Taylor v. FedEx Freight, Inc., No. 10-CV–2118-LHK, 2010 WL 4316136 (N.D. Cal. Oct. 26, 2010).

We all know Halloween is the time for trick-or-treating. Apparently, the plaintiffs in this case thought that the concept carried into their litigation as well.   They say that the defendant tricked them right into federal court, but the Northern District of California disagreed. This is probably a practice pointer the plaintiffs would want you to know about. 

In this case, while declining to remand the action to state court, the District Court in California found that it had no discretion to remand an action on the ground that the case was removed at the end of its life cycle because CAFA provides that cases “may be removed at any point during the pendency of litigation in state court.”

In June 2007, the plaintiffs, line haul drivers in California, brought a state court class action against their employer, FedEx Freight West, a California entity, alleging violations of California wage and hour laws. 

Eighteen months later, in December 2008, FedEx West merged with a related business, FedEx Freight East, Inc., to form a new entity, FedEx Freight, Inc. (“FedEx Freight”) headquartered in Arkansas. The state court certified a class in September 2009, and set the trial to begin in October 2010.

In April, 2010, the parties mutually agreed to propose an extension to the deadlines for expert discovery, and to push back the trial date to February 2011. In the context of these discussions, according to counsel for the plaintiffs, counsel for FedEx Freight requested that the plaintiffs amend their pleadings to name the successor entity, FedEx Freight, instead of its predecessor FedEx West. Counsel for FedEx Freight denied this, claiming that the pleading change was proposed by counsel for the plaintiffs, and that FedEx Freight simply did not oppose it. The parties submitted a stipulation regarding the amendment, and limited the class period to the time up to the FedEx West merger on December 28, 2008. The state court signed the stipulation on April 13, 2010, and the plaintiffs filed a Second Amended Complaint on April 23, 2010, naming only FedEx Freight as a defendant. 

On May 18, 2010, FedEx Freight removed the case to the District Court on the basis of diversity under CAFA. 

The plaintiffs moved to remand, which the District Court denied.

First, the Court found that FedEx Freight’s notice of removal was timely, as it was filed within thirty days of the filing of the Second Amended Complaint. Second, the Court observed that FedEx Freight established that requirements of CAFA jurisdiction under 28 U.S.C. § 1332(d) were met, because the parties were diverse, the amount in controversy was over $5 million and that the class consisted of about 1,278 drivers.

Third, the Court stated that “local controversies exception” under 28 U.S.C. § 1332(d)(4) did not apply because, the only named defendant, FedEx Freight, was a citizen of Arkansas. The Court pointed out that although the plaintiffs and the original defendant, FedEx West, were California citizens, the general rule is that after a merger, a California company’s citizenship is determined by that of the surviving entity, not its predecessors.

Fourth, plaintiffs argued that they amended their pleadings only at FedEx Freight’s suggestion, without realizing its ulterior motives for proposing the change, and that the Court should not allow the case to be removed based on such a “trick.” Although the Court expressed its concerns that the case was removed at the end of its life cycle; it however, maintained that CAFA does not contain an exception to removal for actions that have been pending in state court for a long period of time; on the contrary, it requires that cases “may be removed at any point during the pendency of litigation in state court.” Given that CAFA provided original federal jurisdiction over this case in its present posture, the Court found that it was without discretion to remand it. 

Finally, the plaintiffs asked the Court to exercise jurisdiction to vacate the state court’s April 13, 2010 order granting the parties’ stipulation under Fed. R. Civ. P. 60(b), thereby reinstating the previous complaint against California citizen, FedEx West, and then remand on the basis of no diversity.   Although Rule 60(b) states that it may be used to correct “mistakes,” the Ninth Circuit has held that Rule 60(b) is not intended to remedy the effects of a deliberate and independent litigation decision that a party later comes to regret through second thoughts or subsequently-gained knowledge that corrects prior erroneous legal advice of counsel. 

The plaintiffs argued that their amendment was not deliberate because they did not realize the likely consequences of it. The Court, however, found that this was exactly the type of litigation error that Rule 60(b) could not correct. The plaintiffs did not dispute that they signed the stipulation asking the state court for leave to amend their complaint, and then filed the Second Amended Complaint naming only FedEx Freight as a defendant. Although this made the case vulnerable to removal, the Court concluded that it could not vacate the state courts order on this basis.

It seems that, the plaintiffs thought that they were tricked into federal court. Next Halloween, they should probably ask for the treat instead. Happy late Halloween to everyone!