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

Failure to Rebut Evidence in Support of Motion to Remand Is Fatal

Posted in Case Summaries

Stoddard v. Oxy USA Inc., 2017 WL 3190354 (D. Kan. July 27, 2017).

In denying a plaintiff’s motion to remand, a district court in Kansas held that the defendant proved by the preponderance of the evidence that jurisdiction was proper after the plaintiff failed to present any evidence rebutting the defendant’s supporting affidavit.

The plaintiff, a royalty owner in several wells in Kansas, brought a putative class action in Kansas state court, alleging that the defendant, one of the state’s largest operators of natural gas wells, breached lease agreements with the proposed class of royalty owners by underpaying royalty fees. The plaintiff alleged that the defendant paid royalty fees at a price lower than the commercial price, and improperly deducted a state conservation fee that the defendant, not the royalty owners, was required to pay. The complaint did not allege a specific amount of damages, but claimed the proposed class’s damages totalled less than $5,000,000.

The defendant removed the action to the federal court pursuant to CAFA. In its Notice of Removal, the defendant referenced the plaintiff’s factual allegations in the complaint and alleged the amount in controversy exceeded CAFA’s $5,000,000 jurisdictional minimum based on “the amount of additional royalties that would be owed” if the proposed class “recovered the full amount.”

After the plaintiff moved to remand, the defendant submitted an affidavit in support of removal, which calculated damages for the potential class at over $7,500,000 based “a reasonable royalty fee and a [gas] valuation based on a government report.”

Relying mainly on Dart Cherokee Basin Operating Co. v. Owens, 135 S. Ct. 547 (2014), which focused on evidentiary standards for the notice of removal, the district court found that the defendant’s notice of removal plausibly alleged the amount in controversy exceeded the jurisdictional minimum and that the defendant’s supporting affidavit showed removal was proper by a preponderance of the evidence. (Editor’s Note:  See the CAFA Law Blog analysis of Dart, posted on April 9, 2015).

Under Dart, “a defendant’s notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” Id. at 554. “If the plaintiff contests defendant’s [amount-in-controversy] allegation[s],” then “both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied.” Id. at 553–54 (citing 28 U.S.C. § 1446 (c)(2)(B)).

Here, though the plaintiff claimed that the damages would not exceed the $5 million threshold, the court found that the plaintiff was simply seeking to keep the damages below the jurisdictional minimum. Moreover, based on Standard Fire Insurance Co. v. Knowles, 133 S. Ct. 1345 (2013), the plaintiff could not legally bind the class to a damages limit before certification occurred. (Editor’s Note:  See the CAFA Law Blog analysis of Standard Fire, posted on April 12, 2013).

The court thus found the plaintiff’s allegations as to the amount in controversy irrelevant, and analysed whether the defendant’s notice of removal plausibly alleged the amount in controversy exceeded $5,000,000. The plaintiff’s motion to remand argued the defendant failed to meet the plausibility test, but the court rejected this argument, noting that the facts the defendant relied upon in its notice of removal were the same facts alleged by the plaintiff in the complaint.

The court then moved on to analyse whether the defendant showed removal was proper by a preponderance of the evidence. After noting that evidence supporting removal must be judged at the time of the removal, the court found the defendant’s affidavit filed in opposition to the motion to remand showed damages during the class period alleged in the complaint totaled over $7,500,000. The court further found that the plaintiff failed to present any evidence to contradict the affidavit.

Accordingly, the court found the defendant proved by a preponderance of the evidence that jurisdiction was proper, and denied the plaintiff’s motion to remand.

– Kevin Lampone