would not have carried its burden. It reached this conclusion because it could not be certain that plaintiffs would recover any attorneys' fees or punitive damages. Therefore, because it determined that a question of law — namely the burden of proof standard — was dispositive of the remand motion, and because it felt that resolution of the question might "substantially advance the termination of the litigation," the district court certified its order for interlocutory review pursuant to 28 U.S.C. § 1292(b).
Thereafter, and within the ten days provided by 28 U.S.C. § 1292(b), Guglielmino petitioned this Court for permission to pursue an interlocutory appeal, which we granted.
II
A
The question certified for interlocutory review is "[wjhat is defendant's burden of proof when plaintiffs move to remand pursuant to 28 U.S.C. § 1447(c) and their state-court complaint specifies that their damages are less than the jurisdictional requirement?"
As Chief Judge Walker may have anticipated, we have identified at least three different burdens of proof which might be placed on a removing defendant under varying circumstances. In Sanchez v. Monumental Life Ins. Co., 102 F.3d 398 (9th Cir.1996), we noted that when a complaint filed in state court alleges on its face an amount in controversy sufficient to meet the federal jurisdictional threshold, such requirement is presumptively satisfied unless it appears to a "legal certainty" that the plaintiff cannot actually recover that amount. Id. at 402 (discussing Garza v. Bettcher Indus., Inc., 752 F.Supp. 753, 755-56 (E.D.Mich.1990)); see also St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 82 L.Ed. 845 (1938) (stating that when a complaint filed pleads more than the jurisdictional amount "the sum claimed by the plaintiff controls if the claim is apparently made in good faith" and that "[i]t must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal").
The second situation we have identified is where it is unclear or ambiguous from the face of a state-court complaint whether the requisite amount in controversy is pled. In such a circumstance, we apply a preponderance of the evidence standard. Sanchez, 102 F.3d at 404 ("[T]he removing defendant bears the burden of establishing, by a preponderance of the evidence, that the amount in controversy exceeds[the jurisdictional amount]. Under this burden, the defendant must provide evidence establishing that it is 'more likely than not' that the amount in controversy exceeds that amount."). We have since applied the preponderance holding in Sanchez to complaints filed under the Class Action Fairness Act ("CAFA") that do not specify a particular amount in controversy. Abrego Abrego v. Dow Chemical Co., 443 F.3d 676, 683 (9th Cir.2006) (per curiam).
Finally, in our recent decision in Lowdermilk v. U.S. Bank National Ass'n, 479 F.3d 994 (9th Cir.2007), we held in the CAFA context that when a state-court complaint affirmatively alleges that the amount in controversy is less than the jurisdictional threshold, the "party seeking removal must prove with legal certainty that CAFA's jurisdictional amount is met." Id. at 1000. Two animating principles informed our judgment in Lowdermilk. The first is that federal courts are courts of limited jurisdiction which we will strictly construe. Id. at 998. The second principle is that the plaintiff is "master of her complaint" and can plead to avoid federal jurisdiction. Id. at 998-99. Thus, in Lowdermilk, by adopting "legal certainty" as the standard of proof, "we guard[ed] the presumption against federal jurisdiction and preserve[d] the plaintiffs prerogative, subject to the good faith requirement, to forgo a potentially larger recovery to remain in state court." Id. at 999.
Therefore, because we have recognized varying burdens of proof depending on the situation and the nature of the plaintiffs complaint, we must as a threshold matter determine precisely what Guglielmino's complaint alleged.
B
The complaint in this case is hardly a paragon of clarity. In the Jurisdiction and Venue section, it is alleged that "[t]he damages to each Plaintiff are less than $75,000. In addition, the sum of such damages and the value of injunctive relief sought by plaintiff in this action is less than $75,000." In the complaint's Prayer for Relief, however, no mention is made of a total dollar amount in controversy. Instead, the complaint seeks: (1) an Order certifying this action as a class action; (2) damages under statutory and common law; (3) punitive and exemplary damages; (4) an accounting of moneys due to the plaintiffs; (5) attorneys' fees and costs; (6) payment of back taxes and benefits; (7) notice of the right to rescission and restitution to similarly situated distributors; (8) a declaration of the rights and obligations between the distributor-class and McKee; (9) an injunction prohibiting further unfair business practices by McKee; (10) pre-judgment interest; (11) the costs of suit; and (12) "such other and further relief as this Court deems just and proper."
Even if we assume that relief in the form of common law and statutory damages, exemplary and punitive damages, rescission and restitution, a declaratory judgment, and an injunction prohibiting further unfair business practices constitutes a "sum . less than $75,000," that is not all that the complaint seeks. Section 1332(a)'s amount-in-controversy requirement excludes only "interest and costs" and therefore includes attorneys' fees. Indeed, the Distributors' complaint seeks attorneys' fees claimed to be authorized pursuant to California Code of Civil Procedure sections 1021.5 and 1036, Civil Code 1780(d), and relevant sections of the Labor Code. Lowdermilk, 479 F.3d at 1000 ("[Wjhere an underlying statute authorizes an award of attorneys' fees, either with mandatory or discretionary language, such fees may be included in the amount in controversy.") (quoting Galt G/S v. JSS Scandinavia, 142 F.3d 1150, 1156 (9th Cir.1998)).
Beyond attorneys' fees, the complaint also seeks the back payment of health benefits and taxes as well as an accounting of moneys due to the Distributors and other similarly situated class members. Although these allegations seek payment of sums from McKee, they do not fall comfortably within the realm of "damages" and are not labeled as such in the Prayer for Relief. Nonetheless, because the recovery of these sums would entail a payment by McKee, we are convinced that they must be included within any amount-in-controversy calculation. See Ridder Bros. v. Blethen, 142 F.2d 395, 399 (9th Cir.1944) (holding that for purposes of calculating amount in controversy, "[t]he value of the thing sought to be accomplished by the action may relate to either or any party to the action") (internal quotation omitted).
Thus, because the allegation in the Jurisdiction and Venue section is not repeated in the Prayer for Relief and does not take account of attorneys' fees, accounting of moneys, or payment of back taxes and benefits, the complaint fails to allege a sufficiently specific total amount in controversy. The uncertainty which is inherent in the Distributors' Prayer for Relief places this case within the Sanchez line of cases, and we therefore apply the preponderance of the evidence burden of proof to the removing defendant. Sanchez, 102 F.3d at 404.
Ill
The district court applied a preponderance of the evidence standard and determined that, "conservatively estimated," both named plaintiffs' allegations met the requisite $75,000 amount-in-controversy threshold. See Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546, 559, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005) (holding that when a well-pleaded complaint contains "at least one" claim that satisfies the amount-in-controversy requirement, supplemental jurisdiction may be exercised over the claims of other parties). The Distributors do not challenge the district court's factual findings on appeal that under the preponderance standard, this case was properly removed to federal court. We therefore see no need to address any argument that the district court's calculations were clearly erroneous.
Accordingly, because the Distributors' complaint is unclear and does not specify "a total amount in controversy," the proper burden of proof in this case is proof by a preponderance of the evidence. Because that is the standard the district court applied in denying the motion to remand this case to state court, the judgment of the district court is
AFFIRMED.
. The district court noted that the "legal certainty" test had been applied in a similar, though slightly distinguishable, factual circumstance by the Eleventh Circuit. See Burns v. Windsor Ins. Co., 31 F.3d 1092 (1994). It deemed the legal question "sufficiently close" and "determinative" that it decided to certify the question for interlocutory appeal.
. In Abrego Abrego, we noted that if "the complaint alleges damages of less than the jurisdictional amount, 'more difficult problems are presented,' as to which there is no binding precedent in this circuit." Id. at 683 n. 8 (quoting 14C Charles Alan Wright, Arthur R. Miller, Edward H. Cooper, Federal Practice and Procedure § 3725, at 84).
. McKee contends that Lowdermilk's "legal certainty" standard applies only in the CAFA context. It points out that CAFA has discarded the rule — still applicable in traditional diversity settings such as this case — that closes the removal period one year after a complaint is filed. See 28 U.S.C. § 1453(b) ("A class action may be removed to a district court of the United States in accordance with section 1446 (except that the 1-year limitation under section 1446(b) shall not apply.")). We acknowledge that the one-year removal period presents a significant potential for "gamesmanship" in that a plaintiff can wait until the removal period has closed and then amend their complaint to seek higher damages. See Lowdermilk, 479 F.3d at 1002 (noting that "CAFA mitigates some of the potential for [pleading] abuse by eliminating the one-year removal limitation."). Whether CAFA's elimination of the closure period is a sufficient distinguishing characteristic of those causes of action to justify a different burden of proof, and whether Lowdermilk itself can be read so narrowly, are questions that we leave for another day and another court.
. There was dispute in Lowdermilk between the majority and dissent whether the complaint included attorneys' fees within its allegation that the total amount claimed was less than CAFA's $5 million jurisdictional threshold. The complaint in Lowdermilk apparently read " 'THE AGGREGATE OF CLAIMS DOES NOT EXCEED 5 MILLION DOLLARS . In paragraph 4, under a heading 'JURISDICTION AND VENUE,' it says the '[t]he aggregate total of the claims pled herein do [sic] not exceed five million dollars.' ' " 479 F.3d at 1003 (Kleinfeld, J., dissenting) (quoting the complaint). The majority obviously read these sections of the complaint, and their reference to "aggregate total of claims," to include everything sought, including attorneys' fees. In contrast, here the complaint does not use the word "claim" but instead references only "damages and injunctive relief," within neither of which attorneys' fees comfortably fit.