A Dart Across the Bow

Carlton Fields
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Carlton Fields

The Ninth Circuit Court of Appeals recently underscored that removal practice under the Class Action Fairness Act (CAFA) differs in some important respects from traditional removal practice in non-CAFA cases. It did so because, “[i]n some of our early cases interpreting CAFA, we adopted legal standards that were influenced by a general ‘presumption against federal jurisdiction.’” Now, of course, the Supreme Court in Dart Cherokee Basin Operating Co. v. Owens, 574 U.S. 81 (2014), “has made clear that regardless of whether such a presumption exists in run-of-the-mill diversity cases, ‘no antiremoval presumption attends cases invoking CAFA.’”

In this case, the Ninth Circuit reviewed the district court’s sua sponte remand after a CAFA removal by Marriott. The putative class action alleged unpaid wages, missed meal breaks, and inaccurate wage statements. To satisfy the amount-in-controversy requirement, Marriott matched its employee data with assumptions about the frequency of the violations alleged in the complaint. This methodology led to a potential amount in controversy in excess of $15 million.

The district court concluded, sua sponte, that Marriott’s methodology was based on speculation and conjecture. It stated that “[e]qually valid assumptions could be made that result in damages that are less than the requisite $5,000,000 amount in controversy.” The court also rejected Marriott’s suggestion that attorneys’ fees should be included in the amount-in-controversy calculation, reasoning that they are too speculative to include.

On appeal, the Ninth Circuit reversed. It summarized “three principles” that apply in CAFA removal cases:

First, a removing defendant’s notice of removal “need not contain evidentiary submissions” but only plausible allegations of the jurisdictional elements. Second, when a defendant’s allegations of removal jurisdiction are challenged, the defendant’s showing on the amount in controversy may rely on reasonable assumptions. Third, when a statute or contract provides for the recovery of attorneys’ fees, prospective attorneys’ fees must be included in the assessment of the amount in controversy.

Taking issue with the district court’s statement that Marriott did not prove the amount in controversy, the Ninth Circuit, quoting Dart, emphasized that “a notice of removal ‘need not contain evidentiary submissions.’” Instead, according to Dart, “when a defendant’s assertion of the amount in controversy is challenged . . . both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied.” At bottom, the Ninth Circuit concluded that Marriott did not receive “a fair opportunity to submit proof.”

The Ninth Circuit vacated the district court’s order and remanded to allow the parties to present evidence as to the amount in controversy, including the possible amount of attorneys’ fees at stake if needed. A telling indicator that the Ninth Circuit’s current view of the removal procedure under CAFA may differ from traditional expectations is that the plaintiff actually suggested Rule 11 sanctions in her answer brief for Marriott’s merely defending its approach in this case.

Arias v. Residence Inn by Marriott, 936 F.3d 920 (9th Cir. 2019).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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