Lewis v. Verizon: Ninth Circuit Eases Burden of Proof on CAFA Amount in Controversy Requirements

In Lewis v. Verizon Communications, Inc., --- F.3d ----, 2010 WL 4645465 (9th Cir. November 18, 2010), the Ninth Circuit eased the amount in controversy requirements of the Class Action Fairness Act (CAFA).

The plaintiff filed a class action in Superior Court, alleging that Verizon violated state law by billing telephone subscribers for products and services without their authorization. Verizon removed the case to district court, alleging that its total billings -- not just those alleged to be improper -- exceeded $5 million, exclusive of fees and interest. The court (Gutierrez, C.D.Cal.) granted the plaintiff's motion to remand, and Verizon requested permission to appeal, which the Ninth Circuit granted. Verizon contended on appeal that, "given the Plaintiff's refusal to limit the damages sought [to less then $5 million] and Verizon's showing that the total billings exceed $5 million, the total billings constitute the 'amount in controversy.'" The Ninth Circuit agreed.

The first place to look for the amount in controversy is in the complaint, and the complaint generally controls. Slip op. at 4. However, in the Ninth Circuit, "when the complaint does not contain any specific amount of damages sought, the party seeking removal under diversity bears the burden of showing, by a preponderance of the evidence, that the amount in controversy exceeds the statutory amount." Slip op. at 1.

In what may well be at root a semantic misunderstanding, the district court refused to accept the total billings as representing the amount in controversy. Instead, looking to the allegations of the complaint, it held that the total billings could not represent the amount in controversy because the complaint was claiming liability only for charges that were “unauthorized.” The district court thus assumed total billings would include both authorized and unauthorized charges and held that the Defendant had failed to meet its burden under our case law to show the amount in controversy, i.e., unauthorized charges, exceeded the jurisdictional amount.
There is no evidence or allegation to support this assumption, however. The Plaintiff has alleged that the putative class has been billed for unauthorized charges; the Defendant has put in evidence of the total billings and the Plaintiff has not attempted to demonstrate, or even argue, that the claimed damages are less than the total billed. Indeed, even though it was not apparent in the district court, before us the Defendant has conceded that where proposed class members have been billed for services they did not order, they are entitled to a refund. Hence, on this record, the entire amount of the billings is “in controversy.” The amount in controversy is simply an estimate of the total amount in dispute, not a prospective assessment of defendant's liability. To establish the jurisdictional amount, Verizon need not concede liability for the entire amount, which is what the district court was in essence demanding by effectively asking Verizon to admit that at least $5 million of the billings were “unauthorized” within the meaning of the complaint.

Slip op. at 4-5.

The opinion is here.