• Removal Under CAFA Proper Where Recovery Exceeding $5 Million Not Legally Impossible
  • July 7, 2011 | Author: Renee Choy Ohlendorf
  • Law Firm: Hinshaw & Culbertson LLP - Los Angeles Office
  • The U.S. Court of Appeals for the Seventh Circuit recently held that removal under the Class Action Fairness Act (CAFA), 28 U.S.C. §1453(c)(1), was proper where the defendant met the amount in controversy requirement by establishing that a potential recovery exceeding the $5 million threshold was not legally impossible.

    Plaintiff employees filed a putative class action in Illinois state court alleging that defendant, their employer, had violated the Illinois Minimum Wage Law, 820 ILCS 105/12(a). The employees claimed that the employer had not compensated its employees for work performed before and after their shifts.

    The employer removed the action to federal court on the basis of jurisdiction under CAFA. The only contested issue was whether the requisite amount in controversy for removal to federal court had been met. The employer included compensatory damages, a 2 percent statutory penalty on backpay, costs and attorneys’ fees in its calculations. The employer estimated the amount in controversy to be $5,244,082.14, which consisted of $3,801,204.07 in potential backpay damages and $1,442,878.07 in statutory penalties.

    The District Court disputed the employer’s calculation of the statutory penalty, estimating the amount in controversy to be $4,994,448.07—approximately $5,552 short of the $5 million requirement. It found that the employer had used an incorrect multiplier for each year’s damages and did not apply the correct date that the statutory penalty began to accrue. The District Court concluded that the employees’ attorneys’ fees did not push the amount in controversy over the $5 million mark, as the work for filing the complaint was minimal.

    The Seventh Circuit reversed, holding that jurisdiction under CAFA was proper because the employer’s calculation of the amount in controversy was not legally impossible. The Appellate Court further held that the District Court erred in finding that the employees’ attorneys’ fees did not exceed $5,552. Because attorneys’ fees incurred up to the time of removal could be included in calculating the amount in controversy, it was plausible that the employees’ legal fees for preliminary work in a class action suit could exceed $5,552. Had the District Court so found, the amount in controversy would have exceeded the $5 million requirement for CAFA jurisdiction. As such, the Seventh Circuit held that removal under CAFA was proper, the requisite amount in controversy having been met.