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Deborah Lyddy v. World of Jeans & Tops

March 7, 2012

DEBORAH LYDDY,
PLAINTIFF,
v.
WORLD OF JEANS & TOPS, DBA TILLY'S; AND TILLY'S INC., DEFENDANTS.



The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge

ORDER GRANTING MOTION TO REMAND

Plaintiff Deborah Lyddy ("Lyddy") moves to remand this action to state court for lack of subject matter jurisdiction. Defendants World of Jeans & Tops, dba Tilly's, and Tilly's Inc. (collectively "Tilly's") separately move to dismiss the complaint for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. All motions are opposed. Pursuant to Local Rule 7.1(d)(1), the court finds this matter appropriate for resolution without oral argument. For the reasons set forth below, the court grants the motion to remand and denies the motion to dismiss as moot.

BACKGROUND

On October 4, 2011, Plaintiff commenced this action in the Superior Court for the County of San Diego by filing a class action complaint alleging four claims for (1) violation of Civil Code §1750, (2) violation of Bus. and Prof. §17200; (3) violation of Bus. and Prof. §17500; and (4) conversion. On November 15, 2011, Tilly's removed this action pursuant to 28 U.S.C. §1332(d), the Class Action Fairness Act of 2005 ("CAFA").

Plaintiff's central allegation is that Tilly's violates Civil Code §1749.5(b)(2) by selling pre-paid gift cards that are not redeemable for the cash balance when the remaining cash balance falls below $10.00. (Compl. ¶11-14). Plaintiff alleges that this conduct violates California's Consumer Legal Remedies Act, Civil Code §1750; Unfair Competition Law, Bus. and Prof. §17200; and False Advertising Law, Bus. and Prof. §17500. (Compl. ¶20). Lyddy also alleges that Tilly's wrongfully converted her monies by taking possession of the remaining value of the gift card. (Compl. ¶64).

Plaintiff brings this action as a class action consisting "of thousands of persons in the State of California." (Compl. ¶19). Plaintiff alleges that federal subject matter jurisdiction is lacking under CAFA because the "total amount in controversy is less than $5,000,000." (Compl. ¶9). In the event Plaintiff discovers "new facts [] obtained with respect to the amount at issue, Plaintiff will seek leave to amend this Complaint." Id.

Plaintiff now moves to remand the action to state court on the ground that CAFA's $5,000,000 amount in controversy is not satisfied or, alternatively, that the local controversy exception to CAFA, 29 U.S.C. §1332(d)(4), renders the removal improper. Tilly's opposes the motion.

DISCUSSION

The Amount in Controversy

The court addresses Plaintiff's claim that the court lacks subject matter jurisdiction because the amount in controversy falls below CAFA's statutory minimum requirement of $5,000,000. Federal courts are courts of limited jurisdiction. "Without jurisdiction the court cannot proceed at all in any cause. Jurisdiction is power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause." Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 94 (1998) (quoting Ex parte McCardle, 74 U.S. (7 Wall.) 506, 514, 19 L.Ed. 264 (1868)).

A state court civil action may be removed to federal court if the district court had "original jurisdiction" over the matter. 28 U.S.C. §1441(a). Tilly's, as the party who invokes federal removal jurisdiction, has the burden of demonstrating the existence of federal jurisdiction. See Gaus v. Miles, Inc. 980 F.2d 564, 566 (9th Cir. 1992); B., Inc. v. Miller Brewing Co., 663 F.2d 545 (5th Cir. 1981). Any doubts regarding removal jurisdiction are construed against defendant and in favor of remanding the case to state court. See Gaus, 980 F.2d at 566. Even after enactment of CAFA, the burden of demonstrating subject matter jurisdiction at the time the Notice is filed remains with defendant. See Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 682-83 (9th Cir. 2006) (under CAFA, defendant retains the burden of establishing federal jurisdiction, including the amount in controversy).

Where subject matter jurisdiction is premised upon CAFA, and plaintiff has pled an amount in controversy less than $5,000,000, "the party seeking removal must prove with 'legal certainty' that the amount in controversy is satisfied." Lowdermilk v. U.S. Bank National Assn'n, 479 F.3d 994, 996 (9th Cir. 2007). The Ninth Circuit noted that "a plaintiff may sue for less than the amount she may be entitled to if she wishes to avoid federal jurisdiction and remain in state court," subject only "to a 'good faith' requirement in pleading." Id. at 999. The court is to consider the complaint, Notice, and "summary-judgment-type evidence relevant to the amount in controversy at the time of removal," Abrego, 443 F.3d at 682-83, in making this determination.

Rather than apply the "legal certainty" test, Tilly's argues that the court should apply the preponderance standard because the complaint's amount in controversy allegations are not clear. In Guglielmino v. McKee Foods Corp., 506 F.3d 696 (9th Cir. 2007), the Ninth Circuit noted, for purposes of determining the burden of proof when plaintiffs move to remand pursuant to 28 U.S.C. §1447, that the $75,000 amount in controversy requirement of 28 U.S.C. §1332(a) is subject to varying burdens of proof. In the case where it is unclear or ambiguous whether the amount in controversy is satisfied, the court applies "a preponderance of the evidence standard." Id. at 699. The Ninth Circuit also noted for purposes of CAFA, "when a state-court complaint affirmatively alleges that the amount in controversy is less than the jurisdictional threshold, the 'party seeking removal must prove with legal certainty that CAFA's jurisdictional amount is met.'" Id. (quoting Lowdermilk, 479 F.3d at 1000). Here, Tilly's asserts that the amount in controversy allegations are unclear because Plaintiff seeks leave to amend in the event damages exceed $5,000,000 and seeks additional compensation in the form of punitive damages and attorney's fees. While the complaint is not a model of clarity with respect to the amount in controversy (the Prayer for Relief requests an unspecified amount of compensatory damages in addition to punitive damages and attorney's fees), the court concludes that under either a preponderance or legal certainty burden of proof, Tilly's fails to show that the amount in controversy satisfies the threshold amount in controversy.

Here, the Class consists of all persons in California who purchased, possessed or received a Tilly's gift card and could not redeem the gift card for "its cash value when the remaining cash value on the card is less than $10.00" (Compl. ¶14). California Civil Code §1749.5(b)(2) provides, in pertinent part, that "any gift certificate with a cash value of less than ten dollars ($10) is redeemable in cash for its cash value." Craig DeMerit, Tilly's Vice President of Information Systems, declares that the total number of gift cards purchased in California after January 1, 2008 exceeds 100,000 cards with a value in excess of $10 million and that 15,000 gift cards were purchased outside the State of California but used at "brick and mortar stores" in California. The court notes that calculating with precision the relevant amount in controversy is not an easy task. Tilly's argues that the relevant amount in controversy is the entire amount of money used to purchase the gift cards because the complaint alleges, in a parade of injuries, "the loss of money used to purchase the gift cards." (Compl. ¶35). The court concludes that this isolated phrase, in ...


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