Bayol v. Zipcar, Inc.

Filing 69

REDACTED ORDER by Judge Thelton E. Henderson granting 57 Motion for Leave to File Amended Complaint; denying 54 Motion to Dismiss. First Amended Complaint due 09/01/2015. (tehlc1, COURT STAFF) (Filed on 8/18/2015).

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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GABRIELA BAYOL,

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Plaintiff,

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v.
ZIPCAR, INC.,
Defendant.

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Case No. 14-cv-02483-TEH
ORDER GRANTING PLAINTIFF’S
MOTION FOR LEAVE TO AMEND
COMPLAINT AND DENYING
DEFENDANT’S MOTION TO
DISMISS

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United States District Court
Northern District of California

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This matter came before the Court on August 10, 2015, for a hearing on

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Defendant’s motion to dismiss the Complaint for lack of subject matter jurisdiction

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(Docket No. 54) and Plaintiff’s motion for leave to amend the Complaint (Docket No. 57).

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After carefully considering the arguments of the parties at the hearing and in the papers

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submitted, the Court hereby GRANTS Plaintiff’s motion and DENIES Defendant’s

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motion, for the reasons set forth below.

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BACKGROUND

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Plaintiff Gabriela Bayol (“Bayol”) is a resident of Daly City and a member of

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Zipcar, a short-term car rental service. Compl. ¶ 9 (Docket No. 1). In order to use Zipcar,

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Bayol entered into a standardized Membership Agreement setting out the terms of her

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rentals. Id. Under the Agreement, members must pay a fee of $50 per hour, up to $150,

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for returning a car late, in addition to the normal rental rate. Id. ¶ 22. Bayol alleges that

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she has returned a Zipcar late, and has accordingly paid the late fees set out in the

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Membership Agreement. Id. ¶ 9.

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Between May 30, 2010 and May 29, 2014, Zipcar collected $2,852,495 in late fees

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from non-corporate California Zipcar members. Sophastienphong Decl. ¶¶ 3-4 (Docket

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No. 54-2).

Bayol sent a letter to Zipcar on May 19, 2014, demanding that it cease the allegedly

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illegal collection of late fees from California Zipcar customers. Ex. A to Fisher Decl. at 1

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(Docket No. 57-1). Ten days later, she filed this putative class action to challenge Zipcar’s

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late fees under various California consumer protection statutes, including Civil Code

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section 1671(d), the Consumer Legal Remedies Act (“CLRA”), and the Unfair

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Competition Law (“UCL”). Compl. ¶¶ 34-66. Bayol argues that Zipcar’s late fee

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provision is presumptively illegal under section 1671(d) because it sets liquidated damages

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in a consumer contract. She alleges that it would not be impracticable to calculate Zipcar’s

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actual damages when a car is returned late, that Zipcar did not conduct a reasonable
endeavor to estimate its actual damages, and that the late fees imposed bear no reasonable

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United States District Court
Northern District of California

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relation to Zipcar’s actual damages. She also alleges that such fees are unconscionable and

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unfair, because they are included in a contract of adhesion and are unreasonably favorable

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to Zipcar. Invoking these statutes, Bayol seeks a permanent injunction against Zipcar’s

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late fee policy, restitution and damages. Compl. at 14.
Zipcar now moves to dismiss the Complaint for lack of subject matter jurisdiction.

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Def.’s Mot. at 1. In partial response, Bayol filed a motion for leave to amend the

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Complaint on June 16 of this year. Plaintiff’s Mot. at 1. The only change in the proposed

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First Amended Complaint is that Bayol alleges that Zipcar did not comply with her

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demand letter within 30 days, and she is therefore seeking compensatory and punitive

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damages as allowed by statute. Compare Compl. ¶ 46 (“If Zipcar fails to take corrective

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action within 30 days of receipt of the demand letter, Plaintiff will amend her complaint to

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include a request for damages . . . .”), with Proposed FAC ¶ 46 (Docket No. 57-1) (“[A]

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CLRA notice letter was served on Defendant . . . . Wherefore, Plaintiff seeks damages,

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including punitive damages . . . .”).

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LEGAL STANDARD
I.

Leave to Amend
After the time has passed for a party to amend a pleading as a matter of course, the

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party may only amend further after obtaining leave of the court, or by consent of the

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adverse party. Fed. R. Civ. P. 15(a). “The court should freely give leave when justice so

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requires.” Fed. R. Civ. P. 15(a)(2). “[T]his policy is to be applied with extreme

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liberality.” Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001)

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(quotation omitted). “Courts may decline to grant leave to amend only if there is strong

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evidence of ‘undue delay, bad faith or dilatory motive on the part of the movant, repeated
failure to cure deficiencies by amendments previously allowed, undue prejudice to the

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United States District Court
Northern District of California

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opposing party by virtue of allowance of the amendment, [or] futility of amendment, etc.’”

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Sonoma Cnty. Ass’n of Ret. Emps. v. Sonoma Cnty., 708 F.3d 1109, 1117 (9th Cir. 2013)

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(quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).
Of these so-called Foman factors, prejudice is the weightiest and most important.

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See Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). “Absent

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prejudice, or a strong showing of any of the remaining Foman factors, there exists a

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presumption under Rule 15(a) in favor of granting leave to amend.” Id. Evaluation of the

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Foman factors “should be performed with all inferences in favor of granting the motion.”

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Griggs v. Pace Am. Grp., Inc., 170 F.3d 877, 880 (9th Cir. 1999).

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II.

Subject Matter Jurisdiction
“If the court determines at any time that it lacks subject-matter jurisdiction, the

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court must dismiss the action.” Fed. R. Civ. P. 12(h)(3). A party may raise this defense by

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filing a motion under Rule 12(b)(1). A federal court has original jurisdiction over an

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action under the Class Action Fairness Act where the amount in controversy exceeds $5

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million and other requirements are met. 28 U.S.C. § 1332(d)(2). “The sum claimed by the

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plaintiff controls so long as the claim is made in good faith.” Crum v. Circus Circus

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Enter., 231 F.3d 1129, 1131 (9th Cir. 2000). “To justify dismissal, it must appear to a
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legal certainty that the claim is really for less than the jurisdictional amount.” Id. (internal

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quotation and citation omitted).

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DISCUSSION
As explained below, the Court finds that Bayol should be granted leave to amend

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the Complaint, and that, after such leave is granted, Zipcar’s motion to dismiss should be

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denied.

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I.

Bayol’s Motion for Leave to Amend is Granted
The Complaint in this case alleges violations of the CLRA and the UCL. Compl.

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United States District Court
Northern District of California

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¶¶ 40-66. The UCL only allows for injunctive relief and restitution. See Cal. Bus. & Prof.

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Code § 17203. The CLRA, on the other hand, allows for actual damages, injunctive relief,

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restitution, punitive damages, and any other relief the court deems proper. Cal. Civ. Code

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§ 1780(a)(1)-(5). However, in order to obtain damages, a consumer must first demand that

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the defendant correct the allegedly illegal practice. Id. § 1782(a), (b). If a consumer has

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already initiated a lawsuit for injunctive relief before sending such a demand, the consumer

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may amend the complaint to add a request for damages if the defendant does not correct

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the practice within thirty days of the demand. Id. § 1782(d).
Courts must freely give leave to amend when justice so requires. Fed. R. Civ. P.

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15(a)(2). It is an abuse of discretion to deny leave to amend unless the party opposing

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amendment has shown that the Foman factors apply. Eminence Capital, 316 F.3d at 1052.

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The three Foman factors at issue in this case are prejudice, futility, and undue delay.

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Def.’s Opp’n at 4 (Docket No. 64). As discussed below, Zipcar has not shown that any of

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these factors prevent Bayol from amending the Complaint.

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a. Zipcar will not be prejudiced by amendment
Zipcar argues that it will be prejudiced by allowing Bayol to amend the Complaint.

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Prejudice is the “touchstone” of the Rule 15(a) inquiry. Eminence Capital, 316 F.3d at

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1052.

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Prejudice can be shown where a party alleges new theories late in a case,
significantly increases discovery burdens, forces a defendant to re-litigate claims that have

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already been decided in a prior stage, or delays a party’s ability to collect a judgment.

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AmerisourceBergen Corp. v. Dialysist West, Inc., 465 F.3d 946, 953-54 (9th Cir. 2006);

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Jackson v. Bank of Hawaii, 902 F.2d 1385, 1388 (9th Cir. 1990). For example, in Acri v.

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Int’l Ass’n of Machinists & Aerospace Workers, 781 F.2d 1393 (9th Cir. 1986), a case in

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United States District Court
Northern District of California

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which summary judgment was entered against union members who challenged their

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union’s leadership, the Ninth Circuit affirmed the district court’s denial of leave to amend,

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where “Plaintiffs’ attorney admitted that plaintiffs’ delay in bringing the [new] cause of

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action was a tactical choice because he felt that the causes of action already stated were

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sufficient,” and “the district court found that plaintiffs’ motion to amend was brought to

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avoid the possibility of an adverse summary judgment ruling, and that allowing

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amendment would prejudice the Union because of the necessity for further discovery.” Id.

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at 1398-99.

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However, the mere fact that some litigation costs were incurred prior to amendment

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does not show prejudice, where amendment itself does not raise any of the concerns

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addressed above. Owens, 244 F.3d at 712.

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Punitive damages may be awarded where a defendant has “been guilty of

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oppression, fraud, or malice.” Cal. Civ. Code § 3294(a). Malice is defined as “conduct

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which is intended by the defendant to cause injury to the plaintiff or despicable conduct

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which is carried on by the defendant with a willful and conscious disregard of the rights or

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safety of others.” Id. § 3294(c).

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Here, Zipcar argues that it would be prejudiced by amendment in two ways. First,
Zipcar argues that the proposed amendment does not provide it with adequate notice of
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conduct that would support a punitive damages award. Def.’s Opp’n at 4. Second, Zipcar

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argues that amendment is improper because it was designed to avoid an adverse ruling on

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the motion to dismiss. Id. Neither argument succeeds.

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The proposed amendment provides adequate notice to Zipcar of conduct that could

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give rise to punitive damages. Indeed, the original Complaint provides adequate notice;

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the only change here is that Bayol now alleges that she has demanded that Zipcar correct

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its violations as required by statute. See Cal. Bus. & Prof. Code § 1782. Bayol sent her

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demand letter ten days before filing the initial Complaint, but this was less than the thirty

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day period required by the CLRA. See id. The proposed amendment merely reflects the
fact that she is now seeking damages because Zipcar did not stop its allegedly illegal

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United States District Court
Northern District of California

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practice. Compare Compl. ¶ 46 (“If Zipcar fails to take corrective action within 30 days of

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receipt of the demand letter, Plaintiff will amend her complaint to include a request for

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damages . . . .”), with Proposed FAC ¶ 46 (“[A] CLRA notice letter was served on

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Defendant . . . . Wherefore, Plaintiff seeks damages, including punitive damages . . . .”).

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Both in the original Complaint and in the proposed amendment, Bayol alleges that

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Zipcar charged late fees “intentionally, knowingly, and unlawfully . . . .” Compl. ¶ 43;

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Proposed FAC ¶ 43. At this stage in the litigation, these allegations are sufficient to

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support a potential punitive damages award. Given that, but for the thirty-day limitation of

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the statute, Bayol would have alleged a sufficient claim for punitive damages in the

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original Complaint, the Court does not agree that Bayol is simply adding the magic words

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“punitive damages” in order to manufacture jurisdiction. Zipcar therefore had sufficient

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notice of the facts giving rise to a potential punitive damages award, and it would not be

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prejudiced by amendment for that reason.

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Nor will Zipcar be unduly prejudiced from Bayol escaping an adverse decision on

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its motion to dismiss. True, amendment (and denial of Zipcar’s motion to dismiss) will

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allow the litigation to continue, but that alone is not sufficient prejudice. This is not a case

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where Zipcar is trying to enforce a judgment it has won against a plaintiff alleging a new

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theory late in the game, such as in Acri or Jackson. Rather, Zipcar is trying to dismiss
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Bayol’s lawsuit prior to a determination of its merits, and even though it had notice that

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she intended to seek punitive damages.

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The Court recognizes that Bayol has not always been consistent on the question of

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whether she intended to seek amendment. Compare Compl. ¶ 46 (“If Zipcar fails to take

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corrective action within 30 days of receipt of the demand letter, Plaintiff will amend her

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complaint to include a request for damages . . . .”) with Joint Case Management Statement

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at 3 (Docket No. 45) (“Plaintiff does not anticipate filing an amended complaint at this

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time.”). In spite of these inconsistent statements, the Court finds that, based on the

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allegations in the initial Complaint, Zipcar had fair notice of Bayol’s damages theory, and

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it would not be prejudiced by granting her leave to amend at this time.

United States District Court
Northern District of California

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b. Amendment is not futile
The second Foman factor at issue is futility. Futility of amendment can, by itself,

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justify denying leave to amend. Nunes v. Ashcroft, 375 F.3d 805, 808 (9th Cir. 2003).

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However, the party opposing amendment must make a “strong showing” of futility to deny

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amendment on this ground alone. See Eminence Capital, 316 F.3d at 1052.

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Amendment here would not be futile for the same reason that Zipcar has failed to

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show prejudice: the proposed amendment only changes the allegations regarding whether a

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demand letter was sent, and, after that change, the proposed FAC alleges a plausible claim

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for both compensatory and punitive damages, based on Zipcar’s malice. As discussed

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above, malice is adequately alleged in both the original and proposed amended complaints

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because Zipcar is alleged to have “intentionally, knowingly, and unlawfully” charged its

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customers illegal late fees.

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c. Plaintiff’s delay in seeking leave to amend is not fatal
The final Foman factor at issue is whether there was undue delay in Bayol seeking
leave to amend. “‘[U]ndue delay by itself is insufficient to justify denying a motion to

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amend.’” Owens, 244 F.3d at 712-13 (quoting Bowles v. Reade, 198 F.3d 752, 758 (9th

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Cir. 1999)).

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The Ninth Circuit has held that a delay of fifteen – or even just eight – months

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between when a party becomes aware of a fact and when it seeks leave to amend can

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constitute undue delay. AmerisourceBergen, 465 F.3d at 952; see also Texaco, Inc. v.

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Ponsoldt, 939 F.2d 794, 799 (9th Cir. 1991). However, in neither of these cases was undue

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delay the sole justification for denying leave to amend; rather, in those cases, amendment

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would have prejudiced the non-moving party. AmerisourceBergen, 465 F.3d at 953;

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Texaco, 939 F.2d at 799.
Here, Bayol sent her demand letter to Zipcar on May 19, 2014. She filed her initial

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United States District Court
Northern District of California

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Complaint ten days later, on May 29, 2014. Under California Business and Professions

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Code section 1782(d), Bayol could have filed for leave to amend any time after June 28,

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2014 – thirty days after she filed the initial Complaint.
Instead, Bayol filed this motion for leave to amend on June 16, 2015 – almost one

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year after she was able to do so. Not coincidentally, her motion to amend was filed

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simultaneously with her opposition to Zipcar’s motion to dismiss for lack of subject matter

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jurisdiction.
At the hearing, Bayol’s counsel indicated that she fully intended to amend her

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Complaint once she was able to do so, and it was merely an oversight that she did not do

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so earlier.
Although a delay of twelve months would be sufficient to deny leave to amend if

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Zipcar would be prejudiced or if amendment would clearly be futile, neither of these other

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Foman factors are present here. Undue delay by itself is not sufficient to deny leave to

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amend, and so the Court will not deny Bayol leave to amend on this ground.
Bayol’s motion for leave to amend the Complaint is accordingly GRANTED.

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II.

Zipcar’s Motion to Dismiss is Denied
Considering Bayol’s proposed amended Complaint, it is readily apparent that she

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has alleged a sufficient amount in controversy to defeat Zipcar’s motion to dismiss.

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Federal courts have original jurisdiction under CAFA for class actions alleging more than

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$5 million in controversy. 28 U.S.C. § 1332(d)(2). Under the amended Complaint, Bayol

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has met her burden of showing that there is a “legal possibility” that more than $5 million

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is in controversy.

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a. Bayol must show a legal possibility that the class can recover $5 million
The parties here dispute both the standard of proof for a motion to dismiss for lack

United States District Court
Northern District of California

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of subject matter jurisdiction, and who carries the burden. Citing removal cases, Zipcar

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argues that Bayol, as the party invoking federal jurisdiction, must prove by a

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preponderance of the evidence that the jurisdictional elements are met. Def.’s Mot. at 5

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(citing Rodriguez v. AT&T Mobility Servs. LLC, 728 F.3d 975, 978 (9th Cir. 2013); Abrego

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Abrego v. Dow Chem. Co., 443 F.3d 676, 683 (9th Cir. 2006)).

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Bayol argues that the so-called “legal certainty” standard applies, and that Zipcar

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has the burden of showing to a legal certainty that $5 million is not in controversy.

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Plaintiff’s Opp’n at 4 (Docket No. 56).

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It is clear that the “legal certainty” or “legal possibility” test applies here, rather

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than the preponderance of the evidence test. The Ninth Circuit has explained that the

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standard for evaluating jurisdiction in removal cases is stricter than that for cases originally

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filed in federal court. In Geographic Expeditions, Inc. v. Estate of Lhotka, 599 F.3d 1102

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(9th Cir. 2010), a non-CAFA diversity case, the court held that the legal certainty standard

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applied to a petition to compel arbitration originally filed in federal court. Id. at 1107. The

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court explained that the standard for removal cases is stricter because such cases oust state

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courts of their jurisdiction; such concerns are not present when a case is originally filed in

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federal court. Id. at 1106-07. Applying the legal certainty standard, the court found that

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the “good faith allegations” in the plaintiff’s state court complaint placed a sufficient
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amount in controversy, even though the complaint did not allege a specific amount,

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“because it is not legally certain the amount in controversy is $75,000 or less.” Id. at

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1107-08.

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Turning to the question of who carries the burden, “[a]s the proponent of federal

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court jurisdiction, it is well-established that the plaintiff bears the burden of showing that

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there is no legal certainty that he or she cannot recover the applicable jurisdictional

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amount.” 14AA Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure

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§ 3702 (4th ed. 2015). “It is plaintiff’s burden both to allege with sufficient particularity

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the facts creating jurisdiction, in view of the nature of the right asserted, and, if
appropriately challenged . . . to support the allegation.” St. Paul Mercury Indem. Co. v.

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United States District Court
Northern District of California

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Red Cab Co., 303 U.S. 283, 287 n.10 (1938).

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At the same time, where a complaint, in good faith, alleges on its face a sufficient

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amount in controversy, that amount controls unless there is a legal certainty that the stated

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amount cannot be recovered. Id. at 288-89. Applying this principle, courts in the Ninth

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Circuit have stated that the amount in controversy requirement is “presumptively satisfied”

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by a complaint that alleges a sufficient amount on its face, subject to the legal certainty

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test. E.g., Guglielmino v. McKee Foods Corp., 506 F.3d 696, 699 (9th Cir. 2007) (citing

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Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 402 (9th Cir. 1996)); Lowdermilk v.

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U.S. Bank Nat’l Ass’n, 479 F.3d 994, 998 (9th Cir. 2007) (same), overruled on other

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grounds by Standard Fire Ins. Co. v. Knowles, --- U.S. ---, 133 S. Ct. 1345 (2013).

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Not surprisingly, given statements that the amount in a complaint is

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“presumptively” valid, courts occasionally require the party challenging jurisdiction to

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show that there is a legal certainty that a sufficient amount is not in controversy. E.g.,

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Richardson v. Servicemaster Global Holdings, Inc., No. 09-CV-4044 SI, 2009 WL

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4981149, at *3 (N.D. Cal. Dec. 15, 2009) (“In other words, when a plaintiff brings suit in

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federal court alleging that the amount in controversy exceeds the jurisdictional minimum, a

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defendant challenging the federal court’s jurisdiction must establish to a legal certainty that

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plaintiff’s claim does not satisfy the requisite jurisdictional amount.”). In Wilson v.
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Stratosphere Corp., 371 Fed. App’x 810 (9th Cir. 2010), an unpublished memorandum

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disposition, the Ninth Circuit treated the plaintiff’s allegation that more than $5 million

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was in controversy as presumptively true, and held that “[the defendant] has failed to show

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to a legal certainty that the damages could not reach five million dollars.” Id. at 811. And

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in Robichaud v. Speedy PC Software, No. 12-CV-4730 LB, 2013 WL 818503 (N.D. Cal.

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Mar. 5, 2013), the court noted that the plaintiff had facially alleged more than $5 million in

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controversy, and so “[the defendant] must establish to a legal certainty that the amount in

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controversy is less than that amount.” Id. at *7. Judge Beeler found that “[the defendant

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did] not meet its burden,” because it only made hypothetical conjectures about the amount

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United States District Court
Northern District of California

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in controversy which were not “link[ed] . . . to any evidence.” Id.
However, these cases are in tension with the Supreme Court’s statement in St. Paul

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Mercy, albeit in a footnote, that the plaintiff has the burden of supporting a claim for

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federal jurisdiction when challenged. The better interpretation of St. Paul Mercy is to

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credit a plaintiff’s good faith allegation absent a factual challenge, but to require the

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plaintiff to justify it when challenged by a defendant’s evidence. See Kingman Reef Atoll

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Investments, L.L.C. v. United States, 541 F.3d 1189, 1195 (9th Cir. 2008); Trentacosta v.

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Frontier Pac. Aircraft Indus., Inc., 813 F.2d 1553, 1558-59 (9th Cir. 1987); see also Safe

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Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004).

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Accordingly, Bayol has the burden of showing a legal possibility that she and her
proposed class might recover more than $5 million dollars.

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b. There is a legal possibility that the class will recover more than $5 million
Considering the proposed FAC, Bayol has put more than $5 million in controversy.

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As discussed below, assuming even the most conservative estimate of compensatory

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damages, a 1:1 ratio of punitive damages, and a 25% attorneys’ fee, Bayol will have easily

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surpassed CAFA’s $5 million threshold.

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“[T]he jurisdiction of the court depends upon the state of things at the time of the
action brought.” Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 570 (2004).
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Accordingly, the amount in controversy requirement must be satisfied at the time the

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complaint is filed. See Hill v. Blind Indus. & Servs. of Md., 179 F.3d 754, 757 (9th Cir.

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1999).
Under CAFA, “the claims of the individual class members shall be aggregated to

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determine whether the matter in controversy exceeds the sum or value of $5,000,000,

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exclusive of interest and costs.” 28 U.S.C. § 1332(d)(6). This provision abrogated prior

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court decisions, including those of the Ninth Circuit, that only included an individual

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plaintiff’s claims in most circumstances. Yeroushalmi v. Blockbuster, Inc., No. 05-cv-225

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AHM, 2005 WL 2083008, at *3 n.4 (C.D. Cal. July 11, 2005); see also 14AA Charles
Alan Wright & Arthur R. Miller, Federal Practice & Procedure §§ 3704.2, 3705.1 (4th ed.

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United States District Court
Northern District of California

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2015).

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As noted above, Bayol must show that there is not a legal certainty that the class

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will not recover more than $5 million. A court will find a legal certainty that a plaintiff

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cannot recover a sufficient amount where the law clearly precludes a plaintiff’s claims.

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See Kelly v. Fleetwood Enter., Inc., 377 F.3d 1034, 1039 (9th Cir. 2004). For example, in

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Kelly, the plaintiffs sought $250,000 in compensatory and $10 million in punitive damages

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for a Magnuson-Moss Warranty Act claim regarding a leaky motor home. Id. at 1036. In

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spite of the plaintiffs’ allegations, the court found that there was an insufficient amount in

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controversy, because the statute did not provide for compensatory damages for personal

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injuries and neither the statute nor case law allowed for punitive damages. Id. at 1038-39.

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However, a plaintiff has a legal possibility of recovery where an affirmative defense

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that would limit recovery might not actually apply. Geographic Expeditions, 599 F.3d at

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1108. “This rule makes sense; just because a defendant might have a valid defense that

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will reduce recovery to below the jurisdictional amount does not mean the defendant will

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ultimately prevail on that defense.” Id. Under this rule, even if a potential defense, such

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as the statute of limitations, would apply to cut off a portion of the plaintiffs’ recovery, the

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court will not apply that defense unless it is shown to a legal certainty that it applies. See

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Hernandez v. Towne Park, Ltd., 2012 WL 2373372, at *10 (C.D. Cal. June 22, 2012).
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Here, Bayol pled that “the claims of the proposed Class members exceed the sum or

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value of five million dollars ($5,000,000) in aggregate.” Compl. ¶ 12. However, Zipcar

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has challenged this claim with evidence; as discussed in the previous section, Bayol must

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therefore show that there is a legal possibility that she and the class will recover a

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sufficient amount. The amount in controversy can include compensatory damages,

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punitive damages, attorneys’ fees, and the value of injunctive relief. See, e.g.,

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Guglielmino, 506 F.3d at 700; Gibson v. Chrysler Corp., 261 F.3d 927, 945 (9th Cir.

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2001). The values of each of these amounts are discussed in turn, below.

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i. Compensatory damages

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United States District Court
Northern District of California

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Although a class has not yet been certified, Bayol has proposed a class defined as

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“All California residents who subscribed to and/or are subscribing to Zipcar’s car rental

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services pursuant to the Membership Agreement, or any successor agreement thereto, and

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who paid one or more Late Fees imposed by Defendant pursuant to the Membership

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Agreement.” Compl. ¶ 27.
Zipcar submitted testimony that, between May 30, 2010 and May 29, 2014, Zipcar

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collected $2,852,495 in late fees from non-corporate California Zipcar members.

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Sophastienphong Decl. ¶¶ 3-4.1
At the hearing, Bayol conceded that, under the proposed class definition, class

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members would only be entitled to fees collected from California residents, abandoning

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her argument that the class would also be entitled to fees collected from non-residents

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driving Zipcars in California.
Bayol argues that the statute of limitations should not be considered in evaluating

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the amount in controversy. As noted above, whether or not a court will apply an

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affirmative defense at this stage turns on whether it is certain that the defense applies.

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Here, it is not certain that the statute of limitations would apply. At the hearing, Bayol did

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Zipcar collected $3,049,325 in late fees to California members, but $196,830 of that
amount was collected from corporate customers. Sophastienphong Decl. ¶¶ 3-4.
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not concede that the statute of limitations applies, and the Court did not hear any further

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argument about the merits of the defense; indeed, any such argument would be premature

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at this stage. Under the legal certainty test, the possibility that class members might be

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able to avoid the statute of limitations is enough to preclude cutting off their recovery here.

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However, in this case, apparently due to discovery disputes, there is no evidence regarding

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the amount of late fees that were charged to customers before May 30, 2010.
Bayol also argues that the amount of compensatory damages should include all

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amounts billed to California residents, rather than just the amounts collected from them.

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Plaintiff’s Opp’n at 9.
[REDACTED]2

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United States District Court
Northern District of California

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However, Bayol’s Complaint requests damages for amounts “paid,” not amounts “billed.”

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Compl. ¶¶ 6, 27. The amount that was collected and not refunded is a better estimate of

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the amount paid than is the amount that was simply billed.
In her opposition and at the hearing, Bayol argues that the case of Lara v. Trimac

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Transp. Servs. (W.) Inc., 2010 WL 3119366 (C.D. Cal. Aug. 6, 2010), supports her

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argument that the Court should include all of the amounts billed. Plaintiff’s Opp’n at 6-8.

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In Lara, a removed case about trucking employees’ fuel reimbursements in which the

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plaintiff was seeking remand, the court did not reduce the amount in controversy by

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reimbursements already paid, because “the Parties clearly dispute the propriety of any such

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offset,” and “affirmative defenses, counterclaims, and potential offsets may not be invoked

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to demonstrate the amount-in-controversy is actually less than the jurisdictional

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minimum.” 2010 WL 3119366, at *3. At first blush, this language seems to support

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Bayol’s argument. However, the court in that case noted that it was “initially inclined to

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agree with Plaintiff that a reasonable estimate of the amount in controversy must

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necessarily take into account Plaintiff’s Fuel Earnings, [but that] Plaintiff seeks to have it

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[REDACTED]
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both ways and in the process introduces ambiguity into otherwise clear jurisdictional

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allegations.” Id. at *2. Specifically, the plaintiff in that case “represented to [the court]

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that he will seek the full amount of Fuel Deductions, without any offset, if Defendant does

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not argue for any offset.” Id. Because the plaintiff himself had put the validity of the

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offsets in dispute, he could not claim that they should reduce the amount in controversy for

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his remand motion. Id. at *3. Even so, the court noted that “a reasonable estimate of the

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amount in controversy would likely have to take cognizance of any offset readily apparent

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from the face of the relevant records . . . .” Id.

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[REDACTED]

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[REDACTED]

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United States District Court
Northern District of California

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[REDACTED]

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[REDACTED]

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[REDACTED]
Finally, Bayol argues that some of the refunded amounts were likely billed before

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the Complaint was filed, but refunded after, and any such offsets cannot be counted

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because they depend on events that occurred after the Complaint was filed. Plaintiff’s

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Opp’n at 9-10. As an initial matter, Plaintiff has not actually submitted any evidence that

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this happened.

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[REDACTED]

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[REDACTED]

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[REDACTED]

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the amount of any refunds that occurred after the Complaint was filed is certain to be

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marginal when compared to the four-year period for which Zipcar provided data.
Accordingly, $2,852,495 is a reasonable estimate of the class members’

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compensatory damages in light of the evidence presented to the Court.

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///

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ii. Punitive damages
“Where both actual and punitive damages are recoverable under a complaint each

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must be considered to the extent claimed in determining jurisdictional amount.” Bell v.

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Preferred Life Assur. Soc., 320 U.S. 238, 240 (1943); Gibson, 261 F.3d at 945. As

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discussed above, the CLRA allows plaintiffs to recover punitive damages. Cal. Civ. Code

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§ 1780(a)(4). As was also discussed above, Bayol plausibly seeks punitive damages in her

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proposed amended Complaint. Proposed FAC ¶ 46.

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Although there is no statutory limit on the amount of punitive damages that are
recoverable in this case, the Supreme Court has stated that, “in practice, few awards
exceeding a single-digit ratio between punitive and compensatory damages, to a significant

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United States District Court
Northern District of California

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degree, will satisfy due process.” State Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S.

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408, 425 (2003). A ratio of 1:1 between punitive and economic damages has been

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described as “conservative” for purposes of calculating the amount in controversy.

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Guglielmino, 506 F.3d 696, 698, 701.

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Zipcar argues that, even if punitive damages are included, their value must be

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assessed only as related to a single plaintiff, and not to the class as a whole. Def.’s Reply

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at 12 (Docket No. 63) (citing Gibson, 261 F.3d at 947). However, Gibson was decided in

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2001, prior to CAFA’s enactment in 2005. As noted above, CAFA changed the amount in

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controversy calculation by broadly allowing the aggregation of plaintiffs’ claims. “Thus,

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when CAFA applies, . . . the total amount of the claimed punitive damages are to be

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applied to the statute’s $5 million jurisdictional amount requirement.” 14AA Charles Alan

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Wright & Arthur R. Miller, Federal Practice & Procedure § 3704.2 (4th ed.).

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Here, Bayol’s punitive damages claim easily puts the amount in controversy over

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$5 million. Using a conservative 1:1 ratio for punitive to compensatory damages, and

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using Zipcar’s estimate of late fees collected from California residents as a conservative

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estimate of compensatory damages, Bayol’s claim for punitive damages doubles the

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amount in controversy, putting it above the CAFA threshold.

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iii. Attorneys’ fees

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The amount in controversy includes attorneys’ fees if they are permitted by law.

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Galt G/S v. JSS Scandinavia, 142 F.3d 1150, 1156 (9th Cir. 1998). When reviewing

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attorneys’ fees in the class action context, the Ninth Circuit has held that the “benchmark”

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for a reasonable fee is 25% of the class award’s common fund. Hanlon v. Chrysler Corp.,

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150 F.3d 1011, 1029 (9th Cir. 1998). Courts in this district have relied on the benchmark

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amount as an estimate for the amount in controversy analysis, at least in the removal

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context. E.g., Giannini v. Nw. Mut. Life Ins. Co., No. 12-cv-77 CW, 2012 WL 1535196, at

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*4 (N.D. Cal. Apr. 30, 2012); Jasso v. Money Mart Exp., Inc., No. 11-cv-5500 YGR, 2012

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WL 699465, at *7 (N.D. Cal. Mar. 1, 2012).

United States District Court
Northern District of California

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In spite of this benchmark amount, Bayol argues that an attorneys’ fee estimate of

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30% should be used here, because in order to show federal jurisdiction, she only needs to

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show a legal possibility of obtaining this amount, and this amount has been awarded in

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other cases. Plaintiff’s Opp’n at 15 (citing In re Rite Aid Corp. Sec. Litig., 396 F.3d 294,

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298 (3d. Cir. 2005)). Plaintiff argues, correctly, that the cases in this district cited above

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which used the 25% amount were in the removal context, which has a more demanding

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standard of review than the legal certainty test that is used when a case is initially filed in

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federal court.
The Court does not now decide whether an attorneys’ fee estimate greater than 25%

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may be appropriate when evaluating the amount in controversy for cases initially filed in

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federal court. In this case, Bayol has alleged a sufficient amount in controversy based on

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the combination of compensatory and punitive damages. Even using the benchmark

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estimate of 25% of the damages recovery, Bayol has placed an additional $1,426,247.50 in

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controversy,3 so the amount in controversy rises to at least $7,131,237.50.

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///

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///

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The total damages estimate is $5,704,990, and 25% of $5,704,990 is 1,426,247.50.
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iv. Injunctive relief
Finally, the amount in controversy includes the value of injunctive relief. In re

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Ford Motor Co./Citibank (S.D.), N.A., 264 F.3d 952, 958 (9th Cir. 2001). Where CAFA

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applies, this amount can be determined from either the plaintiff class’s or the defendant’s

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“viewpoint.” Tompkins v. Basic Research LLC, No 08-cv-244 LHK, 2008 WL 1808316,

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at *4 (E.D. Cal. Apr. 22, 2008). As discussed above, CAFA abrogated Ninth Circuit

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precedent, and allowed courts to aggregate the value of plaintiffs’ claims. CAFA’s

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aggregation rule applies to the value of injunctive relief. Id. Thus, a defendant’s aggregate

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cost of compliance with an injunction is appropriately counted toward the amount in

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United States District Court
Northern District of California

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controversy.
Here, Bayol’s Complaint seeks a “permanent injunction enjoining Zipcar . . . from

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in any way engaging in the unfair and unlawful practices and violations of law set forth

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herein.” Compl. at 14. Broadly construed, such an injunction could preclude Zipcar from

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collecting any late fees whatsoever.

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[REDACTED]

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Zipcar’s cost of compliance with an injunction can therefore be estimated at $1 million

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annually.

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At the hearing, Zipcar argued that it would cost it virtually nothing to comply with

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such an injunction, because it could switch off its process of billing late fees within

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minutes of the entry of an injunction. The Court is not persuaded that this means that its

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cost of compliance would be zero. If Zipcar stopped collecting late fees, then its income

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would be reduced by a corresponding amount, whereas its operating costs would remain

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roughly equal (not considering any secondary effects that stopping the collection of late

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fees would have on Zipcar members’ use of the cars). Such lost income is properly

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included as the cost of compliance.

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It is not possible to estimate Zipcar’s future cost of compliance with an as-yet-

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unknown injunction with any real certainty. Nor is it necessary to do so, since a sufficient

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amount in controversy has already been alleged in the factors described above. Even so,
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the fact that [REDACTED]

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under a possible injunction in this case is further evidence that Bayol has placed a

3

sufficient amount in controversy to exceed the CAFA threshold.

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v. Total amount in controversy

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Adding the amounts set forth above, Bayol has put the following amounts in

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controversy: $2,852,495 (compensatory damages); $2,852,495 (punitive damages);

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$1,426,247.50 (attorneys’ fees); and roughly $1 million per year (cost of compliance with

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an injunction). The total amount in controversy is therefore $7,131,237.50, with
approximately $1 million per year in compliance costs. This is significantly greater than

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United States District Court
Northern District of California

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CAFA’s $5 million threshold.

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CONCLUSION
Because of the strong presumption in favor of amendment and the absence of

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reasons not to amend here, Bayol’s motion for leave to amend the Complaint is

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GRANTED. Bayol shall file her amended Complaint within two weeks of entry of this

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order. Considering the amended Complaint, Bayol has alleged more than $7 million

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dollars in controversy, which is well above the requirement for original jurisdiction under

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CAFA. Zipcar’s motion to dismiss for lack of subject matter jurisdiction is therefore

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DENIED.

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///

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///

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///

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///

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///

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///
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Finally, the Court is concerned with the slow pace of litigation in this case. All

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additional motions in this case shall comply with the schedules set forth in the Civil Local

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Rules of the Northern District of California. Requests for extended briefing schedules will

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be denied absent compelling reasons.

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IT IS SO ORDERED.

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Dated: 08/17/15

_____________________________________
THELTON E. HENDERSON
United States District Judge

United States District Court
Northern District of California

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