Massage Envy Franchising v. Mark Pirozzi ( 2019 )

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 19-8014
___________________________
Mark Pirozzi; Keila Green, individually and on behalf of others similarly situated
lllllllllllllllllllllRespondents
v.
Massage Envy Franchising, LLC
lllllllllllllllllllllPetitioner
____________
Petition for Permission to Appeal from United States
District Court for the Eastern District of Missouri - St. Louis
____________
Submitted: August 6, 2019
Filed: September 17, 2019
____________
Before LOKEN, SHEPHERD, and GRASZ, Circuit Judges.
____________
LOKEN, Circuit Judge.
Mark Pirozzi and Keila Green as named plaintiffs filed a class action lawsuit
in Missouri state court against Massage Envy Franchising, LLC (“Massage Envy”).
The petition alleged that Massage Envy violated the Missouri Merchandising Practices
Act (“MMPA”) when advertisements for its one hour massage session failed to
disclose that the session included ten minutes to undress, dress, and consult with the
therapist. A second amended petition filed in March 2019 expanded the class claims
to include Massage Envy’s one and one-half and two hour sessions. The petitions
sought compensatory, statutory, and punitive damages and an award of attorneys’ fees
in unspecified amounts. Massage Envy filed a notice of removal on April 1, 2019,
invoking federal diversity jurisdiction under the Class Action Fairness Act (“CAFA”),
28 U.S.C. §§ 1332(d), 1453. Massage Envy alleged that, if liable to the class, it would
potentially owe an aggregate of $2.885 million in compensatory damages, based on
the value of ten minutes of massage, $720,000 in attorneys’ fees, assuming a 25% fee
award, and $3.6 million in punitive fees, assuming an award of punitive damages
equal to the compensatory damages and attorneys’ fees.
Plaintiffs moved to remand the class action to state court, arguing the notice of
removal was untimely. See 28 U.S.C. § 1446(b). Without addressing that question,
the district court remanded the case to state court, concluding it lacked subject matter
jurisdiction because “Massage Envy offers nothing but speculation that potential
awards of attorneys’ fees and punitive damages push the amount in controversy over
$5 million,” the minimum aggregate amount in controversy required to remove a class
action under CAFA. See § 1332(d)(2). Massage Envy petitions for permission to
appeal the remand order. See § 1453(c)(1). Reviewing de novo, we conclude the
district court misapplied controlling Supreme Court and Eighth Circuit CAFA
precedents. Accordingly, we grant permission to appeal, reverse the district court’s
remand order, deny plaintiffs’ motion to remand, and remand for further proceedings.
“A primary purpose in enacting CAFA was to open the federal courts to
corporate defendants out of concern that the national economy risked damage from
a proliferation of meritless class action suits.” Bell v. Hershey Co., 557 F.3d 953, 957
(8th Cir. 2009). CAFA expands federal diversity jurisdiction to include class actions
in which more than $5 million is in controversy if “any member of a class of plaintiffs
is a citizen of a State different from any defendant.” § 1332(d)(2)(A). If the class
action complaint does not allege that more than $5 million is in controversy, “a
defendant’s notice of removal need include only a plausible allegation that the amount
-2-
in controversy exceeds the jurisdictional threshold.” Dart Cherokee Basin Operating
Co. v. Owens, 135 S. Ct. 547, 554 (2014). If the class action plaintiffs challenge the
notice of removal allegation, “removal is proper on the basis of an amount in
controversy asserted by the defendant if the district court finds, by the preponderance
of the evidence, that the amount in controversy exceeds the jurisdictional threshold.”
Id. at 553-54, quoting § 1446(c)(2)(B).
Here, plaintiffs did not challenge Massage Envy’s allegation that more than $5
million is in controversy; indeed, plaintiffs’ motion to remand affirmatively alleged
aggregate claims that “conservatively” put more than $12 million in controversy. The
district court, exercising its “independent obligation to determine whether federal
subject-matter jurisdiction exists,” nonetheless reviewed the class action petition and
the notice of removal. In remanding, the court stated that “Massage Envy overstates
the actual damages that plaintiffs could recover” and “offers nothing but speculation”
as to the potential awards of attorneys fees and punitive damages. “Given the nature
of [plaintiffs’] allegations,” the court concluded, “it is more likely that a reasonable
fact finder would not award several million dollars in punitive damages.”
In Dart, the Supreme Court noted that a removing defendant’s uncontested
amount-in-controversy allegation may be “questioned by the court.” 135 S. Ct. at 553.
However, the district court erred by applying the wrong legal standard. As the
removing party, Massage Envy has the burden to establish “not whether the damages
[sought] are greater than the requisite amount, but whether a fact finder might legally
conclude that they are.” Hartis v. Chicago Title Ins. Co., 694 F.3d 935, 944 (8th Cir.
2012) (quotation omitted; emphasis in original). When the notice of removal
plausibly alleges that the class might recover actual damages, punitive damages, and
attorneys’ fees aggregating more than $5 million, “then the case belongs in federal
court unless it is legally impossible for the plaintiff to recover that much.” Raskas v.
Johnson & Johnson, 719 F.3d 884, 888 (8th Cir. 2013) (emphasis added), quoting
Spivey v. Vertrue, Inc., 528 F.3d 982, 986 (7th Cir. 2008). “Even if it is highly
-3-
improbable that the Plaintiffs will recover the amounts Defendants have put into
controversy, this does not meet the legally impossible standard.” Id.
Applying this standard, the district court erred when it evaluated the MMPA
violations alleged in plaintiffs’ second amended petition and remanded the class action
to state court because “it is more likely that a reasonable fact finder would not award
several million dollars in punitive damages.” Even if that assessment of plaintiffs’
class action claims was sound (an issue we do not consider), considerations such as
this go to the merits of plaintiffs’ claims; they “should not be smuggled into the
jurisdictional inquiry.” Keeling v. Esurance Ins. Co., 660 F.3d 273, 275 (7th Cir.
2011). When plaintiffs have not challenged the removing defendant’s amount-in-
controversy allegations, “[t]his is a pleading requirement, not a demand for proof.”
Spivey, 528 F.3d at 986. So long as Massage Envy has plausibly alleged that more
than $5 million is in controversy, the case belongs in federal court unless it is legally
impossible for the plaintiff to recover that much.
Plaintiffs’ class action petition explicitly sought to recover punitive damages,
unlike the class action complaint in Hurst v. Nissan North America, Inc., 511 F. App’x
584 (8th Cir. 2013).1 Massage Envy’s notice of removal alleged that plaintiffs’
second amended petition put $3.6 million in aggregated compensatory damages and
attorneys’ fees in controversy. The petition also alleged the class is entitled to
punitive damages in an unstated aggregate amount. It is undisputed that punitive
damages may be awarded for egregious violations of the MMPA. See Mo. Rev. Stat.
§ 407.025.1; Lewellen v. Franklin, 441 S.W.3d 136, 146-48 (Mo. 2014). In Grabinski
v. Blue Springs Ford Sales, Inc., we affirmed multiple punitive damage awards for
1
In Hurst, we affirmed the district court’s remand order because the parties
agreed that, at the time defendant removed, recovery of punitive damages was legally
impossible under Missouri law. But we warned that, “should punitive damages find
their way into the case for consideration by the [state court] jury . . . immediate
removal would be timely and almost certainly proper.” 511 F. App’x at 586-87.
-4-
egregious MMPA violations where “the ratio of the collective punitive damages to the
collective actual damages [was] approximately 27:1.” 203 F.3d 1024, 1026 (8th Cir.),
cert. denied, 531 U.S. 825 (2000). Given the awards of punitive damages upheld in
prior MMPA cases such as Grabinski, plaintiffs’ allegation that they are entitled to
punitive damages in an unstated amount raised the amount in controversy to more than
$5 million, whether or not they ultimately prove they are entitled to the punitive
damages they claim. In determining the amount in controversy for CAFA removal
purposes, “we must accept the class’s characterization.” Keeling, 660 F.3d at 275.
The remaining issue is plaintiffs’ motion to remand, which the district court
denied as moot. Plaintiffs argue that Massage Envy’s notice of removal was untimely
because the class action allegations in their original petition, as well as in their second
amended petition, put more than $5 million in controversy. We conclude this
contention is without merit. The thirty-day removal period in § 1446(b)(3) “begins
running upon receipt of the initial complaint only when the complaint explicitly
discloses the plaintiff is seeking damages in excess of the federal jurisdictional
amount.” In re Willis, 228 F.3d 896, 897 (8th Cir. 2000). If the complaint contains
no such disclosure, the time limit begins to run when the removing defendant
“receives from the plaintiff an amended pleading, motion, order, or other paper from
which the defendant can unambiguously ascertain that the CAFA jurisdictional
requirements have been satisfied.” Gibson v. Clean Harbors Envtl. Servs., Inc., 840
F.3d 515, 519 (8th Cir. 2016) (quotation omitted). Here, neither the initial nor the
second amended petition disclosed an aggregate amount in controversy or permitted
Massage Envy to “unambiguously ascertain” that more than $5 million was in
controversy. When Massage Envy investigated and filed a notice of removal based
on the results of its own amount-in-controversy investigation, the notice was not
untimely.
For the foregoing reasons, we grant the Petition for Permission To Appeal,
reverse the Order of Remand dated July 15, 2019, deny plaintiffs’ Motion for
-5-
Remand, and remand to the district court for further proceedings not inconsistent with
this opinion.
______________________________
-6-