United States: Ninth Circuit Opens New Window For Removal Of State Court Cases To Federal Court

A defendant generally may remove a civil action from state court to federal district court if the district court would have had jurisdiction had the action been originally filed in that court.  28 U.S.C. § 1441(a).  For years it seemed that a defendant had only two windows of time in which to remove an action to federal court.  Sections 1446(b)(1) and (b)(3) of the U.S. Code specify that a defendant must remove a case within thirty days of service of the complaint or within thirty days of receiving from plaintiff some "other document" from which the defendant could ascertain that the case was removable to federal court.  28 U.S.C. §§ 1446(b)(1), (b)(3).

Changing expectations, in a recent case the Ninth Circuit addressed for the first time whether the two thirty-day periods described in sections 1446(b)(1) and (b)(3) are the only periods during which a defendant may remove, or if they are merely periods during which a defendant must remove if one of the thirty-day time limits is triggered.  The case is Roth v. CHA Hollywood Medical Center, L.P. (9th Cir. June 27, 2013).

In Roth, plaintiffs filed a state-law wage and hour class action in California state court.  The plaintiffs thereafter filed an amended complaint naming an additional defendant, CHA Hollywood Medical Center ("CHA").  After conducting its own investigation, CHA discovered that at least one of the putative class members was a citizen of Nevada, thereby creating diversity for removal under the Class Action Fairness Act ("CAFA").  CHA also determined that it could establish that the amount in controversy exceeded CAFA's jurisdictional minimum of $5 million.  Based on these discoveries – which occurred more than 100 days after the filing of the amended complaint – CHA filed a notice of removal in federal district court.

Asserting that the removal was untimely, plaintiffs moved to remand the case back to state court, and the district court granted plaintiffs' motion to remand.  The district court held that removal was improper – even if the jurisdictional requirements had been satisfied – because neither of the thirty-day periods specified in sections 1446(b)(1) and (b)(3) had been triggered by documents received from plaintiffs.  Thus, the district court held that the defendants could not remove based on information discovered by CHA outside of the thirty-day periods.

On appeal, the Ninth Circuit reversed.  The Ninth Circuit held that "a defendant who has not lost the right to remove because of a failure to timely file a notice of removal under § 1446(b)(1) or (b)(3) may remove to federal court when it discovers, based on its own investigation, that a case is removable."  Because here plaintiffs' amended complaint was "at best 'indeterminate'" with respect to removability, CHA, which conducted its own investigation and discovered that the case was removable, was not barred from removing the action outside the two thirty-day periods.

The Ninth Circuit acknowledged that, under sections 1446(b)(1) and (b)(3), there are valid reasons for imposing strict time limits on a defendant when a defendant is put on notice of removability by a plaintiff.  But the court concluded that a plaintiff should not be able to prevent or delay removal by failing to reveal information showing removability and then objecting to removal when the defendant discovers grounds for removal through its own investigation.  The Ninth Circuit noted, "It would be odd, even perverse, to prevent removal in this case, and we see nothing in the text of §§ 1441 and 1446 to require such a result."

The Ninth Circuit further dismissed any concerns that a defendant may delay removing an action based on information it discovered until it is strategically advantageous for the defendant to do so.  The Ninth Circuit noted that, in general diversity actions, any such advantages are severely limited because an action must be removed within one year of the commencement of the action.  Although no similar limitation exists in CAFA cases, the Ninth Circuit reasoned that a plaintiff can prevent potential gamesmanship by providing the defendant with a document from which removability may be ascertained, thus triggering the 30-day removal period under section 1446(b)(3).

This groundbreaking ruling has significant implications for defendants that prefer to be in federal court.  Defendants now have more flexibility and should not be deterred from removing general diversity or CAFA actions to federal court, provided they have otherwise complied with sections 1446(b)(1) and (b)(3).  It is possible that lower courts will narrow the Ninth Circuit's ruling, perhaps attempting to distinguish Roth on its facts or otherwise attempt to narrow this additional window for removal.  Nevertheless, if followed by other circuit courts, the ruling would remove the time constraints that previously existed to determine removability, giving defendants additional time to investigate and obtain evidence to support removal.

The Ninth Circuit's June 27, 2013, opinion can found here.

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