The U.S. Supreme Court heard an argument last week in Dart Cherokee Basin Operating Company, LLC v. Owens — a case that could alter the landscape of where class action lawsuits are resolved. Although most of the argument focused on a procedural issue that will likely prevent the Court from getting to the merits, the case’s history in lower court deserves mention.
One of the requirements of the Class Action Fairness Act (CAFA) is that the amount at issue has to be more than $5 million in order for a federal court to have removal jurisdiction under the statute. The plaintiff in Dart Cherokee filed a class action in Kansas state court over a royalty payments dispute. The defendant companies tried to remove the case to federal court under CAFA, alleging that more than $8 million was at issue. While simply alleging the amount at issue normally suffices for a notice of removal (which requires “a short and plain statement of the grounds for removal” under 28 U.S.C. 1446(a)), a federal district court judge in Kansas held that the defendants had to provide documents to support how much was at issue before the case could be heard in federal court. The defendants appealed and the 10th Circuit declined to hear the case.
If the U.S. Supreme Court reaches the merits of the case, its ruling could have broad implications for businesses and potential class action defendants across the country. Upholding the requirement for additional evidence would mean more class actions proceeding in state court, which is potentially a huge win for class action plaintiffs. Reversing and requiring only an allegation of the jurisdictional requirements — which is what every circuit to have faced this issue before the 10th has held — would restore the law to its position before Dart. If the Court does not reach the merits, it will be interesting to see whether the 10th Circuit’s unique stance on removal under CAFA will have the effect of keeping more class actions in state courts. In the meantime, a more in-depth look at the case and issues on appeal is available here.