Supreme Court Clarifies the Standard Governing Removal of Class Action Cases to Federal Court

by Proskauer - Corporate Defense and Disputes
Contact

The US Supreme Court ruled last Monday that class action defendants need not provide evidentiary submissions in support of their attempts to remove a case from state to federal court. Rather, they need only include in their notice of removal a “plausible allegation” that the amount in controversy exceeds the jurisdictional threshold.

In Owens v. Dart Cherokee Basin Operating Co., the plaintiff filed a putative class action in Kansas state court, alleging that the energy-company defendants underpaid royalties due on oil and gas leases. The defendants removed the action to the U.S. District Court for the District of Kansas pursuant to the Class Action Fairness Act (“CAFA”), which gives federal jurisdiction over class actions only if the amount in controversy exceeds $5 million. The defendants made the short and plain statement in their notice of removal that the alleged underpayments to putative class members totaled more than $8.2 million. In response, the plaintiff moved to remand the case to state court on the ground that the removal notice included no evidence demonstrating that the amount in controversy exceeded $5 million. The district court agreed with the plaintiff, finding that Tenth Circuit precedent required proof of the amount in controversy in the notice of removal under CAFA. The Tenth Circuit refused to review the district court’s ruling.

The Supreme Court granted certiorari to resolve a division among the Circuits. For example, the Fourth, Seventh, Eighth, Ninth, and Eleventh Circuits have held that alleging a short and plain statement of the grounds for removal under CAFA is sufficient. See e.g., Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 199-200 (4th Cir. 2008); Spivey v. Vertrue, Inc., 528 F.3d 982, 986 (7th Cir. 2008); Hartis v. Chicago Title Ins. Co., 694 F.3d 935, 944-45 (8th Cir. 2012); Janis v. Health Net, Inc., 472 F.Appx. 533, 534-35 (9th Cir. 2012); Lowery v. Al. Power Co., 483 F.3d 1184, 1217 n.73 (11th Cir. 2007).

In a 5-4 decision, the majority of the Supreme Court held that a defendant’s notice of removal under CAFA need only include a plausible allegation that the amount in controversy exceeds the jurisdictional threshold. In reaching its conclusion, the majority relied on the wording of the removal statute itself, which merely requires a “short and plain statement” setting forth a good-faith basis supporting removal to federal court.

The Supreme Court’s decision is supported by CAFA’s legislative history as well. Specifically, the Senate report expressly stated that CAFA’s provisions should be interpreted broadly, with a strong preference that federal courts should hear interstate class actions if properly removed by any defendant.

Justice Scalia, writing for the dissent, argued that the Court should have never granted certiorari. Justice Scalia argued that it was improper for the court to decide the substantive issue concerning the sufficiency of the removal notice under CAFA, because the only question before the court was whether the Tenth Circuit abused its discretion in denying defendants’ permission to appeal the District Court’s remand order.

The Court’s decision provides clarity for corporate class action defendants seeking to remove an action from state to federal court. In determining whether to remove the action to federal court, defendants can find comfort in the plain language of the removal statute requiring a “short and plain statement,” as long as defendants can assert, in good faith, that the amount in controversy exceeds $5 million.

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.

© Proskauer - Corporate Defense and Disputes | Attorney Advertising

Written by:

Proskauer - Corporate Defense and Disputes
Contact
more
less

Proskauer - Corporate Defense and Disputes on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.