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CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

Removal Based On CAFA Differs From Removal Based On Diversity Jurisdiction

Posted in Case Summaries

Forest Creek Townhomes, LLC, v. Carroll Property Management, LLC, et. al., 2017 WL 2557716 (6th Cir. June 13, 2017).

In this action, while affirming a district court’s denial of the plaintiff’s motion to remand, the Sixth Circuit found that removal based on CAFA differs from removal based on diversity jurisdiction in important ways, and although CAFA removal is governed by the same thirty-day limits as general removal, no anti-removal presumption attends cases invoking CAFA. The Sixth Circuit thus found that it need not look to CAFA cases as removal in the instant case was based on diversity jurisdiction.

The plaintiff, Forest Creek Townhomes, LLC brought claims against the defendants for negligent misrepresentation and breach of contract in Tennessee state court. Forest Creek alleged that the defendant Hediger Enterprises, Inc.’s representatives negligently misrepresented to Barry Cohen, current sole member of Forest Creek, that the property did not contain mold, and that Hediger breached a property management agreement entered into by the alleged predecessors-in-interest to Forest Creek and Hediger.

The defendants removed the case to federal court nearly ten months after receiving Forest Creek’s complaint, but only seven days after receiving the information about the citizenship of Forest Creek’s sole member. Subsequently, the plaintiff moved to remand claiming that the removal was untimely.  The district court denied the plaintiff’s motion to remand concluding that the defendants’ removal was not untimely because the defendants could not determine Forest Creek’s citizenship from the complaint or public records, and thus did not have adequate grounds for removal until Forest Creek responded to interrogatories.  On appeal, the Sixth Circuit affirmed.

The Sixth Circuit noted that the thirty-day period for removal begins to run when the initial pleading or a subsequent paper first provides solid and unambiguous information that the case is removable. The Sixth Circuit found that since removal in the instant case was based on diversity jurisdiction, the thirty-day period began when the defendants first had solid and unambiguous information that Forest Creek’s citizenship differed from both of the defendants’ and that the amount in controversy exceeded $75,000.  The Sixth Circuit found that because the complaint stated that the amount in controversy exceeded $75,000, only diversity of citizenship was at issue in this case.  The Sixth Circuit noted that the complaint stated that Forest Creek was a Tennessee limited liability company, but did not state any information about Forest Creek’s members or their citizenship.

Forest Creek argued that the defendants also could have determined the citizenship of Forest Creek by examining public information on file with Tennessee state and local agencies. The Sixth Circuit, however, concluded that neither the complaint, nor any public information available on the day the defendants received the complaint, indicated the citizenship of Forest Creek’s sole member.  The Sixth Circuit opined that without knowledge of Forest Creek’s citizenship, the defendants did not have the information necessary to determine whether a federal district court would have diversity jurisdiction.  Therefore, the Sixth Circuit ruled that the thirty-day period for removal did not begin when Forest Creek served the complaint on the defendants.

Forest Creek argued that the defendants should have inquired about the citizenship of its member before propounding discovery. In support of their argument, Forest creek cited to Gascho v. Glob. Fitness Holdings, LLC, 863 F. Supp. 2d 677 (S.D. Ohio 2012) which states: “[w]hen an initial pleading does not present solid and unambiguous information that the case is removable, but does at a minimum suggest removability, a burden is placed on the defendant to inquire about removability … ‘within a reasonable period of time.’”  The Sixth Circuit, however, noted that because Gascho involved the time limits for removal under CAFA, it was not directly relevant in the present case because removal based on CAFA differed from removal based on diversity jurisdiction in important ways.  The Sixth Circuit found that although CAFA removal was governed by the same thirty-day limits as general removal, no anti-removal presumption attended cases invoking CAFA. Thus, the Sixth Circuit concluded that it need not look to CAFA cases to resolve this matter.

Therefore, the Sixth Circuit concluded that defendants timely removed this case seven days after receiving the first paper providing unambiguous information that the case was removable. Accordingly, the Sixth Circuit affirmed the district court’s denial of Forest Creek’s motion to remand.

– Melissa Broussard