What showing must a defendant first make upon removing a case to federal court under the Class Action Fairness Act (CAFA)? Does a “short, plain statement” plausibly alleging the amount in controversy suffice, or is the removing defendant required to produce evidence with the notice of removal to meet its burden? In Dart Cherokee Basin Operating Co. v. Owens, the U.S. Supreme Court decided the former holds: plausible allegations are enough. Notably, the Court also held there no anti-removal presumption for cases under CAFA.

The Dart decision is important because certain courts had placed higher evidentiary hurdles before CAFA removals. The Tenth Circuit required that an evidentiary submission, usually through affidavits, had to accompany the notice of removal under CAFA to meet the defendant’s jurisdictional burden. The Dart majority looked to the language and history of 28 U.S.C. section 1446 – which is incorporated into CAFA removal’s section 1453 – and observed Congress had intended to simplify the ‘pleading’ requirements for removal. The 5-4 majority rejected the argument for a higher evidentiary requirement upon removal:

[D]efendants do not need to prove to a legal certainty that the amount in controversy requirement has been met.  Rather, defendants may simply allege or assert that the jurisdictional threshold has been met.  Discovery may be taken with regard to that question.  In case of a dispute, the district court must make findings of jurisdictional fact to which the preponderance standard applies.

The case began when Brandon W. Owens, plaintiff and respondent, filed a putative class action in Kansas state court alleging that defendants Dart Cherokee Basin Operating Company, LLC, and Cherokee Basin Pipeline, LLC  had underpaid royalties owed to putative class members under certain oil and gas leases. The complaint sought “a fair and reasonable amount” to compensate putative class members for “damages” they sustained due to the alleged underpayments.

Invoking federal jurisdiction under CAFA, Dart removed the case to the U. S. District Court for the District of Kansas. CAFA gives federal courts jurisdiction over certain class actions, defined in §1332(d)(1), if the class has more than 100 members, the parties are minimally diverse, and the amount in controversy exceeds $5 million. Dart’s notice of removal alleged that all three requirements were satisfied. With respect to the amount in controversy, Dart stated that the purported underpayments to putative class members totaled more than $8.2 million.

Owens moved to remand the case to state court, claiming the notice of removal was “deficient as a matter of law,” because it included “no evidence” proving that the amount in controversy exceeded $5 million. In response, Dart submitted a declaration by one of its executive officers detailing damages exceeding $11 million. Owens then urged that Dart’s amount-in-controversy submission came too late, arguing that Tenth Circuit precedent required proof of the amount in controversy in the notice of removal itself. The District Court granted Owens’ remand motion, holding Dart’s declaration could not serve to keep the case in federal court. The Tenth Circuit, as the District Court read Circuit precedent consistently held that reference to factual allegations or evidence outside of the petition and notice of removal is not permitted to determine the amount in controversy.

Based on the text and history of the section 1446, the Dart majority ultimately rejected the Tenth Circuit precedent. The dissenting justices did not address the merits, but considered the case improperly before the court. Ordinarily, decisions to remand cases to state court are not appealable. But CAFA provides that a court of appeals may accept an appeal from an order granting a motion to remand a CAFA case to state court. The defendants asked for such an appeal, but the Tenth Circuit declined to accept it. Justice Ginsburg, writing for the majority, found the “no jurisdiction” argument unpersuasive, noting the Tenth Circuit’s denial of review effectively established law for future CAFA removal in the circuit.

Prospectively, the Dart decision means defendants removing under CAFA no longer need to amass an alphabet of exhibits and affidavits within 30 days of the petition’s filing or within 30 days of when the case becomes removable. Also, the presumption against CAFA removal jurisdiction looks weaker if not hollow in Dart’s wake. A removing defendant will still have to address any jurisdictional flaws in a motion to remand, but Dart provides that a defendant need not prove federal jurisdiction to a legal certainty before then.

Author: Matthew Hamilton