Removal of PAGA Claims Denied Cert Review in Baumann v. Chase, while Dart Cherokee Eases Removal of Class Actions

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On December 15, 2014, the U.S. Supreme Court denied Chase Investment Services Corp.’s petition for certiorari to review a precedent-setting decision in March by the Ninth Circuit in Baumann v. Chase Investment Services Corp., where the court had held the company could not remove the plaintiff’s wage-and-hour claims for PAGA penalties to federal court either under CAFA or traditional diversity jurisdiction. No. 12-55644 (9th Cir. March 13, 2014) (Mr. Baumann is represented by Capstone Law APC). Previously, a Ninth Circuit panel had denied Chase’s request to have the full court rehear the decision in the case. The decision by the Ninth Circuit in March reversed a California district court’s ruling that the aggrieved employees’ claims to civil penalties could be aggregated to satisfy the amount in controversy requirement for diversity jurisdiction.

Meanwhile, on the same day, the U.S. Supreme Court ruled that a class action defendant is not required to provide evidence to support its effort to remove its case. Dart Cherokee Basin Operating Co. LLC v. Owens, Case No. 13-719, 574 U.S. __ (2014) (slip op. available here). The plaintiff, royalty owner Brandon Owens, originally filed suit in Kansas state court. The majority concluded that the Tenth Circuit Court of Appeals had abused its discretion in refusing to review the lower court’s erroneous decision that the defendant, an energy company, had provided insufficient evidence to support its removal bid in a multi-million dollar class action over oil and gas royalties to federal court and further, could not cure the defect by submitting evidence post-removal. A defendant only needs to include a “plausible allegation” that the amount in controversy meets the jurisdictional threshold in a notice of removal, not evidentiary proof. Slip op. at 7.

The Court previously granted the defendant’s petition for writ of certiorari. Dart argued that the Tenth Circuit’s ruling split with other circuit courts which had held that the notice of removal need only satisfy a notice-pleading standard requiring a “short and plain statement of the grounds for removal.” 28 U.S.C. § 1446(a). Justice Ruth Bader Ginsburg wrote for the 5-4 majority, “[the Tenth Circuit’s denial of Dart’s request for review] froze the governing rule in the circuit for this case and future [CAFA] removal notices, with no opportunity for defendants in Dart’s position responsibly to resist making the evidentiary submission” and that the denial created a “bizarre” situation. Slip op. at 12-13. Justices John Roberts, Stephen Breyer, Samuel Alito, and Sonia Sotomayor also joined the majority, holding that a removal notice need only plausibly allege, not detail proof of, the amount in controversy.

Writing for the dissenters, Justice Antonin Scalia, joined by Justices Anthony Kennedy and Elena Kagan, said that the review was “improvidently granted” and the case should not have been taken up at all. Slip op., Scalia dissenting op. at 2. Since the Tenth Circuit gave no reason for its refusal to review the district court ruling, there was no evidence that the appeals court had abused its discretion. “Not long ago we held . . . that an appellate court should not presume that a district court intended an incorrect legal result when the order is equally susceptible of a correct reading . . . .” Slip op., Scalia dissenting op. at 2-3 (citing Sprint/United Management Co. v. Mendelsohn, 52 U.S. 379, 386 (2008)). Justice Clarence Thomas concurred with the dissent as to all but the last sentence—he opined that the high court did not even have jurisdiction to even review the Court of Appeals’ denial of permission to appeal.