The Class Action Fairness Act (“CAFA”) affords federal courts original jurisdiction over class action lawsuits that meet the following three requirements: 1) the class has more than 100 members; 2) the parties are minimally diverse; and 3) the amount in controversy exceeds $5 million.1 A defendant responding to a putative class action filed in state court may remove the action to federal court provided the action meets these three requirements.2 On December 15, 2014, the US Supreme Court issued an important decision regarding the third requirement in Dart Cherokee Basin Operating Co. v. Owen, holding that a defendant seeking to remove a class action based upon CAFA may assert in the notice of removal “a plausible allegation that the amount in controversy exceeds the jurisdictional threshold,” and need not submit evidence in support of the alleged amount unless the plaintiff contests the allegation or the district court questions it.3
In Dart, plaintiff commenced a putative class action in state court arising from defendants’ alleged underpayment of royalties owed to the class members under oil and gas leases. Plaintiff sought recovery of “a fair and reasonable amount” of “damages” sustained by the putative class members. The defendants removed the action under CAFA to the US District Court for the District of Kansas. In their notice of removal, defendants alleged that the purported underpayments exceeded $8.2 million. Reasoning that a defendant must provide proof within the notice of removal of the amount in controversy, the district court remanded the action to state court because defendants failed to include in the notice of removal any evidence that the amount in controversy exceeded $5 million. The Court of Appeals for the Tenth Circuit declined review of the decision, and defendants appealed to the US Supreme Court.
In a 5 to 4 decision authored by Justice Ginsburg, the Supreme Court held that a defendant may simply allege that the amount in controversy exceeds $5 million, and need not submit evidence supporting the assertion. The Court observed that the language of the removal statute4 mirrors that of Federal Rule of Civil Procedure 8(a), which governs pleadings, and that both require only that the pleader allege a “short and plain statement.”5 Justice Ginsburg reasoned that the similarity of the language was no accident; in drafting the removal statute, Congress “intended to ‘simplify the pleading requirements for removal’ and to clarify that courts should ‘apply the same liberal rules to removal allegations that are applied to other matters of pleadings.’”6 Because the liberal federal pleading standard requires courts to accept a plaintiff’s general allegation that the amount in controversy meets the requirements for federal jurisdiction, so too should a court accept a defendant’s allegation that the amount in controversy is sufficient under CAFA, as it would be “anomalous to treat commencing plaintiffs and removing defendants differently with regard to the amount in controversy.”7
A defendant will be required to submit proof of the amount in controversy only when a plaintiff contests, or the district court questions, defendant’s allegation as to the amount in controversy. In such a case, both parties will be required to submit proof of their positions, and the court will determine whether the amount in controversy has been proven by a preponderance of the evidence. Nevertheless, no such requirement exists at the time a defendant files a notice of removal, and will only arise in the event a plaintiff or the court raises the issue.
Finally, the Court rejected the notion that there exists a presumption against removal of actions arising under CAFA. Indeed, Congress enacted CAFA to promote federal court consideration of substantial cases involving interstate parties.8
This decision has harmonized the various positions of the federal appellate courts and has relieved class action defendants of the onerous obligation to gather and submit evidentiary proof of the existence of the amount in controversy within the relatively short deadline by which a defendant must file a notice of removal after service of the complaint.9
1 See 28 U.S.C. § 1332(d). As compared to typical diversity cases requiring complete diversity of the parties, whereby all of the plaintiffs must be diverse from all of the defendants (see 28 U.S.C. § 1332(a)(1-4)), CAFA permits federal courts to assert jurisdiction over cases with only minimal diversity of the parties, which is met if only one plaintiff class member is diverse from any one defendant. See 28 U.S.C. § 1332(d)(2)(A-C).
2 See 28 U.S.C. § 1441(a).
3 574 U.S. __ (2014).
4 The removal statute provides that a defendant seeking to remove a case to federal court must file a notice of removal “containing a short and plain statement of the grounds for removal” See 28 U.S.C. § 1446(a).
5 Compare 28 U.S.C. § 1446(a) with Fed. R. Civ. P. 8(a).
6 574 U.S. __ (quoting H.R. Rep. No. 100-889, p.71 (1988)).
7 574 U.S. __.
8 See id. (citing Standard Fire Ins. Co. v. Knowles, 568 U.S. __ (2013)).
9 The reason for the close decision was based not on the merits of CAFA, but on a strong difference of opinion between the majority and dissent as to whether the case was properly before the Court. Justice Scalia authored the principal dissent in which he emphasized that the Tenth Circuit had denied permission to appeal the case and had not decided the case on its legal merits. Therefore, he argued, the Supreme Court’s jurisdiction over the matter was limited to the question of whether the Tenth Circuit had abused its discretion in denying permission to appeal. Because that question is different from the question before the Court (i.e. whether a removing defendant is required to submit proof of the amount in controversy under CAFA), Justice Scalia would have voted to dismiss the case as improperly before the Court; alternatively, Justice Scalia would have voted to affirm the Tenth Circuit, which had issued only a short order declining to review the case without explanation, because there was no evidence that the Tenth Circuit had abused its discretion. Responding to this argument in the majority opinion, Justice Ginsburg held that in light of “signals” that “the Tenth Circuit’s denial of Dart’s request for review of the remand order was infected by legal error,” the Tenth Circuit had abused its discretion in denying defendants leave to appeal.