Eleventh Circuit Holds That Complaint for Declaratory Relief is “Up to the Task” of Satisfying the $5 Million Jurisdictional Amount for CAFA Removal
Recently, in South Florida Wellness, Inc. v. Allstate Insurance Co., the Court of Appeals for the Eleventh Circuit held that a class action complaint seeking only declaratory relief may be removed to federal court under the Class Action Fairness Act (“CAFA”), because the class members would be eligible to recover more than $5 million — the “amount in controversy” threshold for federal jurisdiction under CAFA — if such relief were granted. Central to the court’s holding was that the “amount in controversy” is an estimate of the value of what is at stake in the litigation, and not a precise measurement of plaintiffs’ likely recovery. In affirming the removal of a complaint seeking only declaratory relief under CAFA, the Eleventh Circuit offered useful insight on the burden of proof for “amount in controversy” purposes.
In South Florida Wellness, the plaintiff, South Florida Wellness (“SFW”) filed a putative class action on behalf of itself and other health care providers and insureds in Florida state court, seeking a declaration that the language in Allstate’s insurance policies limiting PIP coverage to the statutory fee schedule was ambiguous and unclear. Allstate removed the matter to federal court, with an affidavit detailing the number of potential plaintiffs and the amount of each claim. Allstate contended that, although SFW only sought declaratory relief, a judgment in SFW’s favor would entitle class members to recover approximately $70 million. SFW moved to remand, arguing that even though a declaration in its favor would entitle class members to seek payments from Allstate, the financial effect of such a judgment should not be considered because it was too speculative and required additional steps for class members to recover. The District Court held that declaratory relief was insufficient to meet the monetary threshold and remanded the matter to state court.
The Eleventh Circuit reversed, holding that even though the complaint sought only declaratory relief, the actual amount in controversy was about $70 million. The Court explained that at the jurisdictional stage the relevant inquiry is not how much the plaintiffs are ultimately likely to recover but the “value of the object of the litigation measured from the plaintiff’s perspective.” The Court found that it contradicted common sense and human nature to assume that class members would not seek monetary recovery if a declaratory judgment were entered. The Court of Appeals reasoned that potential developments, such as the possibility that the class would not be certified or that class members would opt out or be deterred by the additional steps, were irrelevant to the jurisdictional analysis. The Court of Appeals also pointed out that while Allstate had the burden of proving that the amount in controversy exceeded the jurisdictional threshold, SFW offered no proofs rebutting Allstate’s estimations and calculations.
According to the Eleventh Circuit, suits for declaratory relief are “up to the task” of satisfying the amount in controversy threshold under CAFA. At the center of the court’s holding is the view that the amount in controversy is an estimate of the value of the litigation and not a projection of the ultimate recovery. Although a removing party’s estimate must be “sufficiently measurable and certain,” “decimal-point precision” is not required. Thus, while there may be intervening factors that diminish the plaintiffs’ ultimate recovery, these considerations have no place in the jurisdictional analysis, which is confined to the total potential value of the litigation at the outset.