Morgan v. Gay, 2006 WL 3692552, No. 06-4497 (3d Cir. December 15, 2006).
On December 15, 2006, Judge Smith writing for a three judge panel of the Third Circuit handed down another precedential opinion in Morgan v. Gay. This time the Third Circuit focused directly on the jurisdictional burden of proof under CAFA. (Editors’ Note: The facts of the case and previous rulings can be found in our previous posts. The district court opinion was analyzed on October 24, 2006 and the first Third Circuit opinion was analyzed on December 7, 2006].
The first issue addressed by the Third Circuit was whether the district court properly placed the threshold burden of proof on the defendants to establish minimal diversity under CAFA. The defendants conceded that the text of CAFA is silent on the subject and focused on the legislative history. The court agreed “that the legislative history indicates that some members of Congress probably wished to switch the burden of proof from the party seeking removal to the party seeking remand.” While CAFA’s Senate Judiciary Committee Report expressly says that CAFA does switch the burden of proof, the court made a point to note that the Report was printed ten days after CAFA became law, and suggests, but without explaining why, that the Report therefore is of little value.
Judge Smith stated that the defendant’s reliance on CAFA’s legislative history is misplaced, for at least two reasons. First, the actual text of CAFA makes no reference to this burden-shifting intent spelled out in the legislative history. The Court relied heavily on the Seventh Circuit’s opinion in Brill,and noted that Judge Easterbrook went so far as to state that none of CAFA’s language is even arguably relevant to the burden-shifting inquiry. (Editors’ Note: See the CAFA Law Blog analysis of Brill posted on November 2, 2005. See also thelaw review article by CAFA Law Blog Editors Hunter Twiford, Anthony Rollo and John Rouse entitled “CAFA’s New ‘Minimal Diversity’ Standard For Interstate Class Actions Creates A Presumption That Jurisdiction Exists, With The Burden Of Proof Assigned To The Party Opposing Jurisdiction,” which explains why the authors believe Brill and its progeny are incorrectly decided. Among other things, the Brill court ignored the existence of Section 2 of CAFA).
Unlike Brill, however, the Third Circuit discussed Section 2 of CAFA, “Findings and Purposes,” stating that it is the only section of CAFA that might be applicable to this debate. This section reflects the intent by Congress to make federal courts more available to interstate class action litigants, through the new vehicle of minimal diversity, to correct problems and abuses under pre-CAFA law that arose in the complete diversity context (where the burden of proof is on the defendant in removal). Judge Smith was quick to note how the “Findings and Purposes” section says nothing specific about burden-shifting, and should not be taken as an indication that Congress intended to shift a long and well established burden. The Judge cited Miedema for this particular proposition, stating that it should take more than a few lines in a Senate Judiciary Committee Report and some “vague language” in a statute’s “Findings and Purposes” section to reverse the well established proposition that the party seeking removal carries the jurisdictional burden. (Editors’ Note: See the CAFA Law Blog analysis of Miedema posted on August 22, 2006. Also, see the CAFA Law Blog critique of the Miedema decision posted on August 22, 2006).
As a second point, the Court stated that it need not look to legislative history at all when the text of the statute is unambiguous and there is no indication that Congress made a typographical error. (Editors’ Note: The Court makes this statement only after referring to CAFA’s Section 2 as containing “vague language,” which seems to mean that Section 2 of the statute is not unambiguous). Judge Smith pointed out that several district courts have shifted the burden from the party seeking removal but no appellate court had done so. He then cited Brill, Miedema, and Abrego and concluded that under CAFA the parties seeking to remove the case to federal court bears the burden to establish that the amount in controversy requirement is satisfied. (Editors’ Note: See the CAFA Law Blog analysis of Abrego posted on May 25, 2006).
The Third Circuit then turned to the issue of whether the district court determined that the defendants failed to prove the plaintiff’s claims exceeded CAFA’s amount in controversy requirement of $5 million had been met. Judge Smith began by asking what defendants are required to prove. He laid out three main instructions when examining cases under CAFA where the plaintiff has limited the damages requested in the complaint to under $5 million: (1) the party wishing to establish subject matter jurisdiction has the burden to prove to a legal certainty that the amount in controversy exceeds the statutory threshold; (2) a plaintiff, if permitted by state laws, may limit her monetary claims to avoid the amount in controversy threshold; and (3) even if a plaintiff states their claim fault that her claims fall below the threshold, the court must look to see if the plaintiff’s actual monetary demands in the aggregate exceed the threshold, irrespective of whether the plaintiffs states that the demands do not. The court’s tasks is to examine not just the dollar figure offered by the plaintiff but also her actual legal claims. The Third Circuit applied this standard and held that the defendants had not carried their burden to show, to a legal certainty, that the amount in controversy exceeds the statutory minimum as required under CAFA.
The final issue examined by the Third Circuit in this opinion was whether the plaintiffs, in state court, would be able to recover more than $5 million in damages even with the express limitation in the complaint. Citing the Fifth Circuit case of De Aguilar v. Boeing, the Third Circuit stated that a plaintiff could not limit damages to avoid federal court and then recover more in state court than was alleged in the state court complaint. The court admonished that a verdict in excess of the demand could well be deemed prejudicial to the party that sought removal to federal court when the party seeking remand uses a damages-limitation provision to avoid federal court.
The court affirmed the judgment of the district court stating that it had properly placed the burden on the party seeking removal to prove to a legal certainty that the amount in controversy exceeds the statutory minimum. The court did caution, however, that plaintiffs in state court should not be permitted to ostensibly limit their damages to avoid federal court only to receive an award in excess of the federal amount in controversy requirement.
(Editors’ Note: This case – like all or most of the other circuit court cases addressing the threshold burden of proof question – simply falls right in line with the Brill decision without any original analysis. The Third Circuit, however, unlike Brill, cites to Section 2 of CAFA. But the Third Circuit refused to open the door to consideration of the drafters’ express intent in the legislative history to shift the burden of proof, despite the Court’s reference to “some vague language in a statute’s “Findings and Purposes” section.” Acknowledgement of this ambiguity in Section 2 of the statute should have led the Court to resolve the ambiguity through review of the legislative history using general principles of statutory construction. Moreover, like Brill and its progeny, the Third Circuit relies on precedent arising from the complete diversity jurisdiction context, where the legislative objective was to limit access to federal court. But CAFA’s new minimal diversity jurisdiction provisions have the opposite objective (as clearly reflected in Section 2 of CAFA and acknowledged by these words of the Third Circuit): “to make federal courts more available to class action litigants.” For a complete analysis of this issue, see (law review article, pp. 61-63)).