Ortiz II v. Eagle Family Foods Group LLC

Background

Carlos Ortiz II brought a proposed class action in New York Supreme Court, Bronx County, against Eagle Family Foods Group LLC. He alleged that Eagle violated New York General Business Law Sections 349 and 350 by labeling and promoting Popcorn Indiana Movie Theater Butter Popcorn as “Made With Real Butter,” even though the product was made with clarified butter and natural butter flavor. Ortiz alleged that he paid more than he would have paid if he had known the product did not contain real butter as the exclusive or predominant source of its taste, or in a relatively significant amount compared with other ingredients.

Eagle removed the case to federal court, asserting jurisdiction under the Class Action Fairness Act, or CAFA. CAFA generally permits federal jurisdiction over qualifying class actions when there are at least 100 class members, some diversity between the parties, and more than $5 million in controversy. Ortiz moved to remand the case to state court. Eagle separately moved to dismiss the complaint for failure to state a claim.

Amount in Controversy

The court held that Eagle had not shown that more than $5 million was in controversy when it removed the case. Eagle argued that the amount included statutory damages and possible treble damages under New York law. The court rejected that argument because New York Civil Practice Law and Rules Section 901(b) generally prevents a class action from seeking statutory penalties or minimum damages unless the statute authorizes such recovery in a class action. The court concluded that Ortiz did not seek those damages and could not have sought them in the state-court class action. It therefore excluded both the statutory minimum damages and treble damages from the calculation.

The court also rejected Eagle’s argument that the amount in controversy included approximately $2 million in possible refunds plus $3,641,289 in projected compliance costs. The court assumed, without deciding, that the proposed class’s damages could total $2 million. But it excluded the projected compliance costs because the amount in controversy is measured from the plaintiff’s viewpoint, and Ortiz sought money damages rather than an injunction or declaratory relief requiring Eagle to take corrective measures. The remaining $2 million did not satisfy CAFA’s $5 million requirement.

The court distinguished the Supreme Court’s decision in Shady Grove Orthopedics Associates, P.A. v. Allstate Insurance Co. because that case involved a class action initially filed in federal court, while Ortiz’s case was removed from state court. The court concluded that, in a removed case, the amount in controversy must be based on the claims and remedies legally available when the case was removed.

Ruling and Disposition

Because Eagle did not meet its burden to establish federal jurisdiction, the court granted Ortiz’s motion to remand. The action was remanded to New York state court. Judge Jennifer L. Rochon denied Eagle’s motion to dismiss without prejudice as moot and directed the Clerk of Court to terminate both motions.