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Standard of Proof to Establish Amount in Controversy When Defending Removal Under the Class Action Fairness Act Diane B

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Standard of Proof to Establish Amount in Controversy When Defending Removal Under the Class Action Fairness Act Diane B William Mitchell Law Review Volume 36 | Issue 4 Article 5 2010 Standard of Proof to Establish Amount in Controversy when Defending Removal under the Class Action Fairness Act Diane B. Bratvold Daniel J. Supalla Follow this and additional works at: http://open.mitchellhamline.edu/wmlr Recommended Citation Bratvold, Diane B. and Supalla, Daniel J. (2010) "Standard of Proof to Establish Amount in Controversy when Defending Removal under the Class Action Fairness Act," William Mitchell Law Review: Vol. 36: Iss. 4, Article 5. Available at: http://open.mitchellhamline.edu/wmlr/vol36/iss4/5 This Article is brought to you for free and open access by the Law Reviews and Journals at Mitchell Hamline Open Access. It has been accepted for inclusion in William Mitchell Law Review by an authorized administrator of Mitchell Hamline Open Access. For more information, please contact [email protected]. © Mitchell Hamline School of Law Bratvold and Supalla: Standard of Proof to Establish Amount in Controversy when Defendi STANDARD OF PROOF TO ESTABLISH AMOUNT IN CONTROVERSY WHEN DEFENDING REMOVAL UNDER THE CLASS ACTION FAIRNESS ACT Diane B. Bratvold t and DanielJ. Supallat t I. INTRO DUCTION .................................................................... 1398 II. BACKGRO UND ...................................................................... 1402 A. History and Purpose of CAFA ......................................... 1402 1. CAFA Expanded FederalJurisdiction in Diversity Class A ctions...................................................................... 1403 2. Interlocutory Appeal Procedures Generated Case Law Quickly ..................................................................... 1404 B. CAFA Relaxed Federal Removal Requirements, but Did Not Alter Which Party Bears Burden of Proof ................... 1404 C. Supreme Court Precedent on the Standard of Prooffor Amount in Controversy.................................................... 1406 III. CIRCUIT ANALYSIS OF STANDARD OF PROOF UNDER CAFA. 1410 A. Legal-Certainty Test ....................................................... 1410 B. Preponderance-of-the-EvidenceTest .................................. 1413 C. Reasonable-ProbabilityTest ............................................. 1419 D. Combination Of The Various Standards........................... 1424 IV. THE PROPER STANDARD SHOULD BUILD ON SUPREME COURT PRECEDENT BUT HOLD THAT REMOVING DEFENDANT MUST PROVE THE AMOUNT IN CONTROVERSY t Diane B. Bratvold is a shareholder of the law firm Briggs & Morgan, PA. Di- ane is a fellow of the American Academy of Appellate Lawyers and an active member of a number of bar organizations including the Defense Research Institute Appellate Advocacy Committee, where she serves as Vice Chair and is a member of the Amicus Committee. Diane is Past Chair for the Minnesota State Bar Association Appellate Practice Section and President of the Eighth Circuit Bar Association. She teaches ap- pellate advocacy at the University of St. Thomas Law School and co-authors TheArt of Advocacy: Appeals, a Matthew Bender Publication. tt DanielJ. Supalla is a fourth-year associate at Briggs and Morgan, P.A. and is a member of the Business Litigation section, Financial Markets Group and Appellate Practice Group. Dan received his law degree magrna cum laudefrom the William Mit- chell College of Law, where he served as a staff member and assistant editor of the William Mitchell Law Review from 2004 to 2006. He was named a 2010 Rising Star by Minnesota Law & Politics magazine. Published by Mitchell Hamline Open Access, 2010 1 William Mitchell Law Review, Vol. 36, Iss. 4 [2010], Art. 5 1398 WILLIAM MITCHELL LAW REVIEW [Vol. 36:4 MEETSJURISDICTIONAL REQUIREMENTS BY PREPONDERANCE OF THE EVIDENCE .................................... 1426 V . CO NCLUSIO N ....................................................................... 1433 I. INTRODUCTION In 2005, Congress passed the Class Action Fairness Act, which amended the procedures that apply to large interstate class actions. In doing so, Congress declared that it sought "to assure fairer out- comes for class members and defendants."I In addition to changing class action results, CAFA significantly expanded federal jurisdiction over class actions and mass actions. 2 CAFA thus marked a watershed for the federal courts, which have limited jurisdiction, unlike most state courts that have general jurisdiction. Before enacting CAFA, Congress determined that class action lit- igation requires federal attention and, if certain requirements are met, federal courts obtain jurisdiction. Congress relied on specific findings that class action lawsuits are "an important and valuable part of the legal system when they permit the fair and efficient resolution of legitimate claims of numerous parties by allowing the claims to be aggregated into a single action against a defendant that has allegedly caused harm." 4 But Congress also found "abuses of the class action device."' While some of the abuses related directly to the parties and attorneys involved in class actions, other abuses were specifically tied to a concern that federal principles had been compromised. For ex- 1. Class Action Fairness Act of 2005 (CAFA), Pub. L. No. 109-2 § 1 (a), 119 Stat. 4, 4 (2005) (codified in scattered sections of 28 U.S.C.). 2. See infra Part II.A.1. 3. However, CAFA reserved for the states two types of large class actions that are local in nature: (1) Local controversies remain in state court where (a) more than two-thirds of the class members are from the forum state and either the primary de- fendant ora significant defendant is from that state, (b) the principal injuries were incurred in that state, and (c) no other class action on the issue has been filed in the preceding three years. 28 U.S.C. § 1332(d) (4) (2006). And (2) Defendant's home state may dictate that the action remain in state court when between one-third and two-thirds of the class members are from the forum state, and the primary defendants are from that state. Id. § 1332(d) (3). The first exception is mandatory; the second is discretionary. Id. CAFA also reserved Delaware's jurisdiction over most corporate cases already addressed by the Private Securities Litigation Reform Act of 1995. See id. § 1332 (d) (9). CAFA leaves out many civil rights class actions based on a concern that sovereign immunity defenses should remain intact. See id. § 1332(d) (5). 4. CAFA § 2(a) (1). 5. Id. § 2(a)(2). http://open.mitchellhamline.edu/wmlr/vol36/iss4/5 2 Bratvold and Supalla: Standard of Proof to Establish Amount in Controversy when Defendi 2010] CLASS ACTION FAIRNESS ACT 1399 ample, Congress found that class action abuses had "undermine [d] the national judicial system, the free flow of interstate commerce, and the concept of diversityjurisdiction as intended by the framers of the United States Constitution."6 Significantly, Congress determined that state and local courts had been "keeping cases of national importance out of Federal court," occasionally have acted "in ways that demon- strate bias against out-of-State defendants," and have entered judg- ments that "impose their view of the law on other States and bind the rights of the residents of those States."7 CAFA addressed these problems by changing diversity require- ments, prerequisites to removal, and removal procedures for class ac- 8 tions that include more than 100 members and involve total claims of more than $5 million.9 Diversityjurisdiction is substantially different for these cases. CAFA softened citizenship requirements by eliminat- ing the complete diversity rule; CAFA also increased the total-amount- in-controversy threshold but allowed aggregation of class members' claims.' ° Similarly, CAFA removal procedures are more generous. Any defendant may remove, regardless of consent by other defen- dants, and CAFA eliminated the outer time limit for removal from state to federal court.'" Additionally, CAFA granted defendants the right to immediately appeal12 a district court's decision to remand to state court after removal. Statistics verify that CAFA has been effective in the five years since it was adopted. The FederalJudicial Center examined the period July 1, 2001 through June 30, 2007, and found an overall increase of se- venty-two percent in class action activity.' 3 Most importantly, the Fed- eral Judicial Center compared pre- and post-CAFA periods and de- clared "a dramatic increase in the number of diversity class actions filed as original proceedings in the federal courts." 14 This means that more plaintiffs initially filed class actions in federal courts after CAFA 6. Id. § 2(a)(4). 7. Id. § 2(a) (4) (A)-(C). 8. 28 U.S. C. § 1332(d) (5) (B) (2006). 9. Id. § 1332(d) (2). 10. Id. § 1332(d) (6). 11. Id.§ 1453(b). 12. Id. § 1453(c)(1). 13. EMERY G. LEE III & THOMAS E. WILLGING, FED.JUDICIAL CTR., THE IMPACT OF THE CLAss ACnON FAIRNESS Acr OF 2005 ON THE FEDERAL CouRTs: FOURTH INTERIM REPORT TO THEJUDICIAL CONFERENCE ADVISORY COMMITrEE ON CIVIL RULES 1 (2008), availableat http://www. c.gov/pubfic/pdfnsf/lookup/cafaO408.pdf/$file/cafaO408.pdf [hereinafter FED.JUDICIAL CTR.REPORT]. 14. Id. Published by Mitchell Hamline Open Access, 2010 3 William Mitchell Law Review, Vol. 36, Iss. 4 [2010], Art. 5 1400 WILLIAM MITCHELL LAW REVIEW [Vol. 36:4 became effective. While defense removals to federal court based on diversity jurisdiction initially increased following CAFA, the report stated that these increases had been "trending downward. " 5 Interes- tingly, while
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