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Zhao v. Relayrides, Inc.

United States District Court, N.D. California

May 7, 2018

JIAN-MING “SCOTT” ZHAO, Plaintiff,
v.
RELAYRIDES, INC., et al., Defendants.

          ORDER GRANTING RENEWED MOTION TO REMAND AND REMANDING ACTION TO STATE COURT Re: Dkt. No. 41

          JOSEPH C. SPERO JUDGE

         I. INTRODUCTION

         Defendants removed this action from State court under the Class Action Fairness Act (“CAFA”), which requires, inter alia, that the removing party demonstrate that at least $5 million is in controversy. On December 12, 2017, the Court denied without prejudice Plaintiff's Motion to Remand, finding that Defendants had failed to meet their burden in establishing that CAFA's amount-in-controversy requirement was met and permitting the parties to conduct limited jurisdictional discovery. Presently before the Court is Plaintiff's Renewed Motion for Remand (“Renewed Motion”). The only question before the Court is whether Defendants have met their burden as to CAFA's amount-in-controversy requirement. For the reasons stated below, the Court concludes that they have not. Accordingly, the Court GRANTS the Renewed Motion and remands this case to the Superior Court of California, County of San Mateo.[1] The motion hearing and further case management conference set for May 11, 2018 are vacated.

         II. ANALYSIS [2]

         A. Whether Defendants Have Demonstrated by a Preponderance of the Evidence that CAFA's Amount-in-Controversy Requirement is Met

         The crux of the dispute is whether Defendants have established by a preponderance of the evidence that the economic losses placed into controversy by Plaintiff's First Amended Complaint are sufficient to meet the amount-in-controversy requirement.[3] The Court concludes that Defendants have not met their burden because the method they have used to estimate damages is based on unsupported assumptions and questionable methodology, rendering their estimate speculative. The Court also finds that Defendants' estimate does not accurately reflect the scope of the class claims Plaintiff asserts in his First Amended Complaint because it includes the estimated value of denied claims for repairs of preexisting damage, that is, damage that occurred outside of the rental period.

         1. Legal Standard

         Under CAFA, the burden to establish removability is on the defendant. Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 684 (9th Cir. 2006). “[W]hen a defendant seeks federal-court adjudication, the defendant's amount-in-controversy allegation should be accepted when not contested by the plaintiff or questioned by the court.” Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S.Ct. 547, 553 (2014). Where the amount in controversy is challenged, “both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied.” Id. at 554 (citing 28 U.S.C. § 1446(c)(2)(B)). To demonstrate the amount in controversy for the purposes of establishing that removal was (or was not) proper, the parties may submit evidence beyond the complaint such as affidavits, declarations, or other “summary-judgment type evidence relevant to the amount in controversy. . . .” Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997); see also Orr v. Bank of Am., NT & SA, 285 F.3d 764, 773 (9th Cir. 2002) (“A trial court can only consider admissible evidence in ruling on a motion for summary judgment”); Gaus v. Miles, Inc., 980 F.2d 564, 567 (9th Cir. 1992) (holding that where the jurisdictional amount in controversy is challenged, it is the removing party's burden to come forward with “competent evidence” that this requirement is satisfied).

         To meet its burden a removing party is not required to “research, state, and prove the plaintiff's claims for damages.” Coleman v. Estes Express Lines, Inc., 730 F.Supp.2d 1141, 1147- 48 (C.D.Cal.2010) (citations omitted). On the other hand, “a defendant cannot establish removal jurisdiction by mere speculation and conjecture, with unreasonable assumptions” under CAFA. Ibarra v. Manheim Investments, Inc., 775 F.3d 1193, 1197 (9th Cir. 2015). Thus, where a damages estimate is based on assumptions that have no evidentiary support in the record, the estimate may be insufficient to establish that the amount-in-controversy requirement is met. See Roth v. Comerica Bank, 799 F.Supp.2d 1107, 1126 (C.D. Cal. 2010)(finding in wage and hour case removed to federal court under CAFA that defendant's estimate of amount in controversy was speculative because many of the assumptions that were “key to defendants' damages calculations” were not supported by summary judgment-type evidence and remanding to state court).

         2. The Benn Declaration

         As a preliminary matter, the Court notes that the evidence and methodology on which Defendants now rely to establish the amount in controversy is new. In opposition to the original motion to remand, Defendants relied on the declaration of Turo's president, Alex Benn, who stated that he had personal knowledge, based on his own “review of records” and “research, ” that allowed him to estimate the number of claims denied since 2012 and the average value of those claims. Henderson Decl., Ex. 1 (Benn Opposition Decl.). Subsequent jurisdictional discovery revealed that the handful of documents that Benn had purportedly “reviewed” to come up with these numbers - a spreadsheet and three graphs -lend little or no support for his figures. Moreover, as to the spreadsheet (which reflected a total value of denied claims in the amount of $10, 125, 000), see Henderson Decl., Ex. 6, Benn testified that he did not know where the figures in it came from or what they were based on, and that he only remembered seeing the document on the screen of his attorney's computer. Id., Ex. 7 (Benn Dep.) at 42-43. In his deposition, Benn was unable to offer any solid evidentiary basis for the numbers contained in his declaration.

         Apparently, the figures in the Benn Declaration actually came from Turo's Senior Director of Risk, Tristam Hewitt, who states in a declaration submitted in opposition to the Renewed Motion that the numbers in the spreadsheet upon which Benn says he relied are “rough estimates” that Hewitt provided to Turo's counsel. Hewitt Decl. ¶ 9 & Ex. B (spreadsheet). Hewitt does not explain in his declaration how he derived the figures in the spreadsheet. Defendants have now abandoned these numbers, making no effort to defend them or even to show that they ever had a good faith basis for believing that they were reasonable estimates. The Court is troubled by Defendants' cavalier (at best) approach towards the facts. This problem persists in Defendants' new analysis of the amount-in-controversy, as discussed below.

         3. Reliability of Estimate Offered By Defendants in Opposition to the Renewed Motion

         Following the hearing on Plaintiff's original motion to remand, Hewitt “was asked to provide a more detailed analysis as to the number and value of first party claims using a conservative valuation method.” Hewitt Decl. ¶ 10. He did so and on the basis of that analysis, Defendants now contend the economic losses that are placed in controversy by Plaintiff's First ...


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