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Media Alerts - Rea, et al. v. Michaels Stores, Inc.
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March 6, 2014
  Rea, et al. v. Michaels Stores, Inc.
Headline: Ninth Circuit Declines to Allow Defeat of CAFA Jurisdiction Based on Post-Filing Developments and Damages Waivers.

Areas of Law: Class Action Fairness Act; Federal Jurisdiction; Civil Procedure

Issue(s) Presented: Whether consideration of post-filing developments is appropriate in assessing CAFA's jurisdictional requirements. Whether a damages waiver defeats CAFA's amount-in-controversy jurisdictional requirement.

Brief Summary: The Ninth Circuit here examined the ever-evolving requirements for class action suits under the Class Action Fairness Act (CAFA). Notably, the court asked whether review of a CAFA jurisdictional remand is moot based on post-filing developments that make jurisdiction unlikely. The court recalled that CAFA jurisdiction assessments consider the facts as presented at the time of filing, not following post-filing decisions. Thus, review of the merits is appropriate here because the facts as of filing indicate the possibility of CAFA jurisdiction.

In reviewing the merits, the Ninth Circuit held that defendants sought timely removal. Although removal must be sought within 30 days of receipt of the complaint or within 30 days of some filing that renders the case removable, this rule is not exclusive. If, as here, the complaint and subsequent filings do not facially reveal that the case is removable, the 30-day period never begins. Thus, when the case did become apparently removable based on a Supreme Court decision, defendants request for such removal was timely, as it was done within 30 days.

Finally, the Ninth Circuit reversed the lower court's finding that there was insufficient evidence of satisfaction of the amount in controversy requirement. Given that the appropriate standard for a lower court's review of the amount in controversy issue was in flux at the time the lower court visited the issue, this court noted it was unclear which standard was applied. It held however, that if the wrong standard was applied, remand would be appropriate in order to gain proper review. Or if the correct standard was applied, the lower court clearly erred in its application, and as such remand for review would be appropriate.

For the full opinion:

Extended Summary: Plaintiffs filed suit in state court against Michael's Stores alleging improper classification as exempt employees for purposes of overtime pay. Defendant sought removal to federal court under the Class Action Fairness Act (CAFA). The district court remanded the case to state court on the grounds that the amount in controversy requirement was not met because plaintiffs disclaimed any award of damages greater than $4,999,999.99.

Following a Supreme Court decision, that held such damages waivers inapplicable to the consideration of CAFA jurisdiction, defendants sought removal again. Standard Fire Insurance Co. v. Knowles, 133 S.Ct. 1345 (2013). The district court again remanded the case to state court, this time holding that the 30-day time limit for removal had run. The Ninth Circuit granted review upon defendant's request.

The Ninth Circuit examined whether the case was moot, given post-remand developments in the state court - first, the class was certified in state court prior to the Supreme Court's decision in Standard Fire; and second, that the certified class was now significantly smaller, such that recovery would surely be less than $5,000,000. The court held that for purposes of CAFA jurisdiction, the amount in controversy requirement is examined at the time of filing, not at any later time based on post-filing developments. Thus, the case was not moot.

In examining the timeliness issue, the court cited to the general rule for removal - removal must be sought within 30 days of receiving a complaint or within 30 days of a filing that demonstrates the case has become removable. It then noted that this rule is not exclusive, such that if the case never appears removable, the 30-day period never begins to run. As applied here, because the damages waiver was controlling at the time of filing, the case did not appear removable based on the insufficiency of the amount in controversy and the 30-day removal period was never triggered.

The court also examined the timeliness issue through the lens of 28 U.S.C. § 1447(d), which prohibits review of successive bad-faith attempts to remove. It dismissed the applicability of § 1447 because CAFA expressly allows review of removal orders "notwithstanding section 1447(d)."

Last, the court took up the amount in controversy question. It noted that the record is unclear as to which standard the lower court applied in reviewing the amount in controversy - legal certainty or preponderance of the evidence. At the time of the lower court's review, legal certainty was the controlling standard. Lowdermilk v. U.S. Bank Nat'l Ass'n, 479 F.3d 994 (9th Cir. 2007). However, during pendency of the instant case, the Ninth Circuit determined preponderance of the evidence to be the appropriate standard. Rodriguez v. AT&T Mobility Services, 728 F.3d 975 (9th Cir. 2013).

Thus, if the lower court applied the legal certainty standard, reversal would be necessary based on application of the wrong standard. And an examination under the preponderance of the evidence standard revealed that the lower court clearly erred in finding insufficient evidence that the amount in controversy could meet or exceed the $5,000,000 requirement.

Because the issue was not moot, defendant timely filed for removal, and there was sufficient evidence that the amount in controversy requirement was satisfied, the Ninth Circuit reversed the lower court and remanded the case.

Panel: Andrew J. Kleinfeld, Barry G. Silverman, and Andrew D. Hurwitz, Circuit Judges.

Date of Issued Opinion: February 18, 2014

Docket Number: 8:13-cv-00455-GW-AGR

Decided: Reversed and remanded

Case Alert Author: Kathleen M. McHale

Counsel: Jesse A. Cripps, Gibson, Dunn & Crutcher LLP, Los Angeles, California, for Defendant-Appellant. David J. Gallo, Law Offices of David J. Gallo, Del Mar, California, for Plaintiffs-Appellees.

Author of Opinion:
Per curiam

Case Alert Circuit Supervisor: Professor Ryan T. Williams

    Posted By: Ryan Williams @ 03/06/2014 01:17 PM     9th Circuit  

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