Wednesday, April 18, 2007

CAFA Requires "Interpretational Heavy-Lifting"

Last week, in Lowery v. Alabama Power Co., the Eleventh Circuit confronted a "matter of first impression" when it interpreted CAFA's mass action provisions.  The court identified four requirements for an action to be deemed a mass action under CAFA:

    (1) an amount in controversy requirement of an aggregate of $5,000,000 in claims; (2) a diversity requirement of minimal diversity; (3) a numerosity requirement that the action involve the monetary claims of 100 or more plaintiffs; and (4) a commonality requirement that the plaintiffs' claims involve common questions of law or fact.

In addition to setting out these four threshold requirements, the court also did some "interpretational heavy-lifting" when it addressed section 1332(d)(11)(B)(i), which provides, in pertinent part, that "jurisdiction shall exist only over those plaintiffs whose claims in a mass action satisfy the jurisdictional amount requirements under subsection (a)."  Section 1332(a) requires the amount in controversy to exceed $75 thousand.  The Plaintiffs argued that, if any plaintiff's claim falls below the jurisdictional amount, the district court does not have subject matter jurisdiction over the case.  The Defendants argued that the court need only remand those plaintiffs claims that fall below the jurisdictional amount.

The Eleventh Circuit sided with the Defendants' basic appraoch, but what should a district court do if the aggregate $5 million amount in controversy requirement or the 100 plaintiff numerosity requirement is no longer met after remanding those plaintiffs' claims who fall below the jurisdictional amount?  The Eleventh Circuit followed the the Senate Judiciary Committee Report, which states:

If a mass action satisfies the criteria set forth in the section (that is, it involves the monetary relief claims of 100 or more persons that are proposed to be tried jointly on the ground that the claims involve common questions of law or fact and it meets the tests for federal diversity jurisdiction otherwise established by the legislation), it may be removed to a federal court, which is authorized to exercise jurisdiction over the action. Under the proviso, however, it is the Committee's intent that any claims that are included in the mass action that standing alone do not satisfy the jurisdictional amount requirements of section 1332(a) (currently $75,000), would be remanded to state court. Subsequent remands of individual claims not meeting the section 1332 jurisdictional amount requirement may take the action below the 100- plaintiff jurisdictional threshold or the $5 million aggregated jurisdictional amount requirement. However, so long as the mass action met the various jurisdictional requirements at the time of removal, it is the Committee's view that those subsequent remands should not extinguish federal diversity jurisdictional over the action.

The Court also decided that, where a defendant removes a case to federal district court under CAFA, the burden is on the defendant to establish jurisdiction.  The court also determined that the defendant must establish jurisdiction by a preponderance of the evidence but did not seem happy about its decision.

We are bound to adhere to circuit precedent. Defendants must establish the jurisdictional amount by a preponderance of the evidence. We note, however, that in situations like the present one--where damages are unspecified and only the bare pleadings are available--we are at a loss as to how to apply the preponderance burden meaningfully. We have no evidence before us by which to make any informed assessment of the amount in controversy. All we have are the representations relating to jurisdiction in the notice of removal and the allegations of the plaintiffs' third amended complaint. As such, any attempt to engage in a preponderance of the evidence assessment at this juncture would necessarily amount to unabashed guesswork, and such speculation is frowned upon . . .
we conclude that the removal-remand scheme set forth in 28 U.S.C. ยงยง 1446(b) and 1447(c) requires that a court review the propriety of removal on the basis of the removing documents. If the jurisdictional amount is either stated clearly on the face of the documents before the court, or readily deducible from them, then the court has jurisdiction. If not, the court must remand. Under this approach, jurisdiction is either evident from the removing documents or remand is appropriate. Significantly, if a defendant can only carry the burden of establishing jurisdiction under these circumstances, then the defendant could have satisfied a far higher burden than preponderance of the evidence. Regardless, our precedent compels us to continue forcing this square peg into a round hole.

Despite the length of this post, I'm hardly scratching the surface of this opinion.  I think CAFA is going to require a lot of posts for many years.  I can't decide if I'm happy about that fact.

--Counseller

http://lawprofessors.typepad.com/civpro/2007/04/cafa_requires_i.html

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