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

Sua Sponte Remand By District Court Only Appropriate When Based On A Defect In Subject Matter Jurisdiction

Posted in Case Summaries

Kenny v Wal-Mart Stores, Inc., et al., 2018 WL 650998 (9th Cir. Feb. 1, 2018).

In this action, the United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) found that a district court lacks authority to sua sponte remand an action unless there is a defect in subject matter jurisdiction. Additionally, the defendants’ demurrer did not constitute a waiver of their right to removal.

Plaintiff Kris Kenny (“Plaintiff”) brought a putative class action in the Superior Court of California (the “State Court”) challenging Wal-Mart Stores, Inc. and Wal-Mart Associates, Inc.’s (“Defendants”) policy that required employees who had suffered workplace-related injuries to submit to drug and/or urine testing.After not serving the original complaint, Plaintiff filed and served his First Amended Complaint (“FAC”) on Defendants. In response to the FAC, Defendants filed a demurrer and a motion to strike; however, before Plaintiff opposed their demurrer, Defendants removed the action to the Central District Court of California (the “District Court”) pursuant to CAFA. In response to removal, the District Court sua sponte remanded the case, stating summarily that Defendants waived their right to remove by filing a demurrer in the State Court.

On appeal, the Ninth Circuit vacated the District Court’s remand order.

First, the Ninth Circuit found that a district court only has authority to sua sponte remand an action under 28 U.S.C. § 1447(c) due to jurisdictional defects. The Ninth Circuit noted that whereas a “district court must remand ‘if at any time before final judgment it appears that the district court lacks subject matter jurisdiction,’” it “may remand for defects other than lack of subject matter jurisdiction only upon a timely motion to remand.” Here, the Ninth Circuit found that neither the District Court nor Plaintiff contested subject matter jurisdiction under CAFA, rather, the District Court stated, without explanation, that Defendants waived their right to remove by filing a demurrer to the FAC. Therefore, the Ninth Circuit determined that the District Court exceeded its statutory authority in sua sponte remanding the action on non-jurisdictional grounds.

Second, the Ninth Circuit found that the District Court erred in concluding that Defendants waived their right to removal when the FAC did not reveal a basis for removal pursuant to CAFA. The Ninth Circuit noted that a defendant may waive the right to remove to federal court where, after it is apparent that the case is removable, the defendant takes actions in state court that manifest his or her intent to have the matter adjudicated there and to abandon his or her right to a federal forum. The Ninth Circuit further noted that when a party takes necessary defensive action to avoid a judgment being entered automatically against him, such action does not manifest an intent to litigate in state court and accordingly, does not waive the right to remove.

Here, the Ninth Circuit found that it was undisputed that the FAC was indeterminate as to the amount in controversy. The Ninth Circuit further found that nothing on the face of the FAC put Defendants on notice of the case’s removability and Plaintiff had not pointed to any other document that would have done so. Thus, the Ninth Circuit opined that Defendants could not have waived their right to removal by taking actions in the State Court, when their right to remove was not apparent from the FAC. Accordingly, the Ninth Circuit held that Defendants could not have clearly and unequivocally waived their right to remove by responding to the FAC.

Finally, the Ninth Circuit noted that Defendants filed a demurrer on the last day to respond to the FAC. The Ninth Circuit determined that Defendants’ choice to file a demurrer, rather than another form of responsive pleading did not amount to a waiver of their right to remove. The Ninth Circuit observed that Defendants removed the case before Plaintiff opposed the demurrer and before any hearing was held. Therefore, the Ninth Circuit concluded that Defendants did not manifest an intent to litigate in the State Court or an intent to affirmatively abandon their right to a federal forum.

Therefore, the Ninth Circuit held that the District Court erred in concluding that Defendants waived their right to remove, and accordingly, vacated its remand order.

-Mike Aleali