"With Reasonable Probability:" The First Circuit Defines Defendants' CAFA Jurisdictional Burden
By: R. Bruce Allensworth, Andrew C. Glass, David D. Christensen
In its recent decision, Amoche v. Guarantee Trust Life Insurance Co., --- F.3d ----, 2009 WL 350898 (1st Cir. Feb. 13, 2009), the First Circuit Court of Appeals joined a growing number of federal courts that have articulated defendants’ jurisdictional burden under the Class Action Fairness Act (“CAFA”). CAFA allows defendants to remove a class action matter from state court to federal court if the matter meets certain jurisdictional prerequisites. Eight federal circuits have now ruled that defendants must establish the existence of those prerequisites, at the very least, by a “reasonable probability” or by a preponderance of the evidence. The Amoche opinion highlights potential pitfalls that defendants may face when trying to establish that a case meets the CAFA jurisdictional prerequisites. For instance, CAFA requires a defendant to show that the amount-in-controversy placed at issue by a plaintiff’s claims exceeds $5,000,000 on a classwide basis. The federal circuit courts warn that speculative assertions, unsupported by evidence, will not suffice to meet this jurisdictional burden. Rather, courts exhort defendants to carefully develop the evidentiary support necessary to demonstrate that a plaintiff’s claims have placed more than $5,000,000 at issue.
In Amoche, the plaintiffs brought suit in state court on behalf of New Hampshire consumers who allegedly had not received refunds purportedly owed to them on credit insurance policies purchased in connection with auto loans. After certifying a class of New Hampshire consumers, the state court allowed the plaintiffs to amend their complaint to propose an expanded class of consumers from other states. On the basis of the proposed expanded class, the defendant removed the case from state court to federal district court under CAFA, and the plaintiffs moved to send the case back to state court. Finding that the defendant’s assertions concerning the amount-in-controversy were speculative, the district court granted the plaintiffs’ request.
On appeal, the First Circuit held that a removing defendant must establish CAFA jurisdiction by a “reasonable probability.”
The defendant had submitted a declaration that the New Hampshire class involved approximately $450,000 in damages, and argued, by extrapolating the New Hampshire amount to the thirteen states named in the amended complaint, that the $5,000,000 jurisdictional minimum was satisfied. The defendant, however, did not provide a basis for that extrapolation. The court suggested that the defendant might have met its burden through introducing information regarding its market share and revenues in states other than New Hampshire. Because the defendant failed to account for differences in its business practices among the relevant states, the First Circuit found it could not rely on the defendant’s assertions that the class members’ claims exceeded $5,000,000 in the aggregate.
While CAFA is a powerful procedural device that makes it easier for defendants to litigate class actions in federal court rather than state court, the Amoche opinion highlights the demands federal courts are placing on defendants to carefully develop the evidentiary support necessary to sustain removal, including addressing such areas as the number of potential class members and the alleged value of those members’ claims. Fortunately, as the First Circuit held, the remand of a class action does not necessarily foreclose subsequent attempts to remove the action under CAFA. Indeed, “[s]uccessive attempts at removal are permissible where the grounds for removal become apparent only later in the litigation.”
