Header graphic for print
CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

Defendant Must Show By Fact, Not Mere Conclusory Allegations, That Federal Jurisdiction Exists

Posted in Case Summaries

Carrigan v. Southeast Alabama Rural Health Associates, et al., 2017 WL 4018031 (M.D. Ala. Sept. 12, 2017).

In this action, while granting the plaintiffs’ motion to remand, a district court in Alabama found that while the defendant may have no actual knowledge of the value of the claims, the defendant was not excused from the duty to show by fact, and not mere conclusory allegation, that federal jurisdiction exists.

The plaintiffs brought a putative class action in the Circuit Court of Pike County, Alabama seeking indeterminate damages suffered as a result of lost medical records. The plaintiffs alleged that the defendant, Southeast Alabama Rural Health Associates (“SARHA”), failed to maintain patient medical records because of the other defendants’ failure to properly maintain the database that housed the medical records.  The other defendants, Greenway Health, LLC, Greenway EHS, Sunrise Technology Consultants LLC, and Lee Investment Consultants, LLC, represented to SARHA that they maintained a backup database to secure the medical records when those defendants knew that no such backup existed.

Defendants Greenway and EHS removed the action to federal court pursuant to CAFA.

The plaintiffs moved to remand, arguing that the amount in controversy requirement was not satisfied because the defendants had not proved, by a preponderance of the evidence, that the amount in controversy exceeded $5,000,000.

In their complaint, the plaintiffs did not make a specific demand for damages; instead, they demanded “any and all available fines, penalties, damages, compensatory damages, punitive damages, attorney’s fees, interest and costs.” The defendants pointed to sections of the Alabama Code that granted the Medical Licensure Commission the power to levy fines on medical practitioners up to $10,000 for each failure to maintain a medical record.  The defendants argued that using this section of the Alabama Code to determine the amount in controversy was the only way to estimate the amount in controversy, and given that the class allegedly numbered 70,000, the amount in controversy was satisfied.

The District Court, however, found that the defendants did not explain how the Alabama Code provisions were relevant to determining the amount in controversy in this case. The District Court found, as the defendants admitted, that the provisions applied only to medical practitioners, none of which were involved in this case.  The District Court further found that even if a medical practitioner was involved in the case, the Code did not provide for a private cause of action, but only for administrative fines.  Thus, the District Court concluded that the defendants failed to show how the cited portions of the Alabama Code were relevant to determining the amount in controversy.

The District Court opined that the defendants did not offer any evidence whatsoever about the plaintiffs’ damages, instead, they claimed that unrelated provisions of the Alabama Code were the only way to prove that the amount in controversy requirement was satisfied. The District Court thus ruled that the defendants had offered little more than conclusory allegations that the claims exceeded $5,000,000.

Therefore, the District Court concluded that the defendants failed to meet their burden of proving federal jurisdiction under CAFA, and accordingly, granted the plaintiffs’ motion to remand.

-Melissa Broussard Carroll