Babasa v. LensCrafters, Inc., No. 07-55880 (9th Cir. August 16, 2007)

LensCrafters failed to remove this California case within thirty days notice of CAFA jurisdiction. There is an important practice pointer here…Can you find it? Do you need your glasses?

In this opinion, the 9th Circuit (yes, we all know about its reversal rate) addressed the issue of timeliness of appeal under CAFA and found that the removal from the United States District Court for the Central District of California was untimely. The 9th Circuit held that the district court properly remanded the case to state court because LensCrafters’ notice of removal was filed beyond the thirty day time limit for removal.

On April 4, 2005, the plaintiffs filed their putative class action in California state court alleging various labor code violations. In September of 2005, the plaintiffs filed an Amended Complaint and thereafter agreed to enter into mediation with LensCrafters.

On December 5, 2005, prior to mediation, the plaintiffs sent a letter to counsel for LensCrafters, in preparation for the mediation, estimating that their allegation of 300,000 missed meal periods, compensable at an average of $15.00 hourly rate of pay, would amount to $4.5 million. The letter also noted that civil penalties under §§ 2699 and 210 of the California Labor Code would exceed an additional five million dollars

The attempts to settle the case through mediation failed and the parties continued discovery in California state court.   Almost a year later, on November 1, 2006, in a telephone conference during the course of discovery, the plaintiffs’ counsel reiterated to LensCrafters that the damages at issue exceeded five million dollars. On November 27, 2006, LensCrafters filed its notice of removal alleging that the November 1, 2006 conversation, was the first notice that the amount in controversy exceeded the jurisdictional amount for purposes of CAFA jurisdiction.

After receipt of the plaintiffs’ motion to remand, LensCrafters argued that the letter it received in preparation of the mediation could not have served as proper notice of the amount in controversy for removal purposes because the letter was privileged under California state law. In California, certain documents and communications pertaining to mediation are generally inadmissible in civil litigation.

The United States District Court for the Central District of California held that LensCrafters first received notice of federal court jurisdiction from the December 5, 2005 letter from the plaintiffs’ counsel. Therefore, the district court held that LensCrafters’ subsequent removal efforts were untimely.

The Ninth Circuit Court of Appeals began its opinion stating that California privilege law did not directly apply in the present context. Instead, the Ninth Circuit pointed out that federal law governs the determination of whether a case exceeds the amount in controversy necessary for a diversity action to proceed in federal court. Citing a previous Ninth Circuit case, the court stated “we previously have held that a settlement letter is relevant evidence of the amount in controversy if it appears to reflect a reasonable estimate of the plaintiff’s claim.” Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002). 

(PRACTICE POINTER: It is important to note that CAFA eliminated the one-year statute of limitations for removal in 28 U.S.C. § 1446(b), but did not alter the requirement that defendants must file a “notice of removal . . . within thirty days after receipt . . . of a copy of 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.” 28 U.S.C. § 1446(b)). 

The Ninth Circuit had no doubt that LensCrafters could have ascertained, upon receiving the letter, that the case was removable. The December 5, 2005 letter put LensCrafters on notice as the amount in controversy. The Ninth Circuit held that because LensCrafters filed its notice of removal on November 27, 2006, well over thirty days after it first could have ascertained that the case was removable, the district court properly remanded the case to state court.