Rea v. Michaels Stores

The reviewing court should apply the clearly erroneous standard of review when reviewing the district court’s determination of whether removal jurisdiction exists.

Store managers of Michaels Stores, Inc. (“Michaels”) brought a class action suit against Michaels for improperly classifying the managers as exempt from overtime. Under the Class Action Fairness Act, Michaels removed the case to federal court on two occasions, and the district court remanded the case to the state court both times following the removals based upon the district court’s finding that the amount-in-controversy requirement had not been met. The case came to the Ninth Circuit after Michaels appealed the district court’s decision to remand the case. The panel applied the clearly erroneous standard of review when reviewing the district court’s determination that removal jurisdiction existed. The panel was unclear whether the district court applied the legal certainty standard or the preponderance of evidence standard to the amount-in-controversy evidence Michaels presented. The legal certainty standard is no longer good law, so if the district court applied the legal certainty standard to the amount-in-controversy analysis, the panel would be required to reverse the district court’s decision. If the district court applied the preponderance of the evidence standard, the panel would also be required to reverse because the district court’s finding that the amount-in-controversy was not met was clearly erroneous. The evidence presented showed that damages exceeded the amount-in-controversy; thus, the district court erred in remanding the case to the state court. REVERSED AND REMANDED.