Gay v. Walmart Inc.

Background

Dolores Gay filed a proposed class action in the New York State Supreme Court, County of Westchester, asserting claims under New York General Business Law Sections 349 and 350. She alleged that Walmart’s Great Value “Macaroni & Cheese Original Microwavable Cups” were misleadingly labeled “No artificial flavors” and “Made With Real Cheddar Cheese” because cheddar cheese was only the fourth ingredient in the cheese seasoning. Gay sought the alleged price premium—the difference between what purchasers paid and what they allegedly would have paid without the statements—along with costs and expenses.

Walmart removed the case to federal court under the Class Action Fairness Act, or CAFA. CAFA generally gives federal courts jurisdiction over qualifying class actions with at least 100 class members, more than $5 million in controversy, and minimal diversity between the parties. The parties agreed that Gay is a New York citizen and Walmart is incorporated in Delaware and has its principal place of business in Arkansas.

Amount in Controversy

Walmart argued that statutory damages under General Business Law Sections 349 and 350 would exceed $5 million because it had sold more than 100,000 units of the product. Gay argued that New York Civil Practice Law and Rules Section 901(b) barred recovery of statutory damages in a class action filed in New York state court.

The court agreed with Gay. It held that the amount in controversy had to be assessed at the time of removal under the state law governing the state-court action. Because Sections 349 and 350 do not specifically authorize statutory damages in a class action, Section 901(b) prevented Gay from seeking those damages in the state-court class action. The court therefore excluded the statutory damages from the jurisdictional calculation.

The court also rejected Walmart’s reliance on Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co. The court explained that Shady Grove addressed whether a class action initially filed in federal court could seek statutory damages despite Section 901(b). It did not decide whether damages unavailable under state law could be counted to establish removal jurisdiction over a case originally filed in state court.

Without statutory damages, Walmart did not establish a reasonable probability that the amount in controversy exceeded $5 million. The alleged price-premium damages were based on sales of more than 100,000 units at approximately $3.45 each, but the court noted that even treating the full purchase price as damages would require sales of well over 1,000,000 units to exceed the threshold. The record did not indicate that such sales occurred.

The court also excluded attorney fees and expert fees. Attorney fees under General Business Law Section 349 were discretionary rather than recoverable as a matter of right, and Walmart supplied no competent evidence or specific estimate showing that either type of fee would bridge the gap to $5 million.

Ruling

Because Walmart failed to establish the required amount in controversy, the court held that it lacked jurisdiction over the action. Judge Cathy Seibel granted Gay’s motion to remand and directed the Clerk to remand the case to the New York Supreme Court, County of Westchester. The opinion addressed federal jurisdiction and remand; it did not decide whether Walmart’s product labeling violated New York law.