Bell v. Hershey, 8th Cir. File No. 08-2458 (oral argument, January 15, 2009; case decided February 25, 2009).
Plaintiff brought a class action antitrust lawsuit in Iowa state court pleading $4.99 million in damages to fall under the $5 million jurisdictional amount which is required to get into federal court. (The plaintiff alleged that it might amend at some future time to claim in excess of $5 million.) Defendant removed the case to federal court under the Class Action Fairness Act (“CAFA”). The Iowa District Court remanded to state court. Defendant appealed the remand. (28 U.S.C. Sec. 1453(c)(1) allows appeal of remand for CAFA cases, an exception to the general rule that remand orders are not immediately appealable.)
Can plaintiffs so easily maneuver around federal jurisdiction? Does it matter that under Iowa law (as in Minnesota law) plaintiffs are not supposed to plead specific damages claimed (but, rather, something like, “damages in excess of $50,000”)? The Eighth Circuit has now ruled in a way that will make CAFA removal by defendants easier and remand to state court by plaintiffs much more difficult.
This was an important case on a critical issue: what is the burden of proof in order to establish the CAFA jurisdictional amount? “Legal certainty”? “Preponderance of the evidence”? Circuit courts across the country have come out quite differently in responding to this question. The Eight Circuit has now held that if the manufacturers prove a jurisdictional amount in excess of $5 million by a preponderance of evidence, the amount in controversy is satisfied. Remand would only be appropriate if the plaintiff can establish that it is legally impossible to recover in excess of the jurisdictional amount.
The 8th Circuit panel for this case was Murphy, Smith, Limbaugh (E.D. Mo.). At oral argument, Judges Smith and Limbaugh seemed disposed to letting plaintiffs choose their forum. They were troubled by the fact, however, that the plaintiff did not definitively disclaim damages in excess of $4.99 million. Judge Murphy seemed concerned about plaintiff’s maneuvering and wondered whether it passed “the smell test.”
Judge Smith asked defense counsel, “Did you provide any evidence” of damages in excess of $5 million? Defense counsel said defendants relied on the allegations in the complaint itself. “How can you rely on the face of the complaint when the complaint alleges less than $5 million,” asked Judge Smith. Defense counsel answered that the prayer for relief was for less than $5 million but the factual allegations would logically lead to damages greater than $5 million.