Reyes v. Federal Express Corporation

Background

Saul Reyes alleged that he worked for Federal Express Corporation, also referred to as FedEx, as an hourly, non-exempt employee from March 2019 through September 2020. He alleged that FedEx required him to use his personal cellphone for navigation and communications with supervisors, dispatch, and customers, but did not reimburse him for that business expense or tell him that he could request reimbursement.

Reyes sought to represent two proposed California classes: an expense-reimbursement class of employees who incurred business expenses using personal cellphones during the relevant period, and a related class asserting claims under California’s Unfair Competition Law. The complaints did not state the dollar value of the claims.

Reyes originally filed the case in San Francisco Superior Court on January 13, 2023. FedEx removed it to federal court on February 15, 2023, relying on the Class Action Fairness Act, or CAFA. Reyes moved to remand, arguing that FedEx had not shown that the amount in controversy exceeded CAFA’s $5 million threshold. He alternatively argued that FedEx had not shown that his individual claim exceeded the $75,000 threshold for ordinary diversity jurisdiction.

CAFA Jurisdiction

CAFA provides federal jurisdiction over qualifying class actions when the proposed class has at least 100 members, at least one plaintiff and one defendant are citizens of different states, and the total amount in controversy exceeds $5 million, excluding interest and costs. Because Reyes challenged FedEx’s jurisdictional allegations, FedEx had to prove by a preponderance of the evidence that the amount in controversy exceeded $5 million.

FedEx calculated the amount in controversy by assuming that FedEx violated the relevant laws for 100% of potential class members. The court rejected that assumption. Although the complaint alleged a policy or practice of failing to reimburse necessary business expenses, it did not claim that FedEx never complied with the laws or that every class member was denied reimbursement. The court therefore found that FedEx’s assumed 100% violation rate was not reasonable.

The court also found that FedEx’s evidence did not support another specific violation rate or amount. The declarations identified employees who could potentially need to communicate using cellphones, but did not establish how many employees were eligible for reimbursement or how often violations occurred. FedEx’s calculations for all non-exempt employees, and its additional calculations for drivers, did not provide a sufficient basis to reach the $5 million threshold. The court concluded that CAFA jurisdiction was lacking.

Individual Diversity Jurisdiction

The parties did not dispute that diversity of citizenship existed. The dispute was whether the amount in controversy exceeded $75,000. FedEx argued that Reyes’s potential attorney’s fees alone would exceed that amount.

The court held that, in a proposed class action, potential attorney’s fees could not simply be attributed entirely to the named plaintiff. Instead, the fees had to be apportioned among the proposed class members, and Reyes’s individual share had to meet the jurisdictional threshold. FedEx’s reliance on past fee awards, fees in other employment cases, and counsel’s estimate did not show that Reyes’s pro rata share of potential fees would exceed $75,000. The court therefore found that FedEx also failed to establish ordinary diversity jurisdiction.

Other Motion and Disposition

FedEx asked for permission to file a sur-reply responding to new cases and evidence in Reyes’s reply brief. The court denied that application because it violated several local-rule requirements and, independently, did not properly object to the substance of the new evidence.

The court granted Reyes’s motion to remand and instructed the Clerk to send the case back to state court. Because the court lacked jurisdiction, it did not reach the merits of FedEx’s motion to dismiss. Judge Araceli Martinez-Olguin also vacated the scheduled hearings.