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. 

 

CAFA Local Exception Rejected

 A federal court in Georgia ruled last week that a proposed class action alleging injury from chemical exposures was properly removed under the Class Action Fairness Act of 2005.  See Anderson v. King America Finishing Inc., No. 1:11-cv-2258-JEC (N.D. Ga., 3/25/13).


Plaintiffs alleged that defendant King America Finishing released a toxic chemical into the Ogeechee River from its manufacturing plant in Dover, Georgia. According to plaintiffs, the toxic chemical release caused damage to surrounding land downstream from the Dover plant. In addition, plaintiffs claimed that certain individuals who swam in the Ogeechee River suffered from physical injuries due to the release. Plaintiffs filed a class action complaint in Fulton County Superior Court. They purported to represent a property damage class defined to include “[a]ll possessors of property affected, directly or indirectly, by [the May, 2011] release of chemicals into
the waters of the Ogeechee River.” One named plaintiff also purported to represent a personal injury class defined to include “[a]ll persons who have been exposed, directly or indirectly, with the waters of the Ogeechee River that had been contaminated by the Release.”


Defendants removed the case to federal court pursuant to the Class Action Fairness Act (“CAFA”), 28 U.S.C. §§ 1332(d) and 1453. CAFA generally provides for the removal of any class action in which there is: (1) minimal diversity, (2) at least 100 putative class members and (3) $5 million in alleged damages. 28 U.S.C. §§ 1332(d)(2) and 1453. It was undisputed that these requirements were met in this case. Plaintiffs conceded that all of the named plaintiffs were diverse from defendant, that the putative class exceeded 100 members, and that the claims exceeded $5 million in damages.

Nevertheless, plaintiffs filed a motion to remand the case to state court, based on the “local controversy” exception to CAFA jurisdiction, which provides for the remand of a class action that “uniquely affects a particular locality to the exclusion of all others.” Evans v. Walter Indus., Inc., 449 F.3d 1159, 1164 (11th Cir. 2006). Specifically, a “local controversy” is defined by CAFA as a class action in which: (1) greater than two-thirds of the class members are citizens of the state in which the action was originally filed, (2) at least one “significant” defendant is a citizen of the state in which the action was filed and (3) the principal injuries alleged in the action were incurred in the state in which the action was filed. 28 U.S.C. § 1332(d)(4)(A).

Defendants did not dispute elements 2 and 3. The argument among the parties centered on the two-thirds requirement.  Under CAFA, plaintiffs bear the burden of proving that the exception applies. In order to meet their burden on the two-thirds requirement, plaintiffs had to present evidence from which a court could credibly adduce that more than two-thirds of the purported class members were Georgia citizens. Plaintiffs used tax and voter registration records,  reference to the Secretary of State’s Corporation website, and interviews of personal injury class members who were determined by interview to be Georgia citizens, to just get over the threshold.

The court rejected their calculations, finding no sound evidentiary basis for including several of these groups in the calculation. For example, with regard to the legal entities, the Secretary of State’s website merely lists a Georgia office address for each entity. The website does not indicate that any of these entities have their “principal place of business” in Georgia. In addition to the evidentiary issues with the numerator in plaintiffs’ equation, there were serious questions about the denominator as well. Both the property and the personal injury classes were defined broadly in the complaint to include all land and persons directly or indirectly allegedly impacted by the May, 2011 release. Given that broad definition, the property class likely included many more members than the 900 or so landowners in the particular geographical area chosen by plaintiffs’ attorneys for their showing. Likewise, there could be many more individuals who were “indirectly” injured by the release than the 20 potential class members interviewed by plaintiffs.  The court could not simply speculate about the citizenship of these unaccounted for class members.
Accordingly, the court denied the plaintiffs' motion for remand.