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Supreme Court to Decide Whether All Evidence Supporting Removal Under the Class Action Fairness Act Must Be Submitted With The Notice of Removal

Posted in Motions Practice, U.S. Supreme Court

To remove a civil action from state court to federal court, the defendant must “file … a notice of removal … containing a short and plain statement of the grounds for removal.” 28 U.S.C. § 1446(a). Today, the Supreme Court granted certiorari in Dart Cherokee Basin Operating Co. v. Owens, No. 13-719, to decide whether a notice of removal must also include evidence supporting jurisdiction if the facts establishing jurisdiction do not appear on the face of the state-court complaint. The Court’s resolution of this issue will be important to all businesses seeking to remove state-court class actions to the federal courts.

Owens, the plaintiff in Dart Cherokee, filed a class action in Kansas state court seeking to recover oil and gas royalties, but did not specify the amount sought. The defendants responded by filing a notice of removal that invoked the Class Action Fairness Act of 2005. The notice alleged that the royalties at issue exceeded $8.2 million, and thus satisfied the CAFA’s $5 million jurisdictional minimum. See 28 U.S.C. § 1332(d)(2). When Owens moved to remand the suit to state court, the defendants filed a declaration supporting the jurisdictional facts alleged in their notice of removal. Relying on Tenth Circuit precedent, the district court remanded the case on the ground that the defendants had not “establish[ed] by a preponderance of the evidence that the amount in controversy exceeds $5 million” because they had “fail[ed] to incorporate any evidence supporting [their] calculation in the notice of removal, such as an economic analysis of the amount in controversy or settlement estimates.” The district court refused to consider the evidence filed with the opposition to the motion to remand, holding that the defendants “were obligated to allege all necessary jurisdictional facts in the notice of removal.” A divided panel of the Tenth Circuit denied leave to appeal; and rehearing en banc was denied by an equally divided court, over a published dissent.

According to the petition for certiorari, the Fourth, Seventh, Eighth, Ninth, and Eleventh Circuits apply a notice-pleading standard, requiring that notices of removal include allegations but not evidence. Furthermore, the petition contends, the First, Fourth, Fifth, Seventh, Ninth, and Eleventh Circuits have either allowed or required district courts to consider post-notice removal evidence when deciding whether to remand.

The correct articulation of the procedures and evidentiary burdens for seeking removal, especially under the CAFA, will be of substantial interest to any business that may prefer a federal forum to state court. In many consumer class actions, it is a challenge to assemble sufficient evidence of the size of the putative class and the potential value of their claims by the 30-day deadline for a notice of removal. The Dark Cherokee case will determine whether defendants will continue to have the option, now available in most circuits, of pleading jurisdictional facts in the notice and establishing them with evidence some weeks later in the opposition to any motion to remand.