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Arias v. Residence Inn by Marriott

United States Court of Appeals, Ninth Circuit

September 3, 2019

Blanca Argelia Arias, individually and on behalf of herself and others similarly situated, Plaintiff-Appellee,
v.
Residence Inn by Marriott, a Delaware limited liability company; Marriott International, Inc., a Delaware corporation, Defendants-Appellants.

          Argued and Submitted August 13, 2019 Pasadena, California

          Appeal from the United States District Court for the Central District of California, No. 2:18-cv-08818-RGK-JPR R, Gary Klausner, District Judge, Presiding

          Brian P. Long (argued), Seyfarth Shaw LLP, Los Angeles, California; William Dritsas, Seyfarth Shaw LLP, San Francisco, California; for Defendants-Appellants.

          Samvel Gashgian (argued) and Ramin R. Younessi, Law Offices of Ramin R. Younessi, Los Angeles, California, for Plaintiff-Appellee.

          Before: Consuelo M. Callahan, D. Michael Fisher, [*] and Morgan Christen, Circuit Judges.

         SUMMARY[**]

         Class Action Fairness Act / Amount in Controversy

         The panel vacated the district court's order sua sponte remanding to state court a putative class action brought by employees against Residence Inn by Marriott, which had been removed to federal court under the Class Action Fairness Act.

         The panel held that when a notice of removal plausibly alleges a basis for federal court jurisdiction, a district court may not remand the case back to state court without first giving the defendant an opportunity to show by a preponderance of the evidence that the jurisdictional requirements were satisfied. Marriott's notice of removal alleged that the amount in controversy requirement was satisfied, and the district court did not conclude that Marriott's allegations were implausible. The panel held that by remanding the case to state court sua sponte, the district court deprived Marriott of a fair opportunity to submit proof. The panel concluded that this error warranted vacatur of the remand order.

         The panel held that when a defendant's allegations of removal jurisdiction are challenged, the defendant's showing on the amount in controversy may rely on reasonable assumptions. The panel held that Marriott's notice of removal included personnel and payroll data, and with that data, Marriott estimated the amount-in-controversy by making assumptions that were plausible and may prove to be reasonable in light of allegations in the complaint. The panel held that on remand Marriott must show that its estimated amount in controversy relied on reasonable assumptions.

         The panel held that when a statute or contract provides for the recovery of attorneys' fees, prospective attorneys' fees must be included in the assessment of the amount in controversy.

         The panel rejected plaintiff's contention that the position taken by Marriott in its summary judgment motion in state court - that plaintiff's claims are barred by a release from a prior class action settlement - defeated federal court jurisdiction.

         The panel remanded on an open record for the district court to permit the parties to submit evidence and arguments on the amount in controversy.

          OPINION

          CALLAHAN, CIRCUIT JUDGE.

         Blanca Arias filed a putative class action against Residence Inn by Marriott, LLC and Marriott International, Inc. ("Marriott") in California superior court, alleging that Marriott failed to compensate its employees for wages and missed meal breaks and failed to issue accurate itemized wage statements. Marriott removed the action to federal court alleging diversity jurisdiction under the Class Action Fairness Act ("CAFA"). The district court sua sponte remanded the case back to state court, and Marriott appeals.

         In some of our early cases interpreting CAFA, we adopted legal standards that were influenced by a general "presumption against federal jurisdiction." See Lowdermilk v. U.S. Bank Nat'l Ass'n, 479 F.3d 994, 999 (9th Cir. 2007). The Supreme Court has made clear that regardless of whether such a presumption exists in run-of-the-mill diversity cases, "no antiremoval presumption attends cases invoking CAFA." Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S.Ct. 547, 554 (2014). Because some remnants of our former antiremoval presumption seem to persist, [1] we reaffirm three principles that apply in CAFA removal cases. First, a removing defendant's notice of removal "need not contain evidentiary submissions" but only plausible allegations of the jurisdictional elements. Ibarra v. Manheim Investments, Inc., 775 F.3d 1193, 1197 (9th Cir. 2015). Second, when a defendant's allegations of removal jurisdiction are challenged, the defendant's showing on the amount in controversy may rely on reasonable assumptions. See id. at 1197-99. Third, when a statute or contract provides for the recovery of attorneys' fees, prospective attorneys' fees must be included in the assessment of the amount in controversy. Fritsch v. Swift Transp. Co. of Ariz., LLC, 899 F.3d 785, 794 (9th Cir. 2018). We vacate the district court's order remanding the action to state court, and we remand for further proceedings to allow the parties to present evidence and argument on the amount in controversy.

         I.

         Arias works for defendant Residence Inn by Marriott, LLC in Los Angeles, California. On August 23, 2018, Arias filed a putative class action in state court against Marriott alleging that Marriott failed to pay wages, provide rest breaks, and provide itemized wage statements, all in violation of state wage and hour laws. Arias seeks certification of a class of all employees of Marriott "who were subjected to individual wage and hour violations, during the period within four years from the filing of th[e] Complaint and continuing through trial." In addition to compensatory damages, Arias seeks civil penalties under the California Private Attorney General Act, disgorgement of "ill-gotten gains" under California's Unfair Competition Law, and attorneys' fees.

         On October 12, 2018, Marriott removed the case to federal district court, invoking CAFA jurisdiction.[2] Specifically, Marriott alleged that the district court had original jurisdiction over the matter because the class action satisfied CAFA's requirements of minimum diversity (any member of the class is a citizen of a state different from any defendant), class size (at least 100), and amount in controversy (exceeding $5, 000, 000). See 28 U.S.C. § 1332(d)(2), (d)(5)(B). To show minimum diversity, Marriott alleged that it is a citizen of Maryland and Delaware and it relied on the allegation in the complaint that Arias is a citizen of California. To satisfy the class size requirement, Marriott provided a declaration from a human resources officer stating that Marriott employed at least 2193 nonexempt employees during the period identified in the complaint.

         To satisfy the amount-in-controversy requirement, Marriott relied on a combination of the complaint's definition of the class, Marriott's employee data (e.g., number of nonexempt employees, hourly rate of pay, and number of workweeks worked by putative class members), and assumptions about the frequency of the violations alleged in the complaint. Based on its assumptions and calculations, Marriott alleged a potential amount in controversy exceeding $15 million with its most "conservative estimate" totaling over $5.5 million, excluding attorneys' fees (which Marriott alleged should be included in the calculation). Marriott's calculation in its notice of removal breaks down as follows:

         Unpaid ...


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