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Owens v. Dart Cherokee Basin Operating Co., LLC

United States District Court, Tenth Circuit

May 21, 2013

BRANDON W. OWENS, individually and on behalf of all others similarly situated, Plaintiffs,
v.
DART CHEROKEE BASIN OPERATING CO. LLC, and CHEROKEE BASIN PIPELINE, LLC, Defendants.

MEMORANDUM AND ORDER

JULIE A. ROBINSON, UNITED STATES DISTRICT JUDGE

This putative royalty owners class action suit was removed by Defendants Dart Cherokee Basin Operating Company, LLC (“DCBO”) and Cherokee Basin Pipeline, LLC (“CBPL”) to this Court on December 5, 2012 (Doc. 1). This matter is before the Court on Plaintiff’s Motion to Remand (Doc. 12). The matter is fully briefed and the Court is ready to make its decision. For the reasons explained in detail below, the Court grants Plaintiff’s motion and remands the case to the District Court of Wilson County, Kansas.

I. Background

On October 30, 2012, Plaintiff Brandon W. Owens filed a class action Petition in the District Court of Wilson County, Kansas. In the state court Petition, Plaintiff seeks to represent a class of royalty owners who were underpaid royalties from DCBO or CBPL working interest Kansas wells from January 1, 2002 to the date of the Class Notice. Plaintiff alleges breach of contract and unjust enrichment claims and seeks compensatory damages, costs, and such further relief as the court deems just and proper. The Petition does not state a specific amount as damages.

On December 5, 2012, Defendants removed the state court action to this Court, asserting jurisdiction pursuant to 28 U.S.C. § 1332(d), commonly known as the Class Action Fairness Act of 2005 (“CAFA”). As grounds for removal, Defendants contend the amount in controversy is in excess of $8.2 million. On January 2, 2013, prior to any response being filed to the motion to remand, all further proceedings in the case were stayed pending mediation between the parties; mediation held on April 4, 2013, was unsuccessful, and the Court directed the parties to resume briefing on the pending motion.[1]

II. Discussion

To establish federal jurisdiction under CAFA, three elements are required. First, minimal diversity of citizenship must exist between the parties, meaning at least one plaintiff and one defendant must be citizens of different states. Second, the proposed class must have at least one hundred members in the aggregate. And third, the amount in controversy must exceed $5 million, exclusive of interest and costs.[2] For removal to be proper, the defendant must set forth facts supporting the assertion that the amount in controversy is satisfied.[3] In making this showing, the defendant must support the amount in controversy with factual evidence rather than mere assumption or speculation.[4] The parties are in dispute only about the third element—the amount in controversy.

In determining the amount in controversy for an action removed pursuant to CAFA, the question is not how much the plaintiff will recover, but “an estimate of the amount that will be put at issue in the course of the litigation.”[5] The amount in controversy is ordinarily determined by the allegations of the complaint, or, where they are not dispositive, by the allegations in the notice of removal.[6] If the jurisdictional amount is not shown by the allegations of the complaint, “[t]he burden is on the party requesting removal to set forth, in the notice of removal itself, the ‘underlying facts supporting [the] assertion that the amount in controversy exceeds [$75, 000].’”[7]In other words, the amount in controversy must be affirmatively established on the face of either the petition or notice of removal.[8] The Court narrowly construes removal statutes, [9] and all doubts must be resolved in favor of remand.[10]

In McPhail v. Deere & Co., [11] the Tenth Circuit outlined several methods that a removing defendant may use to satisfy its burden of proving jurisdictional facts by a preponderance of the evidence. A plaintiff “cannot avoid removal merely by declining to allege the jurisdictional amount, ” but in the absence of an explicit demand for more than the jurisdictional amount, defendant must show how much is in controversy through other means.[12] In other words, “the defendant must affirmatively establish jurisdiction by proving jurisdictional facts that made it possible that $75, 000 was in play.”[13] A defendant may accomplish this through interrogatories obtained in state court prior to the removal, or affidavits or other evidence submitted to the federal court.[14] In Frederick v. Hartford Underwriters Ins. Co., the Tenth Circuit reaffirmed McPhail and extended the rationale to class actions under CAFA.[15] In that case, the Tenth Circuit definitively joined a number of Circuits in holding that a defendant seeking to remove under CAFA must show that the amount in controversy exceeds $5 million by a preponderance of the evidence.[16]

Because the Petition does not make a specific monetary demand for damages, the Court looks to the Notice of Removal. Defendants set forth, in relevant part:

9. Plaintiff’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 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. . . .
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 Plaintiff were found to be required to be made.
15. Based upon this calculation of Plaintiff’s putative class claims, the amount of additional royalty sought is ...

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