Graiser v. Visionworks of America, Inc., 2016 WL 1359048 (6th Cir. April 6, 2016).

The Sixth Circuit held that the 30-day removal period under CAFA does not begin if the plaintiff does not serve the defendant with an amended complaint, motion, other paper etc. from which a defendant can figure out that the amount-in-controversy exceeds CAFA’s jurisdictional threshold. The Sixth Circuit further held that if a defendant can determine from the documents served by the plaintiff that the amount-in-controversy could exceed $5 million, the defendant is not obligated to do so, unless the document is apparent.

Continue Reading 30-Day Time Period for Removing Case Pursuant to 1446 Only Begins to Run when Amount-In-Controversy Is Apparent

Walker v. Trailer Transit, Inc., 2013 WL 4488915 (7th Cir. Aug. 23, 2013).

The Seventh Circuit resolves a district court split in the Seventh Circuit holding that the 30-day removal clock under 28 U.S.C. § 1446(b)(3) is triggered only when the defendant receives a pleading or other paper that affirmatively and unambiguously reveals that the predicates for removal are present including the amount of monetary damages sought.

The plaintiff, an owner and operator of a long-haul truck, brought a class action in Indiana state court asserting that the defendant, broker of trucking services, violated its lease agreement.  Under the lease agreement, the defendant was obligated to pay the plaintiff 71% of the gross revenues derived from use of the truck, less all items intended to reimburse the defendant for special services.  The plaintiff alleged that the defendant charged add-on fees to customers which exceeded the cost of providing special services.  Because those fees were allegedly not intended to reimburse the defendant, the plaintiff contended that the truckers were entitled to a portion of these fees under the lease agreement.

In its motion for summary judgment, the defendant argued that the plaintiff’s theory of damages tied to a percentage of profits was untenable.  Although the complaint alleged that truckers were entitled to 71% of the profits from the fee, the defendant contended that the language of the lease agreement could not support an interpretation entitling the class to that measure of damage.  In response to the defendant’s summary judgment motion, the plaintiff argued that a jury could award damages based on either the defendant’s profits or based on the entire fees.

Thereafter, the defendant’s counsel sought clarification on whether the class was seeking 71% of the entire fees or of the profits from the fees.  The plaintiff’s attorney responded by merely copying and pasting the same argument from its earlier response to the summary judgment motion.  Only when the defendant formally requested clarification of the theory of damages through requests for admission, the did the plaintiff admit that the class was seeking 71% of the entire fees.

Within 30 days of receiving the plaintiff’s response to the requests for admission, the defendant removed the action to District Court under CAFA.  The notice of removal included an affidavit from an executive which stated that the possible damages could exceed $5 million if the class sought 71% of the entire amount of the disputed fees, but not if the class sought 71% of the profits from those fees.

Although the plaintiff conceded that the amount-in-controversy requirement was satisfied, he moved for remand arguing that removal was untimely because the 30-day removal period started when he filed his summary-judgment response, or at the latest, when his attorney responded to the defendant’s e-mail, both of which occurred more than 30 days before removal.

The District Court denied remand, holding that neither the summary-judgment response nor the plaintiff’s counsel’s e-mail clearly disclosed that the damages potentially exceeded $5 million.  The Seventh Circuit granted the plaintiff’s petition to appeal and affirmed the District Court’s ruling.

Under 28 U.S.C. § 1446(b)(1) the notice of removal shall be filed within 30 days after defendant receives a copy of the initial pleading setting forth the claim for relief or within 30 days of service of the summons if such initial pleading has then been filed in court and is not required to be served on the defendant.   Further, § 1446(b)(3) provides that if the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant, 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.

The Seventh Circuit stated that the 30-day removal clock is triggered only when the defendant receives a pleading or other paper that affirmatively and unambiguously reveals that the predicates for removal are present.  Further, regarding the amount in controversy in particular, the Seventh Circuit opined that the pleading or other paper must specifically disclose the amount of monetary damages sought.

Although the plaintiff asserted that the 30-day removal clock should begin to run the first moment it becomes possible for the defendant to remove the case, the Seventh Circuit remarked that the plaintiff’s proposed rule merged the timeliness question with the factual inquiry into whether the case is substantively appropriate for removal.

Further, the Seventh Circuit noted that whether the jurisdictional prerequisites are in fact met is a separate determination and involving consideration of materials outside the state-court pleadings, whereas the timeliness inquiry is limited to the examining contents of the clock-triggering pleading or other litigation paper.  The Seventh Circuit opined that evaluating the timeliness of removal should not involve a fact-intensive inquiry about what the defendant subjectively knew or should have discovered through independent investigation.

The Seventh Circuit stated that here, neither the plaintiff’s summary-judgment response nor the follow-up e-mail was sufficient to start the removal clock.  Although the summary-judgment response intimated the defendant for the first time that the class was seeking 71% of the entire disputed fees rather than just 71% of the defendant’s profits from those fees, the Seventh Circuit observed that it was ambiguous, and did not affirmatively reveal that the damages could be greater than $5 million.  Further, the District Court remarked that the follow-up e-mail from the plaintiff’s counsel also did not resolve the ambiguity; instead it only reiterated what was in the summary-judgment response.

The Seventh Circuit held that the removal clock was first triggered when the plaintiff responded to the defendant’s requests for admission seeking formal clarification of the theory of damages, wherein the plaintiff confirmed that the class was indeed seeking damages based on a percentage of the total disputed fees.

The Seventh Circuit, however, stated that even this document did not affirmatively specify a damages figure under the class’s new theory, and thus the removal clock never actually started to run.  Although the defendant filed its notice of removal within 30 days of receiving that response, the Seventh Circuit noted that the removal was not based on the plaintiff’s response to the requests for admission alone; it was based on the plaintiff’s admission and an estimate from the defendant’s executive which collectively showed that the jurisdictional limits were met.

Accordingly, the Seventh Circuit opined that removal was not untimely, and that the District Court had properly denied the motion to remand.

The Seventh Circuit adopts the same standard applied in 2nd, 4th, 5th, 8th, 9th, 10th Circuits and itemizes those Circuits’ decisions on pages 9-10.   There is a good string cite from the Seventh Circuit there if this issue ever becomes your own.   — JR