Court Opinion

ID: 4548178
Source: CourtListenerOpinion
Date Created: 2020-07-14 17:00:28.695091+00
Date Added: 2024-06-11T09:07:25.316599
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

MATTHEW D. GREENE, an individual,          No. 20-55281
on behalf of himself, the proposed
class(es), all others similarly               D.C. No.
situated, and on behalf of the general     5:19-cv-01647-
public,                                       RGK-KK
                     Plaintiff-Appellee,

                  v.                         OPINION

HARLEY-DAVIDSON, INC., a
Wisconsin corporation; HARLEY-
DAVIDSON MOTOR COMPANY, INC., a
Wisconsin corporation; HARLEY-
DAVIDSON MOTOR COMPANY
OPERATIONS, INC., a Wisconsin
corporation,
             Defendants-Appellants,

                  and

DOES, 1 through 10, inclusive,
                          Defendant.

      Appeal from the United States District Court
         for the Central District of California
      R. Gary Klausner, District Judge, Presiding

           Argued and Submitted May 14, 2020
                  Pasadena, California
2                GREENE V. HARLEY-DAVIDSON

                        Filed July 14, 2020

    Before: Daniel P. Collins and Kenneth K. Lee, Circuit
      Judges, and Gregory A. Presnell, * District Judge.

                      Opinion by Judge Lee

                          SUMMARY **

                   Class Action Fairness Act

    The panel reversed the district court’s order granting
plaintiff’s motion to remand to state court an action that was
removed by defendant Harley-Davidson, Inc. to federal
court under the Class Action Fairness Act (“CAFA”).

    CAFA gives federal courts original jurisdiction over
class actions that have a class of over 100 members, minimal
diversity of citizenship between the parties, and an amount
of controversy of more than $5 million.

    Harley-Davidson alleged the following damages
satisfied the CAFA amount-in-controversy requirement: at
least $2,166,666 in compensatory damages based on the
prayer in the complaint; approximately $2,166,666 in
punitive damages based on a 1:1 punitive/compensatory
damages ratio; and $1,083,333 in attorneys’ fees.

     *
      The Honorable Gregory A. Presnell, United States District Judge
for the Middle District of Florida, sitting by designation.
    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
               GREENE V. HARLEY-DAVIDSON                      3

    The panel held that the district court erred in holding that
Harley-Davidson failed to provide sufficient evidence that
more than $5 million was at stake. Specifically, the panel
held that a defendant satisfies CAFA’s amount-in-
controversy requirement if it is reasonably possible that it
may be liable for the proffered punitive damages amount.
The panel held further that Harley-Davidson met this burden
by citing four cases where juries had awarded punitive
damages at ratios higher than 1:1 for claims based on
California’s Consumer Legal Remedies Act. In doing so,
Harley-Davidson relied on a reasonable chain of logic to
assume that a similar amount was at stake here, and
presented sufficient evidence that the amount-in-controversy
exceeded $5 million.

    The panel held that it was improper for the district court
to consider Harley-Davidson’s potential statute of
limitations affirmative defense in determining the amount-
in-controversy. Plaintiff argued that Harley-Davidson’s
potential statute of limitations defense precluded damages
for unnamed class members. The panel held that plaintiff
could not smuggle merits-based arguments into the
jurisdictional inquiry concerning the amount-in-controversy.

    The panel held that plaintiff’s argument that two of the
defendants lacked standing because they were non-moving
parties was meritless. First, a class action may be removed
by any defendant without the consent of co-defendants under
CAFA. Second, all three defendants opposed plaintiff’s
motion to remand, and were aggrieved by the decision being
appealed.

   The panel concluded that Harley-Davidson met its
burden of showing that the amount-in-controversy exceeded
$5 million under CAFA.
4             GREENE V. HARLEY-DAVIDSON

                        COUNSEL

James S. Azadian (argued) and Cory L. Webster, Dykema
Gossett LLP, Los Angeles, California, for Defendants-
Appellants.

Ross H. Hyslop (argued), Pestotnik LLP, San Diego,
California, for Plaintiff-Appellee.

                         OPINION

LEE, Circuit Judge:

     From Easy Rider’s Captain America to the Rolling
Thunder motorcade, Harley-Davidson motorcycles have
symbolized the spirit of rebelliousness and rugged
individualism in American culture. Class actions, too, are
uniquely American: the United States pioneered this
litigation vehicle, and it remains the most robust in the
world. These two American institutions intersect in this case
about allegedly deceptive pricing of Harley-Davidson
motorcycles.

    This case presents a technical, but unresolved, question
in this circuit: If the defendant relies on potential punitive
damages to meet the amount-in-controversy requirement for
removal under the Class Action Fairness Act, what is the
defendant’s burden in establishing that amount? We hold
that the defendant must show that the punitive damages
amount is reasonably possible. Harley-Davidson met that
standard by identifying prior cases involving the same cause
of action in which the juries awarded punitive damages
based on the same or higher punitive/compensatory damages
ratios than the one relied upon by Harley-Davidson. We thus
               GREENE V. HARLEY-DAVIDSON                     5

reverse the district court’s order remanding this case to state
court because it effectively required Harley-Davison to
provide evidence that the proffered punitive damages
amount is probable or likely.

                     BACKGROUND

    In 2015, Plaintiff-Appellee Matthew Greene started
shopping for a Harley-Davidson motorcycle. He researched
online, reviewed Harley-Davidson’s catalogs and brochures,
and browsed motorcycles at the Riverside Harley-Davidson
dealership. The motorcycles had price tags with a
“manufacturer suggested retail price,” and according to
Harley-Davidson’s advertising, the price “exclude[d] dealer
setup, taxes, title and licensing.” Based on this advertising,
Greene expected the dealership to charge him a dealer setup
fee on top of the suggested retail price.

    Greene bought a motorcycle from the Riverside
dealership on June 13, 2015. He paid $23,799.63, which
included a $1,399 freight and prep charge. As expected,
Greene paid the $1,399 fee in addition to the manufacturer’s
suggested retail price. But, unbeknownst to Greene, the
dealership had already performed the necessary prep and
setup tasks for the motorcycle, and Harley-Davidson had
reimbursed the dealership for the costs of doing so.
Therefore, contrary to the dealership’s advertising, the
suggested retail price actually included the dealership’s
setup costs.

    Two years later, Harley-Davidson’s advertising revealed
that it in fact reimburses dealers for performing setup tasks.
Greene now claims that he would not have paid the $1,399
fee if not for Harley-Davidson’s fraudulent statement that
the suggested retail price did not include dealer setup.
6                  GREENE V. HARLEY-DAVIDSON

    Greene filed a putative class action against Harley-
Davidson on June 11, 2019, in California state court. 1
Greene brought claims for (1) false advertising,
(2) violations of the Consumer Legal Remedies Act
(CLRA), (3) breach of express warranty, (4) negligent
misrepresentation, (5) fraud and deceit (6) quasi-
contract/unjust enrichment, (7) aiding and abetting, and
(8) unfair competition.

    Greene seeks (1) damages “in an amount not less than
$1,000,000 for each year beginning June 11, 2015 and
continuing to August 23, 2017,” (2) reasonable attorneys’
fees under a statutory fee shifting provision, (3) punitive
damages, and (4) injunctive relief. He proposes a class of
“[a]ll consumers who, for the period beginning June 11,
2015 through August 22, 2017, purchased or leased from
Riverside Harley-Davidson a new, assembled Harley-
Davidson motorcycle,” and alleges that the class “likely
consists of thousands of members.” The complaint also says
that “any applicable statutes of limitation[s] should be tolled
and are tolled under governing law.”

     Harley-Davidson removed the case, invoking federal
jurisdiction under the Class Action Fairness Act (CAFA).
Harley-Davidson alleged that the following damages
satisfied CAFA’s requirement that the amount in
controversy exceeds $5 million: (1) at least $2,166,666 in
compensatory damages based on the prayer in the Complaint
(at least $1,000,000/year from June 11, 2015 to August 23,
2017); (2) approximately $2,166,666 in punitive damages
based on a 1:1 punitive/compensatory damages ratio; and

    1
        “Harley-Davidson” refers to all three defendants.
                 GREENE V. HARLEY-DAVIDSON                              7

(3) $1,083,333 in attorneys’ fees, or 25 percent of the total
amount in controversy.

     Greene moved to remand the case back to state court,
challenging Harley-Davidson’s punitive damages and
attorneys’ fees amounts. Greene argued that only the CLRA
and fraud causes of action allow for punitive damages, and
that both have a three-year statute of limitations. Invoking
tolling principles established in American Pipe & Constr.
Co. v. Utah, 414 U.S. 538 (1974), Green argued that his
punitive damages prayers had to be based on his individual
claims, not the class claims. 2 He argued that his individual
claims were for $1,399, so a 1:1 ratio would yield a punitive
damages award of $1,399, not $2,166,666. Greene also
challenged Harley-Davidson’s attorneys’ fees amount,
arguing that the “common fund” fees come out of the total
damages and are not added to the total amount in
controversy.

    Harley-Davidson opposed the motion, attaching
(1) evidence that juries had awarded punitive damages above
a 1:1 ratio in four prior California CLRA cases and
(2) evidence that Greene’s attorney sought attorneys’ fees
totaling 35 percent of the recovery in a similar class action.

    2
      In American Pipe, the Court held that if class certification is
denied, the statute of limitation is tolled for the individual (non-class)
claims for those members of the purported class. 414 U.S. at 553.
8              GREENE V. HARLEY-DAVIDSON

    The district court granted Greene’s motion to remand. It
acknowledged that Harley-Davidson had cited several cases
in which the jury had awarded punitive damages on at least
a 1:1 ratio. But it ruled that such evidence was insufficient
because Harley-Davidson made “no attempt to analogize or
explain how these cases are similar to the instant action.
Although [Harley-Davidson] was not required to submit
evidence of punitive damage awards in an identical case as
this one, simply citing to cases without analysis or
explanation is insufficient.” Greene v. Harley Davidson,
No. 5:19-CV-01647-RGK-KK, 2019 WL 5855982, at *3
(C.D. Cal. Nov. 7, 2019) (quotation marks and citations
omitted). The court thus held that, even assuming Harley-
Davidson’s attorneys’ fees amount was correct, Harley-
Davidson had not established by a preponderance of the
evidence that the amount in controversy exceeded
$5 million. Id. at *4. Finally, the district court concluded by
noting that the potential recovery for punitive damages was
$1,399, not $2,166,166. Id. at *3.

    Harley-Davidson timely filed a petition for permission to
appeal, which was granted on March 16, 2020. We have
jurisdiction under 28 U.S.C. § 1453.

                STANDARD OF REVIEW

    The Court “review[s] remand orders in CAFA cases de
novo.” Arias v. Residence Inn by Marriott, 936 F.3d 920,
924 (9th Cir. 2019) (citing Fritsch v. Swift Transp. Co. of
Ariz., LLC, 899 F.3d 785, 792 (9th Cir. 2018)).
              GREENE V. HARLEY-DAVIDSON                     9

                        ANALYSIS

I. Harley-Davidson provided sufficient evidence
   showing that the potential punitive damages amount
   was possible.

    CAFA gives federal courts original jurisdiction over
class actions that have a class of over 100 members, minimal
diversity between the parties, and an amount in controversy
of more than $5 million. 28 U.S.C. § 1332(d); Standard Fire
Ins. Co. v. Knowles, 568 U.S. 588, 592 (2013).

    The only dispute here is whether Harley-Davidson has
met the amount-in-controversy requirement. To meet this
requirement, Harley-Davidson presented evidence that
juries have awarded punitive damages above a 1:1
punitive/compensatory damages ratio in other fraud cases
involving the same statute at issue. The district court,
however, ruled that it was not enough to merely cite cases
involving the same cause of action; rather, a defendant has
the burden of comparing and analogizing the underlying
factual allegations to show that the punitive damages ratio is
permissible.

    The district court erred in holding that Harley-Davidson
failed to provide sufficient evidence that more than
$5 million is at stake. To determine the amount in
controversy, we “first look to the complaint.” Ibarra v.
Manheim Investments, Inc., 775 F.3d 1193, 1197 (9th Cir.
2015). When federal jurisdiction is challenged and the
complaint is silent about damages, “the defendant seeking
removal bears the burden to show by a preponderance of the
evidence that the aggregate amount in controversy exceeds
$5 million.” Id. (citation omitted). The damages assessment
“may require a chain of reasoning that includes
10            GREENE V. HARLEY-DAVIDSON

assumptions,” but those assumptions “need some reasonable
ground underlying them.” Id. at 1199.

   To meet CAFA’s amount-in-controversy requirement, a
defendant needs to plausibly show that it is reasonably
possible that the potential liability exceeds $5 million. As
our court has noted, the amount in controversy is the
“amount at stake in the underlying litigation.” Gonzales v.
CarMax Auto Superstores, LLC, 840 F.3d 644, 648 (9th Cir.
2016) (emphasis added) (quotation marks and citations
omitted). “Amount at stake” does not mean likely or
probable liability; rather, it refers to possible liability.

    The language of the removal statutory provision supports
this view. Under 28 U.S.C. § 1446(a), a defendant needs to
offer a “short and plain statement of the grounds for
removal.” The Supreme Court has held that “Congress, by
borrowing the familiar short and plain statement standard
from Rule 8(a), intended to simplify the pleading
requirements for removal and to clarify that courts should
apply the same liberal rules to removal allegations that are
applied to other matters of pleading.” Dart Cherokee Basin
Operating Co., LLC v. Owens, 574 U.S. 81, 87 (2014)
(quotation marks and citations omitted). And although a
presumption against federal jurisdiction exists in the usual
diversity case, “no antiremoval presumption attends cases
invoking CAFA.” Id. (citations omitted).

   In short, a defendant satisfies the amount-in-controversy
requirement under CAFA if it is reasonably possible that it
may be liable for the proffered punitive damages amount.
One way to meet this burden is to cite a case based on the
same or a similar statute in which the jury or court awarded
punitive damages based on the punitive-compensatory
damages ratio relied upon by the defendant in its removal
                GREENE V. HARLEY-DAVIDSON                         11

notice. 3 Here, Harley-Davidson met that burden by citing
four cases where juries had awarded punitive damages at
ratios higher than 1:1 for claims based on the CLRA. In
doing so, Harley-Davidson “relied on a reasonable chain of
logic” to assume that a similar amount was at stake here, and
“presented sufficient evidence to establish that the amount
in controversy exceeds $5 million.” LaCross v. Knight
Transp. Inc., 775 F.3d 1200, 1201 (9th Cir. 2015).

    Several of our sister circuits have adopted the same or a
similar standard for establishing potential punitive damages
to satisfy the amount-in-controversy requirement. For
example, in Pirozzi v. Massage Envy Franchising, LLC, the
Eighth Circuit held that a proposed punitive damages
amount equal to the compensatory damages and attorneys’
fees request was sufficient because courts have upheld
higher ratios in cases based on the same anti-fraud statute.
938 F.3d 981, 984 (8th Cir. 2019). The Seventh Circuit has
also cautioned that courts should not assess the likelihood of
a large punitive/compensatory damages ratio — as long as
there is a prior decision reflecting that ratio and thus making
it “not impossible” — because it would otherwise require
delving into the merits of the case. Keeling v. Esurance Inc.
Co., 660 F.3d 273, 275 (7th Cir. 2011). Similarly, the Tenth
Circuit has held that a defendant need only provide facts that
make it “possible that punitive damages are in play.”
Frederick v. Hartford Underwriters Ins. Co., 683 F.3d 1242,
1248 (10th Cir. 2012) (emphasis, quotation marks, and
citation omitted) (stating that a defendant may “point to facts
alleged in the complaint, the nature of the claims, or
evidence in the record to demonstrate that an award of

    3
      We note that this is not the exclusive method to show that the
punitive/compensatory damages ratio is possible. We leave for another
day whether there are other ways to meet this requirement.
12             GREENE V. HARLEY-DAVIDSON

punitive damages is possible.”). Finally, the Third Circuit
has suggested that a defendant need only show that it is
subject to “possible exposure” to punitive damages to meet
its burden for the amount in controversy. See Judon v.
Travelers Property Cas. Co. of America, 773 F.3d 495, 508
n. 12 (3d Cir. 2014).

     The district court, however, required Harley-Davidson to
do more than cite a prior case showing that such a punitive
damages ratio is possible. Rather, it demanded that Harley-
Davidson “analogize or explain how [the cited] cases are
similar to the instant action.” Greene, 2019 WL 5855982,
at *3.     But by requiring Harley-Davidson to show
similarities to other cases, the district court improperly asked
it to show the likelihood of the plaintiff prevailing on the
punitive damages claim, rather than merely establishing the
potential amount “at stake.” Gonzales, 840 F.3d at 648. It
effectively changed CAFA’s amount-in-controversy
requirement from possible liability to probable liability. See
Frederick, 683 F.3d at 1248 (holding that defendant does
need to show that punitive damages are “more likely than
not,” but that they are merely “possible”); see also Chavez v.
JPMorgan Chase & Co., 888 F.3d 413, 417 (9th Cir. 2018)
(“the amount in controversy is not a prospective assessment
of a defendant’s liability” but the amount potentially “at
stake” (quotation marks and citation omitted)).

     The district court’s approach also raises practical
difficulties for the defendant. It invites a defendant to
analogize cases that have been tried to verdict to a case at the
pleading stage in which discovery has not even begun. For
a court or jury to have awarded punitive damages in a fraud
case that did not involve any physical injuries (like this one),
it is likely that the damaging facts underlying the award were
revealed during discovery. Cf. Michael Paul Thomas et al.,
              GREENE V. HARLEY-DAVIDSON                   13
Cal. Civ. Prac. Torts § 24:65 (noting the same for products
liability actions based on fraud). But such facts likely will
not be apparent at the pleading stage, making it all but
impossible to analogize the cases.

   To sum up, a defendant that relies on potential punitive
damages to satisfy the amount in controversy under CAFA
meets that requirement if it shows that the proffered
punitive/compensatory damages ratio is reasonably possible.
And one way to establish that possibility is to cite a case
involving the same or a similar statute in which punitive
damages were awarded based on the same or higher ratio.

II. It was improper for the district court to consider
    Harley-Davidson’s potential statute of limitations
    defense.

   Harley-Davidson also appeals from the district court’s
apparent decision to adopt Greene’s argument that Harley-
Davidson’s potential statute of limitations defense precludes
damages for unnamed class members.

    In Greene’s remand motion, he argued that only his
individual CLRA and fraud claims could be tolled, and that
therefore there was only $1,399 of potential punitive
damages. The district court did not explicitly address this
argument but adopted his $1,399 figure. Greene, 2019 WL
5855982, at *4. On appeal, Greene again argues that
punitive damages are unavailable to the class. He argues that
under China Agritech, Inc. v. Resh, 138 S. Ct. 1800, 1806–
07 (2018) and Fierro v. Landry’s Restaurant Inc., 32 Cal.
App. 5th 276, 292 (2019), only his individual CLRA and
fraud claims can be tolled under the American Pipe doctrine.

   The district court erred in considering the merits of
Harley-Davidson’s affirmative defense to determine the
14             GREENE V. HARLEY-DAVIDSON

amount in controversy. The amount in controversy
represents only the “amount at stake in the underlying
litigation,” not the likely liability. Gonzales, 840 F.3d
at 648. We have held that the “strength of any defenses
indicates the likelihood of the plaintiff prevailing; it is
irrelevant to determining the amount that is at stake in the
litigation.” Arias, 936 F.3d at 928 (emphasis in original). In
other words, “just because a defendant might have a valid
defense that will reduce recovery to below the jurisdictional
amount does not mean the defendant will ultimately prevail
on that defense.” Geographic Expeditions, Inc. v. Estate of
Lhotka ex rel. Lhotka, 599 F.3d 1102, 1108 (9th Cir. 2010).

    Greene argues that courts can inquire into potential
recovery in assessing the amount in controversy, citing
Pachinger v. MGM Grand Hotel-Las Vegas, Inc., 802 F.2d
362, 364 (9th Cir. 1986), and Morris v. Hotel Riviera, Inc.,
704 F.2d 1113, 1115 (9th Cir. 1983). But in those cases, the
underlying statute itself limited the damages available, and
there was no need to delve into the merits of the defense or
case. In contrast, evaluating a potential statute of limitations
defense involves a fact-based analysis of the merits,
especially in a case such as this where (1) Greene’s
allegations involve fraud and concealment and (2) his
complaint alleged that all statutes of limitations should be
tolled.

    In adopting Greene’s measure of damages, the district
court assumed that Harley-Davidson would prevail on a
statute of limitations defense against the rest of the class.
The district court improperly “decide[d] the merits of the
case before it could determine if it had subject matter
jurisdiction.” Geographic Expeditions, 599 F.3d at 1108.
Greene cannot smuggle in merits-based arguments into the
“jurisdictional inquiry, which is supposed to be simple and
                  GREENE V. HARLEY-DAVIDSON                             15

mechanical.” Keeling, 660 F.3d at 275. Moreover, doing so
would allow Greene to rewrite his complaint to avoid federal
court. Greene sued for compensatory damages, punitive
damages, and attorneys’ fees for a two-year class period, and
alleged that all statutes of limitations should be tolled. He
sued under laws that allow for punitive damages, exposing
Harley-Davidson to higher damages. Harley-Davidson may
successfully assert certain defenses, but if the class succeeds
in receiving what Greene asked for, Harley-Davidson could
pay more than $5 million in damages.

   Put simply, Greene put more than $5 million in
controversy. Greene is the master of his complaint, and he
owns the allegations that have landed him in federal court. 4

                              * * * * *

    Finally, we briefly address Greene’s argument that two
of the defendants lack standing because they were non-
removing parties. This argument is meritless. A class action
“may be removed by any defendant without the consent of
co-defendants” under CAFA. Ibarra, 775 F.3d at 1195. In
addition, all three defendants opposed Greene’s motion to

    4
       Harley-Davidson also included $1,083,333 in attorneys’ fees —
i.e., 25 percent of the compensatory damages and punitive damages —
to meet the $5+ million amount-in-controversy requirement. The district
court did not analyze the attorneys’ fees portion, and instead assumed it
to be acceptable. A defendant does “not need to prove to a legal
certainty” that a plaintiff will be awarded the proffered attorneys’ fees in
the removal notice, Dart Cherokee, 574 U.S. at 88 (citing H.R. Rep. No.
112–10, at 16 (2011)), and may “require a chain of reasoning that
includes assumptions,” Ibarra, 775 F.3d at 1199. Based on Harley-
Davidson’s evidence that Greene’s attorney sought 35 percent in a
similar case, it is reasonable to assume that Greene’s attorney would seek
fees equal to 25 percent of the amount in controversy if he were to
prevail.
16           GREENE V. HARLEY-DAVIDSON

remand, and were “aggrieved by the decision being
appealed,” Hendricks v. Bank of Am., N.A., 408 F.3d 1127,
1133 (9th Cir. 2005) (citations omitted).

                    CONCLUSION

    Harley-Davidson met its burden of showing that the
amount in controversy exceeds $5 million under CAFA by
establishing that the proffered punitive/compensatory
damages ratio is reasonably possible. The district court’s
decision granting Greene’s motion to remand is
REVERSED.