Duane Morris Takeaways: In an order issued on May 13, 2025, Judge Joshua Wolson of the U.S. District Court for the Eastern District of Pennsylvania ruled that a case removed to federal court on the basis of diversity jurisdiction had to be remanded back to state court given that the amount-in-controversy (AIC) alleged was based on an attorneys' fee award that exceeded the plaintiff's damages award by "at least seven times."
Case Background
On January 9, 2025, Plaintiff Frank Wise sued his former employer Kimberly-Clark, a manufacturer of paper-based consumer products, in the Philadelphia Court of Common Pleas on behalf of himself and a putative class, accusing his former employer of violating the Pennsylvania Minimum Wage Act ("PMWA") by failing to pay overtime for the time spent walking to and from job assignments in the Defendant's manufacturing facility. As part of its remedial regime, the PMWA permits a prevailing party to recover "reasonable" attorneys' fees. Plaintiff Wise estimated that his damages totaled $9,350.30, but on his cover sheet he indicated that the amount in controversy totaled "[m]ore than $50,000.00" for the amalgamated claims of the class. (ECF No. 1-3, p. 2).
On February 26, 2025, Defendant Kimberly-Clark removed the action to federal court, asserting that the amount in controversy was over $75,000 because Plaintiff Wise "may try to recover at least $78,375.00 in attorney's fees." (ECF No. 1 ΒΆΒΆ 24, 29). Plaintiff Wise moved to remand by including with that motion a declaration from his attorneys that if the lawsuit proceeded on an individual, rather than a class wide basis, the Plaintiff and his attorneys would waive the right to recover attorneys' fees that would cause the amount in controversy to cross $75,000.
The Court's Order
Judge Wolson found that Defendant Kimberly-Clark did not carry its burden to demonstrate that the amount in controversy exceeded $75,000, which the Defendant primarily based on its attorneys' fees estimate. Although attorneys' fees can be factored into the amount in controversy threshold, the attorneys' fees sought must be reasonable. To pinpoint the legal standard under Pennsylvania law for determining when an award of attorneys' fees is reasonable, Judge Wolson surveyed case law interpreting statutes similar to the PMWA, such as the Pennsylvania Unfair Trade Practices and Consumer Protection Law, where Pennsylvania courts determined that the "term reasonable" incorporates the concept of proportionality between the damages award and attorneys' fees award. Though Pennsylvania law contains no "hard-and-fast rule for the acceptable ratio," courts consider "the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite properly to conduct the case, the customary charges of the members of the bar for similar services, the amount involved in the controversy and benefits resulting to the clients from the services, and the contingency or certainty of the compensation." (internal citations and quotations omitted). Applying this framework, Judge Wolson found that a 7:1 ratio for attorneys' fees as compared to damages was unreasonable and could not be used to reach the jurisdictional threshold.
Judge Wolson further opined that this conclusion also was consistent with protecting the judicial economy of federal courts as litigants and attorneys should not be able to use exorbitant attorneys' fees estimates to circumvent the amount in controversy requirement to invoke diversity jurisdiction. In the case at hand, the parties agreed for purposes of the motion that Plaintiff Wise could recover $9,350.30 in monetary damages and that the legal issues at hand involved straight-forward unpaid overtime claims. Notably, Judge Wolson also found the Plaintiff's attorneys' declaration, waiving the right to collect attorneys' fees, to be unavailing as it arguably amended the complaint.
Implications For Employers
The Court's holding in Wise emphasizes the importance of providing concrete evidence regarding damages sought and reasonable attorneys' fee estimates when seeking to remove based on diversity jurisdiction. Ultimately, the damages and attorneys' fees alleged in the complaint take precedence, but proportionality must be considered even in the context of fee shifting statutes. If a party's jurisdictional math does not add up, they may be sent back to where the matter started: state court.
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