AT&T Wage Fight May Stay in Federal Court

(CN) - Supreme Court precedent invalidates efforts to have a state court preside over a putative labor class action against AT&T Mobility, the 9th Circuit ruled.

Robert Rodriguez had sued AT&T in Los Angeles Superior Court for unpaid wages, overtime compensation, and damages for statutory violations under California law. He seeks to represent all other similarly situated retail sales managers for AT&T wireless stores in Los Angeles and Ventura counties.

After AT&T removed the case to federal court, however, Rodriguez sought remand on the basis that the total amount in controversy did not exceed the $5 million federal jurisdiction threshold. He also waived the right to claim more than that amount.

A federal judge rejected AT&T's argument that the actual amount in controversy could not be less than $5.5 million based on the potential number of class numbers and the size of their claims, and ordered the case to be remanded to state court.

In making its decision, the District Court noted that, based on the 9th Circuit's decision in Lowdermilk v. U.S. Bank, AT&T bore the burden of proving to "a legal certainty" that more than $5 million was at issue. Rodriguez's "disclaimer" to any money over that amount "effectively foreclosed the jurisdictional issue," the court found.

The Supreme Court upset this holding, however, by finding in Standard Fire Insurance Company v. Knowles that such waivers are ineffective. In that March 2013 decision, the Supreme Court said that "a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified."

The Supreme Court noted that a plaintiff's precertification stipulation binds only the single plaintiff.

Rodriguez conceded that Standard Fire poses a hurdle to the remand order must, according the 9th Circuit's ruling Tuesday.

"His waiver no longer has legal effect," Judge Richard Clifton wrote for a three-member panel. "Because the order to remand the case to state court relied solely on that waiver, it must be vacated and the matter remanded to district court for further consideration."

Standard Fire effectively overruled the circuit's decision in Lowdermilk, the Pasadena-based appellate judges said.

Under Lowdermilk, "when a class action complaint alleges damages below the jurisdictional minimum, the removing defendant must establish to a 'legal certainty' that the amount in controversy in fact exceeds the jurisdictional requirement," Clifton wrote.

Lowdermilk "adopted the legal certainty standard to reinforce plaintiff's prerogative, as master of the complaint, to avoid federal jurisdiction by forgoing a portion of the recovery on behalf of the putative class," he added. "That choice has been taken away by Standard Fire. Further, Standard Fire instructs courts to look beyond the complaint to determine whether the putative class action meets the jurisdictional requirements."

Under Standard Fire, a defendant seeking removal of a putative class need not prove to a legal certainty that the aggregate amount in controversy exceeds the jurisdictional minimum, but rather by a preponderance of evidence, the court added.

"This standard conforms with a defendant's burden of proof when the plaintiff does not plead a specific amount in controversy," Clifton wrote.

In the case at hand, the District Court's decision that AT&T had to prove to a legal certainty that Rodriguez's claim would exceed $5 million was correct at the time based on Lowdermilk. In light of Standard Fire, however, that decision cannot stand. The District Court must now apply the preponderance standard to the amount-in-controversy evidence AT&T provided to determine venue.

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