United States Court of Appeals
For the First Circuit
No. 08-2094
FREDERICK AMOCHE; JON VALLIERE; DIANE DAUPHINAIS,
for themselves and on behalf of all others similarly situated,
Plaintiffs, Appellees,
v.
GUARANTEE TRUST LIFE INSURANCE COMPANY,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Joseph A. DiClerico, Jr., U.S. District Judge]
Before
Lynch, Chief Judge,
Selya and Siler,* Circuit Judges.
Francis A. Citera with whom Christopher Cole, Sheehan,
Phinney, Bass & Green, P.A., Kimberly M. DeShano, and Greenberg
Traurig, LLP were on brief for appellant.
Edward K. O'Brien with whom O'Brien Law Firm, P.C., Charles G.
Douglas III, Jason R.L. Major, and Douglas, Leonard & Garvey, P.C.
were on brief for appellees.
February 13, 2009
*
Of the Sixth Circuit, sitting by designation.
LYNCH, Chief Judge. The Class Action Fairness Act of
2005 ("CAFA") provides for removal to federal court of state class
actions that satisfy the statute's minimal diversity and class size
requirements and have more than $5 million in controversy. See 28
U.S.C. §§ 1332(d), 1453. This case requires us to address for the
first time the burden on a removing defendant to establish the
amount in controversy under CAFA.
We hold that at least where the complaint does not
contain specific damage allegations, the removing defendant must
show a reasonable probability that the amount in controversy
exceeds $5 million. This test uses different nomenclature from,
but we believe is substantively the same as, the standards adopted
by several circuits. Here, defendant failed to meet this burden,
in part, because the plaintiffs' class allegations were not yet
fully developed at the time of removal.
We affirm the district court's order remanding the case
to state court without prejudice to the possibility that defendant
may later seek removal to federal court as the state litigation
progresses.
I.
In this case, the underlying dispute involves the
refunding of premiums for credit insurance policies purchased in
conjunction with loans to automobile buyers. Lenders who finance
automobile purchases sometimes require the borrower to have life
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and disability insurance naming the lender as the beneficiary.
This arrangement guarantees that the loan is paid back even if the
borrower is injured or dies. This type of insurance is often sold
as a "single premium" policy, meaning that the entire premium is
paid up-front. If the borrower pays off the loan early, he may be
entitled to a refund of the unearned portion of the premium -- the
part allocated to pay for coverage during the remaining policy
period -- under either the terms of the insurance contract or a
state's consumer protection laws. The complaint in this case
initially involved only automobile purchasers in New Hampshire,
which has such a statute. See N.H. Rev. Stat. Ann. § 361-A:7(IV-
a). Defendant Guarantee Trust Life Insurance Company ("GTL") sold
single premium credit insurance policies to automobile purchasers
in New Hampshire and forty other states through dealerships and
their associated financing companies.
On June 18, 2004, Frederick Amoche and Jon Valliere sued
GTL in New Hampshire state court, alleging that GTL owed them
refunds of the unearned portions of their credit insurance
premiums. They sought to represent a class of New Hampshire
consumers who had obtained credit insurance through GTL in
conjunction with an automobile loan, paid off the loan early, and
had not been refunded the unearned portion of the prepaid premium.
The complaint requested money damages under a theory of breach of
contract and breach of the implied covenant of good faith and fair
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dealing, restitution of unearned premiums, and various forms of
equitable relief, including an injunction requiring GTL to
implement measures to guarantee that it would promptly refund
unearned premiums to those who pay off their loans early.
On October 13, 2004, plaintiffs filed a motion for class
certification as to their breach of contract claim. They defined
the class as:
All persons who were sold GTL single premium
credit life and/or credit disability insurance
products in connection with their credit
purchase of a motor vehicle from a motor
vehicle dealer located within New Hampshire
and who prepaid their insured loan prior to
the maturity date of such credit transaction
but did not receive a refund or credit for the
unearned portion of the premium prior to the
commencement of this lawsuit. Excluded from
the class are those who received payment from
GTL for death or disability claims and those
who are presumptive class members in a lawsuit
wherein the claims against GTL have been
certified by a New Hampshire state court to
proceed on a classwide basis.
This class definition was narrower than the one contained in the
original complaint because it excluded those who already had claims
pending against GTL in parallel class actions.
On December 17, 2004, plaintiffs filed a second amended
complaint that conformed the class allegations to the class
definition in the motion to certify and added Diane Dauphinais as
a named plaintiff. On September 27, 2005, the state court
certified the proposed class of New Hampshire automobile purchasers
as to the plaintiffs' breach of contract claim.
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Plaintiffs filed a motion for partial summary judgment on
May 2, 2005, seeking to establish GTL's liability on their breach
of contract claim. GTL filed a cross-motion for summary judgment
on October 14, 2005. On May 2, 2006, the state court granted the
plaintiffs' motion for partial summary judgment and denied GTL's
cross-motion, holding that GTL's failure to refund unearned
premiums where the borrower had paid off the automobile loan early
violated the express terms of the insurance contract.
Having secured a finding of liability, plaintiffs filed
a motion for leave to file a third amended complaint on July 12,
2007. In their proposed third amended complaint, plaintiffs
expanded the class definition to include consumers from other
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states.1 As to the size of the proposed expanded class, the third
1
Specifically, plaintiffs defined the class as:
[A]ll persons who:
a. Purchased a motor vehicle and
allowed the dealership to obtain the
vehicle financing for them;
b. The dealership charged them for GTL
credit life and/or disability
insurance coverage on the motor
vehicle financing;
c. GTL's certificates of insurance
evidencing the coverage identified
any of the following creditors as
the beneficiary:
i. American Honda Finance
Corporation;
ii. DaimlerChrysler Financial
Services;
iii. Ford Motor Credit
Corporation;
iv. General Motors Acceptance
Corporation;
v. Nissan Motor Acceptance
Corporation;
vi. Toyota Motor Credit
Corporation;
vii. C h a s e M a n h a t t a n
Automotive Finance
Corporation[;]
viii. Citizens Bank; or
ix. Bank of New Hampshire
(n/k/a TD Banknorth).
d. They paid of[f] their credit-insured
loan prior to the coverage
expiration date;
e. GTL's files show it never processed
their unearned premium; and
f. They never received their unearned
premium.
Excluded from the class were:
[T]hose insured (1) who timely and properly
request[ed] exclusion from the class; (2) who
[were] present or former officers and
directors of GTL; (3) whose coverage was
canceled, by either the insured or GTL, prior
to the scheduled expiration date, according to
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amended complaint said:
Counsel has conducted an extensive pre- and
post-filing investigation into GTL's single
premium credit insurance activities across the
country. Plaintiffs' counsel believe, based
upon knowledge obtained in this and similar
cases, that GTL has issued hundreds of
thousands of credit insurance certificates
pertaining to motor vehicle loans since 2000.
Counsel believe, based on information obtained
in this and similar cases, that a substantial
percentage of the credit-insured vehicle loans
were paid off early and no refunds were made.
And elsewhere, the third amended complaint alleged that GTL had
harmed "thousands of class members by failing to refund their
unearned premiums on early loan payoffs."
The third amended complaint also stated that "GTL has
failed to refund over a million dollars in unearned premiums owed
to . . . the class members"; it described the individual class
members' damages as "less than $1,000" and, based upon similar
suits, likely "about $200." Plaintiffs had consistently claimed
that this case involved over a million dollars in unearned premium
refunds. Indeed, even when the suit involved only a class of New
Hampshire automobile purchasers, plaintiffs alleged that "GTL has
GTL's records; (4) whose indebtedness was
discharged in bankruptcy and not reaffirmed;
(5) whose coverage was terminated because the
collateral was repossessed; (6) who signed GTL
insurance contracts containing an arbitration
provision concerning unearned premium claims;
and (7) whom GTL [had] paid a death or
disability claim.
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wrongfully retained well over $1 million in unearned premiums
belonging to these Class members."
The state court held a hearing on the plaintiffs' motion
for leave to amend on October 4, 2007 and granted the motion on
October 15, 2007. The order granting the motion stated that "the
plaintiffs seek to expand the class to include consumers from
sixteen (16) other states that have enacted consumer protection
legislation similar to that of New Hampshire." The order did not
specify which sixteen states plaintiffs were considering, and the
third amended complaint contained no geographic limitations on the
proposed class. GTL received service of the court's order on
October 17, 2007.
On October 23, 2007, plaintiffs filed a motion to amend
the court's October 15, 2007 order, requesting that the court
change the order's statement of the number of states included in
the suit. Plaintiffs said:
[T]he order states that the plaintiffs are
suing on behalf of 16 other states.
Plaintiffs are not locked into that number,
but want the Court to amend its order to
merely say a range, which would be from 10 to
20 other states. This is not a substantive
change, but one that would more accurately
reflect a likely national scenario.
Plaintiffs did not say which ten to twenty states they were
considering.
On November 15, 2007, before the state court had ruled on
the plaintiffs' motion to amend, GTL filed a notice of removal in
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federal district court, claiming federal jurisdiction under CAFA.
GTL argued that it was apparent from the face of the third amended
complaint that more than $5 million was at stake in the case,
pointing to its allegations that GTL had issued "hundreds of
thousands" of policies, that a refund was due for "a substantial
percentage" of those policies, and that the individual refund owed
was "about $200." GTL argued that if the class contained more than
25,000 people -- a fair reading, in its view, of "a substantial
percentage" of "hundreds of thousands" -- the amount in controversy
would exceed $5 million.
Plaintiffs filed a motion to remand on December 5, 2007.
They did not challenge the timeliness of GTL's notice of removal or
argue that the suit failed to satisfy CAFA's minimal diversity and
class size requirements. Instead, they argued that no federal
jurisdiction existed under CAFA because less than $5 million was at
stake. They claimed that the third amended complaint specified an
amount of damages below the jurisdiction minimum because it stated
that "GTL has failed to refund over a million dollars in unearned
premiums."
Plaintiffs also directly addressed GTL's contention that
the third amended complaint described a class containing more than
25,000 members. They argued that even though GTL had issued
hundreds of thousands of credit insurance policies, most states
would not be included within the suit. And plaintiffs noted that
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the proposed class included only people who had obtained loans with
one of nine lenders, further limiting the class size. Because GTL
had not come forward with any evidence of the potential damages in
this case, plaintiffs characterized GTL's argument regarding the
amount in controversy as "pure speculation" that could not support
removal to federal court.
On January 9, 2008, GTL filed a memorandum in opposition
to the motion to remand. In addition to restating its argument
that the third amended complaint on its face established that the
amount in controversy exceeded $5 million, GTL said:
[S]ince the inception of this ligation[,]
. . . $452,472.29 in total unearned premium
refunds have been either made or requested by
or on behalf of motor vehicle purchasers who
were sold GTL single premium credit life
and/or credit disability insurance products in
connection with the purchase of a motor
vehicle from a dealer located in New
Hampshire . . . .
GTL argued that if the totals from other states were similar, the
amount in controversy would easily exceed $5 million in a suit
involving ten to twenty additional states.
GTL attached to its memorandum an affidavit from Reed
Gass, the vice president of GTL's credit insurance division, which
explained how it had arrived at the $452,472.29 figure. Gass noted
that GTL did not keep records of which lender the insured had used,
meaning that he could not "itemize and quantify the specific
number" of people who had obtained coverage from GTL through one of
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the nine lenders named in the third amended complaint.
Nevertheless, Gass believed that the expanded class could include
"numerous persons in all forty-one of GTL's active premium states"
because several of the named lenders had significant nationwide
presences.
Plaintiffs filed a reply to GTL's memorandum in
opposition to the motion to remand on January 25, 2008. They
challenged GTL's calculation of the relevant sum owed to people
from New Hampshire, arguing that the $452,472.29 amount was
inflated by including people who had not used one of the nine
lenders named in the proposed class definition. Plaintiffs
submitted an affidavit from Aaron Goulette, the project manager for
New Hampshire Unearned Premiums Litigation, containing his
calculation of the damages demanded or paid to New Hampshire
consumers who fit the class definition as $221,912.03, an amount
that, if representative of the damages from other states, would
place the amount in controversy below $5 million.
On March 25, 2008, plaintiffs filed a motion for leave to
file a declaration from Kevin O'Brien, their attorney. In that
declaration, O'Brien stated:
Now that GTL has provided its initial
discovery responses, the plaintiffs' repeated
assertions regarding the likely geographic
scope of the class in this case have been
proven true. Plaintiffs have informed GTL, in
writing, that consistent with their
representations all along, they will not seek
certification of more than a 13-state class.
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Specifically: Connecticut, Michigan,
Pennsylvania, Florida, Missouri, Illinois, New
Hampshire, Texas, Indiana, New Jersey,
Virginia, Maine, and Ohio.
GTL opposed the filing of the O'Brien declaration,
arguing that post-removal limitations placed on the complaint could
not defeat federal jurisdiction. But even if the court were to
consider the O'Brien declaration, GTL noted that the size of the
listed states relative to New Hampshire made it likely that the
damages for the expanded class would exceed the jurisdictional
minimum.
On August 14, 2008, the federal district court granted
the plaintiffs' motion to remand. The court found that plaintiffs
had not alleged a specific amount in damages and placed the burden
on GTL to show that the amount in controversy exceeded $5 million
by a preponderance of the evidence. It then addressed GTL's two
theories regarding the amount in controversy: (1) that it is
apparent from the face of the third amended complaint that the
amount in controversy exceeds $5 million; and (2) that the
calculations in the Gass affidavit show that the amount in
controversy exceeds $5 million.
The district court rejected GTL's first argument, saying:
GTL's conclusion that there are over 25,000
claimants is based on conjecture because the
Complaint does not allege what "a substantial
percentage" of "hundreds of thousands" of
credit insurance certificates is except for
stating that the class includes "thousands of
members" and "is composed of persons who
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bought GTL's credit insurance from motor
vehicle dealers throughout New Hampshire and a
number of other states."
Because the class size was not apparent from the face of the
complaint, the court determined that the amount in controversy
could not be ascertained by simple multiplication of the class size
with the expected individual damages of $200.
As to GTL's second argument, the district court found
that plaintiffs had "cast doubt on the $452,472.29 figure" from the
Gass affidavit because that amount included those who had obtained
automobile loans from lenders other than the nine specified in the
class definition. It held:
The plaintiffs' theory that the total amount
of damages is less than five million dollars
is as persuasive as Gass's conclusion that the
damages in this case are in excess of
$5,400,000. Without more specific information
as to the number of claimants nationwide or
the amount paid by GTL in credit insurance
refunds in states other than New Hampshire,
the amount in controversy is uncertain.
Therefore, the court found that GTL had not carried its burden and
remanded the case to state court.
On August 25, 2008, GTL petitioned for leave to appeal
the district court's remand order under 28 U.S.C. § 1453(c). We
granted GTL's petition on December 15, 2008. After expedited
briefing, the appeal was argued on January 6, 2009.
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II.
In enacting CAFA, Congress was responding to what it
perceived as abusive practices by plaintiffs and their attorneys in
litigating major interstate class actions in state courts, which
had "harmed class members with legitimate claims and defendants
that ha[d] acted responsibly," "adversely affected interstate
commerce," and "undermined public respect for our judicial system."
CAFA, Pub. L. No. 109-2, § 2(a), 119 Stat. 4, 4 (2005). Congress
passed CAFA to prevent these harms "by providing for Federal court
consideration of interstate cases of national importance under
diversity jurisdiction." Id. § 2(b), 119 Stat. at 5. Beyond
extending federal subject matter jurisdiction to include most major
interstate class actions, CAFA also made a federal forum more
accessible to removing defendants by imposing only a minimal
diversity requirement, eliminating the statutory one-year time
limit for removal, and providing for interlocutory appeal of a
federal district court's remand order. See 28 U.S.C.
§§ 1332(d)(2), 1453(b), (c).
Because CAFA is both a removal and a jurisdictional
statute, we start with some basic principles from those areas. The
party invoking federal jurisdiction has the burden of establishing
that the court has subject matter jurisdiction over the case. See
In re New Motor Vehicle Canadian Exp. Antitrust Litig., 522 F.3d 6,
14 (1st Cir. 2008). This is true generally for defendants removing
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to federal court. Danca v. Private Health Care Sys., Inc., 185
F.3d 1, 4 (1st Cir. 1999) ("[Removing] defendants have the burden
of showing the federal court's jurisdiction.").
We now hold that burden of showing federal jurisdiction
is on the defendant removing under CAFA. See, e.g., Spivey v.
Vertrue, Inc., 528 F.3d 982, 986 (7th Cir. 2008) ("The removing
party [under CAFA], as the proponent of federal jurisdiction, bears
the burden of describing how the controversy exceeds $5 million.").
This is also the conclusion reached by the seven other circuits
that have considered this issue. See Strawn v. AT&T Mobility LLC,
530 F.3d 293, 298 (4th Cir. 2008) (compiling cases). The parties
agree that GTL, as the removing defendant, bears the burden of
showing that federal jurisdiction exists. Plaintiffs and GTL,
however, define that burden differently and disagree over whether
GTL has carried its burden.
Before resolving these issues, there is the prior
question of the applicable standard of appellate review.
Plaintiffs correctly argue that our review of the district court's
choice of removal standards is a legal issue subject to de novo
review. But they characterize the district court's determination
with respect to the amount in controversy as a factual finding,
saying appellate review is for clear error. GTL, by contrast,
asserts that our entire review of the district court's decision to
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remand is de novo. The answer is that it depends on the nature of
the claimed error.
The existence of federal subject matter jurisdiction is
a question of law subject to de novo review both in suits brought
under CAFA, Lowery v. Ala. Power Co., 483 F.3d 1184, 1193 (11th
Cir. 2007) ("We review de novo the district court's decision to
remand a case to state court for lack of subject matter
jurisdiction [under CAFA]."), and in other cases, Fayard v. Ne.
Vehicle Servs., LLC, 533 F.3d 42, 45 (1st Cir. 2008). The ultimate
question of whether jurisdiction exists is subject to de novo
review. That ultimate question, however, may turn on or be
influenced by the district court's role as the decider of disputed
facts.
There may be removal cases in which the key facts are
disputed and the district court resolves the dispute; in those
situations, appellate review of that portion of the district
court's assessment of subject matter jurisdiction composed of
factual findings would be for clear error, cf. Skwira v. United
States, 344 F.3d 64, 72 (1st Cir. 2003); Valentín v. Hosp. Bella
Vista, 254 F.3d 358, 365 (1st Cir. 2001), while its ultimate
assessment of jurisdiction remains subject to de novo review.
Here, however, the district court made no findings of disputed fact
relating to the amount in controversy, and our review is entirely
de novo.
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A. The Removing Defendant's Burden Regarding the Amount in
Controversy Under CAFA
We agree with those circuits that have used the
terminology of a "reasonable probability" as the standard a
removing defendant must meet under CAFA.2 See Blockbuster, Inc. v.
Galeno, 472 F.3d 53, 58 (2d Cir. 2006) ("[The removing defendant]
must show that it appears to a 'reasonable probability' that the
aggregate claims of the plaintiff class are in excess of
$5 million."); Brill v. Countrywide Home Loans, Inc., 427 F.3d 446,
449 (7th Cir. 2005) ("[T]he removing litigant must show a
2
Plaintiffs argued before the district court that GTL must
prove "to a legal certainty" that the amount in controversy exceeds
the jurisdictional minimum because, in their view, the third
amended complaint stated a specific amount in damages under
$5 million. Some circuits have required removing defendants to
prove to a legal certainty that the plaintiffs' damages exceed
$5 million where the complaint alleges specific damages below
CAFA's jurisdictional minimum. See, e.g., Lowdermilk v. U.S. Bank
Nat'l Ass'n, 479 F.3d 994, 999-1000 (9th Cir. 2007); Morgan v. Gay,
471 F.3d 469, 474 (3d Cir. 2006). On appeal, plaintiffs have
wisely conceded that "the complaint is at least uncertain,
ambiguous and indeterminate as to the amount in controversy."
Therefore, the question of the burden on a removing defendant where
the complaint alleges specific damages below the jurisdictional
minimum is not before us, and we do not decide it. It is far from
evident to us, though, why the defendant should be put to a higher
standard simply because the plaintiffs have pled an amount under
$5 million. While the limitations on damages in the complaint may,
to use Judge Wilkinson's artful phrase "haunt them in state court,"
Bartnikowski v. NVR, Inc., No. 09-1063, 2009 WL 106378, at *10 (4th
Cir. Jan. 16, 2009) (Wilkinson, J., dissenting); see also Morgan,
471 F.3d at 477 ("[P]laintiffs in state court should not be
permitted to ostensibly limit their damages to avoid federal court
only to receive an award in excess of the federal amount in
controversy requirement."), whether it is binding will depend on
the vagaries of state law. That issue has not been briefed to us.
The resolution of this question can await a case where it matters.
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reasonable probability that the stakes exceed the [jurisdictional]
minimum.").
GTL contends that a reasonable probability burden is too
rigorous and that it should only be required to show, as if it were
an initial plaintiff filing, that it is not a legal certainty that
the amount in controversy is less than the jurisdictional minimum.
This lesser burden, GTL argues, mirrors the burden on a plaintiff
who initially files in federal court.3
The removing defendant's effort to liken its situation to
cases in which the plaintiff has chosen to be in federal court and
it is the defendant who seeks to defeat federal jurisdiction does
not work. In CAFA, Congress expressly expanded federal
jurisdiction largely for the benefit of defendants against a
background of what it considered to be abusive class action
practices in state courts. See CAFA § 2, 119 Stat. at 4-5. That
did not mean, however, that Congress intended to place defendants
3
GTL has correctly identified the burden on a plaintiff to
prove the amount in controversy where a suit is initially filed in
federal court. There, "the amount specified by the plaintiff
controls, as long as that amount is asserted in good faith."
Barrett v. Lombardi, 239 F.3d 23, 30 (1st Cir. 2001). "Once the
damages allegation is challenged, however, 'the party seeking to
invoke jurisdiction has the burden of alleging with sufficient
particularity facts indicating that it is not a legal certainty
that the claim involves less than the jurisdictional amount.'"
Spielman v. Genzyme Corp., 251 F.3d 1, 5 (1st Cir. 2001) (quoting
Dep’t of Recreation & Sports v. World Boxing Ass’n, 942 F.2d 84, 88
(1st Cir. 1991)). "A party may meet this burden by amending the
pleadings or by submitting affidavits." Id. (quoting Dep't of
Recreation & Sports, 942 F.2d at 88) (internal quotation marks
omitted).
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in the same position as plaintiffs who originally choose a federal
forum. Congress certainly did not use any statutory language
adopting the analogy, and the policy considerations are very
different in the two situations.
Furthermore, placing a removing defendant in the same
posture as a plaintiff who originally files in federal court would
conflict with the general rule of deference to the plaintiff's
chosen forum. See 14C Wright, Miller & Cooper, Federal Practice
and Procedure § 3725, at 95 (3d ed. 1998) (recognizing that "a
greater burden [is imposed] on defendants in the removal situation
than is imposed on plaintiffs who wish to litigate in federal court
by invoking its original jurisdiction" to demonstrate the amount in
controversy but that "[t]his discrepancy in treatment of plaintiffs
and defendants may be justified by the historical tradition that
the plaintiff is the master of the forum and is empowered to choose
the court system and venue in which litigation will proceed").
We reject GTL's analogy. Instead, GTL, as the proponent
of federal jurisdiction, must sufficiently demonstrate that the
amount in controversy exceeds CAFA's jurisdictional minimum. To do
so, it must show a reasonable probability that more than $5 million
is at stake in this case. See Blockbuster, 472 F.3d at 58; Brill,
427 F.3d at 449; cf. McNutt v. Gen. Motors Acceptance Corp. of
Ind., 298 U.S. 178, 189 (1936) ("[T]he court may demand that the
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party alleging jurisdiction justify his allegations by a
preponderance of evidence.").
Several brief notes on this approach are in order before
we apply this standard to the facts here. First, the reasonable
probability standard is, to our minds, for all practical purposes
identical to the preponderance standard adopted by several
circuits.4 See Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536,
543 (7th Cir. 2006) (equating the proper application of the
reasonable probability test with the preponderance standard).
There was no error in the district court's discussion of GTL's
burden in terms of the preponderance of the evidence. Yet because
questions of removal are typically decided at the pleadings stage
where little or no evidence has yet been produced, the removing
defendant's burden is better framed in terms of a "reasonable
probability," not a preponderance of the evidence. See Brill, 427
F.3d at 449. The "reasonable probability" language better captures
the preliminary nature of this inquiry, reserving the preponderance
of the evidence terminology for other conclusions.
Second, we do not wish to encourage or create a step-by-
step burden shifting system, which would result in extensive and
4
See, e.g., Frederico v. Home Depot, 507 F.3d 188, 193-96
(3d Cir. 2007); Smith v. Nationwide Prop. & Cas. Ins. Co., 505 F.3d
401, 404 (6th Cir. 2007); Lowery, 483 F.3d at 1208-09; Abrego
Abrego v. Dow Chem. Co., 443 F.3d 676, 683 (9th Cir. 2006) (per
curiam); see also Bartnikowski, 2009 WL 106378, at *3 n.7 (applying
a preponderance of the evidence standard without deciding "whether
a more stringent standard would be appropriate").
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time consuming litigation over the question of the amount in
controversy in CAFA removal cases. See Spielman, 251 F.3d at 4
("[D]etermining whether a case belongs in federal court should be
done quickly, without an extensive fact-finding inquiry.");
Coventry Sewage Assocs. v. Dworkin Realty Co., 71 F.3d 1, 4 (1st
Cir. 1995) ("[P]reliminary jurisdictional determinations should
neither unduly delay, nor unfairly deprive a party from,
determination of the controversy on the merits."); see also 14B
Wright, Miller & Cooper, supra, § 3702, at 16-17 ("The federal
courts, as well as the parties, naturally are concerned about the
efficient use of their own limited resources and attempt to avoid
time-consuming threshold issues that do not go to the merits.").
Consideration of this preliminary issue should not devolve into a
mini-trial regarding the amount in controversy.
Third, with that caution in mind, deciding whether a
defendant has shown a reasonable probability that the amount in
controversy exceeds $5 million may well require analysis of what
both parties have shown. Merely labeling the defendant's showing
as "speculative" without discrediting the facts upon which it rests
is insufficient. See Strawn, 530 F.3d at 299 (finding the
defendant's showing sufficient to establish the amount in
controversy under CAFA where the plaintiffs had "offered nothing"
to challenge the accuracy of the defendant's affidavit). In the
course of that evaluation, a federal court may consider which party
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has better access to the relevant information. See Evans v. Walter
Indus., Inc., 449 F.3d 1159, 1164 n.3 (11th Cir. 2006) ("Defendants
have better access to information about conduct by the defendants,
but plaintiffs have better access to information about which
plaintiffs are injured and their relationship to various
defendants.").
Fourth, a court's analysis of the amount in controversy
focuses on whether a removing defendant has shown a reasonable
probability that more than $5 million is in controversy at the time
of removal. Events subsequent to removal that reduce the amount in
controversy below the jurisdictional minimum do not divest a
federal court of jurisdiction. Coventry Sewage Assocs., 71 F.3d at
6.
Finally, the plaintiffs' likelihood of success on the
merits is largely irrelevant to the court's jurisdiction because
the pertinent question is what is in controversy in the case, not
how much the plaintiffs are ultimately likely to recover. See
Brill, 427 F.3d at 448 ("The question is not what damages the
plaintiff will recover, but what amount is 'in controversy' between
the parties. That the plaintiff may fail in its proof, and the
judgment be less than the threshold (indeed, a good chance that the
plaintiff will fail and the judgment will be zero) does not prevent
removal.").
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B. GTL's Ability to Show a Reasonable Probability that the
Amount in Controversy Exceeds $5 Million
GTL attempts to demonstrate that the amount in
controversy exceeds $5 million in two ways. First, it claims that
the amount in controversy can be ascertained from the face of the
third amended complaint. Second, it relies on the calculations
from the Gass affidavit and the plaintiffs' statements regarding
the number of states involved in the expanded class to demonstrate
the amount in controversy. We decline to atomize our analysis; the
entire record, as we have said, must be evaluated.
At the time that GTL removed to federal court, there was
much uncertainty about which states' consumers were involved in
this class action. The third amended complaint described a
geographically unbounded class of automobile purchasers. But
contrary to GTL's characterization of the pleadings, plaintiffs
were never given permission by the state court to expand the suit
to include all forty-one of GTL's active premium states. The state
court granted plaintiffs leave to amend their pleadings to include
only sixteen states, but those states were not identified.
Plaintiffs then asked the state court to modify its order to allow
them to include ten to twenty still unidentified states. GTL
removed to federal court before the state court acted on the
plaintiffs' motion to amend the order.
In federal court, plaintiffs have specified those states
in a manner entirely consistent with their representations to the
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state court. They now say only thirteen states, at most, are
involved, and they have identified those states. In this context,
we may consider the plaintiffs' more specific and consistent
statement of which states' consumers are involved in this suit.
This specification is not an impermissible effort to defeat federal
jurisdiction by narrowing the pleadings post-removal, see St. Paul
Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 292 (1938), but
rather a fleshing out of the vague language of the third amended
complaint, see Abrego Abrego, 443 F.3d at 690-91; 14C Wright,
Miller & Cooper, supra, § 3725, at 118 ("[A]n affidavit filed by a
plaintiff's attorney subsequent to removal . . . can be considered
as a clarification of an ambiguous complaint, rather than a post-
removal amendment of the plaintiff's complaint . . . .").
Although the plaintiffs' still-developing class
allegations made it difficult to ascertain the amount in
controversy, GTL was not entirely hindered by this. It had
available to it some information, at least as to the thirteen
states identified. GTL was in a better position than plaintiffs to
know who had purchased its policies and where they lived. Yet it
provided the district court with virtually no information about the
potential class size. GTL attributes this failure, in part, to its
own record keeping practices. It says that it does not keep
records of which lender an insured uses and is unaware of which
automobile loans are paid off early until it is contacted by the
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lender. And in fairness to GTL, the plaintiffs' specification of
which states were involved came late in the process.5
These explanations only go so far. In assessing whether
GTL has carried its burden of showing a reasonable probability that
the amount in controversy exceeds $5 million, we may consider what
information reasonably within GTL's control it failed to present in
addition to any affirmative evidence of the amount in controversy.
For example, a statistical analysis involving a sampling of GTL's
credit insurance certificates could have given a rough sense for
the class size. And GTL could have come forward with information
regarding its market share and revenues from states other than New
Hampshire that might have provided some insight to the court into
the amount in controversy for a thirteen-state class action.
The only affirmative evidence that GTL presented of the
amount in controversy is the Gass affidavit. The Gass affidavit
states that the refunds requested by New Hampshire plaintiffs alone
total $452,472.29. If the refunds due to plaintiffs in other
states are similar, GTL argues, the amount in controversy will
easily exceed $5 million in a suit involving at least eleven other
5
The plaintiffs' failure to say until after removal which
states were involved in the expanded class complicated GTL's task
of identifying relevant information regarding its business in
states other than New Hampshire. Indeed, plaintiffs disclosed
which thirteen states they were considering for inclusion in the
class only after briefing on the motion to remand was complete.
Yet these factors do not relieve GTL of its obligation to come
forward with evidence of the amount in controversy and instead
favor remand to allow the litigation to develop further.
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states. Moreover, GTL suggests that the amount owed to plaintiffs
in other states may well be higher because its insurance sales in
New Hampshire represent only a small percentage of its business.
But the $452,472.29 figure for New Hampshire from the
Gass affidavit cannot be translated into an estimate of the amount
in controversy by simple multiplication of that sum by thirteen.
That sum is not reliable. The Gass affidavit admits that the
$452,472.29 amount is inflated by including those who do not fit
the class definition, and plaintiffs contend that when only those
who used one of the nine named lenders are counted, the sum from
New Hampshire drops to $221,912.03. Moreover, the state to state
differences in GTL's business practices -- which could make the
amount of unearned premium refunds owed in a given state either
larger or smaller than the total from New Hampshire -- make the
amount in controversy impossible to ascertain from Gass's figures
with any accuracy. Thus, the calculations from the Gass affidavit
do not demonstrate a reasonable probability that the amount in
controversy exceeds $5 million.
At this stage of the litigation and based on all of the
information of record, at best there is a draw. GTL has not
demonstrated a reasonable probability that the amount in
controversy exceeds $5 million. The district court's decision to
remand was proper.
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III.
Our decision to affirm the district court's remand order
does not permanently foreclose GTL from attempting to remove this
case to federal court. Successive attempts at removal are
permissible where the grounds for removal become apparent only
later in the litigation. See, e.g., FDIC v. Santiago Plaza, 598
F.2d 634, 636 (1st Cir. 1979) (per curiam). Indeed, the text of
the removal statute itself contemplates that a case that was not
initially removable may later be removed if the basis for removal
becomes apparent through a subsequent "amended pleading, motion,
order or other paper." 28 U.S.C. § 1446(b).
GTL's removal of this case at the earliest possible date
was understandable, given the removal statute's requirement that a
defendant file a notice of removal within thirty days of his
receipt of the first removable document. Id. Here, however, the
litigation had not developed to a stage where GTL has shown that
the requirements for federal jurisdiction were met under CAFA.
Indeed, at the time of removal, plaintiffs had not yet said which
states would be included within the class. It is not unfair that
GTL wait until the class allegations are more fully developed
before attempting to remove, if there is a later basis for removal,
especially now that class actions under CAFA are exempt from the
removal statute's one-year time limit. Id. § 1453(b).
The order of remand is affirmed.
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