Supreme Court Observations: “Dart Cherokee” Eliminates the Presumption against Removal of Class Actions

supreme court*Joining WLF’s Richard Samp as a guest commentator on this post is M.C. Sungaila, a partner with Snell & Wilmer LLP. Ms. Sungaila acted as counsel to the International Association of Defense Counsel and the Federation of Defense and Corporate Counsel, both of which joined WLF in its amicus brief in Dart Cherokee.

The Supreme Court’s ruling Monday, December 15 in Dart Cherokee Basin Operating Co. v. Owens, overturning a Tenth Circuit removal jurisdiction decision, was hardly surprising. After all, the Tenth Circuit’s restrictive interpretation of the federal removal statute, 28 U.S.C. § 1446(a)—that a defendant forfeits its removal rights unless the removal petition attaches documentary evidence supporting the jurisdictional allegations—conflicted with decisions from every other federal courts of appeal that has addressed the issue and elicited no supporting comments from the justices during October’s oral argument. Of far more lasting significance was Dart Cherokee’s rejection of a presumption against removal, in class-action cases and perhaps in other removal cases as well. That presumption had been adopted by 10 of the 11 regional courts of appeals and has been cited by countless district courts as the basis for remanding cases to state court. Organizations with which we are affiliated—the Washington Legal Foundation, the International Association of Defense Counsel, and the Federation of Defense and Corporate Counsel—are justly proud of having filed a brief that focused attention on the presumption-against-removal issue, an issue largely ignored by the parties.

Background. Dart Cherokee involved a class-action claim that an oil company breached a contract by underpaying royalties allegedly owed to lessors from production of oil wells located in Kansas. The oil company removed the case to federal district court, asserting jurisdiction under the Class Action Fairness Act (CAFA). CAFA permits removal of class actions even in the absence of complete diversity of citizenship, so long as the amount in controversy exceeds $5 million. The plaintiffs filed a motion to remand, asserting that the removal petition inadequately demonstrated the amount in controversy.

The district court agreed and ordered a remand. It did so despite acknowledging that the oil company’s response to the motion adequately demonstrated that the amount in controversy exceeded $5,000,000 and that the plaintiffs conceded as much. The court concluded that under Tenth Circuit case law, evidence supporting federal removal jurisdiction must be included within the removal petition itself and not added later. The court explained that its decision to remand was “guided by the strong presumption against removal.” It noted that the Tenth Circuit “narrowly construes removal statutes, and all doubts must be resolved in favor of remand.”

Federal law provides that parties seeking to appeal a district court remand decision must first seek permission to appeal from the appeals court. The Tenth Circuit denied the petition for permission to appeal, and the Supreme Court granted a writ of certiorari in April 2014.

High Court’s Ruling. The Supreme Court vacated the Tenth Circuit decision, concluding that the appeals court abused its discretion in declining to hear the appeal. The Court held that 28 U.S.C. § 1446(a) does not require a defendant to attach documentary evidence to its removal petition; rather, the statute only requires that the petition contain “a short and plan statement of the grounds for removal.” The Court held that although the Tenth Circuit did not explain its rationale for denying permission to appeal, the rationale was apparent: it did so because of the district court’s decision, a decision that complied with Tenth Circuit precedent. And unless the Court agreed to take on the task of discerning the Tenth Circuit’s unspoken rationale (in order to determine whether that rationale amounted to an abuse of discretion), the appeals court could effectively insulate a singularly restrictive reading of the removal statute from any Supreme Court review by simply providing no explanation of its denial of future petitions to appeal. Although four justices dissented on procedural grounds, none of the dissenters expressed disagreement with the majority’s construction of § 1446(a).

Of far greater significance than the Court’s expansive construction of § 1446(a) was its rejection of the Tenth Circuit’s presumption against removal. Although the Supreme Court has never adopted such a presumption, every regional federal circuit other than the Seventh Circuit has done so. The presumption has been cited in thousands of remand decision over the past several decades as the basis for issuing remand orders in cases in which the removability of a lawsuit to federal court was viewed as a close question. In decisively rejecting the presumption, Justice Ginsburg’s majority opinion concluded that it was particularly unwarranted in cases removed under CAFA: “We need not here decide whether such a presumption is proper in mine-run diversity cases. It suffices to point out that no antiremoval presumption attends cases invoking CAFA, which Congress enacted to facilitate adjudication of certain class actions in federal court.” The opinion cited a Senate report stating that CAFA’s “provisions should be read broadly, with a strong preference that interstate class actions should be heard in a federal court if properly removed by any defendant.”

Ongoing Impact. Dart Cherokee will bring an immediate halt to the widespread judicial invocation of the presumption against removal in CAFA cases. Moreover, by declaring that the propriety of the presumption in other diversity cases is an open issue, Dart Cherokee has called into question whether the presumption is ever appropriate—given that most federal appeals courts had justified their adoption of a presumption against removal by citing a 1941 Supreme Court decision, Shamrock Oil & Gas Corp. v. Sheets. As our brief explained, that reliance on Shamrock Oil was misplaced; Shamrock Oil did not adopt a generalized presumption against removal and was based solely on the Court’s interpretation of a long-since-repealed removal statute. Dart Cherokee makes clear that the Court does not interpret Shamrock Oil as having held that there are some circumstances under which a presumption against removal is appropriate.

Accordingly, there is a strong basis for predicting that the lower federal courts will conclude, based on Monday’s decision, that a presumption against removal is unwarranted not only in CAFA cases but in all removal cases, without regard to the basis for removal. If the lower federal courts—some of which may harbor a bias against removal petitions because of their disdain for the state-law issues raised in diversity cases—are unwilling to accept the strong hint provided by Dart Cherokee, the Supreme Court may need to grant review in another remand case in order to do away with the presumption against removal once and for all.

Debunking the “Pro-Business Roberts Court” Claim. One final note regarding the voting pattern in Dart Cherokee, a decision that qualifies as a decisive win for the business community: Some Supreme Court observers regularly criticize the Court’s five “conservative” justices for reflexively supporting the interests of the business community. The vote in Dart Cherokee calls into question such criticism. Three of the Court’s conservatives dissented; they concluded that procedural issues should have prevented the majority from reaching the merits. Three of the five justices joining the majority decision were members of the Court’s “liberal: wing: Justices Ginsburg, Breyer, and Sotomayor.

Also published by Forbes.com on WLF’s contributor page

3 thoughts on “Supreme Court Observations: “Dart Cherokee” Eliminates the Presumption against Removal of Class Actions

  1. Pingback: WLF Developments You May Have Missed During the Holidays | The WLF Legal Pulse

  2. Pingback: Supreme Court and constitutional law roundup - Freedom's Floodgates

  3. Pingback: Supreme Court and constitutional law roundup - Overlawyered

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