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Third Circuit Clarifies CAFA Jurisdiction Standards of Review
Practical Law Legal Update 8-592-7185 (Approx. 3 pages)
Third Circuit Clarifies CAFA Jurisdiction Standards of Review
by Practical Law Litigation
| Published on 16 Dec 2014 • USA (National/Federal) |
In Judon v. Travelers Property Casualty Company of America, the US Court of Appeals for the Third Circuit outlined the standards of review that district courts should use when evaluating challenges to federal jurisdiction in matters brought under the Class Action Fairness Act of 2005 (CAFA).
In a December 12, 2014 decision, Judon v. Travelers Property Casualty Company of America, the US Court of Appeals for the Third Circuit clarified the standards of review applicable to jurisdictional challenges brought under CAFA (Nos. 14-3406 and 14-4099 (3d. Cir. Dec. 12, 2014)).
The plaintiff, Judon, was a passenger injured in an automobile accident. She sought damages of $7,636.40 from the defendant, Travelers, the vehicle's insurer. Travelers paid Judon $5,000, the first-party medical benefits limit in its policy, and declined to pay the additional $2,626.40. Judon filed a class action complaint in Pennsylvania state court, alleging that Pennsylvania state law required Travelers to offer up to $25,000 in first-party medical benefits. In her complaint, Judon asserted that there were "hundreds" of members of this class who were wrongfully and illegally denied payment by Travelers, and sought treble damages.
Travelers removed the case to federal court, arguing that the proposed class met the three jurisdictional requirements for CAFA jurisdiction because:
- The parties were minimally diverse.
- The complaint's reference to hundreds of class members meant that the class contained at least 200 members, greater than the 100 required by 28 U.S.C. § 1332(d)(5).
- The amount in controversy exceeded the $5 million minimum set by 28 U.S.C. § 1332(d)(2) because the potential value of each class member's claim, $20,000 (the $25,000 that Judon alleged Travelers was required to pay less the $5,000 that Travelers actually paid), multiplied by the minimum number of class members (200), and then trebled for damages, exceeded $5 million.
Arguing that Travelers bore the burden of showing that the numerosity and amount in controversy requirements under CAFA existed, Judon moved to remand. She did not amend her complaint or retract any of the complaint's assertions in the motion. The district court remanded because it found that Travelers failed to show by a preponderance of the evidence that removal jurisdiction under CAFA existed. Travelers appealed.
In considering the appeal, the Third Circuit clarified the burdens of proof necessary to establish jurisdiction under CAFA:
- Where a challenge to the amount in controversy has been raised in the pleadings or the notice of removal, the party alleging jurisdiction must justify its allegations by a preponderance of the evidence.
- Where the jurisdictional facts are not contested and the amount in controversy is determined in whole or part by applicable law, it must be clear to a legal certainty that the plaintiff cannot recover the amount claimed.
In analyzing the facts of the case with under these standards, the court concluded that:
- The numerosity requirement was satisfied. Because Judon never claimed the proposed class involved fewer than 100 members, Travelers was entitled to rely on this number. The burden should have been placed on Judon to prove with legal certainty that there could not be more than 100 class members.
- The amount in controversy requirement was not satisfied. Judon challenged Traveler's assertion in her motion to remand. Travelers bore the burden of proving with a preponderance of the evidence that jurisdiction existed and failed to do so.
The Third Circuit sent the matter back to the district court with instructions to remand to Pennsylvania state court unless the district court thought that further jurisdictional procedures were necessary.