Robert Rodriguez v. At&t Mobility Services LLC

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ROBERT RODRIGUEZ, individually No. 13-56149

and on behalf of all others similarly

situated, D.C. No.

Plaintiff-Appellee, 2:12-cv-03694-

GW-FMO

v.

AT&T MOBILITY SERVICES LLC, a OPINION

Delaware limited liability company,

Defendant-Appellant.

Appeal from the United States District Court

for the Central District of California

George H. Wu, District Judge, Presiding

Argued and Submitted

August 5, 2013—Pasadena, California

Filed August 27, 2013

Before: Richard C. Tallman, Richard R. Clifton,

and Consuelo M. Callahan, Circuit Judges.

Opinion by Judge Clifton

2 RODRIGUEZ V. AT&T MOBILITY SERVICES

SUMMARY*

Jurisdiction / Class Action

The panel vacated the district court’s order remanding to

state court a putative class action, which had been removed

to federal district court by the defendant under the Class

Action Fairness Act.

The panel held that the lead plaintiff’s waiver of any

claim in excess of the $5 million amount-in-controversy

requirement of 28 U.S.C. § 1332(d)(2) was ineffective, and

the waiver no longer had legal effect. The panel held that

Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 F.3d 994, 999 (9th

Cir. 2007) (imposing on defendants the burden to prove the

amount-in-controversy to a “legal certainty”), was effectively

overruled by the Supreme Court’s holding in Standard Fire

Ins. Co. v. Knowles, 133 S. Ct. 1345 (2013), and that the

proper burden of proof imposed upon a defendant to establish

the amount-in-controversy is the preponderance of the

evidence standard. Because the district court’s remand order

relied solely on the waiver, the panel remanded to the district

court for consideration and application of the preponderance

standard to the amount-in-controversy evidence.

*

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

RODRIGUEZ V. AT&T MOBILITY SERVICES 3

COUNSEL

George W. Abele (argued), Elizabeth A. Brown, and Mario

C. Ortega, Paul Hastings LLP, Los Angeles, California; and

Laurie E. Barnes, AT&T Mobility Services LLC, Los

Angeles, California, for Defendant-Appellant.

Michael S. Morrison (argued), Alexander Krakow & Glick,

LLP, Santa Monica, California; Thomas W. Falvey and J.D.

Henderson, Law Offices of Thomas W. Falvey, Pasadena,

California; Jason W. Wucetich, Dimitrios V. Korovilas,

Wucetich & Korovilas LLP, El Segundo, California, for

Plaintiff-Appellee.

OPINION

CLIFTON, Circuit Judge:

Plaintiff Robert Rodriguez filed a putative class action in

state court, which Defendant removed to federal district court.

Defendant contended that there was federal jurisdiction over

the action under the Class Action Fairness Act of 2005

(“CAFA”), Pub. L. No. 109-2, 119 Stat. 4 (2005), and in

particular 28 U.S.C. § 1332(d)(2). Rodriguez alleged that the

amount in controversy did not exceed $5 million, as required

for federal jurisdiction, and purported to waive any claim by

the class in excess of that amount. Based on that waiver, the

district court granted Rodriguez’s motion to remand the case

to state court. The Supreme Court later held that such a

waiver was ineffective, however. Standard Fire Ins. Co. v.

Knowles, 133 S. Ct. 1345 (2013). As a result, we vacate the

district court’s order and remand to the district court for

further proceedings.

4 RODRIGUEZ V. AT&T MOBILITY SERVICES

In its remand order, the district court held that to establish

federal jurisdiction over a putative class action, Defendant

must demonstrate to a “legal certainty” that the amount in

controversy exceeded the $5 million threshold amount, based

upon our decision to that effect in Lowdermilk v. U.S. Bank

National Association, 479 F.3d 994, 999 (9th Cir. 2007). Our

reasoning there for imposing on defendants the burden to

prove the amount in controversy to a legal certainty, rather

than the ordinary preponderance of the evidence standard, is

clearly irreconcilable with the Supreme Court’s reasoning in

Standard Fire. As a result, 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.

I. Background

Plaintiff Robert Rodriguez brought a putative class action

against AT&T Mobility Services, LLC, on behalf of himself

and all other similarly situated retail sales managers of AT&T

wireless stores in Los Angeles and Ventura counties.

Rodriguez asserted various claims under California law

related to alleged unpaid wages, overtime compensation, and

damages for statutory violations. Rodriguez filed his original

complaint in Los Angeles County Superior Court. AT&T

removed the case to federal court under 28 U.S.C.

§ 1332(d)(2).

Rodriguez moved to remand the case to California state

court, arguing that AT&T could not establish subject-matter

jurisdiction in federal court. Specifically, Rodriguez argued

that the total amount in controversy in this putative class

action did not exceed $5 million, the minimum amount for

federal jurisdiction as required by § 1332(d). Rodriguez

RODRIGUEZ V. AT&T MOBILITY SERVICES 5

pointed to his First Amended Complaint, in which he alleged

as much, that “the aggregate amount in controversy is less

than five million dollars.” To bolster his position, in that

pleading, Rodriguez also “waive[d] seeking more than five

million dollars ($5,000,000) regarding the aggregate amount

in controversy for the class claims alleged.”

AT&T attempted to establish that the amount in

controversy did in fact exceed $5 million by submitting

several sworn declarations from AT&T representatives

regarding the potential number of class members and size of

their claims. AT&T argued that Rodriguez’s allegations,

coupled with the sworn declarations, established that the

amount in controversy could not be less than roughly $5.5

million and was likely double that amount.

The district court rejected AT&T’s argument and ordered

remand to state court. The court noted that the amount in

controversy was the only jurisdictional requirement at issue

in this case and that a defendant seeking removal of an action

to federal court bears the burden of establishing the grounds

for federal jurisdiction, propositions that the parties did not

dispute. Citing our decision in Lowdermilk, the district court

held that AT&T “must demonstrate to a legal certainty that

more than $5,000,000 is at issue in this case.” AT&T could

not do so, the court held, because Rodriguez’s “‘disclaimer’

of any recovery exceeding $5,000,000 effectively foreclosed

the jurisdictional issue.” Because the waiver was controlling,

the court reasoned that it “need not address the issues

surrounding the parties’ respective calculations of the amount

in controversy as if there were no waiver or disclaimer of any

amount exceeding $5,000,000.”

6 RODRIGUEZ V. AT&T MOBILITY SERVICES

AT&T filed a petition to appeal under 28 U.S.C.

§ 1453(c)(1), which we granted on July 1, 2013.

II. Discussion

A defendant may remove to federal district court an

action first brought in state court when the district court

would have original jurisdiction. 28 U.S.C. § 1441. Federal

district courts have original subject matter jurisdiction over

class actions in which a member of the plaintiff class is a

citizen of a state different from any defendant and the

aggregate amount of the class members’ claims exceeds $5

million. 28 U.S.C. § 1332(d)(2). The party seeking the federal

forum bears the burden of establishing that the statutory

requirements of federal jurisdiction have been met. Lewis v.

Verizon Commc’ns, Inc., 627 F.3d 395, 399 (9th Cir. 2010).

We review de novo a district court’s remand order. Abrego

Abrego v. Dow Chem. Co., 443 F.3d 676, 679 (9th Cir. 2006).

As in the district court, the $5 million amount-in-

controversy requirement of 28 U.S.C. § 1332(d)(2) is the

only jurisdictional requirement disputed in this appeal.

A. Plaintiff’s Waiver of Claim Amount

The remand ordered by the district court was explicitly

based upon Rodriguez’s waiver of any claim in excess of $5

million. Recently, however, and after the district court

entered its order, the Supreme Court held that such a waiver

was ineffective. In Standard Fire Insurance Company v.

Knowles, 133 S. Ct. 1345 (2013), the Court held that a lead

plaintiff of a putative class could not foreclose a defendant’s

ability to establish the $5 million amount in controversy by

RODRIGUEZ V. AT&T MOBILITY SERVICES 7

stipulating prior to class certification that the amount in

controversy is less than $5 million. Id. at 1347.

The Court reversed the district court’s remand order

because plaintiff’s stipulation was not binding on the class

and therefore could not resolve the amount-in-controversy

question. Id. at 1350. The Court explained, “a plaintiff who

files a proposed class action cannot legally bind members of

the proposed class before the class is certified.” Id. at 1349.

Thus, a plaintiff’s “precertification stipulation does not bind

anyone but himself.” Id. Requiring courts to “ignore a

nonbinding stipulation,” the Court held, “does no more than

require the federal judge to do . . . what the statute requires,

namely ‘aggregat[e]’ the ‘claims of the individual class

members.’” Id. at 1350 (quoting 28 U.S.C. § 1332(d)(6)

(alteration in original)).

In our case, Rodriguez acknowledges that the district

court’s remand order must be vacated in light of Standard

Fire. His waiver no longer has legal effect. 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.

B. Burden of Proof

That brings us to the question of the standard to be

applied on remand. The district court held that a heightened

burden of proof applied to AT&T in establishing the requisite

jurisdictional minimum. Under Lowdermilk v. U.S. Bank

National Association, 479 F.3d 994 (9th Cir. 2007), 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

8 RODRIGUEZ V. AT&T MOBILITY SERVICES

in fact exceeds the jurisdictional requirement. Id. at 999.

Based on Lowdermilk, the district court’s decision in our case

was correct at the time.

AT&T contends, however, that Standard Fire fatally

undermines Lowdermilk’s legal certainty standard such that

it has been effectively overruled and should not apply on

remand. Rather, AT&T argues that it need only establish that

the amount in controversy exceeds $5 million by a

preponderance of the evidence, the standard that ordinarily

applies where a plaintiff “fails to plead a specific amount of

damages.” Id. at 998. Rodriguez disputes AT&T’s reading of

Standard Fire.

1. The Binding Nature of Prior Precedent

As a three-judge panel of this circuit, we are bound by

prior panel decisions such as Lowdermilk and can only

reexamine them when their “reasoning or theory” of that

authority is “clearly irreconcilable” with the reasoning or

theory of intervening higher authority. Miller v. Gammie,

335 F.3d 889, 893 (9th Cir. 2003) (en banc). “This is a high

standard.” Lair v. Bullock, 697 F.3d 1200, 1207 (9th Cir.

2012) (internal quotation marks omitted).

The test requires us to look at more than the surface

conclusions of the competing authority. The issues presented

in the two cases need not be identical in order for the

intervening higher authority to be controlling. Miller,

335 F.3d at 900. “Rather, the relevant court of last resort must

have undercut the theory or reasoning underlying the prior

circuit precedent in such a way that the cases are clearly

irreconcilable.” Id. But “[i]t is not enough for there to be

‘some tension’ between the intervening higher authority and

RODRIGUEZ V. AT&T MOBILITY SERVICES 9

the prior circuit precedent.” Lair, 697 F.3d at 1207 (quoting

United States v. Delgado-Ramos, 635 F.3d 1237, 1239 (9th

Cir. 2011)).

In United States v. Lindsey, 634 F.3d 541 (9th Cir. 2011),

we elaborated on the Miller standard. The prior circuit

precedent at issue provided that an erroneous denial of a

peremptory challenge required automatic reversal of a

criminal conviction. See id. at 546–47 (discussing the

automatic reversal rule of United States v. Annigoni, 96 F.3d

1132 (9th Cir. 1996) (en banc)). But in Rivera v. Illinois,

556 U.S. 148 (2009), the Supreme Court held that courts

could review improper denials of peremptory challenges for

harmless error without running afoul of the Federal

Constitution. Id. at 157. Rivera only addressed peremptory

challenges in state, not federal, court, and it did not foreclose

the possibility that automatic reversal could be held

appropriate in a federal prosecution. Lindsey, 634 F.3d at 550.

Nonetheless, Lindsey held that Rivera’s reasoning was clearly

irreconcilable with Annigoni’s automatic reversal rule such

that the en banc decision of the Ninth Circuit had been

effectively overruled. Id. (“It does not matter that the two

decisions are not identical.”).

Lindsey highlighted Miller’s instruction to focus on “the

reasoning and analysis in support of a holding, rather than the

holding alone.” Id. at 550. We noted that the result in Miller

was a consequence of the Supreme Court’s having taken an

“approach that [was] fundamentally inconsistent with the

reasoning of our earlier circuit authority.” Id. at 548 (quoting

Miller, 335 F.3d at 892) (internal quotation marks omitted).

Thus, because the conclusion reached in our circuit precedent

was no longer “supported for the reasons stated” in that

10 RODRIGUEZ V. AT&T MOBILITY SERVICES

decision, our court determined that it was no longer

appropriate to apply its holding. Lindsey, 634 F.3d at 551.

In contrast, we held in Lair v. Bullock that a district court

had erred when it eschewed our controlling circuit precedent

because of a subsequent decision by the Supreme Court.

697 F.3d at 1207. Our precedent, Montana Right to Life

Association v. Eddleman, 343 F.3d 1085 (9th Cir. 2003), and

the intervening higher authority, Randall v. Sorrell, 548 U.S.

230 (2006), reached opposite conclusions regarding campaign

contribution limits. Compare Eddleman, 343 F.3d at 1092–96

(upholding Montana’s campaign contribution limit) with

Randall, 548 U.S. at 236–37 (holding that Vermont’s

contribution limitations were unconstitutional). But that

tension was not enough to overrule Eddleman because

Randall “only clarified and reinforced” the principles on

which our prior decision relied. See Lair, 697 F.3d at 1207

(noting that Eddleman was based on the same Supreme Court

precedent on which Randall relied).

We must, then, follow our court’s directive to look

beyond the narrow conclusions of Lowdermilk and Standard

Fire. Instead, we focus on the respective bases for those

decisions to determine whether Standard Fire’s reasoning so

undercuts the principles on which Lowdermilk relied that our

prior decision cannot stand.

2. The Reasoning of Lowdermilk and Standard Fire

Lowdermilk involved a class complaint filed in Oregon

state court on behalf of a class of employees. 479 F.3d at 996.

Defendant removed the case to federal court, and plaintiff

opposed removal, arguing that the aggregate amount in

controversy did not exceed $5 million. Id. Plaintiff’s

RODRIGUEZ V. AT&T MOBILITY SERVICES 11

complaint alleged damages “in total, less than five million

dollars.” Id. at 996. The district court remanded the case to

state court. Id.

We affirmed the order of remand. Because plaintiff had

alleged that the amount in controversy was less than $5

million, we held that “we need not look beyond the four

corners of the complaint to determine whether the CAFA

jurisdictional amount is met.” Id. at 998. We further held that

“a plaintiff may sue for less than the amount she may be

entitled to if she wishes to avoid federal jurisdiction and

remain in state court.” Id. at 999. Plaintiff, being the “master

of her complaint,” could elect to remain in state court by

merely forgoing any damages above the jurisdictional

minimum. Id. at 998–99. Accordingly, we held that “the

familiar ‘legal certainty’ standard best capture[d] the proof

the defendant must produce,” noting, at 999, that the Third

Circuit had reached a similar conclusion in Morgan v. Gay,

471 F.3d 469 (3d Cir. 2006).1

Lowdermilk rested on two principles. 479 F.3d at 998

(“There are two principles that inform our judgment here.”).

First, federal courts are courts of limited jurisdiction, which

is to be strictly construed. Id. Second, “plaintiff is the ‘master

1

No other circuit has adopted this heightened standard, and most circuits

have adopted a preponderance standard. See Frederick v. Hartford

Underwriters Ins. Co., 683 F.3d 1242, 1246 (10th Cir. 2012) (rejecting the

legal certainty test and reviewing cases); Pretka v. Kolter City Plaza II,

Inc., 608 F.3d 744, 752 (11th Cir. 2010); Bell v. Hershey Co., 557 F.3d

953, 958 (8th Cir. 2009); Amoche v. Guarantee Trust Life Ins. Co.,

556 F.3d 41, 50 (1st Cir. 2009); Smith v. Nationwide Prop. & Cas. Ins.

Co., 505 F.3d 401, 404 (6th Cir. 2007); Meridian Sec. Ins. Co. v.

Sadowski, 441 F.3d 536, 540–41 (7th Cir. 2006). The Third Circuit has not

spoken on the legal certainty standard after Standard Fire.

12 RODRIGUEZ V. AT&T MOBILITY SERVICES

of her complaint’ and can plead to avoid federal jurisdiction.”

Id. at 998–99. Lowdermilk adopted the “legal certainty” test,

in part, to “preserve the plaintiff’s prerogative . . . to forgo a

potentially larger recovery to remain in state court.” Id. at

999.

It was the second principle that primarily explained our

decision in Lowdermilk. That federal courts are courts of

limited jurisdiction is inherently true for all cases in which

federal jurisdiction is at issue, but we do not routinely impose

a heightened “to a legal certainty” burden of proof in

determining whether there is federal jurisdiction in other

contexts. See McNutt v. Gen. Motors Acceptance Corp. of

Ind., 298 U.S. 178, 189 (1936) (discussing a party’s burden

to show that federal jurisdiction is appropriate and that he

“justify his allegations by a preponderance of the evidence”);

Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1117 (9th Cir.

2004) (holding that a defendant must carry its burden to

establish by a preponderance of the evidence that the amount

in controversy exceeded $75,000 because plaintiff’s

complaint “[fell] short of even seeking the threshold

amount”).

That second principle is, however, directly contradicted

by Standard Fire. The Court held that a plaintiff seeking to

represent a putative class could not evade federal jurisdiction

by stipulating that the amount in controversy fell below the

jurisdictional minimum. Standard Fire, 133 S. Ct. at 1350. As

a consequence, we cannot now say that a plaintiff, in the class

action context, has the “prerogative . . . to forgo a potentially

larger recovery to remain in state court.” See Lowdermilk,

479 F.3d at 999 (adopting the legal certainty standard to

“preserve” that choice). Plaintiff may not “sue for less than

RODRIGUEZ V. AT&T MOBILITY SERVICES 13

the amount she may be entitled to if she wishes to avoid

federal jurisdiction and remain in state court.” Id.

In addition, Lowdermilk held that district courts “need not

look beyond the four corners of the complaint to determine

whether the CAFA jurisdictional amount is met” so long as

a plaintiff avers damages below $5 million. Id. at 998. Under

Standard Fire, the district court’s inquiry is not so narrow.

Standard Fire instructed district courts to look to the potential

claims of the absent class members, rather than plaintiff’s

complaint, holding that section 1332(d) so requires: “[t]he

statute tells the District Court to determine whether it has

jurisdiction by adding up the value of the claim of each

person who falls within the definition of [the] proposed

class.” 133 S. Ct. at 1348.

Put another way, Lowdermilk reasoned that the initial

jurisdictional determination derives from the complaint, while

Standard Fire mandates that courts determine their

jurisdiction by aggregating all potential class members’

individual claims. See id. at 1350 (“[T]o ignore a nonbinding

stipulation does no more than require the federal judge to do

what she must do in cases without a stipulation and what the

statute requires, namely ‘aggregate’ the ‘claims of the

individual class members.’” (quoting 28 U.S.C.

§ 1332(d)(6)). To do so, district courts must necessarily “look

beyond the four corners of the complaint” when the

complaint alleges damages below the jurisdictional minimum,

contrary to Lowdermilk’s instruction. Lowdermilk, 479 F.3d

at 998.

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

14 RODRIGUEZ V. AT&T MOBILITY SERVICES

recovery on behalf of the putative class. 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.

Standard Fire, 133 S. Ct. at 1350.

The theory supporting our adoption of the legal certainty

standard no longer holds true. Lowdermilk’s legal certainty

standard is a consequence of a plaintiff’s ability to plead to

avoid federal jurisdiction. That principle is not viable in

actions involving absent class members. The reasoning

behind Lowdermilk’s imposition of the legal certainty

standard is clearly irreconcilable with Standard Fire. We hold

that Standard Fire has so undermined the reasoning of our

decision in Lowdermilk that the latter has been effectively

overruled. A defendant seeking removal of a putative class

action must demonstrate, by a preponderance of evidence,

that the aggregate amount in controversy exceeds the

jurisdictional minimum. This standard conforms with a

defendant’s burden of proof when the plaintiff does not plead

a specific amount in controversy. See Guglielmino v. McKee

Foods, 506 F.3d 696, 701 (9th Cir. 2007).2 This is the burden

AT&T must satisfy on remand.

C. Application of the Preponderance Standard

The district court, relying on Rodriguez’s waiver of

damages in excess of $5 million, did not undertake an

analysis of AT&T’s evidence regarding the amount in

controversy. We decline AT&T’s invitation to do so in the

2

Nothing in our opinion should be construed to comment on our court’s

decision in Abrego Abrego v. Dow Chem. Co., 443 F.3d 676 (9th Cir.

2006). That decision concerned issues not presented in this appeal.

RODRIGUEZ V. AT&T MOBILITY SERVICES 15

first instance on appeal. See Horphag Research Ltd. v.

Pellegrini, 337 F.3d 1036, 1041 (9th Cir. 2003) (remanding

when intervening Supreme Court authority altered the

standard at issue).

AT&T also contends that Rodriguez waived challenging

the amount in controversy under a preponderance standard

because Rodriguez never argued it below. AT&T cites no

authority for that proposition, nor could it. The preponderance

standard did not apply to AT&T’s burden of proof prior to

Standard Fire, so Rodriguez did not waive that challenge. See

In Re Mercury Interactive Corp. Sec. Litig., 618 F.3d 988,

992 (9th Cir. 2010) (describing three exceptions to the

discretionary determination of waiver, including “when a new

issue arises while appeal is pending because of a change in

the law”).

Because we hold that the legal certainty standard no

longer applies to AT&T’s burden of proof on remand, and we

vacate the district court’s order remanding the case to state

court, we need not address AT&T’s bad faith argument.

III. Conclusion

A lead plaintiff of a putative class cannot reduce the

amount in controversy on behalf of absent class members, so

there is no justification for assigning to the allegation weight

so significant that it affects a defendant’s right to a federal

forum under § 1332(d)(2). Our reasons for applying a legal

certainty standard are now clearly irreconcilable with

intervening Supreme Court authority. Accordingly,

Lowdermilk has been effectively overruled by Standard Fire.

VACATED and REMANDED.