Banta v. American Medical Response, Inc., No. CV 11-03586 GAF (RZx), 2011 WL 2837642 (C.D. Cal. July 15, 2011).

I have to admit. I always get a perverse kick reading a case involving attorneys getting the judicial slap down. Of course, part of it is relief that it does not involve me. This is one such case. One of the early lessons I learned as a young litigator is to not take a factual position in one case that is contrary to a factual position in another case. Especially for the same client. Especially involving the same facts. Especially in the same case.    The attorneys representing the defendants in this case missed that lesson.

In 2008, Vaughn Banta brought a class action in the Los Angeles County Superior Court identifying all hourly employees of the defendants, American Medical Response, Inc. and various of its related companies, alleging California Labor Code violations for failure to pay overtime wages, meal breaks, rest breaks and other such workplace luxuries.

Before Banta brought his lawsuit, another employee, Laura Bartoni, purportedly acting on behalf of a class of persons employed by the same defendants as dispatchers, had filed a class action essentially alleging the same claims that were now brought by Banta. In the Bartoni action, the plaintiff produced a copy of its collective bargaining agreement (CBA) in response to a discovery request, which revealed that the amount in controversy far exceeded $5 million threshold. The CBA reflected how much the defendant was paying each class member which allowed the defendants to calculate the amount in controversy. Based on this, the defendants (remember, the same defendants as in the Banta case) removed the case to federal court.   Ultimately, the district court in Bartoni remanded the action to state court after concluding that no federal question jurisdiction was present and that CAFA’s local controversy exception applied in that case.

After the Bartoni action was remanded, it was consolidated with the Banta lawsuit and two other class actions which were filed in the Los Angeles County Superior Court.   The court the allowed the plaintiffs in the four coordinated cases to amend their complaints in order to avoid overlapping putative classes and claims. As a result, in 2009, Banta filed his Second Amended Complaint. In the Second Amended Complaint, Banta did not aver the amount in controversy and narrowed the class to include all current or former ‘FieldEmployees’ of the defendants.

In 2011, three years after his original complaint was filed, Banta responded to the defendants’ First Set of Requests for Admissions and acknowledged that the amount in controversy exceeded $5 million. Based on this response, the defendants removed the case to federal court, invoking jurisdiction under CAFA.

Banta filed a motion to remand contending that removal was untimely because the defendants could have ascertained at the time Banta served his initial complaint that the CAFA minimum amount in controversy had been met.

Under 28 U.S.C. § 1446(b), a defendant must file a notice of removal either (1) within thirty days after the receipt after the initial pleading (referred to by the Banta court as first paragraph removal), or (2) within 30 days after 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 (referred to as second paragraph removal).

In this case, the defendants did not file their notice of removal within 30 days of receipt of the initial complaint. Rather, they filed their notice of removal some three years later after Banta admitted to the amount in controversy in a response to a request for admission.

In arguing against the inevitable motion to remand, the defendants relied heavily on Harris v. Bankers Life and Cas. Co., 425 F.3d 689 (9th Cir. 2005), which they claimed resolved any ambiguities regarding the timeliness of removals under the federal removal statute. The Banta Court found Harris to be distinguishable, and not just because the defendants in Banta were not corpses.

The plaintiffs in Harris had included as a defendant an individual whose presence defeated complete diversity, but who unfortunately had been dead for a number of years before the lawsuit was filed. After the plaintiffs failed to respond to a letter from the non-dead defendants asking whether the plaintiffs intended to pursue service against the dead defendant, the defendants removed the case to federal court on the basis of complete diversity. When the district court denied their motion to remand, the plaintiffs appealed, being not only creative but also tenacious, taking their dead defendant diversity argument to the court of appeals asserting that the defendants should have removed within 30 days of the initial pleading naming the dead defendant.

The 9th Circuit, not appreciating the plaintiffs’ novel means of avoiding complete diversity, stated that “Harris’ position involved sharp practices bordering on fraud on the court.” On appeal, the Ninth Circuit held that first paragraph removal is triggered by defendant’s receipt of an initial pleading that upon an objective review reveals a basis for removal, and if no ground for removal is evident in that pleading, the case is not removable at that stage. However, if in fact the initial pleading does not indicate the basis for removal, the notice of removal may be filed within thirty days after the defendant receives an amended pleading, motion, order or other paper from which it can be ascertained from the face of the document that removal is proper.

The Ninth Circuit explained that objective analysis of the pleadings brings certainty and predictability to the process of removal and avoids gamesmanship in pleadings (such as including dead people to defeat diversity jurisdiction). In Harris, the 9th Circuit found that the defendants could not know based on an objective reading on the initial pleading that the defendant that defeated complete jurisdiction was dead and thus could not ever be served with process. So, the defendants properly removed under the second paragraph removal once they learned the dead defendant would not be participating in the case.

The defendants in Banta tried to take the holding in Harris that the initial pleading was to be read objectively when assessing diversity jurisdiction and apply that to the defendants’ determination whether the amount in controversy exceeds the $5 million CAFA minimum. The difference in Banta, however, was the defendants actually knew as a matter of fact what the amount in controversy was when the initial pleading was filed.

Banta initially purported to represent a class of all California employees of the defendants. The original complaint averred that the defendants had a corporate-wide policy of non-compliance with California labor law regarding the payment of overtime wages and the provision of meal and rest breaks. The complaint further alleged that the defendants failed to pay the accrued premium pay to employees for foregone meal periods. Given that the defendant knew how many persons they employ and how much they are paid, they were on notice that the amount in controversy (whether or not it could be proven) was a very large sum of money. The Court remarked that any reasonable effort to establish the amount in controversy would have established the CAFA jurisdiction.

The kicker in for the defendants in this case is that they had already removed a case based on the amount in controversy that involved the same plaintiffs. You will recall at the beginning of this tale that the Banta case had been consolidated with the Bartoni case after the Bartoni case had been remanded to state court based on the local controversy exception. The defendants in Bartoni, represented by the same attorneys as in Banta, had taken a position and established that amount in controversy far exceeded the CAFA limitation. Paraphrasing the finding in Banta, the court found it BS that the defendants in Banta did not know the amount in controversy at the time the Banta initial complaint was filed.

The District Court concluded that where a defendant in the exercise of diligence could readily ascertain, on the basis of information within its (often sole) possession, that the amount in controversy exceeds the jurisdictional minimum, it must remove the action to federal court upon receipt of the complaint even though the complaint may be indefinite on its face as to the amount in controversy.

So the moral of this story for attorneys young and old is keep track of the factual positions you take in a case. Judges have long memories. They at least remember the factual positions taken by the attorneys in the same case regarding the same defendants. And if the judge does not remember, the plaintiff’s attorney is always there to remind the them. Oh, and do not name dead people to defeat complete diversity.