Congress enacted the Class Action Fairness Act, better known as “CAFA,” to address some of the well-documented abuses of class action litigation. Among CAFA’s important provisions is one permitting defendants to remove class actions to federal court when there are over 100 potential class members and the amount in controversy exceeds $5 million. 28 U.S.C. section 1332(d). A case must be removed under CAFA within 30 days after the defendant receives a document from which it can ascertain that the amount in controversy requirement has been met. 28 U.S.C. section 1446(b)(3).
From the time of CAFA’s inception, plaintiffs’ counsel have often looked for ways to prevent removal by, for example, failing to identify the amount in controversy or trying to stipulate that the amount of controversy is actually less than the $5 million removal threshold. Some myopic courts similarly sought to impose a high standard for removal or to require the submission of evidentiary materials to establish that the dispute did, indeed, involve more than $5 million. Fortunately, the Supreme Court put an end to several of these tactics in Standard Fire Insurance Co. v. Knowles, 133 S. Ct. 1345 (2013) and Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S. Ct. 547 (2014). We blogged about those decisions here. The upshot is that to remove under CAFA, the defendant does not need to attach evidence (it need only allege the basic facts in the removal notice) and its submission in the notice of removal need only demonstrate the amount in controversy by a preponderance of the evidence.
That then leaves the question of when a defendant must remove, such as when the amount in controversy is not clear at the time the complaint is filed, or after subsequent events, such as when an amendment or increase of damages over time causes the case to reach the amount in controversy requirement.
In Graiser v. Visionworks of America, Inc., Case No. 16-3167 (6th Cir. April 6, 2016), the court was presented with just that issue. Graiser was not an employment case but, rather, was a consumer case over questions about the defendant’s “Buy One, Get One Free” eyeglasses offer. The defendant originally unsuccessfully removed the case under diversity of citizenship (not CAFA). After remand to state court, the plaintiffs amended their complaint and initially tendered a settlement demand of roughly $4 million, below the CAFA requirement. Over time, however, the amount in controversy increased because the defendant had not changed the terms of the challenged “Buy One, Get One Free” promotion. After the case had been pending over a year, the plaintiffs tendered a new settlement demand based on claimed damages of slightly over $5 million. The defendant removed again, this time under CAFA, within 30 days of receiving the revised demand.
The district court remanded the removal as untimely. Looking through the lens of information the defendant might itself have had, the court largely reasoned that the defendant should have consulted its own records sooner to ascertain whether the amount in controversy met the jurisdictional requirement. The Sixth Circuit, however, reversed and found that the removal was timely. Along the way, the court made two significant holdings:
- The time for removal begins when the defendant receives documents from the plaintiffreflecting that the amount in controversy requirement has been met, not its own records. Thus, the question is not what is in the defendant’s records, and the court should look instead to what the plaintiffs themselves claim in the lawsuit.
- The timeliness of removal under CAFA is determined independently, and is not affected by the timeline for removal under other bases, such as diversity.
Graiser is important because it rejects one of the most significant attacks frequently made by plaintiffs seeking to avoid CAFA removal. As the court’s decision reflected, CAFA was intended to facilitate removal, not to create a spectacle over when the jurisdictional threshold might theoretically have been crossed.
Interestingly, these issues do not run strictly across the traditional lines among courts. In the Owenscase, the majority was written by Justice Ginsberg, while the late Justice Scalia actually dissented, joined, curiously, by Justices Kennedy, Kagan, and (except for the last sentence) Thomas. TheGraiser decision was written by Judge Karen Nelson Moore, a former civil procedure law professor who is normally viewed as a plaintiff-friendly judge.
The bottom line: The time for CAFA removal runs from when the plaintiffs provide the defendant with allegations or evidence meeting the amount in controversy, not when the defendant might compute damages from its own records.