Guessing The Amount In Controversy: Removing Defendants Can Only Hope They Are Right
January 1, 2010 1:56 PM |
Posted by Christian, Kathryn |
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In Lowery v. Alabama Power Company, 483 F.3d 1184 (11th Cir. 2007), the Eleventh Circuit interpreted the $5 million amount in controversy requirement in the Class Action Fairness Act, affirming the district court's decision to grant a motion for remand filed by a class of homeowners alleging that several companies caused personal injury and property damage by discharging pollutants into the air and groundwater. After being added as a defendant to the case in an amended complaint, one company attempted to remove the case to federal court, relying on allegations in the amended complaint concerning the number of plaintiffs and the type of harm they suffered, as well as specific damages allegations in a prior complaint. The company estimated that each of the 400 plaintiffs needed to seek only $12,500 to reach the $5 million amount in controversy and argued that $12,500 was a low estimate for the amount of damages claimed by each class member, in light of the nature of the claimed bodily injury and property damage. The court rejected this calculation, reasoning that "we fail to see how we can justify a conclusion that the per-plaintiff recovery will exceed even so low a total" and that to reach such a conclusion the court would have to "engage in impermissible speculation." The court concluded that the amended complaint alone--which did not allege a specific amount of damages--could not form the basis for removal.
A recent class action decision from the Southern District of Ohio illustrates the difficulty now facing post-Lowery defendants. Following the approach suggested in Lowery, the defendants in Curry v. Applebee's International, Inc., 2009 WL 4975274 (S.D. Ohio Nov. 17, 2009)--faced with a complaint that did not specifically allege the amount of damages sought by the plaintiff class of purchasers of menu items whose nutritional information was allegedly misrepresented--dutifully waited to receive evidence regarding the amount of damages claimed before attempting to remove the case. Upon receipt of interrogatory responses indicating that the plaintiff class was seeking the full value of the menu items purchased at an average value of $7 per item, the defendants attempted to remove the case. The court held that the defendants should have removed the case sooner, upon receipt of a settlement demand requesting compensation in the amount of 5% of the items sold at an average price of $7 per item, because the settlement demand should have indicated to the defendants that the plaintiff class was seeking recovery based upon the value of the menu items purchased. In a footnote, the court went one step farther, stating that because defendants had knowledge of their own sales figures related to the menu items at issue, the case may have been removable as soon as the complaint was filed.