- SCOTUS Rules CAFA Removal Notices Need Contain Only a Plausible Allegation That Amount in Controversy is Satisfied
- February 25, 2015 | Author: Rafael G. Nendel-Flores
- Law Firm: Ogletree, Deakins, Nash, Smoak & Stewart, P.C. - Costa Mesa Office
- On December 15, 2014, the Supreme Court of the United States decided a critical issue regarding Class Action Fairness Act of 2005 (CAFA) removals. Specifically, the Supreme Court settled a controversy surrounding what information a removing defendant must provide regarding the CAFA amount in controversy in its notice of removal. The Court held that a defendant seeking removal under CAFA need not provide any evidence in its removal notice demonstrating that the amount in controversy has been meet. Instead, the Court held that a CAFA removal notice need only contain a “plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” The Court further held that, in the event that either the plaintiff contests the defendant’s allegation or the federal district court has questions regarding the same, both sides must be allowed to present evidence regarding the amount in controversy and the district court must then decide, by a preponderance of evidence, whether the amount in controversy has been satisfied. Dart Cherokee Basin Operating Co., LLC v. Owens, No. 13-719, Supreme Court of the United States (December 15, 2014).
The controversy emerged when a plaintiff filed a putative class action in a state court for underpaid royalties under oil and gas leases. The defendant removed the case to a federal trial court, invoking federal jurisdiction under CAFA, which gives jurisdiction to federal courts if three requirements are satisfied:
- the class has more than 100 members,
- the parties are minimally diverse, and
- the amount in controversy exceeds $5 million.
The defendant’s notice of removal alleged that these three requirements were satisfied and, in particular, stated that the purported underpayments to the putative class members totaled more than $8.2 million. The plaintiff argued that the case should be remanded to state court because the defendant’s notice of removal failed to include any evidence proving that the amount in controversy exceeded $5 million. The defendant responded with a declaration detailing a damages calculation indicating an $11 million damages calculation (without interest).
The U.S. district court granted the plaintiff’s motion for remand, finding that the declaration—having come after the defendant’s notice of removal—was insufficient to keep the case in federal court. The Tenth Circuit Court of Appeals denied the defendant’s petition for review. The Supreme Court of the United States agreed to hear the case to settle a federal circuit court split on the issue.
The Supreme Court’s Decision
Justice Ginsburg started by reviewing section 1446(a) of CAFA, which requires a defendant seeking to remove a case to a federal court to file in the U.S. district court a notice of removal “containing a short and plain statement of the grounds for removal.” Under section 1446(a), the Court ruled, the notice of removal “need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” Further, the Court ruled that section 1446(c)(2)(B) instructs that the defendant must produce evidence establishing the amount in controversy only when the plaintiff contests or the court questions the defendant’s allegation.
Based on this analysis, the Court vacated the Tenth Circuit’s judgment denying the defendant’s petition for review and remanded the case for further proceedings consistent with the Court’s opinion. Justice Scalia, in a dissenting opinion joined by Justices Kennedy and Kagan (and in which Justice Thomas joined except for the final sentence of the dissent), argued that the issue presented differed from the issue the Court had agreed to decide. Thus, Justice Scalia wrote, “the responsible course would have been to confess error and to dismiss the case as improvidently granted.”
While it remains to be seen how faithfully U.S. district courts will apply the Dart Cherokee decision, it may become a landmark decision for class action defendants that previously found the CAFA removal door virtually impossible to open. In many U.S. district courts, class action defendants have been forced to compile, calculate, and submit extremely detailed and onerous evidentiary submissions in their CAFA removals to avoid either motions for remand or sua sponte remands by U.S. district courts. Even then, many class action defendants have been unable to open the CAFA removal door. Removing defendants should now be able to simply make a plausible allegation that the CAFA’s amount in controversy requirement is met. This should substantially lower the cost, effort, and burden associated with CAFA removals. The burden will now shift to the plaintiff to present evidence disputing the defendant’s amount in controversy allegation, and the removing defendant will then be allowed to respond by submitting evidence demonstrating that its amount in controversy allegation was correct. Bottom line: Dart Cherokee should make the CAFA removal door much easier to open for class action defendants.