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Media Alerts - LaCross v. Knight Transportation, Inc. - Ninth Circuit
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January 30, 2015
  LaCross v. Knight Transportation, Inc. - Ninth Circuit
Headline: Ninth Circuit reversed the district court's remand order, holding that, unlike the labor law class action complaint in Ibarra, the class action complaint alleging labor law violations 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, thereby meeting the requisite $5 million amount in controversy for removal under CAFA.

Area of Law: Civil Procedure, Class Action

Issue Presented: Under CAFA, 28 U.S.C. § 1332(d), does a defendant meet its burden to prove the requisite $5 million amount in controversy by a preponderance of the evidence by extrapolating from quarterly fuel costs invoiced on the company's fuel cards provided to its drivers to estimate the amount over the four-year class period when the complaint describes the class to include all of the company's drivers?

Brief Summary: The district court erred in concluding that defendant relied on a flawed assumption that all its drivers worked the entire year and thus failed to meet its burden to prove by a preponderance of the evidence the requisite $5 million amount in controversy.

In Ibarra v. Manheim Investments, Inc., __F.3d__, No. 14-56779 (9th Cir. Jan. 8, 2015), filed simultaneously with the Ninth Circuit's opinion in LaCross, the Ninth Circuit panel held that, when the defendant relies upon a chain of reasoning that includes assumptions to satisfy its burden to prove that the amount in controversy exceeds $5 million, the chain of reasoning and underlying assumptions relied upon by a defendant to remove a case to federal court must be reasonable.

Applying the framework articulated in Ibarra, the Ninth Circuit panel held that, "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."

Reversed and Remanded.

Extended Summary: The Ninth Circuit panel simultaneously issued its opinion in Ibarra v. Manheim Investments, Inc. addressing the evidence necessary for a defendant to prove the amount in controversy under CAFA to qualify for removal to federal court. When an amount in controversy is not facially apparent or is understated, a defendant may rely on a chain of reasoning and assumptions to satisfy its burden of proof that the amount in controversy exceeds $5 million provided the chain of reasoning and assumptions are reasonable.

The named plaintiffs were "Owner Operators" who performed work for Knight Transportation, Inc. and Knight Truck and Trailer Sales, LLC ("Knight"). The Plaintiffs filed a class action in California state court alleging labor law violations including misclassification as independent contractors.

Knight removed the case to federal court estimating the amount in controversy as at least $44 million based on potential liability for employee expenditures under California Labor Code § 2802. The district court granted Plaintiffs' motion to remand, concluding Knight failed to meet its burden of proof establishing the amount in controversy because all Knight's calculations relied on a flawed assumption that all drivers worked 50 weeks per year.

Preliminarily, the removing party must file a notice of removal including a "plausible allegation that the amount in controversy exceeds the jurisdictional threshold." When a defendant's assertion of the amount in controversy is challenged, the court decides on a preponderance of the evidence whether the amount in controversy requirement is satisfied. Under the holding in Ibarra, any chain of reasoning and underlying assumptions relied upon by a defendant to remove a case to federal court must be reasonable.

The Ninth Circuit panel analyzed Knight's method for calculating its potential liability for the driver's fuel cost. The costs were estimated by multiplying $2.3 million in quarterly invoiced fuel costs by 16 quarters for a total of $36.8 million.

Knight further extrapolated a more conservative estimate by creating a ratio, the numerator of which was its lowest number of drivers for the class period and the denominator of which was its greatest number of drivers and multiplying the ratio by the $2.3 million quarterly invoiced fuel cost ($2,369,628 x 116/207) and then multiplying the adjusted value by the 16 quarters for a total of $21 million in estimated fuel costs.

The panel held that the district court erred in concluding Knight's calculations relied on the assumption that the class worked for the whole year because the method used relied on actual fuel invoices rather than driver time.

The Ninth Circuit panel reversed the district court's judgment remanding the case to state court, concluding that sufficient evidence was presented by Knight to establish the amount in controversy by a preponderance of the evidence.

For the full opinion: http://cdn.ca9.uscourts.gov/da...08/14-56780.pdf


Panel: Stephen S. Trott, Consuelo M. Callahan, Circuit Judges and Mark W. Bennet, District Judge.

Date of Issued Opinion: January 8, 2015

Docket Number: 14-56780

Decided: Reversed and Remanded

Case Alert Author: Brandon Powell

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.

Author of Opinion: Gould, Circuit Judge.

Case Alert Circuit Supervisor: Professor Glenn Koppel

Edited: 04/08/2015 at 09:12 AM by Media Alerts Moderator

    Posted By: Glenn Koppel @ 01/30/2015 05:29 PM     9th Circuit  

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