Dart Cherokee: Shifting The Burden To Plaintiff in Federal Diversity Cases

by Jones, Skelton & Hochuli, P.L.C.
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Under Dart, a Plaintiff contesting that the jurisdictional threshold has not been met must now come forward with evidence that establishes the jurisdictional amount in controversy is not present.

We’ve all seen this before: You’ve been assigned to defend a carrier in a bad faith lawsuit filed in State Court. One of your immediate concerns is removing the case to Federal District Court. You’re satisfied that the diversity of citizenship requirement is met, however, you don’t know if the jurisdictional amount of $75,000.00 is met. The complaint is silent on the amount of damages. You do know Plaintiff has certified the case as not subject to compulsory arbitration, i.e., the case is worth $50,000.00 or more. It’s the $25,000.00 plus gap which causes all the angst. Until now, arguably, the entire burden has rested on the Defendant carrier to establish that the amount in controversy exceeds $75,000.00. The recent U.S. Supreme Court Decision in Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S., 135 S.Ct. 547 (Dec. 2014), may have changed all that. Indeed, under Dart, it is arguably incumbent upon Plaintiff, having decided to contest removal, to come forward with evidence that the jurisdictional amount in controversy has not been met.

Typically, in a Motion to Remand to State Court, Plaintiff will contend that the Defendant carrier has not proven the jurisdictional amount in controversy has been met by a “preponderance of the evidence,” and therefore, the case should be remanded. As a result of Dart Cherokee, a defendant seeking to remove a case from State court based upon diversity jurisdiction need only submit “a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” Dart, Slip Op. at 7. The “‘short and plain’ statement need not contain evidentiary admissions.” Id. at 2.

As explained in Dart, the analysis of the sufficiency of a defendant’s removal notice starts with the removal statute, 28 U.S.C. § 1446. That statute, as amended in 2011, provides that the removal notice need only contain a “short and plain” statement of the grounds for removal:

“(a) Generally - - a defendant or defendants desiring to remove any civil action from a state court shall file in the District Court for the United States for the District and Division within which such action is pending a Notice of Removal signed pursuant to Rule 11 of the Federal Rules of Civil Procedure and containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.” 28 U.S.C. §1446(a)(emphasis added).

In Dart, the Plaintiff filed a class action suit seeking “a fair and reasonable amount.” No specific monetary amount was alleged. In its removal notice, Defendant alleged that purported underpayments to the putative class were $8.2 million dollars, exceeding the $5,000,000.00 jurisdictional threshold under the Class Action Fairness Act (the diversity jurisdiction statute for class actions). The Plaintiff moved to remand to State court arguing that the removal notice was deficient, because Defendant had offered “no evidence” proving the amount in controversy exceeded the jurisdictional threshold. Dart, Slip Op., at 2. Defendant responded to the motion by providing a declaration that included a damages calculation exceeding the jurisdictional amount. Plaintiff objected to the attempt to introduce post-removal evidence. The District Court remanded the matter.

Although remand orders are generally not subject to review, a special provision of the CAFA allowed the Defendant to petition for review. The Tenth Circuit denied review, but the Supreme Court granted Certiorari. As framed by the majority, the question presented was:

Whether a defendant seeking removal to Federal Court is required to include evidence supporting Federal jurisdiction in the notice of removal, or is alleging the required “short and plain statement of the grounds for removal” enough?

In answering this question, the Court looked to the language and legislative history of the removal statute, particularly the 2011 amendment. The Court concluded that Congress’ use of the “short and plain” language in the statute was an effort to simplify the “pleading” requirements for removal, so that removal notices were governed by the same liberal rules that apply to other pleadings. Dart, Slip. Op., at 5. The Court observed that when the plaintiff alleges an amount in controversy in its complaint, it is accepted if made in good faith. The Court then observed that it would be anomalous if the same standard were not applied to a defendant’s notice of removal. Id. The Court then quoted the House Judiciary Committee Report discussing amendments to the removal statute in 2011:

[D]efedants 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 amount has been met. . .

Dart, Slip. Op., at 6. The Court concluded by enunciating the standard for determining the sufficiency of a defendant’s removal notice:

In sum, as specified in § 1466(a), a defendant’s notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold. Evidence establishing the amount is required by § 1446(c)(2)(B) only when the plaintiff contests, or the court questions, the defendant’s allegation.

Id. at 7.

It is unlikely that a Federal District Court, in determining whether to remand to State Court, will find Dart dispositive of the jurisdictional amount issue. But it is one more argument to bolster an opposition to a remand motion. Under Dart, a Plaintiff contesting that the jurisdictional threshold has not been met must now come forward with evidence that establishes the jurisdictional amount in controversy is not present. In such a case, discovery may be had, Defendant may present evidence, and if there is a dispute, the District Court will decide whether the jurisdictional threshold has been met. See Dart, Slip. Op., at 6-7.

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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