When the complaint does not specify the amount of damages and a plaintiff challenges removal to federal court by disputing the defendant’s jurisdictional allegations, both sides may submit evidence, and the removing defendant must establish by a preponderance of the evidence that the amount in controversy requirement is met. E.g., Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 88 (2014). The removing defendant need not show that the plaintiff is likely to obtain a judgment in excess of $5 million, as “[s]uch a requirement would require a court to improperly look beyond jurisdictional matters and consider the merits of the claims.” Frederick v. Hartford Underwriters Ins. Co., 683 F.3d 1242, 1248 n.4 (10th Cir. 2012). Nor does the standard require “detailed mathematical calculation” of the amount in controversy. Harris v. KM Indus., Inc., 980 F.3d 694, 701 (9th Cir. 2020). Instead, the amount in controversy is simply an estimate of the total possible amount at issue in the case. Jauregui v. Roadrunner Transp. Servs., Inc., 28 F.4th 989, 994 (9th Cir. 2022).
So what is needed to satisfy the amount in controversy requirement when it is in dispute? It depends. Some courts have explained that “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.” Pazol v. Tough Mudder Inc., 819 F.3d 548, 552 (1st Cir. 2016) (citation omitted). It is true that in some cases, no evidence is necessary because the allegations of the complaint are sufficient, such as when multiplying the estimated number of class members by the potential amount of punitive damages for each class member easily exceeds the monetary threshold. Schutte, 28 F.4th at 855. In other instances, though, determining the amount in controversy may require “summary-judgment-type evidence” such as detailed affidavits from employees and experts or even an evidentiary hearing. Ibarra v. Manheim Invs., Inc., 775 F.3d 1193, 1199 (9th Cir. 2015); see also, e.g., Acad. of Country Music v. Cont’l Cas. Co., 991 F.3d 1059, 1069 (9th Cir. 2021) (finding settlement demand letters relevant to amount in controversy); Anderson v. Wilco Life Ins. Co., 943 F.3d 917, 927 (11th Cir. 2019) (analyzing the face value of life insurance values to determine the amount in controversy). And in other cases, a party may rely on a combination of the allegations and evidence in its possession, such as employee data. See Arias v. Residence Inn by Marriott, 936 F.3d 920, 925 (9th Cir. 2019). Ultimately, if introducing evidence is necessary, the court must prevent the amount in controversy calculation “from becoming a matter of judicial star-gazing.” Northup Props., Inc. v. Chesapeake Appalachia, L.L.C., 567 F.3d 767, 771 (6th Cir. 2009).
Figuring out the amount in controversy often entails a close examination of the plaintiffs’ claims. Parties should therefore be ready to present evidence closely directed to the allegations, particularly when they have better access to relevant evidence than the opposing party. Affidavits proffering conclusory statements and numerical sums while omitting the affiant’s rationale for his or her conclusions may be deemed too speculative and nothing more than “star gazing,” Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 754 (11th Cir. 2010), which is insufficient to satisfy the evidentiary burden. See, e.g., Pazol, 819 F.3d at 556–57 (rejecting reliance on the lodging expenses for the putative class as inherently speculative because it was impossible to determine whether any of the class members incurred additional lodging expenses); Dudley v. Eli Lilly & Co., 778 F.3d 909, 915 (11th Cir. 2014) (finding detailed affidavits with damages calculations insufficient because they “failed to provide estimates of incentive payments that corresponded to the categories of incentive payments identified in the complaint” or “any meaningful guidepost for the payment estimates it had provided”).
This is not to say there are no limits to how closely a district court can scrutinize the evidence regarding the amount in controversy. Recently, the Ninth Circuit reversed a district court’s decision to remand a class action to state court, criticizing the court’s “inappropriate demand of certitude from [the defendant] over its assumptions used in calculating the amount in controversy” and failure to provide reasonable “latitude” in the analysis, particularly given that the defendant “offered substantial evidence and identified assumptions to support its valuation of each of the various claims in this case.” Jauregui, 28 F.4th at 993–94. In doing so, “the district court turn[ed] the CAFA removal process into an unrealistic all-or-nothing exercise of guess-the-precise-assumption-the-court-will-pick—even where, as here, the defendant provided substantial evidence and analysis supporting its amount in controversy estimate.” Id. at 994.
Disputes over the amount in controversy can become even more complicated when a defendant attempts to satisfy the jurisdictional requirements by pointing to the plaintiff’s request for punitive damages. The Ninth Circuit has ruled that a removing defendant must show that the punitive damages amount “is reasonably possible” instead of being likely or probable. Greene v. Harley-Davidson, Inc., 965 F.3d 767, 769, 772 (9th Cir. 2020). A defendant can meet this burden by citing “a case based on the same or a similar statute in which the jury or court awarded punitive damages based on the punitive-compensatory damages ratio relied upon by the defendant in its removal notice.” Id. at 772. In Greene, the district court erred by requiring that the defendant not only cite prior precedent showing that the punitive damages ratio is possible but also explain why the cited case resembled the case at hand. Id. at 773. According to the Ninth Circuit, this approach improperly requires a defendant to show the likelihood of the plaintiff prevailing on punitive damages and ignores the difficulty in analogizing cases where discovery has not yet commenced. See id.
Finally, even when CAFA’s jurisdictional requirements are met, CAFA contains several important exceptions allowing for intrastate class actions, including the local controversy exception, under which a district court “shall” decline to exercise jurisdiction when more than two-thirds of the putative class members are citizens of the state where the action was filed, the principal injuries occurred in that state, and at least one significant defendant is a citizen of that state. 28 U.S.C. § 1332(d)(4)(A). The party seeking to remand based on the exception again bears the burden of proof by a preponderance of evidence. See Smith v. Marcus & Millichap, Inc., 991 F.3d 1145, 1155 (11th Cir. 2021). “CAFA does not demand a plaintiff show the citizenship of each class member with certainty beyond a reasonable doubt” and the burden is not “exceptionally difficult to bear.” Adams v. W. Marine Prods., Inc., 958 F.3d 1216, 1222–23 (9th Cir. 2020).
Care, however, should once again be taken to avoid presenting overly generalized evidence. In Smith, the Eleventh Circuit held that the plaintiffs failed to meet their burden of showing that two-thirds of putative class members were Florida citizens necessary to invoke the local controversy exception because the “generalized studies and surveys” and “census data” were insufficient, standing alone, to serve as the “sole basis of the citizenship determination.” 991 F.3d at 1157 (11th Cir. 2021). “Rather, in addition to any generalized evidence presented, ‘there must ordinarily be at least some [specific] facts in evidence from which the district court may make findings regarding class members’ citizenship for purposes of CAFA’s local controversy exception.’” Id. (quoting Mondragon v. Capital One Auto Fin., 736 F.3d 880, 884 (9th Cir. 2013)).
CAFA jurisdictional disputes often place the parties in awkward positions. The desire to litigate in their desired forum can result in plaintiffs downplaying their maximum recovery while defendants stress the large amounts of punitive damages they may be forced to pay. Regardless of which side counsel is representing, when CAFA’s requirements and its exceptions are at issue, practitioners should take extra care to ensure that any necessary presumptions to establish jurisdiction have a reasonable basis and are supported by evidence relevant to the specific factual allegations and claims at issue.
