Sturdevant et al v. 24 Hour Fitness USA, Inc.

Filing 18

OPINION and ORDER - The court GRANTS Plaintiffs' Motion to Remand to State Court 4 . This case shall be remanded to the Circuit Court of the State of Oregon for the County of Multnomah. The court DENIES Plaintiffs' request for attorney fees. Defendant's Motion to Dismiss 5 is DENIED as moot. IT IS SO ORDERED. DATED this 23rd day of January, 2017, by United States Magistrate Judge John V. Acosta. (peg)

UNITED STATES DISTRICT COURT
DISTRICT OF OREGON
PORTLAND DIVISION

MICHAEL STURDEVANT; SOKE SAING;
GAYLE STAMMER; and THEO DOOLEY

Case No. 3:16-cv-2119-AC
OPINION AND ORDER

Plaintiffs,

v.
24 HOUR FITNESS USA, INC., a California
corporation,
Defendant.

ACOSTA, Magistrate Judge:
Introduction
Plaintiffs Michael Sturdevant and others (collectively, "Plaintiffs") filed this action against
defendant 24 Hour Fitness USA, Inc. ("24 Hour Fitness" or "Defendant") in the Circuit Court for
the State of Oregon, for the County of Multnomah. Plaintiffs allege 24 Hour Fitness increased the
annual renewal fee on their "lifetime" gym memberships after representing that the annual renewal

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fee would never increase. Based on this alleged conduct, Plaintiffs assert a claim under the Oregon
Unlawful Trade Practices Act ("UTPA"), ORS 646.605-656.656. On November 4, 2016, 24 Hour
filed a timely notice of removal to this court (ECF No. 1), asserting federal subject matter
jurisdiction based on diversity of citizenship. Now before the court is Plaintiffs' motion to remand
(ECF No. 4.) Plaintiffs argue the amount in controversy in this case is insufficient to support
diversity jurisdiction. Additionally, Plaintiffs move for attorney fees incuned due to removal,
contending 24 Hour Fitness lacked an objectively reasonable basis for removing this action. For the
reasons explained below, the court grants Plaintiffs' motion and remands this case to state court.
Background

Plaintiffs purchased "lifetime" gym memberships from 24 Hour Fitness. (Comp!., ECF No.

2 Ex. D, '1)2.) "Lifetime" memberships involved a prepaid membership for a number of years, with
annual renewals thereafter for a fee. (Comp!. '1)3.) Defendant's sales representatives allegedly
represented that the "lifetime" membership entitled purchasers to a fixed annual renewal fee. (Id.)
Defendant raised the annual fee in Janumy 2016. (Comp!. '1)4.) Plaintiffs brought this case alleging
violations of the UTPA through misrepresentation of the amount of the annual fee. (Comp!. '1)'\[6-7.)
The state-court complaint seeks $2,500 for each of four plaintiffs -

for a total of $10,000 in

compensatory damages -and injunctive reliefbaning future modification of the annual fee at issue.
(Compl. at 3.) In seeking remand, Plaintiffs claim a much lower potential recovery in their motion,
between $100 and $200 per plaintiff. (Pis. Mot. to Remand, ECF No. 9, at 4.) The complaint also
seeks attorney fees under the UTPA and expresses intent to seek punitive damages. (Comp!. at 3.)
Standard

Following removal, a plaintiff may move to remand to state court, based on defects in
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removal or a lack of subject-matter jurisdiction. 28 U.S.C. § 144 7(c); Lively v. Wild Oats Market,
Inc., 456 F .3d 933, 939 (9th Cir. 2006). The party opposing remand bears the burden of establishing
the propriety of removal. Hunter v. Phillip Morris USA, 582 F.3d 1039, 1041 (9th Cir. 2009)
(citation omitted). Courts construe the removal statute strictly against the party seeking removal.
Provincial Gov't ofMarinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009) (citation
omitted). Courts also resolve any ambiguity regarding removal jurisdiction in favor of remand.
Gaus v. Miles, Inc., 980 F.2d 564, 566-67 (9th Cir. 1992).
Analysis
Plaintiffs move to remand this action to state court based on a lack of subject-matter
jurisdiction. Defendant asserts diversity of citizenship as the basis for subject-matter jurisdiction.
An amount in controversy exceeding $75,000 is a prerequisite for diversity jurisdiction. 28 U.S.C.
§ 1332(a). Subject-matter jurisidiction over a case removed from state court depends on the
circumstances at thetime of removal. Abrego v. Dow Chem. Co., 443 F.3d 676, 690 (9th Cir. 2006).
In removed cases where the amount in controversy is unclear from the face of the complaint, the
removing defendant must establish the amount in controversy by a preponderance of the evidence.
Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996). Where multiple plaintiffs
bring separate and distinct claims, the "anti-aggregation rule" requires courts to determine the
amount in controversy by analyzing the value of individual claims for relief without aggregation.
Urbino v. Orkin Servs. of Cal., Inc., 726 F.3d 1118, 1122 (9th Cir. 2013).

I. The Anti-Aggregation Rule.
This case involves four plaintiffs pursuing similar UTPA claims against the same defendant.
All of the forms of relief at issue in this case Page 3 - OPINION AND ORDER

compensatoty damages, equitable relief, attorney
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fees, and punitive damages -

are subject to the anti-aggregation rule. In re Ford, 264 F.3d at

960-61 (equitable relief); Gibson v. Chrysler Corp., 261 F.3d 927, 944, 946 (9th Cir. 2001)
(compensatory and punitive damages); Goldberg v. CPC Int'/, Inc., 678 F.2d 1365, 1367 (9th Cir.
1982) (attorney fees). Accordingly, the anti-aggregation rule is important to determining whether
diversity jurisdiction exists over this case. Aggregation of multiple-plaintiff claims is possible only
when the plaintiffs assert "common and undivided" claims held as a group. Id (quoting Gibson, 261
F.3d at 944). A claim is "common and undivided" when the plaintiffs cannot bring their claims
without involving one another. Id. Here, Plaintiffs could have brought their individual UTPA
claims against 24 Hour Fitness separately. See OR. REV. STAT.§ 646.638 (authorizing individual
actions for individuals damaged by unlawful trade practices). Defendant therefore cannot aggregate
Plaintiffs' UTPA claims, and must show an unaggregated amount in controversy exceeding $7 5,000
to establish diversity jurisdiction over this case.
II. The Amount in Controversy.
The complaint seeks $2,500 per plaintiff in compensatory damages. Plaintiffs also seek other
forms of relief, which are unquantified. The unquantified relief in the complaint falls into three
categories: equitable relief, attorney fees, and potential punitive damages.

For subject-matter

jurisdiction over this case, Plaintiffs' unquantified claims for relief must put $72,500 in controversy,
without aggregating multiple plaintiffs' claims. Because the amount in controversy is unclear from
the face of the complaint, 24 Hour Fitness's evidentiary burden is to show by a preponderance of the
evidence that the amount in controversy exceeds $75,000. Sanchez, 102 F.3d at 404. In its
opposition to Plaintiffs' motion, 24 Hour Fitness argues the unquantified relief Plaintiffs seek
satisfies the jurisdictional amount-in-controversy requirement.
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The amount in controversy depends on the value of the unaggregated individual claims, both
for monetary damages and equitable relief. In re Ford Motor Co./Citibank (S.D.), NA., 264 F.3d
952, 958-59 (9th Cir. 2001 ). Potential punitive damages are also part of the amount in controversy.

Gibson, 261 F.3d at 946. Where a statute authorizes an award of attorney fees, the fees are part of
the amount in controversy. Galt G/S v. JSS Scaninavia, 142 F.3d 1150, 1155-56 (9th Cir. 1998).
The Ninth Circuit has not decided whether prospective, unaccrued attorney fees are part of the
amount in controversy when a case is removed. Gonzales v. CarMax Auto Superstores, LLC, 840
F.3d 644, 649 n.2 (9th Cir. 2016) ("It remains an open question whether attorney's fees that are
anticipated but unaccrued at the time of removal or filing in federal court ... may be included in the
amount-in-controversy. Other circuits and the district courts in this circuit are divided on the
issue.").
In its notice of removal, 24 Hour Fitness identified attorney fees and punitive damages as
sufficient to satisfy the amount-in-controversy requirement. (Notice of Removal, ECF No. 1, if 8.)
Plaintiffs contend unaccrued attorney fees are not part of the amount in controversy. Additionally,
Plaintiffs argue the amount of potential punitive damages cannot exceed a 4: 1 ratio with
compensatory damages. The court finds unaccrued attorney fees are not part of the amount in
controversy. While a punitive damages award satisfying the amount-in-controversy requirement is
legally possible, 24 Hour Fitness fails to make an evidentiary showing that such an award is more
likely than not. Accordingly, 24 Hour Fitness cannot establish subject-matter jurisdiction.

A. Attorney Fees.
Plaintiffs request attorney fees, as authorized by the UTPA. OR. REV. STAT. § 646.638(3).
Defendant argues the potential fee award satisfies the amount-in-controversy requirement. The
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threshold issue is whether the court may consider unaccrued attorney fees as part of the amount in
controversy. See Gonzales, 840 F.3d at 649 n.2 (noting the issue "remains an open question" in the
Ninth Circuit). Where a statute authorizes a fee award, attorney fees may be part of the amount in
controversy. Galt, 142 F.3d at 1155-56. In Galt, a party sought attorney fees already accrued
defending an indemnity claim. Id. While Plaintiffs have accrued some attorney fees in this action,
24 Hour Fitness relies on the potential for a total fee award after trial. (Notice of Removal if 9.)
There is conflicting authority on the issue, including within this district. Compare Beaver v. NPC

Int'!, Inc., 451 F. Supp. 2d. 1196, 1200 (D. Or. 2006) (considering unaccrued attorney fees), with
Reames v. AB Car Rental Servs., Inc., 899 F. Supp. 2d 1012, 1015 (D. Or. 2012) (considering only
fees accrued at the time of removal or filing).
At oral argument, 24 Hour Fitness's counsel argued the cou1t's previous decision in Perez

v. Del Monte Fresh Produce NA., Inc., No. CV 10-675-AC, 2011 WL 3664595 (D. Or. May 12,
2011), supported consideration ofunaccrued attorney fees in removal cases. In Perez, the parties
agreed that unaccrued attorney fees were part of the amount in controversy. Id. at *5-9. Thus, the
court never reached the threshold issue presented here: whether unaccrued attorney fees are part of
the amount in controversy at the time ofremoval or filing. Reames and Beaver analyze this issue,
and are more useful to deciding the parties' dispute here. A close reading of both cases is therefore
necessary.
In Reames, Judges Papak and Marsh 1 limited consideration of attorney fees to fees accrued

at the time ofremoval. 899 F. Supp. at 1015-16, 1020-21. Reames turned on two concepts. First,

1

The opinion in Reames consists of both Judge Papalc's Findings and Recommentation and
Judge Marsh's opinion adopting Judge Papak's analysis.
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under Abrego v. Dow Chemical Co., 443 F.3d at 690, the court must consider the amount in
controversy at the time of removal. Reames, 899 F. Supp. 2d at 1019. Reames also relied on a
Seventh Circuit opinion, Gardynski-Leschuck v. Ford Motor Co., 142 F.3d 955 (7th Cir. 1998),
which analyzed whether unaccrued attorney fees are in controversy when a case is filed or removed.
Reames, 899 F. Supp. 2d at 1019. In Gardynski-Leschuck, the court found determinative the
distinction "between the likely course of the litigation and the legal rights of the parties". 142 F.3d
at 958. The legal right to recovery has a fixed value at the time of filing or removal: the amount
necessary "to resolve the case on the date it was filed." Id. at 959. Unaccrued legal fees are
avoidable and depend on the course of the litigation. Id. at 958. Judge Papak thus concluded any
estimation of attorney fees over the life of the case is unduly speculative and beyond the amount
actually in controversy at the time of removal. 899 F. Supp. 2d at 1020-21. Second, Judge Papak
noted that the substantial variability of costs and outcomes in civil litigation means any estimation
of attorney fees, "no matter how exquisitely crafted, will inevitably and systematically produce
dramatically inaccurate predictions a significant proportion of the time."
In Beaver, Judge King considered estimations ofpotential attorney fees as part of the amount

in controversy. 451 F. Supp. 2dat 1198-99. JudgeKingfoundprecedentforlookingto analogous
attorney fee awards in cases determining the value of unquantified requests for compensatory
damages. Id. (citing Harding v. US. Figure Skating Ass'n, 851 F. Supp. 1476, 1480-81 (D. Or.
1994)). The Beaver defendant offered evidence of the fee awards in cases with similar claims,
including one involving the same lawyer who represented the plaintiff in Beaver. Id. at 1199-200.
Defendant also argues Guglielmina v. McKee Foods Corp., 506 F.3d 696 (9th Cir. 2007), represents
tacit approval by the Ninth Circuit of considering unaccrued attorney fees. While the district court
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in Guglielmina considered unaccrued attorney fees, the Ninth Circuit's opinion addressed the
evidentiaty standard for proving the amount in controversy. Id. at 698, 701. Guglielmina mentioned
attorney fees only in passing, and thus is not instructive as to whether unaccrued attorney fees should
be considered to dete1mine the amount in controversy.
The court concludes unaccrued attorney fees are not pati of the amount in controversy. The
amount in controversy depends on the circumstances at the time of removal or filing. Singer v. State

Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997); see also Abrego, 443 F.3d at 690. At
the time of removal or filing, future attorney fees remain speculative and avoidable. Reames, 899
F. Supp. 2d at 1020-21. Unaccrued attorney fees are therefore not in controversy for purposes of
the diversity jurisdiction statute. Considering only accrued attorney fees is also consistent with the
policies of construing the removal statute against jurisdiction and resolving any doubts about
jurisdiction against removal. See Marinduque, 582 F.3d at 1087; Gaus, 980 F.2d at 566. Including
unaccrued attorney fees in the amount in controversy is inherently speculative, and would improperly
expand removal jurisdiction.
Thus, 24 Hour Fitness must establish the amount of accrued attorney fees at the time of
removal to show the amount in controversy. Defendant does not submit any evidence regarding the
amount of attorney fees accrued prior to removal. (Deel. of Robert B. Miller ISO Def. 's Opp'n to
Mot. to Remand, ECF No. 12, Exs. 1-2 (evidence of potential awards after trial), 3 (evidence of
attorney fees increasing after removal).) Accordingly, 24 Hour Fitness fails to show any specific
quantity of attorney fees were in controversy at the time of removal.

B. Punitive Damages.
The complaint does not contain an express claim for punitive damages Page 8 - OPINION AND ORDER

in Oregon state

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courts, a complaint cannot contain a claim for punitive damages when filed. See OR. REV. STAT.
§ 31. 725 (barring claims for punitive damages in complaints when filed and establishing procedure
for amending complaint to allege punitive damages). Potential claims for punitive damages are still
part of the amount in controversy, even when not included in the complaint. Gibson, 261 F.3d at
946. Because the complaint does not seek a specific amount of punitive damages, 24 Hour bears the
evidentiary burden of establishing the amount of a likely award by the preponderance of the
evidence.

Sanchez, 102 F.3d at 404; see also Culpepper v. Wells Fargo Bank, NA., No.

6:12-cv-969-TC, 2012 WL 3779038, at *1-2 (D. Or.Aug. 8,2012) (analyzing an Oregon state-court
complaint containing a statement of intent to seek punitive damages in an amended complaint).
Plaintiffs argue punitive damages cannot exceed a 4: 1 ratio with compensatory damages. See

Wieber v. FedEx Ground Package Sys., Inc., 231 Or. App. 469, 490 (2009) ("For cases in which the
injuries giving rise to a punitive damages award are purely economic, the federal constitution
prohibits most punitive damages awards that significantly exceed four times the amount of the
injured party's compensatory damages."). But while a 4:1 ratio between punitive damages and
compensatory damages may be a guideline for assessing due process limitations on punitive damages
awards, no such mathematically precise limitation exists. BMW v. Gore, 517 U.S. 559, 582 (1996)
(" [w ]e cannot draw a mathematical bright line between the constitutionally acceptable and the
constitutionally unacceptable that would fit every case"). A punitive damages award exceeding a
4: 1 ratio would not necessarily exceed due-process limitations.
Defendant's burden is to show a punitive damages award sufficient to meet the jurisdictional
threshold is "more likely than not," not merely of showing the "legal possibility" of a sufficient
punitive damages award. Sanchez, 102 F.3d at 403 (rejecting a test requiring "only a legal possibility
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that the amouut in controversy exceeded" the jurisdictional minimum and adopting a preponderance
of the evidence test). Thus, 24 Hour Fitness must show a potential punitive damages award in this
case is more likely than not to exceed $72,500 per plaintiff.
Relying on Culpepper, 24 Hour Fitness argues it has carried its evidentiary burden. 2012 WL
3779038. While Culpepper is instructive as to how to establish a potential punitive damages award,
the facts of Culpepper are distinguishable. Culpepper was procedurally similar to this case -

a

defendant removed an Oregon state-court case to District Court. Id at* 1. The state-court complaint
did not contain an express claim for punitive damages, but only stated plaintiffs' intent to seek leave
to amend, to add a claim for $1 million in punitive damages. Id at *2. Counsel for the plaintiff in

Culpepper represented at oral argument that he would seek to add the $1 million punitive-damages
claim if the court ordered remand to state court. Id The defendant also summarized "several"
factually analogous cases where punitive damages awards exceeded $75,000. Id Taken together,
the complaint and available evidence in Culpepper showed a potential punitive-damages award
exceeding $75,000. Id
In contrast, the complaint and available evidence in this case are insufficient to show any
likely value of a punitive-damages claim. Plaintiffs in this case do not identify a specific amount of
punitive damages to be sought in an amended complaint. At oral argument, Plaintiffs' counsel
represented that the amount of a punitive damages claim, if any, depends on information he will seek
in discovery. To establish the amount of potential punitive damages, 24 Hour Fitness relies on
reported cases arising under the UTP A and another consumer-protection statute where Oregon '
appellate courts upheld the awards of punitive damages sufficient to satisfy the jurisdictional
threshold based on compensatory damages similar to those alleged here. Parott v. Carr Chevrolet,

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Inc., 331 Or. 537, 564-65 (2001) (upholding a $1 million punitive damages award in a UTPA case
with $11,496 in economic damages); Lithia Medford LM, Inc. v. Yovan, 254 Or. App. 307, 328-29
(2012) (en bane) (upholding a $100,000 punitive damages award in an Oregon Unlawful Debt
Collection Practices case with $500 in noneconomic damages). The court in Culpepper used
factually analogous cases to establish the amount-in-controversy from potential punitive damages.
2012 WL 3779038, at *2 (in a case involving harassing phone calls, looking to telephonic
harassment cases). Thus, the court must determine whether Parrott and Lithia are sufficiently
analogous to this case to provide evidence of the amount of potential punitive damages. Id

Parrott and Lithia Medford are factually similar to one another, but dissimilar to this case.
In Parrott, a used-car dealer misrepresented the condition of a used car prior to sale, and "used
abusive tactics to cover its deceptions." 331 Or. at 560 (citation omitted). In upholding the punitivedamages award, the court held the dealer "committed 'an extraordinarily egregious violation' of the
UTPA." Id. In Lithia, a used-car dealer sold a car with an altered odometer, misrepresenting the
mileage of the car. 254 Or. App. at 310. After the purchaser discovered the true mileage of the car,
the dealer attempted to repossess the car and threatened the purchaser with arrest. Id The court
upheld a punitive-damages award against the dealer, finding the dealer's "conduct was egregious ...
given proof that [the dealer] repeatedly used deceptive and abusive tactics against a financially
vulnerable consumer." Id. at 326. Both cases involved egregious violations of Oregon's consumer
protection statutes in relation to selling used cars, with dealers using abusive tactics to conceal their
misconduct. Parrott, 331 Or. at 560; Lithia Medford, 254 Or. App. at 326.
In contrast, Plaintiffs' complaint alleges willful misrepresentation of a future price increase
for a gym membership. (Compl.

ifif 2, 6.) The subject matter and conduct at issue in Parrott and

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Lithia Medford have minimal similarity to this case. Accordingly, neither case is useful in showing
the amount of potential punitive damages. The party seeking removal based on diversity jurisdiction
bears the evidentiary burden of demonstrating a sufficient amount in controversy, Sanchez, 102 F .3d
at 403, and 24 Hour Fitness has not carried its burden. The court therefore lacks jurisdiction over
this case; remand is required.
III. Attorney Fees under 28 U.S.C. § 1447(c).
Plaintiffs ask the court to award attorney fees incurred in contesting removal of this action,
under 28 U.S.C. § 1447(c). Plaintiffs argue 24 Hour Fitness lacked an objectively reasonable basis
for removing this action. "Absent unusual circumstances, courts may award attorney's fees under

§ 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal.
Conversely, when an objectively reasonable basis exists, fees should be denied." Martin v. Franklin

Capital Corp., 546 U.S. 132, 141 (2005). Removal is not objectively unreasonable merely because
the court orders remand. Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1065 (9th Cir. 2008).
Instead, courts assess whether "the relevant case law clearly foreclosed the defendant's basis for
removal." Id. at I 066--67.
Here, 24 Hour Fitness had an objectively reasonable basis for removal. The propriety of
considering unaccrued attorney's fees is an open question within this circuit. Gonzales, 840 F.3d
at 649 n.2; Reames, 899 F. Supp. 2d at 1015; Beaver, 451 F. Supp. 2d. at 1200. Further, 24 Hour
Fitness' arguments regarding potential punitive damages relied on controlling precedent, failing on
evidentiaryrather than legal grounds. See Gibson, 261 F.3d at 946. Defendant relied on objectively
reasonable legal arguments because case law did not "clearly foreclose[]" either line of argument.

Lussier, 518 F.3d at 1066. Accordingly, the court denies Plaintiffs' request for attorney fees.
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Conclusion

The court GRANTS Plaintiffs' Motion to Remand to State Court (ECF No. 4). This case
shall be remanded to the Circuit Court of the State of Oregon for the County of Multnomah. The
court DENIES Plaintiffs' request for attorney fees. Defendant's Motion to Dismiss (ECF No. 5) is
DENIED as moot.
IT IS SO ORDERED.
DATED

thisDFd~of Janumy, 2017

ited States Magistrate Judge

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