Supreme Court to Address Requirements for Class Action Removal
Consumer products companies are frequently the targets of nationwide class actions, and a common defense strategy includes removing these cases to federal court under the Class Action Fairness Act of 2005. ”CAFA” provides federal jurisdiction over certain class actions where the amount in controversy exceeds $5 million. See 28 U.S.C. §§ 1332(d)(2), (5). On April 7, 2014, the Supreme Court granted review of a 10th Circuit case that was removed under CAFA and then remanded based on a lack of evidence supporting the amount in controversy. The Supreme Court, thus, appears poised to clarify what is required of a defendant removing a case under CAFA (or on other grounds for that matter).
The case is Dart Cherokee Basin Operating Co., LLC v. Owens, 730 F.3d 1234 (10th Cir. 2013), in which the Tenth Circuit declined to overturn a Kansas District Court opinion granting a motion to remand a case removed to federal court by Dart Cherokee Basin Operating Co. under CAFA. Although Dart’s Notice of Removal explained why the Plaintiff’s royalty claims raised the amount in controversy above $5 million, the District Court granted the Plaintiff’s motion to remand because the Notice of Removal was not supported by evidence, “such as an economic analysis … or settlement estimates” supporting Dart’s amount in controversy estimate. Id. at 1234. When Dart proffered supporting evidence in opposition to the motion to remand, the Court held that it was too late based on the requirement that removal papers are generally due within 30 days of the filing of the complaint.
An en banc panel declined review, and the dissenting opinion explained that “nothing in the removal statutes or Supreme Court decisions, or any holdings of this court, require the submission of such evidence before the jurisdictional allegations are challenged.” Id. at 1235. In fact, the dissent noted, Supreme Court precedent holds that, “[w]hen challenged on allegations of jurisdictional facts, the parties must support their allegations by competent proof.” Id. at 1236, quoting Hertz Corp. v. Friend, 559 U.S. 77, 96-97 (2010) (emphasis added). Prior to such challenge, all that should be required is “a short and plain statement of the grounds for removal.” 730 F.3d at 1235, quoting 28 U.S.C. § 1446(a). ”The burden imposed by the district court on Petitioners was excessive and unprecedented.” 730 F.3d at 1237.
The Supreme Court’s grant of review may signal a reversal, and its decision should clarify what a removing defendant must allege (or proffer) and when in order to satisfy the requirements for removal jurisdiction. Predecent suggests that evidence will not be required with removal papers, but perhaps the Court will require more than a “short and plain statement” along the lines of the “plausibility” standard applicable to complaints as set forth in Ashcroft v. Iqbal, 556 U.S. 662 (2009) and related cases. Consumer products companies defending potentially removable cases should watch for this decision as it will provide useful guidance.