On Thursday, in Serrano v. 180 Connect, Inc., ___ F.3d ___ (9th Cir. Feb. 22, 2007), the Ninth Circuit held that the party seeking remand bears the burden of proving the "home state" and "local controvery" exceptions to CAFA removal jurisdiction. In so holding, the court discussed Lao v. Wickes Furniture Co., 455 F.Supp.2d 1045 (C.D. Cal. 2006), a decision that generated a lot of attention, including this Daily Journal article (subscription) (see also this blog post).
In Lao, District Judge Stephen G. Larsen held that CAFA's "home state" and "local controversy" exceptions are not "exceptions" at all but rather "integral component[s] of the removal provisions themselves." Lao, slip op. at 20. The Ninth Circuit disagreed:
We are not persuaded by Lao's reasoning because it is inconsistent with the statute. As noted above, §§ 1332(d)(4)(A) and (B) require federal courts – although they have jurisdiction under § 1332(d)(2) – to “decline to exercise jurisdiction” when the criteria set forth in those provisions are met. Subsections (d)(4)(A) and (B) are not part of the prima facie elements of jurisdiction ... but, instead, are exceptions to jurisdiction.
Serrano, slip op. at 13-14. The Ninth Circuit went on to conclude that the party seeking remand bears the burden of proving the "home state" and "local controversy" exceptions, just like any other exceptions to federal removal jurisdiction. Id. at 14-17.