Thursday, December 13, 2018
Page 3
Ninth Circuit:
Estimated Prospective Liability of $3.1 Billion Precludes Remand
Panel Says Even if Ford Motor Company’s Figure Is High—Not Taking Into Account Factors Pinpointed By the District Court—Judge Klausner Erred in Finding That the $5 Million Threshold Was Not Met
By a MetNews Staff Writer
An order by a district court judge bouncing a case back to the San Luis Obispo Superior Court, on the ground that the $5 million jurisdictional minimum for a federal class action was not met, was reversed yesterday by the Ninth U.S. Circuit Court of Appeals which noted that defendant Ford Motor Company’s estimate of its potential liability was in excess of $3.1 billion.
A three-judge panel declared, in a memorandum opinion, that Judge R. Gary Klausner of the Central District of California erred in remanding a putative action brought under the California “lemon law”—the Song-Beverly Act—which alleged defects in F-150 trucks. The judge found that Ford, in its notice of removal, relied on the manufacturer’s suggested retail price (“MSRP”) of the vehicles, rather than the actual sales prices, and did not take into account the reduced value caused by use of the trucks.
The $3.1 billion figure, even if on the high side, the panel said, dwarfs the jurisdictional minimum under the Class Action Fairness Act (“CAFA”).
Used Wrong Standard
The opinion says that Klausner erred in applying a preponderance of the evidence standard because, under a 2014 U.S. Supreme Court opinion, a notice of removal need only state “a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” But even applying the higher standard, it sets forth, Ford met it.
A declaration attached to the notice, it recites, says that 68,255 new F-150s were sold in 2015-2017 in California and that the average suggested price was $45,498.94. Multiplying the figures, the product is $3,105,530,149.70.
That, the opinion points out, is 620 times the $5 million jurisdictional minimum for a class action.
Reasonable Assumptions
It remarks:
“The $5 million jurisdictional minimum is a very small fraction of $3.1 billion, less than one-fifth of one percent, specifically 0.16%. Defendants seeking to show that a claim exceeds CAFA’s $5 million threshold are entitled to rely on reasonable assumptions….It is reasonable to assume that most purchasers did not buy trucks for tens of thousands of dollars less than the MSRP. And it is equally reasonable to assume that the F-I50s did not lose nearly all of their value after a few years of use. These inferences compel the conclusion that, although the two issues identified by the district court will reduce the amount in controversy, they will not reduce it by 99.84 percent of the original amount calculated by Ford to be in controversy.
“Ford met its burden of showing, by a preponderance of the evidence, that the amount in controversy exceeds CAFA’s $5 million threshold. Under CAFA, this case was properly removed to federal court.”
Attorney Fees
A footnote acknowledges that the Aug. 8 opinion in Fritsch v. Swift Transportation Co. of Arizona, LLC came after Klausner ruled. There, the Ninth Circuit held that in determining whether the jurisdictional minimum is met, prospective attorney fees should be included.
“The possibility that the putative class members could receive an award of attorneys’ fees buttresses our conclusion that the amount in controversy exceeds $5 million,” the footnote says.
The case is Schneider v. Ford Motor Co., No. 18-56347.
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