Delores Lewis v. Verizon Communications, Inc. ( 2010 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DELORES LEWIS, individually and 
on behalf of a class of similarly
No. 10-56512
situated individuals,
Plaintiff-Appellee, D.C. No.
v.  2:10-cv-02337-PSG-
MAN
VERIZON COMMUNICATIONS, INC., a
OPINION
Delaware corporation,
Defendant-Appellant.

Appeal from the United States District Court
for the Central District of California
Philip S. Gutierrez, District Judge, Presiding
Argued and Submitted
November 3, 2010—Pasadena, California
Filed November 18, 2010
Before: Mary M. Schroeder, Richard C. Tallman and
Milan D. Smith, Jr., Circuit Judges.
Opinion by Judge Schroeder
18841
18844 LEWIS v. VERIZON COMMUNICATIONS
COUNSEL
Michael J. McMorrow, Chicago, Illinois, for plaintiff-appellee
Delores Lewis, et al.
Paul J. Watford, Los Angeles, California, for defendant-
appellant Verizon Communications, Inc.
OPINION
SCHROEDER,Circuit Judge:
This is an appeal under the Class Action Fairness Act
(“CAFA”), Pub. L. No. 109-2, 119 Stat. 4 (2005) (codified in
scattered sections of 28 U.S.C.). The Act authorizes the
removal of class action lawsuits from state to federal court
where the amount in controversy exceeds $5 million, exclu-
sive of interest and costs. 28 U.S.C. § 1332(d)(2). The issue
before us is whether the district court properly remanded the
case to state court on the ground that this requirement was not
satisfied.
CAFA mandates a prompt disposition of controversies that
arise over issues relating to jurisdiction under the Act. All of
the deadlines have been satisfied by the parties, thus an appeal
must be decided within 60 days after it is filed. 28 U.S.C.
§ 1453(c)(2). Hence, we are required to decide this appeal no
later than November 22, 2010, 60 days after the petition for
appeal was granted. See Amalgamated Transit Union v.
Laidlaw Transit Services, Inc., 435 F.3d 1140, 1144 (9th Cir.
2006) (“[T]here is no appeal until the petition for permission
is granted, and the entry of the order granting permission
serves as the notice of appeal for all timing issues.”).
In this circuit, when the complaint does not contain any
specific amount of damages sought, the party seeking removal
LEWIS v. VERIZON COMMUNICATIONS 18845
under diversity bears the burden of showing, by a preponder-
ance of the evidence, that the amount in controversy exceeds
the statutory amount. Guglielmino v. McKee Foods Corp.,
506 F.3d 696, 699 (9th Cir. 2007); see also Lowdermilk v.
U.S. Bank Nat’l Ass’n., 479 F.3d 994 (9th Cir. 2007) (remov-
ing defendant has the burden to show amount in controversy
“to a legal certainty” when complaint pleads damages less
than CAFA’s jurisdictional amount). To satisfy its burden in
this case, the removing defendant, Verizon Communications,
Inc. (“Verizon”), supplied an affidavit to show that the poten-
tial damages could exceed the jurisdictional amount. We con-
clude that this showing satisfies Verizon’s burden. We
therefore vacate the district court’s order remanding the case
to state court, and remand to the district court for further pro-
ceedings. In doing so, we reach a conclusion similar to that
reached by the Seventh Circuit in Spivey v. Vertrue, Inc., 528
F.3d 982 (7th Cir. 2008). That case, like this one, involved
claims for unauthorized billings, and the defendant in that
case, like Verizon, submitted an affidavit showing its total bil-
lings exceeded the jurisdictional amount. Id. at 985.
BACKGROUND
The named plaintiff, Delores Lewis, filed this case in Cali-
fornia state court on December 9, 2009. The complaint con-
cerns charges billed by the defendant, Verizon, on behalf of
Enhanced Services Billing, Inc. (“ESBI”), a billing processor,
or “aggregator,” for third-party vendors who offer telephone-
related services. This includes weather and traffic reports,
sports scores, stock tips, and jokes—all of which are known
as “premium content.” ESBI bills customers for this premium
content through local landline telephone providers, like Veri-
zon, which places a charge on a subscriber’s bill.
Lewis claims Verizon billed her for services that she never
ordered. Describing these charges as “unauthorized,” she
seeks to represent a class of landline Verizon customers in
California who have been billed for such services that they
18846 LEWIS v. VERIZON COMMUNICATIONS
never expressly agreed to or requested. The operative com-
plaint states no fixed amount for damages sought.
On March 30, 2010, Verizon filed a notice of removal in
the District Court for the Central District of California alleg-
ing that the case satisfied the $5 million amount in contro-
versy requirement under CAFA, 28 U.S.C. § 1332(d). That
section provides in relevant part “[t]he district courts shall
have original jurisdiction of any civil action in which the mat-
ter in controversy exceeds the sum or value of $5,000,000,
exclusive of interest and cost . . . .” Id. at § 1332(d)(2).
In support of their notice of removal, Verizon submitted a
declaration of Paul E. Glover, Verizon’s Senior Consultant for
Product Management and Development, to establish that
members of the class were billed more than $5 million during
the relevant period:
I have reviewed Verizon’s records for charges billed
by Verizon on behalf of ESBI to landline telephone
subscribers in California from March 1, 2006 to the
present. The records show that these subscribers
were billed more than $5 million, exclusive of fees
and interest, from March 1, 2006 until the present for
ESBI charges . . . .
On April 29, 2010, Plaintiff filed a motion to remand the
action to state court on the ground that Verizon failed to carry
its burden of demonstrating that the case satisfies CAFA’s
amount in controversy requirement. Plaintiff’s motion to
remand proffered no evidence or new allegation that the
amount the class might be entitled to receive was less than
Verizon’s total ESBI billings. Nor did Plaintiff concede that
the class sought a recovery of less than $5 million. Instead,
Plaintiff contended that, because the complaint challenged
only “unauthorized” charges, there was a distinction between
“unauthorized” and “authorized” charges for the purposes of
determining the amount in controversy. Relying on such a dis-
LEWIS v. VERIZON COMMUNICATIONS 18847
tinction, Plaintiff attacked the Glover Declaration as “incom-
petent,” since it only spoke to the amount of Verizon’s gross
billings to consumers for ESBI content. On June 30, 2010, the
district court granted Plaintiff’s motion to remand, and on
September 24, 2010, we granted Verizon’s petition for per-
mission to appeal the remand pursuant to 28 U.S.C. § 1453(c),
authorizing interlocutory review of a CAFA removal order.
In ordering the matter remanded to the state court, the dis-
trict court adopted Plaintiff’s distinction between “authorized”
and “unauthorized” charges to hold that the complaint placed
only the unauthorized charges into controversy. Lewis v. Veri-
zon Commc’ns, Inc., 2010 WL 2650363, at *3 (C.D. Cal. June
30, 2010). Thus, according to the district court, the Glover
Declaration did not satisfy the Defendant’s burden to demon-
strate the requisite amount in controversy, since it describes
the total sum of all ESBI charges billed by Verizon, not just
the “unauthorized” ones. Id. at *3. There was, however, no
evidence to support the premise that some portion of the
charges alleged in the complaint were “authorized.” Nor did
any pleading suggest the class recovery would be less than $5
million.
Verizon contends on appeal that, given the Plaintiff’s
refusal to limit the damages sought and Verizon’s showing
that the total billings exceed $5 million, the total billings con-
stitute the “amount in controversy.” We agree.
DISCUSSION
Prior to CAFA, a class action could be heard in federal
court under diversity jurisdiction only if there was complete
diversity, i.e., all class representatives were diverse from all
defendants, and if at least one named plaintiff satisfied the
amount in controversy requirement of more than $75,000.
Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546(2005). Viewing these two limitations as “defects in diversity
jurisdiction,” Congress, in 2005, passed CAFA, which signifi-
18848 LEWIS v. VERIZON COMMUNICATIONS
cantly expanded federal jurisdiction in diversity class actions.
See David Marcus, Erie, the Class Action Fairness Act, and
Some Federalism Implications of Diversity Jurisdiction, 48
WM. & MARY L. REV. 1247, 1289-90 (2007).
CAFA, however, aimed to limit federal jurisdiction to
larger class actions. CAFA originally included a $2 million
amount in controversy requirement, but it was increased to $5
million after the Congressional Budget Office reported that
“the bill would impose additional costs on the Federal district
court system” since most class-action lawsuits would likely
satisfy the $2 million requirement. See Letter from Dan L.
Crippen, Dir., Cong. Budget Office, to F. James Sensenbren-
ner, Jr., Chairman, Comm. on the Judiciary, U.S. House of
Representatives (Mar. 11, 2002), in H.R. Rep. No. 107-370,
at 27.
CAFA was also designed to settle jurisdictional issues
early. Thus, appeals must be filed “not less than 7 days” after
a remand order. 28 U.S.C. § 1453(c)(1). If the court of
appeals accepts the appeal, the court must issue a final judg-
ment not more than 60 days later. Id. at § 1453(c)(2). And if
the court of appeals does not issue judgment within the time
allowed, “the appeal shall be denied.” Id. at § 1453(c)(4).
Although CAFA is relatively new, the concept of an
“amount in controversy” has a long history. Congress origi-
nally created a jurisdictional amount for diversity jurisdiction
in the Judiciary Act of 1789. That statute established a $500
jurisdictional amount, intended as a floor for the size of cases
that could reach the federal courts. “Congress has used the
requirement of an amount in controversy to limit the original
and derivative access to the lower federal courts.” Thomas E.
Baker, The History and Tradition of the Amount in Contro-
versy Requirement: A Proposal to “Up the Ante” in Diversity
Jurisdiction, 102 F.R.D. 299, 302-03 (1984). Over the years,
Congress has seen fit to increase the amount, but its purpose
has remained the same — “to ensure that a dispute is suffi-
LEWIS v. VERIZON COMMUNICATIONS 18849
ciently important to warrant federal-court attention.” Exxon
Mobil Corp., 545 U.S. at 548. The law with respect to estab-
lishing an “amount in controversy” has thus developed in the
context of diversity jurisdiction.
[1] In determining the amount, we first look to the com-
plaint. Generally, “the sum claimed by the plaintiff controls
if the claim is apparently made in good faith.” St. Paul Mer-
cury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938).
The complaint, however, does not always state a specific sum,
and in such cases, this court has recognized different burdens
of proof depending on the specific circumstances. Gugliel-
mino, 506 F.3d at 699. The fundamental principle laid down
in diversity cases, nevertheless, remains under CAFA: the
party asserting federal jurisdiction has the burden of showing
the case meets the statutory requirements for the exercise of
federal jurisdiction and therefore belongs in federal court.
This traditional rule of burden allocation to determine
removal jurisdiction comports with the Supreme Court’s view
that “[t]he dominant note in the successive enactments of
Congress relating to diversity jurisdiction is one of jealous
restriction, of avoiding offense to state sensitiveness, and of
relieving the federal courts of the overwhelming burden of
‘business that intrinsically belongs to the state courts’ in order
to keep them free for their distinctive federal business.” India-
napolis v. Chase Nat’l Bank, 314 U.S. 63, 76, 62 S.Ct. 15, 86
L.Ed. 47 (1941) (citing Henry J. Friendly, The Historic Basis
of Diversity Jurisdiction, 41 HARV.L.REV. 483, 510 (1928)).
[2] Thus we expressly recognized in Abrego Abrego v.
Dow Chemical Co., 443 F.3d 676, 685 (9th Cir. 2006), that
under CAFA the burden of establishing removal jurisdiction
is, as it was before CAFA, on the party wishing to see the
case in federal court. While CAFA relaxed the federal
removal requirements in some respects, it did not alter the tra-
ditional rule which places the burden of establishing removal
jurisdiction “on the proponent of federal jurisdiction.” Id. This
means that jurisdictional issues may be disputed, and, when
18850 LEWIS v. VERIZON COMMUNICATIONS
they are, the burden is on the party removing the case from
state court to show the exercise of federal jurisdiction is
appropriate.
[3] In this case the Plaintiff alleges that she and the other
putative class members are being billed by Verizon for pre-
mium services they never ordered. In the complaint the
charges at issue are termed “unauthorized” charges. To sup-
port removal, Verizon submitted an affidavit that its total bil-
lings for all ESBI services in California exceeded $5 million.
There was no contrary evidence, no showing that some sub-
stantial part of the total billings was “authorized,” and no alle-
gation that Plaintiff sought less than $5 million.
In what may well be at root a semantic misunderstanding,
the district court refused to accept the total billings as repre-
senting 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.” Lewis, 2010 WL 2650363 at *2. The district
court thus assumed total billings would include both autho-
rized 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. Id. at *4.
[4] There is no evidence or allegation to support this
assumption, however. The Plaintiff has alleged that the puta-
tive class has been billed for unauthorized charges; the Defen-
dant 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 enti-
tled to a refund. Hence, on this record, the entire amount of
the billings is “in controversy.” The amount in controversy is
LEWIS v. VERIZON COMMUNICATIONS 18851
simply an estimate of the total amount in dispute, not a pro-
spective assessment of defendant’s liability. See McPhail v.
Deere & Co., 529 F.3d 947, 956 (10th Cir. 2008) (“The
amount in controversy is not proof of the amount the plaintiff
will recover. Rather, it is an estimate of the amount that will
be put at issue in the course of the litigation.”). 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.
[5] The district court rejected the reasoning of the two cir-
cuits that have, in circumstances similar to this, held a show-
ing on the part of the defendant of the total amounts billed for
services challenged by the complaint is sufficient to establish
the jurisdictional amount. Spivey, 528 F.3d at 985-986; Stawn
v. AT&T Mobility LLC, 530 F.3d 293, 295 (4th Cir. 2008).
The district court followed other district courts in this circuit
that incorrectly read the other circuits’ decisions as resting on
pleadings rather than on an evidentiary showing. See, e.g.,
Amezcua v. Cellco P’ship, 2009 WL 1190553 (N.D. Cal. May
4, 2009).
[6] The law in our circuit is articulated a little differently
from that of others, in that we expressly contemplate the dis-
trict court’s consideration of some evidentiary record. See
generally Diane B. Bratvold & Daniel J. Supalla, Standard of
Proof to Establish Amount in Controversy When Defending
Removal Under the Class Action Fairness Act, 36 WM.
MITCHELL L. REV. 1397 (2010). We employ a preponderance
of the evidence standard when the complaint does not allege
a specific amount in controversy. Guglielmino, 506 F.3d at
699. The Seventh Circuit, along with the First and Second
Circuits, apply what may be a lower standard of proof: a “rea-
sonable probability” standard. See, e.g., Brill v. Countrywide
Home Loans, Inc., 427 F.3d 446, 449 (7th Cir. 2005) (when
the complaint is “silent or ambiguous on one or more of the
18852 LEWIS v. VERIZON COMMUNICATIONS
ingredients needed to calculate the amount in controversy . . .
the removing litigant must show a reasonable probability that
the stakes exceed the minimum.”); see also Amoche v. Guar-
antee Trust Life Ins. Co., 556 F.3d 41, 48 (1st Cir. 2009);
DiTolla v. Doral Dental IPA of New York, 469 F.3d 271, 277
(2nd Cir. 2006). The Fourth Circuit has not adopted a specific
standard of proof, although “several district courts within the
Fourth Circuit have concluded that the appropriate standard of
proof is preponderance of the evidence.” Laws v. Priority
Trustee Services of N.C., L.L.C., 2008 WL 3539512 at * 2
(W.D.N.C. Aug. 11, 2008). Both the Seventh Circuit in Spivey
and the Fourth Circuit in Strawn have looked to evidence out-
side the complaint when the complaint is silent as to the
amount. Regardless of the label applied to the standard of
proof, the result in this case should be the same as that in the
Seventh and Fourth Circuits’ decisions in Spivey and Strawn.
Spivey is the closest to our case. In Spivey, the plaintiff
filed suit in state court seeking to represent a class of custom-
ers allegedly billed by a marketing company for unauthorized
charges. 528 F.3d at 983. The complaint alleged that imposing
unauthorized charges on customers was a standard practice of
the defendant. Id. at 985-86. As in this case, the defendant
removed the action to federal court under CAFA, and also
supplied an affidavit to show that its total charges exceeded
$5 million, but the district court found the evidentiary show-
ing insufficient, remanding the case to state court. Id. The
Seventh Circuit reversed, holding that the defendant had satis-
fied its burden. It concluded that if the defendant routinely
imposed such charges without authorization, all such charges
are in play. “Once the proponent of federal jurisdiction has
explained plausibly how the stakes exceed $5 million, . . .
then the case belongs in federal court unless it is legally
impossible for the plaintiff to recover that much.” Id. at 986.
The Fourth Circuit decision is similar. In Strawn, the plain-
tiff filed suit in state court seeking to represent a class of cus-
tomers who were automatically enrolled in a “Roadside
LEWIS v. VERIZON COMMUNICATIONS 18853
Assistance” program when signing up for cellular phone ser-
vice. 530 F.3d at 294. The district court limited the class to
customers who paid the fee “unwillingly.” Id. The Fourth Cir-
cuit vacated the remand order because the complaint did not
distinguish between “willing” and “unwilling” customers, and
thus included any phone customer who was charged the fee
after being automatically enrolled in the program. Id. at 299.
It relied on AT&T’s affidavit stating the approximate number
of customers in West Virginia enrolled in the program, cou-
pled with the existence of minimum statutory damages, to
hold that AT&T satisfied the jurisdictional burden. Id. at
298-299 (“[T]he minimum amount of class damages, if the
plaintiffs were to succeed on the merits, would be
$11,760,000 (the minimum statutory damages of $200 per
customer x 58,800 customers)”).
[7] Here, as in Spivey and Strawn, the stakes exceed $5
million. The Plaintiff is seeking recovery from a pot that
Defendant has shown could exceed $5 million and the Plain-
tiff has neither acknowledged nor sought to establish that the
class recovery is potentially any less. The amount in contro-
versy on this record therefore comprises the total billings and
the jurisdictional amount is satisfied. Verizon has acknowl-
edged at oral argument that Plaintiff is due refunds of billings
for services never requested. The district court, on the basis
of a record that lacked the clarity provided by the arguments
on appeal, erred in assuming, without pleading or proof, that
some significant portion of the total billings were “autho-
rized” and separate from the damages the Plaintiff seeks.
Verizon has borne its burden to show the amount in contro-
versy exceeds $5 million.
The remand order is VACATED and the case is
REMANDED for further proceedings in district court.