The Supreme Court today relieved decades of uncertainty concerning the filing requirements for removal of cases to federal court from state court by holding that a defendant is required only to file “a short and plain statement” containing a “plausible allegation” that the jurisdictional amount in diversity cases is satisfied. No evidence need be recited in the notice or attached to it. The Court’s ruling, inDart Cherokee Basin Operating Co. v. Owens (no. 13-719), applies in all diversity cases, including would-be class actions removed under the Class Action Fairness Act (CAFA).
Lack of uniformity in the case law until now has prompted some attorneys to file affidavits with their removal notices and to spend hours drafting code-pleading style “petitions for removal.” Owens makes clear that the notice of removal is governed by federal notice-pleading standards.
Owens was a putative class action filed in Kansas state court and removed by the defendant under CAFA. The complaint, which claimed underpayments on oil and gas leases, did not allege a specific amount in controversy. The defendant removed the case, alleging that the amount in controversy was more than $8.2 million, safely above CAFA’s $5 million jurisdictional threshold. The plaintiff moved to remand on the ground that the defendant included no evidence proving that the amount in controversy exceeded $5 million. The defendant responded with a declaration that included a detailed damages calculation indicating an amount in controversy exceeding $11 million. The district court nonetheless granted the remand motion, reasoning that Tenth Circuit precedent prohibited reference to factual allegations not found in the removal notice.
The defendant then sought review by the Tenth Circuit under CAFA’s special provision (28 U.S.C. § 1453(c)(1)) allowing discretionary interlocutory review of district court decisions granting or denying remand motions. A divided Tenth Circuit panel denied review, without stating specific grounds for its action. The defendant next sought rehearing en banc, which was denied by an evenly divided court. The Supreme Court ultimately granted certiorari and heard argument in October.
The 5-4 majority opinion authored by Justice Ginsburg observed that it is “anomalous to treat commencing plaintiffs and removing defendants differently with regard to the amount in controversy.” (Slip. op. at 5.) The Court held that “a defendant’s notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” (Id. at 7.) In the event the defendant’s jurisdictional allegation is challenged, then “both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied.” (Id. at 6.) The Court assumed, without deciding, that the preponderance of evidence standard applies in CAFA cases as well as in general diversity cases.
In a holding specific to CAFA cases, the Court also rejected any “presumption against removal,” which the district court had invoked: “We need not here decide whether such a presumption is proper in mine-run diversity cases. It suffices to point out that no antiremoval presumption attends cases invoking CAFA, which Congress enacted to facilitate adjudication of certain class actions in federal court.” (Id. at 7.) The Court’s purposeful interpretation of CAFA will bring holiday cheer to defendants targeted by class actions.
The focus of oral argument in the case was on an appellate procedure issue: whether the court could review the Tenth Circuit’s denial of the defendant’s petition for review of the district court’s remand order. The majority opinion held that such review is possible where the circuit court abuses its discretion by relying on a “legally erroneous premise” in denying the petition for review. (Id. at 9.) In dissent, Justice Scalia, joined by four justices, scoffed at this aspect of the ruling but did not question, in any respect, the majority’s removal analysis, noting that the Court had granted certiorari “[e]ager to correct what we suspected was [an] erroneous interpretation of § 1446(a).” (Slip. op at 1.) Neither did Justice Thomas, who joined Justice Scalia’s dissent (except one sentence) and separately dissented on the ground that the Court had no jurisdiction at all to review the Tenth Circuit’s denial of the petition. The unusual composition of the majority (Chief Justice Roberts and Justices Kagan, Alito, Breyer and Sotomayor joined Justice Ginsburg’s opinion for the Court) is an indication of the absence of controversy on the removal procedure holding.