The first step in defending a class action filed in state court is to check whether it may be removed to federal court. To some, removal may seem hopeless if the plaintiff asserts only state-law claims and the amount of potential actual damages at stake appears to be well below the $5 million amount-in-controversy threshold of the Class Action Fairness Act (CAFA). But that’s not always the case—especially when the plaintiff also seeks punitive damages or attorneys’ fees. Federal courts have confirmed that those amounts should be included when determining whether the amount in controversy is at least $5 million, as required for removal under CAFA.
Ezell v. Graco Children’s Products Inc. (pdf) (W.D. Okla. Sept. 24, 2012) is a recent example. In that class action, the plaintiffs asserted state-law product-liability claims against a booster seat manufacturer, seeking refunds for the purchase price of booster seats bought by a putative class of Oklahoma customers. Even if every booster seat sold in the state were assumed to be defective, however, the total purchase price of all of those seats would fall more than a million dollars below CAFA’s $5 million threshold. But because the complaint also included a demand for punitive damages, the amount in controversy was bumped up well over the CAFA minimum. Thus, the court denied the plaintiff’s motion to remand the case back to state court.
In its order, the court reiterated that a defendant does not concede liability—nor are plaintiffs automatically entitled to punitive damages—simply because the defendant argues that the court should consider the claim for punitive damages in assessing the amount in controversy. That’s because the defendant’s sole burden is to show that “state law permits a punitive damages award for the claims in question”—not that “the plaintiff is more likely than not to ultimately recover punitive damages.”
Even that standard seems to place too high a burden on defendants. In my view, the defendant merely needs to show that state law might permit an award of punitive damages for the type of claim asserted. If the availability of punitive damages on that claim is uncertain as a legal matter, the fact that a plaintiff has sought punitive damages alone should suffice to meet the price of admission to federal court. So long as it’s not legally impossible for punitive damages to be recovered at the outset of the case, the defendant has met its burden to support removal under CAFA.
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