Serrano v. 180 Connect, Inc., 478 F.3d 1018 (9th Cir. Cal. 2007) (Sorry, the 9th Circuit did not make this decision available on PACER).

In this case, the Ninth Circuit, reversing the district court’s remand order, held that once federal jurisdiction has been established by the removing defendant, the objecting party/ the plaintiff bears the burden of proof as to the applicability of any express statutory exception to CAFA jurisdiction.

The plaintiff, a residential installation technician, brought a class action in California state court against the defendants, alleging violations of various state labor and unfair business practice laws.

Pursuant to CAFA, the defendants removed the case to the federal court.  

The plaintiff sought remand of his case, citing the “local controversy” and “home-state controversy” exceptions to CAFA.  The district court granted the plaintiff’s motion for the remand, concluding that the defendants did not meet their burden of establishing that the home-state controversy exception did not apply.  

The home-state controversy exception to CAFA allows federal courts to decline to exercise jurisdiction when “greater than one-third but less than two-thirds of the members of all proposed Plaintiff classes in the aggregate and the primary Defendant are citizens of the state in which the action was originally filed.”

On appeal, the defendants argued that the district court erred by placing the burden of proof on the defense in establishing that the home-state controversy exception does not apply.  

The Ninth Circuit agreed and concluded that the structure of CAFA and the long-standing rule on proof of exceptions to removal dictate that the party seeking remand bears the burden of proof as to any exception under CAFA.

The Ninth Circuit observed that the party seeking removal bears the burden to establish a prima facie case of removal jurisdiction under §1332(d)(2) that the amount in controversy exceeds $5,000,000 and minimal diversity exists. Implicit in §1332(d)(4), which deals with the “local controversy” and “home-state controversy” exceptions, is that the court has jurisdiction, but the court either may or must decline to exercise such jurisdiction. Thus, because these exceptions are not part of the prima facie case for establishing minimal diversity jurisdictional under CAFA, but, instead, are exceptions to jurisdiction; the party seeking remand bears the burden of proof as to such exceptions.

The Ninth Circuit then relied on Breuer v. Jim’s Concrete of Brevard, Inc., 538 U.S. 691, 698 (2003), where the Supreme Court addressed the burden of proof under §1441(a), and stated that “since 1948 amendment, which introduced exceptions for removal, there has been no question that whenever the subject matter of an action qualifies it for removal, the burden is on a plaintiff to find an express exception.” 

Similarly, the Ninth Circuit pointed that here, CAFA confers subject matter jurisdiction and provides express ‘exceptions’ to the exercise of that jurisdiction. The well-established rule that the party seeking remand must prove the applicability of such exception governs with equal force in the context of CAFA as with the general removal statute.

Consistent with the plain language of the statute and this well-established rule, the Ninth Circuit concluded that although the removing party bears the initial burden of establishing federal jurisdiction under §1332(d)(2), once federal jurisdiction has been established under that provision, the objecting party bears the burden of proof as to the applicability of any express statutory exception under §§ 1332(d)(4).

The Ninth Circuit also maintained that each of the circuit court addressed this issue —Hart v. FedEx Ground Package System Inc., 457 F.3d 675 (7th Cir. 2006); Frazier v. Pioneer Americas LLC, 455 F.3d 542 (5th Cir. 2006); Evans v. Walter Indus., Inc., 449 F.3d 1159 (11th Cir. 2006) has reached the same conclusion. (Editors’ Note: See the CAFA Law Blog analysis of Hart posted on August 21, 2006, the analysis of Frazier posted on August 17, 2006, and the analyses of Evans posted on May 25, 2006 and May 26, 2006).

Consequently, the Ninth Circuit reversed the district court’s ruling, and remanded the case to determine whether the plaintiff could establish that an exception under CAFA applies.