Dart Cherokee: SCOTUS to Hear Case on CAFA Pleading Requirements

Dart Cherokee: SCOTUS to Hear Case on CAFA Pleading Requirements

The Supreme Court will now decide whether a 2006 Seventh Circuit decision on Class Action Fairness Act pleading requirements was correct. The Court has granted certiorari, [enhanced version available to lexis.com subscribers], in a case that will resolve whether defendants filing removal notices under CAFA, 28 U.S.C. § 1332(d), [enhanced version available to lexis.com subscribers], have to plead “evidence supporting their calculation” that the amount in controversy exceeds $5 million. Dart Cherokee Basin Op’g Co., LLC v. Owens, No. 13-719. A divided panel of the Tenth Circuit refused to hear an appeal of a Kansas district court’s remand order articulating the pleading requirement in these words. The Court of Appeals then refused by an evenly divided vote, [enhanced version available to lexis.com subscribers], to review the panel’s decision en banc. 730 F.3d 1234 (2013). The Supreme Court will now resolve the issue.

This is not currently an issue in the Seventh Circuit because Meridian Security Ins. Co. v. Sadowski, 441 F.3d 536 (7th Cir. 2006), [enhanced version available to lexis.com subscribers], held that evidentiary facts need not be alleged in removal petitions. The court held that the only time proof comes into play is if the plaintiff contests factual allegations that support the defendant’s estimate of the amount in controversy, in which case the district court is to establish those facts in a hearing under Fed. R. Civ. P. 12(b)(1), [enhanced version available to lexis.com subscribers]. Then, applying the standard in St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (1938), [enhanced version available to lexis.com subscribers], the case is to stay in federal court “unless it is legally certain that the controversy is worth less than the jurisdictional minimum.” Sadowski, 441 F.3d at 542.

(The issue in Dart Cherokee can only arise in a CAFA removal, because the Federal Courts Jurisdiction and Venue Clarification Act of 2011 amended 28 U.S.C. § 1446(c)(2) to make clear that amount-in-controversy disputes in cases removed under the traditional diversity statute, 28 U.S.C. § 1332(a), [enhanced version available to lexis.com subscribers], are to be resolved after removal in the way that Sadowski spells out.)

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