Ellis Law News: Ninth Circuit Sends AT&T Class Action Back To Supreme Court
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Ellis Law News: Ninth Circuit Sends AT&T Class Action Back To Supreme Court

SAN FRANCISCO – Following new guidance from the U.S. Supreme Court, the Ninth Circuit has made it harder for plaintiffs to stop putative class actions from being removed to federal court.

Ruling unanimously Tuesday, the three-judge panel held that plaintiffs can no longer act as “masters of the complaint,” free to forego some amount of damages to avoid federal jurisdiction under the Class Action Fairness Act of 2005, or CAFA.

The decision authored by Judge Richard Clifton overruled the Ninth Circuit’s 2007 ruling in Lowdermilk v. U.S. Bank National Association, finding it “clearly irreconcilable” with the Supreme Court’s 2013 decision in Standard Fire v. Knowles, 133 S. Ct. 1345, which deemed it improper for plaintiffs to evade federal jurisdiction by waiving some portion of damages.

“I think the panel got it exactly right,” said Gibson, Dunn & Crutcher partner Theodore Boutrous, who argued Standard Fire in front of the Supreme Court. “I think it’s very significant.”

The ruling is a victory for AT&T Mobility and its lawyers at Paul Hastings, making it almost certain that the suit over alleged unpaid wages and overtime will remain in federal court. It also has ramifications for at least two cases that raise similar issues and are now pending before the Ninth Circuit.

Plaintiff Robert Rodriguez, a retail sales manager, sued AT&T Mobility in 2012 on behalf of himself and other managers in Southern California seeking unpaid wages, overtime compensation and statutory damages. The suit was originally brought in Los Angeles Superior Court. However, AT&T’s lawyers at Paul Hastings moved to have the action heard in federal court under CAFA, which triggers federal jurisdiction in cases involving alleged damages of at least $5 million.

Rodriguez, represented by Michael Morrison of Alexander Krakow & Glick as well as lawyers from the Law Offices of Thomas Flavey and Wucetich & Korovilas, moved to remand the case to California state court and waived damages in excess of $5 million. U.S. District Judge George Wu agreed to remand the case, citing the Lowdermilk decision, which required defendants demonstrate to a “legal certainty” that the amount in controversy exceeded $5 million.

The decision Tuesday in Rodriguez v. AT&T Mobility Services, 13-56149, reevaluated that standard in light of the Supreme Court’s March decision in Standard Fire. That case, deemed one of the term’s most business-friendly decisions, held that the lead plaintiff in a class action cannot agree to waive damages in excess of $5 million on behalf of a not-yet-certified class.

As a result of Standard Fire, Clifton wrote, defendants need now satisfy a lighter burden — a preponderance of the evidence standard ­— to bump class actions out of state courts.

“We hold that Lowdermilk has been effectively overruled, and that the proper burden of proof imposed upon a defendant to establish the amount in controversy is the preponderance of the evidence standard,” Clifton wrote.

Judges Richard Tallman and Consuelo Callahan joined Clifton’s opinion.

“We’re pleased with the Court’s decision,” AT&T spokesman Marty Richter wrote in a statement to The Recorder. “AT&T is committed to full compliance with all federal and state laws, including the wage and hour laws, and has received numerous awards for being an employer of choice.”

Paul Hastings partner George Abele, who argued the case for AT&T, did not respond to a request for comment.

In their appeal brief, Rodriguez’s attorneys argued that the Supreme Court’s decision invalidated the waiver but should not change the legal burden on defendants seeking removal of class actions.

Standard Fire did not alter the well-settled law in this Circuit that where the plaintiff alleges that the amount in controversy is less than $5 million, the defendant must prove to a legal certainty that the amount in controversy exceeds $5 million,” wrote Morrison, lead plaintiffs attorney. Morrison did not respond to a request for comment.

Court watchers called Tuesday’s decision important but unsurprising.

“It brings the Ninth Circuit in line with what most other circuits had been doing on this standard,” said Boutrous, who also argued for Wal-Mart in Wal-Mart v. Dukes, a case that dramatically changed the landscape for class action litigation.

Lowering the evidentiary hurdles for defendants to remove cases “takes another step farther that’s very important,” he added.

Joshua Davis, a dean and professor at University of San Francisco School of Law, said he wasn’t surprised by the decision.

“This is just one more way of lightening the burden on the defense,” Davis said. “Many defendants see federal court as more favorable. This makes it easier for defendants to move to federal court.”

Read more: http://www.therecorder.com/?id=1202617268673&Adopting_New_Rule_Ninth_Circuit_Sends_ATT_Class_Action_Back_to_Federal_Court&slreturn=20170327165240#ixzz2dIcmOOvx