If You Don’t Remove Under CAFA, then You Don’t Need to Establish $5 Million as the Amount in Controversy

Murray County, Oklahoma v. Homesales, Inc., 6:11-cv-00084-FHS, 2011 WL 5237307 (E.D. Okla. Oct. 31, 2011).

In this case, a District Court in Oklahoma held that in cases of multiple plaintiffs, each plaintiff must individually satisfy the amount in controversy requirement for diversity jurisdiction under 28 U.S.C. § 1332(a).

Three plaintiffs filed this class action complaint in the state court of Oklahoma against sixteen financial institutions involved in the sale of property, seeking recovery of funds related to documentary stamps which are connected to the sale of property in the three counties.

A defendant, Homesales, Inc., filed a Notice of Removal alleging federal quiestion and diversity. The plaintiffs moved to remand, which the District Court granted.

The defendants alleged diversity jurisdiction was appropriate because the defendants were diverse from the plaintiffs and the requisite amount in controversy had been met. The plaintiffs argued that diversity jurisdiction under 28 U.S.C. § 1332(a) was not appropriate because under CAFA, 28 U.S.C. § 1332(d) defendants must establish that at least $5 million was in controversy.

The Court, however, stated that CAFA was not applicable in this case, and that the defendants did not remove the case under CAFA. Specifically, the defendants removed it under diversity jurisdiction under § 1332(a); thus, the 5 million dollar threshold did not need to be met by defendants.

Next, the Court stated that as there was diversity among the parties, the only question left for determination was whether the requisite amount in controversy had been met. The Tenth Circuit defined “amount in controversy” as “an estimate of the amount that will be put at issue in the course of the litigation.” When the face of the petition does not affirmatively establish that the amount in controversy exceeds $75,000, the removing party undertakes to perform an economic analysis of the alleged damages supported by the underlying facts by a preponderance of the evidence. The Court pointed that in order for jurisdiction to be proper in federal court, the removing party has the burden of showing that the requisite amount in controversy is met as to each plaintiff. Lovell v. State Farm Auto Insurance Co., 466 F.3d 893, 897 (10th Cir.2006) noted that in multiple plaintiff cases, each plaintiff must individually satisfy the amount in controversy requirement.

The Court noted that under § 1332(a), requisite amount in controversy is $75,000.00. The plaintiffs simply alleged in the complaint that it had been damaged by the defendants in excess of $10,000.00. According to the statutory fees, defendant could be liable to plaintiff for at least $1,000.00 for each violation where a documentary stamp tax was not paid. According to the records submitted with the Notice of Removal, the plaintiff alleged at least 60 incidents of possible failure to pay the tax, which amounted to $60,000.00 in damages.

Further, regarding statutory penalties, Oklahoma law provides for at least two. First, under 68 O.S.A. Sec. 217(F), a 50% penalty is imposed on any tax deficiency due to fraud. Because the plaintiff sought more than $10,000.00 in allegedly unpaid taxes, more than $5,000.00 in potential statutory penalties could also be at issue. Second, 68 O.S.A. Sec. 231.1 provides a penalty of up to 10% of the tax, and no more than $200.00 per defendant, on “each tax debtor who neglects, refuses or fails to pay delinquent taxes.” Thus, the statutory penalty was at least another $1,000.00 in penalties at issue. Further, in the Notice of Removal, although the defendants stated that punitive damages would likely exceed $10,000.00 given the amount of actual damages, they failed to provide any economic analysis to justify this amount.

The Court observed that the defendants were required to provide detailed estimates or economic analysis to assist in establishing the potential amount in controversy. The defendants, however, simply failed to do this. Further, the record was completely void of evidence concerning the amount in controversy as to the other plaintiffs.

Accordingly, the Court found that the defendants had not met their burden to establish that the requisite amount in controversy had been met as to any of the three plaintiffs by a preponderance of the evidence. Accordingly, the Court granted the plaintiffs’ motions to remand.