Maciel v. M.A.C. Cosmetics, Inc.

Background

Ignacio Maciel and Ruth Torres brought a proposed class action against M.A.C. Cosmetics, Inc. (MAC), alleging violations of California Labor Code section 2800 and California’s Unfair Competition Law. They alleged that MAC required retail employees to maintain a particular appearance by purchasing clothing and MAC makeup for work and promotional events, but did not reimburse those expenses.

MAC removed the case from state court to the Northern District of California under the Class Action Fairness Act (CAFA). CAFA permits federal jurisdiction over qualifying class actions when the proposed class has at least 100 members, at least one plaintiff is a citizen of a different state from at least one defendant, and the possible aggregate value of the claims exceeds $5 million. The plaintiffs moved to remand, meaning they asked the federal court to return the case to state court.

Jurisdictional requirements

The court found that two CAFA requirements were met and uncontested: the proposed class exceeded 100 people, and the parties were citizens of different states. The dispute concerned whether the possible total value of the claims exceeded $5 million.

After the plaintiffs challenged the amount in controversy, MAC had to prove by a greater-than-50-percent likelihood that the requirement was satisfied. The court explained that this amount concerns the maximum recovery the plaintiffs could reasonably obtain, not the amount they were likely to win. MAC could rely on reasonable assumptions supported by evidence, but speculation and unreasonable assumptions were insufficient.

Possible value of the claims

The parties agreed, for purposes of the calculation, that the proposed class consisted of 2,800 people who worked at least 54,827 total months; each class member purchased one clothing item per month; 70 percent of the class was women and 30 percent was men; and class members purchased a MAC cosmetic product for a promotional event every three weeks, totaling 78,324.2 products.

The court accepted MAC’s evidence that the average promotional product cost $27. It therefore estimated $2,114,753.40 for MAC products.

For clothing, the court accepted an average cost of $36.25 per item for men’s clothing, based on Maciel’s declaration. For women’s clothing, it used an average cost of $35.63 per item, based on the evidence from both sides. The resulting estimates were $596,243.63 for men’s clothing and $1,367,440.21 for women’s clothing, for a total clothing estimate of $1,963,683.84.

Together, the estimated cost of the makeup and clothing was $4,078,437.24. Because the total had to exceed $5 million, MAC needed to establish at least $921,562.77 in possible attorneys’ fees.

Attorneys’ fees

The court agreed that attorneys’ fees had to be considered because California Labor Code section 2802 allows a prevailing employee to recover attorneys’ fees. But MAC offered no evidence supporting its estimate of the possible fees. MAC relied on a 25-percent benchmark used in some class-action settlement cases, but the court explained that this did not satisfy MAC’s burden here. The applicable statute uses a lodestar method, which estimates fees by multiplying reasonable hours by a reasonable hourly rate.

Because MAC did not provide evidence showing that at least $921,562.77 in attorneys’ fees was at stake, the court did not find that the possible amount in controversy exceeded $5 million.

Ruling

Judge Jacquelyn Scott Corley held that MAC had not established federal subject-matter jurisdiction under CAFA. The court rejected the plaintiffs’ argument that a general presumption against removal controlled, explaining that CAFA cases do not receive that presumption. Applying the required evidentiary standard, however, the court concluded that MAC still had not shown that the possible aggregate amount exceeded $5 million.

The court granted the plaintiffs’ motion to remand. The opinion resolved the federal court’s jurisdictional question and did not decide the merits of the California Labor Code or Unfair Competition Law claims.