Ice Cream Shop’s CAFA Removal Rejected by California Federal Court

In recent news, a California district court remanded a wage and hour class action (Hayes v. Salt & Straw, LLC) back to state court after rejecting evidence and arguments supporting its removal under the Class Action Fairness Act (CAFA).

History of the Case: Hayes v. Salt & Straw, LLC 

The plaintiff in the case filed a workplace class action alleging nine California labor code violations and one claim under California’s Unfair Competition Law. The lawsuit includes broad allegations. Allegedly, the defendant failed to provide employees with appropriate wages, failed to provide employees with mandatory rest breaks and meal periods, failed to keep accurate records, failed to include non-discretionary bonuses in the employees’ regular rate of pay when calculating overtime pay rate, and failed to provide employees with accurate overtime pay based on their alternative workweek schedule.

The Defendant in the Case Removed to Federal Court:

The ice cream shop listed as the defendant in the case removed to federal court under CAFA. The plaintiff sought to remand by arguing that CAFA’s $5 million threshold had not been established. The district court heard the plaintiff’s argument and agreed, remanding the case back to California state court and finding that the defendant’s estimate of the amount in controversy was based on unreasonable assumptions.

More About the Class Action Fairness Act (CAFA):

Congress provides jurisdiction over class actions to federal courts when they involve at least 100 class members, there is minimal diversity, and the amount in controversy is more than $5 million. Defendants seeking to remove under CAFA must include a plausible allegation that the amount in controversy exceeds the designated jurisdictional threshold. When the plaintiff in the case disagrees with the amount in controversy the defendant identifies, both parties submit their argument and evidence to the court. The defendant bears the burden of proof. The removing defendant is allowed to make assumptions regarding the amount in controversy. As the court explained in this case, those assumptions must be reasonable and appropriate considering any actual evidence submitted by the other party.

Evidence Submitted by Defendant in Support of Removal to Federal Court:

The defendant in the case submitted a declaration from counsel and a declaration from a human resources manager based on a review of regularly kept payroll records, but they did not submit the actual payroll records. The plaintiff argued that the payroll records were necessary, but the court disagreed, finding that the declarations were well-supported evidence for CAFA removal purposes. The court also pointed out that the plaintiff did not submit any evidence in competition with the declarations, so there was no evidence that they were unreliable or inaccurate.

The Court’s Eventual Rejection of Defendant’s Assumptions:

The court did agree with the plaintiff’s argument that the defendant’s estimates were based on unreasonable assumptions for four of the claims in the suit. The court criticized the defendant’s argument for assuming a 100% violation rate for the overtime wage estimate, waiting time penalty estimate, wage statement claim estimate, and off the clock estimate.

If you need to talk about employment law violations, or if you need to file a California employment law claim, we can help. Get in contact with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys are ready to assist you in any one of various law firm offices located in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.