A Jurisdictional Puzzle: Dart Cherokee Basin Operating Co. v. Owens

In October, the Supreme Court heard arguments for the case Dart Cherokee Basin Operating Co. v. Owens, a highly technical case dealing with notices of removal and class suits.

Terms, etc.

Again, this is a highly technical case, one that requires understanding of a lot of legal proceedings to make sense.

A removal is the transferring of a case from one court to another, particularly from a state court to the federal court whose jurisdiction includes the state.

A notice of removal is the process by which a removal is filed by a defendant. The conditions of the processes are subject to review in this case. Generally, this is considered a subset of pleading.

A class action/lawsuit (it’s redundant to say both because the action is the lawsuit) is when a group of people (i.e. a class) sue someone.

The Class Action Fairness Act of 2005 (CAFA) sought to expand federal jurisdiction over class-action lawsuits. The law makes it easier for defendants to remove cases to federal courts. CAFA, passed during the Bush administration, was supported by tort reform advocates (those who believe it should be harder for workers to sue corporations for physical injuries, etc.). CAFA granted federal courts jurisdiction over class suits in which the financial amount in controversy exceeds $5 million and in which any member of the class of plaintiffs (at least 100) is a citizen of a different state than the defendant. Why increase federal jurisdiction? It’s much easier for a plaintiff to win in state courts, and much easier for defendants to win in federal courts.

The Case

Brandon Owens sued multiple oil companies over oil well concerns, claiming a class of people, including him, was underpaid in royalties. The oil companies sought to remove the case to federal courts, as is common in class suits. In dispute was whether or not the lawsuit was worth over $5 million. The companies stated they would lose $8.2 million if they lost in court, but Owens demanded they present a proof for this claim. The companies provided data on a spreadsheet but the federal district judge ruled this data presentation as too late and sent the case back to the district court. When the oil companies appealed the rejection of removal (typically not allowed but since CAFA is a pro-defendant, a part of the law allows the court of appeals to choose at its discretion to take the case – it “may” take the case), the U.S. Court of Appeals for the 10th District decided not to hear the case in a divided decision. One of the dissenters wrote that the submission to technicalities destroys the substance-based structure of pleading. The judge wrote that this system of justice means that a party could lose its case by filing the wrong piece of paper – a “legal booby trap.”

And so, the question: Is a notice of removal adequate if it just asserts facts necessary to satisfy the jurisdictional requirement without attaching evidence that supports the truth of those facts?

Briefly, again, Dart Cherokee Basin Operating Co., LLC failed to attach the requisite evidence in its notice. The Tenth Circuit held that this notice was defective and it thus could not hear the case. Dart challenged this holding and the Supreme Court agreed to hear the case.

By hearing this case, a simple error correction case, it is quite evident that the Court seeks to set a wide precedent and make removal to federal court easier.

Dart’s brief is remarkably short; at only 23 pages, it is half the length of a standard brief. But according to Columbia Law Professor Ronald Mann, the brief is “succinct,” “to the point,” and “compelling.”

Dart’s case focuses on the “general sense” that federal courts are suppose to reserve the evidence standard to specific case categories, that this one wouldn’t fall under. Specifically, a section of U.S. Code states that a notice of removal only has to contain “a short and plain statement of the grounds for removal.” Dart notes that this language reflects Rule 8, the federal rules of pleading, which notes that pleading contains a “short and plain statement,” just like the notice of removal. Dart also shows that this echo is not accidental: that aforementioned part of U.S. Code was written to reflect the writing of Rule 8.

Owens uses a different part of this section of U.S. Code – subsection (c)(2). Owens notes that this section of code focuses on the amount in controversy allegations while (a) is more focused on other jurisdictional allegations. And since this section of code states the district court must “fin[d], by the preponderance of the evidence” whether the threshold is met, the court cannot make the finding without evidence.

Oral Arguments

Oral argumentation focused on two points:

1. If the Supreme Court reaches the merits of the issue presented, Dart wins. The justices did not object to Dart’s case; it seemed evident that Dart was correct, that evidence is not needed to prove the facts needed for removal.

2. The Supreme Court can’t decide the case: it’s not clear that Dart is correct on the merits. Argued by an amicus brief submitted by Public Citizen in favor of Owens, it was not decisively proven that the federal court that refused to hear Dart’s case did so because of the CAFA dispute. As Justice Kagan noted frequently, it is entirely possible that the court was just busy, or perhaps they agreed with the previous ruling. Though there was a dissent written for not removing the case, the dissenter failed to give a reason why the case was not removed. When a court denies review, it nearly always does not give a reason why, and only sparingly is a dissenting opinion filed, but even dissenting opinions cannot be relied on to identify the reason for denying review.

Rex Sharp, arguing on behalf of the class-action plaintiffs, perhaps went a bit too far and declared that the Supreme Court was wholly barred from review of any cases that a Court of Appeals declined to hear. Alito defended the Supreme Court’s jurisdiction and said that was a bit extreme: if a Court of Appeals declines to hear a case on CAFA because they believe it is bad public policy, then the Supreme Court should be able to step in and hear the case. The Justices agreed but, of course, that isn’t the situation at hand.

The Public Citizen amicus brief also makes the argument that since the case never made it to the Court of Appeals, the Supreme Court can’t hear the case. The justices were not particularly sympathetic to this argument. It’s hard to say this is true, however, because just last year, the Supreme Court heard a relatively related case, Standard Fire Insurance Co. v. Knowles, and came to a ruling. Further, if Public Citizen’s brief is correct, that would create perverse incentives for state courts to insulate cases from the Supreme Court, hampering the purpose of CAFA. Kagan seemed very concerned about this topic–lower courts insulating their decisions from higher court review. This question is examined further here.

Decisions, Decisions

Ed Lee, who counts questions at each party to determine a prediction for the winner (more questions = lower chance of winning), finds an almost even number of questions to each party (48 to Dart Cherokee, 51 to Owens) but five justices (Roberts, Scalia, Kennedy, Sotomayor, and Kagan) asked more of Dart Cherokee (Thomas will likely vote the same way as Scalia) while Ginsburg, Breyer, and Alito asked more of Owens.

Conservative Justices like Scalia and Thomas will have to face a tough choice: ruling in favor of corporations, something they would very much like to do, would require bending the law, interpreting the Constitution by its intent, not text, something those Justices hate to do.

But, as suggested by Kagan, the Court is likely to dismiss the case.

Further Reading, Etc.

Ronald Mann, the Albert E. Cinelli Enterprise Professor of Law at Columbia Law School and Co-Director of The Charles Evans Gerber Transactional Studies Center, gives an argument preview at SCOTUSBlog – “Argument Preview: Justices to mull pleading standard for removal” – September 26, 2014

Richard Re, Assistant Professor of Law at UCLA Law School, summarizes the case and points out the five best moments (or non-moments) in oral argumentation at his blog, Re’s Judicata – “Jurisdiction in Dart, With 5 Favorite Oral Argument Moments” – October 7, 2014

Noah Feldman, Felix Frankfurter Professor of Law at Harvard Law School and Senior Fellow of the Harvard Society of Fellows, sums up the case at Bloomberg View – “Class Action Case Could Bend the Law” – October 7, 2014

Archis A. Parasharami, a litigation partner at Mayer Brown, summarizes oral argument at Mayer Brown’s Class Defense Blog – “Supreme Court May Clarify Procedures For Removal Under CAFA–If It Decides To Answer The Question Presented in Dart Cherokee Basing Operating Co. v. Owens” – October 7, 2014

Adam Steinman, Professor of Law at the University of Alabama School of Law, discusses oral argument on the Civil Procedure & Federal Courts Blog – “SCOTUS Oral Argument in Dart Cherokee” – October 7, 2014

Ronald Mann, again, analyzes oral arguments at SCOTUSBlog – “Argument analysis: Another one bites the dust, as Justices threaten dismissal of second case from October session” – October 8, 2014

Ed Lee, Professor of Law, Director of the Program in Intellectual Property Law, and Norman and Edna Freehling Scholar at IIT Chicago-Kent College of Law, predicts the winner on IIT Chicago-Kent College of Law’s SCOTUS Now Blog – “Predicting the Winners in Holt v. Hobbs and Dart Cherokee Co. v. Owens” – October 8, 2014

Richard Re, again, examines the question of lower courts facilitating Supreme Court review at his blog, Re’s Judicata – “Should Lower Courts Facilitate Supreme Court Review?” – October 16, 2014

Richard Samp, Chief Counsel of the Washington Legal Foundation, discusses Supreme Court jurisdiction in this case on the Washington Legal Foundation Legal Pulse Blog – “High Court Should Not “DIG” Dart Cherokee Basin Case” – October 21, 2014

Richard Re, again, discusses jurisdiction on his blog – “Doubts About Jurisdictional Doubts in Dart” – October 22, 2014

Richard Re, again, identifies a link between this case and two others – Yates (obstruction of justice), and DeBoer (Sixth Circuit decision upholding same-sex marriage laws) at his blog – “Supreme Court Signals” – November 11, 2014

The transcript of the oral arguments can be read here.

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