October 9, 2014

"Details, Details"

On October 7, in Dart Cherokee Basin Operating Co. v Owens, a case arising under the Class Action Fairness Act (CAFA), the Supreme Court heard argument as to whether a defendant removing a case to federal court must include detailed evidence in its notice of removal as to the bases for federal jurisdiction. 

Specifically, to support federal jurisdiction under CAFA, a defendant must establish that: (1) at least one putative class members is a citizen of a state different from that of any defendant (minimal diversity); (2) there are 100 or more class members; and (3) the amount in controversy exceeds $5 Million in the aggregate. Although the removal statute requires only “a short plain statement of the grounds for removal,” the district court held that a notice of removal is deficient, and remand is warranted, where defendant fails to provide evidentiary support in the Notice of Removal itself for an assertion that the amount in controversy had been satisfied, even if plaintiff does not ultimately dispute that contention. 

In this case, at the time of removal, the defendant was aware of the facts which supported its assertion – i.e, a mediation/settlement demand in excess of $5 million, but did not so state in the Notice of Removal. As courts often state in justifying remand, the district court applied a “presumption against removal” and that all doubts are to be construed against removal. The Tenth Circuit denied the defendant’s petition for permission to appeal. On a petition for rehearing en banc, the Circuit judges split 4-4 and thus denied the rehearing petition as well.

The import of this case reaches beyond the removal of class actions and to the level of details required in notices of removal, even where there is no dispute among the parties as to material facts supporting certain bases for removal. If the Supreme Court affirms, a defendant’s removal burden will be heightened throughout the country, in requiring the defendant to submit evidence with the Notice of Removal as to the basis for federal jurisdiction—whether or not plaintiff ultimately disputes those facts.   

District Courts may find themselves confronted with even heftier Notices of Removal on their dockets, even when no jurisdictional dispute among the parties is likely. Moreover, it is possible that such requirements may apply not only to the amount in controversy, but to the other prerequisites for federal jurisdiction as well (e.g. allegations of citizenship). This standard may apply whether the removal is based on CAFA or traditional bases for federal jurisdiction, such as diversity and federal question jurisdiction.

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