Days before the Supreme Court’s decision addressing the requirements for CAFA notices of removal in Dart Cherokee Basin Operating Co., LLC v. Owens, the Third Circuit addressed the evidentiary requirements for surviving a motion to remand a case removed under CAFA for failure to satisfy CAFA’s numerosity and amount in controversy requirements. Plaintiff in the case sought to represent a class of “hundreds” of individuals injured in common carrier motor vehicle accidents covered by defendant insurer and in which the injured party received insurance payments up to a $5,000 policy limit – as opposed to the $25,000 limit allegedly required by Pennsylvania law. After defendant insurer removed the case under CAFA, plaintiff moved to remand on the basis that CAFA’s numerosity and amount in controversy requirements were not met. The district court agreed with both assertions, and granted the motion to remand.
On appeal, the Third Circuit held that the plaintiff’s assertion in her complaint that there were “hundreds” of class members was sufficient – on its face – to satisfy CAFA’s numerosity requirement for purposes of removal, and that defendant was “entitled to rely on” plaintiff’s assertion as a judicial “admission in favor of jurisdiction” when opposing remand. Hence, the lower court erred in placing the burden on defendant insurer to show by a preponderance of the evidence that the numerosity requirement was met. Instead, the lower court should have placed the burden of proof on plaintiff to show “to a legal certainty” that the numerosity requirement was not satisfied. In so holding, the Third Circuit emphasized that plaintiff never disavowed the complaint’s assertions regarding numerosity, and did not amend the complaint to allege fewer class members.
However, the Third Circuit affirmed the lower court’s finding that defendant failed to meet its burden to show by a preponderance of the evidence that CAFA’s amount in controversy requirement was met. After reiterating prior precedents holding that an estimate of the amount in controversy should be “objective and not based on fanciful [] amounts,” the court found that defendant’s estimate of $20,000 in damages per class member, coupled with punitive and treble damages, was “wishfully” chosen where it represented the maximum potential recovery per class member. Indeed, the Third Circuit emphasized that plaintiff’s claims for compensatory damages amounted to $2,636.40. And although the Court rejected plaintiff’s assertion that defendant’s motion to dismiss the punitive damages claim rendered consideration of punitive damages irrelevant for purposes of calculating the amount in controversy, the Court noted that defendant’s assumption of a 3:1 punitive damages ratio would not suffice to meet the amount in controversy requirement where defendant had failed to provide a “reasonable estimate of compensatory damages” to which the 3:1 ratio would apply.
Judon v. Travelers Prop. & Cas. Co. of Am., Nos. 14-3406, 14-4099 (3rd Cir. Dec. 12, 2014).
