Dart Cherokee Basin Operating Co. v. Owens

Citation730 F.3d 1234
Decision Date17 September 2013
Docket NumberNo. 13–603.,13–603.
PartiesDART CHEROKEE BASIN OPERATING COMPANY, LLC; Cherokee Basin Pipeline, LLC, Petitioners, v. Brandon W. OWENS, individually and on behalf of all others similarly situated, Respondent.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

OPINION TEXT STARTS HERE

Matthew J. Salzman, Molly E. Walsh, Stinson Morrison Hecker, Kansas City, MO, for Petitioners.

John F. Edgar, Edgar Law Firm, Kansas City, MO, David E. Sharp, Gunderson, Sharp & Walke, Houston, TX, Rex Sharp, Gunderson Sharp, LLP, Prairie Village, KS, Grady L. Young, Southeast Kansas Legal Associates, PA, Coffeyville, KS, for Respondent.

Before KELLY, LUCERO, HARTZ, TYMKOVICH, HOLMES, MATHESON, BACHARACH and PHILLIPS, Circuit Judges.*

ORDER

This matter is before the court on the petitioners' Petition for Rehearing En Banc. We also have a response. Both pleadings were circulated to all the judges of the court who are in regular active service and who are not recused in this proceeding.

Upon consideration, a poll was requested and the votes were evenly divided. Consequently, the poll did not carry and the en banc petition is denied. SeeFed. R.App. P. 35(a) (noting a majority may direct en banc review).

Judges Kelly, Hartz, Tymkovich and Phillips would grant the petition, with Judge Hartz writing the attached formal dissent, in which Judges Kelly, Tymkovich and Phillips join.

HARTZ, Circuit Judge, joined by KELLY, TYMKOVICH, PHILLIPS, Circuit Judges, dissenting:

This court owes a duty to the bench and bar to provide guidance regarding the procedural requirements of the Class Action Fairness Act of 2005 (CAFA). Yet it has let stand a district-court decision that will in effect impose in this circuit requirements for notices of removal that are even more onerous than the code pleading requirements that I had thought the federal courts abandoned long ago.

Petitioners removed this case to federal court under CAFA. The notice of removal alleged the amount in controversy to be over $8 million, comfortably above the jurisdictional requirement of $5 million, and explained how Petitioners arrived at that figure. After Owens moved to remand the case to state court, Petitioners submitted undisputed proof that the amount in controversy exceeded $14 million. Nevertheless, the district court granted Owens's motion. It did so only because the notice of removal itself had failed to provide evidentiary support, “such as an economic analysis ... or settlement estimates” for the $8 million figure. Mem. & Order at 10, Owens v. Dart Cherokee Basin Operating Co., LLC, No. 12–4157–JAR (D.Kan. May 21, 2013).

Petitioners requested permission to appeal to this court under 28 U.S.C. § 1453(c), but a divided panel denied permission. Petitioners then sought en banc review of the panel's decision. I respectfullydissent from this court's denial of that request by an equally divided vote.

The district court's decision, although not an unreasonable interpretation of language in some of this court's opinions, is contrary to fundamental principles regarding the purpose and function of pleadings in federal court and to Congress's apparent understanding when it recently codified the procedure by which a removing party can establish the amount in controversy. It imposes an evidentiary burden on the notice of removal that is foreign to federal-court practice and, to my knowledge, has never been imposed by a federal appellate court (Owens does not cite to any such case). Unfortunately, this may be the only opportunity for this court to correct the law in our circuit. After today's decision any diligent attorney (and one can assume that an attorney representing a defendant in a case involving at least $5 million—the threshold for removal under CAFA—would have substantial incentive to be diligent) would submit to the evidentiary burden rather than take a chance on remand to state court; if so, the issue will not arise again.

Under the procedural system that has been in effect for almost 80 years, all a party must do in initiating a case in federal court is to submit a pleading that “contain[s] ... a short and plain statement of the grounds for the court's jurisdiction,” Fed.R.Civ.P. 8(a)(1), and “a short and plain statement of the claim showing that the pleader is entitled to relief,” id. at 8(a)(2). The party need not produce proof of an allegation in the pleading until the allegation is challenged by the opposing party or, perhaps, the court. Then the party must establish the alleged fact under the applicable burden of persuasion, ordinarily the preponderance of the evidence.

Until now, there has been no reason to believe that a different rule governs the jurisdictional allegations in a notice of removal. The applicable statute parrots Rule 8, requiring only that the notice “contain[ ] a short and plain statement of the grounds for removal.” 28 U.S.C. § 1446(a). Although the removing party must establish controverted jurisdictional allegations by a preponderance of the evidence, nothing in the removal statutes or Supreme Court decisions, or any holdings of this court, require submission of such evidence before the jurisdictional allegations are challenged.

Under this standard there should be no dispute that Petitioner's notice of removal was adequate, even if we apply Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), in this context to require that the notice raise a plausible claim that the amount in dispute is at least $5 million. The pertinent paragraphs state:

9. [Owens's] Petition does not state a specific amount as damages. It does, however, pray for payment of royalties and interest claimed to be due to royalty owners who were paid royalties with regard to gas produced from wells located in Kansas in which DCBO [one of the Petitioners] has owned any working interest, for the period from January 1, 2002 to the present.

10. This matter involves approximately 700 wells that [DCBO] currently operates in Kansas. The purported class consists of royalty owners that own an interest in the wells in which [DCBO] has a working interest in Kansas. There are approximately 400 royalty owners with interests in the 700 wells at issue.

12. [Owens] claims that [DCBO] owes additional royalties because, among other things, [DCBO] (a) pays royalties based upon a below market price; (b) improperly deducts charges from the sales price for costs associated with gathering, compression, dehydration, and/or treatment for computing royalties; and (c) improperly shifts a portion of the conservation fee to royalty owners.

13. [Owens] seeks to recover on behalf of a class of any royalty owner in any well located in Kansas in which [DCBO] has owned any working interest from January 1, 2002 to the present.

14. [DCBO] has undertaken to quantify the amount of additional royalties that would be owed if all or substantially all of the adjustments to royalties advanced by [Owens] were found to be required to be made.

15. Based upon this calculation of [Owens's] putative class claims, the amount of additional royalties sought is in excess of $8.2 million.

Notice of Removal at 3–4, Owens, No. 12–4157–JAR–JPO (D.Kan. Dec.5, 2012). Allegations of the amount in controversy are ordinarily much more abbreviated.

The Supreme Court has not imposed special burdens at the pleading stage with respect to jurisdictional issues. The sequence of pleading and proving jurisdiction is described in the discussion of standing in 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 [the] elements [of standing]. Since they are not mere pleading requirements but rather an indispensable part of the plaintiff's case, each element must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation. At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice, for on a motion to dismiss we presume the general allegations embrace those specific facts that are necessary to support the claim. In response to a summary judgment motion, however, the plaintiff can no longer rest on such mere allegations but must set forth by affidavit or other evidence specific facts....

(emphasis added) (citations, brackets, and internal quotation marks omitted).

Nor has the Court imposed special rules regarding the pleading of jurisdiction in the removal context. In a recent decision regarding CAFA jurisdiction, the Supreme Court unanimously stated: “The burden of persuasion for establishing diversity jurisdiction, of course, remains on the party asserting it. When challenged on allegations of jurisdictional facts, the parties must support their allegations by competent proof.” Hertz Corp. v. Friend, 559 U.S. 77, 96–97, 130 S.Ct. 1181, 175 L.Ed.2d 1029 (2010) (emphasis added) (citations omitted).

Here, Owens challenged the notice of removal and Petitioners responded with a declaration by an officer setting forth a calculation showing a potential liability far exceeding $5 million. See Owens v. Dart Cherokee Basin Operating Co., 2013 WL 2237740, at *2 (D.Kan. May 21, 2013). The district court did not find the declaration lacking. It simply held that it came too late. First, it ruled that the notice of removal was inadequate. It explained:

Although [Petitioners] state[d] in the Notice of Removal that they have “undertaken to quantify the amount of additional royalties that would be owed,” [Petitioners] fail[ed] to incorporate any evidence supporting this calculation in the Notice of Removal, such as an economic analysis of the amount in controversy or settlement estimates. Accordingly, in the absence of such evidence, the general and conclusory allegations of the Petition and Notice of Removal do not establish by a preponderance of...

To continue reading

Request your trial
8 cases
  • Cope v. Kan. State Bd. of Educ.
    • United States
    • U.S. District Court — District of Kansas
    • 2 Diciembre 2014
    ...Wildlife Fed'n, 497 U.S. 871, 889, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990) ); see also Dart Cherokee Basin Operating Co., LLC v. Owens, 730 F.3d 1234, 1236 (10th Cir.2013) (Hartz, J., dissenting) (explaining “[t]he Supreme Court has not imposed special burdens at the pleading stage with resp......
  • Dart Cherokee Basin Operating Co. v. Owens
    • United States
    • U.S. Supreme Court
    • 15 Diciembre 2014
    ...for notices of removal that are even more onerous than the code pleading requirements that ... federal courts abandoned long ago." 730 F.3d 1234 (2013). The Tenth Circuit was duty bound to grant Dart's petition for rehearing en banc, Judge Hartz urged, because the opportunity "to correct th......
  • Woods v. Standard Ins. Co.
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • 10 Noviembre 2014
    ...establishing the amount in controversy), appeal denied,No. 13–603, 2013 WL 8609250 (10th Cir. June 20, 2013), reh'g denied,730 F.3d 1234 (10th Cir.2013), cert. granted, ––– U.S. ––––, 134 S.Ct. 1788, 188 L.Ed.2d 757 ...
  • Woods v. Standard Ins. Co.
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • 10 Noviembre 2014
    ...establishing the amount in controversy), appeal denied, No. 13–603, 2013 WL 8609250 (10th Cir. June 20, 2013), reh'g denied, 730 F.3d 1234 (10th Cir.2013), cert. granted, ––– U.S. ––––, 134 S.Ct. 1788, 188 L.Ed.2d 757 ...
  • Request a trial to view additional results
1 firm's commentaries
  • Dart Cherokee: SCOTUS To Hear Case On CAFA Pleading Requirements
    • United States
    • Mondaq United States
    • 11 Abril 2014
    ...pleading requirement in these words. The Court of Appeals then refused by an evenly divided vote to review the panel's decision en banc. 730 F.3d 1234 (2013). The Supreme Court will now resolve the This is not currently an issue in the Seventh Circuit because Meridian Security Ins. Co. v. S......
1 books & journal articles
  • Cafa: Recent Developments on the Jurisdictional and Settlement Fronts
    • United States
    • California Lawyers Association Competition: Antitrust, UCL and Privacy (CLA) No. 23-2, September 2014
    • Invalid date
    ...(2013).11. Id. at 1350.12. 479 F.3d 994 (9th Cir. 2007).13. See 133 S.Ct. at 1350.14. Id. at 1348.15. 728 F.3d 975 (9th Cir. 2013).16. 730 F.3d 1234 (10th Cir. 2013).17. 557 F.3d 1026 (9th Cir. 2009).18. Id. at 1029-30.19. 28 U.S.C. § 1332(d)(11)(B)(i).20. See 134 S. Ct. 736 (2014).21. 747 ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT