Supreme Court Eases CAFA Removal Standards

Publications

Supreme Court Eases CAFA Removal Standards

Trending Legal Issue |

The U.S. Supreme Court has eased the standards for removing putative class actions to federal court under the Class Action Fairness Act of 2005 (“CAFA”). Dart Cherokee Basin Operating Co. v. Owens, 135 S. Ct. 547 (2014).

Dart is a terrific case for defendants confronting class actions in state courts. Here are a few quick takeaways:

1. The Notice of Removal need not contain “evidentiary submissions” establishing federal jurisdiction.

The Supreme Court ruled that defendants need not submit “evidence” in their removal papers establishing CAFA jurisdiction. Instead, defendants need provide only “a short and plain statement of the grounds for removal,” 28 U.S.C. § 1446, which “tracks the general pleading requirement stated in Rule 8(a).” 135 S. Ct. at 553.

If neither the plaintiff nor the district court contests the defendant’s allegations in the notice of removal, those allegations “should be accepted,” and no “evidence” is necessary. Id. But if the plaintiff (or the court) contests the allegations in the notice of removal, “both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied.” Id. at 554. As support for this proposition, the Court cited Section 1446(c)(2)(B) (part of the recent amendments to the removal statute), but “assume[d], without deciding,” that this provision applied to CAFA removals. Id. at 554 n.1.

Since Dart, some courts have rejected arguments that a plaintiff must submit evidence to challenge jurisdiction. According to these courts, if the removing defendant is the only party that submits evidence, and the plaintiff contests jurisdiction, the Court still must determine whether CAFA jurisdiction is satisfied.

Another note of caution: Allegations regarding the amount in controversy still must be alleged “plausibly.” Id. at 551. Defendants may want to be safe rather than sorry: provide as much detail as is reasonable regarding the jurisdictional requirements (e.g., diversity, amount in controversy, 100 class members). Otherwise, defendants may find themselves on the receiving end of a Twombly/Iqbal-type argument that their removal allegations were not “plausible.”

2. There is “no antiremoval presumption” in CAFA class actions.

Dart’s holding regarding evidentiary submissions was in line with what the majority of federal courts already had held: that defendants need not submit evidence with their notices of removal.

What may be far more important for CAFA removals is the Dart’s holding that “no antiremoval presumption attends cases invoking CAFA, which Congress enacted to facilitate adjudication of certain class actions in federal court.” 135 S. Ct. at 554. (Note, however, that Dart did not decide whether there is such a presumption against removal in non-CAFA cases. See id. (“We need not here decide whether such a presumption is proper in mine-run diversity cases.”).

In rejecting an antiremoval presumption in CAFA cases, the Court cited Standard Fire Insurance Co. v. Knowles, 135 S. Ct. 1345 (2013), and CAFA’s legislative history (Senate Report 109-14):

[N]o antiremoval presumption attends cases invoking CAFA, which Congress enacted to facilitate adjudication of certain class actions in federal court. See Standard Fire Ins. Co., 568 U. S., at ___, 133 S. Ct. at 1350 (“CAFA’s primary objective” is to “ensur[e] ‘Federal court consideration of interstate cases of national importance.’ ” (quoting §2(b)(2), 119 Stat. 5)); S. Rep. No.109–14, p. 43 (2005) (CAFA’s “provisions should be read broadly, with a strong preference that interstate class actions should be heard in a federal court if properly removed by any defendant.”).

135 S. Ct. at 554.

Before Dart, many courts had held that there is a “presumption”—sometimes described as a “strong presumption”—against CAFA removal. These courts have since rejected those prior holdings. See, e.g., Jordan v. Nationstar Mortg. LLC, 781 F.3d 1178, 1183-84 (9th Cir. 2015); Dudley v. Eli Lilly & Co., 778 F.3d 909, 912 (11th Cir. 2014) (“[W]e may no longer rely on any presumption in favor of remand in deciding CAFA jurisdictional questions.”).

Furthermore, before Dart many courts had given short shrift to the CAFA Senate Report, because it was not printed until after CAFA’s passage. As a result of Dart’s citation to the Senate Report, some courts are now looking to the Report for guidance on interpreting CAFA. See, e.g., Allen v. Boeing Co., 784 F.3d 625, 632 n.8 (9th Cir. 2015) (“The suggestion . . . that the Senate Committee Report provided minimal guidance . . . was implicitly rebutted by [Dart].”).

Finally, Dart’s rejection of a presumption against CAFA removal has been extended beyond the allegations at issue in Dart (the amount in controversy). For example, the Ninth Circuit, citing Dart and the CAFA Senate Report, has held that a defendant may remove a case within thirty days of ascertaining that the action is removable under CAFA—even if an earlier pleading revealed another basis for federal jurisdiction, and the defendant did not remove at that time. See Jordan, 781 F.3d at 1179-80.

3. Federal appellate courts’ discretion to hear CAFA remand appeals “is not rudderless.”     

Dart also provides defendants with ammunition in seeking appeals of remand orders.

Ordinarily, remand orders are not reviewable on appeal. See 28 U.S.C. § 1447(d). CAFA remand orders, however, are reviewable by permissive appeal. 28 U.S.C. § 1453(c)(1).

In Dart, the Tenth Circuit declined the defendant’s petition for permission to appeal the remand order. The Supreme Court held that even though Section 1453(c) appeals are permissive, a federal appellate court’s discretion to hear CAFA remand appeals “is not rudderless.” 135 S. Ct. at 555. A court “would necessarily abuse its discretion if it based its ruling on an erroneous view of the law.” Id. (internal quotations omitted). Instead, a court must exercise its “correctly ‘informed’ discretion,” applying the proper legal standard, to determine whether a petition meets the requirements for review. Id. at 557 (emphasis in Dart). The Supreme Court concluded that the Tenth Circuit had abused its discretion in denying the petition.

4. A 5-4 Decision

The real surprise in this case was the debate about whether the Supreme Court had jurisdiction to rule on the merits at all.

The Tenth Circuit had denied review of the defendant’s appeal of the remand. No one had even questioned the Supreme Court’s jurisdiction to rule on the merits of the cert petition until Public Citizen raised the issue in an amicus brief. Public Citizen argued that because the Tenth Circuit did not issue a decision explaining its ruling, the Supreme Court had no basis for reversing it. Four Justices dissented from the majority opinion on the ground that the merits of the issue were not properly before the Court.

Justice Ginsburg, writing for the majority, noted that the dissenting Justices (including Justice Scalia) had ruled on the merits in Standard Fire v. Knowles, which had the same procedural posture (the court of appeals there declined to accept a CAFA remand petition). See 135 S. Ct. at 555 n.2. Justice Scalia responded: “As for my own culpability in overlooking the issue, I must accept that and will take it with me to the grave. But its irrelevance to my vote in the present case has been well expressed by Justice Jackson, in a passage quoted by the author of today’s opinion: ‘I see no reason why I should be consciously wrong today because I was unconsciously wrong yesterday.’ Massachusetts v. United States, 333 U. S. 611, 639–640 (1948) (dissenting opinion), quoted in Burwell v. Hobby Lobby Stores, Inc., 573 U. S. ___, ___, n. 11 (2014) (slip op., at 12, n. 11) (GINSBURG J., dissenting).”