May 23, 2019 Articles

Why All Federal Courts Should Adopt the Ninth and Sixth Circuits’ Approach to Removal under CAFA

A (second) window of opportunity for removal is consistent with CAFA’s purpose of ensuring that significant interstate class actions are heard in federal court.

By Kymberly Kochis, John Sharpe, and Melissa Fox

Pursuant to the Class Action Fairness Act (CAFA), federal district courts have original jurisdiction over certain class actions when, among other things, the amount in controversy exceeds $5 million. If a plaintiff files an action in state court that meets the requirements for CAFA jurisdiction, the defendant may remove the case to federal court within 30 days of service or “within 30 days after receipt . . . through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.” 28 U.S.C. 1446(b). Generally, courts agree that the 30-day window for removal does not run until the plaintiff provides a document, by pleading or otherwise, that “includes a clear statement of the damages sought or . . . sufficient facts from which” the defendant can easily determine whether the amount in controversy exceeds $5 million. E.g., Romulus v. CVS Pharmacy, Inc., 770 F.3d 67, 75 (1st Cir. 2014). Conversely, many courts have not considered whether CAFA opens a second window for removal when a defendant previously passed on the opportunity to remove the case on other grounds (e.g., based on federal question or diversity jurisdiction). But the Ninth and Sixth Circuits have considered the issue, both holding that a prior opportunity for removal does not preclude a defendant from later removing the case under CAFA.

As a general matter, federal district courts have original jurisdiction when a claim involves a federal question or when there is complete diversity of citizenship among the parties and the amount in controversy exceeds $75,000. 28 U.S.C. §§ 1331, 1332. When Congress passed CAFA in 2005, it significantly expanded federal diversity jurisdiction over class and mass actions. Specifically, CAFA permits defendants to remove class actions if (1) there is minimal diversity of citizenship between the parties; (2) the proposed class has at least 100 members; and (3) the aggregate amount in controversy exceeds $5 million. 28 U.S.C. § 1332(d). Even so, there is some uncertainty as to whether removal under CAFA is appropriate when, having passed on the opportunity to remove the case on grounds that existed when the plaintiff filed suit, the defendant thereafter discovers a basis for CAFA removal. Fortunately, the Ninth and Sixth Circuits have offered sound guidance, should their sister courts consider the issue.

In the Ninth Circuit, a defendant may remove a case from state court within 30 days of “ascertaining that the action is removable under CAFA, even if an earlier pleading, document, motion, order, or other paper revealed an alternative basis for federal jurisdiction.” Jordan v. Nationstar Mortg., 781 F.3d 1178, 1180 (9th Cir. 2015). In Jordan, the plaintiff brought a class action asserting claims under the Fair Debt Collection Practices Act (FDCPA). Id. Nine months later, the plaintiff filed a second amended complaint in which she defined the proposed class but did not specify an amount in controversy. Id. After the state court certified the proposed class, the plaintiff served interrogatory responses that stated the amount in controversy exceeded $25 million. Id. Two days later, the defendant filed a notice of removal to federal court pursuant to CAFA. Id.

The plaintiff moved to remand, claiming that the defendant’s notice of removal was untimely because it was filed more than two years after the complaint triggered federal question jurisdiction under the FDCPA. Id. The defendant countered that, because the plaintiff’s interrogatory answers were the first “paper” from which it could ascertain that the amount in controversy exceeded $5 million, removal was timely under CAFA. Id. The district court disagreed and granted the plaintiff’s motion to remand the case to state court.

On appeal, the Ninth Circuit reversed. Id. at 1184. In reaching this conclusion, the court relied on Dart Cherokee, in which the Supreme Court explained that “no antiremoval presumption attends cases involving CAFA.” Dart Cherokee v. Owens, 135 S. Ct. 547, 554 (2014). The Ninth Circuit also relied on its own prior opinion in Durham v. Lockheed Martin Corp., 445 F.3d 1247 (9th Cir. 2006), in which it held that a federal officer defendant’s 30 days to remove commences when the plaintiff discloses sufficient facts for federal officer removal, even if the defendant was previously aware of, and passed on, a different basis for removal. The Ninth Circuit extended the logic of Durham and concluded that a case becomes removable under CAFA when the ground for removal is first discovered.

Under similar circumstances, the Sixth Circuit reached the same conclusion in Graiser v. Visionworks of America, Inc., 819 F.3d 277 (6th Cir. 2016). There, the defendant could have (but did not) remove a putative class action on diversity grounds after the plaintiff filed an amended complaint. Id. at 280–81. More than six months later, the plaintiff provided a damages estimate exceeding $5 million, and the defendant removed the case under CAFA. Id. at 281. In arguing for remand, the plaintiff noted that the window for removal based on diversity jurisdiction had long been closed. Id. The court, however, persuaded by the Ninth Circuit’s opinion in Jordan, held that “once a defendant ascertains that a case is removable under CAFA, a defendant may remove the case [within 30 days] even if the case was originally removable under a different theory of federal jurisdiction.” Id. at 287.

Allowing a second opportunity for removal is consistent with CAFA’s purpose of ensuring significant interstate class actions are heard in federal court. Further, as the courts in Jordan and Graiser aptly observed, “[a] defendant may choose to litigate a case in state court even if diversity jurisdiction exists, believing that the state is nonetheless a hospitable forum; this same defendant may make a different calculation if later developments show that the case is a CAFA class action.” Id. For these reasons, every federal court should adopt the Ninth and Sixth Circuit’s approach to removal under CAFA.

Kymberly Kochis is a partner at Eversheds Sutherland (US) LLP, in New York City, New York. John Sharpe and Melissa Fox are associates in Eversheds’s Atlanta, Georgia, office.

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