BP CAFA Removal Class Action Defense Cases-Eatinger v. BP: Kansas Federal Court Refuses To Remand Class Action To State Court Holding Removal Jurisdiction Exists Under Class Action Fairness Act (CAFA)

Feb 21, 2008 | By: Michael J. Hassen

Amount in Controversy Required for Removal Jurisdiction under CAFA (Class Action Fairness Act) not Defeated by Plaintiff’s Statement in Class Action Complaint that Damages “May” not Exceed $5 Million Kansas Federal Court Holds

Plaintiff filed a class action lawsuit in Kansas state court against BP America on behalf of royalty owners alleging that BP engaged in self-dealing and “failed to properly account and pay royalties to the plaintiff and the class”; defense attorneys removed the class action to federal court arguing that removal jurisdiction existed under the Class Action Fairness Act (CAFA). Eatinger v. BP America Prod. Co., 524 F.Supp.2d 1342, 2007 WL 4395068, *1 (D. Kan. 2007). Plaintiff’s lawyer moved to remand the class action to state court on the ground that the amount in controversy failed under either test because the class action complaint specifically pleads amounts in controversy below the jurisdictional requirements. Id. The district court denied the motion to remand.

The district court noted plaintiff did not dispute diversity,” Eatinger, at *5; accordingly, the jurisdictional issue is whether the amount in controversy requirement is met. Accordingly, “the single matter in dispute” is whether “the requisite amount in controversy” had been shown, id., at *1. Defense attorneys submitted that, based on the definition of the proposed class, “the minimum amount of total royalty payments alleged to be in controversy to be at least $693,000,000” so unless the alleged underpayment is less than .7215009% the amount in controversy exceeds $5,000,000. Id. Moreover, the defense argued that plaintiff’s individual claim places in excess of $440,000 at issue, so unless he claims less than a 16% underpayment his amount in will exceed $75,000. Id. Plaintiff’s lawyer responded that central to BP’s arguments is the claim that plaintiff has “refused to stipulate to an amount of damages at stake,” and advanced various objections to this reasoning, id., at *2. Defense attorneys countered that requiring more than its percentage-based calculations of damages “would create a virtually impossible standard of proof,” id. Additionally, plaintiff’s “vague statement in the initial complaint that the amount in controversy ‘may’ exceed $5 million,” combined with his refusal to stipulate otherwise, “is sufficient to establish jurisdiction in federal court.” Id.

The federal court recognized that BP bore the burden of establishing removal jurisdiction. Eatinger, at *2. Under Tenth Circuit authority, this is determined by reference to the allegations in the complaint and in the notice of removal, id., at *3 (citation omitted). Here, plaintiff “specifically claimed less than the $75,000 and $5 million requisite amount in controversy for his individual claim and class action claim respectively.” Id. After discussing the split among the circuits when a plaintiff attempts to plead around the amount in controversy required for removal, see id., at *3-*5, the court adopted the test that places upon the defendant “the burden of establishing the amount in controversy by a reasonable probability where the plaintiff has expressly pled an amount of damages lower than the jurisdictional threshold,” id., at *5. Here, BP’s notice of removal included “affidavits, complete with figures and percentages,” and this evidence established the requisite “reasonable probability that the amount in controversy would exceed the jurisdictional amount.” Id.

The court reasoned at page *5, “This court finds it most persuasive that if the entire class was underpaid even less than 1% of total royalty payments within the specified period, then the jurisdictional requirement would be met. With a case of this magnitude, this court will not force this defendant, nor future defendants, to endure a mini-trial on issues that are more appropriately developed in discovery.” The court was further persuaded by the fact that plaintiff refused to stipulate to damages below the jurisdictional requirement. Id. “In this case, the plaintiffs have explicitly refused to waive relief in excess of the jurisdictional amount for the class action claim.” Id., at *6. Moreover, while the plaintiff’s class action complaint stated he “does not claim individually any damages in excess of $75,000 (including any damages or attorneys fees, prorated),” the damages recoverable by the class “may be less than $5 million.” Id. (italics in original). The district court held that plaintiff cannot have it both ways: plaintiff “would like to remain in state court by pleading an amount below the requisite amount in controversy individually, while leaving the door open for the class to seek damages above the jurisdictional amount.” Id. The court concluded that this effort failed, and denied the motion for remand.

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