The Class Action Fairness Act ("CAFA") has been a reliable source of confusion and controversy since it was enacted in 2005. Despite the fact it is approaching its ten-year anniversary, the CAFA still is creating questions. A trio of recent decisions provide answers to some of these questions.
The United States Supreme Court revisited the CAFA in Dart Cherokee Basin Operating Co. v. Owens, 135 S. Ct. 547 (2014). The Supreme Court addressed the issue of when a defendant removing a case pursuant to the CAFA must provide evidence that the CAFA's $5 million amount in controversy requirement is satisfied. The defendant filed a notice of removal that did not contain any evidence of the amount in controversy. The district court remanded, holding that evidence of the amount in controversy must be provided at the time of removal, and that the defendant could not wait to provide such evidence in response to a motion to remand. After the Tenth Circuit declined to review the remand decision, a petition for certiorari was filed and granted. The Supreme Court reversed, holding that a defendant's notice of removal needs only provide a short, plain statement containing a plausible allegation that the amount in controversy exceeds the jurisdictional threshold. Only if the amount in controversy is subsequently challenged by the plaintiff, or if the issue is raised by the district court, does the defendant need to provide evidence to establish the amount in controversy.
A second recent decision explored the timing of removal under the CAFA. Romulus v. CVS Pharmacy, Inc., No. 14-1937, (1st Cir. Oct. 24, 2014), was a putative wage and hour class action brought on behalf of Massachusetts shift supervisors. The complaint alleged that there were "hundreds, if not thousands" of supervisors employed in the state and sought treble damages, interest and attorneys' fees on behalf of the class. However, it was silent on the number of breaks at issue or the damages sought.
The defendant initially tried to remove the suit, calculating the potential damages in excess of $10 million. The district court remanded the case, finding the defendant's damages calculation speculative. A second attempt at removal after initial discovery also resulted in a remand order.
Well more than a year after the case was filed, plaintiffs' counsel sent an email message alleging that the class was improperly compensated for 116,499 meal breaks. Based on this information, which was critical to the calculation of potential damages, the defendant removed the case for a third time. The district court again remanded, claiming the email message was not an "other paper" that would support removal and that the defendant had an obligation to investigate the allegations at the time the original complaint was filed to support its calculation of the amount in controversy.
This time the First Circuit reversed. Noting that there was a split of authority between the Second and Ninth Circuits on the issue, it held that a defendant has no duty to investigate or supply facts outside those provided by the plaintiff in determining whether a case can be removed. It also held that email messages or other informal communications from opposing counsel can qualify as an "other paper" from which it can be ascertained that a case can removed pursuant to 28 U.S.C. 1446(b)(3). In this case, persistence paid off for the defendant. The existence of a circuit split of authority on the issue of a defendant's obligation to investigate the facts supporting removal at the time a case is filed suggests that this is an issue that might also receive attention from the Supreme Court in the future.
Finally, Cedar Lodge Plantation, L.L.C. v. CSHV Fairway View I, L.L.C., No. 14-30753, 2014 U.S. App. LEXIS 18487 (5th Cir. Sept. 26, 2014), involved an effort by the plaintiffs to defeat removal under CAFA by adding a "significant local defendant" after removal and invoking the local controversy exception to CAFA jurisdiction. 28 U.S.C. 1332(d)(4)(A). The district court agreed the addition of the defendant defeated CAFA jurisdiction and remanded. Citing the general rule that post-removal events cannot oust federal jurisdiction, as well as the CAFA's language defining a class action based on the pleadings at the time the action is filed, the Fifth Circuit reversed. The Fifth Circuit also cited Congressional intent that the CAFA's exceptions be narrowly construed in support of its decision.
Plaintiffs continue to try and find creative ways to avoid CAFA jurisdiction. These recent decisions provide some ammunition to combat those efforts. For more information, please contact a member of the Frantz Ward Litigation Group.