Pretka v. Kolter City Plaza II, Inc., No. 09-80706-CIV-MARRA, 2009 WL 4547042 (S.D. Fla. Nov. 30, 2009)

A basic lesson in removal procedure for defendants: your evidence that removal is proper must come from the plaintiffs and must be submitted with your notice of removal.  If you had any doubt on this subject, then the decision in Pretka, shows that this procedure applies to removing under CAFA as well.  (Editors’ Note:  the district court decision was reversed by the 11tth Circuit.  See the CAFA Law Blog analyis of the appellate decision in Pretka posted on June 27, 2010).

The defendant in Pretka v. Kolter City Plaza II, Inc. lost its day in (federal) court when it relied on its own affidavit – and not a document produced by the plaintiffs – for support that removal was proper under CAFA. Documents produced by the plaintiffs even existed at the time of removal, but they were not submitted to the court at the time of removal, so the court could not consider them.

The defendant, a corporation selling condominiums in West Palm Beach, filed a notice of removal under CAFA, alleging that there were over 100 members in the plaintiffs’ proposed class of unhappy condominium purchasers, that at least one purchaser was a citizen of a state different than the defendant’s states of citizenship, and that the amount of controversy exceeded $5,000,000. Unfortunately for the defendant, its sole support for its allegation that more than $5,000,000 was at stake was the declaration of its own Chief Financial Officer.

When the plaintiffs, six named unhappy condominium purchasers, filed their motion to remand, they argued that under Lowery v. Alabama Power Co., 483 F.3d 1184 (11^th Cir. 1007), the court could only consider evidence of the amount in controversy that comes exclusively from the plaintiffs. (Editors’ Note: See the CAFA Law Blog analysis of Lowery posted on May 15, 2007). The court could not, therefore, consider the declaration of the defendant’s own Chief Financial Officer. And because the defendant did not offer any other support of its contention that the claims exceeded $5,000,000 at the time of removal, the case must be remanded. The court agreed.

The defendant tried to recover its case for removal by submitting more evidence with its response to the plaintiffs’ motion. This strategy failed, too.

Among the evidence submitted with its response, the condo seller submitted three demand letters from plaintiffs. While the court agreed that this evidence satisfied the requirement under Lowery that the evidence in support of removal jurisdiction must come from plaintiffs, the court pointed out that this was too little too late. The court could not consider the demand letters – or those other exhibits attached to the response – because the defendant did not submit them at the time of its notice of removal.

What were those other exhibits? One was a collection of potential class members’ purchase agreements. Because the agreements were not provided by the named plaintiffs, the court could not consider this evidence under Lowery either. What was the third? A declaration by the defendant’s Contract and Closing Manager that the total amount in controversy exceeded $41,000,000.

Yes, that’s right. In response to plaintiffs’ argument that the court could not rely on a declaration generated by the defendant for support, the defendant generated another declaration in support. Perhaps the defendant thought the $41,000,000 figure would impress more than “exceeds $5,000,000.” The court found, however, that, as with the first declaration, it could not consider this second declaration because it was not provided to the defendant by the plaintiffs.

The Lowery rule is not really that the evidence must come from the plaintiff exclusively, but rather that neither defendants nor courts can speculate as to the amount of controversy to make up for a lack of evidence at the time of removal. At the time of removal, it is up to a defendant to show that removal jurisdiction is proper. If a defendant is lucky, the allegations in the petition itself show that removal is proper and the defendant’s burden is met. But because plaintiffs, like the ones here, who file in state court often want to stay in state court, they avoid revealing the amount in controversy in the petition on purpose. 

The defendant then must rely on some other document to show that removal is proper. And that other document must inevitably come from the plaintiff. Otherwise, the defendant would submit its own documents, which would be pure speculation. Hence, the practical version of the Lowery rule: the court can only consider evidence that removal is proper that comes exclusively from the plaintiff.

Under Pretka v. Kolter City Plaza II, Inc., the Lowery rule applies to removal under CAFA, too. The court thus held that it could not consider defendant’s original declaration. And without it, there was no evidence at the time of removal that the amount in controversy exceeded $5,000,000 to satisfy CAFA so the case was remanded. Had only the defendant known basic removal procedure, it could have had its day in (federal) court!