On December 15, 2014, the United States Supreme Court resolved a circuit split in holding that a defendant need not supply evidence of the amount in controversy in its notice of removal under the Class Action Fairness Act (“CAFA”). In Dart Cherokee Basin Operating Co. v. Owens, No. 13-719, 574 U.S. -- (2014), the plaintiff, Owens, filed a putative class action in Kansas state court alleging defendants had underpaid royalties to putative class members under certain oil and gas leases. The defendant, Dart, filed a notice of removal with the U.S. District Court for the District of Kansas pursuant to CAFA. To establish diversity jurisdiction under CAFA, defendants must show, among other things, that the amount in controversy exceeds $5 million.
Dart alleged that the amount in controversy exceeded $8.2 million, but Dart submitted no proof with its notice of removal. Owens moved to remand on the basis that the notice’s lack of evidentiary support rendered it legally insufficient. In response, Dart submitted a declaration of one of its officers that included a detailed damages calculation indicating that the amount in controversy exceeded $11 million. Owens challenged the declaration as too late—existing Tenth Circuit precedent required proof of the amount in controversy in the notice of removal itself. The district court agreed with Owens. After the Tenth Circuit denied review, the Supreme Court granted certiorari to resolve a split among the circuits regarding whether evidence must be presented along with a notice of removal asserting federal jurisdiction under CAFA.
The Supreme Court noted that CAFA requires only “a short and plain statement of the grounds for removal.” This language, the Court found, tracks the pleading requirements set out in Rule 8 of the Federal Rules of Civil Procedure. The Court held that if a plaintiff can invoke federal jurisdiction merely by pleading the amount in controversy in good faith, then a defendant’s allegations of the amount in controversy should be subject to the same standard provided they are not challenged by plaintiff or the court. The Court further held that only in the event of such a dispute is evidence required to establish the amount in controversy. Initially, and in the absence of such a dispute, defendants “need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.”
As a result of this decision, defendants will no longer be required to provide plaintiffs “free discovery” of their exposure estimates in advance of a motion to remand.