Morgan v. Gay

• Decision Date: 15 December 2006
• Docket Number: No. 06-4497.,06-4497.
• Citation: 471 F.3d 469
• Parties: Sarah MORGAN, on behalf of herself and all others similarly situated v. Dennis W. GAY; Gina Gay; Basic Research, L.L.C.; Ban, L.L.C.; Klein-Becker, USA L.L.C.; Covaxil Laboratories, L.L.C.; Carter-Reed Company, L.L.C., a/k/a The Carter-Reed Company; A.G. Waterhouse, L.L.C.; Alphagenbo Tech, L.L.C.; Body Forum, L.L.C.; Body Innoventions, L.L.C.; Covarix, L.L.C.; Bydex Management, L.L.C.; Nutrasport, L.L.C; Sovage Dermalogic Laboratories, L.L.C.; Western Holding, L.L.C.; George Evan Bybee; Daniel B. Mowrey, Ph.D; Nathalie Chevreau, Ph.D; Mitchell K. Friedlander; Michael Meade, Appellants.
• Court: U.S. Court of Appeals — Third Circuit

471 F.3d 469

Sarah MORGAN, on behalf of herself and all others similarly situated v. Dennis W. GAY; Gina Gay; Basic Research, L.L.C.; Ban, L.L.C.; Klein-Becker, USA L.L.C.; Covaxil Laboratories, L.L.C.; Carter-Reed Company, L.L.C., a/k/a The Carter-Reed Company; A.G. Waterhouse, L.L.C.; Alphagenbo Tech, L.L.C.; Body Forum, L.L.C.; Body Innoventions, L.L.C.; Covarix, L.L.C.; Bydex Management, L.L.C.; Nutrasport, L.L.C; Sovage Dermalogic Laboratories, L.L.C.; Western Holding, L.L.C.; George Evan Bybee; Daniel B. Mowrey, Ph.D; Nathalie Chevreau, Ph.D; Mitchell K. Friedlander; Michael Meade, Appellants.

No. 06-4497.

United States Court of Appeals, Third Circuit.

Submitted Pursuant to Third Circuit L.A.R. 34.1(a) November 27, 2006.

Filed December 15, 2006.

John M. Agnello, Kerrie Heslin, Carella, Byrne, Bain, Gilfillian, Cecchi, Stewart & Ostein, Roseland, NJ, Christian H. Gannon, Walter H. Swayze, III, Robert J. Kenney, Maria C. Carlucci, Segal McCambridge Singer & Mahoney, LTD., New York, NY, for Appellants.

Jeffrey I. Carton, Jill C. Owens, Meiselman, Denlea, Packman, Carton & Eberz, PC, White Plains, NY, for Appellee.

Before BARRY, SMITH, and NYGAARD, Circuit Judges.

OPINION

SMITH, Circuit Judge.

I.

This appeal requires us for the first time to interpret certain provisions of the newly-enacted Class Action Fairness Act of 2005 (CAFA), Pub.L. No. 109-2, 119 Stat. 4 (2005) (codified in scattered sections of 28 U.S.C.). Specifically, after the defendants removed the case from state court to the District Court, the plaintiff moved to remand to state court.¹ That motion was granted. Because we agree that the District Court properly placed the burden of proof on the defendants to establish federal subject matter jurisdiction under CAFA, and appropriately determined that the defendants failed to prove that the plaintiff's claims exceeded CAFA's amount in controversy requirement of $5 million, we will affirm.

II.

We repeat verbatim the District Court's recitation of the facts of this case because of its brevity and accuracy:

This civil action is based upon false advertising claims by New Jersey purchasers of the skin cream StriVectin-SD. Plaintiff asserts violations of the New Jersey Consumer Fraud Act, N.J.C.A. 56:8-1, et seq., as well as claims under common law fraud, unjust enrichment and breach of express and implied warranties. Originally, the instant action was filed as a nationwide class with representatives in New York, Ohio, Indiana, Mississippi, Texas, New Jersey, Illinois and Vermont. Plaintiff's chosen forum for the original Complaint was the United States District Court, Southern District of New York. At that time, Defendants moved to transfer the action to the District of Utah, based upon a related case previously filed in that district and because all Defendants maintained residences and/or principal places of business in Utah. Defendants' venue motion was ultimately granted.

Thereafter, Plaintiff voluntarily dismissed the action and re-filed a modified, New Jersey law-based Complaint in the Superior Court of New Jersey, Law Division, Monmouth County on January 30, 2006. On March 22, 2006, Defendants removed this action pursuant to 28 U.S.C. §§ 1441 and 1453 based on federal diversity jurisdiction pursuant to 28 U.S.C. § 1332. On April 20, 2006, Plaintiff filed this Motion to Remand back to New Jersey Superior Court. On May 26, 2006, Defendants moved to transfer the case to the United States District Court, District of Utah (Central Division).

The present Complaint addresses the amount in controversy as follows: "this action ... seeks ... trebled compensatory damages; including but not limited to a refund of the purchase price that each member of the class paid for StriVectin-SD; ... punitive damages; ... injunction; interest; court costs; and attorneys fees; however, the total amount of such monetary relief for the class as a whole shall not exceed $5 million in sum or value."

Morgan v. Gay, Civ. No. 06-1371(GEB), 2006 WL 2265302 at *1 (D.N.J. Aug. 7, 2006).

On August 7, 2006, the District Court granted the plaintiff's motion to remand to state court, concluding that the requisite amount in controversy of $5 million had not been demonstrated. The defendants then timely filed a Petition for Leave to Appeal on August 16, 2006, as well as a motion for a stay of the Remand Order pending appeal. The District Court granted the stay that same day. This Court then granted the defendants leave to appeal. See Morgan v. Gay, 466 F.3d 276 (3d Cir.2006). Pursuant to § 1453(c)(2), we have 60 days from October 16, 2006 to decide the appeal. See, e.g., Miedema v. Maytag Corp., 450 F.3d 1322, 1326-27 (11th Cir.2006); Braud v. Transp. Serv. Co. of Illinois, 445 F.3d 801, 803 n. 2 (5th Cir.2006). But see Patterson v. Dean Morris, L.L.P., 444 F.3d 365, 370 (5th Cir.2006) (Garza, J., dissenting) (arguing that the plain language of § 1453(c)(2) mandates that the 60 day time limit begin from when the appeal is filed).

III.

We exercise jurisdiction pursuant to 28 U.S.C. § 1453(c). Our standard of review for issues of subject matter jurisdiction is plenary. Samuel-Bassett v. KIA Motors Am., Inc., 357 F.3d 392, 396 (3d Cir.2004).

IV.

A.

The first issue we address is whether the District Court properly placed the burden of proof on the defendants to establish federal subject matter jurisdiction under CAFA. The defendants concede that CAFA is silent as to which party bears the burden of proof on the amount in controversy. In an attempt to convince this Court that the burden to establish the amount in controversy falls upon the plaintiff rather than themselves, the defendants focus on the legislative history of CAFA as opposed to the text of the statute.

The defendants are correct that the legislative history indicates that some members of Congress probably wished to switch the burden of proof from the party seeking removal to the party seeking remand. The Senate Judiciary Committee Report (issued ten days after CAFA was signed by the President) states that "[i]f a purported class action is removed pursuant to these jurisdictional provisions, the named plaintiff(s) should bear the burden of demonstrating that the removal was improvident (i.e., that the applicable jurisdictional requirements are not satisfied)." S.Rep. No. 109-14, at 42 (Feb. 28, 2005), reprinted in 2005 U.S.C.C.A.N. 3, 40. See also id. at 44, 2005 U.S.C.C.A.N. at 41 (noting that "plaintiff should have the burden of demonstrating that `all matters in controversy' do not (in the aggregate) exceed the sum or value of $5,000,000, exclusive of interest and costs"). Further, this Senate Report states that "new section 1332(d) is intended to expand substantially federal court jurisdiction over class actions. Its provisions should be read broadly, with a strong preference that interstate class actions be heard in a federal court if properly removed by any defendant." Id. at 43, 2005 U.S.C.C.A.N. at 41. These passages indicate that at least some members of the Senate thought that CAFA shifts the burden to the party wishing to litigate in state court and, more generally, close cases should fall under federal jurisdiction.

The defendants' reliance on CAFA's legislative history is misplaced, for at least two reasons. First, the actual text of CAFA makes no reference to this burden-shifting legislative history. Prior to the passage of CAFA, the party seeking to remove a case to federal court bore the burden to establish jurisdiction. See, e.g., Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ("The party invoking federal jurisdiction bears the burden of establishing these elements."); Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990). The text of CAFA does not explicitly address whether it shifts this burden to the party seeking to keep the class action in state court. The Seventh Circuit was the first court of appeals to confront this issue. Writing for a unanimous panel, Judge Easterbrook went so far as to state that "none [of the statute's language] is even arguably relevant" to the burden-shifting inquiry. Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 448 (7th Cir.2005). The problem with relying solely on CAFA's legislative history is that the portion that supports burden-shifting "does not concern any text in the bill that eventually became law."²

The only section of CAFA that might be applicable to this debate is its "Findings and Purposes," which broadly indicates an intent by Congress to make federal courts more available to class action litigants.³ However, the Findings and Purposes say nothing about burden-shifting, and should not be taken by this Court as an indication that Congress intended to shift a long- and well-established burden. See Miedema, 450 F.3d at 1329-30 (rejecting the Findings and Purposes for similar reasons). It should take more than a few lines in a Senate Judiciary Committee Report and some vague language in a statute's "Findings and Purposes" section to reverse the well-established proposition that the party seeking removal carries the jurisdiction-proving burden. Second, and related, as a general matter this Court need not look to legislative history at all when the text of the statute is unambiguous and there is no indication that Congress, for example, made a typographical error in drafting this part of the statute. Cf. Morgan v. Gay, 466 F.3d at 279 (stating that, where the "uncontested intent of Congress" shows that the statute contains a typographical error, the court's duty is to make a "common sense revision" to the text of the statute).

While several district courts have shifted the burden from the party seeking removal, no appellate court to date has done so. In addition to the aforementioned Seventh and Eleventh Circuits (in Brill and Miedema, respectively), the Ninth Circuit has also held that the burden remains with the party seeking removal. See ...