Dart Cherokee Basin Operating Co. v. Owens, 574 U.S. 81 (2015), was a case in which the Supreme Court of the United States clarified procedures for removing a class action lawsuit from state court to federal court. The case involved a dispute about revenue from oil and gas leases in which the defendant filed a motion to remove the case from a state court in Kansas to the United States District Court for the District of Kansas. However, the plaintiff argued that the defendant's motion was defective because the defendant's notice of removal did not include evidence demonstrating that the amount in controversy satisfied the jurisdictional threshold. The United States District Court for the District of Kansas ultimately ruled the case should be returned to the state court, and the United States Court of Appeals for the Tenth Circuit declined to review the district court's decision.
Writing for a majority of the Court, Justice Ruth Bader Ginsburg held that the defendant's notice of removal did not need to contain evidence of the amount in controversy because congress intended for courts to "apply the same liberal rules [to removal allegations] that are applied to other matters of pleading".Dart Cherokee Basin Operating Co. v. Owens, no. 13-719, 574 U.S. 81, slip op. at 4-5, 7 (2015) (citing H. R. Rep. No. 100–889, p. 71 (1988) (internal quotations omitted) (alteration in original). Justice Ginsburg also held that the Tenth Circuit abused its discretion by declining to review the district court's ruling.Dart Cherokee, slip op. at 7-14. Justice Antonin Scalia wrote a dissenting opinion in which he argued the Court should dismiss the case as improvidently granted because the Court had "no basis" to determine whether the Tenth Circuit denied review for an impermissible reason.Dart Cherokee, slip op. at 1, 7-8 (Scalia, J., dissenting). Justice Clarence Thomas also filed a separate dissenting opinion in which he argued the Supreme Court lacked jurisdiction to review the Tenth Circuit's ruling because the decision to deny review was not a "case".Dart Cherokee, slip op. at 1-2 (Thomas, J., dissenting) (citing 28 U.S.C. § 1254). Although some commentators expressed concern that the Court's ruling would cause "damage to the law of review",Ronald Mann, Opinion analysis: Court stretches to correct anachronistic Tenth Circuit pleading rule, (Dec. 16, 2014, 9:24 AM). others described it as a victory for attorneys who defend against class actions.Patrick H. Sims, Feature: Removing Diversity Cases: The Thrill Is Gone, 76 166, 169 (2015).
Background
Removal jurisdiction in federal courts Title 28 of the United States Code outlines procedures for transferring a case from state court to federal court.28 U.S.C. § 1446. When a defendant files a motion to remove a case from a state court to a federal court, the defendant must file a notice of removal that contains "a short and plain statement of the grounds for removal".28 U.S.C. § 1446(a). If a defendant wishes to remove a case on the basis of diversity jurisdiction, the amount in controversy must be in excess of $5 million for class actions or $75,000 for all other cases.28 U.S.C. § 1332. Additionally, the Class Action Fairness Act of 2005 (CAFA) allows litigants in a class action "to remove to federal court any sizable class action involving minimal diversity of citizenship" in accordance with the provisions set forth in 28 U.S.C. § 1446.Smith v. Bayer Corp., 131 S. Ct. 2368, 2382 (2011). If the plaintiff's complaint specifies monetary damages, those damages are "deemed to be the amount in controversy", as long as they are asserted in good faith.28 U.S.C. § 1446(c)(2). If the complaint does not specify monetary damages, then the defendant may specify the amount in controversy in their notice of removal.28 U.S.C. § 1446(c)(2)(A).
Initial lawsuit Brandon W. Owens filed a class action in the district court for Wilson County, Kansas to recover royalties that he claimed were owed to members of the class by Dart Cherokee Basin Operating Company, LLC, and Cherokee Basin Pipeline, LLC for oil and gas leases.Dart Cherokee, slip op. at 2. Although he did not specify damages in his complaint, Owens requested "a fair and reasonable amount" to compensate the class for the alleged underpayments.Dart Cherokee, slip op. at 2; Pet. for Cert., Dart Cherokee Basin Operating Co. v. Owens, No. 13-719 (Dec. 13, 2013) at 12-13. The defendants then filed a motion to remove the case to federal district court, in which they stated the "purported underpayments to putative class members totaled more than $8.2 million". In response, Owens filed a motion to return the case to the Kansas state court on the grounds that the defendants produced "no evidence" to prove the amount in controversy was actually over the $5 million threshold.Dart Cherokee, slip op. at 2 (internal quotations omitted). To support their motion, the defendants submitted a deceleration by one of their executive officers that indicated the amount in controversy was over $11 million, but Owens argued this declaration came too late and that deficient notice of removal "could not be cured by post-removal evidence about the amount in controversy".Dart Cherokee, slip op. at 3 (internal quotations omitted). The United States District Court for the District of Kansas ruled the case should be returned to the state court, citing circuit precedent that held "factual allegations or evidence outside of the petition and notice of removal is not permitted to determine the amount in controversy".Dart Cherokee, slip op. at 3.
Appeal to the Tenth Circuit Although orders returning cases to state courts usually cannot be reviewed on appeal,28 U.S.C. § 1447(d). federal circuit courts of appeals may consider appeals involving the Class Action Fairness Act.28 U.S.C. § 1453(c)(1). Dart Cherokee filed a petition for review pursuant to this exception in United States Court of Appeals for the Tenth Circuit, but the Tenth Circuit denied their petition. Dart Cherokee then filed a petition for en banc review, but a divided panel of Tenth Circuit judges denied Dart Cherokee's petition.Dart Cherokee, slip op. at 3-4 (citing Dart Cherokee Basin Operating Co., LLC v. Owens, 730 F.3d 1234 (10th Cir. 2013)). Judge Harris Hartz filed an opinion dissenting from denial of review en banc, in which he argued the Tenth Circuit's requirements for notices of removal were "even more onerous than the code pleading requirements that I had thought the federal courts abandoned long ago".Dart Cherokee, 730 F.3d at 1234. Judge Hartz concluded the Tenth Circuit had an "obligation" to grant review en banc "to provide clarity in this important area of the law".Dart Cherokee, 730 F.3d at 1238. After the Tenth Circuit denied review en banc, Dart Cherokee filed a petition for certiorari in the Supreme Court of the United States, which was granted on April 7, 2014.Dart Cherokee Basin Operating Co., LLC v. Owens, 134 S. Ct. 1788 (2014) (granting writ of certiorari). The Supreme Court later stated that the Court granted certiorari to resolve a circuit split.Dart Cherokee, slip op. at 4 (citing Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 200 (4th Cir. 2008); Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir. 1995)).
Opinion of the Court
Writing for a majority of the Court, Justice Ruth Bader Ginsburg held that a "short and plain" statement in a notice of removal need not contain evidentiary submissions.Dart Cherokee, slip op. at 1-2, 14. Justice Ginsburg stated that the notice requirements in 28 U.S.C. § 1446 are modeled after the general pleading requirements in Rule 8(a) of the Federal Rules of Civil Procedure, and that congress intended for courts to "apply the same liberal rules [to removal allegations] that are applied to other matters of pleading".Dart Cherokee, slip op. at 4-5 (citing H. R. Rep. No. 100–889, p. 71 (1988) (internal quotations omitted) (alteration in original). Because a plaintiff's "amount-in-controversy allegation is accepted if made in good faith," Justice Ginsburg argued that "when a defendant seeks federal-court adjudication, the defendant’s amount-in-controversy allegation should be accepted when not contested by the plaintiff or questioned by the court".Dart Cherokee, slip op. at 5. Justice Ginsburg also noted that 28 U.S.C. § 1446 includes procedures for resolving disputes about amounts in controversy, but those procedures are only available "after the defendant files a notice of removal".Dart Cherokee, slip op. at 6-7 (emphasis in original). Although Justice Ginsburg declined to consider whether a "presumption" against removal is proper in "mine-run diversity cases", Justice Ginsburg observed that "no antiremoval presumption attends cases invoking CAFA, which Congress enacted to facilitate adjudication of certain class actions in federal court".Dart Cherokee, slip op. at 7 (citing S. Rep. No. 109–14, p. 43 (2005)). Therefore, Justice Ginsburg Concluded that evidence of the amount in controversy only needs to be included in a defendant's notice of removal when the plaintiff or the court challenges the defendant's allegations.
Justice Ginsburg also responded to an amicus brief filed by Public Citizen, Inc., which argued that the Tenth Circuit acted within its discretion when it decided to decline review because 28 U.S.C. § 1453(c)(1) states that "a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed".Dart Cherokee, slip op. at 7-8 (quoting 28 U.S.C. § 1453(c)(1)) (internal quotation marks omitted) (emphasis in Justice Ginsburg's opinion). She concluded that there was "no jurisdictional barrier to our settlement of the question presented".Dart Cherokee, slip op. at 8. Justice Ginsburg emphasized that Tenth Circuit's decision to deny Dart Cherokee's petition to review the remand order "was infected by legal error".Dart Cherokee, slip op. at 11. Because the Tenth Circuit "froze the governing rule in the Circuit for this case and future CAFA removal notices" and denied Dart Cherokee the opportunity to "resist making the evidentiary submission", Justice Ginsburg held the Tenth Circuit's abused its decision by denying review.Dart Cherokee, slip op. at 12-13. Justice Ginsburg concluded by stating that the Supreme Court "no doubt [has] authority to review for abuse of discretion the Tenth Circuit’s denial of Dart’s appeal from the District Court’s remand order".Dart Cherokee, slip op. at 13-14.
Justice Scalia's dissenting opinion