Academy of Country Music v. Continental Casualty Company

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ACADEMY OF COUNTRY MUSIC, a No. 20-55589

California nonprofit corporation,

Plaintiff-Appellee, D.C. No.

2:20-cv-03046-

v. RGK-JC

CONTINENTAL CASUALTY COMPANY,

an Illinois corporation, OPINION

Defendant-Appellant,

and

DOES, 1 through 10,

Defendants.

Appeal from the United States District Court

for the Central District of California

R. Gary Klausner, District Judge, Presiding

Argued and Submitted February 8, 2021

Pasadena, California

Filed March 22, 2021

Before: Richard C. Tallman, Consuelo M. Callahan,

and Kenneth K. Lee, Circuit Judges.

Opinion by Judge Callahan

2 ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO.

SUMMARY *

Jurisdiction / Remand

The panel vacated the district court’s order sua sponte

remanding this civil action to state court, based on the

panel’s determination that the transmittal of the remand

order did not deprive federal courts of jurisdiction and that

review was not barred by 28 U.S.C. § 1447(d).

The panel held that 28 U.S.C. § 1447(d) barred review

only of a remand order that was based on a colorable

§ 1447(c) ground. The panel held further that it could look

behind the district court’s characterization of its order to

determine whether its assertion of § 1447(c) was colorable.

The panel held that the district court’s remand order was

not based on a colorable § 1447(c) ground. Specifically, the

panel held that the district court erred as a matter of law in

requiring that the notice of removal “prove” subject matter

jurisdiction. By acting sua sponte, and thereby refusing to

allow the appellant to offer proof to substantiate its

allegations in the notice of removal that the amount in

controversy exceeded $75,000, the district court denied the

appellant a fair opportunity to submit proof. The panel

further held that because the district court erred as a matter

of law in requiring that the notice of removal “prove” the

amount in controversy and then failed to follow Supreme

Court and Ninth Circuit precedent by refusing to allow the

appellant to supplement its notice of removal, the district

*

This summary constitutes no part of the opinion of the court. It

has been prepared by court staff for the convenience of the reader.

ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO. 3

court’s order was not “colorable” or “arguable,” and could

be reviewed.

The panel concluded that the transmittal of the remand

order to the state court did not deprive this court of

jurisdiction. The panel further held that the district court’s

assertion that a notice of removal must prove subject matter

jurisdiction was contrary to Dart Cherokee Basin Operating

Co., LLC v. Owens, 574 U.S. 81, 89 (2014), and Arias v.

Residence Inn by Marriott, 936 F.3d 920 (9th Cir. 2019), and

thus was not a “colorable” basis for remand.

The panel directed the district court to enter an order

recalling the remand, and to notify the state court that the

district court had resumed jurisdiction over the action.

COUNSEL

Richard A. Simpson (argued), Wiley Rein LLP,

Washington, D.C.; Robert C. Christensen, CAN Coverage

Litigation Group, Oakland, California; for Defendant-

Appellant.

Kayla Robinson (argued) and Kirk Pasich, Pasich LLP, Los

Angeles, California, for Plaintiff-Appellee.

4 ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO.

OPINION

CALLAHAN, Circuit Judge:

We confront two jurisdictional issues. First, we consider

whether the district court’s transmittal of its sua sponte order

remanding this civil action to a state court based solely on

the notice of removal deprives federal courts of jurisdiction.

Second, we consider whether review of the remand order is

barred by 28 U.S.C. § 1447(d). We determine that the

transmittal of the remand order does not deprive federal

courts of jurisdiction and that review in this case is not

barred by § 1447(d). The district court’s requirement that a

notice of removal prove subject matter jurisdiction is

contrary to Dart Cherokee Basin Operating Co., LLC v.

Owens, 574 U.S. 81, 89 (2014), 1 and accordingly, is not a

“colorable” ground under 28 U.SC. § 1447(c). See Powerex

Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224, 234

(2007). Therefore, we vacate the district court’s remand

order.

I

On February 24, 2020, the Academy of Country Music

(Academy) filed a lawsuit in a California Superior Court

alleging that Continental Casualty Company (Continental)

breached an insurance policy by denying coverage for a

claim asserted against it by a former executive. On April 1,

2020, Continental removed the case to the U.S. District

Court for the Central District of California. The Notice of

Removal stated that the parties were diverse; the amount in

controversy exceeded $75,000, exclusive of interest and

costs; and that prior to the commencement of the action,

1

Parallel citations are omitted throughout this opinion.

ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO. 5

Academy had made a demand on Continental for an amount

in excess of $75,000.

On April 10, 2020, the district court issued a sua sponte

order remanding the case to state court. The order’s critical

paragraphs read:

The Court is not satisfied that Defendant has

satisfied its burden to show that the amount

in controversy meets the jurisdictional

requirement. Defendant makes no attempt to

calculate damages, nor does it offer

evidentiary support as to the existence and

amount of punitive damages. The Court is

unable to find a plausible allegation that the

amount in controversy has been met. That

Plaintiff’s Complaint alleges damages “in an

amount exceeding the Court’s jurisdictional

limit” is not persuasive, given that this likely

refers to the jurisdictional limit of $25,000

for unlimited civil cases in California state

court. There is nothing from which the Court

could conclude that this reference to the

“jurisdictional limit” refers to the

jurisdictional limit for diversity jurisdiction.

The fact that Plaintiff, at one time, made a

settlement demand in excess of $75,000 does

not alter the result that the amount in

controversy has not been established. A

settlement demand is “relevant evidence of

the amount in controversy if it appears to

reflect a reasonable estimate of the plaintiff's

claim,” but it is not dispositive. Cohn v.

Petsmart, Inc., 281 F.3d 837, 840 (9th Cir.

6 ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO.

2002). Here, Defendant offers no evidence to

suggest that Plaintiff’s demand reasonably

estimates the value of its claims. “The

removal statute is strictly construed against

removal jurisdiction, and the burden of

establishing federal jurisdiction falls to the

party invoking the statute.” California ex rel.

Lockyer v. Dynegy, Inc., 375 F.3d 831, 838

(9th Cir. 2004) (citing Ethridge v. Harbor

House Rest., 861 F.2d 1389, 1393 (9th Cir.

1988)). “Federal jurisdiction must be

rejected if there is any doubt as to the right of

removal in the first instance.” Gaus,

980 F.2d at 566. Thus, the Court concludes

that it lacks subject matter jurisdiction over

this case.

The same day that the district court issued its sua sponte

remand order it transmitted a certified copy of that order to

the Los Angeles County Superior Court.

On April 27, 2020, Continental filed a motion to alter or

amend the April 10 order pursuant to Federal Rule of Civil

Procedure 59(a). The motion was supported by a declaration

of one of Continental’s claims professionals affirming the

underlying policy’s $2 million limit. It was also supported

by a stipulation that the litigation concerned “(i) damages in

the amount of $621,824.65; (ii) prejudgment interest of

$85,681.17; and (iii) attorneys’ fees and costs of

$562,893.95, for a total amount of $1,270,399.77.”

On June 1, 2020, the district court denied the motion.

The district court stated that its sua sponte order was a

determination that it lacked subject matter jurisdiction and

that review of its decision was precluded by 28 U.S.C.

ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO. 7

§ 1447(d). On June 8, 2020, Continental filed a timely

notice of appeal.

II

There are two challenges to our jurisdiction in this

appeal. First, did the district court’s transmittal of its remand

order to the state court deprive us, as well as the district

court, of jurisdiction? See Seedman v. U.S.D.C., 837 F.2d

413 (9th Cir. 1988). Second, if the transmittal of the remand

order does not deprive the courts of jurisdiction, is review

prohibited by 28 U.S.C. § 1447(d)? These are questions of

law which we review de novo. See Lively v. Wild Oats

Markets, Inc., 456 F.3d 933, 938 (9th Cir. 2006).

We have not always recognized the distinct natures of

these two questions. However, we conclude that controlling

case law holds that the district court’s transmittal of its

remand order does not immunize that order from review.

We further conclude that despite the district court’s

characterization of its order, § 1447(d) does not bar our

review because jurisdiction could not be determined when

the district court issued its sua sponte order.

III

The distinction between federal court jurisdiction and

jurisdiction to review a remand order was suggested in City

of Waco, Texas v. United States Fidelity & Guaranty Co.,

293 U.S. 140 (1934). In an action that had been removed

from a Texas court, the district court issued a single order

that overruled the motion to remand, granted the motion to

dismiss the cross-complaint, and remanded the balance of

the action to state court. Id. at 142.

8 ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO.

The City appealed alleging that the dismissal of its action

was contrary to the law of Texas. Id. The Fifth Circuit held

“that, as no appeal lies from an order of remand, the cause

was irrevocably out of the District Court, the action of that

court in dismissing the city’s cross-action was moot, and its

propriety could not be reviewed.” Id. at 142–43. The Fifth

Circuit further stated that “all matters concerning the entire

controversy, both those presented by the cross bill, and those

presented by the main suit are now, because of the remand,

pending in the State court and for its action, unaffected by

the attempt of the Federal court to dismiss the City’s cross

action.” Id. at 143.

The Supreme Court did not agree. It reasoned that “[i]f

the District Court’s order stands the cross-action will be no

part of the case which is remanded to the state court.” Id.

Critically, the Court stated: “True, no appeal lies from the

order of remand; but in logic and in fact the decree of

dismissal preceded that of remand and was made by the

District Court while it had control of the cause. Indisputably

this order is the subject of an appeal; and, if not reversed or

set aside, is conclusive upon the petitioner.” Id. In other

words, even accepting that the remand order was not

reviewable, its issuance and the pendency of the underlying

suit in state court did not deprive the Court of jurisdiction. 2

2

The Supreme Court further stated:

We are of opinion that the petitioner was entitled to

have the Circuit Court of Appeals determine whether

the dismissal of its cross-action against the Fidelity

Company was proper. If the District Court erred on

this point, which we do not decide, its action should be

reversed. A reversal cannot affect the order of remand,

but it will at least, if the dismissal of the petitioner’s

ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO. 9

The distinction between federal court jurisdiction and

review jurisdiction pursuant to § 1447(d) and its

predecessors appears to have remained dormant until the

Supreme Court decided Thermtron Products, Inc. v.

Hermansdorfer, 423 U.S. 336 (1976). In Thermtron, the

district court remanded an action to the state court because

of its crowded docket. Id. at 340. Thermtron filed an

alternate petition for writ of mandamus or prohibition with

the Sixth Circuit, which held that it had no jurisdiction to

review the removal order because of the prohibition against

review in § 1447(d). Id. at 341–42.

The Supreme Court held that the district court had

“exceeded its authority in remanding on grounds not

permitted by the controlling statute,” and that § 1447(d) was

“not dispositive of the reviewability of remand orders in and

of itself.” Id. at 345. The Court ruled that “only remand

orders issued under § 1447(c) and invoking the grounds

specified therein that removal was improvident and without

jurisdiction are immune from review under § 1447(d).” 3 Id.

complaint was erroneous, remit the entire controversy,

with the Fidelity Company still a party, to the state

court for such further proceedings as may be in

accordance with law.

293 U.S. at 143–44.

3

Sections 1447(c) and (d) state:

(c) A motion to remand the case on the basis of any

defect other than lack of subject matter jurisdiction

must be made within 30 days after the filing of the

notice of removal under section 1446(a). If at any time

before final judgment it appears that the district court

lacks subject matter jurisdiction, the case shall be

remanded. An order remanding the case may require

10 ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO.

at 346. Reviewing the history of § 1447, the Court found

that “[t]here is no indication whatsoever that Congress

intended to extend the prohibition against review to reach

remand orders entered on grounds not provided by the

statute.” Id. at 350. The Court held that “[b]ecause the

District Judge remanded a properly removed case on

grounds that he had no authority to consider, he exceeded his

statutorily defined power; and issuance of the writ of

mandamus was not barred by § 1447(d).” Id. at 351.

There is no mention in Thermtron of whether the district

court transmitted its remand order to the state court. But the

Court’s strong statement that a district court’s actions

beyond that “recognized by the controlling statute” were

reviewable certainly suggests that it would not countenance

a district court evading review by immediately transmitting

its remand order to the state court.

In Flam v. Flam, 788 F.3d 1043 (9th Cir. 2015), we

addressed the merits of a remand order that had been

transmitted to the state court. In Flam, a magistrate judge

issued an order remanding the case to state court. Dr. Flam

timely filed a motion for reconsideration of the removal

order. The district court refused to entertain the motion,

payment of just costs and any actual expenses,

including attorney fees, incurred as a result of the

removal. A certified copy of the order of remand shall

be mailed by the clerk to the clerk of the State court.

The State court may thereupon proceed with such case.

(d) An order remanding a case to the State court from

which it was removed is not reviewable on appeal or

otherwise, except that an order remanding a case to the

State court from which it was removed pursuant to

section 1442 or 1443 of this title shall be reviewable

by appeal or otherwise.

ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO. 11

explaining that 28 U.S.C. § 1447(d) barred review because

“the Magistrate Judge’s remand order was issued, … the

case was closed, … [and] certification was sent to the Fresno

County Superior Court.” Id. at 1045. Nonetheless, we

vacated the magistrate judge’s order, holding that because

the remand order was dispositive of all federal proceedings,

it was properly characterized as a dispositive motion under

28 U.S.C. § 636(b)(1)(A), and could not be issued by a

magistrate judge. Id. at 1047. We could not have considered

the merits of the magistrate judge’s order if the transmittal

of the remand order to the state court had deprived us of

jurisdiction.

Our opinion in Flam recognized that in Seedman,

837 F.2d at 414, we had read § 1447(d) broadly to “preclude

not only appellate review but also reconsideration by the

district court,” but we further recognized that “the rule is not

without exceptions.” Flam, 788 F.3d at 1047. Although

Seedman contains language that seems to suggest that

transmittal of a remand order deprives federal courts of

jurisdiction, a closer reading of Seedman reconciles it with

Flam.

In July 1986, Seedman filed an action in state court

against multiple defendants alleging eight causes of action

based primarily on an alleged breach of an agreement to buy

certain assets. 837 F.3d at 413. We explained the underlying

proceedings as follows:

On November 6, 1986, the district court sua

sponte remanded the case to state court on the

ground that the removal petition was

untimely. One month later, respondents filed

a second removal petition claiming the earlier

remand order was erroneous. The remand

order had already been certified to the state

12 ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO.

court. Petitioner filed a motion for remand,

but the court denied that motion, vacated its

earlier remand order, and granted the second

removal petition. The court concluded its

initial order was based on a clerical error, and

removal was proper.

Id. at 413–14. Seedman filed a petition for a writ of

mandamus, asserting that the district court lacked

jurisdiction to vacate its earlier remand order. Id. at 414.

In holding that the district court’s initial order was not

reviewable, we clearly stated that we were construing

§ 1447(c). We held that the language of § 1447(d) “has been

universally construed to preclude not only appellate review

but also reconsideration by the district court,” and that

“[o]nce a district court certifies a remand order to state court

it is divested of jurisdiction and can take no further action on

the case.” Id. We held that “a second removal petition based

on the same grounds does not ‘reinvest’ the court’s

jurisdiction” because “[a]s the statute makes clear, if the

remand order is based on section 1447(c), a district court

has no power to correct or vacate it.” Id. (emphasis added).

We agree with this statement: if a remand order is based on

§ 1447(c), then § 1447(d) precludes review by any federal

court.

But nothing in Seedman precludes review of remand

orders that are not based on § 1447(c). The next paragraph

in Seedman reads:

Respondent argues that our decision in Bucy

v. Nevada Const. Co., 125 F.2d 213 (9th Cir.

1942) allows a district court to correct

erroneous remand orders. Bucy held only

that a court may correct an error before the

ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO. 13

order is certified to the state court. We stated

in Bucy that it was doubtful a court could

vacate a remand order after certification. Id.

at 217–18. We now so hold: after

certification to the state court a federal court

cannot vacate a remand order issued under

section 1447(c).

Id. The final phrase—“cannot vacate a remand order issued

under section 1447(c)”—clarifies that we were not

commenting on general federal jurisdiction. We further held

in the following paragraph that Thermtron was of no

assistance to respondent because “[h]ere the court’s order

was based on § 1447(c) since the court determined that the

removal had been improvidently granted because the

petition was untimely.” Id. Thus, Seedman is not contrary

to our implicit ruling in Flam, which is consistent with the

relevant Supreme Court cases, that the transmittal of a

remand order to the state court does not deprive a court of

jurisdiction to review that order if review is not barred by

§ 1447(d).

The Third Circuit reached the same conclusion in

Carlyle Investment Management, LLC v. Moonmouth Co.,

779 F.3d 214, 218 (3d Cir. 2015). It held that it had

jurisdiction “because the District Court remanded due to the

forum selection clause and not due to a § 1447(c) reason.”

Id. Plaintiffs had argued that the act of mailing the remand

order had divested the federal courts of jurisdiction. The

Third Circuit held that the cases cited by the plaintiffs were

“easily distinguishable because they involve remands under

§ 1447(c)” and that the court “retains jurisdiction over

appeals of remand orders that are not made pursuant to

§ 1447(c).” Id.

14 ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO.

Any other jurisdictional holding would be troubling.

The Supreme Court has not wavered from its position in

Thermtron that § 1447(d) bars review only of remand orders

made pursuant to § 1447(c). It would be contrary to the

intent of Thermtron to hold that the limited avenue of review

carefully crafted by the Supreme Court could be closed by

the district court transmitting its remand order to a state court

without notice to the parties. Nonetheless, we would so hold

if our precedent or Supreme Court precedent so required, but

as explained, they do not.

IV

A. 28 U.S.C. § 1447(d) bars review only of a remand

order that is based on a colorable § 1447(c) ground.

In Thermtron the Supreme Court explained its limitation

of the bar to review in § 1447(d) as follows:

There is no doubt that in order to prevent

delay in the trial of remanded cases by

protracted litigation of jurisdictional issues,

United States v. Rice, 327 U.S. 742, 751

[(1946)], Congress immunized from all

forms of appellate review any remand order

issued on the grounds specified in § 1447(c),

whether or not that order might be deemed

erroneous by an appellate court. But we are

not convinced that Congress ever intended to

extend carte blanche authority to the district

courts to revise the federal statutes governing

removal by remanding cases on grounds that

seem justifiable to them but which are not

recognized by the controlling statute.

423 U.S. at 351.

ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO. 15

Twenty years later in Quackenbush v. Allstate Insurance

Co., 517 U.S. 706 (1996), the Supreme Court reiterated that

a district court’s “abstention-based remand order does not

fall into either category of remand order described in

§ 1447(c), as it is not based on lack of subject matter

jurisdiction or defects in removal procedure.” Id. at 712.

The Court held that “the abstention-based stay order was

appealable as a final decision under § 1291 because it put the

litigants effectively out of court.” Id. at 713 (internal

quotation marks and citations omitted). 4

In Powerex, 551 U.S. 224, the Supreme Court further

expounded on its holding in Thermtron. It explained that in

Thermtron it “held that § 1447(d) should be read in pari

materia with § 1447(c), so that only remands based on the

grounds specified in the latter are shielded by the bar on

review mandated by the former.” Id. at 229. The Court

reviewed the evolution of the statute and accepted that

Ҥ 1447(d) permits appellate courts to look behind the

district court’s characterization.” Id. at 233 (citing Kircher

v. Putnam Funds Tr., 547 U.S. 633, 641 n.9 (2006)). The

Court concluded that “review of the District Court’s

characterization of its remand as resting upon lack of

subject-matter jurisdiction, to the extent it is permissible at

all, should be limited to confirming that that characterization

was colorable.” Id. at 234.

We anticipated, and have subsequently applied,

Powerex. In Lively, 456 F.3d 933, Wild Oats removed a

personal injury action to the district court, alleging that,

4

The Supreme Court determined that in light of its opinion in Moses

H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1

(1983), contrary to its perspective in Thermtron, the remand order was

appealable. Quackenbush, 517 U.S. at 715.

16 ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO.

because the parties were completely diverse and the amount

in controversy exceeded $75,000, diversity jurisdiction

existed. Id. at 936. The district court remanded the case to

state court for lack of subject matter jurisdiction, holding that

removal was improper because Wild Oats, a California

citizen and local defendant, violated the forum defendant

rule contained in 28 U.S.C. § 1441(b), and that this

constituted a jurisdictional defect. Id. at 936–37. On appeal,

we reaffirmed that we had “jurisdiction to decide whether a

district court has the power to do what it did [in issuing a

remand order], although we cannot examine whether a

particular exercise of power was proper.” Id. at 938 (quoting

N. Cal. Dist. Council of Laborers v. Pittsburg-Des Moines

Steel Co., 69 F.3d 1034,1038 (9th Cir. 1995)).

We explained:

Lively is correct that if the district court

remanded under its § 1447(c) authority, we

would lack jurisdiction to review the

order. . . . Rather than assuming the existence

of this authority, as Lively would have us do,

we must determine its veracity—we must

determine whether the district court had the

authority under § 1447(c) to remand. Stated

differently, the question raised on appeal is

not whether the district court’s remand order

was correct, but whether the district court

exceeded the scope of its § 1447(c) authority

by issuing the remand order in the first place.

Such an inquiry is well within our

jurisdictional bounds—because it “takes aim

at the district court’s authority to issue the

remand order, we have jurisdiction.” In re

Ford Motor Co./Citibank, 264 F.3d 952, 965

ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO. 17

(9th Cir. 2001); see also N. Cal. Dist. Council

of Laborers v. Pittsburg-Des Moines Steel

Co., 69 F.3d 1034, 1038 (9th Cir. 1995).

456 F.3d at 937–38.

In Atlantic National Trust LLC v. Mt. Hawley Insurance

Co., 621 F.3d 931 (9th Cir. 2010), we again considered our

limited jurisdiction to review remand orders under

§ 1447(d). Citing Thermtron, 423 U.S. at 351, we stated that

§ 1447(d) did not bar the court from reviewing a remand

order when the trial court exceeds its statutorily defined

power by remanding a properly removed case on a ground

that it had no authority to consider. Atlantic, 621 F.3d

at 934. We further stated that “we may review remand

orders where the district court exceeded the procedural

limitations in § 1447(c), even where a district court

purported to remand on a ground enumerated in that statute.”

Id. at 935. We concluded that “in light of Powerex, when a

district court remands a case purporting to rely on a ground

enumerated in § 1447(c), we have appellate jurisdiction to

look behind the district court’s characterization of its basis

for remand only to determine whether the ground was

‘colorable.”’ Id. at 938.

More recently, we reiterated this scope of review in

County of San Mateo v. Chevron Corp., 960 F.3d 586, 594–

95 (9th Cir. 2020). We explained:

When a district court bases its remand order

on one of the grounds in § 1447(c)—i.e., the

district court “remands based on subject

matter jurisdiction [or] nonjurisdictional

defects”—as opposed to, for example, based

on a merits determination or concerns about

a heavy docket, [Atl. Nat’l Tr., 621 F.3d] at

18 ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO.

934–35, “review is unavailable no matter

how plain the legal error in ordering the

remand,” Briscoe v. Bell, 432 U.S. 404, 413

n.13 (1977). “[R]eview of the District

Court’s characterization of its remand as

resting upon lack of subject-matter

jurisdiction, to the extent it is permissible at

all, should be limited to confirming that that

characterization was colorable.” Powerex

Corp. v. Reliant Energy Servs., Inc., 551 U.S.

224, 234, (2007).

We are not alone in our reading of § 1447(d). In

Ellenburg v. Spartan Motor Chassis, Inc., 519 F.3d 192 (4th

Cir. 2008), the Fourth Circuit addressed a situation similar

to our case. There “the district court sua sponte entered an

order remanding the case to state court, concluding that the

Notice of Removal’s allegation that the value of the matter

in controversy exceeded the sum of $75,000 was ‘inadequate

to establish’ the jurisdictional amount, because it failed to

‘allege facts adequate to establish’ the amount.” Id. at 194.

The Fourth Circuit cited the Supreme Court’s statement that

courts should not “extinguish the power of an appellate court

to correct a district court that has not merely erred in

applying the requisite provision for remand but has

remanded a case on grounds not specified in the statute and

not touching the propriety of the removal.” Id. at 196

(quoting Thermtron, 423 U.S. at 352). The Fourth Circuit

reasoned that the district court “ruled not that it lacked

subject matter jurisdiction, but rather that the defendants’

allegations of diversity jurisdiction were ‘inadequate’ and

that their Notice of Removal failed ‘to establish that the

amount in controversy exceeds the jurisdictional amount.’”

Id. at 197. The Fourth Circuit further explained:

ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO. 19

In its opinion evaluating the Notice of

Removal, the district court applied a

particular standard for assessing the

sufficiency of such filing; it did not consider

whether subject matter jurisdiction in fact

existed. Rather than permitting allegations in

the Notice of Removal to serve the same role

that allegations in a complaint serve, the

district court demanded that the Notice of

Removal actually demonstrate the factual

basis for the allegations in the notice. The

district court’s selection and application of a

legal standard for pleading in a notice of

removal thus remains reviewable as a

“conceptual antecedent” to the remand order.

See Blackwater, 460 F.3d at 586–87 (citing

Shives v. CSX Transp., Inc., 151 F.3d 164,

168 (4th Cir.1998)).

We may review a conceptual antecedent

ruling even if it was an essential precursor to

a remand order that is itself unreviewable

under § 1447(d).

Id.

We read Supreme Court precedent and our precedent as

holding that § 1447(d) precludes review only of a remand

order based on one of the grounds in § 1447(c)—subject

matter jurisdiction or nonjurisdictional defects—and that we

may look behind the district court’s characterization of its

order to determine whether its assertion of a § 1447(c)

ground is colorable.

20 ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO.

B. The district court’s remand order is not based on a

colorable § 1447(c) ground.

Despite the district court’s contrary assertions, it could

not make a ruling on subject matter jurisdiction. The district

court acted sua sponte based on only the notice of removal.

However, a shortcoming in a notice of removal concerning

the amount in controversy is not jurisdictional, at least not

until the movant has an opportunity to correct any perceived

deficiency in the notice. In Dart Cherokee, 574 U.S. at 89,

the Supreme Court held that “a defendant’s notice of

removal need include only a plausible allegation that the

amount in controversy exceeds the jurisdictional threshold.”

In Arias v. Residence Inn by Marriott, 936 F.3d 920 (9th Cir.

2019), we reiterated that a “notice of removal ‘need not

contain evidentiary submissions’ but only plausible

allegations of the jurisdictional elements.” Id. at 922

(quoting Ibarra v. Manheim Inv., Inc., 775 F.3d 1193, 1197

(9th Cir. 2015)).

Other than for cases under the Class Action Fairness Act

of 2005 (CAFA), we strictly construe the removal statute

against removal jurisdiction. 5 Hansen v. Grp. Health Coop.,

902 F.3d 1051, 1056–57 (9th Cir. 2018) (citing Geographic

Expeditions, Inc. v. Est. of Lhotka ex rel. Lhotka, 599 F.3d

1102, 1107 (9th Cir. 2010)). Nonetheless, the fact that the

party removing a case to a federal district court has the

burden of proving that the district court has jurisdiction does

not mean that the notice of removal must in and of itself meet

this burden.

5

In Arias, we noted that “no antiremoval presumption attends cases

invoking CAFA.” Id. at 922 (quoting Dart Cherokee, 574 U.S. at 89).

ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO. 21

This point was made clear in Dart Cherokee. Invoking

federal jurisdiction under CAFA, Dart removed the case

from a Kansas state court to a federal district court. 574 U.S.

at 84. The defendant filed a motion to remand and the

district court, “[r]eading Tenth Circuit precedent to require

proof of the amount in controversy in the notice of removal

itself,” granted the motion. Id. at 84. Dart petitioned the

Tenth Circuit for permission to appeal, the Tenth Circuit

denied review, and Dart petitioned for certiorari. Dart

requested resolution of the following question: “Whether a

defendant seeking removal to federal court is required to

include evidence supporting federal jurisdiction in the notice

of removal, or is alleging the required ‘short and plain

statement of the grounds for removal’ enough?” Id. at 86.

The Court held that “a defendant’s notice of removal need

include only a plausible allegation that the amount in

controversy exceeds the jurisdictional threshold.” Id. at 89.

It further explained that where a defendant’s assertion of the

amount in controversy is challenged, then “both sides submit

proof and the court decides, by a preponderance of the

evidence, whether the amount-in-controversy requirement

has been satisfied.” Id. at 88.

Following Dart Cherokee, in Arias we held that “a

district court may not remand the case back to state court

without first giving the defendant an opportunity to show by

a preponderance of the evidence that the jurisdictional

requirements are satisfied.” Arias, 936 F.3d at 924. We

explained:

The district court did not conclude that

Marriott’s allegations were implausible.

Instead, the district court stated that Marriott

failed to meet its burden of proving the

amount in controversy. In rejecting

22 ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO.

Marriott’s assumed violation rates, the

district court cited a lack of “evidence

supporting [Marriott’s] assumptions.” But a

notice of removal “need not contain

evidentiary submissions.” Dart Cherokee,

135 S. Ct. at 551. Instead, evidence showing

the amount in controversy is required “only

when the plaintiff contests, or the court

questions, the defendant’s allegation.” Id. at

554. . . . The district court clearly questioned

Marriott’s allegation, but by remanding the

case to state court sua sponte, the district

court deprived Marriott of “a fair opportunity

to submit proof.” Ibarra, 775 F.3d at 1200.

This error warrants vacatur of the remand

order.

Id. at 925. In Arias we further stated that, “when a

defendant’s allegations of removal jurisdiction are

challenged, the defendant’s showing on the amount in

controversy may rely on reasonable assumptions.” Id.

at 922.

Here, the district court erred as a matter of law in

requiring that the notice of removal “prove” subject matter

jurisdiction. Furthermore, by acting sua sponte, and thereby

refusing to allow Continental to offer proof to substantiate

its allegations in the notice of removal that the amount in

controversy exceeded $75,000, the district court denied

Continental “a fair opportunity to submit proof,” which led

us to vacate the remand orders in Ibarra and Arias. What

the court should have done was to issue an order to show

cause requiring the removing party to prove more than

$75,000 was in controversy. Both sides agreed at argument

ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO. 23

that ample proof existed to establish that key jurisdictional

element.

There is no question that Academy’s complaint made the

requisite plausible allegations concerning the amount in

controversy. Indeed, the Notice of Removal stated that the

“matter in controversy exceeds $75,000.” 6 It also stated that

a settlement demand had been made in excess of $75,000.

We have stated that a “settlement letter is relevant evidence

of the amount in controversy if it appears to reflect a

reasonable estimate of the plaintiff’s claim.” Cohn v.

Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002). Moreover,

in support of its Rule 59 motion, Continental provided

supporting documents stipulating that the amount in

controversy exceeds $75,000.

The import of this is not that the district court’s

determination of subject matter jurisdiction was wrong

(although it clearly was), but that the court could not at that

stage of the litigation determine subject matter jurisdiction.

The district court erred as a matter of law in requiring that

the notice of removal “prove” subject matter jurisdiction

instead of containing plausible allegations of the

jurisdictional elements. Arias, 936 F.3d at 922. Thus, as in

Lively, the district court “exceeded the scope of its § 1447(c)

authority by issuing the remand order in the first place.”

Lively, 456 F.3d at 938. In sum, because the district court

erred as a matter of law in requiring that the notice of

removal “prove” the amount in controversy and then failed

to follow Supreme Court and Ninth Circuit precedent by

6

This specific assertion refutes the district court’s unreasonable

suggestion that Continental’s allegation that the amount in controversy

exceeded the court’s jurisdictional limit referred to the state court’s

$25,000 jurisdictional limit.

24 ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO.

refusing to allow Continental to supplement its notice of

removal, the district court’s order is not “colorable” or

“arguable” and may be reviewed. See Powerex, 551 U.S. at

234; County of San Mateo, 960 F.3d at 595. And because

the subject matter jurisdictional question could not be

determined at the time the district court issued its sua sponte

order and the order deprived Continental of “a fair

opportunity to submit proof,” see Arias, 936 F.3d at 925, the

district court’s orders are vacated. 7

V

A district court’s order remanding a civil action to state

court deprives the removing party of access to a federal

court. Accordingly, the Supreme Court has recognized that

such orders, if otherwise reviewable, may be appealed.

Quakenbush, 517 U.S. at 715. We conclude based on

precedent that the transmittal of the remand order to the state

court did not deprive us of jurisdiction. See City of Waco,

293 U.S. 140; Flam, 788 F.3d 1043. We further hold that

the district court’s assertion that a notice of removal must

prove subject matter jurisdiction is contrary to Dart

Cherokee, 574 U.S. 81, and Arias, 936 F.3d 920, and thus is

not a “colorable” basis for remand. Accordingly, we vacate

the district court’s orders. The district court shall enter an

order recalling the remand and shall notify the Los Angeles

7

The district court’s denial of Continental’s Rule 59 motion was

based on its determination that it lacked jurisdiction to consider the

motion. As we hold that the district court did have jurisdiction to

consider the motion, we vacate the court’s denial of the Rule 59 motion

as well as its remand order.

ACAD. OF COUNTRY MUSIC V. CONTINENTAL CAS. CO. 25

County Superior Court that the district court has resumed

jurisdiction over the action.

VACATED AND REMANDED.