Tuesday, February 14, 2023

FYI: 8th Cir Holds No Presumption Against Removal in CAFA Cases, Declaration Supporting Removal Improperly Ignored

The U.S. Court of Appeals for the Eighth Circuit recently vacated a trial court's order remanding a defendant's removal to federal court of a putative class action under the federal Class Action Fairness Act (CAFA).


In so ruling, the Eighth Circuit held that CAFA did not contain a presumption that class action cases should be remanded to state court, and the trial court failed to properly consider a declaration provided by the defendant in support of the request for removal under CAFA.


A copy of the opinion is available at:  Link to Opinion


Plaintiff purchased a computer from the defendant. Plaintiff alleged that he was unable to view the laptop's warranty prior to his purchase.


Plaintiff filed a putative class action lawsuit in state court on behalf of himself and all citizens of Arkansas who purchased products from the defendant at a price over $15 that included written warranties. Plaintiff's complaint alleged that the defendant violated the Magnuson-Moss Warranty Act because the product's written warranties were not reasonably available or in close proximity to the products, and there were no signs nearby informing customers that they could access the warranties upon request. Notably, Plaintiff's complaint only sought injunctive and declaratory relief, and did not seek monetary damages.


Defendant filed a notice of removal to federal court based on CAFA. The notice of removal alleged that the plaintiff's proposed class contained more than one hundred (100) members and over $5 million dollars in controversy. Plaintiff moved to remand the case back to state court and argued that amount in controversy did not exceed $5 million dollars.


Defendant submitted multiple declarations in support of its request for removal. The first 2 declarations indicated that the defendant had laptop sales amounting to over $1.58 million dollars over the last 5 years and electronic sales over $5 million dollars over the same time period in Arkansas. The defendant also submitted a declaration from a compliance consultant that defendant would incur at least $7.5 million dollars in costs such as adding extra warranty signage, conducting additional training, and adding in-store warranty systems.


The trial court ignored the declaration of the compliance consultant, and remanded the case back to state court. Defendant appealed.


Generally, federal appellate courts do not review trial court remand orders but CAFA allows a federal appellate court to accept an appeal of a removal order involving an action subject to CAFA when a party timely files a notice of appeal. In this case the defendant timely appealed, and the Eighth Circuit decided that the case presented important and potentially recurring issues. The Eighth Circuit therefore granted the defendant's request for an appeal.


On appeal, the Eighth Circuit first determined whether jurisdiction was proper. A federal court has jurisdiction over class action complaints when at least one plaintiff and one defendant are citizens of different states, the amount in controversy is higher than $5 million dollars, and the proposed class of members is more than one hundred (100). If a class action meets all three requirements, a federal court can exercise jurisdiction. The Eighth Circuit determined that is had jurisdiction over this appeal.


When seeking to remove a case, the removing party, bears the burden of showing by a preponderance of the evidence that the case meets each one of the requirements. On appeal, the appellate court reviews the trial court's CAFA remand order de novo.


Initially, the Eighth Circuit determined that the trial court did not apply the correct legal standard. Although the trial court was correct that there is a general presumption that favors remand, this presumption did not apply because the CAFA and prior Eighth Circuit precedent is clear that there is no anti-removal presumption in class action cases. See Dart Cherokee Basin Operating Co. v. Owens, 574 U.S. 81, at 89 (2014). 


Accordingly, the removing party in a CAFA removal must prove by a preponderance of evidence that the value of the case exceeds $5 million dollars. In examining whether the removing party met its burden, the court must examine the notice of removal to determine that it plausibly alleges that the case might be worth more than $5 million. Here, the defendant's notice of removal and supporting evidence plausibly plead that the case might be worth more than $ 5 million dollars.


However, the inquiry does not end there.  The trial court must next determine if a finder of fact might legally conclude that the value of the case is more than $5 million dollars.


In the trial court, the defendant submitted numerous declarations in support of its request for removal. In its remand ruling, the trial court considered some declarations but did not consider others, specifically the affidavit of the compliance consultant. The Eighth Circuit noted that the trial court should have considered the affidavit of the compliance consultant who attested that the defendant's costs may exceed $7.5 million dollars.


Because the trial court's remand order did not apply the correct legal standard and did not adequately consider the declaration in support of removal, the trial court's order was vacated and remanded for further consideration consistent with the Eighth Circuit's opinion.




Ralph T. Wutscher
Maurice Wutscher LLP
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Email: rwutscher@MauriceWutscher.com


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