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Stoddard v. OXY USA Inc.

United States District Court, D. Kansas

July 27, 2017

DEANNA GUYLENE STODDARD, on behalf of herself and all others similarly situated, Plaintiff,
v.
OXY USA INC., Defendant.

          MEMORANDUM AND ORDER

          ERIC F. MELGREN UNITED STATES DISTRICT JUDGE.

         Plaintiff Deanna Guylene Stoddard originally filed this action on behalf of herself and all others similarly situated against Defendant Oxy USA, Inc. in the District Court of Grant County, Kansas. Stoddard alleges Oxy breached lease agreements by underpaying royalty fees. Oxy removed this action to this Court under the Class Action Fairness Act (“CAFA”). Stoddard filed this Motion to Remand (Doc. 13), alleging Oxy failed to plausibly allege the Court's jurisdiction in its Notice of Removal. For the reasons stated below, the Court denies Stoddard's motion.

         I. Factual and Procedural Background

         From 2010-2014, Oxy was one of the largest operators of natural gas wells in Kansas. Stoddard is a royalty owner in several wells in Kansas and seeks to represent a proposed class of others similarly situated. Oxy and the proposed class members entered into lease agreements where Oxy operated natural gas wells in return for paying royalty fees for use of the land.

         Stoddard alleges Oxy paid royalty fees at a price lower than the commercial price. Additionally, Stoddard alleges Oxy improperly deducted from their royalty fees a Conservation Fee owed to the Kansas Corporation Commission, which Oxy, not the royalty owners, was required to pay.

         On February 15, 2017, Stoddard filed a class action petition in the District Court of Grant County. Stoddard seeks to represent a class of all royalty owners of Kansas gas wells Oxy operated “who were paid royalties for production of gas, NGLs, or Helium from July 1, 2007 to April 30, 2014.”[1] In her petition, Stoddard claims she and the proposed class “have been damaged through underpayment of the actual amounts due in an amount less than $5 million, exclusive of interest and attorneys' fees.” On March 23, 2017, Oxy filed a Notice of Removal with this Court, alleging jurisdiction under CAFA. On April 4, 2017, Stoddard filed this Motion to Remand the case back to state court. Stoddard argues Oxy failed to plausibly allege all of the requirements for federal jurisdiction under CAFA.

         In Oxy's Notice of Removal, Oxy referenced Stoddard's allegations in her complaint and “attempted to quantify the amount of additional royalties that would be owed” if Stoddard and her proposed class “recovered the full amount.” Oxy calculated the amount would exceed the $5 jurisdictional requirement. After Stoddard's Motion to Remand, Oxy submitted an affidavit prepared by David Bushnell, a former Team Lead for Oxy's gas business, to prove the amount in controversy exceeded the jurisdictional requirement. Bushnell used a royalty fee rate of 12.5% and a helium valuation based on a U.S. Department of the Interior report. According to Bushnell's calculations, the proposed class members' estimated potential damages for the period from July 2007 through April 2014 were $7, 518, 796.

         II. Legal Standard

         A civil action filed in state court is only removable to federal court if the action could have been originally brought in federal court.[2] Federal courts possess limited jurisdiction and specific jurisdiction requirements must be met.[3] The party asserting federal jurisdiction bears the burden to show the propriety of the removal.[4] However, cases invoking CAFA carry “no antiremoval presumption” in favor of remand because Congress enacted CAFA “to facilitate adjudication of certain class actions in federal court.”[5]

         Under CAFA, this Court has original jurisdiction “to hear a class action if the class has more than 100 members, the parties are minimally diverse, and the matter in controversy exceeds that sum or value of $5, 000, 000.”[6] “As historically used, the term in controversy, ” as applied to the amount at issue in a case, “has never required a party seeking to invoke federal jurisdiction to show that damages are greater or will likely prove greater than the requisite amount specified by statute. Instead, the term has required a party seeking federal jurisdiction to show only and much more modestly that a fact finder might legally conclude that damages exceed the statutory amount.”[7]

         If a plaintiff does not specify an amount in controversy in the complaint, a defendant may assert “a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.”[8] Under Supreme Court precedent, a defendant must make a short and plain statement similar as to what is required by Fed.R.Civ.P. 8(a).[9] A short and plain statement “shows that the pleader is entitled to relief in order to give the [nonmovant] fair notice what the claim is and the ground upon which it rests.”[10] The Court accepts as true all factual allegations, but does not do the same for legal conclusions.[11]

         The amount in controversy asserted by a defendant should be accepted “when not contested by the plaintiff or questioned by the court.”[12] If a plaintiff challenges a defendant's allegations “both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in controversy requirement has been satisfied.”[13]

         III. Discussion

         To allege jurisdiction under CAFA, the removing party must show the proposed class has more than 100 members, minimal diversity, and the amount in controversy exceeds $5 million.[14]Stoddard does not contest the first two elements. The only issue at hand is whether Oxy successfully alleged the amount in controversy requirement.

         A. Oxy has plausibly alleged that the amount in controversy exceeds $5, 000, 000.

         Under Dart, a notice of removal must contain a plausible basis for alleging the amount in controversy. Plausibility “does not impose a probability requirement . . . it simply calls for enough fact to raise reasonable expectation that discovery will reveal evidence.”[15] Determining plausibility is a “context specific task that requires the reviewing court to draw on its judicial experience and common sense.”[16] When removing an action, a defendant may rely on a plaintiff's complaint for his facts.[17]

         The amount in controversy is not the amount the plaintiff will recover, but an estimate of the amount that will be “put at issue in the course of the litigation.”[18] Traditionally, when a plaintiff alleges an amount in controversy in good faith, the Court accepts it.[19] If the Plaintiff fails to allege a specific amount, the defendant may assert a plausible allegation that it crosses the jurisdictional threshold.[20] Additionally, the Supreme Court has held that damages claimed by a plaintiff before a class is certified cannot legally bind the proposed class.[21]

         In her claim, Stoddard failed to allege a specific amount in controversy in good faith. Stoddard claimed that the damages resulting from defendant's breaches would only result in an actual amount less than the $5 million threshold. Stoddard is simply seeking to keep the damages below this Court's jurisdictional minimum. Even if the amount was specific, Stoddard attempted to limit the recovery to under $5 million before the class is certified. Stoddard cannot legally bind the class to a damages limit before certification occurs. As a result, Stoddard did not allege an amount in ...


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