By Gerald L. Maatman, Jr. and Rebecca S. Bjork

The U.S. Supreme Court ruled on a 5-4 vote today — across perceived “liberal/conservative” lines, at least until the very end — that defendants may remove class action lawsuits under the Class Action Fairness Act (“CAFA”) without submitting evidence to support the $5 million amount-in-controversy threshold.  In Dart Cherokee Basin Operating Co., LLC v. Owens, No. 13-719 (U.S. Dec. 15, 2015), Justice Ginsburg, just back from heart surgery, authored the majority opinion that was joined by Chief Justice Roberts and Justices Alito, Breyer, and Sotomayor. The majority issued two holdings: (1) that the liberal pleading requirements of Rule 8 apply also to notices removing cases to federal, from state, court; and (2) the Tenth Circuit abused its discretion when it denied Defendant Dart’s petition to review the remand order the district court issued sending the case back to state court.

While not a workplace class action, the decision in Dart Cherokee Basin Operating Co., LLC v. Owens ought to make it easier for employers to remove employment-related class actions from state court to federal court.

Background To The Case

Dart, an oil and gas operating company, along with a pipeline operator, were sued in a state court class action alleging they underpaid royalties to mineral rights owners in Kansas. Dart , slip op, at 2. In removing the case to federal court, the defendants asserted plaintiffs would recover $8.2 million in damages, far in excess of the CAFA’s $5 million threshold. Id. Plaintiff moved to remand to state court, arguing the removal notice was deficient as a matter of law for lack of any evidence supporting the figure.  Id.  In response, Dart submitted an affidavit from an executive supporting the figure, but the district court agreed with the plaintiff that it was too late, and remanded back to state court. Id. at 2-3. And although Dart appealed to the Tenth Circuit under the CAFA exception to the bar against appealing remand orders, codified at 28 U.S.C. § 1453(c)(1), the Tenth Circuit refused to take the case. Id. at 3. In dissent from denial of en banc review, Judge Hartz of the Tenth Circuit explained the decision erroneously imposed high pleading requirements in removal notices beyond even those required by code pleading rejected long ago, and that the error would not be corrected in future cases because no attorney going forward would risk remand and not taking the time to collect and present evidence in a removal notice. Id. at 4.

The parties subsequently sought certiorari to the U.S. Supreme Court to ask whether evidence is needed in removal notices under the CAFA.

The Supreme Court’s Ruling

As for the majority’s first holding, Justice Ginsburg explained that the removal statute by its own terminology, bolstered by legislative history and other statutory provisions, provides the answer. Dart, slip op. at 2, 5-6. Briefly, 28 U.S.C. § 1446(a) states that a party removing a case needs to provide a “short and plain statement” supporting the basis for federal jurisdiction.  Id. at 5.  Justice Ginsburg reasoned that Congress wanted to simplify removal, and disapproved amendments making it more onerous. Id. at 5. She also concluded that the CAFA evidences no presumption against removal, if such a thing even exists in diversity jurisdiction cases (a question she expressly reserved for another case). Id. at 7.

Then the majority dealt with a jurisdictional challenge to the Supreme Court’s ability to hear the case filed by amicus curiae Public Citizen, Inc. on behalf of the plaintiff. It had argued that because the court of appeals used its discretion to deny Dart’s appeal, the merits of the case at the district court level were not before the Supreme Court. Id. at 8. But because “[d]iscretion to review a remand order is not rudderless[,]” the majority explained the Tenth Circuit and Supreme Court could in this case because where, as here, the district court relied on an erroneous view of the law, and hence the district court “necessarily” abuses its discretion. Id. at 8-9. The majority adopted Judge Hartz’s view, including that no attorney would in the future file a removal notice in the Tenth Circuit without evidence of the amount-in-controversy. Id. at 9-10. The majority did state, however, that if on remand the Tenth Circuit articulates a reason — other than the need to provide evidence upon removal — for its discretion to deny hearing the appeal, it may do so. Id. at 14 at n.8.

The four dissenters agreed with Public Citizen that the only issue the Supreme Court could review, i.e., the Tenth Circuit’s decision not to take the appeal, was not presented by the parties, who both engaged the district court’s decision to require evidence, not the Tenth Circuit’s reasons for rejecting review. Id. at 1-2 (Scalia, J., dissenting). Describing this as a “little snag” discovered during the briefing, the dissent argued the Supreme Court should have dismissed the writ of certiorari as improvidently granted, but did not, instead issuing a ruling relating to the district court’s decision. Id. at 2. Justice Scalia further wrote that upon Justice Ginsburg pointing out that he made a similar mistake in an important class action case decided last year, Standard Fire v. Knowles, he “will take [the mistake] to the grave.”

Implications For Employers

Notwithstanding the “Supreme Court intrigue” one can read into this decision and the dissenting opinions, it should matter to our readers for the following reason — the CAFA was enacted in part to streamline removal proceedings, which had become overly complicated in class action cases, and too heavily weighted in favor of the plaintiffs’ interests. In this opinion, the Supreme Court has provided needed clarity and consistency in the law.