In a case of first impression, the 9th Circuit held last week in Roth v. CHA Hollywood Medical Center (here) that removal of a state court case to federal court may be triggered by defendant’s own investigation of the facts supporting removal. Previously, the window for removal has been narrowly construed, with federal court removal allowed only within 30 days of: 1) the filing of the complaint indicating federal jurisdiction or, 2) the receipt from plaintiff of a document supporting removal.
Rejecting the interpretation of numerous district courts, the 9th Circuit has now ruled that a defendant can remove within 30 days of its own discovery that federal jurisdiction exists, and need not rely on plaintiff presenting that information in a document.
This ruling is significant for defendants who have long encountered plaintiffs hiding the ball to avoid removal. For example, removal under the Class Action Fairness Act is dependent on making a threshold showing that the amount in controversy exceeds $5,000,000. Plaintiffs have avoided federal jurisdiction by pleading that the amount in controversy is less than $5,000,000, and carefully refraining from putting anything to the contrary on paper. This new ruling allows defendants to use their own resources to determine whether federal jurisdiction exists without having to rely on plaintiffs to make some kind of admission on paper. As noted by the Court, “neither should a plaintiff be able to prevent or delay removal by failing to reveal information showing removability and then objecting to removal when the defendant has discovered that information on its own.”
Addressing anticipated concerns about gamesmanship on the part of defendants who might delay removing for strategic reasons, the court concluded that plaintiffs can always avoid such tactics by being transparent about removability from the outset.
This 9th Circuit decision comes several months after the Supreme Court, in Standard Fire Insurance Company v. Knowles (see our post on that opinion here), invalidated another scheme that plaintiffs’ counsel sometimes use to try to stymie defendants from removing their state court lawsuits to federal court. In that case, the named class plaintiff’s stipulated at the outset of the lawsuit to maximum damages of less than $5,000,000, which they argued prevented defendants from meeting the CAFA amount in controversy requirement. The Court unanimously rejected this ploy because the named plaintiff lacked authority to bind putative class members.
How does or should this change the way defense counsel practice, at least in the 9th Circuit? Defendants wishing to be in federal court should diligently investigate whether facts exist supporting federal jurisdiction from the outset of the case, irrespective of whether they believe the complaint contains enough information to support removal on its face. If and when those facts are uncovered, (e.g., through data on hours/weeks/shifts worked, rates of pay, amounts of overtime worked, numbers of employees meeting the class description, frequency of pay periods, numbers of terminated employees in the class, etc.), the state court case should immediately be removed to federal court with the facts obtained by defendants that support removal.