July 16, 2020 - This Week at the Ninth

This Week at The Ninth: Nationwide Injunctions and CAFA

This week, the Ninth Circuit weighs in on the hot topic of nationwide injunctions and resolves a novel jurisdictional question in a case involving two staples of American life: Harley-Davidson motorcycles and class-action lawsuits.

CITY AND COUNTY OF SAN FRANCISCO v. BARR
The Ninth Circuit rejected a nationwide injunction in a “Sanctuary” City case.

Panel: Judges Fletcher, Clifton, and Miller with Judge Clifton writing the opinion.

Key Highlight: “Although there is no bar against . . . nationwide relief in federal district court or circuit court, such broad relief must be necessary to give prevailing parties the relief to which they are entitled.”

Background: The federal government provides funding for state and local criminal justice programs through the Edward Byrne Memorial Justice Assistance Grants. In 2017, the Attorney General and Department of Justice attached three new conditions to those grants. The conditions require recipient jurisdictions to (1) provide the Department of Homeland Security (DHS) access to the jurisdiction’s detention or correctional facilities to interview people in custody about their right to be in the United States (“Access Condition”); (2) provide DHS advance notice of the scheduled release of aliens in the jurisdiction’s custody (“Notice Condition”); and (3) certify that the jurisdiction’s laws and policies comply with 8 U.S.C. § 1373, a federal statute prohibiting states and localities from restricting the flow of “information regarding [an individual’s] citizenship or immigration status” between state and local officials and DHS (“Certification Condition”). Plaintiff—the City and County of San Francisco—is a so-called “sanctuary” jurisdictions that has enacted laws limiting its employees’ authority to assist in the enforcement of federal immigration laws. It sued DOJ, the Attorney General, and others to prevent DOJ from denying Byrne grants on the basis of the conditions. The district court entered a declaratory judgment in plaintiff’s favor and enjoined DOJ from enforcing the funding conditions. The district court also extended its injunction to the entire country. DOJ appealed, arguing that the challenged conditions were lawful and that the district court abused its discretion by extending the scope of injunctive relief to non-parties nationwide.

Result: The Ninth Circuit affirmed in part and vacated it part. The Court first held—in accordance with other recent Ninth Circuit precedent—that DOJ lacked authority to impose the Access and Notice Conditions and that plaintiffs’ sanctuary laws did not provide a basis for denial of funds under the Certification Condition.

On the remedial question, however, the Court held that the district court abused its discretion in extending its injunction nationwide. The Court explained that “[a]lthough there is no bar against . . . nationwide relief in federal district court or circuit court, such broad relief must be necessary to give prevailing parties the relief to which they are entitled.” And in this case, the Court continued, nothing in the record showed that the injunction needed to be extended to state and local governments outside of California in order to fully shield the plaintiffs. It was not enough that the funding conditions may have a nationwide impact. Rather, to warrant a nationwide injunction, the district court had to find that plaintiff would continue to suffer the alleged injuries if DOJ were enjoined from enforcing the conditions only in California, which the court had not (and could not have) found. The Court accordingly vacated the nationwide reach of the permanent injunction and limited its reach to California’s geographical boundaries.

GREENE v. HARLEY-DAVIDSON, INC.
The Ninth Circuit ruled that punitive damages need only be “reasonably possible” to satisfy the Class Action Fairness Act’s amount-in-controversy requirement.

Panel: Judges Collins, Lee, and Presnell (C.D. Cal.) with Judge Lee writing the opinion.

Key Highlight: “[A] defendant that relies on potential punitive damages to satisfy the amount in controversy under CAFA meets that requirement if it shows that the proffered punitive/compensatory damages ratio is reasonably possible.”

Background: Matthew Greene filed a putative class action against Harley-Davidson in California state court, alleging that the motorcycle manufacturer’s advertising disguised the fact that certain dealer fees were included in the “manufacturer suggested retail price” of motorcycles. Harley-Davidson removed the case to federal court under the Class Action Fairness Act, which gives federal courts jurisdiction over class actions that have a class of more than 100 members, minimal diversity of citizenship between the parties, and an amount in controversy of more than $5 million. To reach the $5 million amount-in-controversy threshold, Harley-Davidson counted $2,166,666 in compensatory damages sought in the complaint and added $2,166,666 in punitive damages based on a hypothetical 1:1 punitive-to-compensatory damages ratio, plus $1,083,333 in attorneys’ fees. The district court remanded the case back to state court because it said that Harley-Davidson’s math didn’t add up. Specifically, the district court said that Harley-Davidson had not provided adequate evidence that a jury would award punitive damages at a 1:1 ratio, and that a statute of limitations defense would bar most of the punitive damages in any event.

Result: The Ninth Circuit reversed. The Court held that a defendant satisfies CAFA’s amount-in-controversy requirement if it is “reasonably possible” that a jury could award the asserted punitive damages. The amount in controversy, the Court explained, reflects “the amount at stake in the underlying litigation,” and not the “likely or probable liability.” Harley-Davidson met that standard here because it identified four prior cases involving the same cause of action in which juries had awarded punitive damages with at least a 1:1 ratio to compensatory damages. The Court also held that the district court erred in calculating the amount in controversy based on the merits of a statute of limitations defense. Because the “strength of any defenses indicates the likelihood of the plaintiff prevailing; it is irrelevant to determining the amount that is at stake in the litigation.” A plaintiff thus “cannot smuggle in merits-based arguments into the jurisdictional inquiry”—“he owns the allegations that have landed him in federal court.” The Court accordingly sent the case back to proceed in the district court.