Court Opinion

ID: 3197831
Source: CourtListenerOpinion
Date Created: 2016-04-26 18:00:24.495301+00
Date Added: 2024-06-11T11:32:22.407149
License: Public Domain

United States Court of Appeals
                      For the First Circuit

No. 15-1640

     LISA C. PAZOL, MARIA C. NEWMAN, LISA RUSS, and AUDREY J.
 BENNETT, on behalf of themselves and others similarly situated,

                     Plaintiffs, Appellants,

                                v.

   TOUGH MUDDER INCORPORATED, TOUGH MUDDER, LLC, and BK BRIDGE
                           EVENTS, LLC,

                      Defendants, Appellees.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. Timothy S. Hillman, U.S. District Judge]

                              Before

                      Barron, Circuit Judge,
                   Souter, Associate Justice,*
                    and Lipez, Circuit Judge.

     Barry M. Altman, with whom Altman & Altman, James L.
O'Connor, James M. Galliher, C. Deborah Phillips, and Nickless,
Phillips and O'Connor were on brief, for appellants.
     Maria C. Newman, Lisa Russ, Audrey J. Bennett, and Michael
J. Tuteur, with whom Jaclyn V. Piltch and Foley & Lardner LLP
were on brief, for appellees.

                          April 26, 2016

     * Retired Associate Justice of the Supreme Court of the United
States, sitting by designation.
                                 - 1 -
            BARRON, Circuit Judge.           This case turns on the standards

for showing that a class action has an amount in controversy of

more than $5 million, which is the threshold for enabling a case

to be removed to federal court under the Class Action Fairness Act

of 2005 ("CAFA").        Because we conclude that the defendants did not

meet their burden of showing that the amount in controversy in

this class action exceeds that threshold -- at least at this stage

in the litigation -- we agree with the plaintiffs that removal was

improper.   We thus do not reach the other issues that the District

Court   resolved    in    dismissing     this    suit,    and     we   remand     with

instructions to the District Court to remand the case to state

court for lack of jurisdiction.

                                        I.

            The    defendants    are    business       entities    that    organize

physically challenging obstacle course events in various locations

in the United States.         The four named plaintiffs registered to

participate in one of those events -- the "Mudderella" event --

scheduled to take place on September 6, 2014, in Haverhill,

Massachusetts.

            This suit began in Massachusetts Superior Court.                       The

plaintiffs'   complaint      alleged     that,    on    August     22,    2014,    the

defendants notified the plaintiffs that the event had been moved

approximately      twelve     miles     from      Haverhill,       to     Amesbury,

                                       - 2 -
Massachusetts.1        The complaint also alleged that, on August 29,

2014, just a week before the event, the defendants again notified

the    plaintiffs     that   the   event     had   been   moved,   this    time   to

Westbrook, Maine, which is 79 miles from Haverhill.                The complaint

alleged that, as a result of that second -- and final -- change in

location, the four named plaintiffs were unable to participate in

the event, and that the defendants refused to refund the plaintiffs

their registration fees.

               The complaint asserts various claims under Massachusetts

law.       Those claims are breach of contract, breach of the covenant

of good faith and fair dealing, unjust enrichment, and violation

of the Massachusetts Consumer Protection Act, Mass. Gen. Laws ch.

93A.

               Of particular significance to this appeal is what the

complaint pleads with respect to relief.                  The complaint states

that       those   seeking   relief   are,    pursuant    to   Rule   23   of     the

Massachusetts Rules of Civil Procedure, not just the four named

plaintiffs but also:

               All persons who paid registration fees and/or
               other sums to Defendants to participate in
               Mudderella Boston at Kimball Farm in Haverhill
               and did not participate at the changed
               location;

       1
       We take judicial notice of this distance. See United States
v. Moon, 802 F.3d 135, 149 n.11 (1st Cir. 2015) (taking judicial
notice of the distance between Worcester, Massachusetts and
Boston, Massachusetts).

                                      - 3 -
             All persons who participated in Mudderella
             Boston in Westbrook, Maine and traveled
             additional distance due to the change in
             location and thereby incurred added expenses
             including, but not limited to gas, food and/or
             lodging; and/or

             Such other class, classes, or sub-classes as
             certified by the Court.

The complaint further states that the class seeks, in addition to

damages "in amounts to be determined at trial," an unspecified

amount in "reasonable" attorneys' fees and costs, restitution,

disgorgement,       rescission,     a   permanent   injunction    prohibiting

defendants "from engaging in the conduct described herein," and

"such other relief as the Court deems just."

              The plaintiffs served the complaint on the defendants

in November 2014.      The defendants then timely removed the case to

federal court.      See 28 U.S.C. § 1446(b).        The defendants asserted

that removal was permitted under the Class Action Fairness Act of

2005   (CAFA),       which    provides      for   federal     subject   matter

jurisdiction over class actions alleging state-law claims where

certain conditions are met, including minimal diversity between

parties and that "the matter in controversy exceeds the sum or

value of $5,000,000."         28 U.S.C. § 1332(d)(2).

             The plaintiffs moved to remand the case to state court.

The plaintiffs' sole argument for remand was that the District

Court lacked subject matter jurisdiction under CAFA because the

defendants    had    failed    to   show   that   over   $5   million   was   in

                                        - 4 -
controversy. The defendants responded with estimates of the amount

in controversy that were based on the references in the plaintiffs'

complaint to "registration fees" and "added expenses, including,

but not limited to gas, food, and/or lodging."

            The District Court denied the plaintiffs' motion to

remand the case to state court.       The District Court's explanation,

in   its   entirety,   was   that   the   "[d]efendants   hav[e]   shown   a

reasonable probability that the amount in controversy in this case

exceeds $5 million."

            Alongside the dispute over jurisdiction, the defendants

filed a motion to dismiss the case and compel mediation and, if

mediation were to fail, arbitration of the plaintiffs' claims in

accordance with the terms of the agreement that the plaintiffs

entered into when they registered for the Mudderella event.            The

District Court granted that motion.

            The plaintiffs then appealed.          They argue that the

District Court erred in concluding that the defendants met their

burden of showing that over $5 million is in controversy in this

matter and thus that federal subject matter jurisdiction exists

under CAFA.    The plaintiffs also contend that if CAFA jurisdiction

exists, the District Court erred in dismissing the case and

compelling mediation and arbitration of the dispute.           Because we

agree with the plaintiffs on the first point, we do not reach the

second.

                                    - 5 -
                                     II.

          We   begin   with   the    standard   of   review.   We   have

distinguished between a district court's conclusion regarding the

"ultimate question" whether it has subject matter jurisdiction

under CAFA and the district court's resolution of specific factual

disputes in the course of reaching that conclusion.        See Amoche v.

Guar. Trust Life Ins. Co., 556 F.3d 41, 48 (1st Cir. 2009).         The

former determination, we have explained, is evaluated de novo,

while the latter is reviewed for clear error.        Id.

          As we have noted, the District Court's order in this

case was short: it held that the "[d]efendants hav[e] shown a

reasonable probability that the amount in controversy in this case

exceeds $5 million."    Because the District Court simply resolved

the ultimate question of the sum or value in controversy in this

matter, our review is "entirely de novo."       Id. at 47-48; see also

Romulus v. CVS Pharmacy, Inc., 770 F.3d 67, 71, 81 (1st Cir. 2014).

                                    III.

          CAFA was enacted with the stated purpose of expanding

the number of class actions that could be heard in federal court.

Amoche, 556 F.3d at 47, 49 (stating that, "[i]n CAFA, Congress

expressly expanded federal jurisdiction largely for the benefit of

defendants against a background of what it considered to be abusive

class action practices in state courts," "which had 'harmed class

members with legitimate claims and defendants that had acted

                                    - 6 -
responsibly,'        'adversely   affected     interstate     commerce,'       and

'undermined public respect for our judicial system'" (alteration

omitted) (quoting CAFA, Pub. L. No. 109-2, § 2(a), 119 Stat. 4, 4

(2005))).      Congress effectuated that purpose "by imposing only a

minimal diversity requirement, eliminating the statutory one-year

time limit for removal, and providing for interlocutory appeal of

a federal district court's remand order."            Id. at 47-48 (citing 28

U.S.C. §§ 1332(d)(2), 1453(b), (c)).

              But Congress did impose various limits on CAFA's reach.

And among them is the one that is relevant in this case: that the

amount   in    controversy    exceed   $5    million.       See   28   U.S.C.    §

1332(d)(2).

              The defendants bear the burden of showing that this

amount-in-controversy        requirement     has   been   met,    as   they   seek

removal under CAFA.        See Amoche, 556 F.3d at 48-50 (justifying

this burden in part by the "general rule of deference to the

plaintiff's chosen forum").         To meet that burden, the defendants

must show a "reasonable probability" that more than $5 million is

in dispute in this case.          Id. at 50.       That standard is "for all

practical purposes identical to" the preponderance of the evidence

standard.      Id.    "Yet because questions of removal are typically

decided at the pleadings stage where little or no evidence has yet

been produced, the removing defendant's burden is better framed in

                                     - 7 -
terms of a 'reasonable probability,' not a preponderance of the

evidence."     Id.

             The decision as to whether the defendants have met their

burden "may well require analysis of what both parties have shown."

Id. at 51.    Thus, it is not enough for the plaintiffs to "[m]erely

label[]   the        defendant's    showing      as    'speculative'        without

discrediting    the     facts   upon     which   it   rests."   Id.         But    in

evaluating what both parties have shown, we may consider "which

party has better access to the relevant information."                 Id.

             Applying those standards to the facts of this case, we

conclude that a remand to state court is required. The defendants'

argument that over $5 million is in controversy in this matter is

based on what the defendants contend is a reasonable estimate of

the registration fees in controversy and a reasonable estimate of

the gas, food, and lodging expenses that the putative class

incurred as a result of the event's change in location.                           The

plaintiffs     respond     that    the    defendants'     estimates    are        not

reasonable, and that the amount in controversy is in fact lower

than the defendants contend.

             The parties' positions, at first blush, may seem out of

character, in that the plaintiffs seek to downplay the amount of

damages that they seek while the defendants attempt to show how

large the potential damages really are.               But this reversal in the

usual role of plaintiffs and defendants in litigation is not at

                                       - 8 -
all unusual in a case in which defendants seek removal under CAFA.

And here we conclude that the plaintiffs have the better of the

argument as to whether removal is allowed.2

                                   A.

          We begin with the registration fees.                The defendants

contend that all the registration fees for the event are in

controversy -- the fees of those who did not attend the event as

well as the fees of those who did attend.              The defendants base

their argument on the complaint's "prayer for relief," which states

that the plaintiffs seek "damages in amounts to be determined at

trial."    The   plaintiffs   respond     that    they   are       not   seeking

registration fees on behalf of the attendees.

          The complaint supports the plaintiffs' contention.                 The

complaint mentions registration fees only in conjunction with "all

persons who . . . did not participate."        We thus conclude that the

plaintiffs'   contention   that   they    do     not   seek    a    refund   of

registration fees for the attendees is "not an impermissible effort

to defeat federal jurisdiction by narrowing the pleadings post-

     2 Because we reach this conclusion, we need not address the
plaintiffs' argument that the defendants' calculations are based
on the unwarranted assumption that the class includes everyone who
registered for the event, and not just those registrants who reside
in Massachusetts. Even assuming -- favorably to the defendants -
- that the plaintiffs' class action should be understood to include
everyone who registered for the event, the defendants have not met
their burden to show a reasonable probability that over $5 million
is in dispute in this case.

                                  - 9 -
removal, but rather a fleshing out of the vague language of the

[complaint]."     Id. at 52 (citation omitted).

             Accordingly, the only registration fees in controversy

are the fees paid by the people who did not attend the event.                  The

defendants tell us that the registration fees for the people who

did not attend the event total $617,574.86.             The defendants argue

that it is reasonable to treble this amount because the plaintiffs

would be entitled to treble damages were they to succeed on their

chapter 93A claim.        And the defendants contend that it is also

reasonable to add to this calculation a 33% attorney's fee award.

Accepting those premises, the amount in controversy with respect

to the registration fees would come to $2,464,123.69, which would

get the defendants almost halfway to the amount CAFA requires.

                                        B.

             To   show   that   roughly      another    $2.5   million    is    in

controversy, the defendants point first to their estimate as to

gas and food expenses.       The defendants argue that it is reasonably

probable that each of the 4,347 people who attended the event spent

an additional $35 on gas and an additional $56 on food as a result

of the event's change in location.

             The defendants estimate the gas expense using the gas

price   in   Massachusetts      in   September   2014    and   the   round-trip

distance between the Haverhill and Westbrook event locations.                  The

defendants    estimate    the    food    expense   by    using   the     federal

                                     - 10 -
government's per diem reimbursement rate for federal employee

travel in the Westbrook, Maine area.

            There is good reason to doubt whether, at least with

respect to the food expense, it is reasonable to assume each

attendee incurred that expense, as will become clear when we

discuss the problem with the defendants' contention about lodging

expenses.      But taking the figures at face value for the moment,

and after accounting for treble damages and attorney's fees, the

additional amount in controversy attributable to gas and food

expenses would be $1,578,352.23.          If we then add that figure to

the figure for registration fees, which totaled just shy of $2.5

million, the overall amount in controversy would be $4,042,475.92.

            But even accepting the defendant's calculations to this

point,   the    defendants   would    still    need   to   show   that   it   is

reasonably probable that approximately $1 million more is in

controversy in this matter.      Thus, the defendants need the lodging

expenses to be at least that high.            But defendants come up short

in making that case, as we next explain.3

     3 The defendants contend in their brief that there are other
"unidentified damages requested in the [complaint]," as well as
"disgorgement of so called 'ill-gotten gains,' -- and, further,
the value of rescission and permanent injunctive relief."     But
counsel for the defendants conceded at oral argument that the
defendants were relying solely on registration fees, travel
expenses, and attorney's fees to reach the $5 million threshold.
In any event, the defendants make no effort to estimate the
additional monetary value of those additional forms of relief. We

                                     - 11 -
                                    C.

            The defendants make two arguments regarding lodging

expenses.      Neither works.

            First, the defendants contend that it is reasonable to

assume that every person who signed up for the event incurred an

additional lodging-related expense as a result of the change in

location.   The people who did not attend the event, the defendants

argue, may have forfeited the cost of a hotel room in Haverhill or

Amesbury, Massachusetts, when the event was moved.              As for the

people who did attend the event in Maine, the defendants contend

that those people may have incurred the additional expense of a

hotel   room    in   Westbrook.   The    defendants   explain    that   the

additional expense would arise either because the attendees would

not have required lodging in Massachusetts or because the attendees

had already paid for a hotel room in Massachusetts, the entire

price of which the attendees may have forfeited as a result of the

change in the event's location.

            The defendants further contend that because the federal

per diem lodging reimbursement rate in Westbrook is $128 per night

and $98 per night for Haverhill and Amesbury, the average of those

two numbers -- $113 -- represents a reasonable estimate of the

lodging expense attributable to the event's changed location for

thus consider only the categories of expenses that the defendants
have attempted to estimate.

                                  - 12 -
each person who registered.       On that basis, the defendants contend

that the lodging expenses that are in dispute amount to more than

$1 million. They get that figure by multiplying $113 by the 11,307

people who registered for the event and by adding treble damages

and attorney's fees.      Using that estimate, and given the other

expenses that the defendants contend are in dispute, the defendants

would then have met their burden of showing that it is reasonably

probable that more than $5 million is in controversy in this case.

          Alternatively, the defendants argue that even if the

only lodging expenses in controversy are the lodging expenses of

those people who attended the event -- as the complaint suggests

is the case -- those expenses, estimated at the Westbrook per diem

of $128 per attendee, still exceed $1 million.        The expenses are

of that magnitude, the defendants explain, if one multiplies $128

by the 4,347 people who attended the event and then adds treble

damages and attorney's fees.

          These two arguments, however, suffer from the same flaw.

The defendants' arguments rest on the assumption that each person

who registered for the event lived far enough away from Haverhill,

Amesbury, or Westbrook to require lodging at those locations.        But

the defendants have provided us with no information to support

that premise.

          In    fact,   defense    counsel's   representation   at   oral

argument that the defendants "organiz[e] these highly challenging,

                                   - 13 -
physically rigorous obstacle course events all over the country"

suggests that people could sign up for events relatively close to

their homes.           And, we note, the defendants conceded at oral

argument that Massachusetts residents would not have required

lodging for the event.              That concession is at odds with the notion

that all registrants needed lodging, as it is reasonably probable

that       the    event     attracted      at   least    some    registrants         from

Massachusetts,         as    that    is   the   state   in   which   the     event   was

scheduled to take place.4

                 Nor   do    we   find    it    reasonably      probable     that     the

registrants who did require lodging would have incurred additional

lodging expenses (whether $113 or $128) in consequence of the

defendants' having moved the event to Maine.                     It is by no means

unusual for hotels to permit cancellation within a short time frame

for no fee, and the defendants offer us no basis for concluding

that such recourse would not have been available here.                       It is not

apparent, therefore, that the people who did not attend the event

in   Maine       and   who    had     initially    reserved      a   hotel    room    in

Massachusetts (however many, if any, such persons there were) would

       4
       The defendants' assumption that all attendees to the event
incurred $56 in additional food expenses when the race was moved
is thus speculative for a similar reason: we have no information
regarding how far from home people travelled for the event, and
thus whether it is reasonable to think that they in fact spent an
extra $56 on meals in Westbrook on the day of the race.

                                          - 14 -
have forfeited the entire cost of that room when they discovered,

a week before the event, that the event had been relocated.

            Moreover, on this record, only speculation could support

a conclusion that all attendees (if any there were) who travelled

far enough from home to require lodging for the Westbrook event

would not also have required lodging for the race in Haverhill or

Amesbury.     Those   two   communities   are   only   79   and   71   miles,

respectively, from Westbrook.       Nor is it apparent that each of

those attendees who had initially reserved lodging in Haverhill or

Amesbury did then reserve lodging in Westbrook, given the proximity

of Haverhill and Amesbury to Westbrook.           And even if we could

assume that each of the attendees who initially reserved lodging

in Haverhill or Amesbury would have reserved lodging in Westbrook,

we have no reason to assume that each would have forfeited the

entire cost of the hotel room in Haverhill or Amesbury or that

each would have incurred any other additional expense -- such as

a hotel cancellation fee -- as a result of the change in hotel.5

     5 The defendants suggest that class members may have forfeited
the cost of a hotel room in Haverhill and in Amesbury as a result
of the event's change in location to Westbrook. But the defendants
choose not to rely on that argument, instead attributing to each
person the cost of just one hotel room. In any event, we do not
think it is reasonably probable that someone with a hotel
reservation in Haverhill would have forfeited the entire cost of
that room to book a room in Amesbury, given that Amesbury is just
twelve miles from Haverhill.

                                 - 15 -
            In sum, the defendants' argument that all registrants

incurred an additional lodging expense of $113 or, alternatively,

that all attendees incurred an additional lodging expense of $128,

fails.   And that is because the defendants provide no support for

the conclusion that the predicate assumptions underlying their

estimate of lodging expenses are reasonably probable ones.

            As a fallback, the defendants at oral argument offered

a   different   way   of   justifying   their   calculation   of   lodging

expenses.    They contended that their approach accounts for the

problematic assumptions that underlie their argument regarding

those expenses.       Specifically, they argue that the federal per

diem lodging expense rates actually account for the fact that some

people spend much more than those federal per diems on lodging and

some people spend much less or, even, nothing at all because they

do not travel at all.      And so, by using that rate, the defendants

say they are relying on an estimate that already accounts for the

problematic uncertainties that we have just recounted.

            But the defendants provide no support for that most

unlikely description of what the federal per diem rate represents.

The federal government has little interest in determining how much

to reimburse an employee who incurs no expense.         The federal per

diem reimbursement rates for Haverhill or Amesbury ($98), and

Westbrook ($128), thus would seem to reflect an estimate of the

                                  - 16 -
average expense of lodging in Haverhill, Amesbury, and Westbrook

for an employee who actually books a room overnight there.

            Thus, in order for those federal per diem rates to be

reasonably probable estimates of the lodging expenses at issue in

this case, it would have to be reasonably probable that each person

who did not attend the event in Maine forfeited the cost of a hotel

room in Haverhill or Amesbury, Massachusetts.              It would also have

to be reasonably probable that, in consequence of the change in

location of the event, each attendee either booked a room in

Westbrook   and   then   forfeited     the   cost    of    a   hotel   room   in

Massachusetts or booked a room in Westbrook that the person would

not have needed had the event been held in Massachusetts as

originally planned.      But, as we explained, those assumptions are

not reasonably probable ones.

            Nor will we venture to come up with our own estimate of

a reasonably probable lodging expense incurred per registrant.

The defendants have given us no guidance as to how to go about

making such an estimate beyond their unconvincing argument that

the federal per diem rate of $128 is such an estimate.

            Similarly, we will not venture to guess that, even if we

reject   the   defendants'    chosen    means       of    estimating   lodging

expenses, the total additional lodging expenses incurred by all

registrants as a result of the change in location must nevertheless

be something north of $1 million.       To guess as much, we would need

                                 - 17 -
to find it reasonably probable that 1,875 people who attended the

event -- over 43% of all attendees -- incurred additional lodging

expenses at the $128 rate, or that 2,074 people who registered for

the event -- over 18% of all registrants -- incurred additional

lodging expenses at the $113 rate. Only then would the added value

of those expenses, including treble damages and attorney's fees,

increase the total amount in controversy to just over $5 million.

But those are not small numbers of persons.     And there simply is

nothing before us that would support a conclusion that either of

those numbers, given how big they are, is a reasonably probable

estimate of the number of people who incurred additional lodging

expenses.

                                 D.

            Part of the reason that we will not engage in such

speculation, moreover, is that, as we noted at the outset, we may

take into account "which party has better access to the relevant

information."   See Amoche, 556 F.3d at 51.   And here that party is

the defendants.

            The defendants conceded at oral argument that they have

access to the home addresses of everyone who registered for the

event.   With that information, the defendants could have come up

with a reasonably accurate estimate of the number of people who

might have had to travel far enough from home for the event so as

to require lodging.     But they did not do so.      Nor have they

                               - 18 -
attempted to support the assumptions that they ask us to accept

with any historical data that they might possess, such as how far

people generally travel to attend the defendants' events, or, for

that matter, any other relevant knowledge that they possess in

consequence of their having organized these events in the past.

             Given that the defendants had potentially illuminating

information and yet chose not to use it, and given that they have

offered     us   no   other    information     to   support   their    assertion

regarding lodging expenses, we conclude that we cannot accept the

assumptions on which their estimate of lodging expenses depends.

We thus conclude that, as in Amoche, the defendants have not met

their burden to show that more than $5 million is in controversy

in   this   case.      Here,    as   in   Amoche,   the   defendants    rely   on

unsupported assumptions about the operation of their business and

"failed     to   present"      information     "reasonably    within    [their]

control" that might have provided "some insight" into the amount

in controversy.       Id. at 52-53.

                                          E.

             In attempting to counter this conclusion, the defendants

refer us to our statement in Romulus that "[t]he defendant has no

duty to investigate or to supply facts outside of those provided

by the plaintiff."       Romulus, 770 F.3d at 75.          But that statement

was made in the context of our consideration of a different issue

from the one before us in this case.

                                      - 19 -
             We held in Romulus that CAFA's 30-day clock for filing

a notice of removal is triggered when the plaintiff's complaint or

the plaintiff's subsequent "paper" provides the defendant with

sufficient information to easily determine that the matter is

removable.     Id.   And so the language from Romulus on which the

defendants rely was meant to clarify only that the defendant need

not look outside such papers to determine whether the 30-day clock

has been triggered.     Id.   Our conclusion on that score does not

mean that where, as here, defendants timely remove to federal court

on the ground that the plaintiffs' complaint shows that the amount

in controversy requirement has been met, we cannot consider who

has access to the information needed to determine whether the party

seeking removal has met its burden to show that amount has been

met.   In fact, Amoche is clearly to the contrary on that point.

See Amoche, 556 F.3d at 51.

                                  IV.

             The decision of the District Court is reversed, and this

case is remanded to the District Court with instructions to remand

the case to state court for lack of jurisdiction, without prejudice

to removal at a later date.

                                - 20 -