Behrazfar v. Unisys Corp., — F.Supp.2d —-, 2009 WL 3437433 (C.D. Cal., Oct 23, 2009)(NO. SACV 08-0850 AG(RCX)).

The Court remanded the class action to state court finding that 28 U.S.C. § 1447(c)’s 30 days time limit to seek remand does not apply when the plaintiff asserts lack of subject matter jurisdiction.

The plaintiff, an employee, brought a class action in the state court under California’s wage and hour laws, alleging that there was not less than 300 class members, and they worked between 40 and 60 hours per week during the four-year class period. The complaint did not specify the amount of damages that the plaintiff sought or alleged how many weeks per year the class members worked. 

The defendant, Unisys Corporation, removed the action to the District Court under CAFA, based on its assumption that if the class members prevailed on all claims, each class member would receive over $20,000; therefore, the damages of 300 class members would exceed $5 million. 

Fourteen months after removal, the plaintiff moved for remand, which the District Court granted.  

In doing so, the District Court explained that the 30 days time limit under § 1447(c) to seek remand applies when there is any procedural defect in the notice of removal and not when there is lack of subject matter jurisdiction. The District Court found that the plaintiff’s motion did not merely attack the procedural sufficiency of the defendant’s notice of removal, but was based on lack of subject matter jurisdiction.  

The District Court noted that the courts in Evans v. Yum Brands, Inc., 326 F.Supp.2d 214 (D.N.H.2004); Harmon v. OKI Systems, 902 F.Supp. 176 (S.D.Ind.1995), aff’d 115 F.3d 477, cert. denied 118 S.Ct. 413; cf. Ellenburg v. Sparton Motors Chassis, Inc., 519 F.3d 192 (4th Cir.2008) have held that a remand motion is based on a procedural defect under § 1447(c), and not subject matter jurisdiction, if it argues only that the defendant’s notice of removal failed to state the requisite amount in controversy.  The District Court stated that these decisions do not affect a plaintiff’s right to argue that subject matter jurisdiction is, in fact, absent.  And if such an argument is made, § 1447(c) does not remove the defendant’s burden to show that subject matter jurisdiction exists. 

In Harmon, the court held that plaintiffs’ late motion to remand was sufficient to require the defendant to meet the burden of showing the amount in controversy. Thus, the District Court opined that Harmon implicitly found that § 1447(c) does not eliminate a defendant’s burden to show the requisite amount in controversy, even if a plaintiff’s motion to remand is suspiciously tardy. 

In addition, in Newport v. Dell Inc., No. CIV 08-096-TUC-CKJ, 2008 WL 2705364, at * 1, 3-4 (D. Ariz. July 2, 2008), the court held that plaintiff’s argument in a belated motion that the defendants failed to meet their burden of proving the amount in controversy was a challenge to the court’s subject matter jurisdiction.

Accordingly, the District Court observed that because the plaintiff contested the existence of subject matter jurisdiction–that the defendant did not establish the amount in controversy–her motion was based on more than a mere procedural defect; therefore, the delay did not doom the motion to remand. 

Next, the District Court stated that the defendant, as the removing party, bore the burden of proving by a preponderance of the evidence that the amount in controversy exceeded $5 million.

Given the plaintiff’s testimony that she typically worked 10 hours of overtime per week, the defendant calculated the amount in controversy estimating that each class member worked 2.5 hours of overtime per week and 40 weeks per year during the class period. The District Court found that although the defendant was correct in its estimation of the overtime hours, the defendant had not submitted evidence to support the assumption that class members worked 40 weeks a year. 

The District Court observed that the defendant’s calculations were also distorted because it assumed that all class members worked the full four year class period ignoring that some class members did not start working until the middle of the class period and others were fired during the class period. 

Thus, the District Court concluded that the defendant failed to establish by a preponderance of the evidence that over $5 million was in controversy.