Congress passed the Class Action Fairness Act (CAFA) in 2005, in response to perceived (in fact real) concerns regarding potential abuses of the class action process. Among CAFA’s important provisions was the right to remove a case to federal court.
Despite the clear congressional intent, some federal courts have treated CAFA removal with hostility. The Ninth Circuit, for example, held in 2007 that a defendant seeking to remove must prove CAFA jurisdiction by a “legal certainty,” a standard that appears nowhere in the statute. Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 F.3d 994 (9th Cir. 2007). Plaintiffs, too, sought to avoid CAFA removal by various pleading tricks, such as limiting the damages they sought in their complaint – at least until the time for removal passed.
Last year, the Supreme Court held that plaintiffs could not avoid CAFA removal by stipulating to artificially low damage claims. Standard Fire Insurance v. Knowles. In the wake of that case, the Ninth Circuit reversed its own holding in Lowdermilk and held that a removing defendant could establish the basis for CAFA removal by a preponderance of the evidence and did not have to prove it by a “legal certainty.” Rodriguez v. AT&T Mobility Svcs., 2013 U.S. App. LEXIS 17851 (9th Cir. Aug. 27, 2013). We blogged that case on September 13, 2013. But while the Ninth Circuit lowered the high bar it had created, that standard may still have been higher than the statute warranted.
In the wake of Lowdermilk, Rodriguez and cases like them, defendants have been forced to submit evidentiary and other materials to support CAFA jurisdiction even though the statute does not require them. In essence, CAFA has been turned on its head – these courts, with the enthusiastic support of the plaintiffs’ bar, have put the defendants to the task of proving that the claims against them total in excess of $5 million. These burdens not only required defendants, within the removal period, to make damages projections for the plaintiffs’ claims, but to submit declarations and other evidence in support of them. In many cases, this task was made even harder by an artful or vague pleading so that a defendant would have to guess what was being claimed, make estimates about the claim, find competent witnesses, gather evidence, make the necessary calculations and then submit all of that by way of an affidavit or declaration – all within a 30-day period. Eschewing CAFA’s purpose, these decisions made class actions more difficult for defendants and turned provisions intended to level the playing field into yet additional burdens and risks for them.
That era may now be over. In Dart Cherokee Basin Operating Co., LLC v. Owens, Case No. 13-719 (December 15, 2014), the defendant was sued in a putative class action for allegedly underpaying royalties for gas and oil leases. The defendant removed the case under CAFA, specifically noting that the alleged underpayments totaled $8.2 million, well over CAFA’s $5 million requirement. While the defendant alleged the operative facts in its removal notice, it did not immediately submit evidence in support of them. In response to a motion for remand that relied upon the lack of evidence, the defendant submitted a detailed declaration, but the district court found that submission untimely because it had not been submitted with the removal notice. In addition to noting the lack of evidence with the removal notice, the district court found a presumption against removal, and remanded the case. The Tenth Circuit denied review altogether, but the Supreme Court granted certiorari.
The Justices were divided essentially 5:4 over the question of whether they even had jurisdiction to consider the issue, but we’ll leave that issue for someone else’s blog on Supreme Court practice.
After finding that it had jurisdiction to hear the matter, the Supreme Court reversed. It noted that the removal statute, 28 U.S.C. section 1446(a), deliberately tracked the language of Federal Rule 8, which only required a “short and plain” statement of the grounds supporting removal. As Justice Ginsburg noted on behalf of the majority: “A statement ‘short and plain’ need not contain evidentiary submissions.” The Court explicitly disagreed with the district court’s statement regarding an alleged presumption against the removal of CAFA cases, but, instead, noted the legislative history expressing a “strong preference” that class actions be heard in federal court. The Court concluded that the removal notice need NOT include evidentiary submissions, and that it “need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.”
The Owens case, decided nine years after CAFA’s passage, provides much-needed relief. While defendants must still provide “plausible” allegations to support removal in their removal notice, they need not submit evidentiary materials and need not satisfy artificially high standards. The Owens case also makes it clear that no such materials are required in removal cases even outside of CAFA. The Owens case will make removal to federal court a less onerous process for defendants and provide fewer grounds for remand.
The bottom line: A defendant seeking to remove a CAFA case to federal court need only provide “plausible” allegations in the removal notice and has no obligation to submit evidentiary materials in support of those allegations.