FILED
FOR PUBLICATION NOV 18 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
DELORES LEWIS, individually and on No. 10-56512
behalf of a class of similarly situated
individuals, D.C. No. 2:10-cv-02337-PSG-
MAN
Plaintiff - Appellee,
v. OPINION
VERIZON COMMUNICATIONS, INC., a
Delaware corporation,
Defendant - Appellant.
Appeal from the United States District Court
for the Central District of California
Philip S. Gutierrez, District Judge, Presiding
Argued and Submitted November 3, 2010
Pasadena, California
Before: SCHROEDER, TALLMAN and M. SMITH, Circuit Judges.
Opinion by Judge SCHROEDER:
This is an appeal under the Class Action Fairness Act (“CAFA”), Pub. L.
No. 109-2, 119 Stat. 4 (2005) (codified in scattered sections of 28 U.S.C.). The
Act authorizes the removal of class action lawsuits from state to federal court
where the amount in controversy exceeds $5 million, exclusive of interest and
costs. 28 U.S.C. § 1332(d)(2). The issue before us is whether the district court
properly remanded the case to state court on the ground that this requirement was
not satisfied.
CAFA mandates a prompt disposition of controversies that arise over issues
relating to jurisdiction under the Act. All of the deadlines have been satisfied by
the parties, thus an appeal must be decided within 60 days after it is filed. 28
U.S.C. § 1453(c)(2). Hence, we are required to decide this appeal no later than
November 22, 2010, 60 days after the petition for appeal was granted. See
Amalgamated Transit Union v. Laidlaw Transit Services, Inc., 435 F.3d 1140,
1144 (9th Cir. 2006) (“[T]here is no appeal until the petition for permission is
granted, and the entry of the order granting permission serves as the notice of
appeal for all timing issues.”).
In this circuit, when the complaint does not contain any specific amount of
damages sought, the party seeking removal under diversity bears the burden of
showing, by a preponderance of the evidence, that the amount in controversy
exceeds the statutory amount. Guglielmino v. McKee Foods Corp., 506 F.3d 696,
699 (9th Cir. 2007); see also Lowdermilk v. U.S. Bank Nat’l Ass’n., 479 F.3d 994
(9th Cir. 2007) (removing defendant has the burden to show amount in controversy
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“to a legal certainty” when complaint pleads damages less than CAFA’s
jurisdictional amount). To satisfy its burden in this case, the removing defendant,
Verizon Communications, Inc. (“Verizon”), supplied an affidavit to show that the
potential damages could exceed the jurisdictional amount. We conclude that this
showing satisfies Verizon’s burden. We therefore vacate the district court’s order
remanding the case to state court, and remand to the district court for further
proceedings. In doing so, we reach a conclusion similar to that reached by the
Seventh Circuit in Spivey v. Vertrue, Inc., 528 F.3d 982 (7th Cir. 2008). That case,
like this one, involved claims for unauthorized billings, and the defendant in that
case, like Verizon, submitted an affidavit showing its total billings exceeded the
jurisdictional amount. Id. at 985.
BACKGROUND
The named plaintiff, Delores Lewis, filed this case in California state court
on December 9, 2009. The complaint concerns charges billed by the defendant,
Verizon, on behalf of Enhanced Services Billing, Inc. (“ESBI”), a billing
processor, or “aggregator,” for third-party vendors who offer telephone-related
services. This includes weather and traffic reports, sports scores, stock tips, and
jokes—all of which are known as “premium content.” ESBI bills customers for
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this premium content through local landline telephone providers, like Verizon,
which places a charge on a subscriber’s bill.
Lewis claims Verizon billed her for services that she never ordered.
Describing these charges as “unauthorized,” she seeks to represent a class of
landline Verizon customers in California who have been billed for such services
that they never expressly agreed to or requested. The operative complaint states no
fixed amount for damages sought.
On March 30, 2010, Verizon filed a notice of removal in the District Court
for the Central District of California alleging that the case satisfied the $5 million
amount in controversy requirement under CAFA, 28 U.S.C. § 1332(d). That
section provides in relevant part “[t]he district courts shall have original
jurisdiction of any civil action in which the matter in controversy exceeds the sum
or value of $5,000,000, exclusive of interest and cost . . . .” Id. at § 1332(d)(2).
In support of their notice of removal, Verizon submitted a declaration of
Paul E. Glover, Verizon’s Senior Consultant for Product Management and
Development, to establish that members of the class were billed more than $5
million during the relevant period:
I have reviewed Verizon’s records for charges billed by Verizon on
behalf of ESBI to landline telephone subscribers in California from
March 1, 2006 to the present. The records show that these subscribers
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were billed more than $5 million, exclusive of fees and interest, from
March 1, 2006 until the present for ESBI charges . . . .
On April 29, 2010, Plaintiff filed a motion to remand the action to state court
on the ground that Verizon failed to carry its burden of demonstrating that the case
satisfies CAFA’s amount in controversy requirement. Plaintiff’s motion to remand
proffered no evidence or new allegation that the amount the class might be entitled
to receive was less than Verizon’s total ESBI billings. Nor did Plaintiff concede
that the class sought a recovery of less than $5 million. Instead, Plaintiff
contended that, because the complaint challenged only “unauthorized” charges,
there was a distinction between “unauthorized” and “authorized” charges for the
purposes of determining the amount in controversy. Relying on such a distinction,
Plaintiff attacked the Glover Declaration as “incompetent,” since it only spoke to
the amount of Verizon’s gross billings to consumers for ESBI content. On June
30, 2010, the district court granted Plaintiff’s motion to remand, and on September
24, 2010, we granted Verizon’s petition for permission to appeal the remand
pursuant to 28 U.S.C. § 1453(c), authorizing interlocutory review of a CAFA
removal order.
In ordering the matter remanded to the state court, the district court adopted
Plaintiff’s distinction between “authorized” and “unauthorized” charges to hold
that the complaint placed only the unauthorized charges into controversy. Lewis v.
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Verizon Commc’ns, Inc., 2010 WL 2650363, at *3 (C.D. Cal. June 30, 2010).
Thus, according to the district court, the Glover Declaration did not satisfy the
Defendant’s burden to demonstrate the requisite amount in controversy, since it
describes the total sum of all ESBI charges billed by Verizon, not just the
“unauthorized” ones. Id. at *3. There was, however, no evidence to support the
premise that some portion of the charges alleged in the complaint were
“authorized.” Nor did any pleading suggest the class recovery would be less than
$5 million.
Verizon contends on appeal that, given the Plaintiff’s refusal to limit the
damages sought and Verizon’s showing that the total billings exceed $5 million,
the total billings constitute the “amount in controversy.” We agree.
DISCUSSION
Prior to CAFA, a class action could be heard in federal court under diversity
jurisdiction only if there was complete diversity, i.e., all class representatives were
diverse from all defendants, and if at least one named plaintiff satisfied the amount
in controversy requirement of more than $75,000. Exxon Mobil Corp. v.
Allapattah Servs., Inc., 545 U.S. 546 (2005). Viewing these two limitations as
“defects in diversity jurisdiction,” Congress, in 2005, passed CAFA, which
significantly expanded federal jurisdiction in diversity class actions. See David
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Marcus, Erie, the Class Action Fairness Act, and Some Federalism Implications of
Diversity Jurisdiction, 48 W M. & M ARY L. R EV. 1247, 1289–90 (2007).
CAFA, however, aimed to limit federal jurisdiction to larger class actions.
CAFA originally included a $2 million amount in controversy requirement, but it
was increased to $5 million after the Congressional Budget Office reported that
“the bill would impose additional costs on the Federal district court system” since
most class-action lawsuits would likely satisfy the $2 million requirement. See
Letter from Dan L. Crippen, Dir., Cong. Budget Office, to F. James Sensenbrenner,
Jr., Chairman, Comm. on the Judiciary, U.S. House of Representatives (Mar. 11,
2002), in H.R. Rep. No. 107-370, at 27.
CAFA was also designed to settle jurisdictional issues early. Thus, appeals
must be filed “not less than 7 days” after a remand order. 28 U.S.C. § 1453(c)(1).
If the court of appeals accepts the appeal, the court must issue a final judgment not
more than 60 days later. Id. at § 1453(c)(2). And if the court of appeals does not
issue judgment within the time allowed, “the appeal shall be denied.” Id. at §
1453(c)(4).
Although CAFA is relatively new, the concept of an “amount in
controversy” has a long history. Congress originally created a jurisdictional
amount for diversity jurisdiction in the Judiciary Act of 1789. That statute
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established a $500 jurisdictional amount, intended as a floor for the size of cases
that could reach the federal courts. “Congress has used the requirement of an
amount in controversy to limit the original and derivative access to the lower
federal courts.” Thomas E. Baker, The History and Tradition of the Amount in
Controversy Requirement: A Proposal to “Up the Ante” in Diversity Jurisdiction,
102 F.R.D. 299, 302–03 (1984). Over the years, Congress has seen fit to increase
the amount, but its purpose has remained the same — “to ensure that a dispute is
sufficiently important to warrant federal-court attention.” Exxon Mobil Corp., 545
U.S. at 548. The law with respect to establishing an “amount in controversy” has
thus developed in the context of diversity jurisdiction.
In determining the amount, we first look to the complaint. Generally, “the
sum claimed by the plaintiff controls if the claim is apparently made in good faith.”
St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938). The
complaint, however, does not always state a specific sum, and in such cases, this
court has recognized different burdens of proof depending on the specific
circumstances. Guglielmino, 506 F.3d at 699. The fundamental principle laid
down in diversity cases, nevertheless, remains under CAFA: the party asserting
federal jurisdiction has the burden of showing the case meets the statutory
requirements for the exercise of federal jurisdiction and therefore belongs in
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federal court. This traditional rule of burden allocation to determine removal
jurisdiction comports with the Supreme Court’s view that “[t]he dominant note in
the successive enactments of Congress relating to diversity jurisdiction is one of
jealous restriction, of avoiding offense to state sensitiveness, and of relieving the
federal courts of the overwhelming burden of ‘business that intrinsically belongs to
the state courts’ in order to keep them free for their distinctive federal business.”
Indianapolis v. Chase Nat’l Bank, 314 U.S. 63, 76, 62 S.Ct. 15, 86 L.Ed. 47 (1941)
(citing Henry J. Friendly, The Historic Basis of Diversity Jurisdiction, 41
H ARV.L.R EV. 483, 510 (1928)).
Thus we expressly recognized in Abrego Abrego v. Dow Chemical Co., 443
F.3d 676, 685 (9th Cir. 2006), that under CAFA the burden of establishing removal
jurisdiction is, as it was before CAFA, on the party wishing to see the case in
federal court. While CAFA relaxed the federal removal requirements in some
respects, it did not alter the traditional rule which places the burden of establishing
removal jurisdiction “on the proponent of federal jurisdiction.” Id. This means
that jurisdictional issues may be disputed, and, when they are, the burden is on the
party removing the case from state court to show the exercise of federal
jurisdiction is appropriate.
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In this case the Plaintiff alleges that she and the other putative class
members are being billed by Verizon for premium services they never ordered. In
the complaint the charges at issue are termed “unauthorized” charges. To support
removal, Verizon submitted an affidavit that it’s total billings for all ESBI services
in California exceeded $5 million. There was no contrary evidence, no showing
that some substantial part of the total billings was “authorized,” and no allegation
that Plaintiff sought less than $5 million.
In what may well be at root a semantic misunderstanding, the district court
refused to accept the total billings as representing the amount in controversy.
Instead, looking to the allegations of the complaint, it held that the total billings
could not represent the amount in controversy because the complaint was claiming
liability only for charges that were “unauthorized.” Lewis, 2010 WL 2650363 at
*2. The district court thus assumed total billings would include both authorized
and unauthorized charges and held that the Defendant had failed to meet its burden
under our case law to show the amount in controversy, i.e., unauthorized charges,
exceeded the jurisdictional amount. Id. at *4.
There is no evidence or allegation to support this assumption, however. The
Plaintiff has alleged that the putative class has been billed for unauthorized
charges; the Defendant has put in evidence of the total billings and the Plaintiff has
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not attempted to demonstrate, or even argue, that the claimed damages are less than
the total billed. Indeed, even though it was not apparent in the district court, before
us the Defendant has conceded that where proposed class members have been
billed for services they did not order, they are entitled to a refund. Hence, on this
record, the entire amount of the billings is “in controversy.” The amount in
controversy is simply an estimate of the total amount in dispute, not a prospective
assessment of defendant’s liability. See McPhail v. Deere & Co., 529 F.3d 947,
956 (10th Cir. 2008) (“The amount in controversy is not proof of the amount the
plaintiff will recover. Rather, it is an estimate of the amount that will be put at
issue in the course of the litigation.”). To establish the jurisdictional amount,
Verizon need not concede liability for the entire amount, which is what the district
court was in essence demanding by effectively asking Verizon to admit that at least
$5 million of the billings were “unauthorized” within the meaning of the
complaint.
The district court rejected the reasoning of the two circuits that have, in
circumstances similar to this, held a showing on the part of the defendant of the
total amounts billed for services challenged by the complaint is sufficient to
establish the jurisdictional amount. Spivey, 528 F.3d at 985–986; Stawn v. AT&T
Mobility LLC, 530 F.3d 293, 295 (4th Cir. 2008). The district court followed other
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district courts in this circuit that incorrectly read the other circuits’ decisions as
resting on pleadings rather than on an evidentiary showing. See, e.g., Amezcua v.
Cellco P’ship, 2009 WL 1190553 (N.D. Cal. May 4, 2009).
The law in our circuit is articulated a little differently from that of others, in
that we expressly contemplate the district court’s consideration of some evidentiary
record. See generally Diane B. Bratvold & Daniel J. Supalla, Standard of Proof to
Establish Amount in Controversy When Defending Removal Under the Class
Action Fairness Act, 36 W M. M ITCHELL L. R EV. 1397 (2010). We employ a
preponderance of the evidence standard when the complaint does not allege a
specific amount in controversy. Guglielmino, 506 F.3d at 699. The Seventh
Circuit, along with the First and Second Circuits, apply what may be a lower
standard of proof: a “reasonable probability” standard. See, e.g., Brill v.
Countrywide Home Loans, Inc., 427 F.3d 446, 449 (7th Cir. 2005) (when the
complaint is “silent or ambiguous on one or more of the ingredients needed to
calculate the amount in controversy . . . the removing litigant must show a
reasonable probability that the stakes exceed the minimum.”); see also Amoche v.
Guarantee Trust Life Ins. Co., 556 F.3d 41, 48 (1st Cir. 2009); DiTolla v. Doral
Dental IPA of New York, 469 F.3d 271, 277 (2nd Cir. 2006). The Fourth Circuit
has not adopted a specific standard of proof, although “several district courts
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within the Fourth Circuit have concluded that the appropriate standard of proof is
preponderance of the evidence.” Laws v. Priority Trustee Services of N.C., L.L.C.,
2008 WL 3539512 at * 2 (W.D.N.C. Aug. 11, 2008). Both the Seventh Circuit in
Spivey and the Fourth Circuit in Strawn have looked to evidence outside the
complaint when the complaint is silent as to the amount. Regardless of the label
applied to the standard of proof, the result in this case should be the same as that in
the Seventh and Fourth Circuits’ decisions in Spivey and Strawn.
Spivey is the closest to our case. In Spivey, the plaintiff filed suit in state
court seeking to represent a class of customers allegedly billed by a marketing
company for unauthorized charges. 528 F.3d at 983. The complaint alleged that
imposing unauthorized charges on customers was a standard practice of the
defendant. Id. at 985–86. As in this case, the defendant removed the action to
federal court under CAFA, and also supplied an affidavit to show that its total
charges exceeded $5 million, but the district court found the evidentiary showing
insufficient, remanding the case to state court. Id. The Seventh Circuit reversed,
holding that the defendant had satisfied its burden. It concluded that if the
defendant routinely imposed such charges without authorization, all such charges
are in play. “Once the proponent of federal jurisdiction has explained plausibly
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how the stakes exceed $5 million, . . . then the case belongs in federal court unless
it is legally impossible for the plaintiff to recover that much.” Id. at 986.
The Fourth Circuit decision is similar. In Strawn, the plaintiff filed suit in
state court seeking to represent a class of customers who were automatically
enrolled in a “Roadside Assistance” program when signing up for cellular phone
service. 530 F.3d at 294. The district court limited the class to customers who
paid the fee “unwillingly.” Id. The Fourth Circuit vacated the remand order
because the complaint did not distinguish between “willing” and “unwilling”
customers, and thus included any phone customer who was charged the fee after
being automatically enrolled in the program. Id. at 299. It relied on AT&T’s
affidavit stating the approximate number of customers in West Virginia enrolled in
the program, coupled with the existence of minimum statutory damages, to hold
that AT&T satisfied the jurisdictional burden. Id. at 298–299 (“[T]he minimum
amount of class damages, if the plaintiffs were to succeed on the merits, would be
$11,760,000 (the minimum statutory damages of $200 per customer x 58,800
customers)”).
Here, as in Spivey and Strawn, the stakes exceed $5 million. The Plaintiff is
seeking recovery from a pot that Defendant has shown could exceed $5 million and
the Plaintiff has neither acknowledged nor sought to establish that the class
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recovery is potentially any less. The amount in controversy on this record
therefore comprises the total billings and the jurisdictional amount is satisfied.
Verizon has acknowledged at oral argument that Plaintiff is due refunds of billings
for services never requested. The district court, on the basis of a record that lacked
the clarity provided by the arguments on appeal, erred in assuming, without
pleading or proof, that some significant portion of the total billings were
“authorized” and separate from the damages the Plaintiff seeks. Verizon has borne
its burden to show the amount in controversy exceeds $5 million.
The remand order is VACATED and the case is REMANDED for further
proceedings in district court.
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COUNSEL
Michael J. McMorrow, Chicago, Illinois, for plaintiff-appellee Delores Lewis, et
al.
Paul J. Watford, Los Angeles, California, for defendant-appellant Verizon
Communications, Inc.
16