Ninth Circuit Issues Another Employer-Friendly Decision on CAFA Removals
Yesterday the Ninth Circuit issued its decision in Rea v. Michaels Stores, reversing a remand order and finding that the defendant employer’s removal of the case to federal court under the Class Action Fairness Act (CAFA) was proper. In line with its decision last year in Roth v. CHA Hollywood Medical Center, the Ninth Circuit reaffirmed that a defendant’s removal options are not limited to the two 30-day windows specified in the federal removal statute. As long as the defendant has not run afoul of either 30-day removal window (meaning that no pleading or other paper revealed on its face that the action was removable), the defendant may remove at any time based on its own information and investigation. The Ninth Circuit also reaffirmed its holding last year in Rodriguez v. AT&T Mobility Services, that the preponderance of evidence standard (and not the legal certainty standard) applies to CAFA removals and that allegations in a complaint purporting to limit the amount in controversy to under $5 million are not binding and do not prevent removal under CAFA.
Applying these principles to the Michaels Stores case, a wage and hour class action alleging misclassification of store managers, the Ninth Circuit held that the employer’s removal was timely, even though it was filed years into the litigation and not within 30 days of any initial or subsequent pleading. The court also held that Michaels had sufficiently demonstrated that the amount in controversy “could exceed $5 million” based on evidence that Michaels expected its managers to work 45 hours per week, along with deposition testimony of putative class members stating that they in fact regularly worked 45 or more hours per week. Extrapolating these overtime hours to the number of employees in the putative class resulted in alleged overtime damages exceeding $5 million. The court held that this evidence (particularly in the absence of any contrary evidence) was sufficient to meet the employer’s burden of proving by a preponderance of the evidence that the amount in controversy requirement was met. For these reasons, the Ninth Circuit held that the district court’s order remanding the case to state court was erroneous.
Notably, while the plaintiff’s petition for review of the remand order was pending before the Ninth Circuit, the litigation proceeded on remand in the state court, resulting in a class being certified. The plaintiff argued before the Ninth Circuit that this grant of class certification turned the Complaint’s non-binding allegation limiting recovery to under $5 million into a binding allegation, thereby precluding CAFA jurisdiction. The Ninth Circuit rejected this argument, reasoning that post-removal developments are not relevant to assessing whether removal was proper at the time the removal was filed and that such subsequent developments do not defeat an otherwise proper removal.
The Rea v. Michaels Stores decision is helpful for employers defending wage and hour class actions in California state courts but seeking to remove those actions to federal court. The full decision is available here.