Carvalho v. Equifax Information Services, LLC, NO. 09-15030, 2010 WL 3239477 (9th Cir. (Cal.), Aug 18, 2010).

The U.S. Ninth Circuit affirmed the district court’s denial of the plaintiff’s motion to remand, finding that the pre-complaint document indicating the amount to be claimed in the suit cannot be a basis for removal.

The plaintiff, Noemia Carvalho, filed a class action against Credit Consulting Services (“CCS”) and the Equifax Information Services, LLC, Experian Information Solutions, Inc., and TransUnion LLC (collectively, “CRAs”) in state court alleging various violations of the California Consumer Credit Reporting Agencies Act (“CCRAA”). 

The plaintiff received treatment from Bayside Medical Group, Inc. (“Bayside”) in October 2001. As a result of her treatment, she incurred charges amounting to a whopping  $118. Before her treatment, the plaintiff had signed an agreement with Bayside, which stated that as a courtesy, Bayside would recover any charges relating to her treatment from her insurance company. 

For some reason (which were still unclear, as the Court remarked!), Bayside received no payment from her insurance company within 90 days as provided in the agreement. Therefore, it sent the plaintiff a bill for $182 in January 2002, as well as a final notice in March 2003. Neither Carvalho nor any insurer paid the bill. Thereafter, Bayside assigned the debit to CCS, which was a collection agency. 

CCS eventually reported the debt to three major credit reporting agencies, when the plaintiff did not pay the bill. The plaintiff chose to send notices to the CCS and the CRAs explaining her stand. The CCS and the CRAs responded to her several notices stating that the information was accurate. 

In February 2006, the plaintiff next demanded that she be paid $ 25,000 plus attorney fees in a letter where she also claimed that she had clear evidence that the CCS item was wrong because Bayside failed to timely and properly request payment from her insurance company, but sought it from a different insurance company.

In March 2008, Equifax removed the case to the federal on the allegations that the case met the $5 million amount in controversy. After the District Court denied the plaintiff’s motion to remand, she appealed arguing that the amount in controversy was not met and that the notice of removal was untimely.

At the outset, the U.S. Ninth Circuit noted that the first thirty-day removal period is triggered if the case stated by the initial pleading is removable on its face. The second thirty-day removal period is triggered if the initial pleading does not indicate that the case is removable, and the defendant receives a copy of an amended pleading, motion, order or other paper from which removability may first be ascertained.

The plaintiff argued that Equifax received her complaint in October 2006, it should have been aware that the case was removable based on the $25,000 settlement demand she made in February 2006, and also the civil case cover sheet served with the complaint indicating unlimited jurisdiction — i.e., an amount demanded exceeding $25,000. According to the plaintiff, Equifax should have been able do the math to determine that the aggregate amount in controversy exceeded $5 million ($25,000 per plaintiff x 500 potential plaintiffs = $12.5 million). Consequently, the plaintiff contended that the March 2008 removal was untimely under section 1446(b). 

The Ninth Circuit ruled that because the face of the initial pleading–the plaintiff’s state court complaint–lacked any indication of the amount in controversy, it did not trigger this first thirty-day removal period. 

The plaintiff also argued that the settlement demand she made in February 2006 put Equifax on notice of the amount in controversy. 

The Ninth Circuit rejected this suggestion finding that a pre-complaint document containing a jurisdictional clue can operate in tandem with an indeterminate initial pleading to trigger some kind of hybrid of the first and second removal periods. In layman’s terms, the Ninth Circuit rejected the plaintiff’s argument that her February 2006 letter seeking a settlement should be an indication of her demand, which showed that her claim was below $5 million, because this notice was sent months before the case was filed. The Ninth Circuit ruled that a case cannot be removed before its inception.

The CRAs noted that the removal was timely because it was the plaintiff’s deposition testimony, which provided the first indication in this case that the amount in controversy exceeded $5 million, and Equifax removed within 30 days of the deposition. Because the plaintiff did not contest that the deposition revealed that her case satisfied the CAFA’s amount in controversy, she had waived any argument to the contrary. However, the Ninth Circuit did agree with the District Court’s finding that the deposition testimony triggered the second 30 day removal period.