Counting Darts: U.S. Supreme Court To Address Circuit Split On Evidence Required In Notice Of Removal Under CAFA

Wednesday, October 22, 2014 - 18:00

The U.S. Supreme Court will soon address whether a defendant seeking removal to federal court is required to include evidence supporting the amount in controversy requirement in the notice of removal or whether it is sufficient to allege a “short and plain statement of the grounds for removal,” as required under 28 U.S.C. § 1446(a).

In Dart Cherokee Basin Operating Co., LLC v. Owens, the defendants were sued in state court on claims relating to royalty payments on gas wells. Alleging jurisdiction under the Class Action Fairness Act of 2005 (CAFA), the defendants removed the case to federal court. The district court, however, remanded the case, concluding that the defendants had failed to include evidence to support the amount in controversy allegations with their removal notice.[1] Defendants sought review from the Tenth Circuit, but a divided Tenth Circuit denied the defendants’ petition for an appeal of the remand, thus effectively imposing a requirement that defendants submit proof of jurisdiction along with the removal notice.[2] Defendants then sought rehearing en banc, but the Tenth Circuit denied that petition in a split 4-to-4 vote. The dissenting opinion, however, warned that the district court’s decision “imposes an evidentiary burden on the notice of removal that is foreign to federal-court practice and … has never been imposed by a federal appellate court.” The dissent noted that “nothing in the removal statutes of Supreme Court decisions, or any holdings of this court, require the submission of such evidence before the jurisdictional allegations are challenged.”[3]

The Supreme Court granted the defendants’ petition for a writ of certiorari. The removal statute, 28 U.S.C. § 1446(a), requires a defendant seeking removal to file a notice “containing a short and plain statement of the grounds for removal” and to attach the state court filings served on the defendant. It contains no express requirement that a defendant submit evidence supporting its jurisdictional allegations. In enacting CAFA,[4] Congress expanded federal subject matter jurisdiction over class action lawsuits, including by expanding the applicability of diversity jurisdiction over such actions.

Dart is relevant for several reasons. First, the Tenth Circuit created a circuit split on this issue, and the Dart defendants argue that other circuits faced with this issue have not required evidence of jurisdiction to be included with the notice of renewal, which is consistent with the Dart dissent.[5]

The defendants also devote their attention to the “plain language” of the removal statute and argue that it requires only allegations, not evidence, at the notice stage. To further support this position, defendants note that § 1446(c) allows defendants to “assert” the amount of controversy when it is not clear on the face of the complaint – but it does not say “prove” or require evidence. Only in the case of a dispute must the court weigh the evidence and make findings of fact based on a preponderance of the evidence.[6]

Another consideration is the potential waste of judicial and party resources. In general, a defendant must remove a civil action within 30 days of service of the initial pleading. A defendant may argue that requiring a removing defendant to include evidence supporting the amount in controversy requirement in the notice of removal would require an upfront investment to gather facts and evidence. Being forced to gather such facts and evidence in a very short amount of time would inevitably drive up expenses. The defendant could also argue that requiring evidence to be submitted before the jurisdictional assertions are challenged also potentially undermines judicial economy – a concern that may be more troubling to the Court than the parties’ litigation costs.

Moreover, a defendant could argue that the language of § 1446(a) mirrors that of Federal Rules of Civil Procedure (FRCP) 8(a). Both require a “short and plain statement of the grounds for jurisdiction.” Typically, parties do not plead detailed facts and submit evidence to demonstrate that the amount in controversy exceeds the jurisdictional limit. Rather, such evidence is generally submitted only after those jurisdictional allegations have been challenged as insufficient. To the extent § 1446(a) requires evidence at the pleading stage, a defendant could argue that this could impact how courts address jurisdictional allegations under FRCP 8(a).

Finally, in deciding this issue, the Supreme Court may try to stake out a middle ground. Upholding the Dart decision would require defendants to submit substantial evidence with the notice of removal. The Dart defendants advocate a complete reversal, arguing that the “short and plain statement of the grounds for jurisdiction” requires no evidence at all to be submitted with the notice of removal. The Court, however, could decide that the answer is somewhere in between – that is, the Court may choose to expand the meaning of “short and plain statement” to include fairly substantive allegations as to the basis for alleging the amount in controversy. Such a decision might soften the blow (somewhat) for defendants if they are not required to submit actual evidence at the time of removal. But it would still pose interpretive headaches for courts, which would then need to determine where the line between “short and plain” and “too short and too plain” should be.

In sum, there are a number of considerations for the Court to weigh in determining whether the Tenth Circuit got it right in Dart.

[1] Owens v. Dart Cherokee Basin Operating Co., LLC, 2013 WL 2237740 *1 (D. Kan. May 21, 2013).

[2] Dart Cherokee Basin Operating Co., LLC v. Owens, 730 F.3d 1234 (10th Cir. 2013).

[3] Dart, 730 F.3d at 1234 (Hartz, J., dissenting).

[4] Class Action Fairness Act of 2005, Pub. L. No. 109-2, § 2(b)(2), 119 Stat. 4.

[5] See Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 205 (2nd Cir. 2001); Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 194 (4th Cir. 2008); Rachel v. Georgia, 342 F. 2d 336, 340 (5th Cir. 1965); Spivey v. Vertrue, Inc., 528 F.3d 982, 986 (7th Cir. 2008); Hartis v. Chi. Title Ins. Co., 694 F.3d 935, 944-45 (8th Cir. 2012); Janis v. Health Net, Inc., 472 F.App’x 533, 534-35 (9th Cir. 2012); Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 774 n.29 (11th Cir. 2010).

[6] See also H.R. Rep. No. 112-10, at 16.

Kevin F. Meade is a Senior Associate in the Litigation department of Weil, Gotshal & Manges LLP. He has extensive experience litigating complex commercial disputes, including several large class actions and multidistrict litigation. Mr. Meade has represented clients in a broad variety of cases in federal and state court, as well as before administrative agencies.

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