Supreme Court Finds Plausible Showing of Amount in Controversy Sufficient to Remove Action
In a decision that may make it somewhat easier for defendants to remove putative class actions from state to federal court, the U.S. Supreme Court ruled that defendants in such cases do not need to offer evidence in their notices of removal proving that the amount in controversy exceeds the jurisdictional threshold. See Dart Cherokee Basin Operating Co. v. Owens, No. 13-719 (Dec. 15, 2014).
The case involved a putative class action filed in Kansas state court alleging that Defendants underpaid royalties owed under oil and gas leases. Defendants sought to remove the case to federal court by asserting that the district court had diversity jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”). Diversity jurisdiction under CAFA requires a class with more than 100 members, minimal diversity, and an amount in controversy exceeding $5 million. 28 U.S.C. § 1332(d)(2). Defendants’ notice of removal stated that any alleged underpayments to the putative class totaled more than $8.2 million. Plaintiff argued that the case should be remanded because the notice of removal contained no evidence showing that the amount in controversy exceeded the jurisdictional amount. Defendants responded with a declaration from a company executive containing a detailed damages calculation. The district court interpreted controlling law to require proof of the amount in controversy in the notice itself and remanded to state court. Plaintiff petitioned the Tenth Circuit for permission to appeal, but that court denied review and rehearing en banc.
In a 5-4 decision, the justices ruled that a “notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” Dart Cherokee, Slip Op. at 7. The Court first examined the history of the federal statute governing removal, concluding that Congress intended the statute to set a liberal standard similar to that required for pleadings in federal court. Under such a liberal standard, the Court ruled evidence is only required in the event a plaintiff or the judge calls into question the amount in controversy alleged in the notice of removal. The four dissenting Justices argued that a procedural defect in the case should have prevented the Court from reaching the merits.