The Eleventh Circuit’s decision in Dudley v. Eli Lilly and Co., 2014 WL 7360016 (11th Cir. Dec. 29, 2014), highlights the risk of waiving (or, at a minimum, postponing) an otherwise proper removal by not creating a proper record to allow a federal court to assess the amount in controversy.

Preservation Issue: Making a Record in Support of Removal to Federal Court

On December 29, 2014, the Eleventh Circuit issued its decision in Dudley v. Eli Lilly and Co., which impacts removal practice under the Class Action Fairness Act.

In Dudley, the plaintiff filed a class action, alleging that the defendants had failed to make one or more of four different types of incentive payments to former employees.  The district court remanded the case, finding that “Lilly’s proffers about the amount in controversy were purely speculative because Lilly had failed to identify a specific number of class participants made up of only those employees who did not receive their promised compensation; and had failed to identify the amount each member was entitled to receive as compensation.”  Dudley, 2014 WL 7360016, at *1.

So, what had the defendants proffered to establish the amount in controversy?  They estimated the amount of potential damages for each class member by providing ranges of incentive compensation and then selecting the midpoints of those ranges for its calculation.  They did not build into their calculation the fact that not all of the former employees were alleged to have been denied each of the four types of incentive payments alleged by the plaintiff.

 On appeal, the defendants argued that they did not want to provide so much detail so as “to concede liability or be unduly burdened by providing ‘detailed, sales-record-by-sales-record proof of incentive payments allegedly forfeited at termination’ for each former employee.” Id. at *7. The Eleventh Circuit noted that it “agree[d] with these observations,” but could not “see how the district court could generally infer the amount in controversy from this record.” Id.

At the Eleventh Circuit’s request, the defendants filed a supplemental brief in the light of Dart Cherokee  Basin Co. LLC v. Owens, 574 U.S. ___, No. 13-719, 2014 WL 7010692 (Dec. 15, 2014), and argued the plaintiff failed to satisfy her burden under Dart Cherokee:

When Dudley challenged removal, Lilly produced more evidence, offering sworn, detailed evidence that 971 potential class members could collectively seek $9,910,525 (nearly double the jurisdictional threshold).

Dudley, by contrast, failed to satisfy her burden by submitting no evidence at all.  While claiming Lilly over-estimated incentive payments that putative class members could try to recover, Dudley offered no evidence that—and not even in a solitary instance where—Lilly was wrong.  Nor did Dudley attempt to conduct any additional discovery of jurisdictional facts.  Under Dart Cherokee, those failures are decisive:  they left the district court without any jurisdictional basis for returning the case to state court.

(Lilly Supp. Br. at 2).  The defendants also emphasized that the Dart Cherokee Court “clarified that ‘no antiremoval presumption attends cases invoking CAFA.’” (Supp. Br. at 3 (quoting Dart Cherokee, 2014 WL 7010692 at *6)).

Despite these good and timely arguments under Dart Cherokee, the Eleventh Circuit still affirmed the remand to state court.  In doing so, however, it offered some guidance to practitioners:

Lilly, after all, had access to its own employment records and its evidence shows that it was able to parse out . . . their termination dates, and to provide a payment range for each category of compensation. It seems to us that using these same employment records or others, Lilly could have provided the district court with more information about the amount of compensation that was allegedly denied the class members, without conceding liability or being unduly burdened.

Dudley, 2014 WL 7360016, at *7 (emphasis supplied).

Tip:

At bottom, this case illustrates that, even in a post-Dart Cherokee world, CAFA defendants (indeed, all defendants) must remain vigilant in creating their records for removal.  Although there are often solid tactical reasons to proffer less than more in a given case, this affirmance shows that courts still give the evidentiary record supporting removal a hard look.  Given the result in this case, it may prove better to err on the side of including more, rather than less, in the removal record.