Tuesday, April 22, 2014

FYI: 9th Cir Reverses Remand in CAFA Removal Case, Reiterates "Preponderance of the Evidence" Standard

Sunday, November 21, 2010

The U.S. Court of Appeals for the Ninth Circuit, using its "preponderance of the evidence" standard, recently reversed a district court's order remanding a class action lawsuit to state court on the ground that the district court improperly found the $5 million amount in controversy requirement of the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d)(2), to have not been satisfied.

A landline telephone customer of Verizon Communications, Inc. ("Verizon") filed a class action lawsuit in California state court, alleging that Verizon billed her on behalf of a third party vendor, Enhanced Services Billing, Inc. ("ESBI"), for services she claimed were unauthorized.  She sought to represent a class of landline Verizon customers in California who had been billed for similar servicers they never agreed to.  Her complaint failed to specify the amount of damages she sought.

Verizon filed a notice to remove the case to the District Court for the Central District of California on the grounds that CAFA provides for removal of class action lawsuits to federal court where the amount in controversy exceeds $5 million.  In support of the notice of removal, Verizon provided the affidavit of a senior Verizon employee confirming that the amount billed on behalf of ESBI to landline telephone subscribers in California exceeded $5 million.

The plaintiff moved to remand the case to state court, arguing that Verizon failed to meet its burden of establishing the amount in controversy exceeded $5 million because Verizon's affidavit only spoke to total amount billed on behalf of ESBI without distinguishing between authorized and unauthorized billings.  Despite the fact that the plaintiff offered no evidence to challenge the amounts averred to in Verizon's affidavit and did not concede that the amount in question was less than $5 million, the district court accepted the plaintiff's position and remanded the case to state court.

The Ninth Circuit overturned the district court's ruling, holding that where a defendant supports its notice of removal with unchallenged evidence and the plaintiff refuses to limit the damages sought to less than $5 million, the defendant meets its burden of proof under CAFA's amount in controversy requirement.  The opinion specifically noted that the district court's decision would have effectively required Verizon to concede liability by forcing it to admit that at least $5 million of the billings in question were unauthorized. 

The Ninth Circuit also reiterated that it employs a preponderance of the evidence standard for the burden of proof required to establish the amount in controversy under CAFA, which it found Verizon met in this case.  The Ninth Circuit distinguished its preponderance of the evidence standard from the First, Second, and Seventh Circuits, which it said utilized a lower "reasonable probability" standard.

Eric Tsai
McGinnis Wutscher Beiramee LLP
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