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CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

Supplemental Evidence from Removing Defendant May Be Considered To Defeat CAFA Removal

Posted in Case Summaries

Steele v. W.W. Grainger, Inc., 2013 WL 2481476 (S.D. Cal. June 10, 2013).

Removing defendants can undermine the basis for removal jurisdiction with their own subsequent submissions.  A District Court in Southern California held that a court may consider supplemental evidence proffered by the removing defendant, which was not originally included in the removal notice to determine the amount in controversy.

The plaintiff brought an action in San Diego Superior Court alleging that he had one or more telephone communications with the defendant, which the defendant secretly recorded along with other communications with its California customers, in violation of California Penal Code.  The plaintiff also alleged that the defendant routinely recorded both incoming and outgoing telephone communications with customers who resided in and were physically present in the State of California, even though the defendant did not notify or inform these individuals that the communications would be recorded.

The plaintiff sought statutory damages for the class in the amount of $5,000.00 per recorded violation, injunctive relief, costs of suit, and pre-judgment interest.

The defendant removed the action to the District Court under CAFA, and thereafter, filed a motion to dismiss.  In support of its motion to dismiss, the defendant attached the declaration of Mike Tiernan, a Voice Services Specialist, wherein Tiernan declared that the defendant’s telephone system played an automated warning for all inbound calls, notifying callers that the call would be recorded.  In his subsequent supplemental declaration, Tiernan stated that due to a mistake in programming, certain inbound calls made to 1-800-Grainger from certain area codes between November 19, 2013 and April 29, 2013 did not receive the automated warning, but that no other calls were affected as a result of the mistake.

Subsequently, the plaintiff moved for remand arguing that the defendant failed to establish that the amount in controversy exceeded $5 million.  The District Court granted the plaintiff’s motion and denied the defendant’s motion as moot.

Because the Complaint did not allege a specific amount of damages, the parties agreed that the preponderance of the evidence rather than the legal certainty standard applied.  Under this standard of proof, the defendant must provide evidence establishing that it is more likely than not that the amount in controversy exceeds that amount, and must set forth the underlying facts supporting its assertion that the amount in controversy exceeds the statutory minimum.

To support its notice of removal, the defendant attached the declaration of Sheri Mello, the Senior Manager of Deployment and Customer Experience, which stated that she was responsible for the customer experience team, and based on her responsibilities, was familiar with the voice and data department, including the business practice with respect to the recording of inbound and outbound calls received or made by the defendant.  Mello stated that the defendant received and recorded in excess of 1,000 inbound phone calls from the State of California in the past year.  Based on this, Mello calculated statutory damages in the amount of $5,000 per recorded phone call, amounting to $5,000,000, the statutory minimum required under CAFA.

The plaintiff argued that Mello’s declaration ignored the fact that the plaintiff only sought relief for those calls that were recorded without the class members’ consent, i.e., without notification that the call would be recorded.  The plaintiff asserted that, as a result, the declaration failed to provide any evidence as to the number of calls that were recorded without notice or warning that the call would be recorded.

Further, the plaintiff contended that because Tiernan’s declaration and supplemental declaration stated that the only inbound calls that did not receive the automatic warning were calls made to 1-800-Grainger from selected area codes and only from November 19, 2012 to April 29, 2013, the defendant had supplemented its notice of removal and thus drastically limited the amount in controversy.

The defendant, however, argued that removal jurisdiction must be analyzed on the basis of the pleadings filed at the time of removal without reference to subsequent amendments.  The defendant contended that, based on the plaintiff’s assertions that it routinely recorded customer calls without notice and that the plaintiff and other putative class members were entitled to statutory damages of $5,000 per recorded communication, all the defendant had to show to meet the amount in controversy requirement under CAFA was that the defendant recorded more than 1,000 calls during the class period.

The defendant asserted that the plaintiff could not use the fact that seven days after it filed its notice of removal it filed a motion to dismiss, whereby it attached a declaration stating that an automated warning was played to most, if not all inbound calls made during the class period.

Although the District Court agreed that amendments to a complaint post-dating the notice of removal do not alter a removing defendant’s burden, it remarked that the defendant’s arguments that the Court should not consider declarations and documents filed by defendant seven days after its notice of removal were also without merit.

The District Court observed that in addition to the contents of the removal petition, a district court may consider summary-judgment-type evidence relevant to the amount in controversy at the time of removal, such as affidavits or declarations, judicial admissions, and documents filed by the removing party after the notice of removal.

Thus, the District Court opined that Tiernan’s declaration and supplemental declaration could be considered in assessing whether the defendant had proved by a preponderance of the evidence that the amount in controversy exceeded $5,000,000.

Based on evidence submitted by the defendant in the form of the declaration and supplemental declaration from Tiernan, the District Court noted that most if not all inbound calls during the class period received an automated message notifying customers that the call would be recorded, and that the defendant failed to show by a preponderance of the evidence that the amount in controversy exceeded $5,000,000.

Accordingly, the District Court granted the plaintiff’s motion to remand.