Wednesday, July 15, 2020
Federal Jurisdiction Over Class Action Grounded On ‘Reasonably Possible’ Total Recovery
Lee’s Opinion Says Klausner Applied the Wrong Standard in Determining That Amount in Controversy Did Not Meet $5 Million Jurisdictional Minimum
By a MetNews Staff Writer
The determination as to whether a putative class action meets the federal jurisdictional threshold amount of $5 million where a component of the potential award is punitive damages, the District Court must consider what award of such damages is “reasonably possible,” not what is probable, the Ninth U.S. Circuit Court of Appeals held yesterday.
Circuit Judge Kenneth K. Lee wrote the opinion which reverses an order by Judge R. Gary Klausner of the Central District of California shunting the case back to the Riverside Superior Court where plaintiff Matthew D. Greene filed his putative class action last year.
Defendant Harley-Davidson removed it to federal court under the Class Action Fairness Act (“CAFA”), contending the requirements were met as to the amount in controversy and that the class consisted of more than 100 members. Klausner ruled that although Harley Davidson “has established by a preponderance of the evidence that there is $2,166.666 at stake in compensatory damages,” it “has not established by a preponderance of the evidence that there is $2,166,666 at stake in punitive damages.”
He spotted a potential of only $1,399 in punitive damages, and expressed doubt that an award of attorney fees could bring the total to $5 million.
The $1,399 figure was the amount Greene claimed a Harley-Davidson dealership in Riverside charged him in 2015 for setup fees, on top of the manufacturer’s suggested retail price for a motorcycle. Greene later saw advertising that revealed Harley-Davidson reimburses such fees to dealers.
On June 11, 2019 filed his action for violation of consumer protection laws and for fraud, proposing a class of plaintiffs who bought Harleys at the Riverside dealership between 2015 and 2017.
Lee said in yesterday’s opinion:
“From Easy Rider to 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 tins 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.”
In explaining the reversal of Klausner’s order, he declared:
“This case presents a technical, but unresolved, question in tins 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 defendants burden m establishing that amount? We hold that the defendant must show that the punitive damages amount is reasonably possible.”
While Klausner assumed that punitive damages would not exceed the $1,399 which Greene allegedly over-paid, Lee observed that Harley-Davidson succeeded in showing past jury awards where the ratio of punitive damages to actual damages exceeded 1:1 in other fraud cases brought under California’s Consumer Legal Remedies Act.
The circuit judge said that Klausner required more of Harley-Davidson than showing ratios in previous cases. He took note that Klausner “demanded that Harley- Davidson ‘analogize or explain how [the cited] cases are similar to the instant action,’ ” commenting:
“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.’…It effectively changed CAFA’s amount-in-controversy requirement from possible liability to probable liability….
“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 winch 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 tins one), it is likely that the damaging facts underlying the award were revealed during discovery.”
The case is Greene v. Harley-Davidson, Inc., 20-55281.
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