A real class act: the Class Action Fairness Act of 2005's amount in controversy requirement, removal, and the preponderance of the evidence standard.

• Author: Quinn, F. Elliotte, IV

Decisions concerning the limits of federal court jurisdiction always involve competing claims of interest between the federal government and state governments, and when such decisions concern diversity jurisdiction they also involve competing claims of interest between plaintiffs and defendants. (1) These tensions were present at the founding of our republic and have persisted to the present. (2) As a result of these ever present tensions, a fissure recently developed under the Class Action Fairness Act of 2005 (CAFA). (3) CAFA, passed by Congress and signed into law by President George W. Bush, extends the diversity jurisdiction of the lower federal courts to cover state law class actions meeting certain jurisdictional " requirements. (4) One of the jurisdictional requirements is that the class action must involve an amount in controversy in excess of five million dollars. (5) A defendant may remove a class action from state court to federal court if the class action meets CAFA's jurisdictional requirements. (6) When a defendant removes a class action under CAFA, the defendant must show that the amount in controversy requirement is satisfied. CAFA provides no explicit guidance on how or to what standard the defendant must make this showing. Lacking a statutory standard the courts have been forced to determine the appropriate standard. Circuit courts have split as to the appropriate standard. (7)

The choice of a standard affects many interests, including the defendant's interest in removal, the balance of power between state and federal courts, the interests of the states in having cases brought under their laws heard in their courts, and Congress's interests in passing CAFA. Of greatest practical concern, a high standard creates extreme difficulties for defendants seeking to remove and makes it nearly impossible for them to do so. With an impact on so many interests, and a large impact on many of these interests, it is of great importance that courts adopt the appropriate standard.

This Article argues that while the majority of circuit courts have adopted the appropriate preponderance of the evidence standard, other circuits have adopted the wrong standard, a legal certainty standard. Part 1 reviews the diversity jurisdiction of the federal courts. Part II situates CAFA in the diversity jurisdiction of the federal courts and provides an in-depth explanation of the statute. Part III presents the problem over which the circuits have split. Part IV details why one route for resolving the circuit split is the proper route and why courts adopting the alternative route are mistaken.

1. The Constitutional Grant of Diversity Jurisdiction and Statutory Diversity Jurisdiction

   Article III of the U.S. Constitution limits the lower federal courts to nine heads of jurisdiction. (8) One of the nine heads of lower federal court jurisdiction is diversity jurisdiction. (9) Diversity jurisdiction consists of "Controversies ... between Citizens of different States." (10) Congress may permit lower federal courts to exercise diversity jurisdiction. (11) However, Congress has never permitted the lower federal courts to exercise diversity jurisdiction to the lull extent the Constitution permit. (12) Congress created the lower federal courts and delineated their jurisdiction for the first time in the Judiciary Act of 1789. (13) From that first act on, Congress has consistently used an amount in controversy requirement to limit the diversity jurisdiction of the lower federal courts. (14) The Judiciary Act of 1789 provided that the diversity jurisdiction of the lower federal courts only extended to cases in which the amount in controversy exceeded five hundred dollars. (15) In addition, Congress has consistently required complete diversity (16) for a federal court to have diversity jurisdiction. (17) Congress has weighed the state versus federal jurisdictional interests and determined that a complete diversity requirement and an amount in controversy requirement best establish a line separating cases with a more significant state interest from those with a more significant federal interest.

   Today, diversity jurisdiction exists in the forms of 28 U.S.C. [section] 1332(a) ("general diversity jurisdiction"), interpleader, multiparty, multiforum jurisdiction, and CAFA. (18) General diversity jurisdiction permits federal courts to hear any state law claim involving completely diverse parties (19) and an amount in controversy in excess of seventy-five thousand dollars. (20)

   Diversity jurisdiction suits can be heard in either federal or state courts. Because the suits can be heard in either court system, diversity jurisdiction often involves a tension between the forum in which the plaintiff wants to have the case heard as opposed to the defendant's thrum desires. While Congress could simply defer to the plaintiff's choice of forum, Congress has provided that ill most cases where both a state and federal court have jurisdiction, the defendant may remove the case to federal court if he or she so desires. (21) Removal permits a defendant to take a case initially filed in state court and move the case to federal court, so long as the federal court has jurisdiction over the case. (22) While the plaintiff may make the initial choice of forum, the defendant has the power, through removal, to veto a plaintiff's choice of a state court forum.

   Since the creation of the lower federal courts, Congress has consistently permitted defendants to remove diversity jurisdiction cases. (23) The right to removal serves to provide the defendant with the same opportunity as a plaintiff to have a case heard in federal court. (24) For diversity jurisdiction specifically, "the original right to remove probably was designed to protect nonresidents from the local prejudices of state courts." (25) At present, any case meeting the requirements for federal diversity jurisdiction may be removed to federal court. (26)

2. The Class Action Fairness Act of 2005

   In 2005, Congress expanded the diversity jurisdiction of the lower federal courts by passing CAFA. (27) CAFA jurisdiction differs from general diversity jurisdiction in the amount in controversy requirement, a minimal rather than complete diversity requirement, and by permitting the aggregation of individuals' claims in calculating the amount in controversy. (28) CAFA provides that federal district courts have jurisdiction to hear any state law class action so long as the amount in controversy exceeds five million dollars and at least one member of the plaintiff class is diverse from one defendant. (29) In addition, CAFA provides that class actions satisfying the above jurisdictional requirements may be removed from state court to federal court. (30) While CAFA appears on its face to be merely a procedural change, it reflects substantive concerns. (31) Congress passed CAFA in order to enable more class actions to be heard in federal court due to the substantive differences Congress perceived between state and federal court handling of class actions. Congress expressed three stated purposes in passing CAFA, (32) and Congress's intent can be discerned from the nature of the statute.

   CAFA's "purposes" section listed three purposes of the Act: "(1) assure fair and prompt recoveries for class members with legitimate claims: (2) restore the intent of the framers of the United States Constitution by providing for Federal court consideration of interstate cases of national importance under diversity jurisdiction; and (3) benefit society by encouraging innovation and lowering consumer prices." (33) Some commentators have argued that Congress's stated purposes are just "window dressing" (34) and the real purpose behind the bill was to protect class action defendants. (35) Statements of industry groups and insiders support this reading of Congress's intent. (36) However, while citizens may wish that Congress acted for loftier reasons than simple favoritism, Congress may be motivated by such simple interests. (37)

   The Senate Report for CAFA describes in great detail the "abuses of the class action rules" in state courts. (38) These abuses are: "lawyers receive disproportionate shares of settlements," "judicial blackmail forces settlement of frivolous cases," the "'current class action rules can ignore due process rights," "some magnet courts easily certify national class actions," and "copy cat class actions clog the courts and permit forum shopping." (39) To remedy these wrongs, Congress passed an act permitting class actions involving minimally diverse parties with more than five million dollars in controversy to be heard in federal court. (40)

   CAFA expands federal jurisdiction by including a new set of cases, class actions involving minimally diverse parties with at least five million dollars in controversy, within federal jurisdiction. (41) The expansion of federal jurisdiction to include a new set of cases is the simplest and clearest evidence possible of a congressional intent that such cases be heard in federal court. In passing CAFA, Congress made a determination, as shown by the effect of the statute, that state law class actions involving minimally diverse parties and more than five million dollars in controversy involved such great federal jurisdictional interests outweighing the state jurisdictional interests.

   While Congress's intent in passing CAFA was to have more national class actions heard in federal court, judicial decisions concerning CAFA's amount in controversy requirement have tended to narrow the jurisdiction CAFA confers. The first jurisdictional battle fought under CAFA concerned whether, when a defendant removes a class action from state to federal court under CAFA, the defendant has the burden of proving that the amount in controversy is satisfied or the amount in controversy is presumed satisfied and the plaintiff has the burden of proving that it is not satisfied in order to have the...