United States District Court, W.D. Arkansas, Texarkana Division
THOMAS GOODNER and LINDA GOODNER, individually and on behalf of a class of all other similarly situated individuals, Plaintiffs,
CLAYTON HOMES, INC.; CMH HOMES, INC.; and VANDERBILT MORTGAGE & FINANCE, INC., Defendants.
SUSAN O. HICKEY, District Judge
On September 10, 2012, this Court granted Plaintiffs' Motion to Remand and remanded this case to the Circuit Court for Lafayette County for further proceedings. ECF No. 37. The Court's remand decision was based upon Plaintiffs' stipulation which limited the class recovery to a sum less than the amount-in-controversy required by the Class Action Fairness Act. Defendants appealed the decision. On September 16, 2013, the Eighth Circuit Court of Appeals summarily remanded the case to this Court for reconsideration in light of the Supreme Court's recent decision regarding stipulations made on behalf of absent class members. Standard Fire Ins. Co. v. Knowles, 133 S.Ct. 1345, 185 L.Ed.2d 439 (2013).
Plaintiffs' Motion to Remand (ECF No. 12) is now before the Court for reconsideration. Defendants have responded. ECF No. 32. Plaintiffs have filed a reply. ECF No. 33. The parties have filed a large number of supplemental briefs. ECF Nos. 36, 44, 45, and 48. Also before the Court is Plaintiffs' Motion for Jurisdictional Discovery. ECF No. 46. Defendants have filed a response to the discovery motion. ECF No. 47. These issues are ripe for the Court's consideration.
Plaintiffs filed this putative class action suit in Lafayette County Circuit Court on November 10, 2011. The complaint seeks damages for violations of the Arkansas Deceptive Trade Practices Act and the Arkansas Unfair Practices Act as well as unjust enrichment and constructive fraud. The claims arise from an alleged kickback scheme between CMH Homes, Inc. ("CMH") and Vanderbilt Mortgage & Finance, Inc. ("VMF"), both of which are owned by Clayton Homes, Inc. According to Plaintiffs, the scheme consisted of CMH, a manufactured home seller, receiving kickbacks from VMF, a finance company, for referring home buyers to VMF for financing. Plaintiffs allege that neither CMH nor VMH disclosed to Plaintiffs that they were using money charged to and provided by Plaintiffs to make the 4% kickback payment to CMH in return for getting Plaintiffs to agree to finance the purchase of the manufactured home with VMH.
Defendants wish to remain in federal court pursuant to the Class Action Fairness Act ("CAFA"). Plaintiffs, however, move the Court to remand this case back to state court. They argue that the amount in controversy is less than $5 million, and therefore this Court lacks federal jurisdiction over the subject matter of this lawsuit.
For a case to be heard in federal court, CAFA requires, among other things, that the case's amount in controversy be greater than $5 million. 28 U.S.C. § 1332(d)(2) (2006). Plaintiffs previously argued that they put less than $5 million in controversy by stipulating not to accept more, but the Supreme Court's recent decision in Standard Fire Ins. Co. v. Knowles definitively states that such stipulations may not prevent removal under CAFA. 133 S.Ct. at 1348 (holding that, in order to defeat CAFA jurisdiction, a stipulation must be binding, and a plaintiff bringing a proposed class action cannot bind members of the proposed class before it is certified). Plaintiffs now assert that Defendants have not submitted sufficient evidence showing that the amount in controversy exceeds $5 million. This is the only issue that is presently before the Court.
A defendant invoking federal-court diversity jurisdiction through removal must prove the required statutory amount in controversy by a preponderance of the evidence. Hargis v. Access Capital Funding, LLC, 674 F.3d 783, 798 (8th Cir. 2012) (quoting Bell v. Hershey Co., 557 F.3d 953, 956 (8th Cir. 2009)); see also 28 U.S.C. § 1446(c)(2)(B). The defendant does not have to prove by a preponderance that the amount in controversy is more than $5 million, but rather that a fact finder might legally conclude that it is. Hartis v. Chicago Title Ins. Co., 656 F.3d 778, 781 (8th Cir. 2009) (quoting Bell, 557 F.3d at 958)). If a defendant meets its burden, then a plaintiff seeking remand must establish to a legal certainty that the amount in controversy is less than the required statutory amount. Bell, 557 F.3d at 956. The legal-certainty standard is not met if even a possibility exists of recovering more than the statutory minimum. Back Doctors Ltd. v. Metropolitan Property & Casualty Ins. Co., 637 F.3d 827, 831 (7th Cir. 2011).
Defendants maintain that CAFA's amount-in-controversy requirement is easily met by calculating the potential compensatory damages stemming from the alleged kickback scheme, trebling the compensatory damages pursuant to Arkansas law, and adding attorney fees and punitive damages. In response, Plaintiffs claim that: (1) there is no competent proof of Defendants' calculation of the amount of potential compensatory damages; (2) speculative future attorney fees are not in controversy and, if they were, Defendant's estimated attorney fee of 30-40% of the total possible class recovery is not supported by competent proof; (3) a stipulation by Plaintiffs' attorney, Matt Keil, limits the amount of attorney fees in controversy; and (4) Defendants' estimated amount of punitive damages in controversy is not supported by competent proof.
A. Compensatory Damages
Plaintiffs' Complaint alleges that VMF used money charged to and paid by Plaintiffs and by members of the putative class to make a payment of 4% of the gross profit on the sale of a home to CMH ("4% Commission"). They further allege that this scheme by CMF and VMF violates the Arkansas Deceptive Trade Practices Act and the Arkansas Unfair Practices Act. Plaintiffs seek recovery of "the amount of the secret kickback, " or 4% Commission, that was purportedly added to each manufactured home's sales price when they financed their home purchases through VMF. ECF No. 7, at ¶¶ 37, 41, 44, and 47. By Defendants' calculation, the 4% Commission for home sales to Arkansas residents in the putative class period alleged in the Complaint totals $983, 408.86. ECF Nos. 32-1, 44-1, and 48-1.
Defendants used a gross profit figure to calculate the total amount of the 4% Commission charged to Plaintiffs for home sales in the putative class period. Plaintiffs' primary objection to Defendants' calculation is rooted in Defendants' use of the phrase "gross profit located on CMH's computer" in an affidavit explaining this calculation. See ECF No. 32-3, at ¶ 3. Plaintiffs state that this phrase is ambiguous and that the "actual" gross profit used by Defendants to pay the 4% Commission to VMF may be a different number than the "gross profit located on CMH's computer." Defendants, however, clarify that the amount represented by the phrase "gross profit located on CMH's computer" is the same amount as the gross profit amount that they used to calculate the 4% Commission. ECF No. 48, at 11.
Defendants' calculation of the 4% Commission for home sales in the putative class period alleged in the Complaint is supported by sworn affidavits explaining in adequate detail how they arrived at this calculation. Accordingly, a fact-finder might legally conclude that the putative class ...