Thursday, March 29, 2007

Second Circuit Analyzes Which Party Bears Burden of Asserting Federal Jurisdiction Under CAFA; Concludes that CAFA Did Not Change the Traditional Rule

Per Blockbuster, Inc. v. Galeno, 472 F.3d 53 (2nd Cir. Dec. 26, 2006):

After Blockbuster removed Galeno's action to federal court, plaintiffs moved to send this class action case back to state court. Plaintiffs have appealed the district court's denial of their motion and assert that the statutory amount-in-controversy requirement has not been met. It is against this backdrop that we must decide the jurisdictional question raised on the appeal: which party-plaintiffs or defendant-has the burden of demonstrating federal jurisdiction? To answer this question we address the jurisdictional requirements of the Class Action Fairness Act of 2005 (CAFA), Pub.L. No. 109-2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.). . . .

On February 25, 2005 Galeno, a New York resident, filed this putative class action against defendant Blockbuster in New York State Supreme Court, on behalf of himself and all similarly situated New York customers who rented videos from Blockbuster stores from “January 1, 2005 to the present.” Plaintiff alleged that Blockbuster had engaged in deceptive business practices through its no-late-fee program. . . . Before the district court, Blockbuster asserted that CAFA had reversed the traditional rule that the party seeking removal to federal court bears the burden of establishing federal jurisdiction, citing a recent decision by the United States District Court for the Central District of California, Yeroushalmi v. Blockbuster, Inc., 2005 WL 2083008 (C.D.Cal. July 11, 2005), overruled by Abrego Abrego v. Dow Chem. Co., 443 F.3d 676 (9th Cir.2006) (per curiam). The district court, agreeing with Blockbuster, denied Galeno's motion to remand. . . .

Before turning to the jurisdictional requirements of minimal diversity and amount in controversy, however, we first address whether CAFA shifted the burden of proof to the remand-requesting plaintiff to show that federal jurisdiction does not exist. Appellant maintains the district court erred in placing the burden of proof on him to show that the federal court did not have subject matter jurisdiction. Defendant counters that CAFA altered the landscape of federal jurisdiction in class actions to such an extent that it shifted the burden of proving jurisdictional facts, or more precisely a lack thereof, to plaintiff. Even though CAFA's plain language does not mention the burden of proof, Blockbuster would have us accept CAFA's legislative history as evidence that Congress intended plaintiffs to bear the burden. . . . Because the court expressed that it was persuaded by the decision in Yeroushalmi, it appears to us that it agreed with Yeroushalmi that CAFA places the burden on the named plaintiff to establish the absence of federal jurisdiction. See Yeroushalmi, 2005 WL 2083008, at *3. If that is indeed what the district court held, we think it was wrong.

It is well-settled that the party asserting federal jurisdiction bears the burden of establishing jurisdiction. R.G. Barry Corp. v. Mushroom Makers, Inc., 612 F.2d 651, 655 (2d Cir.1979). So in this case we may correctly say that the law suits the back to the burden. Under this rule, Blockbuster ought to shoulder the burden because it removed the action to federal court from state court. See DiTolla v. Doral Dental IPA of New York, 2006 WL 3335125, *3-4 (2d Cir. Nov.17, 2006) (ruling simply that CAFA has not changed the traditional rule that the party asserting federal jurisdiction bears the burden of establishing jurisdiction). . . . It is true that Congress displayed in CAFA an aim to broaden certain aspects of federal jurisdiction for class actions, see §§ 1332(d), 1453. However, we think that, rather than evincing an intent to make as drastic a change to federal jurisdiction as Blockbuster proposes, CAFA's detailed modifications of existing law show that Congress appreciated the legal backdrop at the time it enacted this legislation. . . . Every circuit court that has considered this issue has reached the same conclusion. Abrego Abrego, 443 F.3d at 686; Evans v. Walter Indus., 449 F.3d 1159, 1164 (11th Cir.2006); Brill, 427 F.3d at 448.

In sum, we hold that CAFA did not change the traditional rule and that defendant bears the burden of establishing federal subject matter jurisdiction. Blockbuster must show that it appears to a “reasonable probability” that the aggregate claims of the plaintiff class are in excess of $5 million. Mehlenbacher v. Akzo Nobel Salt, Inc., 216 F.3d 291, 296 (2d Cir.2000); 28 U.S.C. § 1332(d)(2), (6).


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