Defendants may remove an action from state court to federal court on the basis of information learned from their own investigations, outside of the 30-day removal periods triggered by receipt of a pleading or other “paper” from the plaintiffs, the Ninth Circuit held in Roth v. CHA Hollywood Medical Center. Roth was removed under the Class Action Fairness Act (“CAFA”), but the Ninth Circuit explicitly noted that its ruling applies to any diversity case.

The case was filed as a state law wage and hour class action in California state court in 2011. An amended complaint was filed on May 24, 2012, naming CHA Hollywood Medical Center (“CHA”) as a defendant for the first time. On September 4, 2012, CHA filed a petition to remove the case to federal court, which it supported with a declaration from a would-be class member stating she was employed in California during the class period, but had moved to Nevada and intended to live there for the foreseeable future. CHA also provided a declaration stating that the amount in controversy exceeded $5 million.

The federal district court granted the plaintiff’s motion to remand, holding that removal must be based on information received from plaintiffs establishing the case was removable under either diversity or federal question jurisdiction. The court cited 28 U.S.C. section 1446(b)(1) or (b)(3) as the basis for its decision. Those two provisions require, respectively, that a case be removed within 30 days after receipt by defendants of the initial pleading or service of summons, or within 30 days of receipt 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.” The court held the defendants could not remove based on information they discovered from their own investigation because neither of the 30-day periods for removal had been triggered by information received from the plaintiffs.

On appeal, the Ninth Circuit agreed with defendant CHA, holding that the two 30-day removal provisions are not the only basis for removal. Rather, 28 U.S.C. section 1441(a) allows removal to federal court of any case that could have been filed there in the first place. Reading sections1441 and 1446 together, the court held the statutes “permit a defendant to remove outside the two thirty-day periods on the basis of its own information, provided that it has not run afoul of either of the thirty-day deadlines.”

CHA had not violated the 30-day time limits because the plaintiffs had not provided any information from which CHA could determine the case was removable. It was not until CHA discovered the potential class member in Nevada that it had information establishing that the case was removable, and then it “promptly” sought to remove the case to federal court. Acknowledging there is no outer time limit for removal in a CAFA case, the court recognized the potential for defendants to wait to “remove only when it becomes strategically advantageous to do so.” But, the court continued, “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.” The court pointed out that plaintiffs could protect themselves from strategically delayed removals by disclosing information to trigger the 30-day removal period.

A week after its decision in Roth, in Watkins v Vital Pharmaceuticals, the Ninth Circuit reversed another trial court’s remand decision – this time focusing on the evidence needed to establish the $5 million amount in controversy required for removal under CAFA. Watkins was a consumer class action, but its holding applies to employment cases as well. The plaintiffs in that case filed suit on behalf of a potential class of “thousands of consumers throughout the United States” and alleged that “the aggregate of damages sustained by the Class are likely in the millions of dollars.” The company removed to federal court, filing two declarations stating that the amount in controversy was more than $5 million. The trial court, acting on its own, decided that the company did not have adequate evidence of the amount in controversy. Its notice of removal merely “averred” its sales exceeded $5 million and a declaration by its counsel only “vaguely and conclusorily” alleged that the required amount was in controversy.

On appeal, the Ninth Circuit explicitly confirmed that the right to appellate review of decisions remanding CAFA cases applied to remand decisions made on the court’s own motion (“sua sponte”) as well as to rulings on motions made by one of the parties. The Ninth Circuit also agreed with the district court that a defendant is required to prove the amount in controversy by a “preponderance of the evidence.”

Moving to the merits, the Ninth Circuit determined that the controller’s declaration that the company’s total sales exceeded $5 million over the class period, which the district court did not reference, was sufficient to establish the amount in controversy. Noting that the declaration was “undisputed in the district court,” the Ninth Circuit remanded the case to the district court with instructions to exercise jurisdiction in the case.

The Watkins decision establishes a seemingly low bar for the evidence needed to prove the amount in controversy to establish removal jurisdiction. Further litigation may reveal whether similar proof will suffice in situations where plaintiffs challenge the sufficiency of the evidence or attempt to dispute its veracity in the district courts.