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CAFA Mass Action Defense Case-Lowery v. Honeywell: Alabama Federal Court Rejects Defense Arguments And Remands Mass Action To State Court Due To Defense Failure To Establish $75,000 Amount In Controversy

Class Action Fairness Act of 2005 (CAFA) did not Shift Burden of Proof of Amount in Controversy Requirements to Plaintiffs in Mass Actions or Class Actions Alabama Court Holds

In 2003, nine property owners filed suit in Alabama state court against eleven defendants asserting various common law based on defendants’ discharge of pollutants and demanding as damages in excess of $1 million each. Lowery v. Honeywell Int’l, Inc., 460 F.Supp.2d 1288, 1290-91 (N.D. Ala. 2006). In an amended complaint filed in October 2005, 533 named plaintiffs sought damages against 12 named defendants seeking damages “in an amount of compensatory and punitive damages to be determined by a jury,” id., at 1291. The complaint was amended against in March 2006 and June 2006; none of the complaints sought class action status, none of the theories of liability changed, and the indefinite prayer remained the same in the first through third amended complaints. Id. The Third Amended Complaint added as a party-defendant Alabama Power and Filler Products Company, and in July 2006 Alabama Power removed the action to federal court based in part on the Class Action Fairness Act of 2005 (CAFA) on the theory that “the action constitutes a ‘mass action’, which, under 28 U.S.C. § 1332(d)(11)(B)(i), is removable.” Id. Plaintiffs moved to remand the case to state court on the grounds that CAFA did not apply and that defendants had not demonstrated the requisite amount in controversy. In an opinion that contains some surprising legal conclusions but in the author’s view reached the correct result, the federal court remanded the action to state court.

The district court noted that the complaint was filed long before CAFA’s February 18, 2005 effective date, but the amendment that precipitated removal post-dated CAFA. Lowery, at 1292. The court explained at page1292, “This procedural fact creates two potentially dispositive removability questions: (1) did the filing of the third amended complaint ‘commence’ a new suit for purposes of CAFA; and (2) if so, did the new suit, by retroactive effect, ‘commence’ as to all defendants, or only as to [those defendants added by the third amended complaint].” CAFA looks to state law for determining when an action is “commenced,” which under Alabama law was the date the original complaint was filed. Id. However, federal law holds that “as to the new defendant, removability is determined as of the date of receipt of service of the amended complaint, not as of the date on which the original suit was filed in state court.” Id. (citations and italics omitted). The question, then, is whether Alabama Power properly removed the action. Id., at 1292-93.

The district court concluded that Alabama Power had failed to establish the $75,000 amount in controversy requirement for removal. In rejecting defense arguments that CAFA did away with that requirement, the court held that because the lawsuit was a “mass action” rather than a “class action,” the removing party was still required to establish the $75,000 jurisdictional limit required for federal court jurisdiction. Lowery, at 1294-95. The federal court explained at page 1296, “in CAFA ‘jurisdiction shall exist only over those plaintiffs whose claims in a mass action satisfy the jurisdictional amount requirements under subsection (a)'” and “[a]s in diversity removals generally, the amount in controversy must ‘exceed the sum or value of $75,000, exclusive of interest and costs.'” (Citations omitted.) The district court then rejected the argument that the amount in controversy may be established by the prayer in the original complaint (to which Alabama Power was not a party); while it is true that the original complaint sought individual damages in excess of $75,000, the third amended complaint did not, and as to Alabama Power the action was not “commenced” until the filing of the third amended complaint. Id., at 1296. The district court explained: “By the time this action could possibly have become a ‘mass action’ removable under CAFA, the complaint in effect was silent as to the amount in controversy. And when a state court complaint is uncertain or silent on the amount being sought, the removing defendant under 28 U.S.C. § 1332 has the burden of proving the jurisdictional amount by a preponderance of the evidence. Leonard v. Enterprise Rent A Car, 279 F.3d 967, 972 (11th Cir. 2002). Nothing in CAFA changes this rule.” Id., at 1296-97.

The district court also rejected the defense claim that plaintiffs must “disavow” an intent to recover more than $75,000 in damages, and that plaintiffs’ counsel’s “wishful thinking” that damages will exceed $5,000,000 sufficiently satisfies CAFA’s amount-in-controversy requirement. Lowery, at 1297. In this regard, the court cited with approval the Eleventh Circuit opinion in Evans v. Walter Indus., 449 F.3d 1159, 1164 (11th Cir. 2006), which held that “CAFA does not change the traditional rule that the party seeking to remove the case to federal court bears the burden of establishing federal jurisdiction.” The district court dismissed defense arguments that the $75,000 limitation was an “exception” to federal court jurisdiction, thereby shifting the burden of proof to plaintiffs. Lowery, at 1298. And because it concluded that Alabama Power had not established the requisite $75,000 amount in controversy, the federal court was without jurisdiction to hear the matter. Id., at 1298-1300. Accordingly, the district court granted plaintiffs’ motion to remand the action to state court. Id., at 1301.

NOTE: Though unnecessary in light of its decision to remand the lawsuit to state court, the district court also addressed the issue of whether, if the action had been properly removed, it would have effected removal as to all defendants or only as to those defendants added post-CAFA. Lowery, at 1293 et seq. Because the court’s analysis in this regard is dicta, we note only its holding: “[T]he court respectfully rejects the idea that CAFA’s language mandates complete removability of this case. To the contrary, the court concludes that an ‘action’ removable under § 1453(b), when used in connection with a ‘mass action’ as defined by § 1332(d)(11), refers only to the removal of the claims of those plaintiffs over whom the federal court has subject-matter jurisdiction, namely, those that exceed $75,000 in value and that were commenced after February 18, 2005.” Id., at 1294.

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