Split U.S. Supreme Court: Only Plausible Allegation Needed In CAFA Appeal

WASHINGTON, D.C. — (Mealey's)  A notice of removal filed under the Class Action Fairness Act (CAFA) requires only a plausible allegation regarding the amount in controversy exceeding the jurisdictional threshold, a split U.S. Supreme Court ruled Dec. 15 (Dart Cherokee Basin Operating Company, LLC, et al. v. Brandon W. Owens, et al., No. 13-719, U.S. Sup.).

(Opinion available.  Document #43-141219-004Z.) [ subscribers may access Supreme Court briefs for this case]. 

“[A]s specified in [28 U.S. Code] §1446(a), a defendant’s notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.  Evidence establishing the amount is required by §1446(c)(2)(B) only when the plaintiff contests, or the court questions, the defendant’s allegation,” Justice Ruth Bader Ginsburg wrote for the majority. 

Chief Justice John G. Roberts Jr. and Justices Stephen G. Breyer, Samuel Anthony Alito and Sonia Sotomayor joined in the opinion. 

Class Complaint

Brandon Owens filed a class action petition in October 2012 in the Wilson County, Kan., District Court on behalf of natural gas royalty owners who allege that they were underpaid by Dart Cherokee for working-interest Kansas wells between Jan. 1, 2002, and the date of class notice. 

Owens seeks compensatory damages, costs and other relief under theories of breach of contract and unjust enrichment. 

Dart Cherokee and Cherokee Basin Pipeline filed notice of removal on Dec. 5, 2012, to the U.S. District Court for the District of Kansas (Brandon W. Owens, et al. v. Dart Cherokee Basin Operating Co., et al., No. 12-4157, D. Kan. [enhanced opinion]) pursuant to CAFA.  The defendants claimed that the amount in controversy is more than $8.2 million. 

The plaintiffs moved to remand on Dec. 19, 2012. 

Before the filing of responses to the motion to remand, the case was stayed pending mediation between the parties.  Mediation held April 4, 2013, was unsuccessful, and the parties were ordered to resume briefing on the motion to remand. 

Judge Julie A. Robinson granted the motion to remand on May 21.  The defendants failed to establish that the amount in controversy meets the jurisdictional threshold, according to Judge Robinson. 

“Although Defendants state in the Notice of Removal that they have ‘undertaken to quantify the amount of additional royalties that would be owed,’ Defendants fail to incorporate any evidence supporting this calculation in the Notice of Removal, such as an economic analysis of the amount in controversy or settlement estimates.  Accordingly, in the absence of such evidence, the general and conclusory allegations of the Petition and Notice of Removal do not establish by a preponderance of the evidence that the amount in controversy exceeds $5 million.” 

10th Circuit

The defendants petitioned the 10th Circuit U.S. Court of Appeals for leave to appeal.  Judges Carlos F. Lucero, Terrence L. O’Brien and Jerome A. Holmes denied the petition on June 20 without oral arguments. 

The defendants moved July 5 for rehearing en banc.  Judges Paul J. Kelly Jr., Lucero, Harris L. Hartz, Timothy M. Tymkovich, Holmes, Scott M. Matheson Jr., Robert E. Bacharach and Gregory A. Phillips considered the petition.  Judges Mary Beck Briscoe and Neil M. Gorsuch recused and did not participate in the en banc review.  Because the votes for rehearing were evenly divided, the petition was denied Sept. 17. 

Judge Hartz filed a dissent with reasons.  “This court owes a duty to the bench and bar to provide guidance regarding the procedural requirements of the Class Action Fairness Act of 2005 (CAFA),” Judge Hartz opined. 

“The district court’s decision, although not an unreasonable interpretation of language in some of this court’s opinions, is contrary to fundamental principles regarding the purpose and functions of pleadings in federal court and to Congress’s apparent understanding when it recently codified the procedure by which a removing party can establish the amount in controversy.  It imposes an evidentiary burden on the notice of removal that is foreign to federal-court practice and, to my knowledge, has never been imposed by a federal appellate court (Owens does not cite any such case).” 

“The Supreme Court has not imposed special burdens at the pleading stage with respect to jurisdictional issues,” Judge Hartz opined. 

Judges Kelly, Tymkovich and Phillips joined in the dissent. 

Judges Lucero, O’Brien and Holmes issued an order on Sept. 30 denying an order by the defendants to stay the mandate of the court pending appeal. 

The defendants filed a petition for a writ of certiorari on Dec. 13 in the U.S. Supreme Court.  The U.S. Chamber of Commerce filed an amicus curiae brief in support of the petition.  The petition was initially distributed for consideration at the March 28 conference.  It was relisted March 31 for the April 4 conference.  The petition was granted April 7.  Oral arguments were held Oct. 7. 

Abuse Of Discretion

The Supreme Court majority held that the 10th Circuit abused its discretion when it denied Dart’s request for review.  “Doing so froze the governing rule in the Circuit for this case and future CAFA removal notices, with no opportunity for defendants in Dart’s position responsible to resist making the evidentiary submission.  That situation would be bizarre for a decisionmaker who did not think that the amount in controversy in diversity cases is a matter a removal notice must demonstrate by evidence, not merely credibly allege.  And if the Circuit precedent on which the District Court relied misstated the law, as we hold it did, then the District Court’s order remanding this case to the state court is fatally infected by legal error,” Justice Ginsburg opined. 

Justice Antonin Scalia filed a dissenting opinion.  He opined that the high court “granted certiorari to decide whether notices of removal must contain evidence supporting federal jurisdiction.  After briefing we discovered a little snag:  This case does not present that question.  Because we are reviewing the Tenth Circuit’s judgment, the only question before us is whether the Tenth Circuit abused its discretion in denying Dart permission to appeal the District Court’s remand order.  Once we found that the issue presented differed from the issue we granted certiorari to review, the responsible course would have been to confess error and to dismiss the case as improvidently granted.” 

He went on to add, in the last sentence of his opinion, that “[f]ailing that, my vote is to affirm the Court of Appeals, since we have absolutely no basis for concluding that it abused its discretion.” 

Justices Anthony M. Kennedy and Elena Kagan joined in the opinion.  Justice Clarence Thomas joined in Justice Scalia’s opinion as to all but the final sentence.  

Justice Thomas also filed a dissenting opinion in order “to point out another, more fundamental, defect in the Court’s disposition:  We lack jurisdiction to review even the Court of Appeals’ denial of permission to appeal.” 


Nowell D. Berreth, Brian D. Boone and Jonathan D. Parente of Alston & Bird in Atlanta; Matthew J. Salzman and Molly E. Walsh of Stinson Leonard Street in Kansas City, Mo.; and David E. Bengtson and Jordan E. Kieffer of Stinson Leonard Street in Wichita, Kan., represent the petitioners. 

Rex A. Sharp and Barbara C. Frankland of Gunderson Sharp in Prairie Village, Kan.; David E. Sharp of Gunderson Sharp in Houston; John F. Edgar of Edgar Law Firm in Kansas City, Mo.; and Grady Young of Coffeyville, Kan., represent the respondent. 

Kate C. Todd and Tyler R. Green of National Chamber Litigation Center Inc. and John H. Beisner, Jessica D. Miller and Geoffrey M. Wyatt of Skadden, Arps, Slate, Meagher & Flom, all in Washington, filed the amicus brief on behalf of The Chamber of Commerce of the United States of America, The Retail Litigation Center Inc., National Federation of Independent Business and Business Roundtable. 

Scott L. Nelson of Public Citizen Litigation Group in Washington filed an amicus brief on behalf of Public Citizen Inc. 

J. Michael Weston of DRI—The Voice of the Defense Bar in Chicago, Scott B. Smith of Bradley Arant Boult Cummings in Huntsville, Ala., and Edmund S. Sauer of Bradley Arant Boult Cummings in Nashville, Tenn., filed an amicus brief on behalf of DRI—The Voice of the Defense Bar. 

Mary-Christine Sungaila and Jenny Hua of Snell & Wilmer in Costa Mesa, Calif., and Richard A. Samp and Cory L. Andrews of Washington Legal Foundation in Washington filed an amicus brief on behalf of Washington Legal Foundation, International Association of Defense Counsel and Federation of Defense & Corporate Counsel. 

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