Supreme Court Clarifies CAFA Amount in Controversy

Readers will recognize that the Class Action Fairness Act ("CAFA") provides a mechanism for removing to federal court various class actions, especially those implicating national or multi-state issues.  One of the hurdles in that removal process is establishing an amount in controversy under the amended statute--which gives federal courts jurisdiction over class actions if the amount in controversy exceeds $5 million, 28 U.S.C. § 1332(d)(2). Recently, the United States Supreme Court clarified this requirement. See Dart Cherokee Basin Operating Co. v. Owens, No. 13-719, slip op. (U.S. 12/15/14).   The Court held that removal under the Class Action Fairness Act does not require any special evidentiary submission regarding the amount in controversy beyond the facts alleged in the notice of removal.

As specified in § 1446(a), a defendant’s notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold; the notice need not contain evidentiary submissions. Section 1446(a) in fact tracks the general pleading requirement stated in Rule 8(a) of the Federal Rules of Civil Procedure. By borrowing Rule 8(a)’s “short and plain statement” standard, as the legislative history indicates, Congress intended to clarify that courts should apply a liberal rule to removal allegations. See H.R.Rep. No. 100–889, p. 71. Nothing more in the way of evidence is required as a prerequisite to removal.

The amount-in-controversy allegation of a plaintiff invoking federal court jurisdiction generally is accepted if made in good faith. See, e.g., Mt. Healthy City Bd. of Ed. v. Doyle, 429 U.S. 274, 276. Similarly, the amount-in-controversy allegation of a defendant seeking federal court adjudication should be accepted when not contested by the plaintiff. In the event that the plaintiff does contest the defendant’s allegations, both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied. See § 1446(c)(2)(B). That happens, of course, after removal – not as a prerequisite to removal. 

In remanding this case to state court, the District Court relied, in part, on a purported “presumption” against removal. However, no anti-removal presumption exists, at least not in cases invoking CAFA, a statute Congress enacted to facilitate adjudication of certain class actions in federal court. See Standard Fire Ins. Co. v. Knowles, 133 S.Ct. 1345. Note: that observation may be very useful in future CAFA removal cases. 

Thus, the District Court erred in remanding this case for want of an evidentiary submission in the notice of removal, and the Tenth Circuit abused its discretion in denying review of that decision. 

 

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