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

30 Days Removal Restriction Doesn’t Apply When Complaint Doesn’t Reveal On Its Face That The Case Was Removable

Posted in Case Summaries

Sevag_Chalian_v_CVS_Pharmacy_Inc._et_al, 2017 WL 1377589 (C.D. Cal. April 11, 2017)

In this wage and hour action, the United States District Court for the Central District of California (the “District Court”) found removal was timely when diversity jurisdiction was not evident from the face of the plaintiff’s complaint, and when the defendant conducted its investigation to calculate that the amount in controversy exceeded $5,000,000.

Plaintiff Sevag Chalian (“Plaintiff”), a pharmacist, filed a class action complaint against defendants CVS Pharmacy, Inc., CVS RX Services and Garfield Beach CVS LLC (collectively, “Defendants”) in the Los Angeles County Superior Court.  Plaintiff alleged Defendants did not pay him for all of the time he spent completing his required training. He brought claims for unpaid wages, failure to pay overtime, failure to provide accurate itemized wage statements, waiting time penalties, and unfair business practices.

On December 5, 2016, nearly five months after being served, Defendants removed the case to the District Court pursuant to the Class Action Fairness Act (“CAFA”). Defendants alleged the parties were diverse and that the amount in controversy exceeded $5 million.

Plaintiff moved to remand the action back to the Los Angeles County Superior Court arguing the removal was untimely. The District Court, however, denied Plaintiff’s remand motion.

Under 28 U.S.C. §1446(b), a defendant has thirty days to remove if the complaint reveals a basis for removal. If the complaint or any other paper on its face does not provide the basis for removal and the defendant’s own investigation discovered grounds for removal, then defendants can remove the case up to one year after the commencement of the action.

In denying remand, the District Court found the removal was timely. The District Court found that diversity jurisdiction was not evident from the face of Plaintiff’s complaint.  Rather, Plaintiff’s complaint alleged claims of the class did not exceed $5,000,000 and the individual claims did not exceed $75,000.  Defendants conducted their own investigation which concluded the amount in controversy exceeded $5 million, contrary to what was alleged by Plaintiff.  Because the complaint did not reveal on its face that the case was removable, the Court concluded Defendants did not have to remove within the proscribed 30 day period.  Also, because Defendants removed the action within the one-year limit, the District Court concluded removal was timely.

The District Court also found sufficient evidence that the amount in controversy exceeded $5 million. Defendants submitted that the amount in controversy was close to $15,607,980.  Defendants reviewed their records to make a conservative estimate of the number of hours Plaintiff worked allegedly without pay, multiplied that by his hourly rate, then multiplied that by the number of class members.  The total class-wide damages for this claim amounted to $31,752.  The wage statement claims triggered statutory damages readily calculated to equal $4,498,200, and the waiting time penalties equaled $11,030.400.  The total amount of these damages was $15,507,980.  While the District Court found the calculations were not exact, it held they were reasonable estimates to establish the amount in controversy exceeded $5 million.

Plaintiff also argued that both the home-state exception and local controversy exception prevented removal. The District Court rejected Plaintiff’s argument that the home-state exception applied finding defendants CVS Pharmacy, Inc. (“CVS”) and CVS RX Services (“RX Services”) were primary defendants because they were the “real targets” of the action.  Both CVS and RX Services employed Plaintiff and the proposed class, and if they were found liable, they would incur a substantial financial loss.  Because CVS was domiciled in Rhode Island and RX Services was domiciled in New York, the District Court found the primary defendants were not California citizens and the home-state exception did not apply.

The District Court also rejected Plaintiff’s arguments based on the local controversy exception finding that similar lawsuits have been filed against Defendants within the last three years. In California alone, CVS was sued twelve times since August 2012, and once in the District Court of Massachusetts and New York.  Most of these lawsuits were filed within the three years immediately preceding this action, and some involved claims of unpaid wages.  Because Plaintiff failed to establish this element of the local controversy exception, the District Court concluded the local controversy exception did not apply.

Accordingly, the District Court denied Plaintiff’s remand motion.

Yaron Shaham