In a January 8, 2015 decision, Ibarra v. Manheim Investments, Inc., the US Court of Appeals for the Ninth Circuit held that when challenged, both sides must have the opportunity to present evidence to establish the amount-in-controversy requirement for jurisdiction under the Class Action Fairness Act of 2005 (CAFA) and that the court decides the issue by a preponderance of the evidence standard (No. 14-56779, (9th Cir. Jan. 8, 2015)).

The plaintiff, Ibarra, filed a putative class action in California state court against his former employer, Manheim, alleging violations of the California Labor Code. In his complaint, Ibarra explicitly alleged that the aggregate damages did not exceed $5 million, the amount which triggers federal jurisdiction under CAFA. Manheim removed the case to federal court under CAFA, arguing that its own calculations showed that the claims exceeded $5 million. Ibarra moved to remand to state court. The district court held that under Rodriguez v. AT&T Mobility Services, LLC, the defendant seeking removal bears the burden of proof to establish the amount in controversy by a preponderance of the evidence (728 F.3d 975, 977 (9th Cir. 2013)). The district court granted the motion to remand, finding that Manheim's proof of the amount in controversy was inadequate. Manheim appealed.

The circuit court affirmed that the defendant seeking removal bears the burden of proving the amount in controversy by a preponderance of the evidence, but remanded the case to the district court for further consideration. The circuit court held that, when challenged, both sides must have the opportunity to submit proof related to the disputed amount in controversy. The court stated that the parties may submit "summary-judgment" type evidence, including affidavits or declarations. The evidence may be direct or circumstantial and any assumptions must be supported by reasonable grounds, and not "pulled from thin air." Notably, the court expressly declined to decide the procedure for the submission of proof and did not determine whether a plaintiff may offer no evidence and simply argue that the defendant has failed to meet its burden of proof.

Practitioners in the Ninth Circuit are reminded that when parties disagree as to the amount in controversy for CAFA jurisdiction, both sides must have a fair opportunity to submit evidence and the correct standard of proof is whether there is a preponderance of the evidence that the threshold is (or is not) met.