• When 30 Days Just Isn’t Enough: The Ninth Circuit Rules that Defendants’ Right to Remove May Not be Limited to 30 Days
  • February 26, 2014
  • Law Firm: Sheppard Mullin Richter Hampton LLP - Los Angeles Office
  • In Rea v. Michaels Stores, No. 14-55008, 2014 U.S. App. LEXIS 2928 (9th Cir. Feb. 18, 2014), the Ninth Circuit reversed the district court’s order remanding a wage-and-hour class complaint to state court, ruling that the defendant employer’s removal of the case to federal court under the Class Action Fairness Act (CAFA) was proper. The Ninth Circuit held that a defendant’s removal options are not limited to the two 30-day periods specified in the federal removal statutes.

    The plaintiffs brought the action against Michaels Stores, Inc. on behalf of Michaels’ California store managers, alleging that the store had improperly classified the managers as exempt from overtime. The district court first remanded the case back to state court after finding that CAFA’s $5 million amount in controversy requirement was not met (because the plaintiffs “expressly disclaimed” any recovery for the class over $4,999,999). However, after the Supreme Court’s holding in Standard Fire Insurance Co. v. Knowles, 133 S. Ct. 1345 (2013), that attempted damage waivers are ineffective, Michaels removed the case under CAFA a second time. The district court remanded the case once again after finding that the removal ran afoul of CAFA’s 30-day removal window. The district court also held, in the alternative, that Michaels had not demonstrated that the amount in controversy exceeded $5 million.

    The Ninth Circuit reversed the district court’s decision and held that Michaels’ second removal action was proper. The Ninth Circuit reaffirmed its holding in Roth v. CHA Hollywood Medical Center, L.P., 720 F.3d 1121, 1124-25 (9th Cir. 2013), that the two 30-day windows specified in the federal removal statutes are not the exclusive periods for removal. Rather, so long as no pleading or other paper revealed that the case was removable, the time period does not start to run. Thus, even though Michaels did not file its removal action until years into the litigation, because the complaint did not “affirmatively reveal[] on its face the facts necessary for jurisdiction” the 30-day period was never triggered and removal was timely.

    The court also held that the district court’s finding that Michaels had failed to prove the requisite amount in controversy was erroneous. The Ninth Circuit first reiterated that the preponderance of evidence standard (and not the legal certainty standard) applies to CAFA removal actions (per its recent decision in Rodriguez v. AT&T Mobility Services, 728 F.3d 975, 981 (9th Cir. 2013)). Applying that standard to the submitted evidence - including a declaration from a Michaels executive that the company expected its managers to work 45 hours per week, in addition to the deposition testimony of named class members that they did in fact work at least 45 hours per week - the court held that Michaels had sufficiently demonstrated that the amount in controversy “could exceed $5 million.”

    This case should prove helpful to class action defendants seeking removal to federal court.