Rosbacka v. John Johnson's Cars et al

Filing 32

ORDER Remanding Case to State Court for Lack of Subject Matter Jurisdiction. Signed by Judge Gonzalo P. Curiel on 12/5/16.(Certified copy sent to State Court. dlg)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

SOUTHERN DISTRICT OF CALIFORNIA

10
11

JACOB ROSBACKA,

Case No.: 3:16-cv-1086-GPC-WVG
Plaintiff,

12
13

v.

14

ORDER REMANDING CASE FOR
LACK OF SUBJECT MATTER
JURISDICTION

JOHN JOHNSON’S CARS a company of
unknown form; FUENTES AUTO SALES,
INC. a corporation dba OLYMPIC AUTO
SALES; FRANK FUENTES, an
individual; THE GUARANTEE
COMPANY OF NORTH AMERICA
USA, a corporation; NAVY FEDERAL
CREDIT UNION, a federally chartered
credit union,

15
16
17
18
19
20

Defendants.

21
22
23

Before the Court is Defendant Navy Federal Credit Union’s (“NFCU”) motion to

24

dismiss Plaintiff Jacob Rosbacka’s first amended complaint (“FAC”). ECF No. 8. The

25

motion is fully briefed. ECF Nos. 15 & 16. On September 7, 2016, the Court issued an

26

order to show cause why the case should not be remanded for lack of subject matter

27

jurisdiction under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d). ECF

28

No. 24. Defendant filed a response to the Court’s order to show cause on September 23,
1
3:16-cv-1086-GPC-WVG

1

2016. ECF No. 28. Plaintiff Rosbacka filed an opposition reply on October 4, 2016.

2

ECF No. 29. Upon consideration of the moving papers and the applicable law, and for the

3

reasons set forth below, the Court REMANDS the case back to the Superior Court of

4

California, County of San Diego.

5

BACKGROUND

6

The instant case arises from the purchase of a car with the proceeds of a loan

7

obtained from NFCU. FAC ¶ 1, ECF No. 1-2 at 94. After Rosbacka, an individual on

8

active duty in the United States Navy, bought a car from John Johnson’s Cars, a used-

9

vehicle dealership, he learned that the dealership did not own the vehicle he had

10

purchased. FAC ¶ 48. Accordingly, Plaintiff never became the title owner of the car. See

11

id. Because Plaintiff was not the title owner of the vehicle and could not provide NFCU

12

with a security interest in the car, NFCU raised the interest rate on Plaintiff’s auto loan in

13

accordance with the terms of his loan agreement. See FAC ¶¶ 52-58. This suit followed.

14

On February 26, 2016, Plaintiff Rosbacka filed suit in the Superior Court of

15

California, County of San Diego. Pl.’s Class Action Compl., ECF No. 1-2 at 4. Rosbacka

16

filed a first amended complaint on April 7, 2016. FAC, ECF No. 1-2 at 92. The named

17

defendants in the FAC are NFCU, a federally-charted credit union, John Johnson’s Cars, a

18

company of unknown form, Aegis Security Insurance Company, a corporation, Fuentes

19

Auto Sales, a corporation, Frank Fuentes, an individual, and DOES 1 through 75. Id. The

20

FAC asserts a variety of statutory and California state causes of action against NFCU and

21

the other defendants on behalf of Plaintiff as an individual.1 Id. The FAC also asserts two

22

class action claims against NFCU only. Id.

23
24
25
26
27
28

1

The individual claims asserted in the FAC were as follows: 1) violation of the California Unfair
Competition Law by NFCU; 2) violation of the California Rosenthal Fair Debt Collections Practices Act
by NFCU; 3) violation of the California Consumer Legal Remedies Act by NFCU; 4) violation of the
UCL by John Johnson’s Cars, Olympic Auto Sales, and Frank Fuentes; 5) fraud and deceit against John
Johnson’s Cars, Olympic Auto Sales, and Frank Fuentes; 6) negligent misrepresentation against John
Johnson’s cars, Olympic Auto Sales, and Frank Fuentes; 7) breach of warranty against John Johnson’s
2
3:16-cv-1086-GPC-WVG

1

The class actions claims arise under California’s Unfair Competition Law (“UCL”),

2

Cal. Bus. & Prof. Code § 17200, et seq., and the California Rosenthal Debt Collection

3

Practices Act (“Rosenthal Act”), Cal. Civ. Code § 1788, et seq. FAC ¶ 24, ECF No. 1-2 at

4

98. Plaintiff describes the two classes identically, with the exception of the class period.

5

The Rosenthal Class includes all individuals:

6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

(1) who entered into a car loan agreement with NFCU at any point during the
one year prior to the filing of the action (i.e., February 26, 2015); (2) whose
agreements gave NFCU a security interest in, or lien on, the vehicle the
individual purchased with the proceeds of the loans; (3) whose agreements
contained the Preservation of Claims Clause; (4) who purchased motor
vehicles from dealerships in the State of California using the proceeds from
the loan agreements; (5) who did not record NFCU’s security interest in or
lien on the purchased vehicle with the DMV or on the title for the vehicle; (6)
who received notice from NFCU that the APR on the loans would be raised
because NFCU’s security interest in or lien on the vehicles was not recorded
with the DMV or on the certificates of title.
Id. The UCL Class includes all individuals:
(1) who entered into a car loan agreement with NFCU at any point during the
four years prior to the filing of the action (i.e., February 26, 2012); (2) whose
agreements gave NFCU a security interest in, or lien on, the vehicle the
individual purchased with the proceeds of the loans; (3) whose agreements
contained the Preservation of Claims Clause; (4) who purchased motor
vehicles from dealerships in the State of California using the proceeds from
the loan agreements; (5) who did not record NFCU’s security interest in or
lien on the purchased vehicle with the DMV or on the title for the vehicle; (6)
who received notice from NFCU that the APR on the loans would be raised
because NFCU’s security interest in or lien on the vehicles was not recorded
with the DMV or on the certificates of title.

23

Id. With respect to damages, the FAC states that Plaintiff seeks for the class “equitable

24

relief, including, injunctive, restitutionary, and other equitable monetary relief, and

25
26
27
28

Cars; and 8) violation of California Vehicle Code § 11711 against Aegis Security Insurance Co. and the
Guarantee Company of North America USA.
3
3:16-cv-1086-GPC-WVG

1

statutory damages . . . .” Id. ¶ 25, ECF No. 1-2 at 99. More specifically, Plaintiff states

2

that with respect to violations of the Rosenthal Act, it seeks for himself and the class:

3

1) Actual damages under Civil Code § 1788.30(a) and 15 U.S.C.
§ 1692k(a)(1)2 (“any actual damage sustained by such person as a result of
such failure to comply”);
2) Statutory damages under Civil Code § 1788.30(b) and 15 U.S.C.
§ 1692k(a)(2)(B) (“not to exceed the lesser or $500,000 or 1 per centum
of the net worth of the debt collector”); and
3) Reasonable attorneys’ fees and costs under Civil Code § 1788.30(c) and
15 U.S.C. § 1629k(a)(3).

4
5
6
7
8
9
10

Id. ¶ 80. With respect to violations of the UCL, Plaintiff seeks for himself and for the
class an order:

16

1) enjoining Navy Federal from engaging in the acts, methods, and/or
practices as set forth in the FAC, and for payment of restitution;
2) requiring Defendants to immediately cease such acts of unfair competition
and enjoining Defendants from continuing to conduct business via the
unlawful and/or unfair business acts and practices; and
3) requiring Defendants to provide complete equitable monetary relief . . .
including requiring the payment of restitution of any monies as may be
necessary to restore any money or property which may have been
acquired by means of such acts of unfair competition.

17

Id. ¶¶ 65, 69. In his prayer for relief, Plaintiff does not seek a specific amount in damages.

18

See id., ECF No. 1-2 at 124. Rather, he states generally that he is seeking declaratory,

19

equitable, and injunctive relief under the Rosenthal Act and the UCL; general, special,

20

actual, incidental and consequential damages according to proof at trial; pre-judgment

21

interest; attorneys’ fees; and restitution and rescission of Plaintiff’s purchase contract. Id.

11
12
13
14
15

22

On May 4, 2016, Defendant NFCU removed this case from the Superior Court of

23

the State of California, County of San Diego. ECF No. 1. In its notice of removal, Navy

24
25
26
27
28

2

The Rosenthal Act provides that consumer debt collectors are subject to the same remedies available
under 15 U.S.C. § 1692k of the federal Fair Debt Collection Practices Act. Gonzales v. Arrow Fin.
Servs., LLC, 660 F.3d 1055, 1065 (9th Cir. 2011).
4
3:16-cv-1086-GPC-WVG

1

Federal alleges that federal jurisdiction is proper under the Class Action Fairness Act, 28

2

U.S.C. § 1332(d). Def.’s Notice of Removal (“DNR”) ¶¶ 25-26, ECF No. 1 at 6.

3
4

CAFA JURISDICTION
The Class Action Fairness Act vests district courts with original jurisdiction over

5

class actions involving (1) an amount in controversy that “exceeds the sum or value of

6

$5,000,000, exclusive of interests and costs”; (2) “100 or more persons”; and (3) parties

7

that are minimally diverse. 28 U.S.C. § 1332(d); see also Dart Cherokee Basin Operating

8

Co., LLC v. Owens, 135 S. Ct. 547, 552 (2014). CAFA requires that the proponent of

9

federal jurisdiction carry the burden of establishing removal jurisdiction. Abrego Abrego

10

v. Dow Chem. Co., 443 F.3d 676, 685 (9th Cir. 2006). NFCU’s notice of removal alleges

11

that it has met all three of CAFA’s requirements. See DNR ¶¶ 25-46, ECF No. 1 at 6-9.

12

Generally, a defendant’s notice of removal need only include a “plausible allegation

13

that the amount in controversy exceeds the jurisdictional threshold.” See Dart Cherokee,

14

135 S. Ct at 554. However, in the event that a plaintiff or the court questions the

15

defendant’s allegation, 28 U.S.C. § 1446(c)(2)(B) requires the defendant to establish the

16

amount in controversy by a preponderance of the evidence. Id. In determining the

17

amount in controversy, the court will first look to the complaint. Ibarra v. Manheim Invs.,

18

Inc., 775 F.3d 1193, 1197 (9th Cir. 2015). When jurisdiction is contested, the parties may

19

also submit evidence outside the complaint, “including affidavits or declarations, or other

20

‘summary-judgment-type evidence relevant to the amount in controversy at the time of

21

removal.’” Id. (quoting Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th

22

Cir. 1997)). A defendant “cannot establish removal jurisdiction by mere speculation and

23

conjecture” or with “unreasonable assumptions.” Id. Evidence must be submitted related

24

to the amount in controversy using reasonable assumptions underlying the theory of

25

damages exposure. Id. at 1199. Put differently, district courts must evaluate CAFA

26

jurisdiction based on “the reality of what is at stake in the litigation.” Id. at 1198.

27

Here, because the Court questioned whether or not Defendant had adequately

28

alleged CAFA’s minimal jurisdictional amount of $5,000,000, it raised the issue sua
5
3:16-cv-1086-GPC-WVG

1

sponte in an order to show cause. See Fed. R. Civ. P. 12(h)(3) (“Whenever it appears by

2

suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter,

3

the court shall dismiss the action.” ); see also Snell v. Cleveland, Inc., 316 F.3d 822, 826

4

(9th Cir. 2002).

5
6
7

AMOUNT IN CONTROVERSY
1. Class-wide rescission
Defendant’s amount-in-controversy calculation is predicated upon the assertion that

8

Plaintiff seeks class-wide rescission of the auto-loan contracts entered into by Defendant

9

and class members. See Def.’s Resp. to Sept. 7, 2016 Order to Show Cause (“Def.’s

10

Resp.”), ECF No. 28 at 8; see also DNR ¶ 36, ECF No. 1 at 8. Defendant argues that

11

Plaintiff has “expressly put rescission of the subject loans on the table and into

12

controversy” because Plaintiff stated, in its class action complaint, that “[w]hether Class

13

Members are entitled to rescission” was a common question of law or fact among the class

14

members. Def.’s Resp., ECF No. 28 at 8. As such, Defendant alleges that the amount in

15

controversy is $1,170,749,582.08, as that number represents the value of the class loans

16

subject to rescission. Id.

17

The Court disagrees with Defendant’s conclusion that the complaint expressly puts

18

class-wide rescission in controversy. In reaching that assumption, Defendant ignores the

19

other factual allegations in the complaint, none of which seek class-wide rescission. For

20

example, class-wide rescission is not one of the specific allegations of damages listed in

21

Plaintiff’s cause of action under either the Rosenthal Act or the UCL. Plaintiff also does

22

not name class-wide rescission as a remedy for the class in his prayer for relief. This is

23

notable because Plaintiff expressly states in his prayer for relief that he is seeking

24

rescission of his auto loan contract under the individual causes of action he asserts, but

25

does not state that he is seeking rescission for the class. Given this blatant inconsistency

26

between the commonality questions required for class certification and Plaintiff’s specific

27

damages allegations, the Court cannot conclude that the former citation that Defendant

28

relies upon is an accurate and reasonable representation of Plaintiff’s theory of relief. See
6
3:16-cv-1086-GPC-WVG

1

Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 809 n.7 (“Jurisdiction may not be

2

sustained on a theory that the plaintiff has not advanced.”); see also Ibarra, 775 F.3d at

3

1197 (“a defendant cannot establish removal jurisdiction by mere speculation and

4

conjecture, with unreasonable assumptions.”).

5

Indeed, Plaintiff’s opposition to Defendant’s brief makes clear that he is, in fact, not

6

seeking class-wide rescission. Pl.’s Opp. to Def.’s Resp. (“Pl.’s Opp.”), ECF No. 29 at 7

7

(“Contrary to what NFCU claims, there is no prayer for class-wide rescission.”).

8

Plaintiff notes that the reference to class-wide rescission included in the commonality

9

section was an error and that NFCU’s reliance on it was “mistaken.” Id. Because

10

plaintiffs are the master of their complaints and because they can plead to avoid removal

11

jurisdiction, Plaintiff’s stipulation that he is not seeking class-wide rescission gives the

12

Court further justification in concluding that class-wide rescission is not in controversy.

13

See Tanoh v. Dow Chemical Co., 561 F.3d 945, 953 (9th Cir. 2009) (observing the “well-

14

established rule” that plaintiffs are “masters of their complaint [ and] may choose their

15

forum by selecting state over federal court”). Accordingly, the Court rejects Defendant’s

16

contention that there is over $1 billion in controversy based upon Plaintiff’s request for

17

class-wide rescission.

18

2. Amount in controversy under the UCL

19

Defendant further argues that the amount in controversy available under the UCL

20

independently satisfies CAFA’s jurisdictional minimum of $5 million. Def.’s Resp. at 5-

21

6, ECF No. 28 at 9-10. The Court disagrees. For the reasons set forth below, Defendant

22

has only shown, by a preponderance of the evidence, that the amount in controversy under

23

the UCL is — at most — $2,723,952.34.

24

a. Value of refund of loan payments vs. value of increased interest rate charges

25

To support its contention that the amount in controversy available under the UCL

26

meets the CAFA jurisdictional minimum, Defendant begins by arguing that: “[t]o the

27

extent Plaintiff seeks an order: (1) requiring Navy Federal to refund any payments it has

28

received under the subject loans; and (2) enjoining Navy Federal from collecting on those
7
3:16-cv-1086-GPC-WVG

1

loans in the future, the amount in controversy plainly would exceed $5 million.” Id. The

2

Court, however, rejects Defendant’s assumption that Plaintiff seeks a “refund [of] any

3

payments it has received under the subject loans” and seeks to enjoin “Navy Federal from

4

collecting on those loans in the future.” See id.

5

In the FAC, Plaintiff makes clear that he seeks, on behalf of the class, an order

6

requiring Defendants to stop engaging in “acts of unfair competition” and to provide

7

“restitution” or “equitable monetary relief . . . to restore any money or property which may

8

have been acquired by means of such acts of unfair competition.” FAC ¶¶ 68-69. The

9

unfair conduct identified by Plaintiff is NFCU’s practice of “[r]aising or threatening to

10

raise the APR where the seller [of the vehicle] failed to deliver proper title” and “falsely

11

representing that it had the right to increase the APR on the loans.” FAC ¶ 63. Because

12

the unfair conduct that Plaintiff complains of concerns Defendant’s practice of raising the

13

APR on unsecured auto loans, it is not reasonable for Defendant to argue that Plaintiff

14

seeks a class-wide refund of payments collected under the subject loans or to enjoin

15

NFCU from collecting on those loans in the future. See Ibarra, 775 F.3d at 1197.

16

Accordingly, the Court accepts Defendant’s argument only insofar as it avers that

17

“requiring Navy Federal to refund any increased interest charges it has received under

18

loans that Navy Federal converted to a higher APR [and] . . . enjoining Navy Federal from

19

collecting those increased interest charges going forward,” places the value of the

20

“additional interest that Navy Federal collected or stands to collect under the higher APR”

21

into controversy. Def.’s Resp. at 6, ECF No. 28 at 10; Pendergast Decl. ¶¶ 5-6, ECF No.

22

28-1 at 3.

23

To carry its evidentiary burden as to this assertion, Defendant has provided the

24

Court with the declaration of the Assistant Vice President of Consumer Lending for

25

NFCU in order to establish the additional interest in controversy. Pendergast Decl., ECF

26

No. 28-1 at 3. That declaration states that between February 26, 2012 and February 26,

27

2016 (i.e., the UCL class period), NFCU converted the APR on approximately 10,724

28

loans and that the additional interest levied on those loans amounts to $3,227,150.84. Id.
8
3:16-cv-1086-GPC-WVG

1

at ¶ 5. It also states that between February 26, 2012 and March 31, 2015, NFCU

2

converted the APR on 8,259 loans and, thus, stands to collect $2,723,952.34 in higher

3

interest rates on those instruments. Id. at ¶ 6. The difference between the two figures, the

4

Assistant Vice President explains, is that the latter includes only loans that contained the

5

“Preservation of Claims Clause,” whereas the former tracks the class period and includes

6

some loans without the clause. See id. at ¶ 2 (explaining that NFCU ceased using a

7

lending agreement with a “Preservation of Claims Clause” by the end of March 2015).

8

Because eligibility in the class is predicated on the inclusion of the “Preservation of

9

Claims Clause” in an individual’s auto loan, the Court finds that only the latter number,

10
11

$2,723,952.34, correctly speaks to the amount in controversy.
But as Plaintiff points out, this $2,723,952.34 figure is likely much smaller than

12

Defendant suggests because the number fails to account for another requirement of class

13

membership: namely, that the individual purchased his or her car from a California

14

dealership. Pl.’s Opp. at 10, ECF No. 29 at 13. Defendant’s additional interest

15

calculations, Plaintiff argues, are based on the number of California residents who

16

received a letter form NFCU indicating that their APR would be raised if they did not

17

record NFCU’s security interest on their vehicle. See id. However, whether or not NFCU

18

sent the letter to a person residing in California says nothing about whether that person

19

bought their vehicle from a California dealership, as opposed to a non-California

20

dealership or a private party transaction. Id.

21

The Court agrees with Plaintiff. Because Defendant has failed to produce any

22

evidence or make any reasonable assumption regarding how many of the 8,259 loans were

23

used to buy cars from California dealerships, the $2,723,952.34 figure that Defendant has

24

proffered is an inflated estimate of the additional interest in controversy. The Court,

25

however, need not dwell on this point because Defendant has not shown, for the reasons

26

set forth below, that the amount in controversy exceeds $5 million even if the Court

27

assumes, arguendo, that $2,723,952.34 accurately represents the amount of additional

28

interest in controversy.
9
3:16-cv-1086-GPC-WVG

1

b. Value of injunctive relief

2

In order to get to the $5 million jurisdictional minimum from $2,723,952.34,

3

Defendant adds the cost of an injunction into the amount-in-controversy calculation. See

4

Def.’s Resp. at 6, ECF No. 28 at 10. Defendant argues that NFCU “stands to lose

5

significant amounts” if it is enjoined from increasing interest rates in the future. Def.’s

6

Resp. at 6, ECF No. 28 at 10. It also argues that “[i]t is reasonable to presume that an

7

injunction will cost Navy Federal at least as much or more in the future, thus further

8

demonstrating that the cost to Navy Federal from an injunction of the type Plaintiff

9

appears to be seeking is greater than $5 million.” Id. The Court, however, is not

10

persuaded by Defendant’s argument

11

For one, Defendant cites to no relevant legal authority in support of its assertion that

12

that the cost of complying with prospective injunctive relief belongs in the amount in

13

controversy.3 This omission troubles the Court because it seems incongruous to include

14

the future cost of conforming its behavior to the law in the amount-in-controversy

15

calculation. Indeed, the Ninth Circuit has observed that it is inappropriate to include the

16

cost of complying with an injunction in the amount in controversy, when injunctive relief

17

is not the primary relief sought, because otherwise “every incidental request for injunctive

18
19
20
21
22
23
24
25
26
27
28

3

Both authorities that Defendant cites are not on point because they concern injunctive relief that sought
to prevent the defendant from collecting an amount already owed rather than a hypothetical amount that
would be owed in the future. For example, in Mora v. Harley-Davidson Credit Corp.,), the court found
that the amount in controversy should include $20 million in already-owed deficiencies because that
money was the object of plaintiff’s suit and because the defendant stood to lose the right to collect on
those deficiencies if plaintiff succeeded. 2009 WL 464465, at *5 (E.D. Cal. Feb. 24, 2009) (“Plaintiff
claims [defendant] has no legal right to attempt to collect any claimed deficiency from him and a
purported class of similarly situated” individuals). Similarly, in Rosas v. Carnegie Mortgage, LLC, the
court held that an injunction that sought to prevent the defendant from foreclosing on properties worth
more than $5 million put $5 million in controversy because that was what the defendant stood to lose.
2012 WL 1865480, *5 (C.D. Cal. May 21, 2012). By contrast, here, Defendant is asking the Court to
include what it stands to lose in the future if it is no longer permitted to raise APR rates, not what it
stands to lose now.

10
3:16-cv-1086-GPC-WVG

1

relief would satisfy the amount-in-controversy requirement.” See Kanter v. Warner-

2

Lambert Co., 265 F.3d 853, 860-61 (9th Cir. 2001).4

3

But even assuming the law did permit this Court to include the cost of complying

4

with a prospective injunction in the amount in controversy, the Court would decline to do

5

so here because Defendant has failed to carry its evidentiary burden. Defendant has not

6

provided the Court with any evidence speaking to the loss in future profits that it would

7

incur if it were no longer able to raise interest rates in the manner at issue. Defendant

8

states that “it stands to lose significant amounts” and that it “is reasonable to presume that

9

an injunction will cost Navy Federal at least as much or more in the future,” but such

10

generalized assertions are no substitute for record evidence demonstrating the extent of the

11

loss that NFCU would incur if an injunction were to be granted. See Sanchez v.

12

Monumental Life Ins. Co., 102 F.3d 398, 405 (9th Cir. 1996) (concluding that the

13

removing party had failed to satisfy its burden of proof by failing to provide the court with

14

evidence which would allow the court to assess the extent of loss that might occur if

15

injunctive relief were granted). Accordingly, Defendant has failed to satisfy its burden

16

that the cost of an injunction would raise the amount in controversy from $2,723,952.34 to

17

$5 million or more.

18

3. Amount in controversy under the Rosenthal Act

19

The amount in controversy that Plaintiff seeks under the Rosenthal Act, Defendant

20

avers, also satisfies CAFA’s jurisdictional minimum. Defendant’s argument proceeds as

21

follows. First, Defendant argues that if statutory damages are awarded to each of the

22

16,710 individuals who received a 30-day letter from NFCU during the Rosenthal Class

23
24
25
26
27
28

4

In Kanter, the amount-in-controversy provision was the $75,000 required under 28 U.S.C. § 1332 and
not the $5 million required under CAFA. Regardless, the reasoning in Kanter applies with equal force,
here. The plaintiffs in Kanter primarily sought “monetary compensation for consumers who relied on
Defendant’s misleading advertising” and, in addition, sought injunctive relief to prevent the defendant
from continuing to sell their defective product. Id. at 860. Similarly, here, Plaintiff is primarily seeking
monetary compensation for Defendant NFCU’s unfair practice of raising APR rates and only additionally
seeks to prevent Defendant from continuing to do so in the future.
11
3:16-cv-1086-GPC-WVG

1

period (i.e., one year prior to filing), then Plaintiff would be entitled to the statutory

2

maximum of $500,000.5 Second, Defendant argues that if each member of the class

3

receives just $279 in emotional damages, then the jurisdictional minimum will be met.6

4

Defendant goes on to point out that actual damages per individual class member could

5

amount to $3,000 per individual given similar awards in other districts.7
This argument, however suffers from a fatal flaw –– namely, that Plaintiff does not

6
7

seek emotional damages in its complaint. Defendant speculates as to what the class

8

members would recover in emotional damages under the Rosenthal Act, and yet nowhere

9

in Plaintiff’s complaint does it make any mention of emotional harm or allege any facts

10

that could establish such a right to emotional damages. Such speculation and conjecture,

11

based on the unreasonable assumption that Plaintiff will seek emotional damages for the

12

class, cannot serve as the basis for removal jurisdiction. See Ibarra, 775 F.3d at 1197.

13

Accordingly, the most in damages that Defendant has established by a

14

preponderance of the evidence under the Rosenthal Act is $500,000 in statutory damages.

15

4. Reasonable Attorneys’ Fees

16

The last potential source of recovery in this action is attorneys’ fees. Both the

17

Rosenthal Act and the UCL authorize the recovery of attorneys’ fees and costs, see Cal.

18

Civ. Code § 1788.30(c); see also Walker v. Countrywide Home Loans, Inc., 121 Cal. Rptr.

19

2d 79, 1179 (Cal. Ct. App. 2002) (“if a plaintiff prevails in an unfair competition law

20

claim, it may seek attorney fees as a private attorney general pursuant to Code of Civil

21

Procedure section 102.5.”), and those fees and costs are properly included in the amount

22

in controversy, see Lowdermilk v. U.S. Bank Ass’n, 479 F.3d 994, 1000 (9th Cir. 2007),

23

rev’d on other grounds, Ibarra v. Manheim Invs., Inc., 775 F.3d 1193 (9th Cir. 2015).

24
25
26
27
28

5

Statutory damages per individual can amount to $1,000 under the Rosenthal Act, but the total amount
awarded cannot exceed $500,000. Cal. Civ. Code § 1788.17.
6
$279 x 16,710 = $4,511,430 + 500,000 (statutory damages) = $5,011,430.
7
Defendant cites to Sweetland v. Stevens & James, Inc., 563 F. Supp. 2d 300, 304 (D. Me. 2008),
Donahue v. NFS, Inc., 781 F. Supp. 188, 194 (W.D.N.Y. 1991), and Smith v. Law Offices of Mitchell N.
Kay, 124 B.R. 182, 193 (D. Del. 1991), all of which address awards for emotional damages.
12
3:16-cv-1086-GPC-WVG

1

In its notice of removal, Defendant suggests that Plaintiff might be entitled to up to

2

one-third of his recovery in attorneys’ fees. DNR ¶ 41 (“If the Court certified a class and

3

awarded Plaintiff’s counsel one-third of the recovery in attorneys’ fees, the damages

4

award would need to be just $3,750,000 in order for the additional third in fees to add up

5

to more than the jurisdictional minimum.”). Defendant, however, cites to no legal

6

authority to support its assertion that the proper recovery for attorneys’ fees is one-third of

7

the total recovery. Defendant also cites to no relevant precedent in its response to the

8

Court’s order to show cause.8 What’s more, the Court’s independent research

9

demonstrates that, contrary to what Defendant suggests, the correct percentage for

10

estimating an award of attorneys’ fees is 25 percent. See Hanlon v. Chrysler Corp., 150

11

F.3d 1011, 1029 (9th Cir. 1998) (observing that the “benchmark award for attorney fees”

12

in a class action is 25%).

13

Even assuming that the proper award for attorneys’ fees is Defendant’s theory of

14

one-third of the total recovery, Defendant still has not met the jurisdictional minimum.

15

Defendant has provided the Court with evidence that it stands to lose $2,723,952.34 in

16

increased interest rate charges and $500,000 in statutory damages, for a total of

17

$3,223,952.34. Any attorneys’ fees earned on that recovery, at the rate of one-third of the

18

total relief, however, still does not amount to the $5 million jurisdictional minimum.9

19

////

20
21

////

22
23

////

24
25

///

26
27

8

In fact, Defendant does not even mention attorneys’ fees and costs in its order-to-show-cause brief.
$3,223,952.34 (total recovery) x (1/3) (attorneys’ fees and costs rate) = $967,185.70 in attorneys’ fees.
$3,223,952.34 (total recovery) + $967,185.70 (attorney’s fees and costs) = $4,191,138.04.
9

28

13
3:16-cv-1086-GPC-WVG

1
2
3

CONCLUSION
Accordingly, for the foregoing reasons, IT IS ORDERED that the case be
remanded back to state court for lack of subject matter jurisdiction.

4
5

Dated: December 5, 2016

6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
14
3:16-cv-1086-GPC-WVG