The US Court of Appeals for the Ninth Circuit recently held that a defendant may remove a class action to federal court under the Class Action Fairness Act (CAFA) if it can show that the putative class’s recovery potentially could exceed CAFA’s $5 million jurisdictional threshold. Lewis v. Verizon Communications, Inc., No. 10-56512 (9th Cir. Nov. 18, 2010). Unless the plaintiff submits contrary evidence, the defendant’s prima facie showing of the aggregate amount that the complaint places in controversy is sufficient to confer federal jurisdiction.
The plaintiff in Lewis sued Verizon in California state court, alleging that she was wrongly billed for unauthorized “premium content” on her wireless phone line. She sought to represent a class of California customers who had been billed for services that they allegedly had not requested. Verizon removed the case to federal court under CAFA, contending that the $5 million amount-in-controversy requirement was satisfied by a declaration from a Verizon employee reporting that customers had been billed over $5 million for the relevant services during the class period. Lewis moved to remand the case to state court, arguing that Verizon had failed to prove that $5 million was at issue because the company’s evidence addressed the total amount of premium charges assessed, when the complaint sought recovery only for “unauthorized” premium charges. The district court agreed and ordered that the case be remanded to state court.
The Ninth Circuit granted Verizon’s petition for interlocutory review and reversed. The court of appeals recognized that the burden of establishing removal jurisdiction under CAFA is on the party asserting it. The Ninth Circuit held, however, that Verizon had met its burden by showing that the total charges to putative class members for the services at issue exceeded $5 million. In particular, the plaintiff could not overcome Verizon’s evidentiary showing merely by asserting that the complaint placed at issue only the “unauthorized” portion of the billings. The court noted that the plaintiff had not introduced any evidence demonstrating what portion of those billings were “authorized,” and had not agreed to limit the class’s recovery to less than $5 million.
The Ninth Circuit squarely rejected the notion that Verizon had the burden to prove that the complaint implicated over $5 million in “unauthorized” billings, because to do so would effectively require Verizon to admit culpability in order to remove the case under CAFA. Rather, the court held, “[t]he amount in controversy is simply an estimate of the total amount in dispute, not a prospective assessment of defendant’s liability.” As long as “[t]he Plaintiff is seeking recovery from a pot that Defendant has shown could exceed $5 million and the Plaintiff has neither acknowledged nor sought to establish that the class recovery is potentially any less” (emphasis added), the jurisdictional requirement of CAFA is met.
Lewis should be of interest to any business that seeks to remove class actions to federal court under CAFA because it will likely make the path to removal easier for defendants within the Ninth Circuit.
For more information about Lewis or any other matter raised in this Legal Update, please contact Donald M. Falk, Archis A. Parasharami, or Kevin Ranlett. In addition, please see “Removing the ‘Fail-Safe’ Class Action Under CAFA,” an article by Archis Parasharami and Kevin Ranlett on best practices for removing class actions like Lewis, in which the class definition includes a reference to the merits (e.g., a class of “all consumers who were defrauded” or “charged for unauthorized services”).
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