In Pretka v. Kolter City Plaza II, Inc., the US Court of Appeals for the Eleventh Circuit clarified that defendants may introduce their own evidence to meet the jurisdictional requirements for removing a case under the Class Action Fairness Act of 2005 (CAFA), such as the often-contested requirement that at least $5 million is at stake. 2010 WL 2278358 (11th Cir. June 8, 2010). Many observers had read a prior Eleventh Circuit decision—Lowery v. Alabama Power Co., 483 F.3d 1184 (11th Cir. 2007)—to prohibit defendants from doing so, creating a split in authority and making many class actions effectively impossible to remove to federal court. In Pretka, the Eleventh Circuit made clear that, perhaps due to its overly broad “dicta,” Lowery had been misunderstood.
Specifically, in Lowery, the Eleventh Circuit had stated that defendants may rely only on “document[s] received by the defendant from the plaintiff” in demonstrating that the jurisdictional amount has been satisfied. The court had also criticized the defendant for relying upon “speculation” about the stakes of the class action. Some district courts—and many practitioners—had interpreted this language in Lowery to prohibit defendants from introducing any evidence to support removal under CAFA—which effectively made non-removable those cases in which the complaint did not allege the amount in controversy.
In Pretka, the Eleventh Circuit took great pains to narrow Lowery. The Pretka court made clear that Lowery does not hold “that the use of deduction, inference, or other extrapolation of the amount in controversy is impermissible.” Rather, the rule is that mere “speculation” about the amount in controversy is impermissible when the record contains absolutely no evidence to indicate that the amount has been met. Moreover, Pretka held that Lowery’s bar on a defendant’s introduction of evidence to support removal applies only to class actions being removed under the second paragraph of 28 U.S.C. § 1446(b)—that is, class actions being removed after an “an amended pleading, motion, order, or other paper” indicates for the first time that jurisdiction exists. By contrast, if the defendant is removing under the first paragraph of § 1446(b)—i.e., at the outset of the action, as is usually the case—the defendant may use any type of evidence to support a removal petition, including its “own affidavits, declarations, or other documentation ….” This result puts the Eleventh Circuit back in line with other federal courts, which generally permit defendants to submit evidence to support removal.
Pretka is of interest to any business that may be the target of putative class action lawsuits and that is amenable to suit in the Eleventh Circuit. In particular, Pretka will dramatically improve the likelihood that a defendant may remove a class action under CAFA by permitting the defendant to introduce evidence that the amount in controversy exceeds $5 million.
For more information about this issues raised in this Legal Update, please contact Archis A. Parasharami at +1 202 263 3328 or Kevin S. Ranlett at +1 202 263 3217.
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