Franklin v. Home Depot U.S.A., Inc.

Background

Travis Franklin filed a proposed class action against Home Depot U.S.A., Inc. in California state court. He alleged violations of California wage-and-hour laws, including claims involving unpaid minimum and overtime wages, meal and rest periods, wage statements, expense reimbursement, final wages, and sick pay. Franklin alleged that Home Depot required employees to work while off the clock, including during meal breaks, and rounded recorded work time in Home Depot’s favor.

Home Depot removed the case to federal court under the Class Action Fairness Act (CAFA). CAFA permits federal jurisdiction over certain class actions when, among other requirements, the proposed classes have more than 100 members, the parties have the required citizenship difference, and the amount in controversy exceeds $5 million. Franklin did not challenge the class-size or citizenship requirements. He challenged only whether Home Depot had shown that more than $5 million was at stake.

Amount in Controversy

Franklin’s complaint alleged that the amount in controversy was under $5 million, but it did not request a specific dollar amount in the prayer for relief. Home Depot’s notice of removal estimated that at least $6,890,625 was in controversy, based on potential waiting-time penalties and attorneys’ fees.

Because Franklin made a factual challenge to Home Depot’s estimate, Home Depot had to prove by a preponderance of the evidence—that is, showing that the estimate was more likely than not correct—that the amount-in-controversy requirement was met. The court explained that Home Depot could use a reasonable chain of assumptions based on the complaint and did not have to prove its ultimate liability or the final damages amount.

The parties focused on Franklin’s eighth claim, which alleged that Home Depot failed to pay wages when due. Franklin sought 30 days of waiting-time penalties for all employees who terminated employment during the relevant class period. The court concluded that this allegation expressly assumed a 100 percent violation rate for those employees.

Home Depot submitted a declaration from G. Edward Anderson, a vice president and senior economist at Charles River Associates. The declaration stated that more than 103,000 non-exempt, hourly employees worked for Home Depot in California during the relevant period and that more than 55,000 such employees ended their employment during that period. It also stated that those employees worked an average of more than 6.5 hours per shift and earned more than $18 per hour.

Using reduced figures, Home Depot estimated that 50,000 terminated employees, four hours of working time per day, a $15 hourly rate, and 30 days of penalties would produce $90 million in waiting-time penalties alone. The court found Home Depot’s evidence competent and its assumptions reasonable, particularly because Franklin’s complaint alleged penalties for all terminated employees in the relevant subclass. The court also relied on a recent Ninth Circuit decision stating that a defendant may base an estimated violation rate on the complaint’s allegations.

Ruling

The court held that Home Depot established by a preponderance of the evidence that the amount in controversy exceeded CAFA’s $5 million threshold. The court rejected Franklin’s arguments that Home Depot needed additional proof of the assumed violation rate and that Franklin’s allegation of an amount under $5 million controlled the jurisdictional analysis.

Judge Beth Labson Freeman denied Franklin’s Motion to Remand Case to State Court. The order addressed federal jurisdiction only; it did not decide the merits of Franklin’s wage-and-hour claims.