P. Rea v. Michaels Stores Inc , 742 F.3d 1234 ( 2014 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
P. REA; S. SADLOWSKI; D. SPERLINE; No. 14-55008
A. SARABIA,
Plaintiffs-Appellees, D.C. No.
8:13-cv-00455-
v. GW-AGR
MICHAELS STORES INC., a Delaware
corporation, OPINION
Defendant-Appellant.
Appeal from the United States District Court
for the Central District of California
George H. Wu, District Judge, Presiding
Argued and Submitted
February 3, 2014—Pasadena, California
Filed February 18, 2014
Before: Andrew J. Kleinfeld, Barry G. Silverman,
and Andrew D. Hurwitz, Circuit Judges.
Per Curiam Opinion
2 REA V. MICHAELS STORES
SUMMARY*
Class Action Fairness Act
The panel reversed the district court’s order remanding
the case back to state court, and held that the Class Action
Fairness Act’s amount-in-controversy requirement was met.
The panel held that the action was not moot based on the
state court’s subsequent determination to certify the class
because post-remand developments do not defeat jurisdiction
that was properly invoked at the time of filing. The panel also
held that the second removal of the case under the Class
Action Fairness Act (“CAFA”) was timely. Finally, the panel
held that under the preponderance of the evidence standard,
the appellant established that the potential damages could
exceed CAFA’s $5 million jurisdictional amount.
COUNSEL
Jesse A. Cripps, Gibson, Dunn & Crutcher LLP, Los Angeles,
California, for Defendant-Appellant.
David J. Gallo, Law Offices of David J. Gallo, Del Mar,
California, for Plaintiffs-Appellees.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
REA V. MICHAELS STORES 3
OPINION
PER CURIAM:
Plaintiffs brought the present action against Michaels
Stores, Inc. on behalf of Michaels’ California store managers,
alleging that Michaels had improperly classified the managers
as exempt from overtime. Michaels removed the case within
30 days to federal district court under the Class Action
Fairness Act. The district court remanded the case back to
state court, finding that CAFA’s $5,000,000 amount-in-
controversy requirement was not met because the plaintiffs
expressly disclaimed any recovery for the class over
$4,999,999.99.
On March 19, 2013, the Supreme Court held in Standard
Fire Insurance Co. v. Knowles that attempted damages
waivers, such as the plaintiffs’, are ineffective, and will not
defeat removal under CAFA. 133 S. Ct. 1345, 1347 (2013).
The next day, Michaels removed again under the Class
Action Fairness Act. And the district court remanded again,
this time on the basis that the removal ran afoul of CAFA’s
30-day time limit. The court held in the alternative that
Michaels had failed to carry its burden to demonstrate that the
amount in controversy exceeded $5,000,000.
Michaels appeals. We have jurisdiction under 28 U.S.C
§ 1453(c). We review the remand decision de novo, Serrano
v. 180 Connect, Inc., 478 F.3d 1018, 1020 (9th Cir. 2007), but
review the district court’s factual findings for clear error, Fed.
R. Civ. Pro. 52(a)(6). “Under CAFA, we have 60 days from
the time we accept the appeal to complete all action on such
appeal, including rendering judgment.” Lowdermilk v. United
States Bank Nat’l Ass’n, 479 F.3d 994, 996 (9th Cir. 2007),
4 REA V. MICHAELS STORES
abrogated on other grounds by Standard Fire Insurance Co.,
133 S. Ct. 1345 (internal quotation marks omitted).
As a preliminary matter, we must consider the plaintiffs’
argument that this appeal is now moot in light of post-remand
developments. We have already considered this argument
once before on a motion to dismiss Michaels’ petition to
appeal, which we denied in a two-judge order. However,
“[t]he fact that the motions panel denied the . . . motion to
dismiss this appeal does not free this court from the
independent duty to decide whether we have jurisdiction.”
United States v. Houser, 804 F.2d 565, 568 (9th Cir. 1986)
(internal quotation marks omitted).
The plaintiffs argue that after the most recent remand, the
amount in controversy cannot exceed $5,000,000 for two
reasons. First, they point out that a class has now been
certified in state court, which they contend makes the
damages waiver in their complaint binding notwithstanding
Standard Fire. Second, they argue that the certified class is
significantly smaller than the proposed class was, so much so
that it could not possibly recover more than $5,000,000. We
need not consider whether either of these propositions are
correct, however, because the general rule is that “the amount
in controversy is determined from the pleadings as they exist
at the time a petition for removal is filed.” Eagle v. Am. Tel.
& Tel. Co., 769 F.2d 541, 545 (9th Cir. 1985). This action is
not moot based on the state court’s subsequent determination
to certify the class because “post-filing developments do not
defeat jurisdiction if jurisdiction was properly invoked as of
the time of filing.” Visendi v. Bank of America, N.A.,
733 F.3d 863, 868 (9th Cir. 2013) (internal quotation marks
omitted).
REA V. MICHAELS STORES 5
Plaintiffs point us to a Tenth Circuit case, Dudley-Barton
v. Serv. Corp. Int’l., 653 F.3d 1151 (10th Cir. 2011). That
decision is inapposite. There, the Tenth Circuit dismissed a
CAFA appeal as moot when the plaintiffs had dismissed their
case in state court, noting that there was “no meaningful
dispute remaining between the parties.” Id. at 1152. That is
not the case here. The plaintiffs continue to claim damages
for wage and hour violations against the defendant and the
defendant continues to dispute them. This case is therefore
not moot.
As to timeliness, Michaels did remove this case within 30
days. The removal statutes generally require a party to
remove a case within 30 days of receiving the complaint. See
28 U.S.C. § 1446, 1453(b). The statutes provide an exception
to this rule: “if the case stated by the initial pleading is not
removable, a notice of removal may be filed within 30 days
after receipt by the defendant, through service or otherwise,
of a copy 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.” Id. § 1446(b)(3)
(emphasis added). Thus, we have held “that the thirty day
time period [for removal] . . . starts to run from defendant’s
receipt of the initial pleading only when that pleading
affirmatively reveals on its face the facts necessary for federal
court jurisdiction.” Harris v. Bankers Life & Cas. Co.,
425 F.3d 689, 691–92 (9th Cir. 2005) (internal quotation
marks omitted). We also recently held in Roth v. CHA
Hollywood Medical Center, L.P., that the two 30-day periods
are not the exclusive periods for removal. 720 F.3d 1121,
1124–25 (9th Cir. 2013). In other words, as long as the
complaint or “an amended pleading, motion, order or other
paper” does not reveal that the case is removable, the 30-day
6 REA V. MICHAELS STORES
time period never starts to run and the defendant may remove
at any time.
Here, the district court first remanded this case on
grounds that subsequently became incorrect. Michaels
removed it again the day after the Supreme Court announced
its decision in Standard Fire. When Michaels first received
the plaintiffs’ complaint, it had a damage waiver, purporting
to waive any recovery over $4,999,999.99, one penny shy of
the jurisdictional threshold. At the time, our decision in
Lowdermilk controlled, which had held that such damage
waivers were valid and effective, unless the defendant could
prove to a “legal certainty” that damages exceeded $5
million. Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 F.3d 994,
997–99 (9th Cir. 2007). Thus, under the controlling law at the
time Michaels received the complaint, it did not
“affirmatively reveal[] on its face the facts necessary for
federal court jurisdiction,” so the initial 30-day removal
period was never triggered. See Harris, 425 F.3d at 691
(internal quotation marks omitted); Roth, 720 F.3d at 1125.
Because the two thirty-day removal periods are nonexclusive
under our decision in Roth, Michaels’ second CAFA removal
was timely. See Roth, 720 F.3d 1121, 1124–25.
Citing our decision in Seedman v. U.S. Dist. Court for
Cent. Dist. of California, 837 F.2d 413 (9th Cir. 1988), the
plaintiffs argue that the district court could not sustain a
successive removal attempt based on the same grounds as the
first. In Seedman, we interpreted the provision in 28 U.S.C.
§ 1447(d) stating that a remand order “is not reviewable on
appeal or otherwise” as preventing the district court from
considering a removal based on the same grounds as one the
court had previously remanded. Id. at 414. Seedman does not
dictate the result in this case because CAFA explicitly allows
REA V. MICHAELS STORES 7
review of remand orders “notwithstanding section 1447(d)[.]”
See 28 U.S.C. § 1453(c)(1). Moreover, the Supreme Court’s
decision in Standard Fire is “a relevant change of
circumstances . . . justify[ing] a reconsideration of a
successive, good faith petition for removal.” Kirkbride v.
Cont’l Cas. Co., 933 F.2d 729, 732 (9th Cir. 1991). Thus,
even if Roth did not control the outcome of this case,
Michaels’ second removal would still be proper.
In its alternative holding, the district court found that
Michaels’ evidence failed to demonstrate that the amount in
controversy exceeded the $5,000,000 threshold. The factual
findings underlying the district court’s determination that
removal jurisdiction exists are reviewed for clear error. See
Schnabel v. Lui, 302 F.3d 1023, 1029 (9th Cir. 2002) (“[t]he
district court’s findings of fact relevant to subject matter
jurisdiction are reviewed under the clearly erroneous
standard.”); 13E Charles Alan Wright, Arthur R. Miller, &
Edward H. Cooper, Federal Practice and Procedure § 3612
(3d ed. 2009).
It is unclear which legal standard, “legal certainty” or
“preponderance of evidence,” the district court applied to
Michaels’ evidence of the amount in controversy. While the
court’s remand order mentioned the preponderance of the
evidence standard, at the time it issued its order, the
Lowdermilk “legal certainty” standard was still Ninth Circuit
law. After the district court issued its remand decision, we
held in Rodriguez v. AT&T Mobility Services that the
Lowdermilk “legal certainty” test is no longer good law in
light of Standard Fire, and that the preponderance of the
evidence standard applies instead. 728 F.3d 975, 981 (9th Cir.
2013). If the district court applied the Lowdermilk standard,
reversal would be required under Rodriguez. If the district
8 REA V. MICHAELS STORES
court applied the preponderance of the evidence standard, its
finding that the amount-in-controversy requirement was not
met was clearly erroneous. Thus, regardless of what standard
the district court applied, we are required to reverse.
To prove the amount in controversy, Michaels submitted
evidence that store managers work more than 45 hours a
week, which would entitle them to over $5,000,000 if the
plaintiffs prevailed. First, Michaels submitted a declaration
from its Vice President of Field Human Resources showing
that Michaels’ managers were expected to work at least 45
hours a week normally, and 50 hours a week during the
holiday season. Michaels also submitted a letter sent by the
plaintiffs in connection with settlement negotiations where
the plaintiffs valued their claim at over $5,000,000. And the
named plaintiffs in this case all testified that they worked at
least 45 hours each week. No evidence to the contrary was
submitted.
The district court faulted Michaels for only showing that
the managers were expected to work 45 hours or more each
week rather than showing they actually worked that amount.
But managers testified, without contradiction, that they did
work 45 hours or more each week. There was no evidence
that the expectation of 45 hours or more was not met. Under
the preponderance of the evidence standard, Michaels
established “that the potential damages could exceed the
jurisdictional amount.” Lewis v. Verizon Commc’ns, Inc.,
627 F.3d 395, 397 (9th Cir. 2010). There was substantial,
plausible evidence that damages at issue exceeded
$5,000,000, and no evidence at all to the contrary. The district
court’s finding that the defendant failed to prove that the
amount-in-controversy requirement was met was clearly
REA V. MICHAELS STORES 9
erroneous even under the preponderance of the evidence
standard.
REVERSED and REMANDED.