In the case of Romulus v. CVS Pharmacy, Inc., the First Circuit Court of Appeals addressed the removal of class actions to federal court under the Class Action Fairness Act (CAFA), including the timeliness of removal under 28 U.S.C. § 1446(b).  The court held that the 30-day deadline for removal under Section 1446(b)(1) and (b)(3) is triggered only when the initial pleading or a subsequent “other paper” from the plaintiff provides the defendant with sufficient information to readily determine that the matter is removable. The defendant has no duty to perform any significant investigation of facts relevant to federal jurisdiction independent of the information received from the plaintiff.

The court also adopted an “expansive construction” of what constitutes an “other paper” under Section 1446(b)(3).  The court noted, but did not answer, the related question of when a defendant may remove a class action based on its own investigation in the absence of an initial pleading or “other paper” from the plaintiff providing sufficient information to ascertain removability. 

Finally, the court commented on the burden of proof applicable to the determination of facts relevant to removal, which in the case before it concerned the amount in controversy required for removal under CAFA. 

Statutory and Case Background

Section 1446(b) provides two separate triggers for the familiar 30-day deadline for removal.  Section 1446(b)(1) requires the notice of removal to be filed 30 days after the defendant receives the initial pleading, but Section 1446(b)(3) provides that “if the case stated by the initial pleading is not removable” the defendant can remove within 30 days after receipt of “a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.”  (Emphasis added.) 

Pursuant to Section 1446(c)(1) there is an absolute deadline for removal of one year from the commencement of the action in diversity cases, however, that one year limit does not apply to “class actions” under Section 1453(b).  Under CAFA, the amount in controversy for a class action removed on the basis of diversity must exceed $5 million pursuant to Section 1332(d)(2).  Subject to some nuances, a class action that does not satisfy the requirements of CAFA may still be removable under Section 1332(a) if there is complete diversity between the named plaintiffs and named defendants and at least one plaintiff satisfies the $75,000 amount in controversy requirement.  See Exxon Mobil Corp. v. Allapattah Servs., 125 S.Ct. 2611 (2005). 

In Romulus v. CVS Pharmacy, Inc., shift supervisors at CVS stores in Massachusetts filed a putative class action alleging that CVS has a policy requiring shift supervisors to remain at the store when taking breaks if there are no other managerial employees on duty or when there is only one other employee on duty.  Plaintiffs alleged violations of Massachusetts wage and overtime laws and sought unpaid wages, treble damages, attorneys’ fees and costs for those breaks in the class period for which they were required to stay at the store.  In the complaint, plaintiffs did not provide information on the number of breaks at issue, nor did they demand a specific amount of damages.

After an initial removal to federal court within 30 days of service of the complaint, and the first remand order which was not appealed, the parties conducted discovery and CVS provided plaintiffs with electronic time and attendance data.  Both sides analyzed this data and were able to estimate the number of meal breaks at issue during the class period.  In a telephone conversation, both parties discussed their calculations and CVS asked the plaintiffs to provide their estimate in written form, which the plaintiffs did by email on January 18, 2013.  Within 30 days of that email, CVS filed its second notice of removal. 

Plaintiffs again moved to remand, arguing that the second removal was untimely because it was filed 17 months after the case was brought.  CVS argued that the second notice of removal was timely under 28 U.S.C. § 1446(b)(3) because it was filed within 30 days of the date CVS determined that the case was removable based on the email in which plaintiffs provided an estimate of the number of breaks, which allowed CVS, using the average hourly wage that was already part of the record, to calculate that the amount in controversy exceeded $5 million. 

The District Court’s Decision

On March 27, 2014, the district court granted the plaintiffs’ motion to remand holding that CVS’s second notice of removal was untimely and concluding also that CVS had failed to show a reasonable probability that more than $5 million was at stake in the case.  The district court noted that it was well beyond 30 days since service of the complaint, and that CVS had failed to identify any “other paper” providing “new information supporting federal jurisdiction.”  

The district court found that the email in question could not serve as the “other paper” because the estimate in the email was based on data that CVS itself possessed from the beginning of the litigation and had provided to plaintiffs.  The court concluded that CVS had “violated a duty to make a reasonably inquiry into its own records at the time of the complaint.”  Furthermore, the district court accepted plaintiffs’ argument that the amount in controversy was “entirely speculative,” and without factual findings or further explanation, concluded that CVS had “failed to show a reasonable probability that more than $5 million is at stake in this case.”

Appellate Justiciability

It is worth pausing to observe how CVS secured appellate review of the second remand order to begin with.  As a general proposition, remand orders are not reviewable under Section 1447(d).  Section 1453(c)(1), however, creates an exception to that rule, subject to the discretion of the court of appeals, for class actions removed under CAFA (and arguably for all class actions however removed, although the circuits appear split on this and the First Circuit has yet to address it squarely, see Coll. Of Dental Surgeons of Puerto Rico v. Connecticut Gen. Life Ins. Co., 585 F.3d 33, 37-39 (1st Cir. 2009)).  

CVS petitioned the court of appeals for permission to appeal the district court’s second remand order on April 7, 2014.  The court of appeals granted CVS’s petition on September 8, 2014, and issued the subject decision on October 24, 2014. Plaintiffs argued that CVS’s interlocutory appeal was untimely under Section 1453(c)(2), because it was not concluded within 60 days “after the date the appeal [was] filed,” and no extension was granted under Section 1453(c)(3).  The court quickly dismissed that argument, holding that the 60-day period for appellate disposition commences not when a party applies for leave to appeal, but rather when the court of appeals grants permission for appellate review. 

Adopting a “Bright-Line” Rule

In addressing the issue of when the 30-day deadline for removal is triggered under Section 1446(b), the First Circuit followed the lead of several other circuit courts of appeal that have addressed this issue recently and adopted a “bright-line rule.”  The First Circuit held that, in determining whether the Section 1446(b) clock had begun to run, “we focus exclusively on the pleadings and other papers provided by the plaintiffs.”  The court clarified what qualifies as an “other paper” under Section 1446(b)(3), an issue of first impression in the First Circuit.  The court relied on “clear congressional intent to interpret ‘other paper’ broadly,” and found that correspondence from the plaintiff to the defendant, such as the email at issue in this case, can constitute an “other paper” for purposes of Section 1446(b)(3). 

The court explained that this email provided CVS with plaintiffs’ estimate of the number of breaks at issue, which allowed CVS to multiply that estimate by the average hourly wage that was already part of the record.  This allowed CVS to “easily calculate” the total damages claimed, which exceeded $5 million. The court further explained that it did not matter that the data informing from plaintiffs’ estimate in the email was originally provided by defendant because the defendant has “no duty to perform significant investigation of its own data to ascertain removability.”  The court emphasized that the test is when “theplaintiffs’ papers ‘first enable the defendant to make the requisite merits showing to the district court.’” (Emphasis in original.) 

The court acknowledged that this bright-line test “varies in severity among the circuits.”  The First Circuit found that some circuits require the plaintiff to disclose a specific amount of monetary damages in order to trigger the clock under Section 1446(b), Walker v. Trailer Transit, Inc., 727 F.3d 819 (7th Cir. 2013), while others also allow the plaintiff to trigger the removal deadlines by setting forth facts from which a defendant applying a “reasonable amount of intelligence” could ascertain the amount in controversy,Cutrone v. MERS, 749 F.3d 137 (2nd Cir. 2014); Kuxhausen v. BMW Fin. Servs. NA LLC, 707 F.3d 1136 (9th Cir.  2013).

The First Circuit stated that it agreed with the Second Circuit, and presumably the Ninth Circuit, that the 30-day deadline will be triggered if plaintiff’s paper “includes a clear statement of the damages sought or if the plaintiff’s paper sets forth sufficient facts from which the amount in controversy can easily be ascertained by the defendant by simple calculation.” The First Circuit, again agreeing with the Second Circuit, held that under this test, however, the defendant has no duty to investigate “or to supply facts outside of those provided by the plaintiff.” 

The Unanswered Question

The court noted but declined to answer the question of when a defendant can remove a class action based on its own investigation of the facts relevant to federal jurisdiction, in the absence of information in either the complaint or a subsequent “other paper” sufficient to determine that the case is removable.  In footnote 12, the court recognized that recent decisions from three other circuits, Cutrone v. MERS, 749 F.3d 137 (2nd Cir. 2014), Walker v. Trailer Transit, Inc., 727 F.3d 819 (7th Cir. 2013), and Roth v. CHA Hollywood Medical Center, L.P., 720 F.2d 1121 (9th Cir. 2013), supported CVS’s position that a class action can be removed under CAFA at any time, based on the defendant's investigation, provided that the 30-day deadline has not run under either Section 1446(b)(1) or (b)(3). 

The First Circuit deferred “the complicated questions concerning the possibility of removal outside of the specified CAFA statutory procedures” because, in the case before it, CVS was required to remove within 30 days of the plaintiffs’ email constituting an “other paper” under Section 1446(b)(3).  Based on the court’s reasoning discussed above, however, removal presumably would have been timely even if CVS had never received the email in question, because the 30-day clock under Section 1446(b) would never have been triggered and no deadline for removal of any sort would have applied. 

The Amount in Controversy Under CAFA

Another significant issue addressed by the Court in Romulus was the substantive removal question of whether CVS had satisfied the $5 million jurisdictional amount in controversy requirement under CAFA.  In its discussion of this issue, the court clarified the process for determining the amount in controversy and confirmed the applicable standard of proof. 

Citing its decision in Amoche v. Guar. Trust Life Ins. Co., 556 F.3d 41 (2009), the court first reemphasized the distinction between the amount in controversy and the amount, if any, plaintiff is likely to recover.  In the court’s own words:  “As we have stressed, ‘the pertinent question is what is in controversy in the case, not how much the plaintiffs are ultimately likely to recover.’” (citing Amoche, 556 F.3d at 51). 

The court then confirmed once again, as it did previously in Amoche, that the defendant’s burden of proof to establish the CAFA jurisdictional prerequisites by a “reasonable probability” is “identical to the preponderance standard.”  Moreover, the court highlighted the plaintiff’s obligation to offer competing proof concerning the facts relevant to federal jurisdiction, rather than “merely labeling the defendant’s showing as speculative without discrediting the facts upon which it rests.” (quoting Amoche¸556 F.3d at 51.) 

Finally, the court again made it clear that the examination of a removing party’s proof, with or without competing evidence from the plaintiff, should not be so exacting as to cause the proceedings to “devolve into a mini-trial regarding the amount in controversy.”  (citing Amoche, 556 F.3d at 50.)  The applicable standard of review, the court pointed out, is intended “to avoid ‘extensive and time consuming litigation over the question of the amount in controversy in CAFA removal cases.’”  (Id.

Conclusions

Although the First Circuit left some questions unanswered, as a practical matter this decision appears to broaden the universe of cases that will be removable under CAFA and pursuant to diversity jurisdiction generally.  By adopting an expansive definition of “other paper” under Section 1446(b)(3), and confirming that the defendant has no significant duty independent of information received from the plaintiff to investigate the removability of an action, the court will cut down on disputes over when the defendant knew or should have known enough to remove.  Of course, defendants under this “bright line” test need to pay careful attention to information received from the plaintiff – the argument may now shift to whether a particular e-mail from plaintiff’s counsel disclosed enough information to enable the defendant to “easily calculate” the amount in controversy, thereby triggering the 30-day deadline under Section 1446(b)(3). 

The extent to which this decision will apply to class actions removed under general diversity jurisdiction, as opposed to just those removed under CAFA, remains to be seen, as does whether a class action defendant has an indefinite period of time to remove based on its own investigation in the absence of one of the 30-day triggers under Section 1446(b). 

Finally, this decision confirms the standard of proof for facts supporting federal jurisdiction, including the amount in controversy, as well as the plaintiff’s burden to come forward with competing evidence as opposed to simply labeling the defendant’s evidence as “speculative” in support of a motion to remand.  The defendant’s proof will not be subject to such strict scrutiny as to require a “mini-trial” on removal.  Again, this appears to tilt the playing field in favor of federal jurisdiction, at least in cases removed under CAFA, which after all is what Congress intended.