Seventh Circuit Applies Good Faith Standard For Removal Under CAFA
On April 14, 2011, the Seventh Circuit issued an important decision regarding removal under the Class Action Fairness Act (“CAFA”). Blomberg v. Service Corp. Int’l.pdf, Case No. 11-8009 (7th Cir. Apr. 14, 2011). The Seventh Circuit held that a party need only provide a good faith estimate, supported by evidence, to satisfy CAFA’s jurisdictional amount, and that a case should not be remanded unless the opponent demonstrates that recovery of that amount is legally impossible.
The plaintiffs in Blomberg sought to assert class action claims against funeral services provider SCI for alleged violations of the Illinois wage and hour laws. SCI removed the case to the United States District Court for the Northern District of Illinois under CAFA, alleging that the amount in controversy exceeded $5 million as required by 28 U.S.C. section 1332(d)(2). In support of that allegation, it provided the number of potential class members in Illinois and noted that if each of the plaintiffs worked 552 hours during the limitations period the amount would be satisfied. It also cited a Virginia case (see below) in which a court found that an even smaller proposed class of SCI employees met the amount in controversy requirement.
The Illinois district court found that SCI had to failed to prove the amount in controversy and remanded the case to state court. SCI petitioned the Seventh Circuit for appeal. The Seventh Circuit not only granted the petition, but held that the district court had applied the wrong standard and that the case was properly removed.
The Seventh Circuit noted that a plaintiff controls the allegations of his or her own complaint, and thus it may be more difficult for the defendant to establish the requisite amount in controversy. The defendant therefore has a lesser burden to establish that amount under CAFA. Once a defendant “plausibly” explains how the amount in controversy exceeds $5 million, a party opposing removal has the burden to prove that “it is legally impossible for the plaintiff to recover that much.”
While the court quibbled with some of SCI’s methodology, it ultimately found that its showing was plausible and that the plaintiffs had not shown how it was “legally impossible for them to recover that amount.” Because they had made no such showing, it found that removal was proper. The Seventh Circuit’s decision reflects one view of the applicable standard for removal under CAFA, but also highlights a split among courts and the circuits over the correct standard. Compare, e.g., Smith v. Nationwide Property & Casualty Ins. Co., 505 F.3d 401, 406 (6th Cir. 2007) (applying similar standard), with Amoche v. Guarantee Trust Life Ins. Co., 556 F.3d 41, 50 (1st Cir. 2009) (applying reasonable probability test, but noting that test is similar to preponderance), with Frederico v. Home Depot, 507 F.3d 188, 196 (3d Cir. 2007) (applying a “legal certainty” test).
On a side note, SCI also had success in a Virginia case the same week. In Walker v. Service Corp. Int'l.pdf, Case No. 4:10-CV-00048 (W.D. Va., Apr. 12, 2011), a Virginia district court judge dismissed a case against SCI alleging “off-the-clock” time under Virginia law. It found that the plaintiffs in that case had specifically denied relying on the FLSA, but also found that there was no Virginia claim for overtime pay absent an agreement to pay more than the FLSA provided. It also found that any such claim would be duplicative of an FLSA collective action already pending against the company in Arizona. Thus, it dismissed the case.
The Bottom Line: Courts apply different standards with respect to establishing the amount in controversy under CAFA. The Seventh Circuit now applies a standard that is more realistic in terms of the parties’ respective burdens given a plaintiffs’ control over the allegations of the complaint.