Anderson v. Starbucks Corporation

Background

Elizabeth Anderson and several other named plaintiffs sued Starbucks Corporation on behalf of a proposed class of Starbucks store managers. The plaintiffs alleged that Starbucks expected managers to remain available for work-related calls, texts, emails, and applications, including when they were not working, but did not reimburse them for personal cellular phone and data-plan expenses.

The action was filed under California law in Alameda County Superior Court. The claims included reimbursement under California Labor Code section 2802, restitution under California’s Unfair Competition Law, and civil penalties under the Private Attorneys General Act. The proposed class covered people employed by Starbucks in California under the job title Store Manager during the class period.

Starbucks removed the case to federal court under the Class Action Fairness Act, commonly called CAFA. CAFA provides federal jurisdiction over qualifying class actions when, among other requirements, the amount in controversy exceeds $5 million. Starbucks initially estimated that at least $5,905,100 was at stake based on approximately 118,102 collective work months and a $50 monthly phone-plan cost. Including an estimated 25% in attorney fees, Starbucks stated that at least $7,381,375 was in controversy. Starbucks also offered an alternative estimate of $5,058,393.75 using lower expense assumptions and a possible device reimbursement.

Arguments and analysis

The plaintiffs moved to remand, meaning they asked the federal court to return the case to state court. They argued that Starbucks’s estimates were overly generous, including its assumptions about the number of managers, work months, monthly phone costs, full recovery of expenses, device reimbursement, and attorney fees. The plaintiffs did not submit evidence about those subjects of their own.

The court treated the plaintiffs’ challenge as a factual attack on the amount-in-controversy allegations. Under that standard, Starbucks had to establish by a preponderance of the evidence that the amount in controversy exceeded $5 million. The court explained that the amount in controversy is an estimate of the total amount disputed, not a prediction of Starbucks’s ultimate liability. Starbucks did not have to prove the amount with certainty, but it had to provide a plausible explanation of how the stakes could exceed the threshold.

The court found Starbucks’s estimate adequately supported. A Starbucks human-resources vice president stated, based on company business records, that at least 4,168 people held the Store Manager position in California and that those managers worked approximately 118,102 months during the class period. The court found no basis in the record to conclude that those figures were unreliable.

The court also found the phone-cost assumptions reasonable. Starbucks used the lower of two monthly amounts reported by plaintiffs who answered the relevant interrogatory and used an even lower amount in its alternative estimate. The court determined that the complaint and the plaintiffs’ discovery responses described a policy under which managers were expected to be reachable by phone or text throughout their employment, making it reasonable to estimate that each class member could have incurred unreimbursed phone expenses for each month worked. The court found the alternative $50 device-reimbursement estimate reasonable as well.

Finally, the court held that prospective attorney fees had to be included because California Labor Code section 2802 allows recovery of attorney fees incurred in enforcing that section. The court found Starbucks’s 25% fee estimate reasonable in this case, while noting that there is no automatic rule making a 25% award reasonable in every case.

Disposition

The court concluded that Starbucks had plausibly established a possibility that the amount in controversy exceeded $5 million. It held that the case was properly removed to federal court and denied the plaintiffs’ motion to remand. The opinion did not decide whether the plaintiffs would ultimately prevail on their reimbursement, restitution, or civil-penalty claims.