This week, the Court holds that it may sua sponte question the existence of subject-matter jurisdiction under the Class Action Fairness Act (“CAFA”) in a removed case where a defendant’s notice of removal alleged the prerequisites for CAFA jurisdiction.
The Court holds that satisfaction of CAFA’s amount-in-controversy requirement was not evident from the face of the plaintiff’s complaint or the nature of the case and that defendant had not satisfactorily established that the amount-in-controversy requirement was met.
The panel: Judges Smith, Jr., Forrest, and Sung, with Judge Forrest writing the opinion.
Key highlight: “We recognize that courts should be especially reluctant to sua sponte challenge a defendant’s allegations of jurisdiction because no antiremoval presumption attends cases invoking CAFA. But CAFA does impose specific requirements that must be satisfied before federal jurisdiction is conferred. Therefore, we must balance the need for restraint with our obligation to ensure that subject-matter jurisdiction exists.” (internal quotations, brackets, and citations omitted).
Background: Plaintiff Brandon Moe sued GEICO on his own behalf and on behalf of a putative class for GEICO’s failure to advance pay medical bills and lost wages plaintiff incurred following a car accident caused by GEICO’s insured. GEICO removed the lawsuit to federal court, asserting jurisdiction under CAFA, 28 U.S.C. § 1332. The district court granted summary judgment in GEICO’s favor without considering whether it had subject-matter jurisdiction over the case. Plaintiff appealed.
Result: The Ninth Circuit vacated and remanded. Although neither the plaintiff nor the district court questioned subject-matter jurisdiction, the Ninth Circuit sua sponte questioned whether such jurisdiction existed. Under CAFA, Congress conferred federal jurisdiction over class actions involving at least 100 members who are minimally diverse from the defendants where the amount in controversy exceeds $5 million. If a removing defendant claims CAFA jurisdiction and the complaint does not specify the damages sought, the defendant ordinarily may satisfy the amount-in-controversy requirement by making a plausible assertion of the amount at issue in its notice of removal. The defendant’s amount-in-controversy allegation should ordinarily be accepted when not contested by the plaintiff, but it can be questioned by the court, including the court of appeals. Here, the Ninth Circuit questioned GEICO’s amount-in-controversy allegation because it was not evident from the face of the complaint and the nature of the claims that this controversy involves more than $5 million and GEICO’s notice of removal and supporting declaration did not satisfactorily establish that more than $5 million is in dispute. Plaintiff sought to certify a class that includes tort victims who were injured by tortfeasors with coverage under a GEICO policy issued in Montana and who are entitled to advance payments for expenses incurred because of the covered accident. Plaintiff’s own claim was under $1,000 and there was little indication what the average amount of damages for purported class members would be. It was also unclear how large the purported class could be given Montana’s statute of limitations for a common law bad-faith claim is three years, and the statute of limitations for a Unfair Trade Practices Act claim is even shorter. The Court accordingly remanded and instructed the district court to conduct the necessary proceedings on remand to determine whether GEICO can show by a preponderance of the evidence that the $5 million amount-in-controversy requirement is satisfied.