Class action litigators have long faced the unsettled question of what amount of evidence is necessary to support the removal of a state court action to federal court under the Class Action Fairness Act, the answer often changing depending on the specific jurisdiction. No longer.
On December 15, 2014, in a 5-4 decision, the United States Supreme Court set the record straight, ruling that a notice of removal under CAFA does not need to be initially supported by evidence, but only plausibly allege the jurisdictional elements.
Under CAFA, a defendant may remove a class action to federal court if the class has more than 100 members, the parties are minimally diverse, and the amount in controversy exceeds $5 million. As we previously discussed on our post, “California federal district courts split on calculating attorney’s fees for CAFA jurisdiction”, courts differ on what can be included in calculating the amount in controversy requirement, some permitting the inclusion of attorneys’ fees and punitive damages.
Generally, if the state court complaint alleges more than $5 million, the amount in controversy is deemed satisfied. If the amount is not stated in the complaint, the defendant must establish in the notice of removal that the jurisdictional amount is satisfied.
Some circuits (including the Tenth Circuit—where this case originated) require that a notice of removal be affirmatively established and supported by evidence. Other circuits (like the Fourth Circuit) hold that the removal requires adequate pleading only. In the Ninth Circuit, the burden is on the defendant to establish removal jurisdiction by a preponderance of the evidence.
The Supreme Court settled the circuit dispute and held that the removal statute borrowed the “short and plain statement” language from the pleading requirements to simplify the removal process. The notice of removal only requires a plausible allegation that the amount in controversy is met.
If a plaintiff challenges the adequacy of the removal, only then must both parties present evidence at which point the court will decide whether the amount in controversy is satisfied by a preponderance of the evidence. The Court held that there is no basis to hold a defendant’s removal notice to a higher standard than a plaintiff’s complaint when both are required to provide only a “short and plain statement.”
Additionally, the Supreme Court dispelled the notion that there is a presumption against removal of class actions, a favorite argument used to combat federal court jurisdiction. CAFA was enacted to ensure that federal courts adjudicate certain class actions and its primary objective is to encourage federal court jurisdiction over interstate lawsuits.
As a result, the path to removal is clearer and less burdensome. Defendants no longer need to spend unnecessary time determining whether they can meet the evidentiary burden to remove a class action to federal court. The Supreme Court has clearly stated that many class actions are intended to invoke federal jurisdiction.
While defendants still need to make sure the removal requirements are present (and be prepared to present evidence in a dispute), the presumption against removal (to the extent it existed in a jurisdiction at all) is gone and the seemingly high evidentiary burden has been substantially lowered.