Cook v. United Ins. Co. of Am., No. C-11-1179 MMC, 2011 WL 2940713 (N.D. Cal. July 20, 2011).

A District Court in California held that communications made during the course of mediation, where parties signed a confidentiality agreement providing “no aspect of mediation” may be used in any proceeding, shall be excluded from being used to establish the amount in controversy.

The plaintiff, Celese Cook, filed a class action complaint in California Superior Court, asserting, on behalf of herself and those similarly situated, various state law causes of action based on the alleged failure of the defendant, United Insurance Company of America, to reimburse her and other employees for various business related expenses.  

United filed a notice of removal on grounds of diversity jurisdiction pursuant to CAFA, 28 U.S.C. § 1332(d). 

The plaintiff filed a motion to remand the action to state court arguing that United failed to establish by a preponderance of the evidence that the amount in controversy exceeded $5 million. 

The District Court granted the motion to remand.

United asserted that the amount in controversy in this action was $14,997,714. In support thereof, United relied on the following three evidentiary grounds: (1) a Compendium of Declarations in support of the plaintiff’s motion for class certification filed in the state court; (2) a survey as to the amount of the class members’ claims, conducted by the plaintiff and shown to United during a mediation; and (3) oral statements about the potential amount of the claims as shown by the survey, which statements were made by the plaintiff’s attorney during a telephone conversation with United’s then attorney, prior to the mediation.  

First, the Court found that United’s reliance on the Compendium of Declarations was unavailing.  The Compendium consisted of declarations from 15 putative class members setting forth their respective claims for damages.  The sum of the damages claimed in the declarations, however, did not begin to approach $5 million, and United submitted no evidence to support a finding that the amounts claimed by such individuals were typical of the damages claimed by all or any of the other members of the putative class.

Second, the Court observed that although the survey results are sufficient to show an amount in controversy in excess of $5 million, the survey in this case was provided to United at the mediation.  United signed a Confidentiality Agreement with the plaintiff at the mediation, which agreement expressly provided “no aspect of the mediation,” including “admissions made in the course of the mediation proceedings,” may be used in “any arbitral, judicial, or other proceeding,” and, in particular, precluded such use as “evidence supporting removal or remand proceedings.”  The Court stated that it should uphold the exclusion of communications made in course of mediation, when parties signed a confidentiality agreement providing “no aspect of mediation” may be used in any proceedings. Consequently, the Court concluded that United may not rely on the survey results to support removal.

Third, in the telephone call, the plaintiff’s counsel informed United’s counsel of the survey results. Although these statements were made prior to the day of the mediation and thus prior to the execution of the Confidentiality Agreement, the Court observed that the conduct of the respective parties evidenced a mutual understanding and agreement that the survey results were being shared in preparation for the mediation, were considered part of the mediation process, and, thus, were intended to be covered by the Confidentiality Agreement.  

In particular, the telephone call occurred only two days prior to the mediation, and the emails sent by both counsel described the call as the “pre-mediation conference call.”  Such information was given in advance to United’s counsel for the purpose of avoiding delay on the day of the mediation and to avoid the need to extend the mediation for another day for purposes of United’s evaluating the survey and assimilating the results in its assessment of the case.  Moreover, the survey results were to be exchanged in connection with the parties’ mediation statements, which likewise were to be shared prior to the mediation and which no party suggested were not covered by the Confidentiality Agreement. Thus, the Court stated that the conduct of counsel demonstrated they were operating under an implied agreement that the plaintiff’s counsel’s disclosure of the survey results was an “aspect of the mediation” and thus inadmissible in proceedings other than the mediation.  Consequently, the Court concluded that United may not rely on the plaintiff’s counsel’s oral statements regarding the survey results to support removal.

Accordingly, the Court concluded that United had failed to meet its burden of proving, by a preponderance of the evidence, that the amount in controversy met the jurisdictional threshold.

Finally, United requested the Court to stay remand and allow United to conduct jurisdictional discovery.  The Court noted that where CAFA serves as the basis for removal, however, jurisdictional discovery after removal is disfavored.  Unlike other cases, CAFA’s elimination of the one-year time limit for removal alleviates the concern that parties will be prejudiced in their opportunity to develop the record with regard to the amount in controversy by return to state court.  Accordingly, the Court denied United’s request to stay remand, and remanded the action to state court.