Gallagher-Stevens v. Independent Living Systems, LLC

Background

Samuel Gallagher-Stevens filed a proposed class action in California state court on behalf of California non-exempt employees who worked for Independent Living Systems, LLC, including employees staffed through a third party. The complaint asserted eleven causes of action, including claims for unpaid minimum and overtime wages, meal and rest period violations, inaccurate wage statements, unreimbursed business expenses, waiting-time penalties, discrimination and retaliation under the California Fair Employment and Housing Act, unfair competition, and wrongful termination in violation of public policy.

Independent Living Systems removed the case to federal court under the Class Action Fairness Act, or CAFA. CAFA requires more than $5 million to be in dispute, excluding interest and costs. Gallagher-Stevens moved to remand, arguing that Independent Living Systems had not shown that the amount in controversy exceeded that threshold.

Court’s Analysis

Because Gallagher-Stevens made a factual challenge to the removal allegations, Independent Living Systems had to show by more likely than not that the amount in controversy exceeded $5 million. The court accepted the complaint’s allegations as true and assessed the maximum recovery that could reasonably be at issue, while examining whether the company’s assumptions were reasonable.

The court found that Independent Living Systems had substantially overstated the alleged violation rates for several claims. For the meal and rest period claims, the company used a 75% violation rate. Because the complaint described violations as occurring “from time to time” and “periodically,” the court used a 15% rate instead. That reduced the combined amount for those claims to $808,374.68.

For the unpaid minimum wage claims, the company assumed 24 minutes of unpaid time per shift. The court accepted estimates for rounding and mandatory COVID-19 screening time but reduced the meal-break component because the complaint alleged only periodic violations. The court calculated $1,276,449.96 for the unpaid minimum wage claim, including liquidated damages.

The court reduced the wage-statement estimate to $324,750 based on the alleged frequency of violations. It also reduced the reimbursement estimate from $139,003.85 to $69,501.93 because the company used an average weekly cell-phone expense that included personal as well as work-related use. The court accepted the company’s estimates for unpaid overtime, $465,819.52, and waiting-time penalties, $632,825.11.

The resulting amount for the claims was $3,577,720.27. Applying a 25% attorney-fee estimate added $894,430.07, producing a total amount in controversy of $4,472,150.34.

Ruling

Judge William H. Orrick held that Independent Living Systems had not shown that the amount in controversy exceeded CAFA’s $5 million jurisdictional threshold. The court granted Gallagher-Stevens’s motion to remand the case to the Superior Court of California, County of San Francisco. The opinion addressed federal jurisdiction and the amount in controversy; it did not decide the underlying wage, employment, or other claims.