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Polsinelli - Financial and Fiduciary Litigation Polsinelli - Financial and Fiduciary Litigation
         

  

December 2014

  

Supreme Court Establishes New Standards: Removal Pleadings Now Less Burdensome For State Court Suits

  

 
 

  

     

  

 
 

For more information about this alert, please contact:

  

Mark A. Olthoff

Author

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Robert A. Henderson

Practice Area Chair

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rhenderson@polsinelli.com

 

John M. Kilroy, Jr.

Practice Area Vice Chair

816.374.0584

jkilroyjr@polsinelli.com

  

  

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Last week, the United States Supreme Court held that a notice of removal from state court to federal court requires only pleading good faith allegations that the amount in controversy exceeds a jurisdictional threshold. The removing party need not include evidence establishing the amount. The matter in question is Dart Cherokee Basin Operating Co., LLC v. Owens. The Court reversed a decision of the Tenth Circuit Court of Appeals declining review of the district court's remand order.

The Court's holding that liberal pleading standards apply to notices of removal should make removal less burdensome when suits are filed in state court. The case is particularly helpful in the class action context as the removal pleading must merely allege in good faith that the $5 million dollar threshold in CAFA is met. Proof of the amount in controversy requirement need only be introduced when questioned by the plaintiff or the court.

In the case, Owens filed a putative class action in Kansas state court asserting claims for underpaid royalties from oil and gas leases. While the state court petition sought a "fair and reasonable amount" as damages, Dart removed the case to federal court under the Class Action Fairness Act ("CAFA") stating in its Notice of Removal that the alleged underpayments totaled more than $8 million, thus exceeding the $5 million jurisdictional threshold under CAFA. Dart did not attach any evidence supporting the $8 million allegation set forth in its Notice of Removal. When Owens sought remand and argued that Dart failed to meet its burden of proving the amount in controversy exceeded $5 million, Dart responded by submitting a declaration detailing its calculation of the amount in controversy. The Kansas district court granted Owens' remand motion because Dart had supplied evidence outside of the Notice of Removal which the court believed was precluded (under tenth Circuit precedent) by 28 U.S.C. § 1446(a). Dart appealed to the Tenth Circuit but the court denied review under 28 U.S.C. § 1453(c)(1). Dart thereafter sought a writ of certiorari.

Relying on Fed. R. Civ. P. 8, the Supreme Court held that the removal statute demands only a "short and plain statement" plausibly alleging the amount in controversy. A notice of removal does not require evidentiary submissions. Like the filing of allegations in a complaint, the defendant's amount in controversy allegation in a notice of removal is accepted if made in good faith when not contested by the plaintiff or questioned by the court. If the plaintiff or the court questions the amount in controversy allegation, removal is proper so long as the defendant proves by a preponderance of the evidence that the amount exceeds the jurisdictional threshold.

A separate section of the opinion addressed the Court's jurisdiction to review an appeals court's denial of review of a district court's remand order. The majority held that the Court had jurisdiction over the case due to the Tenth Circuit's denial because the district court's remand order was "infected with legal error." The four justices in the minority would have entered a separate order determining that certiorari had been granted improvidently because the Court was, in effect, reviewing an erroneous district court order. Regardless of the posture under which the Supreme Court granted certiorari, the result of the case on the merits is consistent with pleading standards under the applicable statutes and rules.

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* Law360, March 2014
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