Hawkins v. Walmart, Inc.

[7] 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA [10] 11 MATTHEW HAWKINS, on behalf of No. 1:24-cv-00374-KES-SKO himself and all others similarly situated, [12] Plaintiff, 13 ORDER DENYING MOTION TO REMAND v. TO STATE COURT [14] WALMART, INC., (Doc. 7) [15] Defendant. [17] 18 Plaintiff Matthew Hawkins brings this putative class action against defendant Walmart, 19 Inc., alleging false and deceptive advertising and labeling in connection with the sale of 20 Walmart’s Great Value Avocado Oil (“Avocado Oil”). Exhibit 1 to Notice of Removal 21 (“Complaint”), Doc. 1-1. Hawkins moves to remand this action to the Tuolumne County 22 Superior Court. Doc. 7. This matter is suitable for resolution without a hearing pursuant to Local 23 Rule 230(g). Doc. 13. The court has considered the parties’ briefs and, for the reasons explained 24 below, will deny the motion to remand and deny Hawkins’ alternative request for limited 25 jurisdictional discovery. 26 I. BACKGROUND 27 Hawkins alleges he purchased a bottle of Avocado Oil believing it was pure avocado oil 28 as represented by Walmart. Complaint ¶ 8, Doc. 1-1. Hawkins alleges the Avocado Oil was 1 adulterated with other oils and that he and the putative class members would not have purchased 2 it, or would have paid less for it, if they had known that the product was not pure avocado oil. Id. 3 at ¶¶ 3, 8, 19, 23. 4 On February 20, 2024, Hawkins filed this action in state court on behalf of himself, and 5 others similarly situated, alleging violations of California’s (1) Consumer Legal Remedies Act, [6] Cal. Civ. Code § 1750 et seq., (2) False Advertising Law, Cal. Bus. & Prof. Code § 17500 et seq., 7 and (3) Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200 et seq.; and alleging 8 claims for (4) breach of express warranty, Cal. Com. Code § 2313 , (5) breach of implied 9 warranty, Cal. Com. Code § 2314 (2)(f), and (6) intentional misrepresentation. In his complaint, 10 Hawkins alleges he and the putative class members “have suffered a financial injury in the form 11 of paying a price premium that the Class Products command in the market as a result of 12 Walmart’s representations that they are pure avocado oil.” Id. at ¶ 23 . Hawkins also alleges he 13 and the putative class suffered damages “including but not limited to the amounts paid for the 14 Class Products.” Id. at ¶ 86 . 15 Walmart removed this action from the Tuolumne County Superior Court pursuant to the 16 Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332 . Notice of Removal, Doc. 1. Walmart 17 alleges in its Notice of Removal that that this action meets CAFA’s removal requirements 18 because there are more than 100 putative class members, minimal diversity between the parties 19 exists, and the amount in controversy exceeds $5 million, exclusive of interest and costs. Id. at 20 4-8. Hawkins moves to remand this action, arguing removal was improper because Walmart has 21 not sufficiently established the amount in controversy. Motion to Remand (“Motion”), Doc. 7. In 22 the alternative, Hawkins requests narrowly tailored jurisdictional discovery. Walmart opposes the 23 Motion and provides a declaration from its merchandising director, Tommy Reed. Opposition to 24 Motion (“Opposition”), Doc. 9. Hawkins timely filed his reply. Reply in support of Motion 25 (“Reply”), Doc. 11. 26 II. LEGAL STANDARD 27 CAFA confers federal district courts with original jurisdiction over class actions in which 28 there are at least 100 class members, the parties are minimally diverse, and the amount in 1 controversy exceeds $5 million, notwithstanding interest and costs. 28 U.S.C. § 1332 (d); see also 2 Ibarra v. Manheim Invs., Inc., 775 F.3d 1193, 1195 (9th Cir. 2015). Congress intended CAFA to 3 be interpreted expansively, and “[n]o antiremoval presumption attends cases invoking CAFA.” 4 Arias v. Residence Inn by Marriott, 936 F.3d 920, 922, 924 (9th Cir. 2019) (quoting Dart 5 Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81 , 135 (2014)). 6 The amount in controversy is determined by including “all relief claimed at the time of 7 removal to which plaintiff would be entitled if she prevails.” Fritsch v. Swift Transp. Co. of 8 Arizona, LLC, 899 F.3d 785, 793 (9th Cir. 2018). This includes damages (compensatory, 9 punitive, or otherwise), the costs of complying with an injunction, and attorneys’ fees awarded 10 under fee-shifting statutes or contract. Id. “In determining the amount in controversy, courts first 11 look to the complaint.” Ibarra, 775 F.3d at 1197 . When the complaint does not state the amount 12 of damages, the defendant seeking removal bears the burden of showing that the amount in 13 controversy exceeds $5 million. Id. In its notice of removal, a defendant need only include “a 14 plausible allegation that the amount in controversy exceeds the jurisdictional threshold” and does 15 not need to include evidentiary submissions. Dart, 541 U.S. at 89. However, when “a 16 defendant's assertion of the amount in controversy is challenged . . . both sides submit proof and 17 the court decides, by a preponderance of the evidence, whether the amount-in-controversy 18 requirement has been satisfied.” Id. at 88. 19 “A defendant may rely on reasonable assumptions to prove that it has met the statutory 20 threshold.” Harris v. KM Indus., Inc., 980 F.3d 694, 701 (9th Cir. 2020). “An assumption may 21 be reasonable if it is founded on the allegations of the complaint.” Arias, 936 F.3d at 925 . A 22 defendant does not need to “provide evidence proving the assumptions correct” as this would be 23 akin to “impos[ing] a requirement that [the defendant] prove it actually violated the law.” Id. 24 at 27. Rather, such assumptions “must only have ‘some reasonable ground underlying them’” 25 and “cannot be pulled from thin air.” Id. (quoting Ibarra, 775 F.3d at 1199 ). 26 “The district court should weigh the reasonableness of the removing party’s assumptions, 27 not supply further assumptions of its own.” Harris, 980 F.3d at 701 . Yet “there is an important 28 distinction between a court offering entirely new or different assumptions itself versus modifying 1 one or more assumptions in the removing party’s analysis.” Jauregui v. Roadrunner 2 Transportation Servs., Inc., 28 F.4th 989, 996 (9th Cir. 2022). It remains true that “[w]here a 3 defendant’s assumption is unreasonable on its face without comparison to a better alternative, a 4 district court may be justified in simply rejecting that assumption and concluding that the 5 defendant failed to meet its burden.” Id. However, where “the reason a defendant’s assumption 6 is rejected is because a different, better assumption is identified,” the court “should consider the 7 claim under the better assumption—not just zero-out the claim.” Id. Parties may also submit 8 evidence outside the complaint, including affidavits, declarations, or other summary-judgment 9 type evidence. Ibarra, 775 F.3d at 1197 . Courts determine the propriety of removal “on the basis 10 of the pleadings at the time of removal.” Broadway Grill, Inc. v. Visa Inc., 856 F.3d 1274 , 1277 11 (9th Cir. 2017). 12 III. DISCUSSION 13 A. CAFA Jurisdiction 14 Walmart’s Notice of Removal alleged that the proposed class consist of at least 100 15 members, that there is minimal diversity, and that the amount in controversy is more than $5 16 million (consisting of compensatory damages of more than $2 million, punitive damages of more 17 than $2 million, attorneys’ fees of at least $1 million, and the cost for complying with an 18 injunction). See Notice of Removal, Doc. 1. 19 Hawkins moves to remand this action to the Tuolumne County Superior Court, arguing 20 Walmart does not meet CAFA’s jurisdictional requirements because it fails to establish the 21 amount in controversy. Motion, Doc. 7 at 7. Hawkins argues Walmart’s Notice of Removal 22 lacks evidentiary support and is based on speculative and/or flawed assumptions. Id. 23 Specifically, Hawkins argues that Walmart erroneously assumes Hawkins is seeking the full 24 purchase price of the Avocado Oil as damages. Id. at 8-9. Walmart opposes the Motion, arguing 25 the complaint, as pled, plausibly seeks the full purchase price of the Avocado Oil as damages and 26 therefore the amount in controversy is over $7 million. Opposition, Doc. 9 at 8-9. 27 /// 28 /// 1 1. The Notice of Removal 2 Hawkins argues Walmart’s Notice of Removal is defective because it lacks evidence to 3 support its calculation that the amount in controversy is at least $5 million. Motion, Doc. 7 at 2. 4 Hawkins also questions the $2 million compensatory damages figure Walmart alleged in its 5 Notice of Removal, arguing that number was also used by Walmart’s counsel in other, unrelated, 6 consumer class action cases. Id. at 7. Hawkins also argues Walmart’s Notice of Removal should 7 have included the number of Avocado Oil units sold. Id. at 8-9. However, a notice of removal 8 only needs to include a plausible allegation that the amount in controversy exceeds $5 million and 9 does not need to contain evidentiary submissions. Arias, 936 F.3d at 922 (internal citation 10 omitted) (“a removing defendant's notice of removal ‘need not contain evidentiary submissions’ 11 but only plausible allegations of the jurisdictional elements”); see also Ibarra, 775 F.3d at 1197 12 (evidence establishing the amount in controversy is required when plaintiff challenges the amount 13 in controversy). Walmart’s evidentiary obligation to establish the amount in controversy by a 14 preponderance of the evidence arose only once Hawkins contested removal and the amount in 15 controversy. See Jauregui, 28 F.4th at 994 ; see also Hicks v. Grimmway Enterprises, Inc., No. 16 22-CV-2038 JLS (DDL), 2023 WL 3319362 , at *9 (S.D. Cal. May 9, 2023) (defendant’s 17 evidentiary burden arises only after plaintiff challenges the amount in controversy). 18 2. Amount in Controversy 19 Hawkins challenges the assumptions Walmart uses to calculate the amount in controversy, 20 arguing Walmart relies on speculation and flawed assumptions to reach the jurisdictional 21 threshold of $5 million. Motion, Doc. 7 at 7. Hawkins does not challenge the one-to-one ratio 22 Walmart uses to calculate punitive damages or the 25% benchmark it uses to calculate attorneys’ 23 fees, or that such amounts should be included in the calculation of the amount in controversy. Id. 24 at 9. Instead, Hawkins challenges the punitive damages and attorneys’ fees amounts only to the 25 extent that they depend on Walmart’s compensatory damages calculation, which is based on a full 26 purchase price theory of damages. Id. As such, the sole dispute between the parties concerns the 27 calculation of compensatory damages, and, specifically, whether Walmart appropriately bases its 28 estimate of claimed compensatory damages on the full purchase price of the Avocado Oil. 1 a. Compensatory Damages 2 Hawkins argues that it is not reasonable for Walmart to use the full purchase price of the 3 Avocado Oil to calculate compensatory damages, because he did not seek the full purchase price 4 in his complaint and, as a matter of law, he cannot recover the full purchase price. Id. The court 5 first looks to the complaint to ascertain the relief Hawkins sought. Ibarra, 775 F.3d at 1197 . 6 Hawkins argues in his Motion and Reply that he cannot recover the full purchase price for 7 the Avocado Oil and, therefore, it is not a reasonable assumption that he would seek it as a theory 8 of recovery. However, as pleaded, Hawkins’ complaint places into controversy the full purchase 9 price. See Carlos v. Jaguar Land Rover N. Am., LLC, No. CV 19-1318-GW(FFMX), 2019 WL 10 2068465, at *3 (C.D. Cal. May 10, 2019) (plaintiff’s assertion that “there is a basis in law (or 11 logic) which may restrict his recovery of actual damages to some lesser figure than the full 12 purchase price does not change the fact that his Complaint put in controversy far more than 13 that.”). Throughout the complaint, Hawkins alleges that had he known the Avocado Oil was 14 adulterated, he and the putative class members “would not have purchased them at the prices at 15 which they were sold in the market or would not have purchased them at all.” Complaint, Doc. 116 1 ¶ 85; see also e.g. id. ¶¶ 8, 23, 43, 69, 78 . Hawkins seeks damages “including but not limited to 17 the amounts paid for the [Avocado Oil]” and seeks restitution for damages suffered. Complaint, 18 Doc. 1-1 at ¶ 86 & Prayer for Relief. Hawkins also seeks to require Walmart to disgorge the 19 money it “unlawfully, unfairly, and fraudulently obtained” from Hawkins and the putative class 20 members for the Avocado Oil. Id. at ¶ 60 . 21 Hawkins’ request for restitution of the amounts paid for the Avocado Oil and his 22 allegations that, but for the alleged false advertisement, he and the putative class members would 23 not have purchased the Avocado Oil or would have paid less for it, can reasonably be construed 24 as seeking, at least in the alternative, the full purchase price in damages.1 See Complaint, 25 1 Hawkins argues in his Reply, for the first time, that the language of the complaint does not indicate he seeks the full purchase price, but, rather, that it is necessary language to establish [26] standing. Reply, Doc. 11 at 6. Regardless of the purpose for which Hawkins included such 27 allegations in the complaint, Walmart may reasonably rely on the complaint’s allegations to determine the amount in controversy. [28] 1 Doc. 1-1 ¶¶ 8, 23, 43, 69, 78, 85; see also Lokey v. CVS Pharmacy, Inc., No. 20-CV-04782-LB, [2] 2020 WL 5569705 , at *4 (N.D. Cal. Sept. 17, 2020) (complaint plausibly seeks full refund 3 damages when there is a request for restitution coupled with an allegation that plaintiff would not 4 have purchased a more expensive product had plaintiff known the product she was purchasing 5 was the same as a less expensive product). 6 Hawkins is correct that restitution damages are generally calculated by focusing “on the 7 difference between what was paid and what a reasonable consumer would have paid at the time of 8 purchase without the fraudulent or omitted information.” Pulaski & Middleman, LLC v. Google, 9 Inc., 802 F.3d 979, 989 (9th Cir. 2015). However, a plaintiff may recover the full purchase price 10 if the product has no value to the plaintiff. “‘A full refund may be available in a UCL case when 11 the plaintiffs prove the product had no value to them’ because ‘the price paid minus the value 12 actually received equals the price paid’—zero.” Panera Mullins v. Premier Nutrition Corp., No. 13 13-CV-01271-RS, 2016 WL 1535057 , at *6 (N.D. Cal. Apr. 15, 2016) (citing In re Tobacco 14 Cases II, 240 Cal. App. 4th 779, 795 (2015)). 15 Hawkins argues that the full purchase price is not available as damages for food products, 16 but he relies on cases in which the price premium was established in the litigation or in which the 17 complaint itself provided a basis for calculating the price premium. See, e.g., Hadley v. Kellogg 18 Sales Co., 324 F. Supp. 3d 1084, 1104 (N.D. Cal. 2018) (proposed conjoint analysis measuring 19 price premium was a valid measure of damages at class certification and expert opinion stage); 20 Calagno v. Rite Aid Corp., No. 4:20-CV-05476-YGR, 2020 WL 6700451 , at *3 (N.D. Cal. Nov. 21 13, 2020) (full purchase price was not proper measure of damages where overcharge percentage 22 could be determined by comparing two identical products); Aseltine v. Panera, LLC, No. 21-CV23 04284-JST, 2021 WL 8267421 , at *3 (N.D. Cal. Dec. 13, 2021) (delivery fee could not be used to 24 calculate amount in controversy because complaint did not seek to recover delivery fee and 25 sought only to recover hidden food markup). 26 A defendant may look to the complaint to ascertain the amount in controversy, and 27 Hawkins’ complaint, as pleaded, can reasonably be read to indicate that the product had no value 28 to Hawkins and the putative class and that the full purchase price is sought as compensatory 1 damages. See McConnon v. Kroger Co., No. 2:24-CV-02601-SB-E, 2024 WL 2132509 , at *2–3 2 (C.D. Cal. May 10, 2024) (full purchase price could be considered as theory of damages where 3 complaint (1) did not specify whether “adulterated” product was of any value to plaintiff, (2) 4 sought damages for the amounts paid for class product, and (3) pled in alternative that plaintiff 5 would have paid less for product or would not have purchased product at all). 6 The complaint does not indicate what value, if any, Hawkins obtained from the Avocado 7 Oil. While Hawkins challenges Walmart’s use of the full purchase price and argues that a price 8 premium is the proper measure of damages, he does not state or estimate any such price premium. 9 Instead, Hawkins vaguely argues that the food product must have some value to him and the 10 putative class members. Walmart is not required to provide a price premium for Hawkins. Arias, [11] 936 F.3d at 927 (defendant does not need to “provide evidence proving the assumptions correct;” 12 instead, defendant may rely on reasonable assumptions to establish amount in controversy). “The 13 amount in controversy is simply an estimate of the total amount in dispute, not a prospective 14 assessment of defendant's liability.” Lewis v. Verizon Commc'ns, Inc., 627 F.3d 395, 400 (9th 15 Cir. 2010). The court declines to speculate what an appropriate price premium might be. 16 Without a price premium advanced in the complaint (or in the Motion), Walmart reasonably 17 relied on the allegations in the complaint to calculate the amount in controversy. 18 As the complaint can reasonably be read as seeking, in the alternative, the full purchase 19 price as damages, Walmart can rely on its gross sales of $3 million of the Avocado Oil in the 20 relevant period to estimate the compensatory damages at issue based on the complaint. See 21 Turcios v. Carma Lab'ys, Inc., No. CV 12-8487 ABC (EX), 2012 WL 12893989 , at *2-3 (C.D. 22 Cal. Dec. 13, 2012) (where complaint is “somewhat inconsistent” with regards to amount plaintiff 23 sought, “for jurisdictional purposes, the total amount at issue should be based on gross sales… the 24 Court cannot fix Defendant's ultimate liability for restitution” at motion to remand stage); Allred 25 v. Frito-Lay N. Am., Inc., No. 17-CV-1345 JLS (BGS), 2018 WL 1725535 , at *2 (S.D. Cal. Apr. 26 10, 2018) (full restitution of purchase price could be used to calculate amount in controversy 27 where plaintiff sought full restitution of purchase price). Walmart submitted a declaration from 28 its merchandising director that the sales of Avocado Oil from its brick-and-mortar stores 1 exceeded $3 million dollars from February 29, 2020, through February 29, 2024. Hawkins does 2 not challenge the adequacy of the declaration and the court does not find any evidentiary 3 deficiency in the declaration. As such, Walmart has provided sufficient evidence to support its 4 contention that the compensatory damages at issue exceed $3 million. 5 b. Punitive Damages and Attorneys’ Fees 6 Hawkins objects to Walmart’s punitive damages and attorneys’ fees calculations solely on 7 the ground that they are erroneous because they are based on Walmart’s allegedly faulty 8 compensatory damage calculations. Motion, Doc. 7 at 9. As Walmart’s compensatory damages 9 calculation is reasonable, Hawkins’ objections to the punitive damages and attorneys’ fees 10 calculations also have no merit. 11 Walmart properly relies on potential punitive damages to satisfy the amount in 12 controversy. Hawkins does not dispute Walmart’s calculation of punitive damages based on a 13 one-to-one ratio of actual damages. See Motion, Doc. 7 at 9. Walmart has shown that the 14 complaint plausibly put $3 million in compensatory damages at issue. Using a one-to-one ratio 15 between compensatory and punitive damages, the punitive damages are plausibly $3 million. See 16 Greene v. Harley-Davidson, Inc., 965 F.3d 767, 772 (9th Cir. 2020) (defendant satisfied its 17 burden of establishing amount in controversy on removal by citing cases “where juries had 18 awarded punitive damages at ratios higher than 1:1” for claims plaintiff sought). Including 19 $3 million for punitive damages brings the total amount in controversy to over $6 million, which 20 is more than sufficient to establish CAFA jurisdiction. 21 Similarly, Hawkins does not dispute Walmart’s use of a 25% benchmark for potential 22 attorneys’ fees or the use of attorneys’ fees to calculate the amount in controversy. See Motion, 23 Doc. 7. “The CLRA authorizes an award of attorneys' fees to a prevailing plaintiff.” Hawkins v. 24 Kroger Co., 337 F.R.D. 518 , 532 (S.D. Cal. 2020) (citing Cal. Civ. Code § 1780 (e)). Walmart’s 25 inclusion of $1.5 million in estimated attorneys’ fees (25% of the compensatory and punitive 26 damages) in calculating the amount in controversy is reasonable and brings the total amount in 27 controversy to over $7.5 million. See Fritsch, 899 F.3d at 794 (“a court must include future 28 attorneys' fees recoverable by statute or contract when assessing whether the amount-in1 | controversy requirement is met.’’). 2 Accordingly, Walmart has sufficiently established that this action meets CAFA’s 3 | $5 million jurisdictional requirement. 4 B. Jurisdictional Discovery 5 Hawkins seeks, in the alternative, jurisdictional discovery regarding the amount in 6 | controversy. Motion, Doc. 7 at 8. Jurisdictional discovery is appropriate where “pertinent facts 7 | bearing on the question of jurisdiction are controverted or where a more satisfactory showing of 8 || the facts is necessary.” Boschetto v. Hansing, 539 F.3d 1011, 1020 (9th Cir. 2008). Hawkins has 9 | not made a showing that jurisdictional discovery will reveal that the amount in controversy is not 10 | met or that the court lacks jurisdiction over this action. See LNS Enters. LLC v. Cont'l Motors, 11 | Inc., 22 F.4th 852, 864-65 (9th Cir. 2022) (affirming denial of jurisdictional discovery where 12 | plaintiffs “sought jurisdictional discovery without providing any affidavit or evidence 13 | substantiating their requests or describing with any precision how such discovery could be helpful 14 | to the Court, and their request amounted to only a mere hunch.”). Accordingly, Hawkins’ request 15 | for jurisdictional discovery is denied. 16 IV. CONCLUSION 17 Based upon the foregoing, the motion to remand and request for jurisdictional discovery 18 | are denied. [20] 91 | TIS SO ORDERED. _ 22 Dated: _ August 22, 2024 4h 33 UNITED STATES DISTRICT JUDGE