Dailey v. Sears, Roebuck and Co., No. 10cv345-L (CAB), 2011 WL 1099798 (S.D. Cal. Mar. 24, 2011).
While remanding this action to state court, a District Court in California held that for the purpose of removal under § 1446(b), the removing party must receive a “paper”, which triggers removal; and the mere collection of information of removability is not sufficient.
The plaintiff, on behalf of himself and similarly situated assistant managers of Sears, brought a wage and hour class action alleging violation of the California Labor Code.
In the operative complaint, the plaintiff stated that the claims of individual class members, including the plaintiff, were under the $75,000 jurisdictional threshold for federal court. The plaintiff, however, did not expressly allege that the damages in aggregate were less than $5 million. (Editors’ Note: The readers of the CAFA Law Blog would have known what allegation to make, though. Someone sign up the plaintiffs’ attorney for the CAFA Law Blog).
The defendant was engaged in a simultaneous mediation in the instant case and another related case — Jimenez v. Sears, Roebuck & Co. The defendant contended that during mediation in state court, it received a calculation of damages in the Jimenez action and was allegedly also shown the plaintiff’s calculation of damages, both of which exceeded $5 million. After learning this pertinent information in the course of the mediation, the defendant removed the action to federal court under CAFA.
The plaintiff filed a motion to remand, which the District Court granted.
28 U.S.C. § 1446(b) sets forth two thirty-day periods for removal: (1) The notice of removal shall be filed within thirty days after the receipt by the defendant, of a copy of the initial pleading; and (2) a notice of removal may be filed within thirty days after receipt by the defendant of a copy of an amended pleading, motion, order or “other paper” from which it may first be ascertained that the case is removable. Because the plaintiff’s initial pleading did not provide a basis for removal, the Court stated that only the second thirty-day period was relevant here.
The Court noted that the fact that removal is based on information learned in mediation does not necessarily preclude it. A settlement offer letter sent by the plaintiff to the defendant is relevant evidence of the amount in controversy if it appears to reflect a reasonable estimate of the plaintiff’s claim. Accordingly, it can trigger the second thirty-day period under § 1446(b).
In this case, however, the defendant based this removal on a damages calculation from the Jimenez Action. At the mediation, the counsel in the Jimenez Action provided the defendant with a calculation of damages for that action, which exceeded $5 million. The defendant, however, acknowledged that the Jimenez Action involved a larger class of Assistant Managers than the instant action, because the class definition in the Jimenez Action covered a longer period of time. Furthermore, the defendant did not dispute the plaintiff’s contention that his counsel was not aware of the damage calculation in the Jimenez Action until after it was disclosed to the defendant, was not involved in its preparation, had not consented to it, and at the time of the disclosure, had not agreed to a joint mediation.
Because the two classes cover markedly different time periods, and because the defendant had not shown that the plaintiff had adopted the damage calculation as representative of damages in his case, the Court found that the defendant’s reliance on the damage calculation in the Jimenez Action was without avail in establishing the amount in controversy in this case.
The defendant also contended that removal was proper because in mediation its counsel was shown a damage calculation for the instant case which exceeded the jurisdictional amount. The parties, however, disputed precisely what occurred. While the defendant stated that the mediator showed a damage calculation prepared in this case to its counsel, it also acknowledged that it was not given any such document, that the mediator retained the document, and did not let the defendant’s counsel keep it.
On the other hand, the plaintiff presented evidence that his damage calculation was contained in a confidential mediation brief, that the plaintiff did not authorize the mediator to show the brief to the defendant’s counsel, and that the mediator did not show the brief to them, although he ‘shared’ the plaintiff’s damage calculation with them, pursuant to the plaintiff’s authorization. The plaintiff contended that the mediator at most told the defendant’s counsel about his calculation.
The plaintiff accordingly argued that the removal was improper because the defendant did not “receive a paper,” as stated by § 1446(b). In Harris v. Bankers Life & Cas. Co., 425 F.3d 689, 695 (9th Cir. 2005), the Ninth Circuit held that the court should rely on the face of the initial pleading and on the documents exchanged in the case by the parties to determine when the defendant had notice of the grounds for removal, requiring that those grounds be apparent within the four corners of the initial pleading or subsequent paper. The Ninth Circuit stated that § 1446(b) is strictly construed because if the rule was otherwise, courts would have to “inquire into the subjective knowledge of the defendant,” which “could degenerate into a mini-trial regarding who knew what and when.”
The Court remarked that the rule announced in Harris is based on “the canon that instructs that removal statutes should be construed narrowly in favor of remand to protect the jurisdiction of state courts,” and “the goal of the canon, which guards against premature and protective removals and minimizes the potential for cottage industry of removal litigation.” The same policies have been found applicable in removals under CAFA. Furthermore, the rule which Harris applied to the first thirty-day period of § 1446(b), has been applied by the Ninth Circuit to the second thirty-day period, which was at issue in this case.
In this case, the defendant did not receive any “paper” from the plaintiff or the mediator, and there was a dispute about what the defendant’s counsel saw or possibly only heard during the mediation. The Court observed that Harris intended to avoid the situation where a court would have to resolve these types of factual disputes to determine whether a removal is proper. Because the defendant’s removal did not comply with Harris, and was not able to base its removal on any “paper” it received in the mediation, the Court concluded that the defendant failed to establish the required jurisdictional amount for removal.
Accordingly, the Court remanded the action to the Superior Court of the State of California for the County of San Diego.