Dekker v. Vivint Solar, Inc.

Background

The plaintiffs brought an unfair-business-practices case concerning alleged liquidated-damages provisions in Vivint Solar agreements. According to the opinion, those provisions required customers who ended a 20-year solar agreement early to pay substantial amounts, including nearly all remaining monthly payments, other amounts due, and system-removal fees.

Earlier in the case, the district court compelled some plaintiffs to arbitrate, while finding that Juan Bautista had not agreed to arbitration because he had negotiated in Spanish but signed an English contract, and that Gerrie Dekker’s agreement contained no arbitration clause. After Vivint missed a deadline to pay arbitration fees, the court later vacated the orders compelling certain plaintiffs to arbitrate and allowed those plaintiffs to return to the district court.

The court of appeals then issued an order stating that it was dismissing the case for lack of jurisdiction and returning the matter to the district court to determine whether the plaintiffs should be allowed to amend their complaint. The plaintiffs promptly moved to amend. The proposed complaint formally alleged jurisdiction under the Class Action Fairness Act, including the proposed class size, minimal diversity, and amount in controversy.

Legal standard

Because the court had vacated the case deadlines, the parties agreed that Federal Rule of Civil Procedure 15 governed. Rule 15 generally requires courts to freely allow amendments when justice requires. Leave may be denied for reasons such as undue delay, bad faith, repeated failure to fix deficiencies, undue prejudice, or futility.

The court explained that 28 U.S.C. § 1653 allows defective jurisdictional allegations to be amended. It also held that the proposed amended complaint could itself support federal jurisdiction, although a defendant could challenge those allegations with competent evidence. When jurisdiction is contested, the party invoking federal jurisdiction generally must prove the jurisdictional facts by a preponderance of the evidence. For the amount in controversy, however, the allegations remain sufficient unless it appears to a legal certainty that the amount is below the jurisdictional threshold.

Class Action Fairness Act jurisdiction

The Class Action Fairness Act gives federal courts jurisdiction over certain proposed class actions involving more than 100 class members, more than $5 million in controversy, and minimal diversity—that is, at least one plaintiff who is a citizen of a different state from at least one defendant.

The proposed amended complaint alleged a primary class of more than 50,000 Californians who entered residential solar agreements with Vivint and a 1,300-member subclass of Californians who signed English agreements after negotiating in another language. It also alleged that 6,000 Californians had sought to cancel their agreements and that 2,000 had been held in default. The court concluded that the proposed class would exceed 100 members, even under Vivint’s narrower estimates and without counting some customers who were expected to arbitrate.

The court also found the amount in controversy adequate. The complaint alleged examples of Vivint demanding approximately $40,000 from Dekker, nearly $23,000 each from Rogers and Bautista, $21,000 from Barajas, and more than $17,000 from Hilliard. The court inferred that a cancellation or default could generate a demand of at least $10,000. Applying that figure to the alleged class members produced amounts well above $5 million. The court also considered Vivint’s statements that the average default bill exceeded $30,000 and the average cancellation buyout fee was $16,000.

The court rejected Vivint’s argument that arbitration agreements reduced the class below 100 members. It reasoned that if arbitration would eliminate jurisdiction, the court would not have had jurisdiction to compel arbitration in the first place. It also stated that jurisdiction existing when a case begins generally is not lost because of later events.

Disposition

The court held that amendment could remedy the defective jurisdictional allegations and that the proposed amended complaint adequately alleged the class size and amount in controversy required for Class Action Fairness Act jurisdiction. It did not rely on several hundred pages of new reply evidence because Vivint had not had an opportunity to respond to that evidence.

Leave to amend was GRANTED. The March 18 hearing was VACATED, and the court stated that its subject-matter jurisdiction under the Class Action Fairness Act was confirmed. The parties were directed to inform the court of appeals.