Tuesday, January 13, 2015

SUPREME COURT ISSUES DECISION ON PROOF OF JURISDICTIONAL DAMAGES REQUIRED UNDER THE CLASS ACTION FAIRNESS ACT

By TONI ELLINGTON

On December 15, 2014, the U.S. Supreme Court issued a decision in the case of Dart Cherokee Basin Operating Co., LLC, et al. v. Owens, No. 13-719.  This case, previously reported in this blog, was an appeal from a decision by the Tenth Circuit Court of Appeals over the evidentiary requirements for establishing the amount in controversy for removal to a federal court.

The underlying facts of this case are as follows.  The Respondent Brandon W. Owens filed a putative class action in Kansas state court, seeking damages for class members for alleged underpayments of royalties under certain oil and gas leases.  Dart Cherokee Basin Operating Co., LLC (“Dart”) removed the case to federal court, asserting the court’s diversity jurisdiction.  In addition, Dart asserted the Class Action Fairness Act of 2005, which gives a federal court jurisdiction over class actions if there is minimal diversity and the amount in controversy exceeds $5 million.  See 28 U.S.C. §1332(d)(2).  The plaintiff moved to remand, claiming the removal notice was deficient because it contained no evidence that the amount in controversy requirement was met or that the alleged damages would exceed $5 million.

Despite the fact that a Dart executive submitted a detailed declaration which showed the potential damages would exceed $11 million, the district court remanded the case, relying on Tenth Circuit precedent to require proof of the amount in controversy in the notice of removal itself.  The Tenth Circuit denied review and an en banc hearing.

The Supreme Court held that a defendant’s notice of removal must include only a plausible allegation that the amount in controversy exceeds the jurisdictional requirement.  The Court held that the notice of removal need not contain evidentiary submissions.  An allegation of the amount in controversy by a removing defendant will be adequate unless contested by the plaintiff or questioned by the court.

For more information, contact Toni Ellington at (504) 599-8500.

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