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Candy is Dandy but Liquor is Quicker, and So is Removal under CAFA with a Preponderance Standard

Bell v. Hershey Co., 557 F. 3d 953 (8^th Cir. Feb. 26, 2009).

Earlier this year the 8^th Circuit ruled against Willy Wonka in an antitrust action and ordered the distribution of additional golden tickets in his competitor's candy bars. Just kidding. But, the 8^th Circuit did hold that the burden for removal under CAFA is analyzed under the much easier preponderance standard, as opposed to the much more difficult legal certainty standard.

In this case, the damages sought were narrowly limited to avoid the five million dollar jurisdictional threshold in CAFA. The suit actually sought $4.99 million in damages but did not include a binding stipulation limiting the damages the plaintiffs would seek. 

The Hershey Company attempted to remove to federal court and therefore held the burden of proving the jurisdictional threshold was satisfied. The district court held that, in this CAFA case, the defendant had the burden of proving that the damages would exceed the $5 million threshold to a legal certainty. 

The 8^th Circuit held that this was incorrect. The 8^th Circuit held that a party seeking to remove under CAFA 'must establish the amount in controversy by a preponderance of the evidence regardless of whether the complaint alleges an amount below the jurisdictional minimum.' Id. at 7. 

The 8^th Circuit stated that '[t]here would appear to be no logical reason why we should demand more from a CAFA defendant.' Id. at 6. The court further stated that applying this heightened standard to gaining federal jurisdiction would violate a primary purpose of CAFA, which was to open the federal courts to corporate defendants to protect the economy from the proliferation of merit less class action suits. 

A secondary point of interest was that Bell pleaded with specificity, the precise $4.99 million dollars, despite the fact that Iowa law precluded pleading with specificity. The 8^th Circuit stated that 'where, as here, state law forbids pleading a specific amount in the complaint, any attempt to do so is a legal nullity.' Id. at 8. 

A final point of interest to remember has to do with the district court's statement that the defendants in this case would not have been able to satisfy either standard. The 8^th Circuit admonished the district court, reminding them that 'under the preponderance standard, the jurisdictional fact…is not whether the damages are greater than the requisite amount, but whether a fact finder might legally conclude that they are…' Id. at 10. The 8^th Circuit both denied the defendants request to apply the preponderance standard during their review and also instructed the district court to remember to actually engage in a preponderance analysis before determining that the defendants could not satisfy it.

By:  Robert Savoie

Full post as published by CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005 on July 28, 2009 (boomark / email).