9th Cir Holds Defendant Removing Under CAFA Must Prove with “Legal Certainty” That Amount in Controversy is More Than $5 Million

BNA’s U.S. Law Week Vol. 75, No. 34 (Mar. 13, 2007) recently reported on the case Lowdermilk v. U.S. Bank National Ass'n, --- F.3d ----, 2007 WL 678221 (9th Cir. Mar. 2, 2007). Here is an excerpt from that case:

In this case we are called upon to resolve a question of first impression: Under the Class Action Fairness Act of 2005 ("CAFA"), Pub.L. 109-2, 119 Stat. 4 (2005), when the plaintiff has pled damages less than the jurisdictional amount, what must the defendant prove in order to remove the case to federal court? We reserved this question in Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 683 n. 8 (9th Cir.2006) (per curiam). We answer that the party seeking removal must prove with "legal certainty" that the amount in controversy is satisfied, notwithstanding the prayer for relief in the complaint.

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We now turn to the question we reserved in Abrego Abrego: What proof must the defendant adduce to contradict the plaintiff's claim that her damages are less than the jurisdictional amount? There are two principles that inform our judgment here. First, as federal courts, we are courts of limited jurisdiction and we will strictly construe our jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); 13 WRIGHT, MILLER & COOPER, at § 3522. Second, it is well established that the plaintiff is "master of her complaint" and can plead to avoid federal jurisdiction. See, e.g., Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 831 (2002); Caterpillar Inc. v. Williams, 482 U.S. 386, 398-99 (1987); Valles v. Ivy Hill Corp., 410 F.3d 1071, 1075 (9th Cir.2005). Accordingly, subject to a "good faith" requirement in pleading, a plaintiff may sue for less than the amount she may be entitled to if she wishes to avoid federal jurisdiction and remain in state court. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938). Where the plaintiff has alleged her facts and pled her damages, and there is no evidence of bad faith, the defendant must not only contradict the plaintiff's own assessment of damages, but must overcome the presumption against federal jurisdiction. See id . at 290. We think that the familiar "legal certainty" standard best captures the proof the defendant must produce. We are joined in this judgment by the Third Circuit, which recently held in a CAFA case, Morgan v. Fay, that "[g]ood faith in this context is entwined with the legal certainty test, so that a defendant will be able to remove the case to federal court by showing to a legal certainty that the amount in controversy exceeds the statutory minimum." 471 F.3d at 474 (internal quotation marks omitted).

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